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, 2007 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
522 Fifth Avenue, 13th Floor
New York, NY 						              10036
(Address of principal executive offices)                (Zip Code)

Registrant's telephone number, including area code   (212) 296-1999







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


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

Yes    X        No


Indicate by check mark whether the registrant is 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.

	INDEX TO QUARTERLY REPORT ON FORM 10-Q

	September 30, 2007



<caption>

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

				<c>
		Statements of Financial Condition as of September 30, 2007
		(Unaudited) and December 31, 2006 ......................... 2

		Statements of Operations for the Three and Nine Months
		Ended September 30, 2007 and 2006 	(Unaudited)...............3

		Statements of Changes in Partners? Capital for the
		Nine Months Ended September 30, 2007 and 2006 	(Unaudited)...4

		Statements of Cash Flows for the Nine Months Ended
		September 30, 2007 and 2006 (Unaudited).....................5

		Schedules of Investments as of September 30, 2007
		(Unaudited) and December 31, 2006...........................6

		Notes to Financial Statements (Unaudited) ...............7-13

Item 2.	Management?s Discussion and Analysis of
			Financial Condition and Results of Operations .......14-28

Item 3.	Quantitative and Qualitative Disclosures about
			Market Risk ........................................ 28-40

Item 4.	Controls and Procedures .............................40-41

Item 4T.	Controls and Procedures ................................41


PART II. OTHER INFORMATION

Item 1A.Risk Factors............................................42

Item 6.	Exhibits................................................42


</table>



<page> <table> PART I.  FINANCIAL INFORMATION

Item 1.  Financial Statements

	MORGAN STANLEY CORNERSTONE FUND II L.P.
	STATEMENTS OF FINANCIAL CONDITION
<caption>
	September 30,	December 31,
	        2007        	        2006
	$	$
	(Unaudited)
ASSETS

	<c>	<c>
Equity in futures interests trading accounts:
	Unrestricted cash	6,957,525	8,331,036
	Restricted cash	      294,937	        524,953

	     Total cash	    7,252,462	     8,855,989

	Net unrealized gain on open contracts (MS&Co.)	     236,073	       258,505

	     Total Trading Equity	7,488,535	 9,114,494

Due from MS&Co.	               21,596	         16,888
Interest receivable (MS&Co.)	       19,900               	         29,322

	     Total Assets	   7,530,031	    9,160,704

LIABILITIES AND PARTNERS' CAPITAL

Liabilities

Redemptions payable	92,992	86,657
Accrued administrative expenses	22,310	         29,687
Accrued management fees	       21,898	          26,632

   	    Total Liabilities	     137,200	        142,976

Partners? Capital

Limited Partners (2,132.944 and
   2,525.775 Units, respectively)	7,136,644	8,722,240
General Partner (76.567 and
   85.567 Units, respectively)	                                                                 256,187	         295,488

	     Total Partners? Capital	    7,392,831	      9,017,728

	     Total Liabilities and Partners? Capital	    7,530,031	      9,160,704

NET ASSET VALUE PER UNIT	      3,345.91	                             3,453.29


<fn>
	The accompanying notes are an integral part
	of these financial statements.
</table>
<page> <table> 	MORGAN STANLEY CORNERSTONE FUND II L.P.
	STATEMENTS OF OPERATIONS
(Unaudited)

<caption>

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

                               2007   	        2006    	       2007   	    2006
                             $	               $		           $ 	 $

	<c>	<c>			<c>			<c>
INVESTMENT INCOME
	Interest income (MS&Co.)	       70,341		        94,278		    235,586		          303,671

EXPENSES
	Brokerage commissions (MS&Co.)	113,582	143,709	365,356		488,866
	Management fees	    67,412	  83,124	214,352 	 	281,447
	Common administrative expenses	12,000    	    13,000	36,000	     	     36,000
	Transaction fees and costs	         4,665	         10,305	     23,810		        32,844

		   Total Expenses 	     197,659	      250,138		    639,518	      839,157

NET INVESTMENT LOSS 	    (127,318)	     (155,860)	   (403,932)		     (535,486)

TRADING RESULTS
Trading profit (loss):
	Realized	(414,391)	 (180,031)	142,020		(352,425)
	Net change in unrealized	     128,656	     130,800 	      (22,432)		     (344,033)


	           Total Trading Results	    (285,735)	      (49,231)	     119,588		     (696,458)

NET LOSS	    (413,053)	    (205,091)	   (284,344)		  (1,231,944)

NET LOSS ALLOCATION

	Limited Partners	(399,735)	 (198,837) 	 (275,808)            (1,194,778)
	General Partner 	                    (13,318)	  (6,254)	(8,536)		(37,166)


NET LOSS PER UNIT

	Limited Partners                                                	(173.95)	(67.56)	(107.38)                (388.93)
	General Partner                                                	(173.95)	(67.56)	(107.38)                (388.93)



			                                                                       Units	  Units   	    Units      	           Units
WEIGHTED AVERAGE NUMBER
	OF UNITS OUTSTANDING                                 2,279.158	 2,819.554               2,421.537	              3,024.976

<fn>
	The accompanying notes are an integral part
	of these financial statements.
</table>
<page> <table> MORGAN STANLEY CORNERSTONE FUND II L.P.
	STATEMENTS OF CHANGES IN PARTNERS? CAPITAL
	For the Nine Months Ended September 30, 2007 and 2006
	(Unaudited)


<caption>


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

			<c>	<c>	<c>	<c>
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




Partners? Capital,
   December 31, 2006	2,611.342	 8,722,240	295,488	9,017,728

Net Loss                                                                 ?		(275,808)	(8,536)	(284,344)

Redemptions                                                    (401.831)		   (1,309,788)	       (30,765)	   (1,340,553)

Partners? Capital,
   September 30, 2007                                    2,209.511		 7,136,644	  256,187	  7,392,831







<fn>






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


<caption>


				   For the Nine Months Ended September 30,

				            2007      	      2006
				     $	$

CASH FLOWS FROM OPERATING ACTIVITIES

			<c>	<c>
Net loss		(284,344)	(1,231,944)
Noncash item included in net loss:
	Net change in unrealized	22,432	344,033

(Increase) decrease in operating assets:
	Restricted cash	230,016	561,894
	Due from MS&Co.	(4,708)	(32,345)
	Interest receivable (MS&Co.)	9,422	 5,207

Decrease in operating liabilities:
	Accrued administrative expenses	                              (7,377)	           (8,657)
	Accrued management fees	         (4,734)	          (10,459)

Net cash used for operating activities	       (39,293)	        (372,271)


CASH FLOWS FROM FINANCING ACTIVITIES

Cash paid for redemptions of Units	  (1,334,218)	     (2,343,304)

Net cash used for financing activities	   (1,334,218)	     (2,343,304)

Net decrease in unrestricted cash	(1,373,511)	(2,715,575)

Unrestricted cash at beginning of period	   8,331,036	   11,242,503

Unrestricted cash at end of period	   6,957,525	     8,526,928




<fn>


	The accompanying notes are an integral part
	of these financial statements.
</table>
<page> <table> MORGAN STANLEY CORNERSTONE FUND II L.P.
SCHEDULES OF INVESTMENTS
September 30, 2007 (Unaudited) and December 31, 2006

<caption>



Futures and Forward Contracts
       Long
   Unrealized
  Gain/(Loss)

Percentage of
   Net Assets
    Short
Unrealized
Gain/(Loss)

Percentage of
   Net Assets
        Net
   Unrealized
   Gain/(Loss)

$
%
$
%
   $

September 30, 2007, Partnership Net Assets:  $7,392,831





<c>
<c>
<c>
<c>
<c>
Commodity
    21,200
        0.29
      2,920
        0.04
   24,120
Equity
      22,164
        0.30
      3,476
        0.05
     25,640
Foreign currency
    158,627
        2.15
   (47,566)
       (0.64)
 111,061
Interest rate
        4,093
        0.05
    (5,578)
       (0.08)
      (1,485)






     Grand Total:
     206,084
        2.79
  (46,748)
       (0.63)
    159,336

     Unrealized Currency Gain





      76,737

     Total Net Unrealized Gain per Statement of Financial Condition



     236,073


December 31, 2006, Partnership Net Assets:  $9,017,728









Commodity
             ?
          ?
33,387
        0.37
    33,387
Equity
       25,871
        0.29
            ?
          ?
  25,871
Foreign currency
     102,080
        1.13
    76,510
        0.85
 178,590
Interest rate
     (82,786)
       (0.92)
    89,408
        0.99
      6,622






     Grand Total:
       45,165
        0.50
  199,305
        2.21
    244,470

     Unrealized Currency Gain





     14,035

     Total Net Unrealized Gain per Statement of Financial Condition



  258,505






<fn>





The accompanying notes are an integral part
 of these financial statements.
</table>



<page> MORGAN STANLEY CORNERSTONE FUND II L.P.
NOTES TO FINANCIAL STATEMENTS
September 30, 2007
(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. (the ?Partnership?).
The financial statements and condensed notes herein should be read
in conjunction with the Partnership's December 31, 2006, Annual
Report on Form 10-K.

1.  Organization
Morgan Stanley Cornerstone Fund II L.P. 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.

The Partnership?s general partner is Demeter Management
Corporation (?Demeter?). Morgan Stanley & Co. Incorporated
(?MS&Co.?) is the Partnership?s principal commodity broker-dealer
and also acts as the counterparty on all trading of foreign
currency forward contracts.  In addition, Morgan Stanley & Co.
International plc (?MSIP?) serves as the commodity broker for
<page> MORGAN STANLEY CORNERSTONE FUND II L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

trades on the London Metal Exchange.  Demeter, MS&Co., and MSIP
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 MS&Co. and MSIP in
futures, forward, and options trading accounts to meet margin
requirements as needed.  Monthly, MS&Co. pays the Partnership
interest income on 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 MS&Co.

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.

<page> MORGAN STANLEY CORNERSTONE FUND II L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

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

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

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.
<page> MORGAN STANLEY CORNERSTONE FUND II L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

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:
                      Net Unrealized Gains
                        On Open Contracts                 Longest Maturities

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

Sep. 30, 2007	205,727	30,346	236,073	Dec. 2008	Dec. 2007
Dec. 31, 2006	 65,559	192,946	258,505	Dec. 2007	Mar. 2007

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 MS&Co. and MSIP act
as the futures commission merchants or the counterparties, with
respect to most of the Partnership?s assets. Exchange-traded
futures, exchange-traded forward, and exchange-traded futures-

<page> MORGAN STANLEY CORNERSTONE FUND II L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)


styled options contracts are marked to market on a daily basis,
with variations in value settled on a daily basis. MS&Co. and
MSIP, each as a futures commission merchant for the Partnership?s
exchange-traded futures, exchange-traded forward, and exchange-
traded 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 futures, exchange-traded forward, and exchange-
traded futures-styled options contracts, including an amount equal
to the net unrealized gains (losses) on all open exchange-traded
futures, exchange-traded forward, and exchange-traded futures-
styled options contracts, which funds, in the aggregate, totaled
$7,458,189 and $8,921,548 at September 30, 2007, and December 31,
2006, respectively. With respect to the Partnership?s off-
exchange-traded forward currency contracts, there are no daily
settlements of variation in value, nor is there any requirement
that an amount equal to the net unrealized gains (losses) on such
contracts be segregated.  However, the Partnership is required to
meet margin requirements equal to the net unrealized loss on open
forward currency contracts in the Partnership accounts with the
counterparty, which is accomplished by daily maintenance of the
cash balance in a custody account held at MS&Co.  With respect to
those off-exchange-traded forward currency contracts, the

<page> MORGAN STANLEY CORNERSTONE FUND II L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)


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.

4.  New Accounting Developments
In July 2006, the Financial Accounting Standards Board (?FASB?)
issued interpretation No. 48, ?Accounting for Uncertainty in
Income Taxes ? an interpretation of FASB Statement 109? (?FIN
48?).  FIN 48 clarifies the accounting for income taxes by
prescribing the minimum recognition threshold a tax position must
meet before being recognized in the financial statements.  FIN 48
was effective for the Partnership as of January 1, 2007.  Based
on its analysis, management believes that the adoption of FIN 48
has no impact on the Partnership?s financial statements.




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


<page> MORGAN STANLEY CORNERSTONE FUND II L.P.
NOTES TO FINANCIAL STATEMENTS (CONCLUDED)


effective for the Partnership as of January 1, 2008.  The impact
to the Partnership?s financial statements, if any, is currently
being assessed.

5.  Restricted and Unrestricted Cash
As reflected on the Partnership?s Statements of Financial
Condition, restricted cash represents cash on deposit to satisfy
margin requirements for trading.  These amounts of restricted cash
are maintained in separate trading accounts.  Cash that is not on
deposit to satisfy the margin requirements for trading is
reflected as unrestricted cash.





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

Liquidity.  The Partnership deposits its assets with MS&Co. and
MSIP as commodity brokers in separate futures, forward, 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 to take
advantage of price movements in the futures, forward, and options
markets.  The following presents a summary of the Partnership?s
operations for the three and nine month periods ended September
30, 2007, and 2006, 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 the period in question. Past
performance is no guarantee of future results.
<page> The Partnership?s results of operations set forth in the
financial statements on pages 2 through 13 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 a foreign currency forward contract 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
critical accounting policies other than those presently used
could reasonably affect reported amounts.


<page>
For the Three and Nine Months Ended September 30, 2007
The Partnership recorded total trading results including interest
income totaling $(215,394) and expenses totaling $197,659
resulting in a net loss of $413,053 for the three months ended
September 30, 2007. The Partnership?s net asset value per Unit
decreased from $3,519.86 at June 30, 2007, to $3,345.91 at
September 30, 2007.

The most significant trading losses of approximately 8.2% were
recorded in the currency sector, primarily during July and
August, from both short and long positions in the South African
rand versus the U.S. dollar as the value of the rand moved
without consistent direction amid uncertainty regarding the
future interest rate policy of the South African Reserve Bank.
Further losses were incurred primarily during July from short
positions in the Japanese yen versus the U.S. dollar as the value
of the Japanese yen corrected higher against most of its major
rivals when traders reduced ?carry-trade? positions after the
sell-off in the global equity markets resulted in investors
trimming ?riskier? assets funded by loans in Japan.  During
August, long positions in the Australian dollar and euro versus
the U.S. dollar experienced losses during the first half of the
month as the value of the U.S. dollar reversed higher against
these currencies as continued extreme volatility in the global
equity markets and widening credit losses tied to U.S. sub-prime
<page> loans resulted in substantially stronger demand for U.S.
dollar-denominated government bonds.  A portion of the
Partnership?s losses during the quarter was offset by gains of
approximately 1.2% recorded in the energy markets primarily
during July and September from long futures positions in crude
oil and its related products as prices moved higher amid worries
that supplies of European North Sea oil were dwindling, concerns
regarding U.S. refinery capacity, and after continuous hurricane
activity in the Gulf of Mexico threatened production facilities.
Within the global interest rate sector, short positions in U.S.
and German fixed-income futures resulted in further gains of
approximately 0.7% during July as prices declined due to investor
sentiment that consistently strong economic data and rising
global inflation would result in higher interest rates in the
European Union and United States.  Additional gains were
experienced during August from newly established long positions
in U.S. and German fixed-income futures as prices moved sharply
higher in a worldwide ?flight-to-quality? after the significant
decline in the global equity markets, spurred by losses in the
U.S. sub-prime mortgage sector, caused investors to seek the
?safe haven? of government bonds.  Smaller gains of approximately
0.5% were recorded in the global stock index sector primarily
during September from long positions in U.S., Pacific Rim, and
German equity index futures as prices moved higher leading up to
and after the 50 basis point cut in interest rates by the U.S.
<page> Federal Reserve, as well as on sentiment that the easing
U.S. Federal Reserve policy would continue.

The Partnership recorded total trading results including interest
income totaling $355,174 and expenses totaling $639,518, resulting
in a net loss of $284,344 for the nine months ended September 30,
2007. The Partnership?s net asset value per Unit decreased from
$3,453.29 at December 31, 2006, to $3,345.91 at September 30,
2007.

The most significant trading losses of approximately 11.6% were
incurred in the currency sector, primarily during January, March,
July, and August, from both short and long positions in the South
African rand versus the U.S. dollar as the value of the South
African rand moved without consistent direction due to
conflicting economic data out of South Africa.  Further losses
were recorded from short positions in the Mexican peso versus the
U.S. dollar primarily during March and April as the value of the
Mexican peso moved higher amid speculation of an interest rate
hike by the Bank of Mexico.  Finally, losses were experienced
primarily during August from long positions in the British pound,
euro, Australian dollar, and New Zealand dollar versus the U.S.
dollar as the value of the U.S. dollar reversed higher against
these currencies as continued extreme volatility in the global
equity markets and widening credit losses tied to U.S. sub-prime
loans resulted in substantially stronger demand for U.S. dollar-
denominated government bonds.  A portion of the Partnership?s
<page> losses in the first nine months of the year was offset by
gains of approximately 5.5% recorded in the global interest rate
sector primarily during January, May, and June from short
positions in European fixed-income futures as prices fell
initially after reports showed confidence in the Euro-Zone
economy stayed close to a six-year high in December 2006.  Prices
continued to fall after strong economic data reported in the
United Kingdom and Germany increased inflation concerns.
Elsewhere, gains were recorded during January, May, June, and
July from short positions in U.S. interest rate futures as prices
fell amid strength in the equity markets and consistently strong
economic data out of the United States and Euro-Zone.  Finally,
newly established long positions in U.S. and German fixed-income
futures resulted in gains during August as prices moved sharply
higher in a worldwide ?flight-to-quality? after the significant
decline in the global equity markets, spurred by losses in the
U.S. sub-prime mortgage sector, caused investors to seek the
?safe haven? of government bonds.  Additional gains of
approximately 0.8% were experienced in the global stock index
sector, primarily during April, May, June, and September, from
long positions in German equity index futures as prices moved
higher on continued strong corporate earnings and increased
merger and acquisition activity.  Furthermore, gains were
recorded primarily during June and September from long positions
in Taiwanese equity index futures as prices increased amid
investor optimism regarding future earnings in the technology
sector.  Smaller gains of approximately 0.5% were recorded during
<page> January from short futures positions in crude oil and its
related products as prices declined on skepticism that OPEC would
cut production as much as originally pledged and after U.S.
government data showed a larger than expected increase in
domestic inventories of gasoline and heating oil.  Newly
established long futures positions in crude oil and its related
products resulted in gains during February, July, and September
as prices moved higher amid geopolitical uncertainty in Iraq and
news that Iran would continue with its nuclear program.
Furthermore, prices were pressured higher amid worries that
supplies of European North Sea oil were dwindling, concerns
regarding U.S. refinery capacity, and after continuous hurricane
activity in the Gulf of Mexico threatened production facilities.

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.
<page> 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
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
<page> 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 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
<page> 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
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-
<page> 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
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
<page> 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 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
<page> 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.

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, exchange-traded forward, and exchange-traded
futures-styled options contracts are settled daily through
variation margin.  Gains and losses on off-exchange-traded <page>
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 forward
currency contracts in the Partnership accounts with the
counterparty, which is accomplished by daily maintenance of the
cash balance in a custody account held at 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
<page> under the ?Partnership?s Value at Risk in Different Market
Sectors? section and significantly exceed the Value at Risk
(?VaR?) tables disclosed.

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

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

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

The Partnership?s risk exposure in the market sectors traded by
the Trading 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 <page>
constructing a distribution of hypothetical daily changes in the
value of a trading portfolio.  The VaR model takes into account
linear exposures to risk including equity and commodity prices,
interest rates, foreign exchange rates, and correlation among
these variables. The hypothetical changes in portfolio value are
based on daily percentage changes observed in key market indices
or other market factors (?market risk factors?) to which the
portfolio is sensitive.  The one-day 99% confidence level of the
Partnership?s VaR corresponds to the negative change in portfolio
value that, based on observed market risk factors, would have been
exceeded once in 100 trading days, or one day in 100.  VaR
typically does not represent the worst case outcome.   Demeter
uses approximately four years of daily market data (1,000
observations) and 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.

<page> VaR models, including the Partnership?s, are continually
evolving as trading portfolios become more diverse and modeling
techniques and systems capabilities improve.  Please note that
the VaR model is used to numerically quantify market risk for
historic reporting purposes only and is not utilized by either
Demeter or the Trading 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, 2007, and 2006.
At September 30, 2007, and 2006, the Partnership?s total
capitalization was approximately $7 million and $9 million,
respectively.

Primary Market         September 30, 2007   September 30, 2006
Risk Category             Value at Risk        Value at Risk

Currency	        (1.73)% 	 (2.05)%

Equity	(0.36)	(1.29)

Interest Rate	(0.32)	     (1.55)

Commodity	(0.41)	(0.53)

Aggregate Value at Risk	      (2.01)%	(2.42)%


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

Because the business of the Partnership is the speculative
trading of futures, 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, 2006, through September 30, 2007.

Primary Market Risk Category	High	   Low	     Average
Currency	(2.97)%	(1.73)%	(2.44)%

Equity	(0.82)	(0.31)	(0.47)

Interest Rate	(0.61)	(0.32)	(0.46)

Commodity	(0.52)	(0.25)	(0.41)


Aggregate Value at Risk	(3.09)%	(2.01)%	(2.56)%





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

In addition, the VaR tables above, as well as the past performance
of the Partnership, give no indication of the Partnership?s
potential ?risk of ruin?.
<page>
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, 2006, through September 30,
2007.  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 MS&Co.; as of September 30, 2007, such
amount is equal to approximately 97% 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 <page>
associated potential losses, taking into account the leverage,
optionality, and multiplier features of the Partnership?s market-
sensitive instruments, in relation to the Partnership?s Net
Assets.

Qualitative Disclosures Regarding Primary Trading Risk Exposures
The following qualitative disclosures regarding the Partnership?s
market risk exposures - except for (A) those disclosures that are
statements of historical fact and (B) the descriptions of how the
Partnership manages its primary market risk exposures - constitute
forward-looking statements within the meaning of Section 27A of
the Securities Act and Section 21E of the Securities Exchange Act.
The Partnership?s primary market risk exposures, as well as the
strategies used and to be used by Demeter and the Trading 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.

<page> The following were the primary trading risk exposures of
the Partnership at September 30, 2007, by market sector.  It may
be anticipated, however, that these market exposures will vary
materially over time.

Currency.  The largest market exposure of the Partnership at
September 30, 2007, 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, 2007, 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.

Equity.  The third largest market exposure of the Partnership at
September 30, 2007, was to the global stock index sector,
primarily to equity price risk in the G-7 countries.  The G-7
countries consist of France, the U.S., Britain, Germany, Japan,
Italy, and Canada.  The stock index futures traded by the
Partnership are by law limited to futures on broadly-based
indices.  At September 30, 2007, the Partnership?s primary
exposures were to the S&P 500 (U.S.), NASDAQ 100 (U.S.), DAX
<page> (Germany), S&P/MIB Index (Italy), Hang Seng (China), Euro
Stoxx 50 (Europe), and TAIWAN (Taiwan) 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.

Interest Rate.  At September 30, 2007, the Partnership had market
exposure to the global interest rate sector.  This exposure was
primarily spread across Japanese, U.S., and European 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 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.


<page>
Commodity.
Energy.  The second largest market exposure of the
Partnership at September 30, 2007, 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
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, 2007:

Foreign Currency Balances.  The Partnership?s primary foreign
currency balances at September 30, 2007, were in the 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.

<page>
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,
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.

<page>

(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.

Item 4T.	CONTROLS AND PROCEDURES
Not applicable.



<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, 2006, and the Partnership?s Report on Form
10Q for the quarters ended March 31, 2007, and June 30, 2007.

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 13, 2007       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)