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 June 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

330 Madison Avenue, 8th Floor, New York, NY 10017

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

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

Yes    X       	No___________


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

Large accelerated filer___Accelerated filer___Non-accelerated filer  X


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



<page> <table> MORGAN STANLEY DIVERSIFIED FUTURES FUND L.P.

INDEX TO QUARTERLY REPORT ON FORM 10-Q

June 30, 2007

<caption>



PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

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

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

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

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

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

Item 2.	Management?s Discussion and Analysis of
			Financial Condition and Results of Operations.......13-28

Item 3.	Quantitative and Qualitative Disclosures about
			Market Risk.........................................28-41

Item 4.	Controls and Procedures.............................41-42

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


PART II. OTHER INFORMATION

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

Item 6.	Exhibits...............................................43
</table>


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

	MORGAN STANLEY DIVERSIFIED FUTURES FUND L.P.
	STATEMENTS OF FINANCIAL CONDITION
<caption>

			June 30,	December 31,
			        2007        	        2006
			$	$
			(Unaudited)
ASSETS

		<c>	<c>
Equity in futures interests trading accounts:
	Unrestricted cash	27,975,685	30,147,827
	Restricted cash	    1,411,379	    1,421,435

	     Total cash	   29,387,064	  31,569,262

     Net unrealized gain on open contracts (MS&Co.)	1,063,317	    101,838
     Net unrealized gain (loss) on open contracts (MSIL)	          (274,829)	        77,188

		Total net unrealized gain on open contracts	       788,488	      179,026

	Net option premiums	       315,229	                              -

		Total Trading Equity	30,490,781	31,748,288

Interest receivable (MS&Co.)	        89,177	      107,594
Due from MS&Co.	        83,817	              -

		Total Assets	  30,663,775	 31,855,882

LIABILITIES AND PARTNERS? CAPITAL

Liabilities

Redemptions payable	409,780	491,468
Accrued incentive fees	319,068	        64,875
Accrued management fees 	37,218	        39,487
Administrative expenses payable	      18,210	       52,917

		Total Liabilities	    784,276	      648,747

Partners? Capital

Limited Partners (26,371.057 and
	29,305.386 Units, respectively)	29,549,786	30,865,627
General Partner (294.245 and
      324.245 Units, respectively)	      329,713	      341,508
		Total Partners? Capital	   29,879,499	  31,207,135
		Total Liabilities and Partners? Capital	   30,663,775	  31,855,882
NET ASSET VALUE PER UNIT	                                       1,120.54              	       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 Six Months
          Ended June 30,                               Ended June 30,


                2007   	               2006    	        2007   	    2006
                   $	                  $	             $	  $

	<c>		<c>		<c>			<c>
INVESTMENT INCOME
	Interest income (MS&Co.)	    278,673		       344,726   	    580,404	       653,760

EXPENSES
	Brokerage commissions (MS&Co.)	490,553	415,739	870,096		867,474
	Incentive fees	319,068	-     	319,068		-
	Management fees	109,400	196,024  	223,011 	    	    416,649
	Administrative expenses	18,000	     25,000	30,000		      55,000
	Transaction fees and costs	     13,144	    26,531	      24,992 	           	53,828

		   Total Expenses 	    950,165	   663,294	  1,467,167		  1,392,951

NET INVESTMENT LOSS 	   (671,492)	  (318,568)	    (886,763)	             (739,191)

TRADING RESULTS
Trading profit (loss):
	Realized	3,855,763	393,571	2,077,843		3,060,668
	Net change in unrealized	    (419,271)	   569,524	      609,462	 	   (299,764)

	           Total Trading Results	   3,436,492	   963,095	   2,687,305		   2,760,904

NET INCOME 	    2,765,000	   644,527	  1,800,542		  2,021,713

NET INCOME ALLOCATION

	Limited Partners	2,735,479	639,920	1,781,731	  	2,001,920
	General Partner 	29,521	4,607	18,811		19,793

NET INCOME PER UNIT

	Limited Partners                     	  100.33	    12.27                    67.30                  49.65
	General Partner                            	  100.33	    12.27                    67.30                  49.65

<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 Six Months Ended June 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                                                              ?    	             2,001,920	19,793	2,021,713

Redemptions	     (4,508.774)	       (4,822,711)        	     (32,212)	     (4,854,923)

Partners? Capital,
June 30, 2006	    33,897.300	   35,243,842	     394,519	 35,638,361



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

Net Income                                                              ?    	             1,781,731	18,811	1,800,542

Redemptions	   (2,964.329)	       (3,097,572)        	     (30,606)	     (3,128,178)

Partners? Capital,
June 30, 2007	    26,665.302	   29,549,786	     329,713	 29,879,499




<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 Six Months Ended June 30,

				                  2007        	        2006
				         $	$


CASH FLOWS FROM OPERATING ACTIVITIES

			<c>	<c>
Net income 	1,800,542	2,021,713
Noncash item included in net income:
	Net change in unrealized	(609,462)	299,764

(Increase) decrease in operating assets:
	Restricted cash	10,056	832,493
     Net option premiums						      (315,229)			-
     Interest receivable (MS&Co.)		 			         18,417	         	         (7,134)
     Due from MS&Co.						        (83,817)			 -

Increase (decrease) in operating liabilities:
	Accrued incentive fee	254,193	-
	Accrued management fees 	(2,269) 	(36,239)
	Administrative expenses payable 	       (34,707)	                           (49,159)

Net cash provided by operating activities	    1,037,724	      3,061,438


CASH FLOWS FROM FINANCING ACTIVITIES

Cash paid for redemptions of Units	   (3,209,866)	   (5,186,798)

Net cash used for financing activities	   (3,209,866)	   (5,186,798)

Net decrease in unrestricted cash	(2,172,142)	(2,125,360)

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

Unrestricted cash at end of period	   27,975,685	   32,621,073


<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

June 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 (?MSIL?) 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.  Effective April 13, 2007,
Morgan Stanley & Co. International Limited changed its name to
Morgan Stanley & Co. International plc.  Morgan Stanley Capital
Group Inc. ("MSCG") acts as the counterparty on all trading of
options on foreign currency forward contracts.  Demeter, MS&Co.,
MSIL, 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 MSIL 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 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


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

for delayed delivery of an instrument at a specified date and
price.  Risk arises from changes in the value of these contracts
and the potential inability of counterparties to perform under the
terms of the contracts. There are numerous factors which may
significantly influence the market value of these contracts,
including interest rate volatility.

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

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



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

financial instrument or other contract that has all three of the
following characteristics:

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

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

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

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

Jun. 30, 2007	732,290	 56,198	  788,488	 Jun. 2008	  Jun. 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., MSIL, 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 MSIL, 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 $30,119,354 and


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

$31,720,560 at June 30, 2007, and December 31, 2006, 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.  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, should materially decrease the
Partnership?s credit risk in the event of MS&Co.?s or MSCG?s
bankruptcy or insolvency.




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

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

In September 2006, the FASB issued SFAS No. 157, ?Fair Value
Measurements? (?SFAS No. 157?).  SFAS No. 157 defines fair value,
establishes a framework for measuring fair value, and expands
disclosures about fair value measurements.  SFAS No. 157 is
effective for the Partnership as of January 1, 2008.  The impact
to the Partnership?s Financial Statements, if any, is currently
being assessed.














<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
MSIL 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 six month periods ended June 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 12 of this report are
prepared in accordance with accounting principles generally
accepted in the United States of America, which require the use of
certain accounting policies that affect the amounts reported in
these financial statements, including the following:  The
contracts the Partnership trades are accounted for on a trade-date
basis and marked to market on a daily basis.  The difference
between their cost and market value is recorded on the Statements
of Operations as ?Net change in unrealized trading profit (loss)?
for open (unrealized) contracts, and recorded as ?Realized trading
profit (loss)? when open positions are closed out.  The sum of
these amounts constitutes the Partnership?s trading results.  The
market value of a futures contract is the settlement price on the
exchange on which that futures contract is traded on a particular
day. The value of 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 Six Months Ended June 30, 2007
The Partnership recorded total trading results including interest
income totaling $3,715,165 and expenses totaling $950,165,
resulting in net income of $2,765,000 for the three months ended
June 30, 2007.  The Partnership?s net asset value per Unit
increased from $1,020.21 at March 31, 2007, to $1,120.54 at June
30, 2007.

The most significant trading gains of approximately 6.5% were
experienced in the global interest rate sector, primarily during
May and June, from short positions in European fixed-income
futures as prices fell sharply lower due to a report that showed
real Gross Domestic Product in the Euro-Zone increased more than
expected in the first quarter of 2007.  In addition, prices were
pressured lower after reports showed German investor confidence
rose during May and Italian retail sales were stronger than
expected during April.  Finally, European fixed-income futures
prices plunged toward the end of May after news that Germany's
unemployment rate held at a six-year low, while French
unemployment dropped to the lowest level in 24 years.  Meanwhile,
gains were also recorded from short positions in Canadian and
Australian interest rate futures during May as prices declined
amid strength in regional equity markets and consistently strong
economic data out of Canada and Australia.  Additional gains were
recorded from short positions in U.S. fixed-income futures
throughout the quarter as prices moved lower after the

<page> Philadelphia Federal Reserve's index of regional
manufacturing increased more than expected in April and the
Federal Reserve Bank of Richmond President Jeffrey Lacker stated
there were still inflationary concerns present in the U.S.
economy.  Additional gains of approximately 2.4% were experienced
in the currency sector throughout the quarter primarily from
short positions in the Japanese yen versus the U.S. dollar,
British pound, and euro as the value of the Japanese yen weakened
against its major rivals amid expectations that strengthening
global equity markets might give investors more confidence to buy
higher-yielding assets financed with money borrowed in Japan,
thereby continuing the carry-trade.  Additionally, the value of
the Japanese yen moved lower after news that the Tankan survey
was weaker than expected, leading investors to believe that the
Bank of Japan would not raise interest rates.  Further gains were
recorded from long positions in the Australian dollar, British
pound, euro, and New Zealand dollar versus the U.S. dollar as
strong economic data out of Australia, the United Kingdom,
European Union, and New Zealand added to growing investor
sentiment that the respective Central Banks of these countries
would raise interest rates in order to combat inflation, thus
pushing the value of those currencies higher relative to the U.S.
dollar.  Lastly, gains were recorded from long positions in the
Canadian dollar versus the U.S. dollar as the value of the
Canadian dollar strengthened in tandem with rising commodities
prices and speculation that the Bank of Canada might continue
raising interest rates.  Within the global stock index sector,
<page> gains of approximately 1.3% were recorded primarily during
April and May from long positions in European and U.S. equity
index futures as prices rose due to the aforementioned strong
economic data in the Euro-Zone and United States, as well as
consistently strong corporate earnings amid increased global
merger and acquisition activity.  Smaller gains of approximately
0.3% were recorded in the agricultural markets, primarily during
April, from short positions in cotton futures as prices dropped
to a five-month low after U.S. exporters reported a decrease in
Chinese demand.  Additional gains were recorded during April from
short positions in sugar futures as prices moved lower after
India, the world?s second-biggest producer of sugar, produced a
record output of this commodity.  Elsewhere, long positions in
cocoa futures resulted in gains during June as prices increased
amid concerns that there might be a world production deficit due
to dry weather in Western Africa.  A portion of the Partnership?s
gains in the second quarter was offset by losses of approximately
1.7% recorded within the metals sector during April from short
positions in copper and zinc futures as prices rose on
speculation that strengthening global equity markets would spur
an increase in global demand for base metals.  During May, long
positions in gold futures resulted in further losses as prices
declined due to speculation selling.  Additional losses were
recorded from long positions in aluminum futures during May and
June as prices decreased after the Chinese government announced
that it would raise export taxes for base metals and on
speculation that rising production and inventories might create a
global surplus.
<page> The Partnership recorded total trading results including
interest income totaling $3,267,709 and expenses totaling
$1,467,167, resulting in net income of $1,800,542 for the six
months ended June 30, 2007.  The Partnership?s net asset value per
Unit increased from $1,053.24 at December 31, 2006, to $1,120.54
at June 30, 2007.

The most significant trading gains of approximately 5.3% were
recorded in the global interest rate sector throughout a
majority of the year from short positions in European fixed-
income futures as prices trended lower amid consistently strong
consumer sentiment and unemployment data out of Germany, France,
and the United Kingdom.  Elsewhere, additional gains were
recorded from short positions in Australian and Canadian fixed-
income futures as prices declined amid strength in regional
equity markets and consistently strong economic data out of
Australia and Canada. Additional gains of approximately 1.0%
were experienced in the global stock index sector from long
positions in European equity index futures as prices increased
during April due to the aforementioned strong economic data in
the Euro-Zone, as well as consistently strong corporate earnings
amid increased global merger and acquisition activity.
Additional gains of approximately 0.8% were experienced in the
agricultural markets during March, April, and June from long
positions in cocoa futures after political unrest in the Ivory
Coast, the world?s biggest cocoa grower, raised concerns that
fighting might resume in the country and cut production.

<page> Meanwhile, gains were recorded from short positions in
sugar futures as prices decreased after India, the world?s
second-biggest producer of sugar, produced a record output of
this commodity.  Smaller gains of approximately 0.6% were
recorded in the currency markets during April, May, and June
from short positions in the Japanese yen versus the U.S. dollar,
British pound, and euro as the value of the Japanese yen
weakened against most of its major rivals amid expectations that
strengthening global equity markets might give investors more
confidence to buy higher-yielding assets financed with money
borrowed in Japan, thereby continuing the carry-trade.
Elsewhere, gains were recorded from long positions in the
Canadian dollar versus the U.S. dollar during May and June as
the value of the Canadian dollar strengthened in tandem with
rising commodities prices and speculation that the Bank of
Canada might raise interest rates.  A portion of the
Partnership?s gains in the first six months of the year was
offset by losses of approximately 2.3% recorded in the metals
markets throughout a majority of the year from positions in
copper, aluminum, and zinc futures.  During February, March, and
April, short positions in copper futures experienced losses as
prices moved higher on continued speculation that low stockpiles
might create a supply shortage in the future and after the
International Monetary Fund?s strong global growth forecasts
bolstered sentiment that global demand for base metals might
increase this year.  Further losses were recorded from long




<page> positions in aluminum futures during May and June as
prices decreased after an announcement by the Chinese government
that it would raise export taxes for base metals and on
speculation that rising production and inventories might create
a global surplus.   Lastly, short and long positions in zinc
futures incurred losses during the second quarter as prices
moved without consistent direction due to conflicting data
regarding supply and demand.

For the Three and Six Months Ended June 30, 2006
The Partnership recorded total trading results including interest
income totaling $1,307,821 and expenses totaling $663,294,
resulting in net income of $644,527 for the three months ended
June 30, 2006.  The Partnership?s net asset value per Unit
increased from $1,039.09 at March 31, 2006 to $1,051.36 at June
30, 2006.

The most significant trading gains of approximately 6.9% were
recorded in the metals markets from long futures positions in
copper, nickel, zinc, and aluminum, as prices increased sharply
during April and May to record highs amid strong global
industrial demand from the U.S., China, and India.  Within the
precious metals markets, gold and silver prices both rallied to
25-year highs in April, benefiting from strong demand and lagging
supply.  Additional gains of approximately 2.1% were experienced
in global interest rate futures markets, primarily during April,
from short positions in German, U.S., Japanese, and Australian

<page> fixed-income futures.  Within European markets, rising
equity prices and strong economic data pushed German fixed-income
futures prices lower.  Similarly, U.S. interest rates climbed
higher following the release of stronger than expected economic
data.  Japanese interest rate futures also dropped amid growing
speculation that the Bank of Japan would end its ?ultra-easy?
monetary policy and begin to increase interest rates.  Finally,
Australian interest rates also declined, due in part to optimism
that the Australian economy, which is heavily dependent on the
sale of natural resources, would continue to benefit from rising
commodity prices.  Within the currency markets, gains of
approximately 1.8% were recorded during April from short
positions in the U.S. dollar as the value of the U.S. dollar
declined against many of its major rivals, notably the euro,
Japanese yen, Singapore dollar, Swedish krona, and Swiss franc,
amid news that foreign central banks would diversify their
currency reserves away from the U.S. dollar.  During May, long
positions in the euro versus the U.S. dollar experienced gains as
the value of the euro continued to strengthen against the U.S.
dollar after Dutch Finance Minister Gerritt Zalm said that the
European Central Bank would not intervene to halt the
appreciation of the euro.  A portion of these gains for the
quarter was offset by losses of approximately 6.6% in global
equity indices during May from long positions in U.S., European,
and Pacific Rim (Australian, Hong Kong, and Japanese) stock index


<page> futures as prices declined due to inflation concerns and
uncertainty regarding future interest rate policy.  Further
losses in the global stock index sector were incurred toward the
end of June from newly established short futures positions in
U.S. and Pacific Rim stock indices as prices reversed higher on
hopes of a pause in the U.S. interest rate hikes.  Additional
losses of approximately 1.8% 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.  Further losses in the energy sector were
recorded during June from short futures positions in crude oil
and its related products 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.  Smaller losses of
approximately 0.3% were incurred in the agricultural markets
during May from short positions in live cattle futures as prices
reversed higher after news that South Korea would resume U.S.
beef imports.  Additional losses were recorded during May and
June from long positions in corn futures as prices fell primarily
due to heavy fund-selling.

The Partnership recorded total trading results including interest
income totaling $3,414,664 and expenses totaling $1,392,951,
resulting in net income of $2,021,713 for the six months ended

<page> June 30, 2006.  The Partnership?s net asset value per Unit
increased from $1,001.71 at December 31, 2005 to $1,051.36 at
June 30, 2006.

The most significant trading gains of approximately 9.3% were
recorded from long futures positions in base and precious metals.
Copper, aluminum, zinc, and nickel 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 prices moved higher on persistent demand from foreign
central banks.  Additional gains of approximately 2.8% were
experienced in global interest rate futures markets, primarily
during March and April, from short positions in German, U.S.,
Japanese, and Australian fixed-income futures.  Within European
markets, rising equity prices and strong economic growth pushed
German fixed-income futures prices lower.  Similarly, U.S. fixed-
income futures declined following the release of stronger than
expected economic data.  Additional gains were recorded from
short positions in Japanese interest rate futures as prices
declined amid growing speculation that the Bank of Japan would
end its ?ultra-easy? monetary policy and begin to increase
interest rates.  Finally, gains were experienced from short
positions in Australian fixed-income futures as prices also
declined, due in part to optimism that the Australian economy,
which is heavily dependent on the sale of natural resources,
would continue to benefit from rising commodity prices.  A

<page> portion of these gains was offset by losses of
approximately 3.4% in the energy markets during February from
long positions in crude oil futures as prices declined after an
announcement by Chinese government authorities 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.  Within the
global stock index futures markets, losses of approximately 1.9%
were incurred from long positions in U.S., European, and Hong
Kong stock index futures as prices declined 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 futures positions in U.S. and Hong Kong
stock indices as prices reversed higher.  These markets finished
stronger for the month, rallying on hopes of a pause in the U.S.
interest rate hikes.  Further losses of approximately 0.7% were
incurred in the currency markets from long U.S. dollar positions
versus the Australian dollar and Japanese yen as the U.S.
<page> dollar?s value reversed lower against these currencies
during January on expectations that a string of increases in
interest rates by the U.S. Federal Reserve would soon come to an
end.  Also pushing the value of the U.S. dollar lower against its
rivals 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 euro,
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 euro and 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 seventeenth consecutive rate hike on June 29.
Additionally, 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 would not raise interest rates in the near-term, thus
continuing Japan?s ?zero-interest-rate policy?.  Smaller losses

<page> of approximately 0.6% were incurred in the agricultural
markets during May from short positions in corn futures as prices
settled higher on news of strong demand and bullish export data.

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

<page> contract.  However, the Partnership is required to meet
margin requirements equal to the net unrealized loss on open
forward currency contracts in the Partnership accounts with the
counterparty, which is accomplished by daily maintenance of the
cash balance in a custody account held at MS&Co.

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

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

The Partnership?s past performance is no guarantee of its future
results.  Any attempt to numerically quantify the Partnership?s
market risk is limited by the uncertainty of its speculative
trading.  The Partnership?s speculative trading and use of
leverage may cause future losses and volatility (i.e., ?risk of
ruin?) that far exceed the Partnership?s experience to date under


<page> the ?Partnership?s Value at Risk in Different Market
Sectors? section and significantly exceed the Value at Risk
(?VaR?) tables disclosed.

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

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

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

The Partnership?s risk exposure in the market sectors traded by
the Trading 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

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

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


<page> VaR models, including the Partnership?s, are continually
evolving as trading portfolios become more diverse and modeling
techniques and systems capabilities improve.  Please note that
the VaR model is used to numerically quantify market risk for
historic reporting purposes only and is not utilized by either
Demeter or the Trading 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 June 30, 2007 and 2006. At
June 30, 2007 and 2006, the Partnership?s total capitalization
was approximately $30 million and $36 million, respectively.

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

Interest Rate			    (0.90)%		  	  (0.61)%

Currency		  		    (0.78)				  (0.30)

Equity				    (0.63) 			    -

Commodity				    (0.38)			   	  (0.52)

Aggregate Value at Risk	    (1.37)%  	  	 	  (0.80)%


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
<page> Partnership?s open positions across all the market
categories, and is less than the sum of the VaRs for all such
market categories due to the diversification benefit across asset
classes.

Because the business of the Partnership is the speculative trading
of futures, forwards, and options 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 July 1, 2006, through June 30, 2007.

The Partnership?s low VaR, as a percentage of total Net Assets
for the four quarter-end reporting periods from July 1, 2006,
through June 30, 2007, is zero as there were no open positions in
the Partnership during the period from September 15, 2006,
through November 30, 2006, due to the termination of the trading
manager, VK Capital Inc.





<page>
Primary Market Risk Category        High      Low      Average
Interest Rate					(1.17)%	  -	 	(0.65)%

Currency						(1.22)	  -		(0.73)

Equity						(0.65)	  -		(0.42)

Commodity						(0.77)	  -		(0.40)


Aggregate Value at Risk			(1.60)%	  -		(1.04)%




Limitations on Value at Risk as an Assessment of Market Risk
VaR models permit estimation of a portfolio?s aggregate market
risk exposure, incorporating a range of varied market risks,
reflect risk reduction due to portfolio diversification or hedging
activities, and can cover a wide range of portfolio assets.
However, VaR risk measures should be viewed in light of the
methodology?s limitations, which include, but may not be limited
to the following:
*	past changes in market risk factors will not always result in
accurate predictions of the distributions and correlations of
future market movements;
*	changes in portfolio value caused by market movements may
differ from those of the VaR model;
*	VaR results reflect past market fluctuations applied to
current trading positions while future risk depends on future
positions;
*	VaR using a one-day time horizon does not fully capture the
market risk of positions that cannot be liquidated or hedged
within one day; and
<page>
*	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 June 30, 2006, and for the four quarter-end
reporting periods from July 1, 2006, through June 30, 2007.  VaR
is not necessarily representative of the Partnership?s historic
risk, nor should it be used to predict the Partnership?s future
financial performance or its ability to manage or monitor risk.
There can be no assurance that the Partnership?s actual losses on
a particular day will not exceed the VaR amounts indicated above
or that such losses will not occur more than once in 100 trading
days.

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


<page> The Partnership also maintains a substantial portion of
its available assets in cash at MS&Co.; as of June 30, 2007, such
amount is equal to approximately 96% 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
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
<page> strategies. Government interventions, defaults and
expropriations, illiquid markets, the emergence of dominant
fundamental factors, political upheavals, changes in historical
price relationships, an influx of new market participants,
increased regulation, and many other factors could result in
material losses, as well as in material changes to the risk
exposures and the risk management strategies of the Partnership.
Investors must be prepared to lose all or substantially all of
their investment in the Partnership.

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

Interest Rate.  The largest market exposure of the Partnership at
June 30, 2007, was to the global interest rate sector.  This
exposure was primarily spread across European, U.S., Japanese,
Canadian, and Australian 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
<page> 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.

Currency.   The second largest market exposure of the Partnership
at June 30, 2007, was to the currency sector.  The Partnership?s
currency exposure is to exchange rate fluctuations, primarily
fluctuations which disrupt the historical pricing relationships
between different currencies and currency pairs.  Interest rate
changes, as well as political and general economic conditions
influence these fluctuations.  The Partnership trades a large
number of currencies, including cross-rates - i.e., positions
between two currencies other than the U.S. dollar.  At June 30,
2007, the Partnership?s major exposures were to the euro,
Australian dollars, Japanese yen, British pound, Norwegian krone,
Swedish krona, and Swiss francs 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.


<page>
Equity.  The third largest market exposure of the Partnership at
June 30, 2007, was 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 June 30, 2007, the Partnership?s
primary exposures were to the FTSE 100 (United Kingdom), NIKKEI
225 (Japan), CAC 40 (France), DAX (Germany), and S&P 500 (U.S.)
stock indices.  The Partnership is exposed to the risk of adverse
price trends or static markets in the European, Asian, and
U.S. 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:
Soft Commodities and Agriculturals.  At June 30, 2007, the
Partnership h	ad market exposure in the markets that comprise
these sectors.  Most of the exposure was to the cocoa,
coffee, and sugar markets.  Supply and demand inequalities,
severe weather disruptions, and market expectations affect
price movements in these markets.

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

Energy.  At June 30, 2007, the Partnership had market
exposure in 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 June 30, 2007:

Foreign Currency Balances.  The Partnership?s primary foreign
currency balances at June 30, 2007, were in euros, British
pound, Japanese yen, Australian dollars, Swiss francs, and
Canadian dollars.  The Partnership controls the non-trading
risk of foreign currency balances by regularly converting
them back into U.S. dollars upon liquidation of their
respective positions.




<page>
Qualitative Disclosures Regarding Means of Managing Risk Exposure
The Partnership and the Trading 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 quarter ended March 31, 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)

August 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.