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

	FORM 10-Q

[X]	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 30, 2006 or

[ ]	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from               to

Commission File No. 0-13298

	MORGAN STANLEY CORNERSTONE FUND II L.P.

	(Exact name of registrant as specified in its charter)

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

Demeter Management Corporation
330 Madison Avenue, 8th Floor
New York, NY 						             10017
(Address of principal executive offices)               (Zip Code)

Registrant's telephone number, including area code  (212) 905-2700











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


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

Yes    X        No


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

Large accelerated filer___Accelerated filer___Non-accelerated filer _X__


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



<page> <table> 	MORGAN STANLEY CORNERSTONE FUND II L.P.


(formerly, Dean Witter Cornerstone Fund II)

	INDEX TO QUARTERLY REPORT ON FORM 10-Q

	September 30, 2006

<caption>



PART I. FINANCIAL INFORMATION

				<c>
Item 1. Financial Statements

		Statements of Financial Condition as of September 30, 2006
		(Unaudited) and December 31, 2005 ........................ 2

		Statements of Operations for the Three and Nine Months
		Ended September 30, 2006 and 2005 	(Unaudited)............. 3

		Statements of Changes in Partners? Capital for the
		Nine Months Ended September 30, 2006 and 2005 	(Unaudited)..4

		Statements of Cash Flows for the Nine Months Ended
		September 30, 2006 and 2005 (Unaudited)....................5

		Notes to Financial Statements (Unaudited) ............. 6-12

Item 2.	Management?s Discussion and Analysis of
			Financial Condition and Results of Operations ..... 13-29

Item 3.	Quantitative and Qualitative Disclosures about
			Market Risk ....................................... 30-42

Item 4.	Controls and Procedures ...............................42


PART II. OTHER INFORMATION

Item 1A.Risk Factors...........................................43

Item 5.	Other Information...................................43-44

Item 6.	Exhibits...............................................45


</table>



<page> <table> PART I.  FINANCIAL INFORMATION
Item 1.  Financial Statements

	MORGAN STANLEY CORNERSTONE FUND II L.P.
(formerly, Dean Witter Cornerstone Fund II)
	STATEMENTS OF FINANCIAL CONDITION
<caption>
	September 30,	December 31,
	        2006        	        2005
	$	$
	(Unaudited)
ASSETS

	<c>	<c>
Equity in futures interests trading accounts:
	Unrestricted cash	8,526,928	11,242,503
	Restricted cash	        651,914	    1,213,808

	     Total cash	     9,178,842	   12,456,311

	Net unrealized gain on open contracts (MS&Co.)	174,010       	       344,900
	Net unrealized gain on open contracts (MSIL)	         ?  	       173,143

	     Total net unrealized gain on open contracts	        174,010	       518,043

	     Total Trading Equity	9,352,852	12,974,354

Due from Morgan Stanley DW	44,055	         11,710
Interest receivable (Morgan Stanley DW)	                                  30,269	         35,476

	     Total Assets	    9,427,176	 13,021,540

LIABILITIES AND PARTNERS' CAPITAL

Liabilities

Redemptions payable	80,594	333,219
Accrued management fees	        27,427	         37,886
Accrued administrative expenses	         23,551	         32,208

   	    Total Liabilities	       131,572	       403,313
Partners? Capital

Limited Partners (2,670.226 and
    3,261.160 Units, respectively)	8,984,156	12,240,749
General Partner (92.567 and
    100.567 Units, respectively)	       311,448	         377,478

	     Total Partners? Capital	     9,295,604	    12,618,227

	     Total Liabilities and Partners? Capital	     9,427,176	    13,021,540

NET ASSET VALUE PER UNIT	                                                          3,364.57
3,753.50
<fn>
	The accompanying notes are an integral part
	of these financial statements.
</table>
<page> <table> 	MORGAN STANLEY CORNERSTONE FUND II L.P.
(formerly, Dean Witter Cornerstone Fund II)
	STATEMENTS OF OPERATIONS
(Unaudited)

<caption>

                    For the Three Months	              For the Nine Months
186:
  	                                                    Ended September 30,                       Ended September 30,

                                         2006   	        2005    	       2006   	    2005
                                        $	               $		           $ 	 $

	<c>		<c>		<c>			<c>
INVESTMENT INCOME
	Interest income (Morgan Stanley DW)	     94,278		        96,617 		     303,671		           260,100

EXPENSES
	Brokerage commissions (Morgan Stanley DW)	143,709	209,004	488,866		654,757
	Management fees	      83,124	    125,729	 281,447		   386,686
	Common administrative expenses	              13,000	           9,000    	             36,000		         29,000
	Transaction fees and costs	     10,305	           10,352	        32,844		         40,979

		   Total Expenses 	    250,138	      354,085		      839,157	     1,111,422

NET INVESTMENT LOSS 	   (155,860)	     (257,468)	     (535,486)		      (851,322)

TRADING RESULTS
Trading profit (loss):
	Realized	(180,031) 	954,398	(352,425)		(1,025,713)
	Net change in unrealized	    130,800	        33,976 	     (344,033)		      (1,103,619)

	           Total Trading Results	     (49,231)	       988,374	     (696,458)		    (2,129,332)

NET INCOME (LOSS)	   (205,091)	       730,906	  (1,231,944)            (2,980,654)

NET INCOME (LOSS) ALLOCATION

	Limited Partners	(198,837) 	  711,066	(1,194,778)		(2,906,645)
	General Partner 	            (6,254)          	19,840	(37,166)		(74,009)


NET INCOME (LOSS) PER UNIT

	Limited Partners                                                	(67.56)	            197.27	(388.93)	(735.92)
	General Partner                                           	   (67.56)               197.27	(388.93)	(735.92)



<fn>


	The accompanying notes are an integral part
	of these financial statements.
</table>
<page> <table> MORGAN STANLEY CORNERSTONE FUND II L.P.
(formerly, Dean Witter Cornerstone Fund II)
	STATEMENTS OF CHANGES IN PARTNERS? CAPITAL
	For the Nine Months Ended September 30, 2006 and 2005
	(Unaudited)

<caption>

			                                                         Units of
			                                                      Partnership	 Limited	     General
			                                                         Interest    	     Partners   	          Partner    	     Total
					$	      $	 $

			<c>	<c>	<c>	<c>
Partners? Capital,
   December 31, 2004                                     3,998.749	18,161,153	468,530	18,629,683

Net Loss                                                                  ?		(2,906,645)	(74,009)
	(2,980,654)

Redemptions                                                    (430.121)		   (1,649,428)	      ?
  (1,649,428)

Partners? Capital,
   September 30, 2005                                    3,568.628		 13,605,080	  394,521
13,999,601




Partners? Capital,
   December 31, 2005	3,361.727	12,240,749	377,478	12,618,227

Net Loss                                                                  ?		(1,194,778)	(37,166)
	(1,231,944)

Redemptions                                                    (598.934)		   (2,061,815)	       (28,864)
  (2,090,679)

Partners? Capital,
   September 30, 2006                                    2,762.793		 8,984,156	  311,448
 9,295,604







<fn>



The accompanying notes are an integral part
	of these financial statements.
</table>
<page> <table> 	MORGAN STANLEY CORNERSTONE FUND II L.P.
(formerly, Dean Witter Cornerstone Fund II)
	STATEMENTS OF CASH FLOWS
(Unaudited)

<caption>



				   For the Nine Months Ended September 30,

				            2006      	      2005
				     $	$

			<c>	<c>
CASH FLOWS FROM OPERATING ACTIVITIES

Net loss		(1,231,944)	(2,980,654)
Noncash item included in net loss:
	Net change in unrealized	344,033	1,103,619

(Increase) decrease in operating assets:
	Restricted cash	561,894	1,175,009
	Due from Morgan Stanley DW	(32,345)	45,465
	Interest receivable (Morgan Stanley DW)	5,207	(5,712)

Decrease in operating liabilities:
	Accrued management fees	    (10,459)           	         (13,203)
	Accrued administrative expenses	        (8,657)	        (11,304)

Net cash used for operating activities	   (372,271)	      (686,780)


CASH FLOWS FROM FINANCING ACTIVITIES

Cash paid for redemptions of Units	   (2,343,304)	    (1,532,640)

Net cash used for financing activities	   (2,343,304)	     (1,532,640)

Net decrease in unrestricted cash	(2,715,575)	(2,219,420)

Unrestricted cash at beginning of period	  11,242,503	   14,047,174

Unrestricted cash at end of period	   8,526,928	   11,827,754






</table>


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


<page> MORGAN STANLEY CORNERSTONE FUND II L.P.
(formerly, Dean Witter Cornerstone Fund II)
NOTES TO FINANCIAL STATEMENTS
September 30, 2006
(Unaudited)

The unaudited financial statements contained herein include, in the
opinion of management, all adjustments necessary for a fair
presentation of the results of operations and financial condition
of Morgan Stanley Cornerstone Fund II L.P. (formerly known as Dean
Witter Cornerstone Fund II) (the ?Partnership?).  The financial
statements and condensed notes herein should be read in conjunction
with the Partnership's December 31, 2005 Annual Report on Form 10-
K.  Certain prior year amounts relating to cash balances were
reclassified on the Statements of Financial Condition and the
related Statements of Cash Flows to conform to 2006 presentation.
Such reclassifications have no impact on the Partnership?s reported
net income (loss).

1.  Organization
Morgan Stanley Cornerstone Fund II L.P. (formerly known as Dean
Witter Cornerstone Fund II) is a New York limited partnership
organized in 1983 to engage in the speculative trading of futures
contracts, options on futures contracts, and forward contracts on
foreign currencies and other commodity interests.  The Partnership
is one of the Morgan Stanley Cornerstone Funds, comprised of the
Partnership, Morgan Stanley Cornerstone Fund III L.P., and Morgan
Stanley Cornerstone Fund IV L.P.
<page> MORGAN STANLEY CORNERSTONE FUND II L.P.
(formerly, Dean Witter Cornerstone Fund II)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)


Effective July 21, 2006, Dean Witter Cornerstone Fund II was
renamed to Morgan Stanley Cornerstone Fund II L.P.

The Partnership?s general partner is Demeter Management
Corporation (?Demeter?). The non-clearing commodity broker is
Morgan Stanley DW Inc. (?Morgan Stanley DW?).  The clearing
commodity brokers are Morgan Stanley & Co. Incorporated (?MS &
 Co.?) and Morgan Stanley & Co. International Limited
(?MSIL?).  Demeter, Morgan Stanley DW, MS & Co., and MSIL are
wholly-owned subsidiaries of Morgan Stanley.  The trading
managers to the Partnership are Northfield Trading L.P. and John
W. Henry & Company, Inc. (individually, a ?Trading Manager?, or
collectively, the ?Trading Managers?).

2.  Related Party Transactions
The Partnership's cash is on deposit with Morgan Stanley DW, MS &
Co., and MSIL in futures, forwards, and options trading accounts to
meet margin requirements as needed.  Monthly, Morgan Stanley DW
pays the Partnership interest income equal to 80% of its average
daily Net Assets at a rate equal to the average yield on 13-week
U.S. Treasury bills. The Partnership pays brokerage commissions to
Morgan Stanley DW.

<page> MORGAN STANLEY CORNERSTONE FUND II L.P.
(formerly, Dean Witter Cornerstone Fund II)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

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

The Partnership?s contracts are accounted for on a trade-date
basis and marked to market on a daily basis.  The Partnership
accounts for its derivative investments in accordance with the
<page> MORGAN STANLEY CORNERSTONE FUND II L.P.
(formerly, Dean Witter Cornerstone Fund II)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

provisions of Statement of Financial Accounting Standards No.
133, ?Accounting for Derivative Instruments and Hedging
Activities? (?SFAS No. 133?).  SFAS No. 133 defines a
derivative as a financial instrument or other contract that has
all three of the following characteristics:

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

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

The net unrealized gains on open contracts, reported as a component
of ?Equity in futures interests trading accounts? on the
Statements of Financial Condition, and their longest contract
maturities were as follows:








<page> MORGAN STANLEY CORNERSTONE FUND II L.P.
(formerly, Dean Witter Cornerstone Fund II)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)


                        Net Unrealized Gains
                         On Open Contracts                Longest Maturities

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

Sep. 30, 2006	157,802	16,208	174,010	Dec. 2007	Dec. 2006
Dec. 31, 2005	239,383	278,660	518,043	Dec. 2006	Mar. 2006

The Partnership has credit risk associated with counterparty non-
performance.  As of the date of the financial statements, the
credit risk associated with the instruments in which the
Partnership trades is limited to the amounts reflected in the
Partnership's Statements of Financial Condition.



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, forward, and futures-styled options
contracts are marked to market on a daily basis, with variations
in value settled on a daily basis. Morgan Stanley DW, MS & Co., and
MSIL, each as a futures commission merchant for the Partnership?s
exchange-traded futures, forward, and futures-styled options
contracts, are required, pursuant to regulations of the Commodity
Futures Trading Commission (?CFTC?), to segregate from their own
assets, and for the sole benefit of their commodity customers, all
funds held by them with respect to exchange-traded

<page> MORGAN STANLEY CORNERSTONE FUND II L.P.
(formerly, Dean Witter Cornerstone Fund II)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

futures, forward, and futures-styled options contracts, including
an amount equal to the net unrealized gains (losses) on all open
futures, forward, and futures-styled options contracts, which
funds, in the aggregate, totaled $9,336,644 and $12,695,694 at
September 30, 2006 and December 31, 2005, respectively. With
respect to the Partnership?s off-exchange-traded forward currency
contracts, there are no daily exchange-required settlements of
variation in value, nor is there any requirement that an amount
equal to the net unrealized gains (losses) on open forward
contracts be segregated.  However, the Partnership is required to
meet margin requirements equal to the net unrealized loss on open
contracts in the Partnership accounts with the counterparty, which
is accomplished by daily maintenance of the cash balance in a
custody account held at Morgan Stanley DW for the benefit of MS &
Co. With respect to those off-exchange-traded forward currency
contracts, the Partnership is at risk to the ability of MS & Co.,
the sole counterparty on all such contracts, to perform. The
Partnership has a netting agreement with MS & Co. This agreement,
which seeks to reduce both the Partnership?s and MS & Co.?s
exposure on off-exchange-traded forward currency contracts, should
materially decrease the Partnership?s credit risk in the event of
MS & Co.?s bankruptcy or insolvency.


<page> MORGAN STANLEY CORNERSTONE FUND II L.P.
(formerly, Dean Witter Cornerstone Fund II)
NOTES TO FINANCIAL STATEMENTS (CONCLUDED)

4.  New Accounting Developments
In July 2006, the FASB issued FASB Interpretation No. 48,
?Accounting for Uncertainty in Income Taxes, an interpretation of
FASB Statement No. 109? (?FIN 48?). FIN 48 clarifies the
accounting for uncertainty in income taxes recognized in a
company?s financial statements and prescribes a recognition
threshold and measurement attribute for the financial statement
recognition and measurement of a tax position taken or expected to
be taken in an income tax return. FIN 48 also provides guidance on
derecognition, classification, interest and penalties, accounting
in interim periods, disclosure and transition. FIN 48 is effective
for the Partnership as of January 1, 2007. The Partnership is cur-
rently evaluating the potential impact of adopting FIN 48.

In September 2006, the FASB issued SFAS No. 157, ?Fair Value
Measurements? (?SFAS No. 157?). SFAS No. 157 defines fair value,
establishes a framework for measuring fair value and expands
disclosures about fair value measurements. SFAS No. 157 is
effective for the Partnership as of January 1, 2008.  The Partner-
ship is currently evaluating the potential impact of adopting SFAS
No. 157.




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

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

The Partnership?s investment in futures, forwards, and options 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 or options contract has
increased or decreased by an amount equal to the daily limit,
positions in that futures or options 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 <page> from
promptly liquidating its futures or options contracts and result in
restrictions on redemptions.

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

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

Capital Resources.  The Partnership does not have, nor does it
expect to have, any capital assets.  Redemptions of units of
limited partnership interest (?Unit(s)?) in the future will
affect the amount of funds available for investments in futures,
forwards, and options in subsequent periods. It is not possible to
estimate the amount, and therefore the impact, of future outflows
of Units.

<page> There are no known material trends, favorable or
unfavorable, that would affect, nor any expected material changes
to, the Partnership?s capital resource arrangements at the present
time.

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

Results of Operations
General.  The Partnership?s results depend on the Trading Managers
and the ability of each Trading Manager?s trading program(s) to
take advantage of price movements in the futures, forwards, and
options markets.  The following presents a summary of the
Partnership?s operations for the three and nine month periods ended
September 30, 2006 and 2005, and a general discussion of its
trading activities during each period.  It is important to note,
however, that the Trading Managers trade 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
Managers 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 Managers? trading
activities on behalf of the Partnership during <page> the period in
question. Past performance is no guarantee of future results.

The Partnership?s results of operations set forth in the financial
statements on pages 2 through 12 of this report are prepared in
accordance with accounting principles generally accepted in the
United States of America, which require the use of certain
accounting policies that affect the amounts reported in these
financial statements, including the following:  The contracts the
Partnership trades are accounted for on a trade-date basis and
marked to market on a daily basis.  The difference between their
cost and market value is recorded on the Statements of Operations
as ?Net change in unrealized trading profit (loss)? for open
(unrealized) contracts, and recorded as ?Realized trading profit
(loss)? when open positions are closed out.  The sum of these
amounts constitutes the Partnership?s trading results.  The market
value of a futures contract is the settlement price on the exchange
on which that futures contract is traded on a particular day. The
value of foreign currency forward contracts is based on the spot
rate as of the close of business.  Interest income, as well as
management fees, incentive fees, brokerage commissions, and
transaction fees and costs of the Partnership are recorded on an
accrual basis.

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


For the Three and Nine Months Ended September 30, 2006
The Partnership recorded total trading results including interest
income totaling $45,047 and expenses totaling $250,138, resulting
in a net loss of $205,091 for the three months ended September 30,
2006. The Partnership?s net asset value per Unit decreased from
$3,432.13 at June 30, 2006 to $3,364.57 at September 30, 2006.

The most significant trading losses of approximately 2.3% were
recorded in the currency markets during July from short U.S.
dollar positions against the euro as the value of the U.S. dollar
moved higher primarily due to a narrower-than-expected U.S. trade
deficit. Furthermore, the value of the euro moved lower after the
European Central Bank decided to keep interest rates unchanged.
Elsewhere in the currency sector, short positions in the South
African rand experienced losses during July and August as the
value of the rand moved higher against the U.S. dollar amid
higher commodity prices and strong economic growth in South
Africa.  Further losses were incurred from short positions in the
Mexican peso versus the U.S. dollar at the beginning of July as
the value of the peso reversed higher after Felipe Calderon was
declared the winner of the Mexican presidential election.  Newly
established long positions in the peso incurred additional losses
at the end of July as the value of the peso weakened against the
<page> U.S. dollar, weighed down by fears of a slowing U.S.
economy.  In September, losses were incurred from long positions
in the Singapore dollar and Mexican peso versus the U.S. dollar
as the value of the U.S. dollar increased against these
currencies after government reports showed U.S. consumer
confidence rebounded and the core consumer price expenditure
index hit an eleven-year high.  Additionally, the Mexican peso
declined after investors expressed concern that a military coup
in Thailand would have a ?ripple-effect? on other emerging-
market currencies.  Within the global interest rate sector,
losses of approximately 1.6% were incurred during July from short
positions in U.S., British and German fixed-income futures as
prices reversed higher on significant geopolitical concerns after
North Korea conducted long-range missile tests, terrorist
bombings aboard commuter trains in Bombay, India and fears of an
escalating conflict in the Middle East.  In addition, U.S.
interest rate futures prices were pressured higher on investor
sentiment that the U.S. Federal Reserve will hold interest rates
steady in the near-term, while British and German fixed-income
futures prices moved higher on news that the Bank of England and
the European Central Bank kept interest rates unchanged.
Additional losses were recorded during September from long
positions in U.S. fixed-income futures as prices declined during
the first half of the month after better-than-expected economic
data decreased demand. Elsewhere in the global interest rate
sector, short positions in short-term European and British fixed-
income futures also incurred losses as prices reversed higher at
<page> the end of September after reports showed German investor
sentiment dropped to a seven-year low and second quarter U.K.
Gross Domestic Product growth was revised downward.  A portion of
the Partnership?s overall losses for the quarter was offset by
gains of approximately 1.4% experienced within the energy
markets, primarily during September, from short positions in
crude oil futures and its related products as prices dropped to a
ten-month low amid the discovery of a large oil field in the Gulf
of Mexico.  Prices were also pressured lower after OPEC cut its
demand forecast.  Elsewhere in the energy markets, short
positions in natural gas futures also recorded gains during
September as prices trended lower due to consistent news of
increased domestic supply by the U.S. Department of Energy and a
calm hurricane season.

The Partnership recorded total trading results including interest
income totaling $(392,787) and expenses totaling $839,157,
resulting in a net loss of $1,231,944 for the nine months ended
September 30, 2006.  The Partnership?s net asset value per Unit
decreased from $3,753.50 at December 31, 2005 to $3,364.57 at
September 30, 2006.

The most significant trading losses of approximately 11.8% were
experienced in the currency markets from short positions in the
Japanese yen and Swiss franc versus the U.S. dollar as the U.S.
dollar trended lower on expectations that a string of increases
in interest rates by the U.S. Federal Reserve could possibly come
<page> to an end.  The Japanese yen moved higher against the U.S.
dollar during January and February as strong economic data out of
the region increased speculation that the Bank of Japan would
raise interest rates.  During April, the Japanese yen
strengthened on continued speculation of an interest rate hike by
the Bank of Japan, while the Australian dollar moved higher on an
unexpected interest rate hike by the Reserve Bank of Australia in
May.  During April, short positions in the Swiss franc also
incurred losses as the value of the franc moved higher against
the U.S. dollar on political tensions in the Middle East, which
increased the demand for the safe-haven currency.  Finally,
losses were incurred from long positions in the Brazilian real
versus the U.S. dollar during September as the value of the U.S.
dollar increased against the real after government reports showed
U.S. consumer confidence rebounded during the month and the core
consumer price expenditure index hit an eleven-year high.  In
addition, the Brazilian real declined after investors expressed
concern that a military coup in Thailand would have a ?ripple-
effect? on other emerging-market currencies.  Within the energy
markets, losses of approximately 1.9% were incurred during
February from long futures positions in crude oil and its related
products as prices declined after Chinese government authorities
announced that China would place an emphasis on prospecting
alternative energy sources in the future, reports of larger-than-
expected supplies from the International Energy Agency, and mild
weather in the U.S. Northeast.  Additional losses in the energy
sector were recorded during March from short futures positions as
<page> prices strengthened early in the month on supply fears
fueled by news of geopolitical tensions in Nigeria and Iran.
Further losses were incurred from long futures positions in crude
oil and its related products in May and June as prices declined
on reports of domestic inventory levels at eight-year highs, the
news of the death of Iraqi insurgent leader Abu Musab al-Zarqawi,
and positive steps taken regarding the nuclear standoff between
the U.S. and Iran.  Within the global stock index markets, losses
of approximately 0.5% were incurred from long positions in U.S.
and Japanese equity index futures.  During March, S&P 500 Index
futures prices moved lower early in the month amid disappointing
readings of U.S. housing, consumer confidence, and the Chicago
purchasing managers index data.  U.S. equity markets further
weakened in May on inflation fears and uncertainty regarding
global interest rate policy.  During February, Japanese equity
markets moved lower on uncertainty regarding the future of the
interest rate policy of the Bank of Japan.  Finally, losses of
approximately 0.4% were incurred during January, from both long
and short positions in Japanese fixed-income futures as prices
experienced short-term volatile price movement amid uncertainty
regarding the future interest rate policy of the Bank of Japan.
During July, losses were incurred within the global interest rate
sector from short positions in British fixed-income futures as
prices reversed higher on significant geopolitical concerns after
North Korea conducted long-range missile tests, terrorist
bombings aboard commuter trains in Bombay, India and fears of an
escalating conflict in the Middle East.  In addition, British
<page> fixed-income futures prices moved higher on news that the
Bank of England kept interest rates unchanged in August.
Additional losses were recorded from short positions in short-
term European and British fixed-income futures as prices reversed
higher at the end of September after reports showed German
investor sentiment slid to a seven-year low and second quarter
U.K. Gross Domestic Product growth was revised downward.  A
portion of the Partnership?s overall losses for the first nine
months of the year was offset by gains of approximately 2.6% in
the metals markets, primarily during January, from long futures
positions in copper, aluminum, zinc, and nickel as prices
strengthened amid news of weak supplies, forecasts for continued
buying by China, and acceleration in demand from the U.S., Europe
and Japan.  Elsewhere in the metals markets, gains were recorded
from long futures positions in gold and silver as precious metals
prices moved higher in January on persistent demand from foreign
central banks.  Smaller gains of approximately 0.1% were
experienced within the agricultural markets from long positions
in sugar futures as prices trended higher during January, moving
to their highest level since 1981 in response to a decline in
inventories, as well as increased ethanol demand.

For the Three and Nine Months Ended September 30, 2005
The Partnership recorded total trading results including interest
income totaling $1,084,991 and expenses totaling $354,085,
resulting in net income of $730,906 for the three months ended
September 30, 2005.  The Partnership?s net asset value per Unit
<page> increased from $3,725.69 at June 30, 2005 to $3,922.96 at
September 30, 2005.

The most significant trading gains of approximately 11.0% were
recorded in the energy markets primarily during August from long
futures positions in natural gas, crude oil, and their related
products as prices climbed higher throughout the month on supply
and demand concerns.  After Hurricane Katrina struck the Gulf of
Mexico, prices advanced further to touch record highs amid
concerns for heavily damaged, or even possibly destroyed,
refineries and production facilities.  Gains of approximately
2.9% were achieved in the global stock index markets during July
from long positions in Pacific Rim and European stock indices as
prices increased amid positive economic data out of the U.S. and
Japan.  Prices continued to strengthen after China reformed its
U.S. dollar currency peg policy, leading market participants to
conclude that a revaluation in the Chinese yuan would likely ease
trade tensions between China, the U.S, Europe, and Japan.
Finally, strong corporate earnings out of the European Union and
the U.S. resulted in optimistic investor sentiment and pushed
prices higher.  During September, gains were produced from long
positions in Japanese stock index futures as prices increased on
positive comments from Bank of Japan Governor Toshihiko Fukui,
who said the Japanese economy was in the process of emerging from
a soft patch as demonstrated by rising production, improving
business sentiment, and a sustained upturn in consumer spending.
Additional sector gains resulted from long positions in European
<page> and U.S. stock index futures as oil prices declined and
investors embraced signs that the global economy could move
forward despite Hurricane Katrina's devastation of the U.S. Gulf
Coast.  In the agricultural markets, gains of approximately 1.4%
were experienced primarily during July from long futures
positions in corn and sugar, and short futures positions in
coffee.  Corn prices advanced amid hot-dry weather in the U.S.
Midwest, while sugar prices rallied on reductions in market
supply.  Short coffee positions benefited as coffee prices
declined in response to export growth from Vietnam.  During
August, short positions in coffee and cotton experienced gains as
prices trended lower amid news of lower global consumption and
strong supply.  Elsewhere in the agricultural markets, gains were
experienced during August from long positions in sugar futures as
prices advanced due to speculative buying.  Profits of
approximately 0.4% were recorded in the metals markets primarily
during September from long futures positions in copper as prices
strengthened in response to increased global demand from
countries such as China and India.  A portion of the
Partnership?s overall gains for the quarter was offset by losses
of approximately 6.1% in the currency markets, primarily during
August and September.  During August, long U.S. dollar positions
against the British pound, Singapore dollar, Swiss franc, and
euro incurred losses as the value of the U.S. dollar declined
amid higher crude oil prices, lower durable goods, the U.S. trade
imbalance, and economic warnings from U.S. Federal Reserve
Chairman Alan Greenspan.  Short U.S. dollar positions against the
<page> British pound, Norwegian krone, Swiss franc, and euro held
during September recorded losses as the value of the U.S. dollar
advanced amid bolstered expectations that the U.S. Federal
Reserve would continue to raise interest rates in light of
reports of a smaller-than-expected rise in U.S. jobless claims.
Meanwhile, the British pound weakened after records of the
slowest British economic growth led to expectations for further
interest rate cuts by the Bank of England.  In addition, the
values of European currencies closed lower amid weaker growth
forecasts for the European economy and developments of political
uncertainty stemming from news that Germany?s incumbent
Chancellor, Gerhard Schroeder, would not concede defeat to the
opposition leader Angela Merkel in the days after the election.
In the global interest rate markets, losses of approximately 3.8%
were experienced during July and August from positions in U.S,
European, and Japanese interest rate futures.  During July, long
U.S. interest rate futures positions experienced losses as prices
declined following a rise in interest rates and after the U.S.
Labor Department released its June employment report.  European
fixed-income prices declined on strength in regional equity
markets, and news of terrorist attacks on the London transport
network also weighed on European bond prices.    Within the
Japanese interest rate markets, losses were recorded as prices
declined following positive economic comments on the Japanese
economy by the Japanese Ministry of Finance.  During August,
short positions in U.S. and Japanese fixed-income futures
incurred losses as prices reversed higher on worries about the
<page> global economic impact of Hurricane Katrina.  Within
Japanese interest rate futures markets, a bigger-than-expected
decline in Japanese industrial output for July, which clouded
prospects for the Japanese economy, also contributed to higher
prices.  Additional losses were recorded from positions in
European interest rate futures as prices moved without consistent
direction.

The Partnership recorded total trading results including interest
income totaling $(1,869,232) and expenses totaling $1,111,422,
resulting in a net loss of $2,980,654 for the nine months ended
September 30, 2005.  The Partnership?s net asset value per Unit
decreased from $4,658.88 at December 31, 2004 to $3,922.96 at
September 30, 2005.

The most significant trading losses of approximately 14.5% were
experienced in the currency markets primarily during the first
quarter.  During January, long positions in a variety of foreign
currencies, primarily the South African rand, Swiss franc, euro,
and Singapore dollar, recorded losses after the U.S. dollar?s
value reversed higher amid positive U.S. economic data and
speculation for higher U.S. interest rates.  During February,
long positions in the Singapore dollar against the U.S. dollar
experienced losses as the U.S. dollar?s value rose in response to
positive sentiment for the Bush Administration?s budget proposal.
Relaxed speculation that China would re-value its currency
following the Group of Seven (?G-7?) countries meetings also
<page> boosted the U.S. dollar.  The G-7 countries consist of
France, the U.S., Britain, Germany, Japan, Italy, and Canada.
Additional losses were recorded from newly-established short
positions in the Singapore dollar, as well as from existing short
positions in the South African rand, Swiss franc, and euro,
against the U.S. dollar as the U.S. dollar weakened due to U.S.
Current-Account deficit concerns.  In early March, short European
currency positions resulted in losses as their values moved
higher amid a sharp rise in German industrial production.
Additional losses were recorded from newly-established long euro
positions, as well as from existing long positions in the British
pound and the Singapore dollar, versus the U.S. dollar after the
value of the U.S. dollar reversed sharply higher amid an increase
in U.S. interest rates and consumer prices.  During August, long
U.S. dollar positions against the British pound, Singapore
dollar, Swiss franc, and euro incurred losses as the value of the
U.S. dollar declined amid higher crude oil prices, lower durable
goods orders reported by the U.S. Commerce Department, the U.S.
trade imbalance, and economic warnings from U.S. Federal Reserve
Chairman Alan Greenspan.  Short U.S. dollar positions against the
British pound, Norwegian krone, Swiss franc, and euro held during
September recorded losses as the value of the U.S. dollar
advanced amid bolstered expectations that the U.S. Federal
Reserve would continue to raise interest rates.  Meanwhile, the
British pound weakened after records of the slowest British
economic growth led to expectations for further interest rate
cuts by the Bank of England.  In addition, the values of European
<page> currencies closed lower amid weaker growth forecasts for
the European economy and developments of political uncertainty
stemming from news that Germany?s incumbent Chancellor, Gerhard
Schroeder, would not concede defeat to the opposition leader
Angela Merkel in the days after the election.  Additional
Partnership losses of approximately 3.8% established in the
metals markets throughout the first and second quarters primarily
from positions in precious metals as prices in the markets
experienced choppiness amid volatility in the value of the U.S.
dollar and a negative outlook in demand.  In the global interest
rate markets, losses of approximately 3.3% resulted during the
first and third quarters.  During February long positions in
Japanese interest rate futures recorded losses as prices reversed
lower after positive economic data and expectations for higher
interest rates reduced investor demand for fixed-income
investments.  Newly-established short Japanese positions held
during March experienced losses after prices reversed higher amid
overall weakness in global equity markets and the emergence of
poor Japanese economic data that signaled the potential for
another recession.  During the third quarter, losses stemmed from
positions in U.S and Japanese interest rate futures.  During
July, long U.S. interest rate futures positions experienced
losses as prices declined following a rise in interest rates and
after the U.S. Labor Department released its June employment
report.  Within the Japanese interest rate markets, losses were
recorded as prices declined following positive comments on the
Japanese economy by the Japanese Ministry of Finance.  During
<page> August, short positions in U.S. and Japanese fixed-income
futures incurred losses as prices reversed higher on worries
about the global economic impact of Hurricane Katrina.  Within
Japanese interest rate futures markets, a bigger-than-expected
decline in Japanese industrial output for July, which clouded
prospects for the Japanese economy, also contributed to higher
prices.  A portion of the Partnership?s overall losses for the
first nine months of the year was offset by gains of
approximately 3.7% in the energy markets primarily during the
third quarter from long futures positions in natural gas, crude
oil, and their related products as prices climbed higher on
supply and demand concerns. After Hurricane Katrina struck the
Gulf of Mexico, prices advanced further to touch record highs
amid concerns for heavily damaged, or even possibly destroyed,
refineries and production facilities.  Additional gains of
approximately 1.2% recorded in the global stock indices were
achieved primarily during the third quarter from long positions
in European and Pacific Rim stock index futures as prices rose
amid positive economic data out of the U.S. and Japan.  Prices
continued to strengthen after China reformed its U.S. dollar
currency peg policy, leading market participants to conclude that
a revaluation in the Chinese yuan would likely ease trade
tensions between China, the U.S, Europe, and Japan.   Finally,
strong corporate earnings out of the European Union and the U.S.
resulted in optimistic investor sentiment and pushed prices
higher. During September, gains were produced from long positions
in Japanese stock index futures as prices increased on positive
<page> economic comments from Bank of Japan Governor Toshihiko
Fukui, improving business sentiment and a sustained upturn in
consumer spending.  Additional sector gains resulted from long
positions in European stock index futures as equity prices
increased due to a decline in oil prices.
<page> Item 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK

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

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

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

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

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

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

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

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

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

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

VaR models, including the Partnership?s, are continually evolving
as trading portfolios become more diverse and modeling techniques
and systems capabilities improve.  Please note that the VaR model
is used to numerically quantify market risk for historic <page>
reporting purposes only and is not utilized by either Demeter or
the Trading Managers 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 September 30, 2006 and 2005.
At September 30, 2006 and 2005, the Partnership?s total
capitalization was approximately $9 million and $14 million,
respectively.

Primary Market          September 30, 2006   September 30, 2005
Risk Category             Value at Risk        Value at Risk

Currency	       (2.05)%      	(2.03)%

Interest Rate	          (1.55)	   (0.43)

Equity	(1.29)	(0.96)

Commodity	(0.53)	(2.07)

Aggregate Value at Risk	      (2.42)%	   (3.16)%


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

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

The table below supplements the quarter-end VaR set forth above
by presenting the Partnership?s high, low, and average VaR, as a
percentage of total Net Assets for the four quarter-end reporting
periods from October 1, 2005 through September 30, 2006.

Primary Market Risk Category	High	   Low	     Average
Currency	(2.05)%	(1.22)%	(1.64)%

Interest Rate	(1.55)	(0.33)	(1.03)

Equity	(1.48)	(0.14)	(1.05)

Commodity	(1.07)	(0.23)	(0.53)


Aggregate Value at Risk	(2.48)%	(1.93)%	(2.30)%


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

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

The VaR tables provided present the results of the Partnership?s
VaR for each of the Partnership?s market risk exposures and on an
aggregate basis at September 30, 2006, and for the four quarter-end
reporting periods from October 1, 2005 through September 30, <page>
2006.  VaR is not necessarily representative of the Partnership?s
historic risk, nor should it be used to predict the Partnership?s
future financial performance or its ability to manage or monitor
risk.  There can be no assurance that the Partnership?s actual
losses on a particular day will not exceed the VaR amounts
indicated above or that such losses will not occur more than once
in 100 trading days.

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

The Partnership also maintains a substantial portion of its
available assets in cash at Morgan Stanley DW; as of September
30, 2006, such amount is equal to approximately 95% of the
Partnership?s net asset value.  A decline in short-term interest
rates would result in a decline in the Partnership?s cash
management income. This cash flow risk is not considered to be
material.

Materiality, as used throughout this section, is based on an
assessment of reasonably possible market movements and any
associated potential losses, taking into account the leverage,
optionality, and multiplier features of the Partnership?s market-
sensitive instruments, in relation to the Partnership?s Net
Assets.
<page> Qualitative Disclosures Regarding Primary Trading Risk
Exposures
The following qualitative disclosures regarding the Partnership?s
market risk exposures - except for (A) those disclosures that are
statements of historical fact and (B) the descriptions of how the
Partnership manages its primary market risk exposures - constitute
forward-looking statements within the meaning of Section 27A of the
Securities Act and Section 21E of the Securities Exchange Act. The
Partnership?s primary market risk exposures, as well as the
strategies used and to be used by Demeter and the Trading Managers
for managing such exposures, are subject to numerous uncertainties,
contingencies and risks, any one of which could cause the actual
results of the Partnership?s risk controls to differ materially
from the objectives of such strategies.  Government interventions,
defaults and expropriations, illiquid markets, the emergence of
dominant fundamental factors, political upheavals, changes in
historical price relationships, an influx of new market
participants, increased regulation, and many other factors could
result in material losses, as well as in material changes to the
risk exposures and the risk management strategies of the
Partnership.  Investors must be prepared to lose all or
substantially all of their investment in the Partnership.

The following were the primary trading risk exposures of the
Partnership at September 30, 2006, by market sector.  It may be
anticipated, however, that these market exposures will vary
materially over time.
<page>
Currency.  The largest market exposure of the Partnership at
September 30, 2006 was to the currency sector.  The Partnership?s
currency exposure is to exchange rate fluctuations, primarily
fluctuations which disrupt the historical pricing relationships
between different currencies and currency pairs.  Interest rate
changes, as well as political and general economic conditions,
influence these fluctuations. The Partnership?s primary exposure at
September 30, 2006 was to outright U.S. dollar positions.  Outright
positions consist of the U.S. dollar vs. other currencies.  These
other currencies include major and minor currencies.  Demeter does
not anticipate that the risk associated with the Partnership?s
currency trades will change significantly in the future.

Interest Rate.  The second largest market exposure of the
Partnership at September 30, 2006 was to the global interest rate
sector and was primarily spread across the U.S., European, and
Japanese interest rate sectors.  Interest rate movements directly
affect the price of the sovereign bond futures positions held by
the Partnership and indirectly affect the value of its stock index
and currency positions.  Interest rate movements in one country, as
well as relative interest rate movements between countries,
materially impact the Partnership?s profitability.  The
Partnership?s primary interest rate exposure is generally to
interest rate fluctuations in the U.S. and the other G-7 countries?
interest rates.  Demeter anticipates that the G-7 <page> countries?
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.

Equity.  At September 30, 2006, the Partnership had exposure to the
global stock index sector, primarily to equity price risk in the G-
7 countries.  The stock index futures traded by the Partnership are
by law limited to futures on broadly-based indices.  At September
30, 2006, the Partnership?s primary exposures were to the S&P/MIB
(Italy), DAX (Germany), NASDAQ 100 (U.S.), TAIWAN (Taiwan), Euro
Stoxx 50 (Europe), S&P 500 (U.S.), and Hang Send (China) stock
indices.  The Partnership is primarily exposed to the risk of
adverse price trends or static markets in the U.S., European, and
Asian stock indices.  Static markets would not cause major market
changes, but would make it difficult for the Partnership to avoid
trendless price movements, resulting in numerous small losses.


Commodity.
Energy.  The third largest market exposure of the Partnership
at September 30, 2006, was to the energy sector.  The
Partnership?s primary energy exposure was to futures contracts
in crude oil and its related products, as well as natural gas.
 Price movements in these markets result from <page>
geopolitical developments, particularly in the Middle East, as
well as weather patterns, and other economic fundamentals.
Significant profits and losses, which have been experienced in
the past, are expected to continue to be experienced in the
future.  Natural gas has exhibited volatility in price
resulting from weather patterns and supply and demand factors
and will likely continue in this choppy pattern.

Qualitative Disclosures Regarding Non-Trading Risk Exposure
The following was the only non-trading risk exposure of the
Partnership at September 30, 2006:

Foreign Currency Balances.  The Partnership?s primary foreign
currency balances at September 30, 2006 were in euros, Hong
Kong dollars, Japanese yen, British pounds, and Canadian
dollars.  The Partnership controls the non-trading risk of
foreign currency balances by regularly converting them back
into U.S. dollars upon liquidation of their respective
positions.

Qualitative Disclosures Regarding Means of Managing Risk Exposure
The Partnership and the Trading Managers, 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 Trading Managers in a multi-manager Partnership,
<page> each of whose strategies focus on different market sectors
and trading approaches, and by monitoring the performance of the
Trading Managers daily. In addition, the Trading Managers establish
diversification guidelines, often set in terms of the maximum
margin to be committed to positions in any one market sector or
market-sensitive instrument.

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

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

 (b)	There have been no material changes during the period
covered by this quarterly report in the Partnership?s
internal control over financial reporting (as defined in
Rules 13a-15(f) and 15d-15(f) of the Exchange Act) or in
other factors that could significantly affect these
controls subsequent to the date of their evaluation.



<page> PART II.  OTHER INFORMATION

Item 1A. RISK FACTORS
Information regarding risk factors appears in Item 2.
?Management?s Discussion and Analysis of Financial Condition and
Results of Operations? and Item 3.  ?Quantitative and Qualitative
Disclosures about Market Risk? of this Form 10-Q.  There have been
no other material changes from the risk factors previously
referenced in the Partnership?s Report on Form 10-K for the fiscal
year ended December 31, 2005 and the Partnership?s Reports on Form
10-Q for the quarters ended March 31, 2006 and June 30, 2006.

Item 5.  OTHER INFORMATION
Management.  On September 22, 2006, the following individual was
elected as a Director of Demeter.  Jacques Chappuis, age 37, is a
Director of Demeter, and will be a principal of Demeter, pending
approval by and registration with the National Futures
Association.  Mr. Chappuis is a Managing Director of Morgan
Stanley and Head of Alternative Investments for the Global Wealth
Management Group.  Prior to joining Morgan Stanley in 2006, Mr.
Chappuis was Head of Alternative Investments for Citigroup?s
Global Wealth Management Group and prior to that a Managing
Director at Citigroup Alternative Investments.  Before joining
Citigroup, Mr. Chappuis was a consultant at the Boston Consulting
Group, where he focused on the financial services sector, and a
<page> corporate finance Associate at Bankers Trust Company.  Mr.
Chappuis received a B.A. degree in finance from Tulane University
in 1991 and an MBA in finance, with honors, from the Columbia
University Graduate School of Business in 1998.

On November 6, 2006, Mr. Kevin Perry resigned his position as
Chief Financial Officer of Demeter effective November 7, 2006.

On November 7, 2006, the Board of Directors of Demeter appointed
Mr. Lee Horwitz as the Chief Financial Officer of Demeter.  Lee
Horwitz, age 55, is the Chief Financial Officer of Demeter, and
will be a principal of Demeter, pending approval by and
registration with the National Futures Association.  Mr. Horwitz
currently serves as an Executive Director and Controller within
the Global Wealth Management Group at Morgan Stanley.  Mr.
Horwitz joined Morgan Stanley in March 1984 and has held a
variety of positions throughout Morgan Stanley?s organization
during his tenure.  Mr. Horwitz received a B.A. degree from
Queens College and an MBA from Rutgers University.  Mr. Horwitz
is a Certified Public Accountant.

Other.  Effective July 21, 2006, Dean Witter Cornerstone Fund II
was renamed to Morgan Stanley Cornerstone Fund II L.P.


<page>
Item 6.  EXHIBITS
31.01	Certification of President of Demeter Management
Corporation, the general partner of the Partnership,
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.02	Certification of Chief Financial Officer of Demeter
Management Corporation, the general partner of the
Partnership, pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002.

32.01	Certification of President of Demeter Management
Corporation, the general partner of the Partnership,
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.

32.02	Certification of Chief Financial Officer of Demeter
Management Corporation, the general partner of the
Partnership, pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
































<page>





SIGNATURE



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




                        Morgan Stanley Cornerstone Fund II L.P.
                        (Registrant)

                        By: Demeter Management Corporation
                            (General Partner)

November 14, 2006       By: /s/ Lee Horwitz
                                Lee Horwitz
                                Chief Financial Officer



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















DEAN WITTER CORNERSTONE FUND II
NOTES TO FINANCIAL STATEMENTS (CONTINUED)






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