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 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











44:
45:  (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.
53:
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 DIVERSIFIED FUTURES FUND 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.......14-29

Item 3.	Quantitative and Qualitative Disclosures about
			Market Risk.........................................29-42

Item 4.	Controls and Procedures.............................42-43

Item 4T.	Controls and Procedures................................43


PART II. OTHER INFORMATION

Item 1A.Risk Factors...........................................44

Item 6.	Exhibits...............................................44
</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,
			        2007        	        2006
			$	$
			(Unaudited)
ASSETS

		<c>	<c>
Equity in futures interests trading accounts:
	Unrestricted cash	23,572,742	30,147,827
	Restricted cash	         792,957	    1,421,435

	     Total cash	    24,365,699	  31,569,262

     Net unrealized gain on open contracts (MS&Co.)	447,128	    101,838
     Net unrealized gain on open contracts (MSIP)	        112,467     	        77,188

		Total net unrealized gain on open contracts	         559,595	      179,026

	Net option premiums	         (54,144)	                    ?

		Total Trading Equity	24,871,150	31,748,288

Interest receivable (MS&Co.)	             65,344    	      107,594

		Total Assets	   24,936,494	 31,855,882

LIABILITIES AND PARTNERS? CAPITAL

Liabilities

Redemptions payable	448,695	491,468
Accrued management fees 	31,410	        39,487
Administrative expenses payable	        18,000	       52,917
Accrued incentive fee	              ?    	        64,875

		Total Liabilities	      498,105	      648,747

Partners? Capital

Limited Partners (24,932.653 and
	29,305.386 Units, respectively)	24,178,260	30,865,627
General Partner (268.245 and
      324.245 Units, respectively)	      260,129	      341,508

		Total Partners? Capital	   24,438,389	  31,207,135

		Total Liabilities and Partners? Capital	   24,936,494	  31,855,882
NET ASSET VALUE PER UNIT	                                                           969.74	       1,053.24
<fn>

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

<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,

                                      2007                2006    	        2007   	    2006
                                      $	                      $		             $	  $

	<c>		<c>		<c>			<c>
INVESTMENT INCOME
	Interest income (MS&Co.)	       242,844		       351,558   	   823,248        	    1,005,318

EXPENSES
	Brokerage commissions (MS&Co.)	413,772	374,920	1,283,868		1,242,394
	Management fees	103,164	143,004  	 326,175	    	    559,653
	Administrative expenses	18,000	       21,000	48,000		       76,000
	Transaction fees and costs	9,418	        22,589	 34,410	            	76,417
	Incentive fee	           ?    	           ?    	     319,068		           ?

		   Total Expenses 	    544,354	     561,513	   2,011,521		  1,954,464

NET INVESTMENT LOSS 	   (301,510)	    (209,955)	   (1,188,273)             (949,146)

TRADING RESULTS
Trading profit (loss):
	Realized	(3,462,578)	2,068,004	(1,384,735)		5,128,672
	Net change in unrealized	      (228,893)	  (2,483,734)	     380,569 		  (2,783,498)

	           Total Trading Results	   (3,691,471)	     (415,730)	 (1,004,166)		    2,345,174

NET INCOME (LOSS) 	   (3,992,981)	     (625,685)	  (2,192,439)		   1,396,028

NET INCOME (LOSS) ALLOCATION

	Limited Partners	(3,948,611)	(618,176)	(2,166,880)	  	1,383,744
	General Partner 	(44,370)	(7,509)	(25,559)		12,284

NET INCOME (LOSS) PER UNIT

	Limited Partners	(150.80)	 (17.78)	(83.50)	31.87
	General Partner 	(150.80)	(17.78)	(83.50)	31.87



                                                           Units	                       Units   	        Units      	         Units
WEIGHTED AVERAGE NUMBER
   OF UNITS OUTSTANDING             25,967.827             32,998.338         27,343.044	  34,999.049       		 	(0.19)

<fn>

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

<page> <table> MORGAN STANLEY DIVERSIFIED FUTURES FUND 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	  38,406.074	38,064,633	          406,938	              38,471,571

Net Income                   	?		1,383,744	12,284	1,396,028

Redemptions	   (6,342.318)	 (6,668,992)          (58,251)   	  (6,727,243)

Partners? Capital,
	September 30, 2006	   32,063.756	  32,779,385	  360,971	  33,140,356





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






<fn>








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

<page> <table>  	MORGAN STANLEY DIVERSIFIED FUTURES FUND 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 income (loss)	(2,192,439)	1,396,028
Noncash item included in net income (loss):
	Net change in unrealized	(380,569)	2,783,498

(Increase) decrease in operating assets:
	Restricted cash	628,478	2,026,557
	Net option premiums	54,144	?
     Interest receivable (MS&Co.)		 			         42,250	         	       (26,871)

Decrease in operating liabilities:
	Accrued management fees 	(8,077) 	         (73,547)
	Administrative expenses payable	                            (34,917)	(69,770)
	Accrued incentive fees	        (64,875)	                               ?

Net cash provided by (used for) operating activities	    (1,956,005)	      6,035,895


CASH FLOWS FROM FINANCING ACTIVITIES

Cash paid for redemptions of Units	    (4,619,080)	    (6,854,638)

Net cash used for financing activities	     (4,619,080)	    (6,854,638)

Net decrease in unrestricted cash	     (6,575,085)	        (818,743)

Unrestricted cash at beginning of period	     30,147,827	   34,746,433

Unrestricted cash at end of period	     23,572,742	   33,927,690



<fn>

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



<page> <table> MORGAN STANLEY DIVERSIFIED FUTURES FUND 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:  $24,438,389





<c>
<c>
<c>
<c>
<c>
Commodity
     (93,215)
       (0.38)
    194,944
       0.80
   101,729
Equity
          ?
          ?
     (6,545)
      (0.03)
    (6,545)
Foreign currency
      88,268
        0.36
    372,710
       1.53
   460,978
Interest rate
   (126,883)
       (0.52)
        3,181
       0.01
   (123,702)






     Grand Total:
   (131,830)
       (0.54)
    564,290
       2.31
   432,460

     Unrealized Currency Gain





   127,135

     Total Net Unrealized Gain per Statement of Financial Condition



   559,595







December 31, 2006, Partnership Net Assets:  $31,207,135










Commodity
      83,712
        0.27
      88,033
       0.28
   171,745
Equity
  152,030
        0.48
         ?
          ?
 152,030
Foreign currency
      52,612
        0.17
     (24,884)
      (0.08)
     27,728
Interest rate
  (262,014)
       (0.84)
      89,200
       0.29
   (172,814)






     Grand Total:
     26,340
        0.08
    152,349
       0.49
   178,689

     Unrealized Currency Gain





          337

     Total Net Unrealized Gain per Statement of Financial Condition



   179,026




<fn>


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




<page> MORGAN STANLEY DIVERSIFIED FUTURES FUND 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 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, 2006, 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.

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 contracts.  In addition, Morgan Stanley & Co.
International plc (?MSIP?) serves as the commodity broker for

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

trades on the London Metal Exchange.  Morgan Stanley Capital Group
Inc. ("MSCG") acts as the counterparty on all trading of options
on foreign currency forward contracts.  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.

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.  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.  Financial Instruments
The Partnership trades 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.  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


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

and the potential inability of counterparties to perform under the
terms of the contracts. There are numerous factors which may
significantly influence the market value of these contracts,
including interest rate volatility.

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

The Partnership?s contracts are accounted for on a trade-date
basis and marked to market on a daily basis.  The Partnership
accounts for its derivative investments in accordance with the
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:



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


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

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

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


                        Net Unrealized Gains
                          on Open Contracts                Longest Maturities

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

Sep. 30, 2007	 98,616	460,979	  559,595	 Aug. 2008	  Aug. 2008
Dec. 31, 2006     151,298	 27,728	  179,026	 Sep. 2007    Mar. 2007





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

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., 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 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 $24,464,315 and


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

$31,720,560 at September 30, 2007, and December 31, 2006, respect-
ively. 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.  However, the Partner-
ship 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, should materially decrease the Partnership?s credit
risk in the event of MS&Co.?s or MSCG?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



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

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
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 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

<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 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, 2007, and 2006, 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.

<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 $(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,
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
<page> 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
after news that China and India 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

<page> 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
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

<page> industrial data and the International Monetary Fund's
strong global growth forecasts bolstered sentiment that global
demand for base metals would increase this year.  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, 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 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
<page> 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 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
<page> 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.


For the Three and Nine Months Ended September 30, 2006
The Partnership recorded total trading results including interest
income totaling $(64,172) and expenses totaling $561,513,
resulting in a net loss of $625,685 for the three months ended
September 30, 2006.  The Partnership?s net asset value per Unit
decreased from $1,051.36 at June 30, 2006, to $1,033.58 at
September 30, 2006.

The most significant trading losses of approximately 2.2% were
incurred within the currency markets from short and long U.S.
dollar positions against the euro, Swiss franc, Swedish krona,
Australian dollar, and Singapore dollar. Short positions in the
U.S. dollar against the euro, Swiss franc, and Swedish krona
incurred losses during early July as the U.S. dollar
strengthened following narrower than expected May U.S. trade
deficit data. Furthermore, the value of the euro moved lower
after the European Central Bank decided to keep interest rates
unchanged. Additional losses were recorded toward the end of
July from newly established short positions in the Swiss franc
and Swedish krona, as well as existing short positions in the
Australian dollar, versus the U.S. dollar as the value of the
U.S. dollar moved lower on fears of a slowing economy and weaker
<page> than expected U.S. Gross Domestic Product growth. Further
losses in the currency markets were incurred from short
positions in the U.S. dollar versus the Swiss franc, euro,
Australian dollar, and Singapore dollar as the U.S. dollar
reversed higher at the end of August and into September after
revisions to U.S. quarterly productivity data showed unit labor
costs rose last year at the fastest pace since 1990. Additional
losses of approximately 0.5% were recorded in the agricultural
complex from short positions in coffee futures as prices
increased during August, hitting seven-year highs, on concerns
of tight supplies and increased demand.  Elsewhere in the
agricultural complex, short positions in corn futures incurred
losses as prices rose during July and August on reports of low
inventories and high demand amid an increase in ethanol
production. A portion of the Partnership?s overall losses for
the quarter was offset by gains of approximately 0.4%
experienced in the global interest rate sector, primarily during
August, from long positions in long-term Japanese and U.S.
fixed-income futures as prices increased on higher demand amid
concerns of a slowing global economy and news that Iran would
continue its nuclear research program. Japanese fixed-income
futures prices increased after lower than expected inflation
data dampened expectations for an interest rate hike by the Bank
of Japan in the near future, while U.S. interest rate futures
prices were supported higher by government reports showing a
slowdown in the U.S. economy and soft inflation data.  Elsewhere
in the global interest rate sector, short positions in short-
term British fixed-income futures experienced gains as prices
<page> fell after an unexpected interest rate hike by the Bank
of England.

The Partnership recorded total trading results including interest
income totaling $3,350,492 and expenses totaling $1,954,464,
resulting in net income of $1,396,028 for the nine months ended
September 30, 2006.  The Partnership?s net asset value per Unit
increased from $1,001.71 at December 31, 2005, to $1,033.58 at
September 30, 2006.

The most significant trading gains of approximately 9.4% were
experienced from long futures positions in base and precious
metals.  Copper, aluminum, zinc, and nickel futures prices
strengthened throughout a majority of the year amid weak
supplies, forecasts for continued buying in China, and
acceleration in demand from Japan, Europe, and the U.S.  Within
the precious metals markets, gold and silver futures prices
moved higher on persistent demand from foreign central banks.
Additional gains of approximately 3.3% were recorded in the
global interest rate sector, primarily during March and April,
from short positions in European and U.S. fixed-income futures.
Rising equity prices and strong economic growth pressured
European fixed-income futures prices lower, while U.S. fixed-
income futures prices declined following the release of stronger
than expected economic data. Additional gains were recorded in
the global interest rate sector during August from long
positions in long-term Japanese and U.S. fixed-income futures as
prices increased on higher demand amid concerns of a slowing
<page> global economy and news that Iran would continue its
nuclear research program. Japanese fixed-income futures prices
also increased after lower than expected inflation data dampened
expectations for an interest rate hike by the Bank of Japan in
the near future, while U.S. interest rate futures prices were
supported higher by government reports showing a slowdown in the
U.S. economy and soft inflation data.  A portion of these gains
for the first nine months of the year was offset by losses of
approximately 3.5% incurred in the energy futures markets during
February from long positions in crude oil futures 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 were incurred in the energy
markets during May from long futures positions in crude oil and
its related products as prices fell on renewed optimism that the
standoff between Iran and the West could be resolved
diplomatically.  In June, short futures positions in crude oil
and its related products incurred losses as prices reversed
higher amid reports from the U.S. Department of Energy showing
lower than expected levels of domestic gasoline inventories and
fears of supply disruptions in the Gulf of Mexico. Losses of
approximately 2.9% were experienced within the currency sector
from long U.S. dollar positions versus the Australian dollar and
Japanese yen as the U.S. dollar?s value reversed lower during
January on expectations that the U.S. Federal Reserve?s interest
rate tightening campaign might soon come to an end.  Also <page>
pressuring the value of the U.S. dollar lower was speculation
that several major central banks would diversify some of their
assets away from the U.S. dollar.   Further losses in the
currency sector were experienced during February from short U.S.
dollar positions relative to the Australian dollar and Japanese
yen as the value of the U.S. dollar reversed higher after
declining U.S. unemployment and increased wage inflation data
led investors to predict that U.S. interest rates would continue
to increase.  The value of the Australian dollar also moved
lower in the wake of a temporary decline in gold prices.  During
June, long positions in the Japanese yen versus the U.S. dollar
recorded further losses as the U.S. dollar reversed higher
against most of its rivals amid diplomatic developments made
between the U.S. and Iran regarding Iran?s nuclear research
program, as well as the news of the confirmed death of insurgent
leader Abu Musab al-Zarqawi in Iraq.  Furthermore, the value of
the U.S. dollar continued to move higher in the days leading up
to the U.S. Federal Reserve?s 17th consecutive interest rate
hike.   Meanwhile, the value of the Japanese yen declined during
the first half of June relative to the U.S. dollar after
comments from Bank of Japan Governor Toshihiko Fukui implied
that the Bank of Japan will not raise interest rates in the
near term, thus continuing Japan?s ?zero-interest-rate policy?.
Losses were also experienced during July and May from short
positions in the British pound versus the euro and U.S. dollar
as the British pound strengthened on solid housing and consumer-
price data out of the United Kingdom. During July and September,
losses were recorded from long and short positions in the U.S.
<page> dollar against the Australian dollar, Swiss franc, and
euro as the value of the U.S. dollar fluctuated amid uncertainty
regarding the future of the U.S. Federal Reserve?s interest rate
policy. In the global stock index sector, losses of
approximately 1.9% were recorded from long positions in U.S.,
European, and Hong Kong stock index futures as prices declined
during May due to inflation concerns and uncertainty regarding
future interest rate policy.  Further losses in the global stock
index sector were incurred during June from short positions in
U.S. and Hong Kong stock index futures as prices reversed higher
on hopes of a pause in the U.S. interest rate tightening
campaign. Smaller losses of approximately 1.0% were incurred in
the agricultural complex during May from short positions in corn
futures as prices rose on news of strong demand and bullish
export data.  Additional losses were incurred as prices
continued to increase during July and August on reports of low
inventories and as demand remained high amid an increase in
ethanol production. Elsewhere in the agricultural complex,
losses were recorded, primarily during February, from long
positions in coffee futures as prices declined on news of crop
growth and higher harvest rates from Brazil, the world?s largest
coffee producer. In addition, losses were recorded in August
from short positions in coffee futures as prices increased on
concerns of tight supplies amid speculation of lower production
and increased demand.  Meanwhile, losses were experienced from
both long and short positions in cocoa futures as prices moved
without consistent direction throughout a majority of the year
amid conflicting news regarding supply and demand.
<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 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
<page> 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.

<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
these variables. The hypothetical changes in portfolio value are
<page> 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
reporting purposes only and is not utilized by either Demeter or
the Trading Advisor in their daily risk management activities.
<page> 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.
The Partnership?s VaR at September 30, 2006, was zero for all
market categories because its open positions had been offset.  At
September 30, 2007, and 2006, the Partnership?s total
capitalization was approximately $24 million and $33 million,
respectively.

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

Currency					(0.88)%		  	    -  %

Interest Rate				(0.64)			    -

Equity				     (0.09)			    -

Commodity				    	(0.61)		   	    -

Aggregate Value at Risk	    	(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.

<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, 2006, through September 30, 2007.

Primary Market Risk Category        High      Low      Average
Currency						(1.22)%	(0.78)%	(0.94)%

Interest Rate					(1.17)	(0.54)	(0.81)

Equity						(0.65)	(0.09)	(0.45)

Commodity						(0.77)	(0.38)	(0.55)


Aggregate Value at Risk			(1.60)%	(1.20)%	(1.39)%



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:

<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, 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
<page> 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
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
<page> 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, 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
<page> 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, 2007, the Partnership?s major
exposures were to outright U.S. dollar positions.  Outright
positions consist of the U.S. dollar vs. other currencies.  These
other currencies include major and minor currencies.  Demeter
does not anticipate that the risk associated with the
Partnership?s currency trades will change significantly in the
future.

Interest Rate.  The third largest market exposure of the
Partnership at September 30, 2007, was to the global interest
rate sector.  This exposure was primarily spread across European,
U.S., 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.  The Partnership?s primary interest rate exposure
is generally to interest rate fluctuations in the U.S. and the
other G-7 countries.  The G-7 countries consist of France, the
U.S., Britain, Germany, Japan, Italy, and Canada.  However, the
Partnership also takes futures positions in the government debt
of smaller countries ? e.g., Australia.  Demeter anticipates that
<page> the G-7 countries? interest rate 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, 2007, 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, 2007, the Partnership?s primary
exposure was to the CAC 40 (France) stock index.  The Partnership
is exposed to the risk of adverse price trends or static markets
in the European stock indices.  Static markets would not cause
major market changes, but would make it difficult for the
Partnership to avoid trendless price movements, resulting in
numerous small losses.

Commodity:
		Metals.	 The second largest market exposure of the Partnership
at September 30, 2007, was to the metals sector.  The
Partnership's metals exposure was to fluctuations in the
price of base metals, such as aluminum and zinc, and precious
metals, such as gold.  Economic forces, supply and demand
inequalities, geopolitical factors, and market expectations
influence price movements in these markets.  The Trading
Advisor utilizes the trading system(s) to take positions when
<page> market opportunities develop, and Demeter anticipates
that the Partnership will continue to do so.

		Soft Commodities and Agriculturals.  At September 30, 2007,
the Partnership had market exposure to the markets that
comprise these sectors.  Most of the exposure was to the
coffee, soybean oil, and corn markets.  Supply and demand
inequalities, severe weather disruptions, and market
expectations affect price movements in these markets.

		Energy.  At September 30, 2007, the Partnership had market
exposure to the energy sector.  The Partnership?s primary
energy exposure was to futures contracts in natural gas.
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 British
pounds, Australian dollars, Swiss francs, Canadian dollars,
New Zealand dollars, Japanese yen, euros, Norwegian krone,
Mexican pesos, and South African rand.  The Partnership
controls the non-trading risk of foreign currency balances by
<page> 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 and trading approaches, and by
monitoring the performance of the Trading Advisor daily.  In
addition, the Trading Advisor establishes diversification
guidelines, often set in terms of the maximum margin to be
committed to positions in any one market sector or market-
sensitive instrument.

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

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 Diversified Futures Fund L.P.
                      (Registrant)

                      By:   Demeter Management Corporation
                            (General Partner)

November 14, 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.