Document:

Exhibit 10.01

                              MANAGEMENT AGREEMENT

            THIS AGREEMENT, made as of the 1st day of November, 2006, among
MORGAN STANLEY DIVERSIFIED FUTURES FUND III L.P., a Delaware limited partnership
(the "Partnership"), DEMETER MANAGEMENT CORPORATION, a Delaware corporation (the
"General Partner"), and HYMAN BECK & COMPANY, INC., a Delaware corporation (the
"Trading Advisor").

                              W I T N E S S E T H:

            WHEREAS, the Partnership has been organized pursuant to the Amended
and Restated Limited Partnership Agreement, dated as of May 14, 1990, as may be
amended from time to time, (the "Limited Partnership Agreement"), to trade, buy,
sell, spread, or otherwise acquire, hold, or dispose of commodities (which may
include foreign currencies, mortgage-backed securities, money market
instruments, obligations of or guaranteed by the United States government,
financial instruments, and any other securities or items which are now, or may
hereafter be, the subject of futures contract trading), commodity futures
contracts, commodity forward contracts, foreign exchange commitments, options on
physical commodities and on futures contracts, spot (cash) commodities and
currencies, and any rights pertaining thereto (hereinafter referred to
collectively as "commodity interest contracts") and securities (such as United
States Treasury bills) approved by the Commodity Futures Trading Commission (the
"CFTC") for investment of customer funds;

            WHEREAS, the Partnership previously offered and sold units of
limited partnership interest ("Units") to investors pursuant to a Registration
Statement on Form S-1 (No. 33-34989) (the "Registration Statement") filed under
the Securities Act of 1933, as amended (the "Securities Act"), and a final
Prospectus dated July 12, 1990, constituting a part thereof (as amended and
supplemented, the "Prospectus");

            WHEREAS, the principals of the Trading Advisor have extensive
experience trading in commodity interest contracts and the Trading Advisor is
willing to provide certain services and undertake certain obligations as set
forth herein;

            WHEREAS, the Partnership and the General Partner desire the Trading
Advisor to act as trading advisor for the Partnership and to make investment
decisions with respect to commodity interest contracts for the Partnership's Net
Assets (as defined in Section 7(d)(1) of the Limited Partnership Agreement) and
the Trading Advisor desires so to act; and

            WHEREAS, the Partnership, the General Partner and the Trading
Advisor wish to enter into this Management Agreement which, among other things,
sets forth certain terms and conditions upon which the Trading Advisor will
conduct commodity interest contract trading for the Partnership;

            NOW THEREFORE, the parties hereto hereby agree as follows:

            1.    Undertakings of the Trading Advisor.

            The Trading Advisor agrees to make all disclosures regarding itself,
its principals and affiliates, its trading performance, its trading programs,
systems, methods, and strategies (subject to the need, in the reasonable
discretion of the Trading Advisor, to preserve the confidentiality of
proprietary information concerning such programs, systems, methods, and
strategies), any client accounts over which it has discretionary trading
authority (other than the names of any such clients), and otherwise, as the
General Partner may reasonably require to fulfill its due diligence obligations,
to provide any necessary disclosures to investors and to comply with any
applicable federal or state law or rule or regulation, including those of the
Securities and Exchange Commission (the "SEC"), the CFTC, the National Futures
Association (the "NFA"), the National Association of Securities Dealers, Inc.
(the "NASD") or any other regulatory body, exchange, or board. As used herein,
the term "principal" shall have the meaning as defined in Rule 3.1(a) of the
CFTC's Regulations and the term "affiliate" shall mean any individual or entity
that directly or indirectly controls, is controlled by, or is under common
control with, the Trading Advisor.

            2.    Duties of the Trading Advisor.

            (a) The Trading Advisor hereby agrees to act as Trading Advisor for
the Partnership and, as such, shall have sole authority and responsibility for
directing the investment and reinvestment of the Net Assets of the Partnership,
which initially shall be traded pursuant to its trading program, the Global
Portfolio, as described in the Trading Advisor's Disclosure Document dated March
27, 2006 (as amended or supplemented, the "Disclosure Document"), and may be
subsequently traded pursuant to such other of the Trading Advisor's programs
described in the Disclosure Document, as the General Partner may agree (with
such changes and additions to such trading programs as the Trading Advisor, from
time to time, incorporates into its trading program(s) for accounts the size of
the Partnership), (collectively, the "Trading Program") on the terms and
conditions and in accordance with the prohibitions and trading policies set
forth in Exhibit A hereto, the Limited Partnership Agreement and as otherwise
provided in writing to the Trading Advisor; provided, however, that the General
Partner may override the instructions of the Trading Advisor to the extent
necessary (i) to comply with the trading policies of the Partnership, as
described in this Agreement, the Limited Partnership Agreement and as otherwise
provided in writing to the Trading Advisor, and with applicable speculative
position limits, (ii) to pay the Partnership's expenses, (iii) to the extent the
General Partner believes doing so is necessary for the protection of the
Partnership, (iv) to terminate the commodity interest contract trading of the
Partnership, or (v) to comply with any applicable law or regulation. The General
Partner agrees not to override any such instructions for the reasons specified
in clause (ii) of the preceding sentence unless the Trading Advisor fails to
comply with a request of the General Partner to make the necessary amount of
funds available to the Partnership within five calendar days of such request.
Except as otherwise provided herein, the Trading Advisor shall not be liable for
the consequences of any decision by the General Partner to override instructions
of the Trading Advisor. In performing services for the Partnership, the Trading
Advisor may not materially alter or change the Trading Program without the prior
written consent of the General Partner (and shall not effect such alteration or
change on behalf of the Partnership without the General Partner's consent), and
it being understood that changes in the commodity interest contracts traded,
provided that such commodity interest contracts are listed in Exhibit B hereto,
shall not be deemed an alteration in the Trading Program.

            (b) The Trading Advisor shall:

            (i) Exercise good faith and due care in trading commodity interest
      contracts for the account of the Partnership in accordance with the
      prohibitions and trading policies of the Partnership described in Exhibit
      A hereto, the Limited Partnership Agreement and as otherwise provided in
      writing to the Trading Advisor. The Trading Advisor shall trade the
      Partnership's Net Assets pursuant to the Trading Program.

            (ii) Subject to reasonable assurances of confidentiality by the
      General Partner and the Partnership, provide the General Partner, within
      30 calendar days of a request therefor by the General Partner, with
      information comparing the performance of the Partnership's account and the
      performance of all other client accounts directed by the Trading Advisor
      using the Trading Program over a specified period of time. In providing
      such information, the Trading Advisor may take such steps as are necessary
      to assure the confidentiality of the Trading Advisor's clients'
      identities. The Trading Advisor shall, upon the General Partner's request,
      consult with the General Partner concerning any discrepancies between the
      performance of such other accounts and the Partnership's account. The
      Trading Advisor shall promptly inform the General Partner of any material
      discrepancies of which the Trading Advisor becomes aware. The General
      Partner acknowledges that different trading programs, strategies or
      implementation methods may be utilized for different accounts, accounts
      with different trading policies, accounts experiencing differing inflows
      or outflows of equity, accounts that commence trading at different times,
      accounts which have different portfolios or different fiscal years and
      that such differences may cause divergent trading results.

            (iii) Upon the request of the General Partner and subject to
      reasonable assurances of confidentiality by the General Partner and the
      Partnership, provide the General Partner with all material information
      concerning the Trading Advisor other than proprietary information
      (including, without limitation, information relating to changes in
      control, personnel, trading approach, or financial condition). The General
      Partner acknowledges that all trading instructions made by the Trading
      Advisor will be held in confidence by the General Partner, except to the
      extent necessary to conduct the business of the Partnership or as required
      by law.

            (iv) Inform the General Partner when the Trading Advisor's open
      positions maintained by the Trading Advisor exceed the Trading Advisor's
      applicable speculative position limits.

            (c) All purchases and sales of commodity interest contracts pursuant
to this Agreement shall be for the account, and at the risk, of the Partnership
and not for the account, or at the risk, of the Trading Advisor or any of its
stockholders, directors, officers, or employees, or any other person, if any,
who controls the Trading Advisor. All brokerage fees, including give-up fees at
rates approved by Morgan Stanley DW, Inc., an affiliate of the General Partner
("Morgan Stanley DW"), arising from trading by the Trading Advisor shall be for
the account of the Partnership. The Trading Advisor makes no representations as
to whether its trading will produce profits or avoid losses.

            (d) Notwithstanding anything in this Agreement to the contrary, the
Trading Advisor shall assume financial responsibility for any errors committed
or caused by it in transmitting orders for the purchase or sale of commodity
interest contracts for the Partnership's account, including, but not limited to,
payment of the floor brokerage commissions, exchange and NFA fees, and other
transaction charges and give-up charges incurred on such trades. The Trading
Advisor's errors shall include, but not be limited to, inputting improper
trading signals or communicating incorrect orders for execution. The Trading
Advisor shall not be responsible for errors committed or caused by Morgan
Stanley DW, Morgan Stanley & Co. Incorporated, an affiliate of the General
Partner ("MS&Co.") or any other floor broker or futures commission merchant
executing trades. The Trading Advisor shall have an affirmative obligation
promptly to notify the General Partner of its own errors, and the Trading
Advisor shall use its best efforts to identify and promptly notify the General
Partner of any order or trade that the Trading Advisor reasonably believes was
not executed in accordance with its instructions.

            (e) Prior to the commencement of trading, the General Partner on
behalf of the Partnership shall deliver to the Trading Advisor a trading
authorization, in the form attached as Exhibit C hereto, appointing the Trading
Advisor the Partnership's attorney-in-fact for such purpose.

            3.    Designation of Additional or Replacement Trading Advisors and
                  Reallocation of Net Assets.

            If the General Partner at any time deems it to be in the best
interests of the Partnership, the General Partner may designate an additional or
replacement trading advisor or advisors for the Partnership and may apportion to
such additional or replacement trading advisor(s) the management of such amounts
of Net Assets as the General Partner shall determine in its absolute discretion.
The designation of an additional trading advisor or advisors or replacement of
any trading advisor for the Partnership by the General Partner shall not require
any approval of the Trading Advisor. The designation and retention of an
additional or replacement trading advisor(s) and the apportionment of Net Assets
to any such trading advisor(s) pursuant to this Section 3 shall neither
terminate this Agreement nor modify in any regard the respective rights and
obligations of the Partnership, the General Partner and the Trading Advisor
hereunder. In the event that an additional trading advisor is so designated, the
Trading Advisor shall thereafter receive management and incentive fees based,
respectively, on that portion of the Net Assets managed by the Trading Advisor
and that portion of the Trading Profits (as defined in Section 6(c) hereof)
properly attributable to the trading done by the Trading Advisor.

            4.    Trading Advisor Independent.

            For all purposes of this Agreement, the Trading Advisor shall be
deemed to be an independent contractor and shall, unless otherwise expressly
provided herein or authorized, have no authority to act for or represent the
Partnership in any way or otherwise be deemed an agent of the Partnership or the
General Partner. Nothing contained herein shall be deemed to require the
Partnership or the General Partner to take any action contrary to the Limited
Partnership Agreement, the Certificate of Limited Partnership of the Partnership
as from time to time in effect (the "Certificate of Limited Partnership"), or
any applicable law or rule or regulation of any regulatory body, exchange, or
board. Nothing herein contained shall constitute the Trading Advisor or the
General Partner as a member of any partnership, joint venture, association,
syndicate or other entity with the Partnership or the General Partner, or be
deemed to confer on any of them any express, implied, or apparent authority to
incur any obligation or liability on behalf of any other. It is expressly agreed
that the Trading Advisor is neither a promoter, sponsor, nor issuer with respect
to the Partnership.

            5.    Commodity Brokers.

            The Trading Advisor shall effect all transactions in commodity
interest contracts for the Partnership through, and shall maintain a separate
account with, such commodity broker or brokers as the General Partner shall
direct. At the present time, Morgan Stanley DW shall act as the non-clearing
commodity broker and MS&Co. shall act as the clearing commodity broker for the
Partnership, with the exception of trades on the London Metal Exchange which
will be cleared by Morgan Stanley & Co. International Limited, an affiliate of
the General Partner ("MSIL"). In addition, MS&Co. will act as the counterparty
on all of the foreign currency forward trades for the Partnership. The General
Partner shall provide the Trading Advisor with copies of brokerage statements.
Notwithstanding that MS&Co. and MSIL shall act as the clearing commodity brokers
for the Partnership, the Trading Advisor may execute trades through floor
brokers other than those employed by MS&Co. and MSIL so long as arrangements are
made for such floor brokers to "give-up" or transfer the positions to MS&Co. and
MSIL and provided that the rates charged by such floor brokers have been
approved in writing by Morgan Stanley DW. Except as provided in Exhibit A, the
Trading Advisor will not be responsible for paying give-up fees at rates
approved by Morgan Stanley DW.

            6.    Fees.

            (a) For the services to be rendered to the Partnership by the
Trading Advisor under this Agreement, the Partnership shall pay the Trading
Advisor the following fees:

            (i) A monthly management fee, without regard to the profitability of
      the Trading Advisor's trading for the Partnership's account, equal to 1/12
      of 1.50% (a 1.50% annual rate) of the Partnership's "Net Assets" (as
      defined in Section 7(d)(1) of the Limited Partnership Agreement) as of the
      opening of business on the first day of each calendar month, commencing
      with the month in which the Partnership begins to receive trading advice
      from the Trading Advisor pursuant to this Agreement.

            (ii) A quarterly incentive fee equal to 20% of the "Trading Profits"
      (as defined in Section 6(c) hereof) experienced by the Partnership as of
      the end of each calendar quarter.

            (b) If this Agreement is terminated on a date other than the last
day of a calendar quarter, the incentive fee described above shall be determined
as if such date were the end of a calendar quarter. If this Agreement is
terminated on a date other than the end of a month, the management fee described
above shall be prorated based on the ratio of the number of trading days in the
month through the date of termination to the total number of trading days in the
month. If, during any month after the Partnership commences trading operations,
the Partnership does not conduct business operations, or suspends trading for
the account of the Partnership managed by the Trading Advisor, or, as a result
of an act or material failure to act by the Trading Advisor, is otherwise unable
to utilize the trading advice of the Trading Advisor on any of the trading days
of that period for any reason, the management fee described above shall be
prorated based on the ratio of the number of trading days in the month that the
Partnership account managed by the Trading Advisor engaged in trading operations
or utilized the trading advice of the Trading Advisor to the total number of
trading days in the month.

            (c) As used herein, the term "Trading Profits" shall mean net
commodity interest contract trading profits (realized and unrealized) earned on
the Partnership's Net Assets, decreased by the monthly management fees and
brokerage fees; with such trading profits and items of decrease determined from
the end of the last calendar quarter in which an incentive fee was earned by the
Trading Advisor or, if no incentive fee has been earned previously by the
Trading Advisor, from the date that the Partnership begins to receive trading
advice from the Trading Advisor pursuant to this Agreement to the end of the
calendar quarter as of which such incentive fee calculation is being made.
Extraordinary expenses of the Partnership, if any, will not be deducted in
determining Trading Profits. No incentive fee will be paid on interest income
earned by the Partnership.

            (d) If any payment of incentive fees is made to the Trading Advisor
on account of Trading Profits and the Trading Advisor thereafter fails to earn
Trading Profits or experiences losses for any subsequent incentive period, the
Trading Advisor shall be entitled to retain such amounts of incentive fees
previously paid to the Trading Advisor in respect of such Trading Profits.
However, no subsequent incentive fees shall be payable to the Trading Advisor
until the Partnership has again earned Trading Profits; provided, however, that
if the Partnership's Net Assets are reduced because of redemptions that occur at
the end of, or subsequent to, an incentive period in which the Trading Advisor
experiences a commodity interest contract trading loss, the trading loss for
that incentive period which must be recovered before the Trading Advisor will be
deemed to experience Trading Profits will be equal to the amount determined by
(x) dividing the Partnership's Net Assets after such redemptions by the
Partnership's Net Assets immediately before such redemptions and (y) multiplying
that fraction by the amount of the unrecovered commodity interest contract
trading loss experienced in the calendar quarter prior to redemptions. In the
event that the Partnership experiences a commodity interest contract trading
loss in more than one calendar quarter without the payment of an intervening
incentive fee and the Partnership's Net Assets are reduced in more than one such
calendar quarter because of redemptions, then the trading loss for each such
incentive period shall be adjusted in accordance with the formula described
above and such reduced amount of commodity interest contract trading loss shall
be carried forward and used to offset subsequent commodity interest contract
trading profits.

            7.    Term.

            (a) This Agreement shall continue in effect until October 31, 2007
(the "Initial Termination Date"). If this Agreement is not terminated on the
Initial Termination Date, as provided for herein, then, this Agreement shall
automatically renew for an additional one-year period and shall continue to
renew for additional one-year periods until this Agreement is otherwise
terminated, as provided for herein. At least 30 calendar days prior to the
expiration of the Initial Termination Date or any subsequent one-year period, as
the case may be, the Trading Advisor may terminate this Agreement at the end of
the current period by providing written notice to the Partnership indicating
that the Trading Advisor desires to terminate this Agreement at the end of such
period. This Agreement shall also terminate if the Partnership terminates.

            (b) The Partnership shall have the right to terminate this Agreement
at its discretion (i) at any month-end upon 5 calendar days' prior written
notice to the Trading Advisor or (ii) at any time upon written notice to the
Trading Advisor upon the occurrence of any of the following events: (a) if any
person described as a "principal" of the Trading Advisor in the Disclosure
Document ceases for any reason to be an active executive officer of the Trading
Advisor; (b) if the Trading Advisor becomes bankrupt or insolvent; (c) if the
Trading Advisor is unable to use its Trading Program as in effect on the date
hereof and as refined and modified in the future for the benefit of the
Partnership; (d) if the registration, as a commodity trading advisor, of the
Trading Advisor with the CFTC or its membership in the NFA is revoked,
suspended, terminated, or not renewed, or limited or qualified in any respect;
(e) if the Trading Advisor merges or consolidates with, or sells or otherwise
transfers its advisory business, or all or a substantial portion of its assets,
any portion of its commodity interest contract trading programs, systems or
methods, or its goodwill, to any individual or entity; (f) if the Net Asset
value of a Unit, after adjusting for distributions, if any, shall be less than
$500.00; (g) if, at any time, the Trading Advisor violates any trading or
administrative policy described in this Agreement or the Limited Partnership
Agreement or otherwise provided in writing to the Trading Advisor by the General
Partner, except with the prior express written consent of the General Partner;
or (h) if the Trading Advisor fails in a material manner to perform any of its
obligations under this Agreement.

            (c) The Trading Advisor may terminate this Agreement at any time,
upon written notice to the Partnership, in the event: (i) that the General
Partner imposes additional trading limitation(s) in the form of one or more
trading policies or administrative policies that the Trading Advisor does not
agree to follow in its management of the Partnership's Net Assets; (ii) the
General Partner objects to the Trading Advisor implementing a proposed material
change in the Trading Advisor's Trading Program used by the Partnership and
Trading Advisor certifies to the General Partner in writing that it believes
such change is in the best interests of the Partnership; (iii) the General
Partner overrides a trading instruction of the Trading Advisor for reasons
unrelated to those set forth in Section 2 hereof and a determination by the
General Partner that the Trading Advisor has violated the Partnership's trading
policies and the Trading Advisor certifies to the General Partner in writing
that as a result the Trading Advisor believes the performance results of the
Trading Advisor relating to the Partnership will be materially adversely
affected; or (iv) the Partnership materially breaches this Agreement and does
not correct the breach within 10 business days of receipt of a written notice of
such breach from the Trading Advisor.

            The indemnities set forth in Section 8 hereof shall survive any
termination of this Agreement.

            8.    Standard of Liability; Indemnifications.

            (a) Limitation of Trading Advisor Liability. In respect of the
Trading Advisor's role in the commodity interest contract trading of the
Partnership's assets, none of the Trading Advisor, or its controlling persons,
its affiliates, and their respective directors, officers, shareholders,
employees or controlling persons shall be liable to the Partnership or the
General Partner or their partners, officers, shareholders, directors or
controlling persons except that the Trading Advisor shall be liable for acts or
omissions of any such person provided that such act or omission constitutes a
breach of this Agreement or a representation, warranty or covenant herein,
willful misconduct or negligence or is the result of any such person not having
acted in good faith and in the reasonable belief that such actions or omissions
were in, or not opposed to, the best interests of the Partnership.

            (b) Trading Advisor Indemnity. The Trading Advisor shall indemnify,
defend and hold harmless the Partnership and the General Partner, their
controlling persons, their affiliates and their respective directors, officers,
shareholders, employees, and controlling persons from and against any and all
losses, claims, damages, liabilities (joint and several), costs, and expenses
(including any reasonable investigatory, legal, and other expenses incurred in
connection with, and any amounts paid in, any settlement; provided that the
Trading Advisor shall have approved such settlement) incurred as a result of any
action or omission involving the Partnership; provided that such liability
arises from an act or omission of the Trading Advisor, or any of its controlling
persons or affiliates or their respective directors, officers, partners,
shareholders, or employees which is found by a court of competent jurisdiction
upon entry of a final judgment (or, if no final judgment is entered, by an
opinion rendered by counsel who is approved by the Partnership and the Trading
Advisor, such approval not to be unreasonably withheld) to be a breach of this
Agreement or a representation, warranty or covenant herein, or the result of
willful misconduct or negligence or conduct not done in good faith in the
reasonable belief that it was in, or not opposed to, the best interests of the
Partnership.

            (c) Partnership Indemnity. The Partnership shall indemnify, defend,
and hold harmless the Trading Advisor, its controlling persons, their affiliates
and their respective directors, officers, shareholders, employees, and
controlling persons, from and against any and all losses, claims, damages,
liabilities (joint and several), costs, and expenses (including any reasonable
investigatory, legal, and other expenses incurred in connection with, and any
amounts paid in, any settlement; provided that the Partnership shall have
approved such settlement) resulting from a demand, claim, lawsuit, action, or
proceeding (other than those incurred as a result of claims brought by or in the
right of an indemnified party) relating to the services provided by and the
obligations undertaken by the Trading Advisor in connection with the
Partnership; provided that a court of competent jurisdiction upon entry of a
final judgment finds (or, if no final judgment is entered, an opinion is
rendered to the Partnership by independent counsel reasonably acceptable to both
parties) to the effect that the action or inaction of such indemnified party
that was the subject of the demand, claim, lawsuit, action, or proceeding did
not constitute negligence, willful misconduct, or a breach of this Agreement by
the Trading Advisor or such indemnified party or a representation, warranty or
covenant of the Trading Advisor herein and was done in good faith and in a
manner such indemnified party reasonably believed to be in, or not opposed to,
the best interests of the Partnership.

            (d) The foregoing agreements of indemnity shall be in addition to,
and shall in no respect limit or restrict, any other remedies which may be
available to an indemnified person.

            (e) Promptly after receipt by an indemnified person of notice of the
commencement of any action, claim, or proceeding to which any of the indemnities
may apply, the indemnified person will notify the indemnifying party in writing
of the commencement thereof if a claim in respect thereof is to be made against
the indemnifying party hereunder; but the omission so to notify the indemnifying
party will not relieve the indemnifying party from any liability which the
indemnifying party may have to the indemnified person hereunder, except where
such omission has materially prejudiced the indemnifying party. In case any
action, claim, or proceeding is brought against an indemnified person and the
indemnified person notifies the indemnifying party of the commencement thereof
as provided above, the indemnifying party will be entitled to participate
therein and, to the extent that the indemnifying party desires, to assume the
defense thereof with counsel selected by the indemnifying party and not
unreasonably disapproved by the indemnified person. After notice from the
indemnifying party to the indemnified person of the indemnifying party's
election so to assume the defense thereof as provided above, the indemnifying
party will not be liable to the indemnified person under the indemnity
provisions hereof for any legal and other expenses subsequently incurred by the
indemnified person in connection with the defense thereof, other than reasonable
costs of investigation.

            Notwithstanding the preceding paragraph, if, in any action, claim,
or proceeding as to which indemnification is or may be available hereunder, an
indemnified person reasonably determines that its interests are or may be
adverse, in whole or in part, to the indemnifying party's interests or that
there may be legal defenses available to the indemnified person which are
different from, in addition to, or inconsistent with the defenses available to
the indemnifying party, the indemnified person may retain its own counsel in
connection with such action, claim, or proceeding and will be indemnified by the
indemnifying party for any legal and other expenses reasonably incurred in
connection with investigating or defending such action, claim, or proceeding.

            In no event will the indemnifying party be liable for the fees and
expenses of more than one counsel for all indemnified persons in connection with
any one action, claim, or proceeding or in connection with separate but similar
or related actions, claims, or proceedings in the same jurisdiction arising out
of the same general allegations. The indemnifying party will not be liable for
any settlement of any action, claim, or proceeding effected without the
indemnifying party's express written consent, but if any action, claim, or
proceeding is settled with the indemnifying party's express written consent, the
indemnifying party will indemnify, defend, and hold harmless an indemnified
person as provided in this Section 8.

            9.    Right to Advise Others and Uniformity of Acts and Practices.

            (a) The Trading Advisor is engaged in the business of advising
investors as to the purchase and sale of commodity interest contracts. During
the term of this Agreement, the Trading Advisor, its principals and affiliates,
will be advising other investors (including affiliates and the stockholders,
officers, directors, and employees of the Trading Advisor and its affiliates and
their families) and trading for their own accounts. However, under no
circumstances shall the Trading Advisor or any of its principals or affiliates
by any act or omission favor any account advised or managed by the Trading
Advisor or any of its principals or affiliates over the account of the
Partnership in any way or manner (other than by charging different management
and/or incentive fees). The Trading Advisor and its principals and affiliates
agree to treat the Partnership in a fiduciary capacity to the extent recognized
by applicable law, but, subject to that standard, the Trading Advisor or any of
its principals or affiliates shall be free to advise and manage accounts for
other investors and shall be free to trade on the basis of the same Trading
Program employed by the Trading Advisor for the account of the Partnership, or
trading programs, systems, methods, or strategies that are entirely independent
of, or materially different from, those employed for the account of the
Partnership, and shall be free to compete for the same commodity interest
contracts as the Partnership or to take positions opposite to the Partnership,
where such actions do not knowingly or deliberately prefer any of such accounts
over the account of the Partnership. At the request of the General Partner, the
Trading Advisor shall use its best efforts to make available for inspection and
copying by the General Partner copies of the normal monthly, quarterly, and
annual (as the case may be) reports sent to participants in commodity pools
(without identifying such participants) for which the Trading Advisor or any of
its principals or affiliates acts as a commodity trading advisor and similar
information with respect to any other accounts of theirs with respect to which
such reports are not required to be delivered. At the request of the General
Partner, the Trading Advisor and its principals and affiliates shall provide the
General Partner with a written explanation, acceptable to the General Partner,
of material differences in performance between the Partnership's account and
such other accounts.

            (b) The Trading Advisor and its principals and affiliates shall not
be restricted as to the number or nature of its clients, except that: (i) so
long as the Trading Advisor acts as a trading advisor for the Partnership,
neither the Trading Advisor nor any of its principals or affiliates shall hold
knowingly any position or control any other account that would cause the
Partnership, the Trading Advisor, or the principals or affiliates of the Trading
Advisor to be in violation of the Commodity Exchange Act, as amended, and any
regulations promulgated thereunder (the "CEAct"), any applicable rule or
regulation of any other regulatory body, exchange, or board; and (ii) neither
the Trading Advisor nor any of its principals or affiliates shall render
commodity interest contract trading advice to any other individual or entity or
otherwise engage in activity which shall knowingly cause positions in commodity
interest contracts to be attributed to the Trading Advisor under the rules or
regulations of the CFTC or any other regulatory body, exchange, or board so as
to require the significant modification of positions taken or intended for the
account of the Partnership; provided that the Trading Advisor may modify its
Trading Program to accommodate the trading of additional funds or accounts. If
applicable speculative position limits are exceeded by the Trading Advisor in
the opinion of (i) independent counsel (who shall be other than counsel to the
Partnership), (ii) the CFTC, or (iii) any other regulatory body, exchange, or
board, the Trading Advisor and its principals and affiliates shall promptly
liquidate positions in all of their accounts, including the Partnership's
account, as to which positions are attributed to the Trading Advisor as nearly
as possible in proportion to the accounts' respective amounts available for
trading (taking into account different degrees of leverage and "notional"
equity) to the extent necessary to comply with the applicable position limits.

            10.   Representations, Warranties, and Covenants of the Trading
                  Advisor.

            (a) Representations, Warranties, and Agreements of the Trading
Advisor. The Trading Advisor with respect to itself and each of its principals
represents and warrants to and agrees with the General Partner and the
Partnership as follows:

            (i) It will exercise good faith and due care in using the Trading
      Program on behalf of the Partnership.

            (ii) The Trading Advisor shall follow, at all times, the trading
      policies of the Partnership (as described in the Limited Partnership
      Agreement and as set forth in Exhibit A hereto) and as amended in writing
      and furnished to the Trading Advisor from time to time.

            (iii) The Trading Advisor shall trade: (A) the Partnership's Net
      Assets pursuant to the Trading Program; and (B) only in futures and option
      contracts traded on U.S. contract markets, foreign currency forward
      contracts traded with MS&Co. (which may include forward contracts
      initially executed with financial institutions other than MS&Co.), and
      such other commodity interest contracts that are approved in writing by
      the General Partner and have been approved by the CFTC for U.S. persons.

            (iv) The Trading Advisor is duly organized, validly existing and in
      good standing as a corporation under the laws of the jurisdiction of its
      incorporation and is qualified to do business as a foreign corporation and
      in good standing in each other jurisdiction in which the nature or conduct
      of its business requires such qualification and the failure to so qualify
      would materially adversely affect the Trading Advisor's ability to perform
      its duties under this Agreement. The Trading Advisor has full corporate
      power and authority to perform its obligations under this Agreement. The
      only principals (as defined in Rule 4.10(e) under the CEAct) of the
      Trading Advisor are those set forth in the Disclosure Document (the
      "Trading Advisor Principals").

            (v) All information furnished in writing to the General Partner by
      the Trading Advisor relating to the Trading Advisor and each Trading
      Advisor Principal, the Trading Advisor's Trading Program, any other
      trading programs, approaches and systems and Trading Advisor performance,
      including the Disclosure Document, is or will be materially accurate and
      complete in all material respects and does not and will not contain any
      misleading or untrue statement of a material fact or omit to state a
      material fact which is required to be stated therein or necessary to make
      the statements therein not misleading.

            (vi) This Agreement has been duly and validly authorized, executed
      and delivered on behalf of the Trading Advisor and is a valid and binding
      agreement of the Trading Advisor enforceable in accordance with its terms.

            (vii) Each of the Trading Advisor and each "principal" of the
      Trading Advisor, as defined in Rule 4.10(e) under the CEAct, has all
      federal and state governmental, regulatory and exchange licenses,
      registrations and approvals and has effected all filings with federal and
      state governmental and regulatory agencies required to conduct its or his
      business and to act as required to perform its or his obligations under
      this Agreement. The Trading Advisor is registered as a commodity trading
      advisor under the CEAct and is a member of the NFA in such capacity.

            (viii) The execution and delivery of this Agreement, the incurrence
      of the obligations set forth herein, the consummation of the transactions
      contemplated herein and in the Limited Partnership Agreement and the
      payment of the fees hereunder will not violate, or constitute a breach of,
      or default under, the certificate of incorporation or bylaws of the
      Trading Advisor or any other agreement or instrument by which it is bound
      or of any order, rule, law or regulation binding on it of any court or any
      federal, state, municipal or other governmental body or administrative
      agency or panel or self-regulatory organization having jurisdiction over
      it.

            (ix) Since the date of the Disclosure Document, there has not been
      any material adverse change in the condition, financial or otherwise,
      business or prospects of the Trading Advisor or any Trading Advisor
      Principal.

            (x) Except as set forth in writing to the General Partner, there has
      not been in the five years preceding the date of this Agreement and there
      is not pending, or to the best of the Trading Advisor's knowledge
      threatened, any action, suit or proceeding at law or in equity before or
      by any court or by any federal, state, municipal or other governmental
      body or any administrative, self-regulatory or commodity exchange
      organization to which the Trading Advisor or any Trading Advisor Principal
      is or was a party, or to which any of the assets of the Trading Advisor or
      any Trading Advisor Principal is or was subject and which resulted in or
      might reasonably be expected to result in any material adverse change in
      the condition, financial or otherwise, of the Trading Advisor. Neither the
      Trading Advisor nor any Trading Advisor Principal has received any notice
      of an investigation by the NFA or the CFTC regarding noncompliance by the
      Trading Advisor or any of the Trading Advisor Principals with the CEAct.

            (xi) Neither the Trading Advisor nor any Trading Advisor Principal
      has received, or is entitled to receive, directly or indirectly, any
      commission, finder's fee, similar fee, or rebate from any person in
      connection with the operation of the Partnership.

            (b) Covenants of the Trading Advisor. The Trading Advisor covenants
and agrees that:

            (i) The Trading Advisor shall use its best efforts to maintain all
      registrations and memberships necessary for the Trading Advisor and the
      Trading Advisor Principals to continue to act as described herein and to
      at all times comply in all material respects with all applicable laws,
      rules, and regulations, to the extent that the failure to so comply would
      have a materially adverse effect on the Trading Advisor's ability to act
      as described herein.

            (ii) The Trading Advisor shall inform the General Partner
      immediately as soon as the Trading Advisor or Trading Advisor Principals
      becomes the subject of any investigation, claim or proceeding of any
      regulatory authority having jurisdiction over such person or becomes a
      named party to any litigation materially affecting the condition,
      financial or otherwise, business or prospects of the Trading Advisor. The
      Trading Advisor shall also inform the General Partner immediately if the
      Trading Advisor or any of its officers become aware of any breach of this
      Agreement by the Trading Advisor.

            11.   Representations and Warranties of the Partnership and the
                  General Partner.

            The General Partner and the Partnership represent and warrant to the
Trading Advisor, as follows:

            (a) The Partnership has provided to the Trading Advisor a copy of
the Prospectus.

            (b) The Partnership is a limited partnership duly organized pursuant
to the Certificate of Limited Partnership, the Limited Partnership Agreement and
the Delaware Revised Uniform Limited Partnership Act ("DRULPA") and is validly
existing under the laws of the State of Delaware with full power and authority
to engage in the trading of commodity interest contracts and to engage in its
other contemplated activities as described in the Prospectus; the Partnership
has received a certificate of authority to do business in the State of New York
as provided by Article 8-A of the New York Revised Limited Partnership Act and
is qualified to do business in each jurisdiction in which the nature or conduct
of its business requires such qualification and where failure to be so qualified
could materially adversely affect the Partnership's ability to perform its
obligations hereunder.

            (c) The General Partner is duly organized and validly existing and
in good standing as a corporation under the laws of the State of Delaware and in
good standing and qualified to do business as a foreign corporation under the
laws of the State of New York and is qualified to do business and is in good
standing as a foreign corporation in each jurisdiction in which the nature or
conduct of its business requires such qualification and where the failure to be
so qualified could materially adversely affect the General Partner's ability to
perform its obligations hereunder.

            (d) The Partnership and the General Partner have full partnership or
corporate power and authority under applicable law to conduct their business and
to perform their respective obligations under this Agreement.

            (e) This Agreement has been duly and validly authorized, executed
and delivered by the General Partner for itself and on behalf of the Partnership
and constitutes a valid, binding and enforceable agreement of the Partnership
and the General Partner in accordance with its terms.

            (f) The execution and delivery of this Agreement, the incurrence of
the obligations set forth herein and the consummation of the transactions
contemplated herein and in the Limited Partnership Agreement will not violate,
or constitute a breach of, or default under, the General Partner's certificate
of incorporation or bylaws, the Certificate of Limited Partnership, the Limited
Partnership Agreement, or any agreement or instrument by which either the
General Partner or the Partnership, as the case may be, is bound or any order,
rule, law or regulation applicable to the General Partner or the Partnership of
any court or any governmental body or administrative agency or panel or
self-regulatory organization having jurisdiction over the General Partner or the
Partnership.

            (g) The General Partner and each principal of the General Partner,
as defined in Rule 3.1 under the CEAct, have all federal and state governmental,
regulatory and exchange approvals, registrations, and licenses, and have
effected all filings with federal and state governmental agencies and regulatory
agencies required to conduct their business and to act as required to perform
their obligations under this Agreement (including, without limitation,
registration as a commodity pool operator under the CEAct and membership in the
NFA as a commodity pool operator) and will maintain all such required approvals,
licenses, filings and registrations for the term of this Agreement.

            12.   Complete Agreement.

            This Agreement constitutes the entire agreement between the parties
with respect to the matters referred to herein, and no other agreement, verbal
or otherwise, shall be binding as between the parties unless in writing and
signed by the party against whom enforcement is sought.

            13.   Assignment.

            This Agreement may not be assigned by any party hereto without the
express written consent of the other parties hereto.

            14.   Amendment.

            This Agreement may not be amended except by the written consent of
the parties hereto.

            15.   Severability.

            The invalidity or unenforceability of any provision of this
Agreement or any covenant herein contained shall not affect the validity or
enforceability of any other provision or covenant hereof or herein contained and
any such invalid provision or covenant shall be deemed to be severable.

            16.   Disclosure Document.

            During the term of this Agreement, the Trading Advisor shall furnish
to the General Partner promptly copies of all disclosure documents or similar
documents used by the Trading Advisor. The General Partner acknowledges receipt
of the Trading Advisor's Disclosure Document.

            17.   Notices.

            All notices required to be delivered under this Agreement shall be
in writing and shall be effective when delivered personally or by telecopy on
the day delivered, or when given by registered or certified mail, postage
prepaid, return receipt requested, on the day actually received, addressed as
follows (or to such other address as the party entitled to notice shall
hereafter designate in accordance with the terms hereof):

            if to the Partnership:

            Morgan Stanley Diversified Futures Fund III L.P.
            c/o Demeter Management Corporation
            330 Madison Avenue
            8th Floor
            New York, New York 10017
            Attn: Walter Davis, President

            if to the General Partner:

            Demeter Management Corporation
            330 Madison Avenue
            8th Floor
            New York, New York 10017
            Attn: Walter Davis, President

            if to the Trading Advisor:

            Hyman Beck & Company, Inc.
            100 Campus Drive
            Florham Park, New Jersey 07932
            Attn: Alexander Hyman

            18.   Survival.

            The provisions of this Agreement shall survive the termination of
this Agreement with respect to any matter arising while this Agreement was in
effect.

            19.   GOVERNING LAW.

            THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAW OF THE STATE OF NEW YORK. IF ANY ACTION OR PROCEEDING SHALL BE
BROUGHT BY A PARTY TO THIS AGREEMENT OR TO ENFORCE ANY RIGHT OR REMEDY UNDER
THIS AGREEMENT, EACH PARTY HERETO HEREBY CONSENTS AND WILL SUBMIT TO THE
JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK OR ANY FEDERAL COURT SITTING
IN THE COUNTY, CITY AND STATE OF NEW YORK. ANY ACTION OR PROCEEDING BROUGHT BY
ANY PARTY TO THIS AGREEMENT TO ENFORCE ANY RIGHT, ASSERT ANY CLAIM OR OBTAIN ANY
RELIEF WHATSOEVER IN CONNECTION WITH THIS AGREEMENT SHALL BE BROUGHT BY SUCH
PARTY EXCLUSIVELY IN THE COURTS OF THE STATE OF NEW YORK OR ANY FEDERAL COURT
SITTING IN THE COUNTY, CITY AND STATE OF NEW YORK.

            20.   Remedies.

            In any action or proceeding arising out of any of the provisions of
this Agreement, the Trading Advisor agrees not to seek any prejudgment equitable
or ancillary relief. The Trading Advisor agrees that its sole remedy in any such
action or proceeding shall be to seek actual monetary damages for any breach of
this Agreement.

            21.   Headings.

            Headings to sections herein are for the convenience of the parties
only and are not intended to be part of or to affect the meaning or
interpretation of this Agreement.

            22.   Counterparts.

            This Agreement may be executed in one or more counterparts, each of
which shall be deemed an original but all of which together shall constitute the
same agreement.

<PAGE>

            IN WITNESS WHEREOF, this Agreement has been executed for and on
behalf of the undersigned as of the day and year first above written.

                  MORGAN STANLEY DIVERSIFIED FUTURES FUND III L.P.
                       by Demeter Management Corporation,
                       General Partner

                  By /s/ Walter Davis
                    ----------------------------------------------
                    Name:  Walter Davis
                    Title: President

                  DEMETER MANAGEMENT CORPORATION

                  By /s/ Walter Davis
                    ----------------------------------------------
                    Name:  Walter Davis
                    Title: President

                  HYMAN BECK & COMPANY, INC.

                  By /s/ Alexander Hyman
                    ----------------------------------------------
                    Name:  Alexander Hyman
                    Title: Principal

<PAGE>

                                                                       EXHIBIT A

                                Trading Policies

1.    Futures Trade Execution through Clearing Commodity Broker:

      o     When placing orders for futures trades with the clearing commodity
            broker designated in this Agreement or by the General Partner (the
            "Clearing Commodity Broker"), the Trading Advisor must follow the
            Clearing Commodity Broker's order entry procedures, of which the
            Trading Advisor has been advised.

      o     For futures trades at exchanges where give-up execution is not
            allowed, the Trading Advisor must use the execution facilities
            provided by the Clearing Commodity Broker.

2.    FX Trade Execution through FX Counterparties:

      o     When placing orders for foreign currency forward contracts ("FX
            Trades") with a dealer ("FX Counterparty"), the Trading Advisor must
            follow the FX Counterparty's order entry procedures, of which the
            Trading Advisor has been advised.

      o     When executing FX Trades on behalf of the Partnership, the Trading
            Advisor must use the execution facilities of the FX
            Counterparty(ies) designated by the General Partner for such FX
            Trades, unless the General Partner otherwise agrees in a form
            acceptable to the General Partner.

3.    "Give-Up" Futures Trade Execution:

      o     The Trading Advisor shall ensure that a "give-up" execution
            agreement is in place prior to the execution of any trade through a
            floor broker in accordance with this Agreement or as otherwise
            provided in writing to the Trading Advisor by the General Partner.

      o     The Trading Advisor may authorize payment of an execution service
            fee ("Give-Up Fee") only to the executing clearing firm or the floor
            broker (the "Executing Broker") that directly gives the futures
            trade to the Clearing Commodity Broker for such clearance, and in an
            amount not greater than the amount permitted by the General Partner
            from time to time (the "Execution Allowance"). The Execution
            Allowance shall be based on the General Partner's assessment for
            prevailing competitive rates for Give-Up Fees.

      o     Give-Up Fee bills in amounts up to the Execution Allowance will be
            processed by the Clearing Commodity Broker, with notice provided to
            the Trading Advisor. To the extent that such bills will be greater
            than the Execution Allowance, the Trading Advisor will obtain the
            prior written consent of the General Partner.

      o     The Trading Advisor shall provide that information which may
            reasonably be requested by the General Partner to verify the Give-Up
            Fees processed by the Clearing Commodity Broker.

4.    Trade Allocations:

      o     The Trading Advisor shall be responsible for determining the
            procedure(s) used to allocate trades to all customer accounts it
            manages, including the Partnership's account(s), in accordance with
            CFTC regulations. In the event that either of the Clearing Commodity
            Broker or the Executing Broker agrees to perform any step(s)
            necessary to such allocation procedure, it remains the Trading
            Advisor's responsibility to ensure that the procedure(s) are
            performed correctly and that the allocated trades are correctly
            booked to the Partnership's account(s).

5.    Daily Trade Reporting and Checkout:

      o     The Trading Advisor shall be responsible for the timely reporting of
            those futures trades not executed by, and subsequently given-up to,
            the Clearing Commodity Broker, and shall be responsible for ensuring
            that the Executing Broker(s) transmit such futures trades to the
            Clearing Commodity Broker for clearance within a timely basis.

      o     The Trading Advisor shall be responsible for daily "checkout" (trade
            recap) of all of the Partnership's futures, options, and FX Trades.
            Such checkout or trade recap shall be administered according to the
            procedures set forth by the Clearing Commodity Broker's and/or FX
            Counterparty's designated checkout area, of which the Trading
            Advisor has been advised.

6.    Reconciliations:

      o     The Trading Advisor shall be responsible for trade reconciliation
            and account balancing with the Clearing Commodity Broker and/or FX
            Counterparty's designated trade reconciliation area. The Trading
            Advisor shall use best efforts to provide to the General Partner a
            daily reconciliation for each Partnership account by no later than
            10:00 a.m. EST/EDT. Such reconciliation will specify those trades to
            be added to and/or canceled from an account, provide a valuation
            versus current settlement prices of such trades, and advise of any
            other pending cash adjustments due from Executing Brokers. The 10:00
            a.m. time requirement is contingent upon the Clearing Commodity
            Broker fulfilling its balancing obligations on an equally timely
            basis.

      o     The Trading Advisor shall report to the General Partner any
            incorrect settlement and/or closing price of which it becomes aware
            with regard to the Clearing Commodity Broker's account statement(s)
            for the Partnership.

7.    Foreign Currency Conversions:

      o     The Trading Advisor shall be responsible for the conversion of
            foreign currency balances to U.S. dollars. The Trading Advisor may,
            at its discretion, place such foreign currency conversion trades as
            may be necessary. Conversion trades should be verified in the
            Trading Advisor's daily checkout or trade recap, account balancing,
            and reconciliation procedures.

8.    Monitoring of Delivery Periods, Option Expirations and Trade Settlement:

      o     The Trading Advisor shall be responsible for monitoring first notice
            (delivery) dates, last trading dates, option expiration dates, and
            forward settlement and/or maturity dates. The Trading Advisor shall
            also take appropriate steps to ensure that it has exited positions
            prior to delivery, expiration and settlement. With regard to option
            positions, the Trading Advisor must, in a timely fashion,
            communicate to the Clearing Commodity Broker's and/or FX
            Counterparty's designated area proper notice of its intentions
            regarding all such open positions that are due to expire.

9.    Trading Errors:

      o     The Trading Advisor must inform the General Partner and Clearing
            Commodity Broker of any such occasion in which trades are placed in
            error. The provisions of Section 2(d) of this Agreement shall be
            interpreted to mean that the benefit of profitable trading errors
            made by the Trading Advisor when trading on behalf of the Trading
            Company shall be awarded to the Partnership, whereas the detriment
            of unprofitable trading errors made by the Trading Advisor when
            trading on behalf of the Partnership must be borne by the Trading
            Advisor.

<PAGE>

                                                                       EXHIBIT B
                                                                       ---------

                       Commodity Interest Contracts Traded

                              THE GLOBAL PORTFOLIO
                              --------------------

<TABLE>
<CAPTION>

FIXED INCOME                                            STOCK INDICES
------------                                            -------------
<S>                                     <C>             <C>                                <C>
U.S. 30-Year Treasury Bonds             (CBOT)          S&P 500                            (CME)
U.S. 10-Year Treasury Notes             (CBOT)          E-Mini S&P 500                     (CME)
U.S. 5-Year Treasury Notes              (CBOT)          E-Mini Russell 1000                (CME)
U.S. 2-Year Treasury Notes              (CBOT)          NASDAQ 100                         (CME)
10-Year Interest Rate Swap              (CBOT)          E-Mini NASDAQ Composite            (CME)
5-Year Interest Rate Swap               (CBOT)          E-Mini MSCI EAFE                   (CME)
30-Day Federal Funds                    (CBOT)          S&P Midcap 400                     (CME)
Eurodollars                             (CME)           E-Mini S&P Midcap 400              (CME)
LIBOR                                   (CME)           Russell 2000                       (CME)
Canadian Bankers' Acceptance Notes      (ME)            E-Mini Russell 2000                (CME)
Canadian 10-Year Government Bonds       (ME)            DJIA                               (CBOT)
Long Gilts                              (EURONEXT)      Mini-sized Dow                     (CBOT)
Short Sterling                          (EURONEXT)      Russell 1000                       (NYBOT)
EURIBOR                                 (EURONEXT)      NYSE Composite Index               (NYBOT)
Euroswiss                               (EURONEXT)      S&P Canada 60 Index                (ME)
2-Year Euro Swapnote                    (EURONEXT)      FTSE 100 Index                     (EURONEXT)
5-Year Euro Swapnote                    (EURONEXT)      FTSE 250 Index                     (EURONEXT)
10-Year Euro Swapnote                   (EURONEXT)      FTSE Eurotop 100 Index             (EURONEXT)
Euro-Bund                               (EUREX)         CAC 40 Index                       (EURONEXT)
Euro-Bobl                               (EUREX)         AEX-index                          (EURONEXT)
Euro-Schatz                             (EUREX)         Light AEX-index                    (EURONEXT)
Euro-Buxl                               (EUREX)         Bel 20 Index                       (EURONEXT)
CONF                                    (EUREX)         MSCI Pan-Euro Index                (EURONEXT)
Japanese Government Bonds               (TSE/SGX)       DAX                                (EUREX)
Mini Japanese Government Bonds          (SGX)           Dow Jones Euro Stoxx 50            (EUREX)
Euroyen (TIBOR)                         (SGX/TFX)       Dow Jones Stoxx 50                 (EUREX)
Australian 10-Year Treasury Bonds       (SFE)           SMI                                (EUREX)
Australian 3-Year Treasury Bonds        (SFE)           IBEX 35                            (MEFF)
Australian 90-Day Bank Accepted Bills   (SFE)           SPI 200 Index                      (SFE)
New Zealand 90-Day Bank Bills           (SFE)           Nikkei 225 Index                   (SGX)
                                                        MSCI Taiwan Stock Index            (SGX)
                                                        MSCI Singapore Index               (SGX)
                                                        TOPIX                              (TSE)
                                                        Hang Seng Index                    (HKFE)

METALS                                                  ENERGIES
------                                                  --------
Copper                                  (NYMEX)         Light Sweet Crude Oil              (NYMEX)
Gold                                    (NYMEX/CBOT)    Light Sweet Crude Oil e-miNY       (NYMEX)
Mini-sized Gold                         (CBOT)          Heating Oil                        (NYMEX)
Silver                                  (NYMEX/CBOT)    Heating Oil miNY                   (NYMEX)
Mini-sized Silver                       (CBOT)          Unleaded Gas                       (NYMEX)
Platinum                                (NYMEX)         Natural Gas                        (NYMEX)
Palladium                               (NYMEX)         Natural Gas e-miNY                 (NYMEX)
London Aluminum                         (LME)           New York Harbor RBOB Gasoline      (NYMEX)
London Copper                           (LME)           Brent Crude Oil                    (ICE)
London Lead                             (LME)           Gas Oil                            (ICE)
London Nickel                           (LME)           WTI Crude Oil                      (ICE)
London Tin                              (LME)
London Zinc                             (LME)           INTERNATIONAL COMMODITIES
                                                        -------------------------
AGRICULTURALS                                           Random Length Lumber               (CME)
-------------                                           Goldman Sachs Commodity Index      (CME)
Corn                                    (CBOT)          Coffee                             (NYBOT)
Mini-sized Corn                         (CBOT)          Sugar #11                          (NYBOT)
Oats                                    (CBOT)          Frozen Concentrated Orange juice   (NYBOT)
Soybeans                                (CBOT)          Cotton                             (NYBOT)
Mini-sized Soybeans                     (CBOT)          Cocoa                              (NYBOT/EURONEXT)
Soybean Meal                            (CBOT)          Robusta Coffee                     (EURONEXT)
Soybean Oil                             (CBOT)          White Sugar                        (EURONEXT)
Wheat                                   (CBOT)
Mini-sized Wheat                        (CBOT)          FX (INTERBANK/IMM/FINEX)
Rough Rice                              (CBOT)          ------------------------
Rapeseed                                (EURONEXT)      U.S. Dollar
Milling Wheat                           (EURONEXT)      Euro
                                                        Canadian Dollar
MEATS                                                   British Pound
-----                                                   Swiss Franc
Live Cattle                             (CME)           Swedish Krona
Lean Hogs                               (CME)           Japanese Yen
Frozen Pork Bellies                     (CME)           Australian Dollar
Feeder Cattle                           (CME)           New Zealand Dollar
                                                        Norwegian Krona
                                                        Brazilian Real
                                                        Czech Krona
                                                        Danish Krone
                                                        Hong Kong Dollar
                                                        Hungarian Forint
                                                        Indonesian Rupia
                                                        Indian Rupee
                                                        Korean Wong
                                                        Mexican Peso
                                                        Polish Zloty
                                                        Singapore Dollar
                                                        Thai Bhat
                                                        Taiwan Dollar
                                                        South African Rand
                                                        Chinese Renminbi
                                                        Select crosses involving the above

</TABLE>
<PAGE>

                                                                       EXHIBIT C
                                                                       ---------

                              TRADING AUTHORIZATION

Hyman Beck & Company, Inc.
100 Campus Drive
Florham Park, NJ 07932
Attn: Alexander Hyman

Ladies and Gentlemen:

            MORGAN STANLEY DIVERSIFIED FUTURES FUND III L.P., a Delaware limited
partnership (the "Partnership"), does hereby make, constitute, and appoint HYMAN
BECK & COMPANY, INC., a Delaware corporation, (the "Trading Advisor") as the
Partnership's agent and attorney-in-fact to purchase and sell commodity
interests through Morgan Stanley & Co. Incorporated and Morgan Stanley & Co.
International Limited, as commodity brokers, as described in and in accordance
with the terms of the Management Agreement dated as of November 1, 2006 among
the Partnership, Demeter Management Corporation and the Trading Advisor, until
further notice to the Trading Advisor.

            This authorization shall terminate and be null, void, and of no
further effect simultaneously with the termination of the said Management
Agreement.

                                       Very truly yours,

                                       MORGAN STANLEY DIVERSIFIED
                                          FUTURES FUND III L.P.
                                       by Demeter Management Corporation,
                                          General Partner

                                        By:
                                           -------------------------------------
                                           Walter Davis, President

Dated:  _______, 2006Exhibit 10.01

                              MANAGEMENT AGREEMENT

            THIS AGREEMENT, made as of the 1st day of November, 2006, among
MORGAN STANLEY DIVERSIFIED FUTURES FUND L.P., a Delaware limited partnership
(the "Partnership"), DEMETER MANAGEMENT CORPORATION, a Delaware corporation (the
"General Partner"), and HYMAN BECK & COMPANY, INC., a Delaware corporation (the
"Trading Advisor").

                              W I T N E S S E T H:
                              - - - - - - - - - -

            WHEREAS, the Partnership has been organized pursuant to the Amended
and Restated Limited Partnership Agreement, dated as of June 30, 1995, as may be
amended from time to time, (the "Limited Partnership Agreement"), to trade, buy,
sell, spread, or otherwise acquire, hold, dispose of, or deal in commodities
(which may include currencies, mortgage-backed securities, money market
instruments, obligations of or guaranteed by the United States government, and
other financial instruments, securities, stock, financial and economic indexes,
and items which are now, or may hereafter be, the subject of futures contract
trading), futures contracts, forward contracts, foreign exchange commitments,
options on physical commodities and on futures contracts, spot (cash)
commodities and currencies, and any rights pertaining thereto (hereinafter
referred to collectively as "futures interests") and securities (such as United
States Treasury securities) approved by the Commodity Futures Trading Commission
(the "CFTC") for investment of customer funds;

            WHEREAS, the Partnership previously offered and sold units of
limited partnership interest ("Units") to investors pursuant to a Registration
Statement on Form S-1 (No. 33-90360) (the "Registration Statement") filed under
the Securities Act of 1933, as amended (the "Securities Act"), and a final
Prospectus dated June 30, 1995, constituting a part thereof (as amended and
supplemented, the "Prospectus");

            WHEREAS, the principals of the Trading Advisor have extensive
experience trading in futures interests and the Trading Advisor is willing to
provide certain services and undertake certain obligations as set forth herein;

            WHEREAS, the Partnership and the General Partner desire the Trading
Advisor to act as trading advisor for the Partnership and to make investment
decisions with respect to futures interests for the Partnership's Net Assets (as
defined in Section 8(d)(1) of the Limited Partnership Agreement) and the Trading
Advisor desires so to act; and

            WHEREAS, the Partnership, the General Partner and the Trading
Advisor wish to enter into this Management Agreement which, among other things,
sets forth certain terms and conditions upon which the Trading Advisor will
conduct futures interests trading for the Partnership;

            NOW THEREFORE, the parties hereto hereby agree as follows:

            1.    Undertakings of the Trading Advisor.
                  ------------------------------------

            The Trading Advisor agrees to make all disclosures regarding itself,
its principals and affiliates, its trading performance, its trading programs,
systems, methods, and strategies (subject to the need, in the reasonable
discretion of the Trading Advisor, to preserve the confidentiality of
proprietary information concerning such programs, systems, methods, and
strategies), any client accounts over which it has discretionary trading
authority (other than the names of any such clients), and otherwise, as the
General Partner may reasonably require to fulfill its due diligence obligations,
to provide any necessary disclosures to investors and to comply with any
applicable federal or state law or rule or regulation, including those of the
Securities and Exchange Commission (the "SEC"), the CFTC, the National Futures
Association (the "NFA"), the National Association of Securities Dealers, Inc.
(the "NASD") or any other regulatory body, exchange, or board. As used herein,
the term "principal" shall have the meaning as defined in Rule 3.1(a) of the
CFTC's Regulations and the term "affiliate" shall mean any individual or entity
that directly or indirectly controls, is controlled by, or is under common
control with, the Trading Advisor.

            2.    Duties of the Trading Advisor.
                  ------------------------------

            (a) The Trading Advisor hereby agrees to act as Trading Advisor for
the Partnership and, as such, shall have sole authority and responsibility for
directing the investment and reinvestment of the Net Assets of the Partnership,
which initially shall be traded pursuant to its trading program, the Global
Portfolio, as described in the Trading Advisor's Disclosure Document dated March
27, 2006 (as amended or supplemented, the "Disclosure Document"), and may be
subsequently traded pursuant to such other of the Trading Advisor's programs
described in the Disclosure Document, as the General Partner may agree (with
such changes and additions to such trading programs as the Trading Advisor, from
time to time, incorporates into its trading program(s) for accounts the size of
the Partnership), (collectively, the "Trading Program") on the terms and
conditions and in accordance with the prohibitions and trading policies set
forth in Exhibit A hereto, the Limited Partnership Agreement and as otherwise
provided in writing to the Trading Advisor; provided, however, that the General
Partner may override the instructions of the Trading Advisor to the extent
necessary (i) to comply with the trading policies of the Partnership, as
described in this Agreement, the Limited Partnership Agreement and as otherwise
provided in writing to the Trading Advisor, and with applicable speculative
position limits, (ii) to pay the Partnership's expenses, (iii) to the extent the
General Partner believes doing so is necessary for the protection of the
Partnership, (iv) to terminate the futures interests trading of the Partnership,
or (v) to comply with any applicable law or regulation. The General Partner
agrees not to override any such instructions for the reasons specified in clause
(ii) of the preceding sentence unless the Trading Advisor fails to comply with a
request of the General Partner to make the necessary amount of funds available
to the Partnership within five calendar days of such request. Except as
otherwise provided herein, the Trading Advisor shall not be liable for the
consequences of any decision by the General Partner to override instructions of
the Trading Advisor. In performing services for the Partnership, the Trading
Advisor may not materially alter or change the Trading Program without the prior
written consent of the General Partner (and shall not effect such alteration or
change on behalf of the Partnership without the General Partner's consent), and
it being understood that changes in the futures interests traded, provided that
such futures interests are listed in Exhibit B hereto, shall not be deemed an
alteration in the Trading Program.

            (b) The Trading Advisor shall:

            (i) Exercise good faith and due care in trading futures interests
      for the account of the Partnership in accordance with the prohibitions and
      trading policies of the Partnership described in Exhibit A hereto, the
      Limited Partnership Agreement and as otherwise provided in writing to the
      Trading Advisor. The Trading Advisor shall trade the Partnership's Net
      Assets pursuant to the Trading Program.

            (ii) Subject to reasonable assurances of confidentiality by the
      General Partner and the Partnership, provide the General Partner, within
      30 calendar days of a request therefor by the General Partner, with
      information comparing the performance of the Partnership's account and the
      performance of all other client accounts directed by the Trading Advisor
      using the Trading Program over a specified period of time. In providing
      such information, the Trading Advisor may take such steps as are necessary
      to assure the confidentiality of the Trading Advisor's clients'
      identities. The Trading Advisor shall, upon the General Partner's request,
      consult with the General Partner concerning any discrepancies between the
      performance of such other accounts and the Partnership's account. The
      Trading Advisor shall promptly inform the General Partner of any material
      discrepancies of which the Trading Advisor becomes aware. The General
      Partner acknowledges that different trading programs, strategies or
      implementation methods may be utilized for different accounts, accounts
      with different trading policies, accounts experiencing differing inflows
      or outflows of equity, accounts that commence trading at different times,
      accounts which have different portfolios or different fiscal years and
      that such differences may cause divergent trading results.

            (iii) Upon the request of the General Partner and subject to
      reasonable assurances of confidentiality by the General Partner and the
      Partnership, provide the General Partner with all material information
      concerning the Trading Advisor other than proprietary information
      (including, without limitation, information relating to changes in
      control, personnel, trading approach, or financial condition). The General
      Partner acknowledges that all trading instructions made by the Trading
      Advisor will be held in confidence by the General Partner, except to the
      extent necessary to conduct the business of the Partnership or as required
      by law.

            (iv) Inform the General Partner when the Trading Advisor's open
      positions maintained by the Trading Advisor exceed the Trading Advisor's
      applicable speculative position limits.

            (c) All purchases and sales of futures interests pursuant to this
Agreement shall be for the account, and at the risk, of the Partnership and not
for the account, or at the risk, of the Trading Advisor or any of its
stockholders, directors, officers, or employees, or any other person, if any,
who controls the Trading Advisor. All brokerage fees, including give-up fees at
rates approved by Morgan Stanley DW, Inc., an affiliate of the General Partner
("Morgan Stanley DW"), arising from trading by the Trading Advisor shall be for
the account of the Partnership. The Trading Advisor makes no representations as
to whether its trading will produce profits or avoid losses.

            (d) Notwithstanding anything in this Agreement to the contrary, the
Trading Advisor shall assume financial responsibility for any errors committed
or caused by it in transmitting orders for the purchase or sale of futures
interests for the Partnership's account, including, but not limited to, payment
of the floor brokerage commissions, exchange and NFA fees, and other transaction
charges and give-up charges incurred on such trades. The Trading Advisor's
errors shall include, but not be limited to, inputting improper trading signals
or communicating incorrect orders for execution. The Trading Advisor shall not
be responsible for errors committed or caused by Morgan Stanley DW, Morgan
Stanley & Co. Incorporated, an affiliate of the General Partner ("MS&Co.") or
any other floor broker or futures commission merchant executing trades. The
Trading Advisor shall have an affirmative obligation promptly to notify the
General Partner of its own errors, and the Trading Advisor shall use its best
efforts to identify and promptly notify the General Partner of any order or
trade that the Trading Advisor reasonably believes was not executed in
accordance with its instructions.

            (e) Prior to the commencement of trading, the General Partner on
behalf of the Partnership shall deliver to the Trading Advisor a trading
authorization, in the form attached as Exhibit C hereto, appointing the Trading
Advisor the Partnership's attorney-in-fact for such purpose.

            3.    Designation of Additional or Replacement Trading Advisors and
                  -------------------------------------------------------------
                  Reallocation of Net Assets.
                  ---------------------------

            If the General Partner at any time deems it to be in the best
interests of the Partnership, the General Partner may designate an additional or
replacement trading advisor or advisors for the Partnership and may apportion to
such additional or replacement trading advisor(s) the management of such amounts
of Net Assets as the General Partner shall determine in its absolute discretion.
The designation of an additional trading advisor or advisors or replacement of
any trading advisor for the Partnership by the General Partner shall not require
any approval of the Trading Advisor. The designation and retention of an
additional or replacement trading advisor(s) and the apportionment of Net Assets
to any such trading advisor(s) pursuant to this Section 3 shall neither
terminate this Agreement nor modify in any regard the respective rights and
obligations of the Partnership, the General Partner and the Trading Advisor
hereunder. In the event that an additional trading advisor is so designated, the
Trading Advisor shall thereafter receive management and incentive fees based,
respectively, on that portion of the Net Assets managed by the Trading Advisor
and that portion of the Trading Profits (as defined in Section 6(c) hereof)
properly attributable to the trading done by the Trading Advisor.

            4.    Trading Advisor Independent.
                  ----------------------------

            For all purposes of this Agreement, the Trading Advisor shall be
deemed to be an independent contractor and shall, unless otherwise expressly
provided herein or authorized, have no authority to act for or represent the
Partnership in any way or otherwise be deemed an agent of the Partnership or the
General Partner. Nothing contained herein shall be deemed to require the
Partnership or the General Partner to take any action contrary to the Limited
Partnership Agreement, the Certificate of Limited Partnership of the Partnership
as from time to time in effect (the "Certificate of Limited Partnership"), or
any applicable law or rule or regulation of any regulatory body, exchange, or
board. Nothing herein contained shall constitute the Trading Advisor or the
General Partner as a member of any partnership, joint venture, association,
syndicate or other entity with the Partnership or the General Partner, or be
deemed to confer on any of them any express, implied, or apparent authority to
incur any obligation or liability on behalf of any other. It is expressly agreed
that the Trading Advisor is neither a promoter, sponsor, nor issuer with respect
to the Partnership.

            5.    Commodity Brokers.
                  ------------------

            The Trading Advisor shall effect all transactions in futures
interests for the Partnership through, and shall maintain a separate account
with, such commodity broker or brokers as the General Partner shall direct. At
the present time, Morgan Stanley DW shall act as the non-clearing commodity
broker and MS&Co. shall act as the clearing commodity broker for the
Partnership, with the exception of trades on the London Metal Exchange which
will be cleared by Morgan Stanley & Co. International Limited, an affiliate of
the General Partner ("MSIL"). In addition, MS&Co. will act as the counterparty
on all of the foreign currency forward trades for the Partnership. The General
Partner shall provide the Trading Advisor with copies of brokerage statements.
Notwithstanding that MS&Co. and MSIL shall act as the clearing commodity brokers
for the Partnership, the Trading Advisor may execute trades through floor
brokers other than those employed by MS&Co. and MSIL so long as arrangements are
made for such floor brokers to "give-up" or transfer the positions to MS&Co. and
MSIL and provided that the rates charged by such floor brokers have been
approved in writing by Morgan Stanley DW. Except as provided in Exhibit A, the
Trading Advisor will not be responsible for paying give-up fees at rates
approved by Morgan Stanley DW.

            6.    Fees.
                  -----

            (a) For the services to be rendered to the Partnership by the
Trading Advisor under this Agreement, the Partnership shall pay the Trading
Advisor the following fees:

            (i) A monthly management fee, without regard to the profitability of
      the Trading Advisor's trading for the Partnership's account, equal to 1/12
      of 1.50% (a 1.50% annual rate) of the Partnership's "Net Assets" (as
      defined in Section 8(d)(1) of the Limited Partnership Agreement) as of the
      opening of business on the first day of each calendar month, commencing
      with the month in which the Partnership begins to receive trading advice
      from the Trading Advisor pursuant to this Agreement.

            (ii) A quarterly incentive fee equal to 20% of the "Trading Profits"
      (as defined in Section 6(c) hereof) experienced by the Partnership as of
      the end of each calendar quarter.

            (b) If this Agreement is terminated on a date other than the last
day of a calendar quarter, the incentive fee described above shall be determined
as if such date were the end of a calendar quarter. If this Agreement is
terminated on a date other than the end of a month, the management fee described
above shall be prorated based on the ratio of the number of trading days in the
month through the date of termination to the total number of trading days in the
month. If, during any month after the Partnership commences trading operations,
the Partnership does not conduct business operations, or suspends trading for
the account of the Partnership managed by the Trading Advisor, or, as a result
of an act or material failure to act by the Trading Advisor, is otherwise unable
to utilize the trading advice of the Trading Advisor on any of the trading days
of that period for any reason, the management fee described above shall be
prorated based on the ratio of the number of trading days in the month that the
Partnership account managed by the Trading Advisor engaged in trading operations
or utilized the trading advice of the Trading Advisor to the total number of
trading days in the month.

            (c) As used herein, the term "Trading Profits" shall mean net
futures interests trading profits (realized and unrealized) earned on the
Partnership's Net Assets, decreased by the monthly management fees and brokerage
fees; with such trading profits and items of decrease determined from the end of
the last calendar quarter in which an incentive fee was earned by the Trading
Advisor or, if no incentive fee has been earned previously by the Trading
Advisor, from the date that the Partnership begins to receive trading advice
from the Trading Advisor pursuant to this Agreement to the end of the calendar
quarter as of which such incentive fee calculation is being made. Extraordinary
expenses of the Partnership, if any, will not be deducted in determining Trading
Profits. No incentive fee will be paid on interest income earned by the
Partnership.

            (d) If any payment of incentive fees is made to the Trading Advisor
on account of Trading Profits and the Trading Advisor thereafter fails to earn
Trading Profits or experiences losses for any subsequent incentive period, the
Trading Advisor shall be entitled to retain such amounts of incentive fees
previously paid to the Trading Advisor in respect of such Trading Profits.
However, no subsequent incentive fees shall be payable to the Trading Advisor
until the Partnership has again earned Trading Profits; provided, however, that
if the Partnership's Net Assets are reduced because of redemptions that occur at
the end of, or subsequent to, an incentive period in which the Trading Advisor
experiences a futures interests trading loss, the trading loss for that
incentive period which must be recovered before the Trading Advisor will be
deemed to experience Trading Profits will be equal to the amount determined by
(x) dividing the Partnership's Net Assets after such redemptions by the
Partnership's Net Assets immediately before such redemptions and (y) multiplying
that fraction by the amount of the unrecovered futures interests trading loss
experienced in the calendar quarter prior to redemptions. In the event that the
Partnership experiences a futures interests trading loss in more than one
calendar quarter without the payment of an intervening incentive fee and the
Partnership's Net Assets are reduced in more than one such calendar quarter
because of redemptions, then the trading loss for each such incentive period
shall be adjusted in accordance with the formula described above and such
reduced amount of futures interests trading loss shall be carried forward and
used to offset subsequent futures interests trading profits.

            7.    Term.
                  -----

            (a) This Agreement shall continue in effect until October 31, 2007
(the "Initial Termination Date"). If this Agreement is not terminated on the
Initial Termination Date, as provided for herein, then, this Agreement shall
automatically renew for an additional one-year period and shall continue to
renew for additional one-year periods until this Agreement is otherwise
terminated, as provided for herein. At least 30 calendar days prior to the
expiration of the Initial Termination Date or any subsequent one-year period, as
the case may be, the Trading Advisor may terminate this Agreement at the end of
the current period by providing written notice to the Partnership indicating
that the Trading Advisor desires to terminate this Agreement at the end of such
period. This Agreement shall also terminate if the Partnership terminates.

            (b) The Partnership shall have the right to terminate this Agreement
at its discretion (i) at any month-end upon 5 calendar days' prior written
notice to the Trading Advisor or (ii) at any time upon written notice to the
Trading Advisor upon the occurrence of any of the following events: (a) if any
person described as a "principal" of the Trading Advisor in the Disclosure
Document ceases for any reason to be an active executive officer of the Trading
Advisor; (b) if the Trading Advisor becomes bankrupt or insolvent; (c) if the
Trading Advisor is unable to use its Trading Program as in effect on the date
hereof and as refined and modified in the future for the benefit of the
Partnership; (d) if the registration, as a commodity trading advisor, of the
Trading Advisor with the CFTC or its membership in the NFA is revoked,
suspended, terminated, or not renewed, or limited or qualified in any respect;
(e) if the Trading Advisor merges or consolidates with, or sells or otherwise
transfers its advisory business, or all or a substantial portion of its assets,
any portion of its futures interests trading programs, systems or methods, or
its goodwill, to any individual or entity; (f) if the Net Asset value of a Unit,
after adjusting for distributions, if any, shall be less than $500.00; (g) if,
at any time, the Trading Advisor violates any trading or administrative policy
described in this Agreement or the Limited Partnership Agreement or otherwise
provided in writing to the Trading Advisor by the General Partner, except with
the prior express written consent of the General Partner; or (h) if the Trading
Advisor fails in a material manner to perform any of its obligations under this
Agreement.

            (c) The Trading Advisor may terminate this Agreement at any time,
upon written notice to the Partnership, in the event: (i) that the General
Partner imposes additional trading limitation(s) in the form of one or more
trading policies or administrative policies that the Trading Advisor does not
agree to follow in its management of the Partnership's Net Assets; (ii) the
General Partner objects to the Trading Advisor implementing a proposed material
change in the Trading Advisor's Trading Program used by the Partnership and
Trading Advisor certifies to the General Partner in writing that it believes
such change is in the best interests of the Partnership; (iii) the General
Partner overrides a trading instruction of the Trading Advisor for reasons
unrelated to those set forth in Section 2 hereof and a determination by the
General Partner that the Trading Advisor has violated the Partnership's trading
policies and the Trading Advisor certifies to the General Partner in writing
that as a result the Trading Advisor believes the performance results of the
Trading Advisor relating to the Partnership will be materially adversely
affected; or (iv) the Partnership materially breaches this Agreement and does
not correct the breach within 10 business days of receipt of a written notice of
such breach from the Trading Advisor.

            The indemnities set forth in Section 8 hereof shall survive any
termination of this Agreement.

            8.    Standard of Liability; Indemnifications.
                  ----------------------------------------

            (a) Limitation of Trading Advisor Liability. In respect of the
Trading Advisor's role in the futures interests trading of the Partnership's
assets, none of the Trading Advisor, or its controlling persons, its affiliates,
and their respective directors, officers, shareholders, employees or controlling
persons shall be liable to the Partnership or the General Partner or their
partners, officers, shareholders, directors or controlling persons except that
the Trading Advisor shall be liable for acts or omissions of any such person
provided that such act or omission constitutes a breach of this Agreement or a
representation, warranty or covenant herein, willful misconduct or negligence or
is the result of any such person not having acted in good faith and in the
reasonable belief that such actions or omissions were in, or not opposed to, the
best interests of the Partnership.

            (b) Trading Advisor Indemnity. The Trading Advisor shall indemnify,
defend and hold harmless the Partnership and the General Partner, their
controlling persons, their affiliates and their respective directors, officers,
shareholders, employees, and controlling persons from and against any and all
losses, claims, damages, liabilities (joint and several), costs, and expenses
(including any reasonable investigatory, legal, and other expenses incurred in
connection with, and any amounts paid in, any settlement; provided that the
Trading Advisor shall have approved such settlement) incurred as a result of any
action or omission involving the Partnership; provided that such liability
arises from an act or omission of the Trading Advisor, or any of its controlling
persons or affiliates or their respective directors, officers, partners,
shareholders, or employees which is found by a court of competent jurisdiction
upon entry of a final judgment (or, if no final judgment is entered, by an
opinion rendered by counsel who is approved by the Partnership and the Trading
Advisor, such approval not to be unreasonably withheld) to be a breach of this
Agreement or a representation, warranty or covenant herein, or the result of
willful misconduct or negligence or conduct not done in good faith in the
reasonable belief that it was in, or not opposed to, the best interests of the
Partnership.

            (c) Partnership Indemnity. The Partnership shall indemnify, defend,
and hold harmless the Trading Advisor, its controlling persons, their affiliates
and their respective directors, officers, shareholders, employees, and
controlling persons, from and against any and all losses, claims, damages,
liabilities (joint and several), costs, and expenses (including any reasonable
investigatory, legal, and other expenses incurred in connection with, and any
amounts paid in, any settlement; provided that the Partnership shall have
approved such settlement) resulting from a demand, claim, lawsuit, action, or
proceeding (other than those incurred as a result of claims brought by or in the
right of an indemnified party) relating to the services provided by and the
obligations undertaken by the Trading Advisor in connection with the
Partnership; provided that a court of competent jurisdiction upon entry of a
final judgment finds (or, if no final judgment is entered, an opinion is
rendered to the Partnership by independent counsel reasonably acceptable to both
parties) to the effect that the action or inaction of such indemnified party
that was the subject of the demand, claim, lawsuit, action, or proceeding did
not constitute negligence, willful misconduct, or a breach of this Agreement by
the Trading Advisor or such indemnified party or a representation, warranty or
covenant of the Trading Advisor herein and was done in good faith and in a
manner such indemnified party reasonably believed to be in, or not opposed to,
the best interests of the Partnership.

            (d) The foregoing agreements of indemnity shall be in addition to,
and shall in no respect limit or restrict, any other remedies which may be
available to an indemnified person.

            (e) Promptly after receipt by an indemnified person of notice of the
commencement of any action, claim, or proceeding to which any of the indemnities
may apply, the indemnified person will notify the indemnifying party in writing
of the commencement thereof if a claim in respect thereof is to be made against
the indemnifying party hereunder; but the omission so to notify the indemnifying
party will not relieve the indemnifying party from any liability which the
indemnifying party may have to the indemnified person hereunder, except where
such omission has materially prejudiced the indemnifying party. In case any
action, claim, or proceeding is brought against an indemnified person and the
indemnified person notifies the indemnifying party of the commencement thereof
as provided above, the indemnifying party will be entitled to participate
therein and, to the extent that the indemnifying party desires, to assume the
defense thereof with counsel selected by the indemnifying party and not
unreasonably disapproved by the indemnified person. After notice from the
indemnifying party to the indemnified person of the indemnifying party's
election so to assume the defense thereof as provided above, the indemnifying
party will not be liable to the indemnified person under the indemnity
provisions hereof for any legal and other expenses subsequently incurred by the
indemnified person in connection with the defense thereof, other than reasonable
costs of investigation.

            Notwithstanding the preceding paragraph, if, in any action, claim,
or proceeding as to which indemnification is or may be available hereunder, an
indemnified person reasonably determines that its interests are or may be
adverse, in whole or in part, to the indemnifying party's interests or that
there may be legal defenses available to the indemnified person which are
different from, in addition to, or inconsistent with the defenses available to
the indemnifying party, the indemnified person may retain its own counsel in
connection with such action, claim, or proceeding and will be indemnified by the
indemnifying party for any legal and other expenses reasonably incurred in
connection with investigating or defending such action, claim, or proceeding.

            In no event will the indemnifying party be liable for the fees and
expenses of more than one counsel for all indemnified persons in connection with
any one action, claim, or proceeding or in connection with separate but similar
or related actions, claims, or proceedings in the same jurisdiction arising out
of the same general allegations. The indemnifying party will not be liable for
any settlement of any action, claim, or proceeding effected without the
indemnifying party's express written consent, but if any action, claim, or
proceeding is settled with the indemnifying party's express written consent, the
indemnifying party will indemnify, defend, and hold harmless an indemnified
person as provided in this Section 8.

            9.    Right to Advise Others and Uniformity of Acts and Practices.
                  ------------------------------------------------------------

            (a) The Trading Advisor is engaged in the business of advising
investors as to the purchase and sale of futures interests. During the term of
this Agreement, the Trading Advisor, its principals and affiliates, will be
advising other investors (including affiliates and the stockholders, officers,
directors, and employees of the Trading Advisor and its affiliates and their
families) and trading for their own accounts. However, under no circumstances
shall the Trading Advisor or any of its principals or affiliates by any act or
omission favor any account advised or managed by the Trading Advisor or any of
its principals or affiliates over the account of the Partnership in any way or
manner (other than by charging different management and/or incentive fees). The
Trading Advisor and its principals and affiliates agree to treat the Partnership
in a fiduciary capacity to the extent recognized by applicable law, but, subject
to that standard, the Trading Advisor or any of its principals or affiliates
shall be free to advise and manage accounts for other investors and shall be
free to trade on the basis of the same Trading Program employed by the Trading
Advisor for the account of the Partnership, or trading programs, systems,
methods, or strategies that are entirely independent of, or materially different
from, those employed for the account of the Partnership, and shall be free to
compete for the same futures interests as the Partnership or to take positions
opposite to the Partnership, where such actions do not knowingly or deliberately
prefer any of such accounts over the account of the Partnership. At the request
of the General Partner, the Trading Advisor shall use its best efforts to make
available for inspection and copying by the General Partner copies of the normal
monthly, quarterly, and annual (as the case may be) reports sent to participants
in commodity pools (without identifying such participants) for which the Trading
Advisor or any of its principals or affiliates acts as a commodity trading
advisor and similar information with respect to any other accounts of theirs
with respect to which such reports are not required to be delivered. At the
request of the General Partner, the Trading Advisor and its principals and
affiliates shall provide the General Partner with a written explanation,
acceptable to the General Partner, of material differences in performance
between the Partnership's account and such other accounts.

            (b) The Trading Advisor and its principals and affiliates shall not
be restricted as to the number or nature of its clients, except that: (i) so
long as the Trading Advisor acts as a trading advisor for the Partnership,
neither the Trading Advisor nor any of its principals or affiliates shall hold
knowingly any position or control any other account that would cause the
Partnership, the Trading Advisor, or the principals or affiliates of the Trading
Advisor to be in violation of the Commodity Exchange Act, as amended, and any
regulations promulgated thereunder (the "CEAct"), any applicable rule or
regulation of any other regulatory body, exchange, or board; and (ii) neither
the Trading Advisor nor any of its principals or affiliates shall render futures
interests trading advice to any other individual or entity or otherwise engage
in activity which shall knowingly cause positions in futures interests to be
attributed to the Trading Advisor under the rules or regulations of the CFTC or
any other regulatory body, exchange, or board so as to require the significant
modification of positions taken or intended for the account of the Partnership;
provided that the Trading Advisor may modify its Trading Program to accommodate
the trading of additional funds or accounts. If applicable speculative position
limits are exceeded by the Trading Advisor in the opinion of (i) independent
counsel (who shall be other than counsel to the Partnership), (ii) the CFTC, or
(iii) any other regulatory body, exchange, or board, the Trading Advisor and its
principals and affiliates shall promptly liquidate positions in all of their
accounts, including the Partnership's account, as to which positions are
attributed to the Trading Advisor as nearly as possible in proportion to the
accounts' respective amounts available for trading (taking into account
different degrees of leverage and "notional" equity) to the extent necessary to
comply with the applicable position limits.

            10.   Representations, Warranties, and Covenants of the Trading
                  ---------------------------------------------------------
                  Advisor.
                  --------

            (a) Representations, Warranties, and Agreements of the Trading
Advisor. The Trading Advisor with respect to itself and each of its principals
represents and warrants to and agrees with the General Partner and the
Partnership as follows:

            (i) It will exercise good faith and due care in using the Trading
      Program on behalf of the Partnership.

            (ii) The Trading Advisor shall follow, at all times, the trading
      policies of the Partnership (as described in the Limited Partnership
      Agreement and as set forth in Exhibit A hereto) and as amended in writing
      and furnished to the Trading Advisor from time to time.

            (iii) The Trading Advisor shall trade: (A) the Partnership's Net
      Assets pursuant to the Trading Program; and (B) only in futures and option
      contracts traded on U.S. contract markets, foreign currency forward
      contracts traded with MS&Co. (which may include forward contracts
      initially executed with financial institutions other than MS&Co.), and
      such other futures interests that are approved in writing by the General
      Partner and have been approved by the CFTC for U.S. persons.

            (iv) The Trading Advisor is duly organized, validly existing and in
      good standing as a corporation under the laws of the jurisdiction of its
      incorporation and is qualified to do business as a foreign corporation and
      in good standing in each other jurisdiction in which the nature or conduct
      of its business requires such qualification and the failure to so qualify
      would materially adversely affect the Trading Advisor's ability to perform
      its duties under this Agreement. The Trading Advisor has full corporate
      power and authority to perform its obligations under this Agreement. The
      only principals (as defined in Rule 4.10(e) under the CEAct) of the
      Trading Advisor are those set forth in the Disclosure Document (the
      "Trading Advisor Principals").

            (v) All information furnished in writing to the General Partner by
      the Trading Advisor relating to the Trading Advisor and each Trading
      Advisor Principal, the Trading Advisor's Trading Program, any other
      trading programs, approaches and systems and Trading Advisor performance,
      including the Disclosure Document, is or will be materially accurate and
      complete in all material respects and does not and will not contain any
      misleading or untrue statement of a material fact or omit to state a
      material fact which is required to be stated therein or necessary to make
      the statements therein not misleading.

            (vi) This Agreement has been duly and validly authorized, executed
      and delivered on behalf of the Trading Advisor and is a valid and binding
      agreement of the Trading Advisor enforceable in accordance with its terms.

            (vii) Each of the Trading Advisor and each "principal" of the
      Trading Advisor, as defined in Rule 4.10(e) under the CEAct, has all
      federal and state governmental, regulatory and exchange licenses,
      registrations and approvals and has effected all filings with federal and
      state governmental and regulatory agencies required to conduct its or his
      business and to act as required to perform its or his obligations under
      this Agreement. The Trading Advisor is registered as a commodity trading
      advisor under the CEAct and is a member of the NFA in such capacity.

            (viii) The execution and delivery of this Agreement, the incurrence
      of the obligations set forth herein, the consummation of the transactions
      contemplated herein and in the Limited Partnership Agreement and the
      payment of the fees hereunder will not violate, or constitute a breach of,
      or default under, the certificate of incorporation or bylaws of the
      Trading Advisor or any other agreement or instrument by which it is bound
      or of any order, rule, law or regulation binding on it of any court or any
      federal, state, municipal or other governmental body or administrative
      agency or panel or self-regulatory organization having jurisdiction over
      it.

            (ix) Since the date of the Disclosure Document, there has not been
      any material adverse change in the condition, financial or otherwise,
      business or prospects of the Trading Advisor or any Trading Advisor
      Principal.

            (x) Except as set forth in writing to the General Partner, there has
      not been in the five years preceding the date of this Agreement and there
      is not pending, or to the best of the Trading Advisor's knowledge
      threatened, any action, suit or proceeding at law or in equity before or
      by any court or by any federal, state, municipal or other governmental
      body or any administrative, self-regulatory or commodity exchange
      organization to which the Trading Advisor or any Trading Advisor Principal
      is or was a party, or to which any of the assets of the Trading Advisor or
      any Trading Advisor Principal is or was subject and which resulted in or
      might reasonably be expected to result in any material adverse change in
      the condition, financial or otherwise, of the Trading Advisor. Neither the
      Trading Advisor nor any Trading Advisor Principal has received any notice
      of an investigation by the NFA or the CFTC regarding noncompliance by the
      Trading Advisor or any of the Trading Advisor Principals with the CEAct.

            (xi) Neither the Trading Advisor nor any Trading Advisor Principal
      has received, or is entitled to receive, directly or indirectly, any
      commission, finder's fee, similar fee, or rebate from any person in
      connection with the operation of the Partnership.

            (b) Covenants of the Trading Advisor. The Trading Advisor covenants
and agrees that:

            (i) The Trading Advisor shall use its best efforts to maintain all
      registrations and memberships necessary for the Trading Advisor and the
      Trading Advisor Principals to continue to act as described herein and to
      at all times comply in all material respects with all applicable laws,
      rules, and regulations, to the extent that the failure to so comply would
      have a materially adverse effect on the Trading Advisor's ability to act
      as described herein.

            (ii) The Trading Advisor shall inform the General Partner
      immediately as soon as the Trading Advisor or Trading Advisor Principals
      becomes the subject of any investigation, claim or proceeding of any
      regulatory authority having jurisdiction over such person or becomes a
      named party to any litigation materially affecting the condition,
      financial or otherwise, business or prospects of the Trading Advisor. The
      Trading Advisor shall also inform the General Partner immediately if the
      Trading Advisor or any of its officers become aware of any breach of this
      Agreement by the Trading Advisor.

            11.   Representations and Warranties of the Partnership and the
                  ---------------------------------------------------------
                  General Partner.
                  ----------------

            The General Partner and the Partnership represent and warrant to the
Trading Advisor, as follows:

            (a) The Partnership has provided to the Trading Advisor a copy of
the Prospectus.

            (b) The Partnership is a limited partnership duly organized pursuant
to the Certificate of Limited Partnership, the Limited Partnership Agreement and
the Delaware Revised Uniform Limited Partnership Act ("DRULPA") and is validly
existing under the laws of the State of Delaware with full power and authority
to engage in the trading of futures interests and to engage in its other
contemplated activities as described in the Prospectus; the Partnership has
received a certificate of authority to do business in the State of New York as
provided by Article 8-A of the New York Revised Limited Partnership Act and is
qualified to do business in each jurisdiction in which the nature or conduct of
its business requires such qualification and where failure to be so qualified
could materially adversely affect the Partnership's ability to perform its
obligations hereunder.

            (c) The General Partner is duly organized and validly existing and
in good standing as a corporation under the laws of the State of Delaware and in
good standing and qualified to do business as a foreign corporation under the
laws of the State of New York and is qualified to do business and is in good
standing as a foreign corporation in each jurisdiction in which the nature or
conduct of its business requires such qualification and where the failure to be
so qualified could materially adversely affect the General Partner's ability to
perform its obligations hereunder.

            (d) The Partnership and the General Partner have full partnership or
corporate power and authority under applicable law to conduct their business and
to perform their respective obligations under this Agreement.

            (e) This Agreement has been duly and validly authorized, executed
and delivered by the General Partner for itself and on behalf of the Partnership
and constitutes a valid, binding and enforceable agreement of the Partnership
and the General Partner in accordance with its terms.

            (f) The execution and delivery of this Agreement, the incurrence of
the obligations set forth herein and the consummation of the transactions
contemplated herein and in the Limited Partnership Agreement will not violate,
or constitute a breach of, or default under, the General Partner's certificate
of incorporation or bylaws, the Certificate of Limited Partnership, the Limited
Partnership Agreement, or any agreement or instrument by which either the
General Partner or the Partnership, as the case may be, is bound or any order,
rule, law or regulation applicable to the General Partner or the Partnership of
any court or any governmental body or administrative agency or panel or
self-regulatory organization having jurisdiction over the General Partner or the
Partnership.

            (g) The General Partner and each principal of the General Partner,
as defined in Rule 3.1 under the CEAct, have all federal and state governmental,
regulatory and exchange approvals, registrations, and licenses, and have
effected all filings with federal and state governmental agencies and regulatory
agencies required to conduct their business and to act as required to perform
their obligations under this Agreement (including, without limitation,
registration as a commodity pool operator under the CEAct and membership in the
NFA as a commodity pool operator) and will maintain all such required approvals,
licenses, filings and registrations for the term of this Agreement.

            12.   Complete Agreement.
                  -------------------

            This Agreement constitutes the entire agreement between the parties
with respect to the matters referred to herein, and no other agreement, verbal
or otherwise, shall be binding as between the parties unless in writing and
signed by the party against whom enforcement is sought.

            13.   Assignment.
                  -----------

            This Agreement may not be assigned by any party hereto without the
express written consent of the other parties hereto.

            14.   Amendment.
                  ----------

            This Agreement may not be amended except by the written consent of
the parties hereto.

            15.   Severability.
                  -------------

            The invalidity or unenforceability of any provision of this
Agreement or any covenant herein contained shall not affect the validity or
enforceability of any other provision or covenant hereof or herein contained and
any such invalid provision or covenant shall be deemed to be severable.

            16.   Disclosure Document.
                  --------------------

            During the term of this Agreement, the Trading Advisor shall furnish
to the General Partner promptly copies of all disclosure documents or similar
documents used by the Trading Advisor. The General Partner acknowledges receipt
of the Trading Advisor's Disclosure Document.

            17.   Notices.
                  --------

            All notices required to be delivered under this Agreement shall be
in writing and shall be effective when delivered personally or by telecopy on
the day delivered, or when given by registered or certified mail, postage
prepaid, return receipt requested, on the day actually received, addressed as
follows (or to such other address as the party entitled to notice shall
hereafter designate in accordance with the terms hereof):

            if to the Partnership:

            Morgan Stanley Diversified Futures Fund L.P.
            c/o Demeter Management Corporation
            330 Madison Avenue
            8th Floor
            New York, New York  10017
            Attn: Walter Davis, President

            if to the General Partner:

            Demeter Management Corporation
            330 Madison Avenue
            8th Floor
            New York, New York  10017
            Attn: Walter Davis, President

            if to the Trading Advisor:

            Hyman Beck & Company, Inc.
            100 Campus Drive
            Florham Park, New Jersey 07932
            Attn: Alexander Hyman

            18.   Survival.
                  ---------

            The provisions of this Agreement shall survive the termination of
this Agreement with respect to any matter arising while this Agreement was in
effect.

            19.   GOVERNING LAW.
                  --------------

            THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAW OF THE STATE OF NEW YORK. IF ANY ACTION OR PROCEEDING SHALL BE
BROUGHT BY A PARTY TO THIS AGREEMENT OR TO ENFORCE ANY RIGHT OR REMEDY UNDER
THIS AGREEMENT, EACH PARTY HERETO HEREBY CONSENTS AND WILL SUBMIT TO THE
JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK OR ANY FEDERAL COURT SITTING
IN THE COUNTY, CITY AND STATE OF NEW YORK. ANY ACTION OR PROCEEDING BROUGHT BY
ANY PARTY TO THIS AGREEMENT TO ENFORCE ANY RIGHT, ASSERT ANY CLAIM OR OBTAIN ANY
RELIEF WHATSOEVER IN CONNECTION WITH THIS AGREEMENT SHALL BE BROUGHT BY SUCH
PARTY EXCLUSIVELY IN THE COURTS OF THE STATE OF NEW YORK OR ANY FEDERAL COURT
SITTING IN THE COUNTY, CITY AND STATE OF NEW YORK.

            20.   Remedies.
                  ---------

            In any action or proceeding arising out of any of the provisions of
this Agreement, the Trading Advisor agrees not to seek any prejudgment equitable
or ancillary relief. The Trading Advisor agrees that its sole remedy in any such
action or proceeding shall be to seek actual monetary damages for any breach of
this Agreement.

            21.   Headings.
                  ---------

            Headings to sections herein are for the convenience of the parties
only and are not intended to be part of or to affect the meaning or
interpretation of this Agreement.

            22.   Counterparts.
                  -------------

            This Agreement may be executed in one or more counterparts, each of
which shall be deemed an original but all of which together shall constitute the
same agreement.

<PAGE>

            IN WITNESS WHEREOF, this Agreement has been executed for and on
behalf of the undersigned as of the day and year first above written.

                  MORGAN STANLEY DIVERSIFIED FUTURES FUND L.P.
                     by Demeter Management Corporation,
                     General Partner

                  By    /s/ Walter Davis
                     -----------------------------
                     Name:  Walter Davis
                     Title: President

                  DEMETER MANAGEMENT CORPORATION

                  By    /s/ Walter Davis
                     -----------------------------
                     Name:  Walter Davis
                     Title: President

                  HYMAN BECK & COMPANY, INC.

                  By    /s/ Alexander Hyman
                     -----------------------------
                     Name:  Alexander Hyman
                     Title: Principal

<PAGE>

                                                                       EXHIBIT A
                                                                       ---------

                                Trading Policies

1.    Futures Trade Execution through Clearing Commodity Broker:
      ----------------------------------------------------------

      o     When placing orders for futures trades with the clearing commodity
            broker designated in this Agreement or by the General Partner (the
            "Clearing Commodity Broker"), the Trading Advisor must follow the
            Clearing Commodity Broker's order entry procedures, of which the
            Trading Advisor has been advised.

      o     For futures trades at exchanges where give-up execution is not
            allowed, the Trading Advisor must use the execution facilities
            provided by the Clearing Commodity Broker.

2.    FX Trade Execution through FX Counterparties:
      ---------------------------------------------

      o     When placing orders for foreign currency forward contracts ("FX
            Trades") with a dealer ("FX Counterparty"), the Trading Advisor must
            follow the FX Counterparty's order entry procedures, of which the
            Trading Advisor has been advised.

      o     When executing FX Trades on behalf of the Partnership, the Trading
            Advisor must use the execution facilities of the FX
            Counterparty(ies) designated by the General Partner for such FX
            Trades, unless the General Partner otherwise agrees in a form
            acceptable to the General Partner.

3.    "Give-Up" Futures Trade Execution:
      ----------------------------------

      o     The Trading Advisor shall ensure that a "give-up" execution
            agreement is in place prior to the execution of any trade through a
            floor broker in accordance with this Agreement or as otherwise
            provided in writing to the Trading Advisor by the General Partner.

      o     The Trading Advisor may authorize payment of an execution service
            fee ("Give-Up Fee") only to the executing clearing firm or the floor
            broker (the "Executing Broker") that directly gives the futures
            trade to the Clearing Commodity Broker for such clearance, and in an
            amount not greater than the amount permitted by the General Partner
            from time to time (the "Execution Allowance"). The Execution
            Allowance shall be based on the General Partner's assessment for
            prevailing competitive rates for Give-Up Fees.

      o     Give-Up Fee bills in amounts up to the Execution Allowance will be
            processed by the Clearing Commodity Broker, with notice provided to
            the Trading Advisor. To the extent that such bills will be greater
            than the Execution Allowance, the Trading Advisor will obtain the
            prior written consent of the General Partner.

      o     The Trading Advisor shall provide that information which may
            reasonably be requested by the General Partner to verify the Give-Up
            Fees processed by the Clearing Commodity Broker.

4.    Trade Allocations:
      ------------------

      o     The Trading Advisor shall be responsible for determining the
            procedure(s) used to allocate trades to all customer accounts it
            manages, including the Partnership's account(s), in accordance with
            CFTC regulations. In the event that either of the Clearing Commodity
            Broker or the Executing Broker agrees to perform any step(s)
            necessary to such allocation procedure, it remains the Trading
            Advisor's responsibility to ensure that the procedure(s) are
            performed correctly and that the allocated trades are correctly
            booked to the Partnership's account(s).

5.    Daily Trade Reporting and Checkout:
      -----------------------------------

      o     The Trading Advisor shall be responsible for the timely reporting of
            those futures trades not executed by, and subsequently given-up to,
            the Clearing Commodity Broker, and shall be responsible for ensuring
            that the Executing Broker(s) transmit such futures trades to the
            Clearing Commodity Broker for clearance within a timely basis.

      o     The Trading Advisor shall be responsible for daily "checkout" (trade
            recap) of all of the Partnership's futures, options, and FX Trades.
            Such checkout or trade recap shall be administered according to the
            procedures set forth by the Clearing Commodity Broker's and/or FX
            Counterparty's designated checkout area, of which the Trading
            Advisor has been advised.

6.    Reconciliations:
      ----------------

      o     The Trading Advisor shall be responsible for trade reconciliation
            and account balancing with the Clearing Commodity Broker and/or FX
            Counterparty's designated trade reconciliation area. The Trading
            Advisor shall use best efforts to provide to the General Partner a
            daily reconciliation for each Partnership account by no later than
            10:00 a.m. EST/EDT. Such reconciliation will specify those trades to
            be added to and/or canceled from an account, provide a valuation
            versus current settlement prices of such trades, and advise of any
            other pending cash adjustments due from Executing Brokers. The 10:00
            a.m. time requirement is contingent upon the Clearing Commodity
            Broker fulfilling its balancing obligations on an equally timely
            basis.

      o     The Trading Advisor shall report to the General Partner any
            incorrect settlement and/or closing price of which it becomes aware
            with regard to the Clearing Commodity Broker's account statement(s)
            for the Partnership.

7.    Foreign Currency Conversions:
      -----------------------------

      o     The Trading Advisor shall be responsible for the conversion of
            foreign currency balances to U.S. dollars. The Trading Advisor may,
            at its discretion, place such foreign currency conversion trades as
            may be necessary. Conversion trades should be verified in the
            Trading Advisor's daily checkout or trade recap, account balancing,
            and reconciliation procedures.

8.    Monitoring of Delivery Periods, Option Expirations and Trade Settlement:
      ------------------------------------------------------------------------

      o     The Trading Advisor shall be responsible for monitoring first notice
            (delivery) dates, last trading dates, option expiration dates, and
            forward settlement and/or maturity dates. The Trading Advisor shall
            also take appropriate steps to ensure that it has exited positions
            prior to delivery, expiration and settlement. With regard to option
            positions, the Trading Advisor must, in a timely fashion,
            communicate to the Clearing Commodity Broker's and/or FX
            Counterparty's designated area proper notice of its intentions
            regarding all such open positions that are due to expire.

9.    Trading Errors:
      ---------------

      o     The Trading Advisor must inform the General Partner and Clearing
            Commodity Broker of any such occasion in which trades are placed in
            error. The provisions of Section 2(d) of this Agreement shall be
            interpreted to mean that the benefit of profitable trading errors
            made by the Trading Advisor when trading on behalf of the Trading
            Company shall be awarded to the Partnership, whereas the detriment
            of unprofitable trading errors made by the Trading Advisor when
            trading on behalf of the Partnership must be borne by the Trading
            Advisor.

<PAGE>

                                                                       EXHIBIT B
                                                                       ---------

                            Futures Interests Traded
                            ------------------------

                              THE GLOBAL PORTFOLIO
                              --------------------

<TABLE>
<CAPTION>

FIXED INCOME                                         STOCK INDICES
------------                                         -------------
<S>                                     <C>           <C>                               <C>
U.S. 30-Year Treasury Bonds             (CBOT)       S&P 500                            (CME)
U.S. 10-Year Treasury Notes             (CBOT)       E-Mini S&P 500                     (CME)
U.S. 5-Year Treasury Notes              (CBOT)       E-Mini Russell 1000                (CME)
U.S. 2-Year Treasury Notes              (CBOT)       NASDAQ 100                         (CME)
10-Year Interest Rate Swap              (CBOT)       E-Mini NASDAQ Composite            (CME)
5-Year Interest Rate Swap               (CBOT)       E-Mini MSCI EAFE                   (CME)
30-Day Federal Funds                    (CBOT)       S&P Midcap 400                     (CME)
Eurodollars                             (CME)        E-Mini S&P Midcap 400              (CME)
LIBOR                                   (CME)        Russell 2000                       (CME)
Canadian Bankers' Acceptance Notes      (ME)         E-Mini Russell 2000                (CME)
Canadian 10-Year Government Bonds       (ME)         DJIA                               (CBOT)
Long Gilts                              (EURONEXT)   Mini-sized Dow                     (CBOT)
Short Sterling                          (EURONEXT)   Russell 1000                       (NYBOT)
EURIBOR                                 (EURONEXT)   NYSE Composite Index               (NYBOT)
Euroswiss                               (EURONEXT)   S&P Canada 60 Index                (ME)
2-Year Euro Swapnote                    (EURONEXT)   FTSE 100 Index                     (EURONEXT)
5-Year Euro Swapnote                    (EURONEXT)   FTSE 250 Index                     (EURONEXT)
10-Year Euro Swapnote                   (EURONEXT)   FTSE Eurotop 100 Index             (EURONEXT)
Euro-Bund                               (EUREX)      CAC 40 Index                       (EURONEXT)
Euro-Bobl                               (EUREX)      AEX-index                          (EURONEXT)
Euro-Schatz                             (EUREX)      Light AEX-index                    (EURONEXT)
Euro-Buxl                               (EUREX)      Bel 20 Index                       (EURONEXT)
CONF                                    (EUREX)      MSCI Pan-Euro Index                (EURONEXT)
Japanese Government Bonds               (TSE/SGX)    DAX                                (EUREX)
Mini Japanese Government Bonds          (SGX)        Dow Jones Euro Stoxx 50            (EUREX)
Euroyen (TIBOR)                         (SGX/TFX)    Dow Jones Stoxx 50                 (EUREX)
Australian 10-Year Treasury Bonds       (SFE)        SMI                                (EUREX)
Australian 3-Year Treasury Bonds        (SFE)        IBEX 35                            (MEFF)
Australian 90-Day Bank Accepted Bills   (SFE)        SPI 200 Index                      (SFE)
New Zealand 90-Day Bank Bills           (SFE)        Nikkei 225 Index                   (SGX)
                                                     MSCI Taiwan Stock Index            (SGX)
                                                     MSCI Singapore Index               (SGX)
                                                     TOPIX                              (TSE)
                                                     Hang Seng Index                    (HKFE)

METALS                                               ENERGIES
------                                               --------
Copper                                  (NYMEX)      Light Sweet Crude Oil              (NYMEX)
Gold                                    (NYMEX/CBOT) Light Sweet Crude Oil e-miNY       (NYMEX)
Mini-sized Gold                         (CBOT)       Heating Oil                        (NYMEX)
Silver                                  (NYMEX/CBOT) Heating Oil miNY                   (NYMEX)
Mini-sized Silver                       (CBOT)       Unleaded Gas                       (NYMEX)
Platinum                                (NYMEX)      Natural Gas                        (NYMEX)
Palladium                               (NYMEX)      Natural Gas e-miNY                 (NYMEX)
London Aluminum                         (LME)        New York Harbor RBOB Gasoline      (NYMEX)
London Copper                           (LME)        Brent Crude Oil                    (ICE)
London Lead                             (LME)        Gas Oil                            (ICE)
London Nickel                           (LME)        WTI Crude Oil                      (ICE)
London Tin                              (LME)
London Zinc                             (LME)        INTERNATIONAL COMMODITIES
                                                     -------------------------
                                                     Random Length Lumber               (CME)
                                                     Goldman Sachs Commodity Index      (CME)
AGRICULTURALS                                        Coffee                             (NYBOT)
-------------                                        Sugar #11                          (NYBOT)
Corn                                    (CBOT)       Frozen Concentrated Orange juice   (NYBOT)
Mini-sized Corn                         (CBOT        Cotton                             (NYBOT)
Oats                                    (CBOT)       Cocoa                              (NYBOT/EURONEXT)
Soybeans                                (CBOT)       Robusta Coffee                     (EURONEXT)
Mini-sized Soybeans                     (CBOT)       White Sugar                        (EURONEXT)
Soybean Meal                            (CBOT)
Soybean Oil                             (CBOT)
Wheat                                   (CBOT)
Mini-sized Wheat                        (CBOT)       FX (INTERBANK/IMM/FINEX)
Rough Rice                              (CBOT)       ------------------------
Rapeseed                                (EURONEXT)   U.S. Dollar
Milling Wheat                           (EURONEXT)   Euro
                                                     Canadian Dollar
MEATS                                                British Pound
-----                                                Swiss Franc
Live Cattle                             (CME)        Swedish Krona
Lean Hogs                               (CME)        Japanese Yen
Frozen Pork Bellies                     (CME)        Australian Dollar
Feeder Cattle                           (CME)        New Zealand Dollar
                                                     Norwegian Krona
                                                     Brazilian Real
                                                     Czech Krona
                                                     Danish Krone
                                                     Hong Kong Dollar
                                                     Hungarian Forint
                                                     Indonesian Rupia
                                                     Indian Rupee
                                                     Korean Wong
                                                     Mexican Peso
                                                     Polish Zloty
                                                     Singapore Dollar
                                                     Thai Bhat
                                                     Taiwan Dollar
                                                     South African Rand
                                                     Chinese Renminbi
                                                     Select crosses involving the above
</TABLE>

<PAGE>

                                                                       EXHIBIT C
                                                                       ---------

                              TRADING AUTHORIZATION

Hyman Beck & Company, Inc.
100 Campus Drive
Florham Park, NJ 07932
Attn: Alexander Hyman

Ladies and Gentlemen:

            MORGAN STANLEY DIVERSIFIED FUTURES FUND L.P., a Delaware limited
partnership (the "Partnership"), does hereby make, constitute, and appoint HYMAN
BECK & COMPANY, INC., a Delaware corporation, (the "Trading Advisor") as the
Partnership's agent and attorney-in-fact to purchase and sell commodity
interests through Morgan Stanley & Co. Incorporated and Morgan Stanley & Co.
International Limited, as commodity brokers, as described in and in accordance
with the terms of the Management Agreement dated as of November 1, 2006 among
the Partnership, Demeter Management Corporation and the Trading Advisor, until
further notice to the Trading Advisor.

            This authorization shall terminate and be null, void, and of no
further effect simultaneously with the termination of the said Management
Agreement.

                                Very truly yours,

                                    MORGAN STANLEY DIVERSIFIED FUTURES FUND L.P.

                                       by  Demeter Management Corporation,
                                          General Partner

                                        By:
                                             -----------------------------------
                                               Walter Davis, President

Dated: _______, 2006

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