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, 2008 or

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

Commission File Number 0-23577


	MORGAN STANLEY DIVERSIFIED FUTURES FUND L.P.

	(Exact name of registrant as specified in its charter)

		Delaware						     13-3461507
(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, a non-accelerated filer, or a smaller
reporting company.  See the definitions of ?large accelerated filer?,
?accelerated filer? and ?smaller reporting company? in Rule 12b-2 of the
Exchange Act.

Large accelerated filer_______ 		Accelerated filer_______
Non-accelerated filer   X   		Smaller reporting company_______

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 DIVERSIFIED FUTURES FUND L.P.

INDEX TO QUARTERLY REPORT ON FORM 10-Q

September 30, 2008

<caption>



PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

				<c>
		Statements of Financial Condition as of September 30, 2008
		(Unaudited) and December 31, 2007..........................2

		Statements of Operations for the Three and Nine Months
		Ended September 30, 2008 and 2007 (Unaudited)..............3

		Statements of Changes in Partners? Capital for the
		Nine Months Ended September 30, 2008 and 2007 (Unaudited)..4

		Statements of Cash Flows for the Nine Months Ended
		September 30, 2008 and 2007 (Unaudited)....................5

		Condensed Schedules of Investments as of September 30, 2008
		(Unaudited) and December 31, 2007..........................6

		Notes to Financial Statements (Unaudited)...............7-16

Item 2.	Management?s Discussion and Analysis of
			Financial Condition and Results of Operations.......17-31

Item 3.	Quantitative and Qualitative Disclosures About
			Market Risk.........................................32-45

Item 4.	Controls and Procedures................................45

Item 4T.	Controls and Procedures................................45


PART II. OTHER INFORMATION

Item 1A.Risk Factors...........................................46

Item 5.	Other Information...................................46-47

Item 6.	Exhibits............................................47-48

</table>


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

	MORGAN STANLEY DIVERSIFIED FUTURES FUND L.P.
	STATEMENTS OF FINANCIAL CONDITION
<caption>
			September 30,	December 31,
			        2008        	        2007
			$	$
			(Unaudited)
ASSETS

		<c>	<c>
Trading Equity:
	Unrestricted cash	19,192,415	19,830,358
	Restricted cash	                  ?         	    1,879,193

	     Total cash	   19,192,415	   21,709,551

     Net unrealized gain on open contracts (MS&Co.)	948,505	261,807
     Net unrealized gain on open contracts (MSIP)	             381,965	         11,898

		Total net unrealized gain on open contracts	1,330,470	273,705

	Options purchased (proceeds paid $0
           and $1,448,845, respectively)	                  ?           	               1,131,684

		Total Trading Equity	20,522,885	23,114,940

Interest receivable (MS&Co.)	              12,563	         42,623

		Total Assets	   20,535,448	  23,157,563

LIABILITIES AND PARTNERS? CAPITAL

Liabilities

Redemptions payable	2,078,842	338,077
Accrued management fees 	          22,577	         27,464
Administrative expenses payable	             13,000	         14,000
Options written (premiums received $0
    and $1,415,459, respectively)				                          ?           	 	   1,131,684

		Total Liabilities	     2,114,419	    1,511,225

Partners? Capital

Limited Partners (16,060.699 and
	23,320.265 Units, respectively)	18,198,661	21,400,179
General Partner (196.245  and
      268.245 Units, respectively)	           222,368	       246,159

		Total Partners? Capital	       18,421,029	  21,646,338

		Total Liabilities and Partners? Capital	       20,535,448	  23,157,563

NET ASSET VALUE PER UNIT	                                            1,133.12               	         917.66
<fn>
	The accompanying notes are an integral part
	of these financial statements. </table>
- 2 -


<page> <table>  	MORGAN STANLEY DIVERSIFIED FUTURES FUND L.P.
	STATEMENTS OF OPERATIONS
(Unaudited)

<caption>
                            For the Three Months                       	  For the Nine Months
                           Ended September 30,                        Ended September 30,


                          2008   	               2007    	        2008   	    2007
                       $	                      $		             $	  $

	<c>		<c>	<c>	<c>
INVESTMENT INCOME
	Interest income (MS&Co.)	     59,812		       242,844   	   234,322		       823,248

EXPENSES
	Brokerage commissions (MS&Co.)	148,659	413,772	435,643		1,283,868
	Management fees	73,214	103,164  	247,544 	    	    326,175
	Administrative expenses	13,000	     18,000	43,000		      48,000
	Transaction fees and costs	7,117	     9,418	 23,878	           	34,410
	Incentive fee	    ?   	          ?            ?   	     319,068

		   Total Expenses 	     241,990	    544,354	    750,065		   2,011,521

NET INVESTMENT LOSS 	   (182,178)	   (301,510)	       (515,743)	          (1,188,273)

TRADING RESULTS
Trading profit (loss):
	Realized	1,444,622	(3,432,974)	3,806,585		(1,384,773)
	Net change in unrealized	     878,718	    (258,497)	    1,090,151	 	     380,607

	           Total Trading Results	   2,323,340	  (3,691,471)	   4,896,736		 (1,004,166)

NET INCOME (LOSS)	    2,141,162	 (3,992,981)	    4,380,993		  (2,192,439)

NET INCOME (LOSS) ALLOCATION

	Limited Partners	2,117,621	(3,948,611)	4,330,739	  	(2,166,880)
	General Partner 	23,541	(44,370)	50,254		(25,559)

NET INCOME (LOSS) PER UNIT

	Limited Partners     122.76                 (150.80)              215.46                 (83.50)
	General Partner      122.76                 (150.80)              215.46                 (83.50)



                                                                  Units                     Units                   Units	Units
WEIGHTED AVERAGE NUMBER
	OF UNITS OUTSTANDING                            18,864.904 		25,967.827	21,179.572		27,343.044

<fn>



The accompanying notes are an integral part
of these financial statements.
</table>
- 3 -
<page> <table> MORGAN STANLEY DIVERSIFIED FUTURES FUND L.P.
STATEMENTS OF CHANGES IN PARTNERS? CAPITAL
For the Nine Months Ended September 30, 2008 and 2007
(Unaudited)
<caption>



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

			<c>	<c>	<c>	<c>
Partners? Capital,
	December 31, 2006	  29,629.631	30,865,627	          341,508	              31,207,135

Net Loss                   	?		(2,166,880)	(25,559)	(2,192,439)

Redemptions	                                                   (4,428.733)	 (4,520,487)          (55,820)  	  (4,576,307)

Partners? Capital,
	September 30, 2007	    25,200.898	  24,178,260	  260,129	  24,438,389




Partners? Capital,
December 31, 2007	23,588.510	        21,400,179	246,159 	            21,646,338

Net Income                   	?		4,330,739	50,254	4,380,993

Redemptions	                                                   (7,331.566)	 (7,532,257)          (74,045)  	  (7,606,302)

Partners? Capital,
	September 30, 2008	    16,256.944	  18,198,661	  222,368	  18,421,029








<fn>






The accompanying notes are an integral part
	of these financial statements.
</table>
- 4 -
 <page> <table> 	MORGAN STANLEY DIVERSIFIED FUTURES FUND L.P.
	STATEMENTS OF CASH FLOWS
(Unaudited)


<caption>



				        For the Nine Months Ended September 30,

				                  2008        	             2007
				         $	     $


CASH FLOWS FROM OPERATING ACTIVITIES

			<c>	<c>
Net income (loss)	4,380,993	(2,192,439)
Noncash item included in net income (loss):
	Net change in unrealized	(1,090,151)	(380,607)

(Increase) decrease in operating assets:
	Restricted cash	1,879,193 	628,478
     Proceeds paid for options purchased				   1,448,845		   (2,084,979)
     Interest receivable (MS&Co.)		 		                     30,060	         	         42,250

Increase (decrease) in operating liabilities:
	Accrued management fees	                                 (4,887)           	(8,077)
	Administrative expenses payable	                                                   (1,000)                           (34,917)
	Premiums received for options written	    (1,415,459)	   2,139,161
   	Accrued incentive fee	              ?     	       (64,875)

Net cash provided by (used for) operating activities	      5,227,594	    (1,956,005)


CASH FLOWS FROM FINANCING ACTIVITIES

Cash paid for redemptions of Units	    (5,865,537)	    (4,619,080)

Net cash used for financing activities	   (5,685,537)	    (4,619,080)

Net decrease in unrestricted cash	(637,943)    	        (6,575,085)

Unrestricted cash at beginning of period	    19,830,358	   30,147,827

Unrestricted cash at end of period	    19,192,415	   23,572,742


<fn>


The accompanying notes are an integral part
	of these financial statements.
</table>
- 5 -
<page> <table> MORGAN STANLEY DIVERSIFIED FUTURES FUND L.P.
CONDENSED SCHEDULES OF INVESTMENTS
September 30, 2008 (Unaudited) and December 31, 2007

				<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, 2008, Partnership Net Assets:  $18,421,029





<c>
<c>
<c>
<c>
<c>
Commodity
       ?
         ?
    925,466
       5.02
  925,466
Equity
       ?
         ?
  231,473
       1.26
 231,473
Foreign currency
     (39,021)
       (0.21)
    656,822
       3.57
    617,801
Interest rate
      49,257
        0.26
         ?
       ?
     49,257






     Grand Total:
      10,236
        0.05
 1,813,761
       9.85
1,823,997

     Unrealized Currency Loss





  (493,527)

     Total Net Unrealized Gain


December 31, 2007, Partnership Net Assets:  $21,646,338



  1,330,470






Commodity
        4,079
        0.02
    258,330
       1.19
  262,409
Equity
         ?
          ?
    70,228
       0.33
  70,228
Foreign currency
      45,314
        0.21
   (159,957)
      (0.74)
   (114,643)
Interest rate
     (11,061)
       (0.05)
      36,751
       0.17
      25,690






     Grand Total:
      38,332
        0.18
   205,352
       0.95
243,684

     Unrealized Currency Gain





    30,021

     Total Net Unrealized Gain


  Fair Value
  $
Percentage of
   Net Assets
          %



Options purchased on Futures Contracts
              ?
         ?



Options purchased on Forward Contracts
      1,131,684
        5.23



Options written on Futures Contracts
              ?
         ?



Options written on Forward Contracts
     (1,131,684)
       (5.23)






   273,705
<fn>
The accompanying notes are an integral part
of these financial statements.
</table>
-	6 ?
<page> MORGAN STANLEY DIVERSIFIED FUTURES FUND L.P.
NOTES TO FINANCIAL STATEMENTS

September 30, 2008

(Unaudited)


The unaudited financial statements contained herein include, in
the opinion of management, all adjustments necessary for a fair
presentation of the financial condition and results of operations
of Morgan Stanley Diversified Futures Fund L.P. (the
"Partnership").  The financial statements and condensed notes
herein should be read in conjunction with the Partnership?s
December 31, 2007, Annual Report on Form 10-K.

1.  Organization
Morgan Stanley Diversified Futures Fund L.P. is a Delaware limited
partnership organized in 1987 to engage primarily in the
speculative trading of futures contracts, options on futures and
forward contracts, and forward contracts on physical commodities
and other commodity interests, including, but not limited to,
foreign currencies, financial instruments, metals, energy, and
agricultural products (collectively, "Futures Interests").

The Partnership may buy or write put and call options through
listed exchanges and the over-the-counter market.  The buyer has
the right to purchase (in the case of a call option) or sell (in
the case of a put option) a specified quantity of a specific
Futures Interest or underlying asset at a specified price prior to

- 7 -
<page> MORGAN STANLEY DIVERSIFIED FUTURES FUND L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

or on a specified expiration date.  The writer of an option is
exposed to the risk of loss if the market price of the underlying
asset declines (in the case of a put option) or increases (in the
case of a call option).  The writer of an option can never profit
by more than the premium paid by the buyer but can lose an
unlimited amount.

Premiums received/proceeds paid from writing/purchasing options
are recorded as liabilities/assets on the Statements of Financial
Condition and are subsequently adjusted to current values.  The
difference between the current value of the options and the
premiums received/proceeds paid is treated as an unrealized gain
or loss.

The Partnership?s general partner is Demeter Management
Corporation ("Demeter"). The commodity brokers are Morgan Stanley
& Co. Incorporated ("MS&Co.") and Morgan Stanley & Co.
International plc ("MSIP").  MS&Co. also acts as the counterparty
on all trading of foreign currency forward contracts.  Morgan
Stanley Capital Group Inc. ("MSCG") acts as the counterparty on
all trading of options on foreign currency forward contracts.
MSIP serves as the commodity broker for trades on the London Metal
Exchange. Demeter, MS&Co., MSIP, and MSCG are wholly-owned
subsidiaries of Morgan Stanley. Hyman Beck & Company Inc. (the
"Trading Advisor") is the trading advisor to the Partnership.
- 8 -
<page> MORGAN STANLEY DIVERSIFIED FUTURES FUND L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)


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 the Partnership?s average daily Net
Assets for the month at a rate equal to the monthly average yield
on the 4-week U.S. Treasury bill discount rate during such month.
The Partnership pays brokerage commissions to MS&Co.

3.  Income Taxes
No provision for income taxes has been made in the accompanying
financial statements, as partners are individually responsible
for reporting income or loss based upon their respective share of
the Partnership?s revenues or expenses for income tax purposes.
The Partnership files U.S. federal and state tax returns.  The
2004 through 2007 tax years generally remain subject to
examination by U.S. federal and most state tax authorities.

4.  Financial Instruments
The Partnership trades Futures 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

- 9 -
<page> MORGAN STANLEY DIVERSIFIED FUTURES FUND L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

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
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;
- 10 -
<page> MORGAN STANLEY DIVERSIFIED FUTURES FUND L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)


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 (losses) on open contracts, reported as a
component of "Trading Equity" on the Statements of Financial
Condition, and their longest contract maturities were as follows:

<table> <caption>
                  Net Unrealized Gains/(Losses)
                          on Open Contracts                Longest Maturities

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

			<c>		<c>		<c>		<c>		<c>
Sep. 30, 2008	712,669	 617,801	1,330,470	 Jun. 2009	  Dec. 2008
Dec. 31, 2007     388,364	(114,659)	  273,705	 Sep. 2008    Aug. 2008
</table>
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.

-	11 -
<page> MORGAN STANLEY DIVERSIFIED FUTURES FUND L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)


The Partnership also has credit risk because MS&Co., MSIP, and/or
MSCG act as the futures commission merchants or the counter-
parties, with respect to most of the Partnership?s assets.
Exchange-traded futures, exchange-traded forward, and exchange-
traded futures-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 acting as a commodity broker 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 $19,905,084 and
$22,097,915 at September 30, 2008, and December 31, 2007,
respectively. With respect to the Partnership?s off-exchange-
traded forward currency contracts and forward currency options
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.

                               - 12 -
<page> MORGAN STANLEY DIVERSIFIED FUTURES FUND L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)


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 Partnership is at
risk to the ability of MS&Co., the sole counterparty on all such
contracts, to perform.  With respect to those off-exchange-traded
forward currency options contracts, the Partnership is at risk to
the ability of MSCG, the sole counterparty on all such contracts,
to perform.  The Partnership has a netting agreement with each
counterparty. These agreements, which seek to reduce both the
Partnership?s and the counterparties? exposure on off-exchange-
traded forward currency contracts, including options on such
contracts, should materially decrease the Partnership?s credit
risk in the event of MS&Co.?s or MSCG?s bankruptcy or insolvency.

5.  New Accounting Developments
In September 2006, the Financial Accounting Standards Board
("FASB") issued Statement of Financial Accounting Standards No.
157 ("SFAS 157"), "Fair Value Measurements".  SFAS 157 requires
use of a fair value hierarchy that prioritizes the inputs to
valuation techniques used to measure fair value into three
levels: Level 1 - quoted market prices in active markets for
                              - 13 -

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

identical assets and liabilities; Level 2 - inputs other than
quoted market prices that are observable for the asset or
liability, either directly or indirectly (including quoted prices
for similar investments, interest rates, credit risk); and Level
3 - unobservable inputs for the asset or liability (including the
Partnership?s own assumptions used in determining the fair value
of investments).

Demeter evaluated the impact of adopting SFAS 157 on the
Partnership?s financial statements.  The Partnership adopted SFAS
157 as of January 1, 2008.  Based on its analysis, the effect of
applying SFAS 157 to the investments included in the financial
statements does not have a material impact on the Partnership?s
financial statements.

The following table summarizes the valuation of the Partnership?s
investments by the above SFAS 157 fair value hierarchy as of
September 30, 2008: <table> <caption>



Assets
Quoted Prices in
Active Markets for
  Identical Assets
        (Level 1)
Significant Other
     Observable
         Inputs
       (Level 2)
Significant
  Unobservable
    Inputs
  (Level 3)




      Total


 <c>
<c>
 <c>

<<c>
Unrealized gain on open contracts
      $712,669
         $617,801
 n/a

   $1,330,470
</table>



-	14 -
<page> MORGAN STANLEY DIVERSIFIED FUTURES FUND L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)


In March 2008, the FASB issued SFAS No. 161, Disclosures about
Derivative Instruments and Hedging Activities ("SFAS 161").  SFAS
161 is intended to improve financial reporting about derivative
instruments and hedging activities by requiring enhanced
disclosures to enable investors to better understand how those
instruments and activities are accounted for; how and why they are
used; and their effects on a Partnership?s financial position,
financial performance, and cash flows.  SFAS 161 is effective for
financial statements issued for fiscal years beginning after
November 15, 2008, and interim periods within those fiscal years.
The Partnership is currently evaluating the impact that the
adoption of SFAS No. 161 will have on its financial statement
disclosures.

6.  Restricted and Unrestricted Cash
As reflected on the Partnership?s Statements of Financial
Condition, restricted cash equals the cash portion of assets on
deposit to meet margin requirements plus the cash required to
offset unrealized losses on foreign currency forwards and options
and offset losses on offset London Metal Exchange positions.  All
of these amounts are maintained separately.  Cash that is not
classified as restricted cash is therefore classified as
unrestricted cash.


- 15 -


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


7.  Reclassifications

Certain prior year amounts relating to options on the Statements
of Cash Flows and Condensed Schedules of Investments for December
31, 2007, were reclassified to conform to 2008 presentation.
Certain prior year amounts on the Statements of Operations were
reclassified to conform to 2008 presentation. Such
reclassifications have no impact on the Partnership?s reported net
income (loss).

















- 16 -
<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 the Trading Advisor.
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
                               - 17 -
<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.

- 18 -
<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 Advisor
and the ability of the Trading Advisor?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, 2008 and 2007, and a general discussion of its trading
activities during each period.  It is important to note, however,
that the Trading Advisor trades in various markets at different
times and that prior activity in a particular market does not
mean that such market will be actively traded by the Trading
Advisor 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 Advisor?s trading
activities on behalf of the Partnership during the period in
question. Past performance is no guarantee of future results.
- 19 -
<page> The Partnership?s results of operations set forth in the
financial statements on pages 2 through 16 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 gain (loss)"
for open (unrealized) contracts, and recorded as "Realized trading
gain (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, administrative fees, incentive fees,
brokerage commissions, and transaction fees and costs, and
administrative expenses of the Partnership are recorded on an
accrual basis.

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

- 20 -
<page> For the Three and Nine Months Ended September 30, 2008
The Partnership recorded total trading results including interest
income totaling $2,383,152 and expenses totaling $241,990
resulting in net income of $2,141,162 for the three months ended
September 30, 2008.  The Partnership?s net asset value per Unit
increased from $1,010.36 at June 30, 2008, to $1,133.12 at
September 30, 2008.

The most significant trading gains of approximately 8.9% were
experienced within the currency sector, primarily during August
and September.  Such gains were recorded from short positions in
the Australian dollar and euro versus the U.S. dollar as the
value of the U.S. dollar increased relative to most of its rivals
in August after the U.S. Commerce Department reported a larger-
than-previously-estimated increase in Gross Domestic Product
during the second quarter.  The U.S. dollar then moved sharply
higher against these currencies during September in tandem with
surging U.S. Treasury prices amid a worldwide "flight-to-quality"
due to fears of an intense credit crunch and subsequent global
recession, resulting in further gains from short positions in
these currencies versus the U.S. dollar.  Meanwhile, short
positions in the Australian dollar versus the euro resulted in
gains as the value of the Australian dollar decreased relative to
the euro during September amid speculation that the Reserve Bank
of Australia would cut interest rates to combat slowing economic
growth.  Within the global stock index sector, gains of
approximately 2.8% were recorded, primarily during September,
                              - 21 -
<page> from short positions in U.S., European, and Pacific Rim
equity index futures as prices moved sharply lower amid
unprecedented U.S. financial market volatility and turmoil
following news of the collapse of a major U.S. investment bank
and the government rescue of a U.S. insurance giant.
Furthermore, global equity prices plunged after the U.S. House of
Representatives rejected the Economic Stabilization Act of 2008,
which would have allowed the U.S. Treasury to purchase troubled
mortgage-backed securities from U.S. financial institutions.
Within the metals markets, gains of approximately 2.1% were
experienced, primarily during August and September, from short
futures positions in copper, aluminum, and zinc as prices dropped
on concerns that turmoil in the financial markets would further
weaken the global economy and erode demand for base metals.
Elsewhere, short positions in silver futures resulted in gains
during August and September as prices declined due to a rise in
the value of the U.S. dollar.  Within the energy markets, gains
of approximately 1.4% were recorded throughout the majority of
the quarter from short futures positions in natural gas as prices
decreased amid rising inventories and news that the Atlantic
hurricane season's first storm had avoided the gas-producing
fields in the Gulf of Mexico.  Additional gains were experienced
from short positions in crude oil futures as prices moved lower
throughout the quarter amid signs that the U.S. economic slump
would extend into 2009 and curb future energy demand.  Further
gains of approximately 0.3% were recorded within the agricultural
markets, primarily during September, from

                           - 22 -
<page> in soybean oil and corn as prices declined amid news that
favorable weather might improve crop conditions in the U.S.
Midwest and speculation that a slowing U.S. economy might reduce
demand for alternative biofuels.  Smaller gains were experienced
from short positions in cotton futures as prices dropped to a
one-year low in September after the U.S. Department of
Agriculture reported exports remained below average due to a
decline in demand.  A portion of the Partnership?s gains for the
quarter was offset by losses of approximately 1.1% incurred
within the global interest rate sector, primarily during July,
from short positions in U.S. and European fixed-income futures as
prices increased amid a "flight-to-quality" due to the
aforementioned drop in the global equity markets and worries
regarding the fundamental health of the global economy.

The Partnership recorded total trading results including interest
income totaling $5,131,058 and expenses totaling $750,065,
resulting in net income of $4,380,993 for the nine months ended
September 30, 2008.  The Partnership?s net asset value per Unit
increased from $917.66 at December 31, 2007, to $1,133.12 at
September 30, 2008.

The most significant trading gains of approximately 14.6% were
recorded within the currency sector from long positions in the
euro and Swiss franc versus the U.S. dollar as the value of the
U.S. dollar moved lower against these currencies during January,
February, March, and June due to disappointing economic data in
                              - 23 -
<page> the U.S.  Newly established short positions in the
Australian dollar and euro versus the U.S. dollar resulted in
additional gains as the value of the U.S. dollar increased
relative to most of its rivals in August after the U.S. Commerce
Department reported a larger-than-previously-estimated increase
in Gross Domestic Product during the second quarter.  The U.S.
dollar then moved sharply higher against these currencies during
September in tandem with surging U.S. Treasury prices amid a
worldwide ?flight-to-quality? due to fears of an intense credit
crunch and subsequent global recession, resulting in further
gains from short positions in these currencies versus the U.S.
dollar.  Finally, short positions in the Australian dollar versus
the euro experienced gains as the value of the Australian dollar
decreased relative to the euro during September amid speculation
that the Reserve Bank of Australia would cut interest rates to
combat slowing economic growth.  Within the global stock index
sector, gains of approximately 5.5% were recorded, primarily
during the first quarter, from short positions in U.S., European,
and Pacific Rim equity index futures as prices declined on
concerns that a persistent U.S. housing slump, mounting losses
linked to U.S. sub-prime mortgage investments, rising commodity
prices, and a weakening job market would restrain consumer
spending, erode corporate earnings, and curb global economic
growth.  Additional gains were experienced in September from
short positions in global stock index futures as prices dropped
sharply amid unprecedented U.S. financial market volatility and
                            - 24 -
<page> turmoil.  Within the global interest rate sector, gains of
approximately 4.3% were recorded, primarily during January and
February, from long positions in U.S., German, and Japanese
interest rate futures as prices increased in a "flight-to-
quality" following the aforementioned sharp decline in global
equity prices and concerns that an economic slowdown in the
United States would weaken the global economy.  During May, newly
established short positions in European fixed-income futures
resulted in additional gains as prices declined after government
reports revealed accelerating inflation in the Euro-Zone.  Within
the energy markets, gains of approximately 1.0% were experienced,
primarily during the third quarter, from short positions in crude
oil futures as prices moved lower on signs that the U.S. economic
slump would extend into 2009 and curb future energy demand.
Additional gains were recorded from short futures positions in
natural gas as prices decreased throughout the third quarter amid
rising inventories and news that the Atlantic hurricane season's
first storm had avoided the gas-producing fields in the Gulf of
Mexico.  Further gains of approximately 0.3% were experienced
within the agricultural sector from long futures positions in
soybean oil and corn as prices increased during January and
February following news that global production might drop, while
rising energy prices might boost demand for alternative biofuels.
Smaller gains were recorded during September from newly
established short positions in soybean oil and corn futures as
prices declined amid news that favorable weather might improve
crop conditions in the U.S. Midwest and speculation that a
                             - 25 ?
<page> slowing U.S. economy would reduce demand for alternative
biofuels.  A portion of the Partnership?s gains for the first
nine months of the year was offset by losses of approximately
1.5% incurred with the metals markets, primarily during the first
quarter, from short futures positions in aluminum, zinc, and
copper as prices increased in January and February due to news of
weak global supplies amid rising demand from China and India.
During March, additional losses were experienced from newly
established long positions in aluminum futures as prices reversed
lower amid speculation that a slumping U.S. economy would lead to
a decline in global demand for base metals.  Smaller losses were
recorded from short futures positions in gold as prices reversed
sharply higher during September due to "safe haven" buying amid
global credit-market turmoil and uncertainty regarding the U.S.
financial system.

For the Three and Nine Months Ended September 30, 2007
The Partnership recorded total trading results including interest
income totaling $(3,448,627) and expenses totaling $544,354,
resulting in a net loss of $3,992,981 for the three months ended
September 30, 2007.  The Partnership?s net asset value per Unit
decreased from $1,120.54 at June 30, 2007, to $969.74 at
September 30, 2007.

The most significant trading losses of approximately 7.1% were
recorded in the global interest rate sector, primarily during
July and August, from short positions in U.S., European,
                            - 26 -
<page> Australian, and Canadian fixed-income futures as prices
reversed sharply higher in a worldwide "flight-to-quality" after
the significant decline in the global equity markets resulted in
substantially higher demand for the "safe haven" of government
bonds.  Further losses were incurred during September from newly
established long futures positions in European interest rates as
prices reversed lower after a rebound in global equities and the
U.S. Federal Reserve's decision to cut benchmark interest rates.
Additional losses of approximately 2.5% were incurred within the
currency sector, primarily during July and August, from short
positions in the Japanese yen versus the U.S. dollar, British
pound, and euro 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.  Elsewhere in the currency markets, short
positions in the Canadian dollar versus the U.S. dollar resulted
in losses as the value of the Canadian dollar increased relative
to the U.S. dollar in July and September amid rising energy
prices and data indicating a decrease in unemployment.  Within
the global stock index sector, losses of approximately 2.3% were
experienced, primarily during July and August, from long
positions in U.S., European, and Japanese equity index futures
as prices reversed lower on persistent concerns that the
collapsing U.S. sub-prime mortgage market and decreasing U.S.
real estate prices would pull the global economy into a
recession.  Furthermore, global equity index futures prices fell
                             - 27 -
<page> after news that China and India had increased their bank
reserve requirements, which added to worries about global cash
liquidity declining in the near future.  During September,
further losses were recorded from newly established short
positions in U.S. and European stock index futures as prices
moved higher after the U.S. Federal Reserve cut its benchmark
lending rate by half a percentage point in order to prevent the
aforementioned market decline and the continuing real estate
slump from dragging down the economy.  Additional losses of
approximately 2.1% were incurred within the agricultural sector,
primarily during August, from long futures positions in coffee
as prices declined amid technically-based selling.  Meanwhile,
additional losses were experienced throughout the majority of
the quarter from both long and short positions in cocoa futures
as prices moved without consistent direction amid conflicting
news regarding supply and demand.  Elsewhere, long positions in
sugar futures resulted in further losses as prices decreased
during August on concern that increased supplies from India, the
second-largest producer, would contribute to a global surplus.
Smaller losses of approximately 0.2% were recorded in the metals
markets, primarily during July, from long positions in gold
futures as prices were pulled lower amid heavy speculative
selling.  Additional losses were incurred in September from long
futures positions in copper and zinc as prices fell amid
speculation that a slumping housing market and slowing U.S.
economy would reduce demand for the base metals.  A portion of
the Partnership?s overall losses for the quarter was offset by
                             - 28 -
<page> gains of approximately 0.1% in the energy sector,
primarily during July and August, from short positions in
natural gas futures as prices declined on signs that inventories
were sufficient to meet demand.

The Partnership recorded total trading results including interest
income totaling $(180,918) and expenses totaling $2,011,521,
resulting in a net loss of $2,192,439 for the nine months ended
September 30, 2007.  The Partnership?s net asset value per Unit
decreased from $1,053.24 at December 31, 2006, to $969.74 at
September 30, 2007.

The most significant trading losses of approximately 2.5% were
recorded in the metals markets, primarily during March and
April, from short positions in copper futures as prices
increased after the release of stronger-than-expected Chinese
industrial data and the International Monetary Fund's strong
global growth forecasts bolstered sentiment that global demand
for base metals would increase in 2007.  Elsewhere in the metals
sector, long positions in gold futures resulted in losses during
March, May, and July as prices declined amid temporary strength
in the value of the U.S. dollar and heavy speculative selling.
Furthermore, losses were incurred from long futures positions in
aluminum and zinc as prices fell in May, June, and July on
worries regarding future Chinese demand and concern that
economic growth would slow.  Additional losses of approximately
2.2% were experienced within the global interest rate sector,
                            - 29 -
<page> primarily during February from short positions in U.S.
fixed-income futures as prices reversed sharply higher after a
massive sell-off in the global equity markets, which began on
February 27, 2007 following comments from former U.S. Federal
Reserve Chairman Alan Greenspan that the U.S. economy could be
due for a recession.  Further losses were recorded during July
and August from short futures positions in U.S. interest rates
as prices reversed sharply higher in a worldwide "flight-to-
quality" after the significant decline in the global equity
markets resulted in substantially higher demand for the "safe
haven" of government bonds.  Within the currency sector, losses
of approximately 1.9% were incurred primarily during March,
July, and August, from short positions in the Japanese yen
versus the euro and Australian dollar as the value of the
Japanese yen corrected sharply higher against these currencies
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.  Meanwhile, long
positions in the Swiss franc and Swedish krona versus the U.S.
dollar resulted in losses during January and May as the value of
the U.S. dollar reversed higher against these currencies after
stronger-than-expected U.S. economic data eased concerns of a
slowdown in the economy of the United States.  Furthermore, the
value of the Swiss franc and Swedish krona moved higher amid
data indicating accelerating inflation in Switzerland and
Sweden.  Additional losses of approximately 1.4% were
                             - 30 -
<page> experienced within the global stock index sector,
primarily during the first and third quarters, from long
positions in U.S., European, and Japanese equity index futures
as prices fell sharply in February and March after former U.S.
Federal Reserve Chairman Alan Greenspan indicated that the U.S.
economy could be due for a recession.  Additional losses were
recorded in July and August as prices moved sharply lower on
persistent concerns that the collapsing U.S. sub-prime mortgage
market and decreasing U.S. real estate prices would pull the
global economy into a recession.  Furthermore, global equity
index prices fell after news that China and India had
increased their bank reserve requirements, which added to
worries about global cash liquidity declining in the near
future.  Smaller losses of approximately 1.3% were incurred
within the agricultural markets primarily during January and
February from long positions in coffee futures as prices
declined amid a rise in production from Vietnam and speculation
that price increases imposed by large food companies during the
last quarter of 2006 would potentially curb demand in the United
States.  Elsewhere in the agricultural complex, short positions
in corn futures resulted in additional losses during May as
prices increased amid lower production and after a
representative from the European Union announced plans for an
increase in biodiesel usage to reduce the Euro-Zone?s dependence
on foreign oil.




- 31 -
<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 on such contracts 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
forward currency contracts and forward currency options 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
                             - 32 -
<page> 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 experience to date under
the "Partnership?s Value at Risk in Different Market Sectors"
section and significantly exceed the Value at Risk ("VaR") tables
disclosed.
- 33 -
<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 Advisor 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
                             - 34 -
<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
                             - 35 -
<page> reporting purposes only and is not utilized by either
Demeter or the Trading Advisor 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, 2008 and 2007.
At September 30, 2008 and 2007, the Partnership?s total
capitalization was approximately $18 million and $24 million,
respectively.

Primary Market          September 30, 2008     September 30, 2007
Risk Category	  	       Value at Risk          Value at Risk

Currency					(1.09)%		   	    (0.88)%

Interest Rate				(0.56)			    (0.64)

Equity					(0.35)			    (0.09)

Commodity				    	(0.75)			    (0.61)

Aggregate Value at Risk	 	(1.90)%		    	    (1.38)%




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 market categories
due to the diversification benefit across asset classes.
- 36 -
<page> Because the business of the Partnership is the speculative
trading of futures, forwards, and options on such contracts, 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, 2007, through September 30, 2008.

Primary Market Risk Category        High      Low      Average
Currency						(1.68)%	(0.61)%	(1.07)%

Interest Rate					(1.16)	(0.56)	(0.72)

Equity						(0.53)	(0.27)	(0.36)

Commodity						(0.75)	(0.38)	(0.60)


Aggregate Value at Risk			(2.57)%	(0.98)%	(1.65)%



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:
-	37 ?
<page>
*	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, 2008 and 2007, and for the four
quarter-end reporting periods from October 1, 2007, through
September 30, 2008.  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
                              - 38 -
<page> 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, 2008,
such amount was equal to approximately 102% 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.

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
                              - 39 -
<page> 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 Advisor 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 expropria-
tions, 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, 2008, by market sector.  It may be
anticipated, however, that these market exposures will vary
materially over time.



- 40 -
<page> Currency.   The largest market exposure of the Partnership
at September 30, 2008, 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 trades
a large number of currencies, including cross-rates - i.e.,
positions between two currencies other than the U.S. dollar.  At
September 30, 2008, the Partnership?s major exposures were to
British pound, Japanese yen, euro, and Australian dollar currency
crosses, as well as 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.  At September 30, 2008, the Partnership had market
exposure to the global interest rate sector.  This exposure was
primarily spread across European, Japanese, U.S., Australian, and
Canadian 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.
                              - 41 -
<page> The Partnership?s primary interest rate exposure is
generally to interest rate fluctuations in the U.S. and the other
G-7 countries.  The G-7 countries consist of France, the U.S.,
the United Kingdom, Germany, Japan, Italy, and Canada.  However,
the Partnership also takes futures positions in the government
debt of smaller countries - e.g., Australia.  Demeter anticipates
that the G-7 countries? interest rates will remain the primary
interest rate exposure of the Partnership for the foreseeable
future.  The speculative futures positions held by the
Partnership may range from short to long-term instruments.
Consequently, changes in short, medium, or long-term interest
rates may have an effect on the Partnership.

Equity.  At September 30, 2008, the Partnership had market
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, 2008, the Partnership?s primary
exposures were to the Nikkei 225 (Japan), FTSE 100 (United
Kingdom), S&P 500 (U.S.), CAC 40 (France), SPI 200 (Australia),
and DAX (Germany) stock indices.  The Partnership is exposed to
the risk of adverse price trends or static markets in the U.S.,
European, and Pacific Rim 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.

- 42 -
<page> 	Commodity.
Soft Commodities and Agriculturals.  The second largest
market exposure of the Partnership at September 30, 2008, was
to the markets that comprise these sectors.  Most of the
exposure was to the coffee, cotton, soybean oil, sugar,
cocoa, wheat, and corn markets.  Supply and demand
inequalities, severe weather disruptions, and market
expectations affect price movements in these markets.

		Metals.	  The third largest market exposure of the Partnership
at September 30, 2008, was to the metals sector.  The
Partnership's metals exposure was to fluctuations in the
price of base metals, such as zinc, copper, lead, and
aluminum, as well as precious metals, such as silver.
Economic forces, supply and demand inequalities, geopolitical
factors, and market expectations influence price movements in
these markets.  The Trading Advisor utilizes its trading
systems to take positions when market opportunities develop,
and Demeter anticipates that the Trading Advisor will
continue to do so.

Energy.  At September 30, 2008, the Partnership had market
exposure to the energy sector.  The Partnership?s energy
exposure was primarily to futures contracts in natural gas
and crude oil.  Price movements in these markets result from
geopolitical developments, particularly in the Middle East,
as well as weather patterns and other economic fundamentals.
                          - 43 -
<page> Significant profits and losses, which have been
experienced in the past, are expected to continue to be
experienced in the future.  Natural gas has exhibited
volatility in prices resulting from weather pattern 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, 2008:

Foreign Currency Balances.  The Partnership?s primary foreign
currency balances at September 30, 2008, were in Australian
dollars, Japanese yen, British pounds, Canadian dollars,
euros, Swiss francs, and Mexican pesos.  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 Advisor, separately, attempt to
manage the risk of the Partnership?s open positions in essentially
the same manner in all market categories traded.  Demeter attempts
to manage market exposure by diversifying the Partnership?s assets
among different market sectors through the selection of a
Commodity Trading Advisor and by daily monitoring its performance.
In addition, the Trading Advisor establishes Diversification
                            - 44 -
<page> 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 Advisor.

Item 4.  CONTROLS AND PROCEDURES
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.

Changes in Internal Control Over Financial Reporting
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.

-	45 -
<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, 2007, and the Partnership?s Reports on
Form 10-Q for the quarters ended March 31, 2008 and June 30, 2008.

Item 5.  OTHER INFORMATION
Limited Partners of the Partnership are advised that Demeter has
determined to withdraw from the Partnership effective November 30,
2008, and thereafter will commence dissolution of the Partnership
pursuant to the Partnership?s Limited Partnership Agreement.  In
connection with such withdrawal, Demeter terminated trading for
the Partnership effective October 31, 2008.  Following termination
of trading for the Partnership, all Partnership assets will be
paid interest at the rate equal to the average yield on 4-week
U.S. Treasury Bills, with your share of interest credited to your
Units.  The management and brokerage fees on any assets remaining
in the Partnership after October 31, 2008, will be waived, given
the absence of any further futures trading by the Partnership.


- 46 -
<page> Through November 30, 2008, qualified Limited Partners may,
under certain conditions, redeem some or all of their interest in
the Partnership and use the proceeds of such redemption to
purchase an interest in another Morgan Stanley managed futures
partnership for which Demeter is the general partner (an offering
in any such managed futures partnership is by prospectus or
offering memorandum only).  Otherwise, Limited Partners may simply
redeem their interest in the Partnership and receive the proceeds
of such redemption in cash.  Whether you exchange or redeem your
Partnership Units, there will be no minimum holding period
requirement or redemption charge.  Limited Partners who do not
redeem their interest in the Partnership prior to November 30,
2008, should be aware that final distribution of any remaining
Partnership assets is anticipated to be made on or about December
15, 2008.

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.


- 47 -
<page>
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.



























- 48 -


<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 Diversified Futures Fund L.P.
                      (Registrant)

                      By:   Demeter Management Corporation
                            (General Partner)

November 14, 2008     By:/s/Christian Angstadt
                            Christian Angstadt
                            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.