***Exhibit 13.01***

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***Nestor Partners***

*Financial Statements forthe Years Ended December 31, 2007, 2006 and 2005 and*

*Report of IndependentRegistered Public*

*AccountingFirm*

 

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**NESTOR PARTNERS**

** **

**TABLE OF CONTENTS**

 
| ** **                                               | ** **                         | ** **                                      | ** ** | **Page**   |
|----------------------------------------------------------|------------------------------------|-------------------------------------------------|------------|------------|
| ** **                                               | ** **                         | ** **                                      | ** ** | ** ** |
| AFFIRMATION OF MILLBURN RIDGEFIELD CORPORATION           |                               |                                            |       |       |
|                                                     |                               |                                            |       |       |
| REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING  FIRM |                               |                                            |       | 1          |
|                                                     |                               |                                            |       |       |
| FINANCIAL STATEMENTS:                                    |                               |                                            |       |       |
|                                                     |                               |                                            |       |       |
|                                                     | Statements of Financial Condition  |                                            |       | 2          |
|                                                     |                               |                                            |       |       |
|                                                     | Condensed Schedules of Investments |                                            |       | 3–6   |
|                                                     |                               |                                            |       |       |
|                                                     | Statements of Operations           |                                            |       | 7          |
|                                                     |                               |                                            |       |       |
|                                                     |                               | Statements of Changes in Partners’ Capital |       | 8          |
|                                                     |                               |                                            |       |       |
|                                                     |                               | Statements of Financial Highlights              |       | 9          |
|                                                     |                               |                                            |       |       |
|                                                     |                               | Notes to Financial Statements                   |       | 10–16 |
|                                                          |                                    |                                                 |            |            |  |  |

 

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** **

 

 

**AFFIRMATION OF MILLBURNRIDGEFIELD CORPORATION**

** **

 

Incompliance with the Commodity Futures Trading Commission’s regulations, Ihereby affirm that to the best of my knowledge and belief, the informationcontained in the statements of financial condition of Nestor Partners at December 31,2007 and 2006, including the condensed schedules of investments, and therelated statements of operations, changes in partners’ capital, and financialhighlights for each of the three years in the period ended December 31,2007, are complete and accurate.

 

 

 

HarveyBeker, Co-Chief Executive OfficerMillburn Ridgefield CorporationGeneral Partner of Nestor Partners

 

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**REPORTOF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**

** **

To thePartners of Nestor Partners:

 

Wehave audited the accompanying statements of financial condition of Nestor Partners (the “Partnership”) asof December 31, 2007 and 2006, including the condensed schedules ofinvestments, and the related statements of operations, changes in partners’capital, and financial highlights for each of the three years in the periodended December 31, 2007. These financial statements and financialhighlights are the responsibility of the Partnership’s management. Ourresponsibility is to express an opinion on these financial statements andfinancial highlights based on our audits.

 

Weconducted our audits in accordance with the standards of the Public CompanyAccounting Oversight Board (United States). Those standards require that weplan and perform the audit to obtain reasonable assurance about whether thefinancial statements and financial highlights are free of material misstatement.The Partnership is not required to have, nor were we engaged to perform, anaudit of its internal control over financial reporting. Our audits includedconsideration of internal control over financial reporting as a basis fordesigning audit procedures that are appropriate in the circumstances, but notfor the purpose of expressing an opinion on the effectiveness of thePartnership’s internal control over financial reporting. Accordingly, weexpress no such opinion. An audit also includes examining, on a test basis,evidence supporting the amounts and disclosures in the financial statements andfinancial highlights, assessing the accounting principles used and significantestimates made by management, as well as evaluating the overall financialstatement presentation. We believe that our audits provide a reasonable basisfor our opinion.

 

In ouropinion, such financial statements and financial highlights present fairly, inall material respects, the financial position of Nestor Partners at December 31, 2007 and 2006, and theresults of its operations, changes in partners’ capital, and financialhighlights for each of the three years in the period ended December 31,2007, in conformity with accounting principles generally accepted in the UnitedStates of America.

 

 

 

 

Deloitte &Touche LLP

 

March 11,2008

 

NewYork, New York

 

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**NESTOR PARTNERS**

 

**STATEMENTS OF FINANCIAL CONDITION**

**AS OF DECEMBER 31, 2007 AND 2006**

 
| ** **                                                                                             | ** ** | **2007**    | ** **  | **2006**    | ** ** |
|--------------------------------------------------------------------------------------------------------|------------|-------------|-------------|-------------|------------|
|                                                                                                   |       |        |        |        |       |
| **ASSETS**                                                                                             | ** ** | ** **  | ** **  | ** **  | ** ** |
|                                                                                                   |       |        |        |        |       |
| EQUITY IN TRADING ACCOUNTS:                                                                            |       |        |        |        |       |
| Investments in  U.S. Treasury notes–at market value (amortized cost $40,392,047 and  $45,775,054) |       | $           | 40,599,095  |        | $          | 45,761,875 |   |
| Net unrealized  appreciation on open futures and forward currency contracts                            |       | 3,362,537   |        | 9,240,848   |       |
| Due from brokers                                                                                       |       | 3,413,463   |        | 6,847,054   |       |
| Cash denominated  in foreign currencies (cost $2,232,905 and $3,216,906)                               |       | 2,222,407   |        | 3,222,378   |       |
|                                                                                                   |       |        |        |        |       |
| Total equity in  trading accounts                                                                      |       | 49,597,502  |        | 65,072,155  |       |
|                                                                                                   |       |        |        |        |       |
| INVESTMENTS IN  U.S. TREASURY NOTES–at market value (amortized cost $94,729,231 and  $92,232,843) |       | 95,111,960  |        | 92,198,954  |       |
|                                                                                                   |       |        |        |        |       |
| CASH AND CASH EQUIVALENTS                                                                              |       | 13,731,232  |        | 5,105,014   |       |
|                                                                                                   |       |        |        |        |       |
| ACCRUED INTEREST RECEIVABLE                                                                            |       | 1,142,553   |        | 936,128     |       |
|                                                                                                   |       |        |        |        |       |
| TOTAL                                                                                                  |       | $           | 159,583,247 |        | $          | 163,312,251 |   |
|                                                                                                   |       |        |        |        |       |
| **LIABILITIES AND PARTNERS’ CAPITAL**                                                             | ** ** | ** **  | ** **  | ** **  | ** ** |
|                                                                                                   |       |        |        |        |       |
| LIABILITIES:                                                                                           |       |        |        |        |       |
| Capital  contributions received in advance                                                             |       | $           | 2,120,500   |        | $          | 725,000 |   |
| Net unrealized  depreciation on open forward currency contracts                                        |       | 318,479     |        | —      |       |
| Accrued  brokerage fees                                                                                |       | 292,980     |        | 325,946     |       |
| Accrued expenses                                                                                       |       | 287,840     |        | 387,775     |       |
| Capital  withdrawals payable                                                                           |       | 4,527,184   |        | 14,171,689  |       |
|                                                                                                   |       |        |        |        |       |
| Total  liabilities                                                                                     |       | 7,546,983   |        | 15,610,410  |       |
|                                                                                                   |       |        |        |        |       |
| PARTNERS’ CAPITAL                                                                                 |       | 152,036,264 |        | 147,701,841 |       |
|                                                                                                   |       |        |        |        |       |
| TOTAL                                                                                                  |       | $           | 159,583,247 |        | $          | 163,312,251 |   |

 

See notes to financial statements.

 

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**NESTOR PARTNERS**

** **

**CONDENSED SCHEDULE OF INVESTMENTS**

**AT DECEMBER 31, 2007**

 
| ** **                                      | ** ** | **Net Unrealized**         | ** ** | ** **         | ** ** |
|-------------------------------------------------|------------|----------------------------|------------|--------------------|------------|
| ** **                                      | ** ** | **Appreciation**           | ** ** | **Net**            | ** ** |
| ** **                                      | ** ** | **(Depreciation)**         | ** ** | **Unrealized**     | ** ** |
| ** **                                      | ** ** | **as a % of**              | ** ** | **Appreciation**   | ** ** |
| ** **                                      | ** ** | **Partners’ Capital** | ** ** | **(Depreciation)** | ** ** |
| ** **                                      | ** ** | ** **                 | ** ** | ** **         | ** ** |
| **FUTURES AND FORWARD CURRENCY CONTRACTS**      | ** ** | ** **                 | ** ** | ** **         | ** ** |
| ** **                                      | ** ** | ** **                 | ** ** | ** **         | ** ** |
| LONG FUTURES CONTRACTS:                         |       |                       |       |               |       |
| Energies                                        |       | 0.45                       | %          | $                  | 691,028    |   |
| Grains                                          |       | 1.04                       |       | 1,588,727          |       |
| Interest rates                                  |       | (0.18                      | )          | (278,280           | )          |
| Metals                                          |       | 0.04                       |       | 63,836             |       |
| Softs                                           |       | 0.09                       |       | 136,331            |       |
| Stock indices                                   |       | 0.16                       |       | 225,186            |       |
|                                            |       |                       |       |               |       |
| Total long  futures contracts                   |       | 1.60                       |       | 2,426,828          |       |
|                                            |       |                       |       |               |       |
| SHORT FUTURES CONTRACTS:                        |       |                       |       |               |       |
| Energies                                        |       | (0.03                      | )          | (40,850            | )          |
| Interest rates                                  |       | 0.40                       |       | 613,247            |       |
| Livestock                                       |       | 0.10                       |       | 152,100            |       |
| Metals                                          |       | 0.07                       |       | 102,133            |       |
| Softs                                           |       | (0.07                      | )          | (111,978           | )          |
| Stock Indices                                   |       | 0.10                       |       | 153,914            |       |
|                                            |       |                       |       |               |       |
| Total short  futures contracts                  |       | 0.57                       |       | 868,566            |       |
|                                            |       |                       |       |               |       |
| TOTAL INVESTMENTS IN FUTURES CONTRACTS–Net |       | 2.17                       |       | 3,295,394          |       |
|                                            |       |                       |       |               |       |
| FORWARD CURRENCY CONTRACTS:                     |       |                       |       |               |       |
| Total long  forward currency contracts          |       | 0.03                       |       | 40,033             |       |
| Total short  forward currency contracts         |       | (0.20                      | )          | (291,369           | )          |
|                                            |       |                       |       |               |       |
| TOTAL INVESTMENTS IN FORWARD                    |       |                       |       |               |       |
| CURRENCY  CONTRACTS–Net                    |       | (0.17                      | )          | (251,336           | )          |
|                                            |       |                       |       |               |       |
| TOTAL                                           |       | 2.00                       | %          | $                  | 3,044,058  |   |

 

3

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**NESTOR PARTNERS**

 

**CONDENSED SCHEDULE OF INVESTMENTS**

**AT DECEMBER 31, 2007**

 

**U.S. TREASURY NOTES**

 
| ** ** | ** **       | ** **                                                              | ** **                              | **Value as a % of** | ** ** | ** ** | ** **  |
|------------|------------------|-------------------------------------------------------------------------|-----------------------------------------|---------------------|------------|------------|-------------|
| **Face**   | ** **       | ** **                                                              | ** **                              | **Partners’**  | ** ** | ** ** | ** **  |
| **Amount** | ** **       | **Description**                                                         | ** **                              | **Capital**         | ** ** | **Value**  | ** **  |
|       |             |                                                                    |                                    |                |       |       |        |
| $          |  34,640,000 |                                                                    | U.S. Treasury notes, 3.000%, 02/15/2008 |                | 22.78      | %          | $           | 34,634,588 |   |
| 34,640,000 |             | U.S. Treasury notes, 2.625%, 05/15/2008                                 |                                    | 22.73               |       | 34,553,400 |        |
| 33,685,000 |             | U.S. Treasury notes, 3.250%, 08/15/2008                                 |                                    | 22.15               |       | 33,674,473 |        |
| 32,900,000 |             | U.S. Treasury notes, 3.125%, 10/15/2008                                 |                                    | 21.60               |       | 32,848,594 |        |
|       |             |                                                                    |                                    |                |       |       |        |
|       |             | Total investments  in U.S. Treasury notes (amortized cost $135,121,278) |                                    | 89.26               | %          | $          | 135,711,055 |   |
|            |                  |                                                                         |                                         |                     |            |            |             |  |  |

 

See notes to financial statements.

 

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**NESTOR PARTNERS**

 

**CONDENSED SCHEDULE OF INVESTMENTS**

**AT DECEMBER 31, 2006**

 
| ** **                                               | ** ** | **Net Unrealized**         | ** ** | ** **         | ** ** |
|----------------------------------------------------------|------------|----------------------------|------------|--------------------|------------|
| ** **                                               | ** ** | **Appreciation**           | ** ** | **Net**            | ** ** |
| ** **                                               | ** ** | **(Depreciation)**         | ** ** | **Unrealized**     | ** ** |
| ** **                                               | ** ** | **as a % of**              | ** ** | **Appreciation**   | ** ** |
| ** **                                               | ** ** | **Partners’ Capital** | ** ** | **(Depreciation)** | ** ** |
| ** **                                               | ** ** | ** **                 | ** ** | ** **         | ** ** |
| **FUTURES AND FORWARD CURRENCY CONTRACTS**               | ** ** | ** **                 | ** ** | ** **         | ** ** |
| ** **                                               | ** ** | ** **                 | ** ** | ** **         | ** ** |
| LONG FUTURES CONTRACTS:                                  |       |                       |       |               |       |
| Grains                                                   |       | 0.22                       | %          | $                  | 321,754    |   |
| Interest rates                                           |       | (0.76                      | )          | (1,123,031         | )          |
| Metals                                                   |       | (0.09                      | )          | (131,262           | )          |
| Softs                                                    |       | —                     |       | 6,188              |       |
| Stock indices                                            |       | 1.44                       |       | 2,120,454          |       |
|                                                     |       |                       |       |               |       |
| Total long  futures contracts                            |       | 0.81                       |       | 1,194,103          |       |
|                                                     |       |                       |       |               |       |
| SHORT FUTURES CONTRACTS:                                 |       |                       |       |               |       |
| Energies                                                 |       | 0.57                       |       | 840,877            |       |
| Interest rates                                           |       | 1.63                       |       | 2,403,088          |       |
| Livestock                                                |       | —                     |       | 2,430              |       |
| Metals                                                   |       | —                     |       | (2,950             | )          |
| Softs                                                    |       | (0.16                      | )          | (226,786           | )          |
|                                                     |       |                       |       |               |       |
| Total short  futures contracts                           |       | 2.04                       |       | 3,016,659          |       |
|                                                     |       |                       |       |               |       |
| TOTAL INVESTMENTS IN FUTURES CONTRACTS–Net          |       | 2.85                       |       | 4,210,762          |       |
|                                                     |       |                       |       |               |       |
| FORWARD CURRENCY CONTRACTS:                              |       |                       |       |               |       |
| Total long forward  currency contracts                   |       | 2.67                       |       | 3,933,503          |       |
| Total short  forward currency contracts                  |       | 0.74                       |       | 1,096,583          |       |
|                                                     |       |                       |       |               |       |
| TOTAL INVESTMENTS IN FORWARD CURRENCY CONTRACTS–Net |       | 3.41                       |       | 5,030,086          |       |
|                                                     |       |                       |       |               |       |
| TOTAL                                                    |       | 6.26                       | %          | $                  | 9,240,848  |   |

 

 

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**NESTOR PARTNERS**

** **

**CONDENSED SCHEDULE OF INVESTMENTS**

**AT DECEMBER 31, 2006**

** **

**U.S. TREASURY NOTES**

 
| ** ** | ** ** | ** **                                | ** **                              | **Value as a % of** | ** ** | ** ** | ** **  |
|------------|------------|-------------------------------------------|-----------------------------------------|---------------------|------------|------------|-------------|
| **Face**   | ** ** | ** **                                | ** **                              | **Partners’**  | ** ** | ** ** | ** **  |
| **Amount** | ** ** | **Description**                           | ** **                              | **Capital**         | ** ** | **Value**  | ** **  |
|       |       |                                      |                                    |                |       |       |        |
| $          | 35,205,000 |                                      | U.S. Treasury notes, 2.250%, 02/15/2007 |                | 23.76      | %          | $           | 35,089,484 |   |
| 34,730,000 |       | U.S. Treasury notes, 3.125%, 05/15/2007   |                                    | 23.35               |       | 34,485,805 |        |
| 34,730,000 |       | U.S. Treasury notes, 2.750%, 08/15/2007   |                                    | 23.19               |       | 34,247,036 |        |
| 34,730,000 |       | U.S. Treasury notes, 3.000%, 11/15/2007   |                                    | 23.11               |       | 34,138,504 |        |
|       |       |                                      |                                    |                |       |       |        |
|       |       | Total  investments in U.S. Treasury notes |                                    |                |       |       |        |
|       |       | (amortized cost  $138,007,897)            |                                    | 93.41               | %          | $          | 137,960,829 |   |
|            |            |                                           |                                         |                     |            |            |             |  |  |

 

 

See notes tofinancial statements.

 

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**NESTOR PARTNERS**

 

**STATEMENTSOF OPERATIONS**

**YEARSENDED DECEMBER 31, 2007, 2006 AND 2005**

 

 

 
| ** **                                        | ** ** | **2007**   | ** ** | **2006**   | ** ** | **2005**   | ** ** |
|---------------------------------------------------|------------|------------|------------|------------|------------|------------|------------|
|                                              |       |       |       |       |       |       |       |
| INVESTMENT INCOME:                                |       |       |       |       |       |       |       |
| Interest income                                   |       | $          | 7,278,769  |       | $          | 8,039,516  |       | $ | 4,819,054 |   |
|                                              |       |       |       |       |       |       |       |
| EXPENSES:                                         |       |       |       |       |       |       |       |
| Brokerage fees                                    |       | 3,533,293  |       | 4,317,248  |       | 4,802,240  |       |
| Administrative  expenses                          |       | 385,059    |       | 448,912    |       | 434,264    |       |
| Custody fees                                      |       | 22,648     |       | 26,883     |       | 26,346     |       |
|                                              |       |       |       |       |       |       |       |
| Total expenses                                    |       | 3,941,000  |       | 4,793,043  |       | 5,262,850  |       |
|                                              |       |       |       |       |       |       |       |
| NET INVESTMENT INCOME (LOSS)                      |       | 3,337,769  |       | 3,246,473  |       | (443,796   | )          |
|                                              |       |       |       |       |       |       |       |
| NET REALIZED AND UNREALIZED GAINS (LOSSES):       |       |       |       |       |       |       |       |
| Net realized  gains (losses) on closed positions: |       |       |       |       |       |       |       |
| Futures and  forward currency contracts           |       | 27,664,175 |       | 3,165,360  |       | 15,906,728 |       |
| Foreign exchange  translation                     |       | 60,753     |       | (204,576   | )          | (159,844   | )          |
| Net change in  unrealized:                        |       |       |       |       |       |       |       |
| Futures and  forward currency contracts           |       | (6,196,790 | )          | 10,612,526 |       | (5,895,404 | )          |
| Foreign exchange  translation                     |       | (15,970    | )          | 41,753     |       | (76,974    | )          |
| Net gains  (losses) from U.S. Treasury notes:     |       |       |       |       |       |       |       |
| Net change in  unrealized                         |       | 636,845    |       | 247,752    |       | (97,880    | )          |
|                                              |       |       |       |       |       |       |       |
| Total net  realized and unrealized gains          |       | 22,149,013 |       | 13,862,815 |       | 9,676,626  |       |
|                                              |       |       |       |       |       |       |       |
| NET INCOME                                        |       | 25,486,782 |       | 17,109,288 |       | 9,232,830  |       |
|                                              |       |       |       |       |       |       |       |
| LESS PROFIT SHARE TO GENERAL PARTNER              |       | 3,048,112  |       | 2,092,010  |       | 1,140,619  |       |
|                                              |       |       |       |       |       |       |       |
|                                              |       |       |       |       |       |       |       |
| NET INCOME AFTER PROFIT SHARE TO GENERAL PARTNER  |       | $          | 22,438,670 |       | $          | 15,017,278 |       | $ | 8,092,211 |   |

 

 

See notes tofinancial statements.

 

7

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**NESTORPARTNERS**

 

**STATEMENTS OF CHANGES IN PARTNERS’ CAPITAL**

**YEARS ENDED DECEMBER 31, 2007, 2006, AND 2005**

 

 

 
| ** **                                              | ** ** | ** **   | ** **  | **Special**  | ** ** | **New Profit** | ** ** | ** **  | ** ** | ** **  | ** ** |
|---------------------------------------------------------|------------|--------------|-------------|--------------|------------|----------------|------------|-------------|------------|-------------|------------|
| ** **                                              | ** ** | **Limited**  | ** **  | **Limited**  | ** ** | **Memo**       | ** ** | **General** | ** ** | ** **  | ** ** |
| ** **                                              | ** ** | **Partners** | ** **  | **Partners** | ** ** | **Account**    | ** ** | **Partner** | ** ** | **Total**   | ** ** |
|                                                    |       |         |        |         |       |           |       |        |       |        |       |
| PARTNERS’ CAPITAL–                            |       |         |        |         |       |           |       |        |       |        |       |
| January 1,  2005                                   |       | $            | 152,324,173 |         | $          | 37,543,063     |       | $           | —     |        | $          | 3,710,902 |   | $ | 193,578,138 |   |
| Contributions                                           |       | 12,748,963   |        | 2,007,151    |       | —         |       | —      |       | 14,756,114  |       |
| Withdrawals                                             |       | (43,567,219  | )           | (1,422,830   | )          | —         |       | (1,625,112  | )          | (46,615,161 | )          |
| Net income                                              |       | 5,221,311    |        | 3,700,476    |       | 779            |       | 310,264     |       | 9,232,830   |       |
| General  Partner’s allocation–profit share    |       | (1,140,619   | )           | —       |       | 1,140,619      |       | —      |       | —      |       |
| Transfer of New  Profit Memo Account to General Partner |       | —       |        | —       |       | (1,141,398     | )          | 1,141,398   |       | —      |       |
|                                                    |       |         |        |         |       |           |       |        |       |        |       |
| PARTNERS’ CAPITAL–                            |       |         |        |         |       |           |       |        |       |        |       |
| December 31,  2005                                 |       | 125,586,609  |        | 41,827,860   |       | —         |       | 3,537,452   |       | 170,951,921 |       |
| Contributions                                           |       | 16,121,682   |        | 3,138,546    |       | —         |       | —      |       | 19,260,228  |       |
| Withdrawals                                             |       | (56,887,936  | )           | (631,001     | )          | —         |       | (2,100,659  | )          | (59,619,596 | )          |
| Net income                                              |       | 10,668,416   |        | 5,935,379    |       | 8,650          |       | 496,843     |       | 17,109,288  |       |
| General  Partner’s allocation–profit share    |       | (2,043,240   | )           | (48,770      | )          | 2,092,010      |       | —      |       | —      |       |
| Transfer of New  Profit Memo Account to General Partner |       | —       |        | —       |       | (2,100,660     | )          | 2,100,660   |       | —      |       |
|                                                    |       |         |        |         |       |           |       |        |       |        |       |
| PARTNERS’ CAPITAL–                            |       |         |        |         |       |           |       |        |       |        |       |
| December 31,  2006                                 |       | 93,445,531   |        | 50,222,014   |       | —         |       | 4,034,296   |       | 147,701,841 |       |
| Contributions                                           |       | 2,540,000    |        | 261,412      |       |           |       |        |       | 2,801,412   |       |
| Withdrawals                                             |       | (19,245,185  | )           | (1,347,475   | )          |           |       | (3,361,111  | )          | (23,953,771 | )          |
| Net income                                              |       | 14,528,281   |        | 10,109,532   |       | 12,999         |       | 835,970     |       | 25,486,782  |       |
| General  Partner’s allocation–profit share    |       | (2,868,410   | )           | (179,702     | )          | 3,048,112      |       | —      |       | —      |       |
| Transfer of New  Profit Memo Account to General Partner |       | —       |        | —       |       | (3,061,111     | )          | 3,061,111   |       | —      |       |
|                                                    |       |         |        |         |       |           |       |        |       |        |       |
| PARTNERS’ CAPITAL–                            |       |         |        |         |       |           |       |        |       |        |       |
| December 31,  2007                                 |       | $            | 88,400,217  |         | $          | 59,065,781     |       | $           | —     |        | $          | 4,570,266 |   | $ | 152,036,264 |   |

 

See notes tofinancial statements.

 

 

8

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**NESTOR PARTNERS**

 

**STATEMENTS OF FINANCIAL HIGHLIGHTS**

**YEARS ENDED DECEMBER 31, 2007, 2006 AND 2005**

** **

 
| ** **                                                   | ** ** | ** **   | ** ** | **Special**  | ** ** |
|--------------------------------------------------------------|------------|--------------|------------|--------------|------------|
| ** **                                                   | ** ** | **Limited**  | ** ** | **Limited**  | ** ** |
| ** **                                                   | ** ** | **Partners** | ** ** | **Partners** | ** ** |
| YEAR ENDED DECEMBER 31, 2007:                                |       |         |       |         |       |
| Ratios to  average capital–net investment income        |       | 1.07         | %          | 3.82         | %          |
|                                                         |       |         |       |         |       |
| Total expenses                                               |       | 3.71         |       | 0.86         |       |
| Profit share  allocation                                     |       | 3.10         |       | 0.32         |       |
|                                                         |       |         |       |         |       |
| Total expenses  and profit share allocation                  |       | 6.81         |       | 1.18         |       |
|                                                         |       |         |       |         |       |
| Total return  before profit share allocation                 |       | 16.96        |       | 20.27        |       |
| Profit share  allocation                                     |       | (3.34        | )          | (0.36        | )          |
|                                                         |       |         |       |         |       |
| TOTAL RETURN AFTER PROFIT SHARE ALLOCATION                   |       | 13.62        | %          | 19.91        | %          |
|                                                         |       |         |       |         |       |
| YEAR ENDED DECEMBER 31, 2006:                                |       |         |       |         |       |
| Ratios to  average capital–net investment income        |       | 1.11         | %          | 3.60         | %          |
|                                                         |       |         |       |         |       |
| Total expenses                                               |       | 3.39         |       | 0.88         |       |
| Profit share  allocation                                     |       | 1.59         |       | 0.11         |       |
|                                                         |       |         |       |         |       |
| Total expenses  and profit share allocation                  |       | 4.98         |       | 0.99         |       |
|                                                         |       |         |       |         |       |
| Total return  before profit share allocation                 |       | 10.82        |       | 13.61        |       |
| Profit share  allocation                                     |       | (2.02        | )          | (0.11        | )          |
|                                                         |       |         |       |         |       |
| TOTAL RETURN AFTER PROFIT SHARE ALLOCATION                   |       | 8.80         | %          | 13.50        | %          |
|                                                         |       |         |       |         |       |
| YEAR ENDED DECEMBER 31, 2005:                                |       |         |       |         |       |
| Ratios to  average capital–net investment income (loss) |       | (1.03        | )%         | 2.24         | %          |
|                                                         |       |         |       |         |       |
| Total expenses                                               |       | 3.81         |       | 0.57         |       |
| Profit share  allocation                                     |       | 0.85         |       | —       |       |
|                                                         |       |         |       |         |       |
| Total expenses  and profit share allocation                  |       | 4.66         |       | 0.57         |       |
|                                                         |       |         |       |         |       |
| Total return  before profit share allocation                 |       | 6.13         |       | 9.61         |       |
| Profit share  allocation                                     |       | (0.90        | )          | —       |       |
|                                                         |       |         |       |         |       |
| TOTAL RETURN AFTER PROFIT SHARE ALLOCATION                   |       | 5.23         | %          | 9.61         | %          |

 

See notes tofinancial statements.

 

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**NESTOR PARTNERS**

** **

**NOTES TO FINANCIAL STATEMENTS**

**YEARS ENDEDDECEMBER 31, 2007, 2006 AND 2005**

 

**1.**                      ORGANIZATION OF THE PARTNERSHIP

** **

Nestor Partners (the “Partnership”) is a limited partnership, which wasorganized in 1976 under the New Jersey Uniform Limited Partnership Act. TheLimited Partnership Agreement (the “Agreement”) was amended and restated as of April 5,2004. The Partnership engages in the speculative trading of futures and forwardcurrency contracts. The instruments that are traded by the Partnership arevolatile and involve a high degree of market risk.

 

The General Partner of the Partnership is Millburn RidgefieldCorporation (the “General Partner”). Principals, employees, former employees,and other affiliates of the General Partner have invested in the Partnership asspecial limited partners.

 

The Agreement provides that subject to certain limitations, the GeneralPartner shall conduct and manage the business of the Partnership. The GeneralPartner has the right to make all investment decisions regarding thePartnership, authorize the payments of distributions to partners, enter intocustomer agreements with brokers, and take such other actions, as it deemsnecessary or desirable, to manage the business of the Partnership.

 

The limited partners, special limited partners, New Profit Memo Account(see Note 3), and the General Partner share in the profits and losses of thePartnership, which are determined before brokerage fees (Note 2) andprofit share allocations on the basis of their proportionate interests ofPartnership capital (Note 3). The General Partner and special limitedpartners are charged lower brokerage fees than limited partners, in accordancewith the Agreement. No limited partner or special limited partner shall beliable for Partnership obligations in excess of their capital contribution plusprofits allocated to their capital accounts, if any.

 

Subject to certain conditions, a partner has the right to redeem all ora portion of its partnership capital as of any month-end upon fifteen days’prior written notice to the General Partner. In its sole discretion, the General Partner may permit redemptions onshorter notice or as of a date other than month-end.  Partners who purchased their intereststhrough certain selling agents and redeem their partnership capital prior tothe one-year anniversary of their subscription will pay the applicable earlyredemption fee.  Redemptions will be madeas of the last day of the month for an amount equal to the net asset value ofthe portion of a partner’s capital being redeemed; a redeeming partner shallreceive such redeemed capital less the redemption fee, if any.

 

The General Partner, subject to Commodity Futures Trading Commissionrequirements, may (at its discretion) sell additional Limited PartnershipInterests to persons desiring to become limited partners.

 

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The Partnership will dissolve on October 31, 2017, or in the eventof certain conditions set forth in the Agreement.

 

**2.**                      SUMMARY OF SIGNIFICANT ACCOUNTINGPOLICIES

** **

***Investments—***The Partnership records its transactionsin futures and forward currency contracts and U.S. Treasury notes, includingrelated income and expenses, on a trade-date basis.

 

Open futures contractsare valued at market value and open forward currency contracts are valued atfair value which is based on pricing models that consider the time value ofmoney and the current market and contractual prices of the underlying financialinstruments. Realized gains (losses) and changes in unrealized appreciation(depreciation) on futures and forward currency contracts are recognized in theperiods in which the contracts are closed or the changes occur, and areincluded in net realized and unrealized gains (losses) in the statements ofoperations.

 

Investments in U.S. Treasury notes are valued at the market value basedon the midpoint of bid/ask quotations reported daily at 3pm EST by Bloomberg.The Partnership amortizes premiums and accretes discounts on U.S. Treasurynotes. Such securities are normally on deposit with financial institutions ascollateral for performance of the Partnership’s trading obligations withrespect to derivative contracts and are held for safekeeping in a custodyaccount.

 

***Foreign Currency Translation—***Assets and liabilities denominated inforeign currencies are translated to U.S. Dollars at quoted prices of suchcurrencies. Purchases and sales of investments are translated to U.S. Dollarsat the exchange rate prevailing when such transactions occurred.

 

***Brokerage Fees—***The Agreement provides that thePartnership shall charge the limited partners’ capital accounts and pay theGeneral Partner brokerage fees at a fixed rate of 0.542% per month of net assetvalue (6.5% per annum) of limited partnership interests. Effective July 1,2003, the General Partner reduced the brokerage fee rate to 0.458% per month ofnet asset value (5.5% per annum). The General Partner retains the right tocharge less than the annual brokerage rate except as specified in theAgreement. The General Partner bears all commission and clearing charges due tothird-party brokers.

 

***Administrative Expenses—***The Partnership bears expenses, includingperiodic legal, accounting and filing fees, up to an amount equal to 1⁄4 of 1%per annum of the average net assets of the Partnership. The General Partnerbears any excess over such amounts. The Partnership will pay any extraordinaryexpenses applicable to it.

 

The Partnership’s administrative expenses included $254,148, $308,037and $317,619 in 2007, 2006 and 2005, respectively, which relates to legal andaccounting services provided to the Partnership by an affiliate of the GeneralPartner.

 

***Income Taxes—***Income taxes have not been provided, aspartners are individually liable for the taxes, if any, on their share of thePartnership’s income and expenses.

 

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In July 2006, the Financial Accounting Standards Board (“FASB”)issued FASB Interpretation No. 48, “Accounting for Uncertainty in IncomeTaxes — an interpretation of FASB Statement No. 109” (“FIN 48”), whichclarifies the accounting for uncertainty in tax positions. FIN 48 requires thatthe Partnership recognize in its financial statements the impact of a taxposition if that position is more likely than not of being sustained on audit,based on the technical merits of the position. The provisions of FIN 48 areeffective for fiscal years beginning after December 15, 2006, with thecumulative effect of the change in accounting principle recorded as an adjustmentto opening partners’ capital. Millburn Ridgefield Corporation as GeneralPartner of the Partnership has evaluated the impact of adopting FIN 48 on thefinancial statements.  Based on a review of the Partnership’s opentax years, 2004 to 2007, for the U.S. Federal jurisdiction, the New York andNew Jersey State jurisdictions, and the New York City jurisdiction, FIN 48 didnot have an impact on the Partnership.  The Partnership is treated as alimited partnership for federal and state income tax reporting purposes andtherefore the limited partners are responsible for the payment of taxes.

 

***Fair Value ofFinancial Instruments—***The fair value of the Partnership’s assets andliabilities, which qualify as financial instruments under Statement ofFinancial Accounting Standards (“SFAS”) No. 107, *Disclosures about Fair Value of Financial Instruments*,approximates the carrying amounts presented in the statements of financialcondition.

 

***Estimates—***The preparation of financial statementsin conformity with accounting principles generally accepted in the UnitedStates of America requires management to make estimates and assumptions thataffect the amounts and disclosures reported in the financial statements. Actualresults could differ from these estimates.

 

***Right of Offset—***The customer agreements between thePartnership and its brokers give the Partnership the legal right to netunrealized gains and losses. Unrealized gains and losses related to offsettingtransactions with these brokers are reflected on a net basis in the equity intrading accounts in the statements of financial condition.

 

***Recently Issued Pronouncements******—***In September 2006, the FASB issued SFAS No. 157,“Fair Value Measurements”, which defines fair value, establishes a frameworkfor measurement of fair value, and expands disclosures about fair valuemeasurements. The provisions of SFAS No. 157 are effective for fiscalyears beginning after November 15, 2007. The Partnership adopted thispronouncement January 1, 2008. The three levels of the fair value hierarchyunder SFAS No. 157 are described below:

 

Level 1: Unadjusted quoted prices in active markets that areaccessible at the measurement date for identical, unrestricted assets orliabilities;

 

Level 2: Quoted prices in markets that are not active or financialinstruments for which all significant inputs are observable, either directly orindirectly;

 

Level 3: Prices or valuations that require inputs that areboth significant to the fair value measurement and unobservable.

 

The adoption of SFAS No. 157 will result in expanded disclosuresand is not expected to have a material impact on the Partnership’s financialstatements.

 

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** **

**3.**                      PROFIT SHARE ALLOCATION

** **

The Agreement provides that the General Partner’s profit share equal to20% of Trading Profits at the end of each year is charged to the limitedpartners’ capital accounts. New Trading Profits includes realized andunrealized trading profits (losses), interest income, brokerage fees,trading-related expenses and administrative expenses. For limited partners’withdrawals during the year, the profit share calculation shall be computed asthough the withdrawal date was at year-end. Profit share attributable to interests redeemed during a year istentatively credited to an account maintained for bookkeeping purposes, calledNew Profit Memo Account. Because limited partners may purchase theirpartnership interests at different times, they may recognize different amountsof Trading Profits.  Each limited partnerpays a profit share only on Trading Profits applicable to its partnershipinterest.  Limited partners who makemultiple investments in the Partnership receive separate partnership interestsfor purposes of tracking the profit share. Accordingly, in any given year, some limited partners may experience netgains and be charged the 20% profit share allocation for all or a portion oftheir interests where limited partners in the aggregate experienced net losses.

 

Any profit share charged is added to the General Partner’s capitalaccount to the extent net taxable capital gains are allocated to the GeneralPartner, and the remainder, if any, of such profit share is added to the NewProfit Memo Account. The General Partner may not make any withdrawal from thebalance in the New Profit Memo Account. If, at the end of a subsequent year,net taxable gains are allocated to the General Partner in excess of such year’sprofit share, a corresponding amount is transferred from the New Profit MemoAccount to the General Partner’s capital account.

 

**4.**                      DUE FROM BROKERS

** **

At December 31, 2007 and 2006, the due from brokers balances inthe statements of financial condition include cash receivable from brokers.

 

**5.**                      TRADING ACTIVITIES

** **

The Partnership conducts its trading activities with various brokersacting either as a broker or counterparty to various transactions. At December 31,2007 and 2006, cash, due from brokers and Treasury notes aggregating$46,234,965 and $55,831,307, respectively, included in the Partnership’s equityin trading accounts, were held by such brokers in segregated accounts ascollateral as required by U.S. Commodity Futures Trading Commission’sregulations or by the counterparty bank or broker. Such collateral can be soldor repledged by the counterparties, at their discretion.

 

The Partnership enters into contracts withvarious financial institutions that contain a variety of indemnifications. ThePartnership’s maximum exposure under these 

 

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arrangements is unknown. However, thePartnership has not had prior claims or losses pursuant to these contracts andexpects the risk of loss to be remote.

 

**6.**                      DERIVATIVE INSTRUMENTS

** **

The Partnership is party to derivative financial instruments in thenormal course of its business. These financial instruments include futures andforward currency contracts which may be traded on an exchange (“exchange-tradedcontracts”) or over-the-counter (“OTC contracts”).

 

The Partnership records its derivative activities on a mark-to-marketbasis as described in Note 2. For OTC contracts, the Partnership entersinto master netting agreements with its counterparties. Therefore, assetsrepresent the Partnership’s unrealized gains, less unrealized losses for OTCcontracts in which the Partnership has a master netting agreement. Similarly,liabilities represent net amounts owed to counterparties on OTC contracts.

 

Futures contracts are agreements to buy or sell an underlying asset orindex for a set price in the future. Initial margin deposits are made uponentering into futures contracts and can be either in cash or treasurysecurities. Open futures contracts are revalued on a daily basis to reflect themarket value of the contracts at the end of each trading day. Variation marginpayments are received or made, depending upon whether unrealized gains orlosses are incurred. When the contract is closed, the Partnership records arealized gain or loss equal to the difference between the value of the contractat the time it was opened and the time it was closed. The Partnership bears themarket risk that arises from changes in the value of these financialinstruments.

 

Forward currency contracts entered into by the Partnership represent afirm commitment to buy or sell an underlying currency at a specified value andpoint in time based upon an agreed or contracted quantity. The ultimate gain orloss is equal to the difference between the value of the contract at the onsetand the value of the contract at settlement date.

 

Each of these financial instruments is subject to various risks similarto those related to the underlying financial instruments, including marketrisk, credit risk, concentration risk, and sovereign risk.

 

Market risk is the potential change in the value of the instrumentstraded by the Partnership due to market changes, including interest and foreignexchange rate movements and fluctuations in futures or security prices. Marketrisk is directly impacted by the volatility and liquidity in the markets inwhich the related underlying assets are traded. The financial instrumentstraded by the Partnership contain varying degrees of off-balance sheet riskwhereby changes in the market values of the futures and forward currencycontracts and the Partnership’s satisfaction of its obligations related to suchmarket value changes may exceed the amount recognized in the statements offinancial condition.

 

Credit risk is the possibility that a loss may occur due to the failureof a counterparty to perform according to the terms of a contract. Credit riskis normally reduced to the extent

 

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that an exchange or clearing organization acts as a counterparty tofutures transactions, since typically the collective credit of the members ofthe exchange is pledged to support the financial integrity of the exchange. Inthe case of OTC transactions, the Partnership must rely solely on the credit ofthe individual counterparties. The contract amounts of the forward currency andfutures contracts do not represent the Partnership’s risk of loss due tocounterparty nonperformance. The Partnership’s exposure to credit riskassociated with counterparty nonperformance of these contracts is limited tothe unrealized gains inherent in such contracts, which are recognized in thestatements of financial condition, plus the value of margin or collateral heldby the counterparty.  The amount of suchcredit risk was $20,413,535 and $29,077,055 at December 31, 2007 and 2006,respectively.

 

The General Partner has established procedures to actively monitormarket risk and minimize credit risk, although there can be no assurance thatit will, in fact succeed in doing so. The General Partner’s market risk controlprocedures include diversification of the Partnership’s portfolio andcontinuously monitoring the portfolio’s open positions, historical volatilityand maximum historical loss. The General Partner seeks to minimize credit riskprimarily by depositing and maintaining the Partnership’s assets at financialinstitutions and brokers which the General Partner believes to be creditworthy.The Partnership’s trading activities are primarily with brokers and otherfinancial institutions located in North America, Europe and Asia. All futurestransactions of the Partnership are cleared by major securities firms pursuantto customer agreements. For all forward currency transactions, the Partnershiputilizes two clearing brokers, both major financial institutions.

 

The Partnership is subject to sovereign risk such as the risk of restrictionsbeing imposed by foreign governments on the repatriation of cash and theeffects of political or economic uncertainties. Net unrealized appreciation(depreciation) on futures and forward currency contracts are denominated in thePartnership’s functional currency (U.S. Dollar). Cash settlement of futures andforward currency contracts is made in the local currency (settlement currency)and then translated to U.S. Dollars.

 

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Net unrealized appreciation (depreciation) on futuresand forward currency contracts by settlement currency type, denominated in U.S.Dollars, is detailed below:

 

 
| ** **         | ** ** | **December 31,** | ** ** |
|--------------------|------------|-----------------------|------------|
| ** **         | ** ** | **2007**              | ** ** | **2006** | ** ** |
| ** **         | ** ** | **Total Net**         | ** ** | ** ** | ** ** | **Total Net** | ** ** | ** ** | ** ** |
| ** **         | ** ** | **Unrealized**        | ** ** | ** ** | ** ** | **Unrealized** | ** ** | ** ** | ** ** |
| ** **         | ** ** | **Appreciation**      | ** ** | **Percent of** | ** ** | **Appreciation** | ** ** | **Percent of** | ** ** |
| ** **         | ** ** | **(Depreciation)**    | ** ** | **Total** | ** ** | **(Depreciation)** | ** ** | **Total** | ** ** |
| ** **         | ** ** | ** **            | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| **Currency Type**  | ** ** | ** **            | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| ** **         | ** ** | ** **            | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Aussie dollar      |       | $                     | 621,309    |   | 20.41 | % | $ | 397,950 |   | 4.31 | % |
| British pound      |       | 259,328               |       | 8.52 |   | 671,168 |   | 7.26 |   |
| Canadian dollar    |       | 17,603                |       | 0.58 |   | (694,556 | ) | (7.52 | ) |
| Czech koruna       |       | (43,072               | )          | (1.41 | ) | — |   | — |   |
| Euro               |       | (263,139              | )          | (8.64 | ) | 1,984,900 |   | 21.48 |   |
| Hong Kong dollar   |       | 24,109                |       | 0.79 |   | 549,899 |   | 5.95 |   |
| Hungarian forint   |       | (4,111                | )          | (0.14 | ) | 313,424 |   | 3.39 |   |
| Icelandic krona    |       | (9,803                | )          | (0.32 | ) | — |   | — |   |
| Japanese yen       |       | 596,739               |       | 19.60 |   | 2,233,502 |   | 24.17 |   |
| Mexican peso       |       | (14,747               | )          | (0.48 | ) | — |   | — |   |
| New Zealand dollar |       | (11,479               | )          | (0.38 | ) | 96,156 |   | 1.04 |   |
| Polish zloty       |       | 45,536                |       | 1.50 |   | — |   | — |   |
| Singapore dollar   |       | 7,180                 |       | 0.24 |   | — |   | — |   |
| Slovak koruna      |       | (24,789               | )          | (0.81 | ) | — |   | — |   |
| South African rand |       | 5,904                 |       | 0.19 |   | 172,414 |   | 1.87 |   |
| Swedish krona      |       | 25,310                |       | 0.83 |   | 52,291 |   | 0.57 |   |
| Swiss franc        |       | 167,352               |       | 5.50 |   | 927,525 |   | 10.04 |   |
| Turkish lira       |       | 75,287                |       | 2.47 |   | (130,175 | ) | (1.41 | ) |
| U.S. dollar        |       | 1,569,541             |       | 51.55 |   | 2,666,350 |   | 28.85 |   |
|               |       |                  |       |   |   |   |   |   |   |
| Total              |       | $                     | 3,044,058  |   | 100.00 | % | $ | 9,240,848 |   | 100.00 | % |

 

**7.**                      FINANCIAL HIGHLIGHTS

** **

The ratios are calculated based on limited partners’ capital andspecial limited partners’ capital taken as a whole. The computation of suchratios based on the amount of expenses and profit share allocation assessed toan individual partner’s capital account may vary from these ratios based on thetiming of capital transactions and differences in individual partner’sbrokerage fees and profit share allocation arrangements.

 

Returns are calculated for limited partners and special limitedpartners taken as a whole. An individual partner’s returns may vary from thesereturns based on the timing of capital transactions and differences inindividual partners’ brokerage fees and profit share allocation arrangements.

 

 

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