**UNITED STATESSECURITIES AND EXCHANGE COMMISSION**

 

**Washington, D.C. 20549**

 

**FORM 10-K**

 

**ý****  Annual Report Pursuant toSection 13 or 15(d)of the Securities Exchange Act of 1934**

 

**For the Fiscal Year Ended:December 31, 2005**

 

**or**

 

**o****  Transition Report Pursuant to Section13 or 15(d)of the Securities Exchange Act of 1934**

 

**Commission File Number: 000-50725**

 

**NESTOR PARTNERS**

(Exact name of registrant as specified in its charter)

 
| **New Jersey**                  | ** ** | **22-2149317**      |
|---------------------------------|------------|---------------------|
| (State or other jurisdiction of |       | (I.R.S. Employer    |
| incorporation or organization)  |       | Identification No.) |

 

**c/o MILLBURN RIDGEFIELD CORPORATION**

**411 West Putnam Avenue**

**Greenwich, Connecticut  06830**

(Address of principal executive offices)

 

Registrant’s telephonenumber, including area code:   **(203) 625-7554**

 

Securities registeredpursuant to Section 12(b) of the Act:   **None**

 

Securities registered pursuant to Section 12(g)of the Act:   **Limited PartnershipInterests**

(Title of Class)

 

Indicateby check mark if the registrant is a well-known seasoned issuer, as defined inRule 405 of the Securities Act. Yes o   No ý

 

Indicate by check mark if the registrant is notrequired to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o   No ý

 

Indicateby check mark whether the registrant (1) has filed all reports required to befiled by Section 13 or 15(d) of the Securities Exchange Act of 1934 during thepreceding 12 months (or for such shorter period that the registrant wasrequired to file such reports), and (2) has been subject to such filingrequirements for the past 90 days.Yes ý   No o

 

Indicateby check mark if disclosure of delinquent filers pursuant to Item 405 ofRegulation S-K is not contained herein, and will not be contained, to the bestof registrant’s knowledge, in definitive proxy or information statementsincorporation by reference in Part III of this Form 10-K or any amendment tothis Form 10-K. ý

 

Indicateby check mark whether the registrant is a large accelerated filer, anaccelerated filer, or a non-accelerated filer. See definition of “acceleratedfiler and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Checkone):

| Large accelerated filer  o |   | Accelerated Filer o |   | Non-accelerated filer ý |
|----------------------------|--------|---------------------|--------|------------------------------|

 

Indicateby check mark whether the registrant is a shell company (as defined in Rule12b-2 of the Act). Yes o   No ý

 

State the aggregate market value of the voting andnon-voting common equity held by non-affiliates computed by reference to theprice at which the common equity was last sold, or the average bid and askedprice of such common equity, as of the last business day of the registrant’smost recently completed second fiscal quarter.

 

Not applicable.

 

Documents Incorporated by Reference

 

Registrant’s FinancialStatements for the years ended December 31, 2005, 2004 and 2003 with Report ofIndependent Registered Public Accounting Firm, the annual report to securityholders for the fiscal year ended December 31, 2005, is incorporated byreference into Part II Item 8 and Part IV hereof and filed as an exhibitherewith.

 

 

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PART I

 

Item 1.   Business

 

(a)   General development of business

 

Nestor Partners (the “Partnership”) is a limitedpartnership organized December 13, 1976 under the New Jersey Uniform LimitedPartnership Act. The general partner of the Partnership is Millburn RidgefieldCorporation, a Delaware corporation (the “General Partner”).

 

The Partnership’s business is trading a diversifiedportfolio of futures, forward and related option contracts on currencies,metals, financial instruments, stock indices, energy and agricultural commodities.Approximately 30%-45% of the Partnership’s trading, measured by the GeneralPartner’s assessment of risk, currently takes place in the currency markets. ThePartnership began its trading activities in February 1977. All tradingdecisions are made by the General Partner.

 

The General Partner was organized in May 1982 tomanage discretionary accounts in futures and forward markets. It is thecorporate successor to a futures trading and advisory organization which hasbeen continuously managing assets in the currency and futures markets usingquantitative, systematic techniques since 1971. The General Partner has beenregistered with the Commodity Futures Trading Commission (“CFTC”) as a “commoditypool operator” since September 13, 1984 and as a “commodity trading advisor”since July 1, 1982 and is a member of National Futures Association. TheMillburn Corporation, an affiliate of the General Partner, performs certainaccounting, administrative and operating functions for the Partnership andother commodity pools and investment partnerships managed by the GeneralPartner.

 

As of December 31, 2005, the aggregate net asset valueof the Partnership was $170,951,921. The value at December 31, 2005 of alimited partner’s initial $1,000 investment in the Partnership on February 1,1977 would be $40,681.79, based on the actual rate of return a limited partner’sinvestment in the Partnership would have recognized, net of the highest chargesapplicable to a limited partner, during each month in the calculation periodfrom February 1977 to December 31, 2005.

 

The Partnership’s fiscal year ends on December 31.

 

The Partnership will terminate on October 31, 2017 orupon the prior withdrawal, insolvency or dissolution of the General Partner oroccurrence of any event legally requiring termination.

 

ThePartnership is not a registered investment company or mutual fund. Accordingly,investors in the Partnership do not have the protections afforded by theInvestment Company Act of 1940, as amended.

 

(b)   Financial information about industry segments

 

ThePartnership’s business constitutes only one segment, i.e., a speculativecommodity pool. The Partnership does not engage in sales of goods and services.Financial information regarding the Partnership’s business is set forth in Item6 “Selected Financial Data” and in the Partnership’s Financial Statementsincluded as Exhibit 13.01 to this report.

 

(c)   Narrative description of business

 

The Partnership engages in the speculative trading offutures, options on futures, and forward contracts. The Partnership’s soletrading adviser is the General Partner. The Partnership trades, pursuant to theGeneral Partner’s Diversified Portfolio, in the agricultural, metals, energy,interest rate and stock index futures and futures options markets and in thecurrency markets, trading primarily forward contracts in the interbank market. The

 

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objective of the General Partner’s trading method isto participate in all major sustained price moves in the markets traded. TheGeneral Partner’s approach is medium-term to long-term in nature. The GeneralPartner makes trading decisions pursuant to its trading method, which includestechnical trend analysis, certain non-trend-following technical systems, andmoney management principles, which may be revised from time to time.

 

The General Partner is engaged in an ongoing researcheffort to improve its trading methods and to apply its quantitative analyticexpertise to new financial products.

 

Successful systematic futures trading depends on twofactors;  development and selection ofthe trading systems used in each market, and allocation of portfolio risk amongthe markets available for trading.

 

Market environments change over time, and particularsystems may perform well in one environment but poorly in another. Likewise,portfolio sectors and individual markets go through periods where systematictrading is very profitable and other periods where no system makes any money.

 

The goal of the General Partner’s research has been todevelop and select a mix of systems in each market and allocate risk across awide array of markets, so as to contain overall portfolio risk in the targetedrange, while allowing exposure to profitable trend opportunities. Over the last30 years, the General Partner has developed hundreds of trading systems. Theseintermediate- to long-term trading systems generate buy or sell decisions in aparticular market based on the direction of price movements in the market.

 

Systems can be materially different – better in someperiods and worse in others. The main distinguishing features are time-frameover which systems work (intra-day to long-term), the type of data fed intothem (granularity [ticks to weeks/months], type [market or economicstatistics], source [cash, futures or options markets]), and the objective ofthe system (profiting from trends, trading-ranges or volatility). No singleapproach will work all the time. Therefore, the General Partner’s objective isto have several approaches operating at all times. Since the early 1980’s, theGeneral Partner has selected multiple systems for each market.

 

When arriving at the portfolio allocation, the GeneralPartner seeks maximum diversification subject to liquidity constraints. Themarkets traded and allocations are reviewed monthly, although changes may occurless frequently. The following factors are considered in constructing auniverse of markets to trade for each portfolio:  profitability, correlation of marketperformance, liquidity of markets, depth of markets, breadth of markets,professional judgment, desired diversification and transaction costs. Once theuniverse of markets is established, the General Partner’s simulation andoptimization techniques help determine which markets to include in theportfolio. The current allocation to any market in the portfolio does notexceed 3%.

 

Risk is a function of both price level and pricevolatility. In attempting to assess market volatility as a means of monitoringand evaluating risk, the General Partner uses its volatility overlay as a partof individual market risk management. This system is designed to measure therisk in the portfolio’s position in each market and signals a decrease inposition size when risk increases and an increase in position size when riskdecreases. The General Partner’s volatility overlay maintains overall portfoliorisk and distribution of risk across markets within designated ranges. It isapplied to the systematic strategies described above. A secondary benefit ofthe volatility overlay can be timely profit taking. Because markets tend tobecome more volatile after a profitable trend has been long underway, thevolatility overlay often signals position reductions before trend reversals.

 

Inaddition to the volatility overlay, the General Partner’s risk managementfocuses on money management principles applicable to the portfolio as a wholerather than to individual markets and control of leverage and portfoliosize.  There are, however, norestrictions on the amount of leverage the General Partner may use at any time.

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TheGeneral Partner receives a flat-rate monthly brokerage fee equal to 0.458 of 1%of the month-end Net Assets (a 5.5% annual rate). The General Partner chargesless than the annual brokerage rate of 5.5% to those subscribers who subscribewithout incurring the selling commission paid by the General Partner, orsubscribe incurring reduced selling commissions paid by the General Partner. Thesereductions have no effect on other investors. The General Partner also receivesa profit share equal to 20% of any new trading profit as defined, determined asof the end of each calendar year. The annual profit share is calculated net ofbrokerage fees and administrative expenses.

 

ThePartnership pays its administrative expenses, including costs incurred inconnection with the continuing offering of the limited partnership interests (“Interests”),and any extraordinary expenses which it may incur. The General Partner pays allthe routine costs of executing and clearing the Partnership’s trades and allcompensation due to the selling agents.

 

UBSFinancial Services Inc., Deutsche Bank Securities, Inc. and Merrill Lynch,Pierce, Fenner & Smith Inc. act as the futures brokers for the Partnership.The Partnership executes currency forward trades with several brokers andbanks, including Morgan Stanley & Co. Incorporated and clears all suchtrades with Morgan Stanley & Co. Incorporated, serving as prime broker. ThePartnership pays “bid asked” spreads on its forward trades, as such spreads areincorporated into the pricing of forward contracts. The General Partnermonitors the Partnership’s trades to ensure that the prices it receives arecompetitive.

 

Eachpartner has a capital account, and its initial balance is the amount of hiscontribution to the Partnership. There is also a new profit memo account whichis credited with the General Partner’s profit share on redeemed Interests andany excess of the General Partner’s profit share over the Partnership’s taxablegains at year-end. The Net Assets of the Partnership are determined monthly,and any increase or decrease from the end of the preceding month is added to orsubtracted from the accounts (including the new profit memo account) of thepartners in the ratio that each account bears to all accounts. The credits tothe new profit memo account are charged to the accounts of the limitedpartners.

 

At the end of each fiscal year the Partnership’staxable capital gain or loss (including gains and losses on open positions incertain futures and forward contracts which are “marked-to-market” at the endof the Partnership’s fiscal year) and ordinary income and expense are allocatedamong the partners for tax purposes, and each partner who is a United Statescitizen or resident is required to include on his personal income tax returnhis distributive share of such items. Items of operating income such asinterest and items of operating expense such as legal, accounting and filingfees that accrued during each month will be allocated among the persons whowere partners during each month in the ratio that each partner’s capitalaccount bears to all partners’ capital accounts.

 

Net capital gain is allocated first to the GeneralPartner up to the amount of the General Partner’s profit share for the year andthen up to the amount of any balance in the new profit memo account. Netcapital gain is next allocated to each partner who has redeemed all or aportion of his Interests during the year to the extent that the amount receivedon redemption exceeds the partner’s Tax Basis. A partner’s Tax Basis is theamount paid for the Interests redeemed plus net taxable income less taxablelosses previously allocated to such Interests and less amounts previouslydistributed to the partner with respect to the redeemed Interests. Remainingnet capital gain is allocated among the partners whose capital accounts haveincreased from their Tax Basis. The allocation to each partner is in the ratiothat his increase bears to all partners’ increases. Net capital gain remainingis allocated to each partner in the ratio that his capital account value bearsto the total capital account value of all partners.

 

Net capital loss is allocated first to each limitedpartner who has redeemed all or a portion of his Interests during the year tothe extent that the amount the partner’s Tax Basis for the Interests redeemedexceeds the amount received on redemption. Remaining net taxable capital lossis allocated among the partners whose capital accounts have decreased fromtheir Tax Basis. The allocation to each partner is in the ratio that hisdecrease bears to all partners’ decreases. Net capital loss remaining isallocated to each partner in the ratio that his capital account value bears tothe total capital account value of all partners.

 

The Partnership’s cash and U.S. Treasury instrumentsare used by the Partnership to engage in its trading activities and as reservesto support that trading. The Partnership’s assets deposited with thePartnership’s futures

 

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brokers as margin are maintained in “customersegregated funds accounts” or “foreign futures and foreign options securedamount accounts” and are held in cash, or U.S. Treasury instruments. Partnershipassets not deposited as margin are maintained in bank or brokerage accounts andare held primarily in bank money market funds or U.S. Treasury instruments.

 

The Partnership does not engage in lending (other thanthrough permitted securities investments). The General Partner does notanticipate making any distributions of Partnership profits, if any.

 

Regulation

 

Underthe Commodity Exchange Act, as amended (the “CEA”), commodity exchanges andfutures trading are subject to regulation by the CFTC. National FuturesAssociation (“NFA”), a “registered futures association” under the CEA, is theonly non-exchange self-regulatory organization for futures industryprofessionals. The CFTC has delegated to NFA responsibility for theregistration of “commodity trading advisors,” “commodity pool operators,” “futurescommission merchants,” “introducing brokers” and their respective associatedpersons and “floor brokers” and “floor traders.”  The CEA requires commodity pool operators andcommodity trading advisors, such as the General Partner, and commodity brokersor futures commission merchants, such as the UBS Financial Services Inc.,Merrill Lynch, Pierce, Fenner & Smith Incorporated and Deutsche Bank A.G.,to be registered and to comply with various reporting and record keepingrequirements. The CFTC may suspend a commodity pool operator’s or tradingadvisor’s registration if it finds that its trading practices tend to disruptorderly market conditions or in certain other situations. In the event that theregistration of the General Partner as a commodity pool operator or a commoditytrading advisor were terminated or suspended, the General Partner would beunable to continue to manage the business of the Partnership. Should theGeneral Partner’s registration be suspended, termination of the Partnershipmight result.

 

Inaddition to such registration requirements, the CFTC and certain commodityexchanges have established limits on the maximum net long or net short positionwhich any person may hold or control in particular commodities. Most exchangesalso limit the changes in futures contract prices that may occur during asingle trading day. Currency forward contracts are not subject to regulation byany United States Government agency.

 

(i)   through(xii) - not applicable.

 

(xiii)   thePartnership has no employees.

 

(d)   Financialinformation about geographic areas

 

ThePartnership does not engage in material operations in foreign countries(although it does trade from the United States in foreign currency forwardcontracts and on foreign futures exchanges), nor is a material portion of itsrevenues derived from foreign customers.

 

(e)   Availableinformation

 

ThePartnership files quarterly, annual and current reports with the Securities andExchange Commission (“SEC”). These reports are available to read and copy atthe SEC’s Public Reference Facilities in Washington, D.C. at 450 Fifth Street,N.W., Washington, D.C. 20549. Please call the SEC’s toll free number,1-800-SEC-0330, for further information. The Partnership does not maintain awebsite where these reports are posted. However, the Partnership’s filings areposted on the SEC’s website at http://www.sec.gov.

 

Item1A.   Risk Factors

 

***Risk of Loss***. An investor may incur significantlosses on an investment in the Partnership. The General Partner cannot provideany assurance that investors will not lose all or substantially all of theirinvestment.

 

***Past Performance Records.***   Although the GeneralPartner has significant experience trading customer funds in the futuresmarkets, and the Partnership itself has traded successfully since inception, **PAST PERFORMANCE**

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**IS NOT NECESSARILYINDICATIVE OF FUTURE RESULTS.****R**eturns recognized by any given investor are materiallyaffected by when that investor invested in the Partnership.

 

***Futures and Forward ContractTrading Is Volatile***. Trading in the futures and forward markets typically results involatile performance. Several occasions in the recent past have witnessedsudden and major reversals in these markets, resulting in major losses fortraders. The performance record of the General Partner’s trading has exhibiteda considerable degree of volatility.

 

***Highly Leveraged Trading.***   The low margin depositsnormally required in futures and forward trading permit an extremely highdegree of leverage. The Partnership may frequently hold positions with a grossvalue several times in excess of the Partnership’s Net Assets. Consequently, evena slight movement in the prices of its open positions could result insignificant losses.

 

***Markets May Be Illiquid orDisrupted.***   MostUnited States futures exchanges limit fluctuations in some futures contractprices during a single day by regulations referred to as “daily limits.”  During a single trading day no trades may beexecuted in such contracts at prices beyond the daily limit. Once the price ofa futures contract has increased or decreased to the limit point, positions canbe neither taken nor liquidated. Futures prices have occasionally moved to thedaily limit for several consecutive days with little or no trading. Similaroccurrences could prevent the Partnership from promptly liquidating unfavorablepositions and subject the Partnership to substantial losses. Also, theCommodity Futures Trading Commission (the “CFTC”) or exchanges may suspend orlimit trading. Trading on non-United States exchanges may also be subject toprice fluctuation limits and are otherwise subject to periods of significantilliquidity. Trading in the forward currency markets is not subject to dailylimits, although such trading is also subject to periods of significantilliquidity.

 

***Failure of Brokerage Firms andForward Market Participants.***   The Commodity Exchange Act, asamended (the “CEA”) requires a clearing broker to segregate all funds receivedfrom such broker’s customers in respect of futures (but not forward)transactions from such broker’s proprietary funds. If any of the Partnership’scommodity brokers were not to do so to the full extent required by law, or inthe event of a substantial default by one or more of such broker’s othercustomers, the assets of the Partnership might not be fully protected in theevent of the bankruptcy of such broker. Furthermore, in the event of such abankruptcy, the Partnership would be limited to recovering only a *pro rata* share of all available funds segregated on behalfof the affected commodity broker’s combined customer accounts, even thoughcertain property specifically traceable to the Partnership (for example, UnitedStates Treasury bills or cash deposited by the Partnership with such broker)was held by such broker. Commodity broker bankruptcies have occurred in whichcustomers were not able to recover from the broker’s estate the full amount oftheir funds on deposit with such broker and owing to them. Commodity brokerbankruptcies are not insured by any governmental agency, and investors wouldnot have the benefit of any protection such as that afforded customers ofbankrupt securities broker-dealers by the Securities Investors ProtectionCorporation.

 

In respect of its forward trading, the Partnershipwill be subject to the risk of the inability or refusal to perform with respectto such contracts on the part of the principals or agents with or through whichthe Partnership trades. Any failure or refusal to discharge their contractualobligations by the counterparties with which the Partnership deals on theforward markets, whether due to insolvency, bankruptcy or other causes, couldsubject the Partnership to substantial losses. The Partnership will not beexcused from performance under any forward contracts into which it has entereddue to defaults under other forward contracts which in the General Partner’sstrategy were to have substantially “covered” the former. The Partnership dealsin the forward markets only with major financial institution counterpartieswhich the General Partner considers to be creditworthy. However, defaults haveoccurred in the forward markets, and the risk of such defaults cannot beeliminated from the Partnership’s trading.

 

***Certain Special ConsiderationsRelated to Forward Trading.*** ** **None of the CFTC, National FuturesAssociation (“NFA”), futures exchanges or banking authorities currentlyregulate forward trading. Because a principal portion of the Partnership’scurrency trading takes place in the forward markets, prospective investors mustrecognize that much of the Partnership’s activity takes place in unregulatedmarkets rather than on futures exchanges subject to the jurisdiction of theCFTC or other regulatory bodies. Partnership funds on deposit with the currencyforward counterparties with which the Partnership trades are not protected bythe same segregation requirements imposed on CFTC regulated commodity brokersin respect of customer funds deposited with them. Although the

 

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Partnership deals only with major financialinstitutions as currency forward counterparties, the insolvency or bankruptcyof a currency forward counterparty could subject the Partnership to the loss ofits entire deposit with such counterparty. The forward markets are wellestablished. However, it is impossible to predict how, given certain unusualmarket scenarios, the unregulated nature of these markets might affect thePartnership.

 

***Trading in Options.***   The General Partner hastraded futures and forward options on behalf of the Partnership in the past andmay trade such instruments in the future. Although successful options tradingrequires many of the same skills as successful futures and forward trading, therisks involved are somewhat different. For example, the assessment of near-termmarket volatility - which is directly reflected in the price of outstandingoptions - can be of much greater significance in trading options than it is inmany long-term futures strategies. The use of options can be extremelyexpensive if market volatility is incorrectly predicted.

 

***Trading on Futures ExchangesOutside the United States.***   The General Partner trades onfutures exchanges outside the United States on behalf of the Partnership. Tradingon such exchanges is not regulated by any United States government agency andmay involve certain risks not applicable to trading on United States exchanges.For example, some non-U.S. exchanges, in contrast to United States exchanges,are “principals’ markets” similar to the forward markets in which performanceis the responsibility only of the individual member with whom the Partnershiphas entered into a futures contract and not of any exchange or clearingcorporation. In such cases, the Partnership will be subject to the risk of theinability or refusal to perform with respect the individual member with whomthe Partnership has entered into a futures contract. Trading on foreignexchanges involves the additional risks of expropriation, burdensome orconfiscatory taxation, moratoriums, exchange or investment controls andpolitical or diplomatic disruptions, each of which might materially adverselyaffect the Partnership’s trading activities. In trading on foreign exchanges,the Partnership is also subject to the risk of changes in the exchange ratesbetween the United States dollar and the currencies in which the foreigncontracts are settled.

 

***Substantial Charges toPartnership.***   ThePartnership is obligated to pay the General Partner brokerage commissions andannual operating expenses regardless of whether the Partnership is profitable. (Operatingexpenses are limited to 1/4 of 1% per annum of the average month-end Net Assetsof the Partnership.)  In addition, theGeneral Partner receives, with respect to each Interest, a profit share of 20%of any increase in Trading Profits over the previous high point in TradingProfits at the end of each fiscal year. Trading Profits are based upon theincrease in value of each Interest at the end of each fiscal year (or when anInterest is redeemed) including any unrealized appreciation in open futures andforward positions. Such appreciation may never be realized by the Partnership.

 

Because investors will purchase Interests at differenttimes they may recognize different amounts of Trading Profits. Each limitedpartner will pay a profit share only on Trading Profits applicable to itsInterests. Investors who make multiple investments in the Partnership willreceive separate Interests for purposes of tracking the profit share. As aresult, investors who own multiple Interests may pay a profit share in respectof some of their Interests even if they experience a loss on an aggregatebasis.

 

Forward trading is conducted in a principals’ marketin which counterparties buy and sell currencies among each other, including a “bid-ask”spread in their pricing. Institutions trading in such markets do not paybrokerage commissions in addition to such spreads. It is not possible toquantify the “bid-ask” spreads paid by the Partnership in respect of itscurrency trading because it is not possible for the Partnership to know what,if any, profit its counterparty is making on the forward trades into which itenters. However, these spreads represent a significant execution cost to thePartnership.

 

***Trading Decisions Based onTechnical Systems.***   Trading decisions of the General Partner are notdetermined by analysis of fundamental supply and demand factors, generaleconomic factors or anticipated world events, but by technical trading systemsinvolving trend analysis and other factors and the money management principlesdeveloped by the General Partner and its affiliates. The profitability of anytrading system involving technical trend analysis depends upon the occurrencein the future of significant sustained price moves in at least some of themarkets traded. Without such sustained price moves in at least some of themarkets traded, the General Partner’s trend-following systems are unlikely toproduce profits and the Partnership could suffer significant losses.

 

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***Discretionary Aspects of theGeneral Partner’s Strategies***. Although the General Partner applies highlysystematic strategies, these strategies retain certain discretionary aspects. Decisions,for example, to adjust the size of positions indicated by the systematicstrategies, which futures contracts to trade and method of order entry, requirejudgmental input from the General Partner’s principals. Discretionarydecision-making may result in the General Partner’s making unprofitable tradesin situations when a more wholly systematic approach would not have done so.

 

***Possible Effects of TechnicalTrading Systems.***   Therehas been, in recent years, a substantial increase in interest in technicalfutures trading systems, particularly trend-following systems. As the capitalunder the management of trading systems based on the same general principlesincreases, an increasing number of traders may attempt to initiate or liquidatesubstantial positions at or about the same time as the Partnership, orotherwise alter historical trading patterns or affect the execution of trades,to the significant detriment of the Partnership.

 

Although the Partnership is as likely to be profitableas unprofitable in up or down markets, there is some tendency for managedfutures products — particularly those managed by systematic, trend-followingadvisors — to perform similarly during the same or approximately the sameperiods. Prospective investors must recognize that, irrespective of the skilland expertise of the General Partner, the success of the Partnership may besubstantially dependent on general market conditions over which the GeneralPartner has no control.

 

In addition, there has been an increase in the use oftrading systems employing counter-trend techniques that attempt to profit fromthe wide use of trend following systems by running stop points or otherwise. Theincreased use of such techniques could alter trading patterns the GeneralPartner attempts to exploit to the detriment of the Partnership.

 

***Changes in Trading Method.***   The General Partner maymodify its trading method without approval by or notice to limited partners. Modificationsmay include changes in or substitution of technical trading systems, riskcontrol overlays, money management principles and markets traded andintroduction of non-technical factors and methods of analysis andnon-trend-following technical systems and methods of analysis. The tradingsystems to be utilized by the General Partner are proprietary and confidential.

 

***Possible Effects of SpeculativePosition Limits.***   TheCFTC and United States exchanges have established limits referred to as “positionlimits” on the maximum net long or net short speculative futures position whichany person may hold or control in particular futures contracts. Generally,banks and dealers do not impose such limits with respect to forward contractsin currencies. All futures accounts managed by the General Partner and itsaffiliates are combined for position limit purposes. With respect to trading infutures contracts subject to position limits (for example, corn, wheat, cotton,soybeans, soybean meal and oil), the General Partner may reduce the size of thepositions which would otherwise be taken for the Partnership to avoid exceedingthe limits. If position limits are exceeded by the General Partner in theopinion of the CFTC or any other regulatory body, exchange or board, theGeneral Partner will liquidate positions in all accounts under its management,including the Partnership, as nearly as possible in proportion to respectiveamounts of equity in each account to the extent necessary to comply withapplicable position limits.

 

***Other Clients of the GeneralPartner and Its Affiliates.***   The General Partner manages futuresand forward accounts other than the Partnership, including accounts in whichthe General Partner, its principals and employees have significant investments.The General Partner and its affiliates may manage additional accounts in thefuture. It is possible that such accounts may be in competition with thePartnership for the same or similar positions in the futures and forwardmarkets. The General Partner intends generally to use similar trading methodsfor the Partnership and all other systematic accounts the General Partner andits affiliates manage. The General Partner will not knowingly or deliberatelyuse systems for any account that are inferior to systems employed for any otheraccount or favor any account over any other account. No assurance is given,however, that the results of the Partnership’s trading will be similar to thatof other accounts concurrently managed by the General Partner or itsaffiliates.

 

***Possible Adverse Effects ofIncreasing the Assets Managed by the General Partner.***The General Partner has not agreed tolimit the amount of additional equity which it may manage. The rates of returnachieved by trading advisors often tend to degrade as assets under managementincrease. There can be no assurance that the

 

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General Partner’s strategies will not be adverselyaffected by additional equity, including the Partnership’s account, accepted bythe General Partner.

 

***Dependence on Key Personnel.***   Despite the systematicmethods used by the General Partner, it is dependent on the services of alimited number of key persons. The loss of any such persons could make it moredifficult for the General Partner to continue to manage the Partnership.

 

***Limited Ability to LiquidateInvestment in Interests.***   An investment in an Interest cannotbe immediately liquidated by a limited partner. Interests may be transferredonly under limited circumstances and no market for Interests will exist at anytime. A limited partner can liquidate his investment through redemption of hisInterest. A limited partner may require the Partnership to redeem all or aportion of his Interest as of the last day of any month on fifteen days’written notice to the General Partner. Because notices of redemption must besubmitted significantly in advance of the actual redemption date, the valuereceived upon redemption may differ significantly from the value of theInterest at the time a decision to redeem is made. Furthermore, becauseredemptions are only permitted at month-end, investors are not able to selectthe value, or even the approximate value, at which they will redeem theirInterests.

 

***Conflicts of Interest.***   The Partnership will besubject to a number of actual and potential conflicts of interest. Suchconflicts may include, among other things, the possibility of the GeneralPartner, a commodity broker for the Partnership or any of their respectiveaffiliates favoring other customer accounts or their own proprietary trading incertain respects over that of the Partnership.

 

***Limited Partners Will NotParticipate in Management.***   Purchasers of Interests will not be entitledto participate in the management of the Partnership or the conduct of itsbusiness. Such authority is vested solely in the General Partner.

 

***Profits Included in TaxableIncome Whether or Not Cash or Other Property is Distributed.***   The Partnership is notrequired to make any distributions of cash or other property to the partners. Ifthe Partnership has taxable income for a fiscal year, such income will betaxable to limited partners who are U.S. taxpayers in accordance with theirallocable shares of the Partnership’s profits, irrespective of the fact that nocash or other property has been distributed to them. Accordingly, the taxliability of limited partners for any profits of the Partnership will almostcertainly exceed any distributions received from it.

 

***Possible Limitation onDeductibility of “Investment Advisory Fees.”***   Noncorporate investors may berequired to treat the amount of any incentive profit shares as well as aportion of the brokerage commissions and other ordinary expenses of thePartnership, as “investment advisory fees” which may be subject to substantialrestrictions on deductibility for federal income tax purposes. Any suchclassification of these amounts could substantially increase the amount of thePartnership’s profits (if any) subject to tax.

 

***“Passive” Losses.***  Any income derived from thePartnership’s trading activities will constitute “Portfolio Income” or otherincome not from a passive activity, which means that losses resulting from alimited partner’s other passive activities cannot be offset against suchincome.

 

***Possibility of Tax Audit.***  There can be no assurancethat the Partnership’s tax returns will not be audited by the Internal RevenueService or that adjustments to such returns will not be made as a result ofsuch an audit. If an audit results in an adjustment, limited partners may berequired to pay additional taxes, plus interest and possibly penalties andadditions to tax.

 

***Possible Changes in the Tax Code.***  In recent years, the UnitedStates federal income tax law has undergone repeated and substantial changes, anumber of which have been materially adverse, or potentially materiallyadverse, to investment partnerships. It is impossible to predict what theeffect of future changes in the Internal Revenue Code of 1986, as amended, willbe on an investment in the Partnership.

 

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***Statutory Regulation.***   Although thePartnership and the General Partner are subject to regulation by the CFTC, thePartnership is not registered under the Investment Company Act of 1940. Investorsare, therefore, not accorded the protection provided by such legislation.

 

***Future Regulatory and MarketChanges.***   Theregulation of the United States commodities markets has undergone substantialchange in recent years, a process which is expected to continue. In addition, anumber of substantial regulatory changes are pending or in progress in certainforeign markets. The effect of regulatory change on the Partnership isimpossible to predict but could be material and adverse.

 

Some concern has been expressed by variousgovernmental authorities that the impact of speculative pools of capital, suchas the Partnership, on international currency trading is making itsignificantly more costly and difficult for central banks and governments toinfluence exchange rates. This and similar concerns could lead to pressure torestrict the access of speculative capital to these markets.

 

In addition to regulatory changes, the economicfeatures of the markets to be traded by the Partnership have undergone, and areexpected to continue to undergo, rapid and substantial changes as newstrategies and instruments have been introduced. Furthermore, the number ofparticipants, particularly institutional participants, in the futures andforward markets appears to have expanded substantially. There can be noassurance as to how the General Partner will perform given the changes to, andincreased competition in, the marketplace.

 

Item 2.   Properties

 

ThePartnership does not own or use any physical properties in the conduct of itsbusiness. The General Partner or an affiliate perform administrative servicesfor the Partnership from their offices.

 

Item 3.   Legal Proceedings

 

TheGeneral Partner is not aware of any pending legal proceedings to which eitherthe Partnership is a party or to which any of its assets are subject. Inaddition there are no pending material legal proceedings involving the GeneralPartner.

 

Item 4.   Submissionof Matters to a Vote of Security Holders

 

None.

 

PART II

 

Item 5.   Market for the Registrant’s Common Equity andRelated Stockholder Matters

 

(a)   Market Information.

 

Thereis no trading market for the Interests, and none is likely to develop. Interestsmay be redeemed upon  15 business days’written notice to the General Partner at their net asset value as of the lastday of any month, subject to certain early redemption charges.

 

(b)   Holders.

 

As ofDecember 31, 2005, there were 714 holders of Interests.

 

(c)   Dividends.

 

Nodistributions or dividends have been made on the Interests, and the GeneralPartner has no present intention to make any.

 

10

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(d)   SecuritiesAuthorized for Issuance Under Equity Compensation Plans.

 

None.

 

(e)   RecentSales of Unregistered Securities; Use of Proceeds from Registered Securities.

 

ThePartnership did not sell any unregistered securities within the past threeyears which have not previously been included in the Partnership’s QuarterlyReports on Form 10-Q or in a Current Report on Form 8-K.

 

(f)   IssuerPurchases of Equity Securities.

 

Pursuantto the Partnership’s Agreement of Limited Partnership, limited Partners maywithdraw capital from their capital accounts in Partnership as of the end ofeach calendar month. The withdrawal of capital by limited partners has noimpact on the value of the capital accounts of other limited partners.

 

Thefollowing table summarizes limited partner withdrawals during the fourthcalendar quarter of 2005:

 

| **Month**          | ** ** | **Limited Partners  Amount withdrawn** | ** ** | **Special Limited Partners  Amount withdrawn** | ** ** |
|--------------------|------------|--------------------------------------------------|------------|---------------------------------------------------------------|------------|
|               |       |                                             |       |                                                          |       |
| October 31, 2005   |       | $                                                | 750,466    |                                                          | $          | 684 |   |
| November 30,  2005 |       | $                                                | 1,892,012  |                                                          | —     |   |
| December 31,  2005 |       | $                                                | 3,831,387  |                                                          | $          | 215,000 |   |
| Total              |       | $                                                | 6,473,865  |                                                          | $          | 215,684 |   |

 

Item 6.   Selected Financial Data

 

Thefollowing is a summary of operations for the fiscal years 2005, 2004, 2003,2002 and 2001 and total assets of the Partnership at December 31, 2005, 2004,2003, 2002 and 2001.

 
| ** **                                         | ** ** | **For the Year  Ended  December 31,  2005** | ** **  | **For the Year  Ended  December 31,  2004** | ** ** | **For the Year  Ended  December 31,  2003** | ** ** | **For the Year  Ended  December 31,  2002** | ** **  | **For the Year  Ended  December 31,  2001** | ** ** |
|----------------------------------------------------|------------|------------------------------------------------------------|-------------|------------------------------------------------------------|------------|------------------------------------------------------------|------------|------------------------------------------------------------|-------------|------------------------------------------------------------|------------|
| Income Statement  Items:                           |       |                                                       |        |                                                       |       |                                                       |       |                                                       |        |                                                       |       |
|                                               |       |                                                       |        |                                                       |       |                                                       |       |                                                       |        |                                                       |       |
| Interest income                                    |       | $                                                          | 4,819,054   |                                                       | $          | 2,406,435                                                  |       | $                                                          | 2,061,312   |                                                       | $          | 2,985,561 |   | $ | 7,983,764 |   |
| Total net  realized and unrealized gains (losses)* |       | $                                                          | 9,676,626   |                                                       | $          | (510,071                                                   | )          | $                                                          | 6,747,761   |                                                       | $          | 38,834,784 |   | $ | (9,865,332 | ) |
|                                               |       |                                                       |        |                                                       |       |                                                       |       |                                                       |        |                                                       |       |
| Expenses:                                          |       |                                                       |        |                                                       |       |                                                       |       |                                                       |        |                                                       |       |
| Brokerage  commissions                             |       | $                                                          | 4,802,240   |                                                       | $          | 5,497,025                                                  |       | $                                                          | 5,378,592   |                                                       | $          | 4,580,773 |   | $ | 5,834,846 |   |
| Administrative  expenses (including custody fees)  |       | $                                                          | 460,610     |                                                       | $          | 528,584                                                    |       | $                                                          | 456,873     |                                                       | $          | 393,610 |   | $ | 422,147 |   |
| Profit share                                       |       | $                                                          | 1,140,619   |                                                       | $          | 484,760                                                    |       | $                                                          | 668,526     |                                                       | $          | 3,393,398 |   | $ | 65,922 |   |
|                                               |       |                                                       |        |                                                       |       |                                                       |       |                                                       |        |                                                       |       |
| Net Income (loss)                                  |       | $                                                          | 8,092,211   |                                                       | $          | (4,614,005                                                 | )          | $                                                          | 2,305,082   |                                                       | $          | 33,452,564 |   | $ | (8,204,483 | ) |
|                                               |       |                                                       |        |                                                       |       |                                                       |       |                                                       |        |                                                       |       |
| Balance Sheet  Items:                              |       |                                                       |        |                                                       |       |                                                       |       |                                                       |        |                                                       |       |
|                                               |       |                                                       |        |                                                       |       |                                                       |       |                                                       |        |                                                       |       |
| Total assets                                       |       | $                                                          | 180,964,978 |                                                       | $          | 209,518,483                                                |       | $                                                          | 214,486,737 |                                                       | $          | 145,414,744 |   | $ | 155,687,931 |   |
| Total partners’  capital                      |       | $                                                          | 170,951,921 |                                                       | $          | 193,578,138                                                |       | $                                                          | 210,664,198 |                                                       | $          | 140,956,833 |   | $ | 153,581,240 |   |

 

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*Fromtrading of futures and forward contracts, foreign exchange transactions andU.S. Treasury obligations

 

11

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Item 7.   Management’s Discussion and Analysis of FinancialCondition and Results of Operations

 

Referenceis made to “Item 6. Selected Financial Data” and “Item 8. FinancialStatements and Supplementary Data.” The information contained therein is essential to, and should be read inconjunction with, the following analysis.

 

Capital Resources

 

Interestsmay be offered for sale as of the beginning, and may be redeemed as of the end,of each month.

 

Theamount of capital raised for the Partnership should not have a significantimpact on its operations, as the Partnership has no significant capitalexpenditure or working capital requirements other than for monies to paytrading losses, brokerage commissions and charges. Within broad ranges ofcapitalization, the General Partner’s trading positions should increase ordecrease in approximate proportion to the size of the Partnership.

 

ThePartnership raises additional capital only through the sale of Interests andcapital is increased through trading profits (if any). The Partnership does notengage in borrowing.

 

ThePartnership trades futures, options and forward contracts on interest rates,commodities, currencies, metals, energy and stock indices. Risk arises fromchanges in the value of these contracts (market risk) and the potentialinability of counterparties or brokers to perform under the terms of theircontracts (credit risk). Market risk is generally to be measured by the faceamount of the futures positions acquired and the volatility of the marketstraded. The credit risk from counterparty non-performance associated with theseinstruments is the net unrealized gain, if any, on these positions plus thevalue of the margin or collateral held by the counterparty. The risksassociated with exchange-traded contracts are generally perceived to be lessthan those associated with over-the-counter transactions, because exchangestypically (but not universally) provide clearinghouse arrangements in which thecollective credit (in some cases limited in amount, in some cases not) of themembers of the exchange is pledged to support the financial integrity of theexchange. In over-the-counter transactions, on the other hand, traders mustrely solely on the credit of their respective individual counterparties. Marginswhich may be subject to loss in the event of a default, are generally requiredin exchange trading, and counterparties may require margin or collateral in theover-the-counter markets.

 

TheGeneral Partner has procedures in place to control market risk, although therecan be no assurance that they will, in fact, succeed in doing so. Theseprocedures primarily focus on (1) real time monitoring of open positions;(2) diversifying positions among various markets; (3) limiting theassets committed as margin, generally within a range of 15% to 35% of anaccount’s Net Assets at exchange minimum margins, (including imputed margins onforward positions) although the amount committed to margin at any time may besubstantially higher; (4) prohibiting pyramiding (that is, usingunrealized profits in a particular market as margin for additional positions inthe same market); and (5) changing the equity utilized for trading by anaccount solely on a controlled periodic basis rather than as an automaticconsequence of an increase in equity resulting from trading profits. ThePartnership controls credit risk by dealing exclusively with large, wellcapitalized financial institutions as brokers and counterparties.

 

Thefinancial instruments traded by the Partnership contain varying degrees ofoff-balance sheet risk whereby changes in the market values of the futures andforward contracts or the Partnership’s satisfaction of the obligations mayexceed the amount recognized in the statement of financial condition of the Partnership.

 

Due tothe nature of the Partnership’s business, substantially all its assets arerepresented by cash and United States government obligations, while thePartnership maintains its market exposure through open futures and forwardcontract positions.

 

12

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ThePartnership’s futures contracts are settled by offset and are cleared by theexchange clearinghouse function. Open futures positions are marked to marketeach trading day and the Partnership’s trading accounts are debited or creditedaccordingly. Options on futures contracts are settled either by offset or byexercise. If an option on a future is exercised, the Partnership is assigned aposition in the underlying future which is then settled by offset. ThePartnership’s spot and forward currency transactions conducted in the interbankmarket are settled by netting offsetting positions or payment obligations andby cash payments.

 

Thevalue of the Partnership’s cash and financial instruments is not materiallyaffected by inflation. Changes in interest rates, which are often associatedwith inflation, could cause the value of certain of the Partnership’s debtsecurities to decline, but only to a limited extent. More important, changes ininterest rates could cause periods of strong up or down market price trends,during which the Partnership’s profit potential generally increases. However,inflation can also give rise to markets which have numerous short price trendsfollowed by rapid reversals, markets in which the Partnership is likely tosuffer losses.

 

Liquidity

 

ThePartnership’s assets are generally held as cash or cash equivalents which areused to margin the Partnership’s futures and forward currency positions andwithdrawn, as necessary, to pay redemptions and expenses. Other than potentialmarket-imposed  limitations on liquidity,due, for example, to limited open interest in certain futures markets or todaily price fluctuation limits, which are inherent in the Partnership’s futuresand forward trading, the Partnership’s assets are highly liquid and areexpected to remain so. During its operations through December 31, 2005, thePartnership experienced no meaningful periods of illiquidity in any of thenumerous markets traded by the General Partner.

 

Critical Accounting Estimates

 

The Partnership records its transactions in futuresand forward currency contracts, including related income and expenses, on atrade date basis. Open futures contracts traded on an exchange are valued atmarket, which is based on the closing settlement price on the exchange wherethe futures contract is traded by the Partnership on the day with respect towhich Net Assets are being determined. Open forward currency contracts arerecorded at fair value, based on pricing models that consider the current market prices (“Spot Prices”) plus the timevalue of money (“Forward Points”) and contractual prices of the underlyingfinancial instruments. The Spot Prices and Forward Points for open forwardcurrency contracts are generally based on the 3:00 P.M. New York time pricesprovided by widely used quotation service providers on the day with respect towhich Net Assets are being determined. The Forward Points from the quotationservice providers are generally in periods of one month, two months, threemonths and six months forward while the contractual forward delivery dates forthe foreign currency contracts traded by the Partnership may be in betweenthese periods.

 

The General Partner’s policy is to calculate theForward Points for each contract being valued by determining the number of daysfrom the date the forward currency contract is being valued to its maturitydate and then using straight-line interpolation to calculate the valuation ofForward Points for the applicable forward currency contract. The GeneralPartner will also compare the calculated price to the forward currency pricesprovided by dealers to determine whether the calculated price is fair andreasonable.

 

The preparation of financial statements in conformitywith accounting principles generally accepted in the United States of Americarequires management to make estimates and assumptions, such as accrual ofexpenses, that affect the amounts and disclosures reported in the financialstatements. Based on the nature of the business and operations of thePartnership, the General Partner believes that the estimates utilized inpreparing the Partnership’s financial statements are appropriate andreasonable, however actual results could differ from these estimates. Theestimates used do not provide a range of possible results that would requirethe exercise of subjective judgment. The General Partner further believes that,based on the nature of the business and operations of the Partnership, no otherreasonable assumptions relating to the application of the Partnership’scritical accounting estimates other than those currently used would likelyresult in materially different amounts from those reported.

 

13

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Off-Balance SheetArrangements

 

The Partnership does not engage in off-balance sheetarrangements with other entities.

 

Contractual Obligations

 

ThePartnership does not enter into any contractual obligations or commercialcommitments to make future payments of a type that would be typical for anoperating company or that would affect its liquidity or capital resources. ThePartnership’s sole business is trading futures and forward currency contracts,both long (contracts to buy) and short (contracts to sell). All such contractsare settled by offset, not delivery. Substantially all such contacts are forsettlement within four months of the trade date and substantially all suchcontracts are held by the Partnership for less than four months before beingoffset or rolled over into new contracts with similar maturities. ThePartnership’s Financial Statements, included as Exhibit 13.01 to this report,present a Condensed Schedule of Investments setting forth net unrealizedappreciation (depreciation) of the Partnership’s open future and forwardcurrency contracts, both long and short, at December 31, 2005.

 

Results of Operations

 

*Performance Summary*

 

ThePartnership’s success depends on the General Partner’s ability to recognize andcapitalize on trends and other profit opportunities in different sectors of theworld economy. The General Partner’s trading methods are confidential, so thatsubstantially the only information that can be furnished regarding thePartnership’s results of operations is its performance record. Unlike mostoperating businesses, general economic or seasonal conditions have no directeffect on the profit potential of the Partnership, while, at the same time, itspast performance is not necessarily indicative of future results. Because ofthe speculative nature of its trading, operational or economic trends havelittle relevance to the Partnership’s results. The General Partner believes,however, that there are certain market conditions — for example, markets withstrong price trends — in which the Partnership has a better opportunity ofbeing profitable than in others.

 

*2005*

 

During2005, the Partnership achieved a net realized and unrealized gain of $9,676,626from its trading operations (including foreign exchange transactions andtranslations). Brokerage commissions of $4,802,240 and administrative expensesof $460,610 were paid or accrued. The Partnership paid a profit share to theGeneral Partner of $1,140,619. Interest income of $4,819,054 partially offsetthe Partnership’s expenses resulting in a net gain of $8,092,211. An analysisof the trading gain (loss) by sector is as follows:

 

| **Sector**     | ** ** | **% Gain (Loss)** | ** ** |
|----------------|------------|-----------------------------|------------|
|           |       |                        |       |
| Interest Rates |       | 2.20                        | %          |
| Currencies     |       | (3.35                       | )%         |
| Stock Indices  |       | 7.97                        | %          |
| Metals         |       | 3.11                        | %          |
| Energies       |       | 1.20                        | %          |
| Grains         |       | (2.81                       | )%         |
| Softs          |       | (0.31                       | )%         |
| Livestock      |       | (0.62                       | )%         |
|           |       |                        |       |
| Total          |       | 7.39                        | %          |

 

The Partnership produceda modest gain for the year. Equity indices were strongly profitable, and to alesser extent so were cross rate currency positions, metals, energy andinterest rates. On the other hand, sizable losses resulted from trading dollarcurrency positions, and lesser shortfalls came from trading grains, softs, andlivestock.

 

14

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International equityindices were highly profitable in 2005. Following some consolidation early inthe year, non-U.S. equity indexes moved broadly higher through year end. Therewere gains from long positions in Asian, European, and South African equityindices. Solid growth worldwide propelled equities forward despite the headwindsthat came from high energy prices and rising interest rates. Trading of U.S.stock indexes, which were range-bound for most of 2005, was not profitable,however.

 

Strong growth ofindustrial production, especially in China, underpinned demand for metals, andlong positions in copper, zinc and platinum generated gains. Continuingexpansion of money supply worldwide fueled demand for precious metals and longgold and silver positions were also profitable.

 

Energy prices werevolatile, but still moved somewhat higher on balance for the year, and longpositions in crude, heating oil, London gas oil, unleaded gasoline, andkerosene were slightly profitable. By the end of 2005, however, position sizeshad been reduced significantly.

 

Interest rates were quitevolatile during 2005. Early in the year, markets expected continuing declinesin non-U.S. interest rates, and further advances in short term U.S. rates. Lateron, however, interest rates rose rather broadly as the European Central Bankjoined the Federal Reserve in raising official rates, as growth in emergingeconomies remained strong, as Japan showed evidence of exiting from itsprotracted slump, and as high prices for energy and other commodities inducedinflation fears that periodically roiled markets. In this environment, profitsfrom long non-U.S. interest rate positions during the first half of 2005 werelargely offset by losses from these positions in the second half. Indeed, byyear end, the portfolio’s interest rate positions had been reduced or reversedfrom long to short, anticipating higher interest rates.

 

Turning to currencies,cross rate trades based on selling low yield currencies and buying highinterest rate currencies were profitable. In particular, selling yen and buyingthe Australian dollar, Canadian dollar and British pound was profitable, as wasselling the euro and buying Polish zlotys and Canadian dollars.

 

Dollar trading, however,was unprofitable throughout the year. The U.S. currency was not able to sustaina trend and exhibited significant volatility, especially during the second halfof 2005. As a result, 14 of the 17 currencies traded versus the dollarregistered losses or no appreciable gain for the year.

 

Tradingof agricultural commodities and livestock generated losses. Prices of corn,wheat and elements of the soybean complex experienced wide swings in 2005, andmodest losses were sustained across the grain sector of the portfolio. A longsugar position was quite profitable as weather related crop shortages in Braziland Asia increased demand for the commodity and prompted short covering as well.However, losses from trading coffee, cotton, and cocoa were more thanoffsetting. Livestock trading was marginally unprofitable.

 

*2004*

 

During 2004, the Partnership had a net realized andunrealized loss of $510,071 from its trading operations (including foreignexchange transactions and translations). Brokerage commissions of $5,497,025and administrative expenses of $528,584 were paid or accrued. The Partnershippaid a profit share to the General Partner of $484,760. Interest income of$2,406,435 partially offset the Partnership’s expenses resulting in a net lossof $4,614,005. An analysis of the trading gain (loss) by sector is as follows:

 

| **Sector**     | ** ** | **% Gain (Loss)** | ** ** |
|----------------|------------|-----------------------------|------------|
|           |       |                        |       |
| Interest Rates |       | 2.94                        | %          |
| Currencies     |       | (3.05                       | )%         |
| Stock Indices  |       | (2.48                       | )%         |
| Metals         |       | (0.22                       | )%         |
| Energies       |       | 2.55                        | %          |
| Grains         |       | 0.45                        | %          |
| Softs          |       | 0.20                        | %          |
| Livestock      |       | 0.14                        | %          |
|           |       |                        |       |
| Total          |       | 0.53                        | %*         |

 

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* While the Partnership had a net dollar tradingloss during 2004, there was a percentage trading gain in the aggregate sectorsdue to the timing of additional capital contributions and monthly volatility.

 

15

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The year 2004 was distinguished by dramatictransitions in the underlying character of market trading dynamics. Profitabletrends in January and February gave way to a six month period of trendless,turbulent action across a broad swath of markets that produced significantlosses. Beginning in September, trends reappeared and the Partnership chalkedup a sharp recovery in the year’s final four months. Interest rate and energytrading were profitable and to a lesser extent so was trading of agriculturalcommodities. These gains were partially offset by losses from currency, stockindex and metals trading. The Partnership generated a small trading gain forthe year.

 

At the start of the year, long positions in note andbond futures, particularly for the U.S. and Europe, were quite profitable assluggish European growth, concerns about a “jobless” U.S. recovery and centralbank buying of treasuries drove interest rates down. Rising energy pricesbenefited long energy positions, and equity and metals trading were profitable.Currency trading was very unprofitable, however, as a dollar decline halted andreversed during the quarter.

 

From March through August, a number of uncertaintiesplagued market participants including: the June Iraqi elections, the U.S. Presidential elections in November,the strength of the American economy and thrust of Federal Reserve policy, andChina’s foreign exchange, industrial and monetary policy directions. As aresult, markets across the board displayed unprofitable, directionless priceaction. Trading of currencies, interest rates, stock indices, metals and agriculturalcommodities produced losses. Energy trading was the only profitable sector forthis period.

 

As the aforementioned uncertainties began to clarify,market participants became more confident of their opinions and a number ofprofitable trend opportunities emerged. In particular, a sharp dollar declineled to profits from a series of short dollar positions, particularly versus theeuro and Korean won. This dollar sell off was prompted by worries aboutpersistent U. S. current account and budget deficits, as well as the risingprobability that foreign central banks would begin to diversify theirinternational reserve holdings away from the American currency. Trading ofinterest rate, stock index, and metal futures was also profitable over the lastfour months of the year.

 

*2003*

 

During 2003, the Partnership achieved net realized andunrealized gains of $6,747,761 from its trading operations (including foreignexchange transactions and translations). Brokerage commissions of $5,378,592and administrative expenses of $456,873 were paid or accrued. The Partnershippaid a profit share to the General Partner of $668,526. Interest income of$2,061,312 partially offset the Partnership’s expenses resulting in a net gainof $2,305,082. An analysis of the trading gain (loss) by sector is as follows:

 

| **Sector**     | ** ** | **% Gain (Loss)** | ** ** |
|----------------|------------|-----------------------------|------------|
|           |       |                        |       |
| Interest Rates |       | 0.18                        | %          |
| Currencies     |       | 5.24                        | %          |
| Stock Indices  |       | 3.28                        | %          |
| Metals         |       | 2.02                        | %          |
| Energies       |       | (1.91                       | )%         |
| Grains         |       | (1.69                       | )%         |
| Softs          |       | (0.38                       | )%         |
|           |       |                        |       |
| Total          |       | 6.74                        | %          |

 

16

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The Partnership’s performance was quite volatilethroughout the year 2003. Substantial gains registered in January and Februarywere largely erased in March, when major long term price trends in currencies,energy and interest rates reversed abruptly as the Iraq invasion moved fromrhetoric to reality, and as traders and investors rushed to square positions,moving to the sidelines at least temporarily. Then, in May, as the initialphase of the Iraqi conflict was reaching a quicker then expected resolution,concern about large U.S. budget and trade deficits, unfavorable U.S. interestrate differentials, and Treasury Secretary Snow’s apparent acquiescence to aweaker dollar, reignited a dollar selloff. At the same time, fears ofdeflation, and the Fed’s continued easy monetary policy, produced a renewedfall in interest rates. These broad movements brought with them a sizableprofit for the portfolio. However, after slightly favorable summer results,interest rate and energy markets succumbed to volatility without sustainedtrends, and the Partnership’s trading in these markets resulted in lossesoutweighing gains from currency, stock index, and metals trading over thesecond half of 2003.

 

On a sector basis, currency trading was profitable for2003. Long positions in the euro and commodity currencies (South African rand,Australian and New Zealand dollars) were quite profitable as the U.S. currencyfell. On the other hand, trading of Far Eastern currencies (yen, Korean won,and the Singapore dollar) produced losses, since heavy Central Bankintervention throughout the region counterbalanced much of the downwardpressure on the U.S. unit and led to erratic rate fluctuations.

 

The Partnership’s net long position in stock futureswas profitable due to a general up move in equities worldwide. Long gold andcopper positions were profitable, particularly later in the year, as flight tosafety and a weak dollar boosted gold prices, and as a weak dollar and surgingindustrial demand pushed copper prices upward.

 

Energy prices were highly volatile during the year,particularly with the onset of hostilities in Iraq in March, and, hence energytrading generated losses in 2003.

 

Interest rate trading was very profitable during thefirst half of 2003 when rates worldwide were continuing to trend downward.However, when that trend reversed abruptly in mid-June and was followed byerratic non-directional range trading, offsetting losses were experienced,especially during the September – December period.

 

Lastly, trading of agricultural commodities producedlosses throughout the year.

 

Item 7A. Quantitativeand Qualitative Disclosures About Market Risk

 

**Introduction**

 

***PastResults Are Not Necessarily Indicative of Future Performance***

 

ThePartnership is a speculative commodity pool. Unlike an operating company, therisk of market sensitive instruments is integral, not incidental, to thePartnership’s main line of business.

 

Marketmovements result in frequent changes in the fair market value of thePartnership’s open positions and, consequently, in its earnings and cash flow. ThePartnership’s market risk is influenced by a wide variety of factors, includingthe level and volatility of interest rates, exchange rates, equity pricelevels, the market value of financial instruments and contracts, thediversification effects among the Partnership’s open positions and theliquidity of the markets in which it trades.

 

ThePartnership can rapidly acquire and/or liquidate both long and short positionsin a wide range of different markets. Consequently, it is not possible topredict how a particular future market scenario will affect performance, andthe Partnership’s past performance is not necessarily indicative of its futureresults.

 

Valueat Risk is a measure of the maximum amount which the Partnership couldreasonably be expected to lose in a given market sector. However, the inherentuncertainty of the Partnership’s speculative trading and the recurrence in themarkets traded by the Partnership of market movements far exceeding expectationscould result in actual trading or non-trading losses far beyond the indicatedValue at Risk or the Partnership’s experience to date (*i.e.,*“risk of ruin”). In light of the foregoing as well as the risks anduncertainties intrinsic to all future projections,

 

17

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the inclusion of thequantification included in this section should not be considered to constituteany assurance or representation that the Partnership’s losses in any marketsector will be limited to Value at Risk or by the Partnership’s attempts tomanage its market risk.

 

Materiality,as used in this section “Quantitative and Qualitative Disclosures About MarketRisk,” is based on an assessment of reasonably possible market movements andthe potential losses caused by such movements, taking into account theleverage, optionality and multiplier features of the Partnership’s marketsensitive instruments.

 

Quantifying the Partnership’s Trading Value at Risk

 

***Quantitative Forward-Looking Statements***

*** ***

*Thefollowing quantitative disclosures regarding the Partnership’s market riskexposures contain “forward-looking statements” within the meaning of the safeharbor from civil liability provided for such statements by the PrivateSecurities Litigation Reform Act of 1995 (set forth in Section 27A of theSecurities Act and Section 21E of the Securities Exchange Act of 1934). Allquantitative disclosures in this section are deemed to be forward-lookingstatements for purposes of the safe harbor, except for statements of historicalfact.*

 

ThePartnership’s risk exposure in the various market sectors traded by the GeneralPartner is quantified below in terms of Value at Risk. Due to the Partnership’smark-to-market accounting, any loss in the fair value of the Partnership’s openpositions is directly reflected in the Partnership’s earnings (realized orunrealized) and cash flow (at least in the case of exchange-traded contracts inwhich profits and losses on open positions are settled daily through variationmargin).

 

In 2005, exchangemaintenance margin requirements have been used by the Partnership as themeasure of its Value at Risk. Maintenance margin requirements are set byexchanges to equal or exceed 95-99% of the maximum one day losses in the fairvalue of any given contract incurred during the time period over whichhistorical price fluctuations are researched for purposes of establishingmargin levels. The maintenance margin levels are established by exchanges usinghistorical price studies as well as an assessment of current market volatility(including the implied volatility of the options on a given futures contract)and economic fundamentals to provide a probabilistic estimate of the maximumexpected near-term one day price fluctuation.

 

In 2005, the Partnershipchanged its method of calculating Value at Risk for forward currency contractsthat are not exchange traded and beganto use exchange maintenance margin requirements for equivalent or similarfutures positions as the measure of Value at Risk.  The Partnershippreviously used dealers’ margin as the measure of Value at Risk for forward currency contracts.  Dealers’margin rates reflect factors other than volatility such as credit andadministrative considerations which are not relevant to Value at Risk. Accordingly, the Partnership believes that, for the Partnership’s forward currency contracts, equivalentexchange maintenance margin requirements are a more appropriate indicator of Value at Risk.

 

In quantifying thePartnership’s Value at Risk, 100% positive correlation in the differentpositions held in each market risk category has been assumed. Consequently, themargin requirements applicable to the open contracts have simply beenaggregated to determine each trading category’s aggregate Value at Risk. Thediversification effects resulting from the fact that the Partnership’spositions are rarely, if ever, 100% positively correlated have not beenreflected.

 

*The Partnership’s Trading Valueat Risk in Different Market Sectors*

 

The following tableindicates the average, highest and lowest amounts of trading Value at Riskassociated with the Partnership’s open positions by market category for thefiscal year ended December 31, 2005, calculated using the new method describedabove. During fiscal year 2005 and 2004, the Partnership’s average totalcapitalization was approximately $170.2 million and $198.1 million,respectively.

 
| **Fiscal Year 2005** | ** ** |
|--------------------------------|------------|
| **Market Sector**         | ** ** | **Average  Value at Risk** | ** ** | **% of Average  Capitalization** | ** ** | **Highest  Value At Risk** | ** ** | **Lowest  Value At Risk** | ** ** |
| Interest Rates                 |       | $ | 5.1 |   | 3.0% |   | $ | 6.4 |   | $ | 3.9 |   |
| Currencies                     |       | $ | 10.1 |   | 5.9% |   | $ | 13.6 |   | $ | 7.9 |   |
| Stock Indices                  |       | $ | 9.3 |   | 5.5% |   | $ | 11.0 |   | $ | 7.7 |   |
| Metals                         |       | $ | 1.8 |   | 1.1% |   | $ | 1.9 |   | $ | 1.5 |   |
| Softs                          |       | $ | 1.0 |   | 0.6% |   | $ | 1.4 |   | $ | 0.5 |   |
| Grains                         |       | $ | 0.4 |   | 0.2% |   | $ | 0.5 |   | $ | 0.2 |   |
| Energies                       |       | $ | 1.3 |   | 0.8% |   | $ | 1.7 |   | $ | 0.5 |   |
| Livestock                      |       | $ | 0.2 |   | 0.1% |   | $ | 0.2 |   | $ | 0.1 |   |
| Total                          |       | $ | 29.2 |   | 17.2% |   |   |   |   |   |

 

The following tables indicates the average, highest and lowest amountsof trading Value at Risk associated with the Partnership’s open positions bymarket category for the fiscal years ended December 31, 2005 and 2004. Thecalculations have been prepared under the method used by the Partnership inprior years which considered dealer’s margin for forward currency contractsinstead of exchange maintenance margin requirements.

 

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**Fiscal Year 2005**

 

| **Market Sector** | ** ** | **Average  Value at Risk** | ** ** | **% of Average  Capitalization** | ** ** | **Highest  Value At Risk** | ** ** | **Lowest  Value At Risk** | ** ** |
|------------------------|------------|--------------------------------------|------------|--------------------------------------------|------------|--------------------------------------|------------|-------------------------------------|------------|
|                   |       |                                 |       |                                       |       |                                 |       |                                |       |
| Interest Rates         |       | $                                    | 5.1        |                                       | 3.0%       |                                 | $          | 6.4                                 |       | $ | 3.9 |   |
|                   |       |                                 |       |                                       |       |                                 |       |                                |       |
| Currencies             |       | $                                    | 24.1       |                                       | 14.1%      |                                 | $          | 31.8                                |       | $ | 18.2 |   |
|                   |       |                                 |       |                                       |       |                                 |       |                                |       |
| Stock Indices          |       | $                                    | 9.3        |                                       | 5.5%       |                                 | $          | 11.0                                |       | $ | 7.7 |   |
|                   |       |                                 |       |                                       |       |                                 |       |                                |       |
| Metals                 |       | $                                    | 1.8        |                                       | 1.1%       |                                 | $          | 1.9                                 |       | $ | 1.5 |   |
|                   |       |                                 |       |                                       |       |                                 |       |                                |       |
| Softs                  |       | $                                    | 1.0        |                                       | 0.6%       |                                 | $          | 1.4                                 |       | $ | 0.5 |   |
|                   |       |                                 |       |                                       |       |                                 |       |                                |       |
| Grains                 |       | $                                    | 0.4        |                                       | 0.2%       |                                 | $          | 0.5                                 |       | $ | 0.2 |   |
|                   |       |                                 |       |                                       |       |                                 |       |                                |       |
| Energies               |       | $                                    | 1.3        |                                       | 0.8%       |                                 | $          | 1.7                                 |       | $ | 0.5 |   |
|                   |       |                                 |       |                                       |       |                                 |       |                                |       |
| Livestock              |       | $                                    | 0.2        |                                       | 0.1%       |                                 | $          | 0.2                                 |       | $ | 0.1 |   |
|                   |       |                                 |       |                                       |       |                                 |       |                                |       |
| Total                  |       | $                                    | 43.2       |                                       | 25.4%      |                                 |       |                                |       |   |

 

**Fiscal Year 2004**

 

| **Market Sector** | ** ** | **Average  Value at Risk** | ** ** | **% of Average  Capitalization** | ** ** | **Highest  Value At Risk** | ** ** | **Lowest  Value At Risk** | ** ** |
|------------------------|------------|--------------------------------------|------------|--------------------------------------------|------------|--------------------------------------|------------|-------------------------------------|------------|
|                   |       |                                 |       |                                       |       |                                 |       |                                |       |
| Interest Rates         |       | $                                    | 6.4        |                                       | 3.2        | %                                    | $          | 8.4                                 |       | $ | 5.2 |   |
|                   |       |                                 |       |                                       |       |                                 |       |                                |       |
| Currencies             |       | $                                    | 28.8       |                                       | 14.4       | %                                    | $          | 37.3                                |       | $ | 22.3 |   |
|                   |       |                                 |       |                                       |       |                                 |       |                                |       |
| Stock Indices          |       | $                                    | 5.6        |                                       | 2.8        | %                                    | $          | 9.1                                 |       | $ | 2.2 |   |
|                   |       |                                 |       |                                       |       |                                 |       |                                |       |
| Metals                 |       | $                                    | 1.1        |                                       | 0.5        | %                                    | $          | 1.4                                 |       | $ | 0.9 |   |
|                   |       |                                 |       |                                       |       |                                 |       |                                |       |
| Softs                  |       | $                                    | 0.6        |                                       | 0.3        | %                                    | $          | 0.8                                 |       | $ | 0.3 |   |
|                   |       |                                 |       |                                       |       |                                 |       |                                |       |
| Grains                 |       | $                                    | 0.5        |                                       | 0.3        | %                                    | $          | 0.5                                 |       | $ | 0.5 |   |
|                   |       |                                 |       |                                       |       |                                 |       |                                |       |
| Energies               |       | $                                    | 1.4        |                                       | 0.7        | %                                    | $          | 2.5                                 |       | $ | 0.9 |   |
|                   |       |                                 |       |                                       |       |                                 |       |                                |       |
| Livestock              |       | $                                    | 0.2        |                                       | 0.1        | %                                    | $          | 0.2                                 |       | $ | 0.2 |   |
|                   |       |                                 |       |                                       |       |                                 |       |                                |       |
| Total                  |       | $                                    | 44.6       |                                       | 22.3       | %                                    |       |                                |       |   |

 

Average,highest and lowest Value at Risk amounts relate to the quarter-end amountsduring each fiscal year. Average Capitalization is the average of thePartnership’s capitalization at the end of each month during the fiscal year 2005and 2004. Dollar amounts represent millions of dollars.

 

***Material Limitations on Value at Risk as an Assessment ofMarket Risk***

*** ***

Theface value of the market sector instruments held by the Partnership istypically many times the applicable maintenance margin requirement (maintenancemargin requirements generally ranging between approximately 1% and 10% ofcontract face value) as well as many times the capitalization of thePartnership. The magnitude of the Partnership’s open positions creates a “riskof ruin” not typically found in most other investment vehicles. Because of thesize of its positions, certain market conditions — unusual, but historicallyrecurring from time to time — could cause the Partnership to incur severelosses over a short period of time. The foregoing Value at Risk table — as wellas the past performance of the Partnership — give no indication of this “riskof ruin.”

 

19

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***Non-Trading Risk***

*** ***

ThePartnership has non-trading market risk on its foreign cash balances not neededfor margin. However, these balances (as well as any market risk they represent)are immaterial.

 

ThePartnership also has non-trading cash flow risk as a result of holding asubstantial portion (over 80%) of its assets in U.S. Treasury notes and othershort-term debt instruments (as well as any market risk they represent) formargin and cash management purposes. Although the General Partner does notanticipate that, even in the case of major interest rate movements, thePartnership would sustain a material mark-to-market loss on its securitiespositions, if short-term interest rates decline so will the Partnership’s cashmanagement income. The Partnership also maintains a portion (approximately 10%)of its assets in cash in interest-bearing bank accounts. These cash balancesare also subject (as well as any market risk they represent) to cash flow risk,which is not material.

 

***Qualitative Disclosures Regarding Primary Trading RiskExposures***

*** ***

*Thefollowing qualitative disclosures regarding the Partnership’s market riskexposures — except for (i) those disclosures that are statements of historicalfact and (ii) the descriptions of how the General Partner manages thePartnership’s primary market risk exposures — constitute forward-lookingstatements within the meaning of Section 27A of the Securities Act and Section21E of the Securities Exchange Act. The Partnership’s primary market riskexposures as well as the strategies used and to be used by the General Partner*for*managing such exposures are subject to numerous uncertainties,contingencies and risks, any one of which could cause the actual results of thePartnership’s risk controls to differ materially from the objectives of suchstrategies. Government interventions, defaults and expropriations, illiquidmarkets, the emergence of dominant fundamental factors, political upheavals,changes in historical price relationships, an influx of new marketparticipants, increased regulation and many other factors could result in materiallosses as well as in material changes to the risk exposures and the riskmanagement strategies of the Partnership. There can be no assurance that thePartnership’s current market exposure and/or risk management strategies willnot change materially or that any such strategies will be effective in eitherthe short- or long-term. Investors must be prepared to lose all orsubstantially all of their investment in the Partnership.*

 

Thefollowing were the primary trading risk exposures of the Partnership as ofDecember 31, 2005, by market sector.

 

FinancialInstruments. Interest rate movements directly affect theprice of the sovereign bond futures positions held by the Partnership andindirectly the value of its stock index and currency positions. Interest ratemovements in one country as well as relative interest rate movements betweencountries may materially impact the Partnership’s profitability. ThePartnership’s primary interest rate exposure is to interest rate fluctuationsin the United States and other major industrialized, or Group of Seven (Canada,France, Germany, Italy, Japan, United Kingdom and United States, collectively “G-7”),countries. However, the Partnership also may take positions in futurescontracts on the government debt of smaller nations. The General Partneranticipates that G-7 interest rates, both long-term and short-term, will remainthe primary market exposure of the Partnership for the foreseeable future.

 

Currencies.Exchange rate risk is a principal market exposure of the Partnership. ThePartnership’s currency exposure is to exchange rate fluctuations, primarilyfluctuations which disrupt the historical pricing relationships betweendifferent currencies and currency pairs. The fluctuations are influenced byinterest rate changes as well as political and general economic conditions. ThePartnership trades in a large number of currencies, including cross-rates—e.g.,positions between two currencies other than the U.S. dollar. As of December 31,2005, the Partnership’s currency exposures were in the U.S. dollar versus theEuro, Swiss Franc, Czech Krone, Polish Zloty, Norwegian Krone, HungarianForint, Swedish Krona, Canadian Dollar, South African Rand, New Zealand Dollar,Australian Dollar, Yen, Korean Won, Singapore Dollar, Mexican Peso andBrazilian Real. The exposure in currency crosses were in the Yen versus theCanadian Dollar, Australian Dollar, Swiss Franc and British Pound and in theEuro versus the Yen, British Pound, Swiss Franc, Polish Zloty, Norwegian Krone,and Canadian Dollar.

 

StockIndices. The Partnership’s equity exposure, through stockindex futures, is to equity price risk in the G-7 countries as well as othercountries. As of December 31, 2005, the Partnership’s exposures in the G-7countries were in the: E-Mini Nasdaq 100, E- Mini S&P 500, E-Mini Russell2000 and E-Mini Dow (United States); FTSE 100 (United Kingdom); TOPIX andNikkei (Japan); DAX (Germany); and CAC-40 (France) stock indices. ThePartnership’s exposure to stock index futures of other countries at December31, 2005 were in the: Simex Taiwan Index (Taiwan), Simex (Singapore) ALL Shares(South Africa), SPI 200 (Australia), IBEX 35 (Spain), Hang Seng (Hong Kong),and the DJ Euro Stoxx 50 (Euro Zone) stock indices.

 

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Metals. The DiversifiedPortfolio used for the Partnership trades precious and base metals. ThePartnership’s metals market exposure is in gold, silver, platinum, aluminum,copper, lead, nickel, tin and zinc.

 

Agricultural.The Partnership’s primary commodities exposure is to agricultural pricemovements, which are often directly affected by severe or unexpected weatherconditions. As of December 31, 2005, the Partnership had exposure toagricultural commodities including coffee, sugar, cocoa, cotton, wheat, corn,the soybean complex as well as live cattle and hogs.

 

Energy. The Partnership’sprimary energy market exposure is to gas and oil price movements, oftenresulting from political developments in the Middle East and economic conditionsworldwide. Energy prices are volatile and substantial profits and losses havebeen and are expected to continue to be experienced in this market.

 

***Qualitative Disclosures Regarding Non-Trading Risk Exposure***

*** ***

Thefollowing were the only non-trading risk exposures of the Partnership as ofDecember 31, 2005.

 

ForeignCurrency Balances. The Partnership’s primary foreign currencybalances are in Japanese yen, euro, British pounds and Hong Kong dollars. ThePartnership controls the non-trading risk of these balances by regularlyconverting these balances back into dollars (no less frequently than twice amonth).

 

SecuritiesPositions. The Partnership’s only market exposure ininstruments held other than for trading is in its securities portfolio. ThePartnership holds only cash or interest-bearing, credit risk-free, short-termpaper — typically U.S. Treasury instruments with durations no longer than 1year. Violent fluctuations in prevailing interest rates could cause immaterialmark-to-market losses on the Partnership’s securities, although substantiallyall of these short-term instruments are held to maturity.

 

***Qualitative Disclosures Regarding Means of Managing RiskExposure***

*** ***

TheGeneral Partner attempts to control risk through the systematic application ofits trading method, which includes a multi-system approach to price trendrecognition, an analysis of market volatility, the application of certain moneymanagement principles, which may be revised from time to time, and adjustingleverage or portfolio size. In addition, the General Partner limits its tradingto markets which it believes are sufficiently liquid in respect of the amountof trading it contemplates conducting.

 

Thegoal of the General Partner’s research has been to develop and select a mix ofsystems in each market and allocate risk across a wide array of markets, so asto contain overall portfolio risk in the targeted range, while allowingexposure to profitable trend opportunities. Over the last 30 years, the GeneralPartner has developed hundreds of trading systems. These intermediate- tolong-term trading systems generate buy or sell decisions in a particular marketbased on the direction of price movements in the market.

 

Systemscan be materially different – better in some periods and worse in others. Themain distinguishing features are time-frame over which systems work (intra-dayto long-term), the type of data fed into them (granularity [ticks toweeks/months], type [market or economic statistics], source [cash, futures oroptions markets]), and the objective of the system (profiting from trends,trading-ranges or volatility). No single approach will work all the time. Therefore,the General Partner’s objective is to have several approaches operating at alltimes. Since the early 1980’s, the General Partner has selected multiplesystems for each market.

 

Whenarriving at the portfolio allocation, the General Partner seeks maximumdiversification subject to liquidity constraints. The markets traded andallocations are reviewed monthly, although changes may occur less frequently. Thefollowing factors are considered in constructing a universe of markets to tradefor each portfolio:  profitability,correlation of market performance, liquidity of markets, depth of markets,breadth of markets,

 

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professional judgment,desired diversification and transaction costs. Once the universe of markets isestablished, the General Partner’s simulation and optimization techniques helpdetermine which markets to include in the portfolio. The current allocation toany market in the portfolio does not exceed 3%.

 

Inattempting to assess market volatility as a means of monitoring and evaluatingrisk, the General Partner uses its volatility overlay as a part of individualmarket risk management. This system is designed to measure the risk in theportfolio’s position in each market and signals a decrease in position sizewhen risk increases and an increase in position size when risk decreases. TheGeneral Partner’s volatility overlay maintains overall portfolio risk anddistribution of risk across markets within designated ranges. It is applied tothe systematic strategies described above. A secondary benefit of thevolatility overlay can be timely profit taking. Because markets tend to becomemore volatile after a profitable trend has been long underway, the volatilityoverlay often signals position reductions before trend reversals.

 

Inaddition to the volatility overlay, the General Partner’s risk managementfocuses on money management principles applicable to the portfolio as a wholerather than to individual markets. One such principle is portfoliodiversification, which attempts to improve the quality of profits by reducingvolatility.

 

Additionalmoney management principles applicable to the portfolio as a wholeinclude:  (1) limiting the assetscommitted as margin or collateral, generally within a range of 15% to 35% of anaccount’s net assets, though the amount may at any time be substantiallyhigher; (2) prohibiting pyramiding - that is, using unrealized profits in aparticular market as margin for additional positions solely in the same market;and (3) changing the equity used for trading by an account solely on acontrolled periodic basis, not automatically due to an increase in equity fromtrading profits.

 

Anotherimportant risk management function is the careful control of leverage orportfolio size. Leverage levels are determined by simulating the entireportfolio—all markets, all systems, all risk control overlays, the exactweightings of the markets in the portfolio and the proposed level ofleverage—over the past five or ten years to determine the worst caseexperienced by the portfolio in the simulation period.

 

Theworst case or peak-to-trough drawdown is measured from a daily high inportfolio assets to the subsequent daily low whether that occurs days, weeks ormonths after the daily high. If the General Partner considers the drawdown toosevere, it reduces the leverage or portfolio size. There are, however, norestrictions on the amount of leverage the General Partner may use at any giventime.

 

Item 8.   Financial Statements and Supplementary Data

 

Financialstatements required by this item, including the report of Deloitte & ToucheLLP for the fiscal years ended December 31, 2005 and 2004, are included asExhibit 13.01 to this report. The report of Ernst & Young LLP for thefiscal year ended December 31, 2003 is filed as Exhibit 13.02 to this report.

 

Thefollowing summarized quarterly financial information presents the results ofoperations for the three month periods ended March 31, June 30, September 30and December 31, 2005 and 2004. This information has not been audited.

 
| ** **                                   | ** ** | **Fourth Quarter  2005** | ** ** | **Third Quarter  2005** | ** ** | **Second Quarter  2005** | ** ** | **First Quarter  2005** | ** ** |
|----------------------------------------------|------------|-------------------------------|------------|------------------------------|------------|-------------------------------|------------|------------------------------|------------|
| Interest Income:                             |       | $                             | 1,416,980  |                         | $          | 1,240,684                     |       | $                            | 1,091,606  |   | $ | 1,069,784 |   |
| Net Realized and  Unrealized Gains (Losses): |       | 6,740,563                     |       | 11,612,135                   |       | 3,565,696                     |       | (12,241,768                  | )          |
| Expenses*:                                   |       | 1,167,224                     |       | 1,243,152                    |       | 1,334,475                     |       | 1,517,999                    |       |
| Net Income (Loss):                           |       | 6,990,319                     |       | 11,609,667                   |       | 3,322,827                     |       | (12,689,983                  | )          |
|                                              |            |                               |            |                              |            |                               |            |                              |            |  |  |  |  |

 

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*  Expenses are exclusive of any realized andaccrued profit share to the General Partner.

 

22

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| ** **                                   | ** ** | **Fourth Quarter  2004** | ** ** | **Third Quarter  2004** | ** ** | **Second Quarter  2004** | ** ** | **First Quarter  2004** | ** ** |
|----------------------------------------------|------------|-------------------------------|------------|------------------------------|------------|-------------------------------|------------|------------------------------|------------|
| Interest Income:                             |       | $                             | 720,751    |                         | $          | 556,677                       |       | $                            | 573,748    |   | $ | 555,259 |   |
| Net Realized and  Unrealized Gains (Losses): |       | 33,210,354                    |       | (9,846,684                   | )          | (34,106,126                   | )          | 10,232,385                   |       |
| Expenses*                                    |       | 1,549,414                     |       | 1,368,420                    |       | 1,505,443                     |       | 1,602,332                    |       |
| Net Income  (Loss):                          |       | 31,927,650                    |       | (10,662,654                  | )          | (34,088,232                   | )          | 8,209,231                    |       |
|                                              |            |                               |            |                              |            |                               |            |                              |            |  |  |  |  |

 

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*  Expenses are exclusive of any realized andaccrued profit share to the General Partner.

 

There were noextraordinary, unusual or infrequently occurring items recognized in anyquarter within the two most recent fiscal years, and the Partnership has notdisposed of any segments of its business. There have been no year-endadjustments that are material to the results of any fiscal quarter reportedabove.

 

Item 9.   Changes in and Disagreements with Accountantson Accounting and Financial Disclosure

 

None

 

Item9A.   Controls and Procedures

 

TheGeneral Partner, with the participation of the General Partner’s principalexecutive officers and principal financial officer, has evaluated theeffectiveness of the design and operation of its disclosure controls andprocedures with respect to the Partnership within 90 days of the filing date ofthis Annual Report, and, based on their evaluation, have concluded that thesedisclosure controls and procedures are effective. There were no significantchanges in the General Partner’s internal controls with respect to thePartnership or in other factors applicable to the Partnership that couldsignificantly affect these controls subsequent to the date of their evaluation.

 

Item9B.   Other Information.

 

None.

 

PART III

 

Item10.   Directors and Executive Officers of the Registrant

 

(a,b)  Identification of Directors and ExecutiveOfficers

 

ThePartnership has no directors or executive officers. The Partnership iscontrolled and managed by the General Partner.

 

TheGeneral Partner, is a Delaware corporation organized in May 1982 to managediscretionary accounts in futures and forward markets. It is the corporatesuccessor to a futures trading and advisory organization which has beencontinuously managing assets in the currency and futures markets usingquantitative, systematic techniques since 1971.

 

Theprincipals and senior officers of the General Partner as of December 31, 2005are as follows:

 

***Harvey Beker, age 52.***Mr. Bekeris Co-Chief Executive Officer and Co-Chairman of the General Partner and TheMillburn Corporation, and a partner of their affiliate, ShareInVest ResearchL.P. He received a Bachelor of Arts degree in economics from New York University(“NYU”) in 1974 and a Master of Business Administration

 

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degree in finance fromNYU in 1975. From June 1975 to July 1977, Mr. Beker was employed by LoebRhoades, Inc. where he developed and traded silver arbitrage strategies. FromJuly 1977 to June 1978, Mr. Beker was a futures trader at Clayton Brokerage Co.of St. Louis. Mr. Beker has been employed by The Millburn Corporation sinceJune 1978 and initially served as the Director of operations for its affiliate,Millburn Partners. During his tenure at Millburn (including its affiliates,Millburn Partners and CommInVest Research Limited Partnership (“CommInVest”))he has been instrumental in the development of the research, trading andoperations areas. Mr. Beker became a principal of the firm in June 1982, and apartner in ShareInVest, the predecessor of ShareInVest Research L.P. (“ShareInVest”),in April 1982.

 

***Gregg R. Buckbinder, age 47.***Mr.Buckbinder is Senior Vice-President and Chief Operating Officer of the GeneralPartner and The Millburn Corporation and a partner, since January 2000, ofShareInVest. He graduated cum laude from Pace University (“Pace”) in 1980 witha B.B.A. in accounting and received an M.S. in taxation from Pace in 1988. Hejoined the General Partner and The Millburn Corporation in January 1998 fromOdyssey Partners, L.P. where he was responsible for the operation,administration and accounting of the firm’s merchant banking and managedaccount businesses from July 1990 through December 1997. Mr. Buckbinder wasemployed by Tucker Anthony, a securities broker and dealer, from June 1985 toJuly 1990 where he was First Vice President and Controller, and from August1983 to June 1984 where he designed and implemented various operations andaccounting systems. He was with the public accounting firm of Ernst &Whinney from June 1984 to June 1985 as a manager in the tax department and fromSeptember 1980 to August 1983 as a senior auditor, with an emphasis on clientsin the financial services business. He is a Certified Public Accountant and amember of the American Institute of Certified Public Accountants.

 

***George E. Crapple, age 61.***Mr.Crapple is Co-Chief Executive Officer and Co-Chairman of the General Partnerand The Millburn Corporation and a partner of ShareInVest. In 1966 he graduatedwith honors from the University of Wisconsin where his field of concentrationwas economics and he was elected to Phi Beta Kappa. In 1969 he graduated fromHarvard Law School, **magna cum laude**,where he was a member of the Harvard Law Review. He was a lawyer with Sidley& Austin, Chicago, Illinois, from 1969 until April 1, 1983, as a partnersince 1975, specializing in commodities, securities, corporate and tax law. Hewas first associated with the General Partner in 1976 and joined GeneralPartner and The Millburn Corporation (including its affiliates, MillburnPartners and CommInVest) on April 1, 1983 on a full-time basis. He became apartner in ShareInVest in April 1984. Mr. Crapple is a Director, Member of theExecutive Committee, Chairman of the Appeals Committee and a former Chairman ofthe Eastern Regional Business Conduct Committee of the NFA, past Chairman ofthe Managed Funds Association, a member of the Global Markets AdvisoryCommittee of the CFTC and a member of the board of directors of the FuturesIndustry Association (“FIA”).

 

***Steven M. Felsenthal, age 36.***Mr.Felsenthal is General Counsel and Chief Compliance Officer of the GeneralPartner, The Millburn Corporation and ShareInVest. Prior to joining Millburn inJanuary 2004, Mr. Felsenthal was a senior associate in the investmentmanagement group at Schulte Roth & Zabel LLP (September 1999- January2004), where he represented and advised hedge funds, registered investmentcompanies, investment advisers, broker-dealers and banks in connection with allfacets of their asset management businesses, and a member of the tax departmentof Kramer, Levin, Naftalis & Frankel LLP (October 1996- September 1999). Hegraduated**cum laude** fromYeshiva University in 1991 with a bachelor of arts degree in political science,and **order of the coif** fromFordham University School of Law in 1996, where he also served as an editor ofthe Fordham Environmental Law Journal. Mr. Felsenthal received an LL.M degree intaxation from NYU School of Law in 2001 and has written and been quoted innumerous published articles on various topics related to investment management.Mr. Felsenthal is a member of the New York State Bar.

 

***Mark B. Fitzsimmons, age 58.****** ***Mr. Fitzsimmons is aSenior Vice-President of the General Partner and The Millburn Corporation and apartner, since January 2000, of ShareInVest. His responsibilities include bothbusiness development and investment strategy. He joined the General Partner andits affiliates in January 1990 from Morgan Stanley & Co. Incorporated wherehe was a Principal and Manager of institutional foreign exchange sales and wasinvolved in strategic trading for the firm from October 1987 until January 1990.From September 1977 to October 1987 he was with Chemical Bank New YorkCorporation (“Chemical”), first as a Senior Economist in Chemical’s ForeignExchange Advisory Service and later as a Vice-President and Manager of Chemical’sCorporate Trading Group. While at Chemical he also traded both foreign exchangeand fixed income products. From September 1973 to September 1977 Mr.Fitzsimmons was employed by the Federal Reserve Bank of New York, dividing histime

 

24

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between the InternationalResearch Department and the Foreign Exchange Department. He graduated summa cumlaude from the University of Bridgeport, Connecticut in 1970 with a B.S. ineconomics. His graduate work was done at the University of Virginia, where hereceived a certificate of candidacy for a Ph.D. in economics in 1973.

 

***Barry Goodman, age 48.***Mr.Goodman is Executive Vice-President, Director of Trading and Co-Director ofResearch of the General Partner and The Millburn Corporation and a partner ofShareInVest. His responsibilities include overseeing the firm’s tradingoperation and managing its trading relationships, as well as the design andimplementation of trading systems. He graduated **magna cum laude** from Harpur College of the State University ofNew York in 1979 with a B.A. in economics. From September 1980 through October1982 he was a commodity trader for E. F. Hutton & Co., Inc. (“E.F. Hutton”).At E.F. Hutton, he also designed and maintained various technical indicatorsand coordinated research projects pertaining to the futures markets. He joinedthe General Partner and The Millburn Corporation (including its affiliate,Millburn Partners) in November 1982 as Assistant Director of Trading. He becamea partner in ShareInVest in January 1984.

 

***Dennis B. Newton, age 54.***Mr.Newton is a Senior Vice-President of the General Partner and The MillburnCorporation. His primary responsibilities are in administration and businessdevelopment. Prior to joining the General Partner and The Millburn Corporationin September 1991, Mr. Newton was President of Phoenix Asset Management, Inc. (“Phoenix”),a registered commodity pool operator from April 1990 to August 1991 andPresident of its affiliated introducing broker, Phoenix Futures Inc., fromMarch 1990 to June 1991. Prior to his employment with Phoenix, Mr. Newton was aDirector of Managed Futures with Prudential-Bache Securities Inc. (“Prudential-Bache”)from October 1987 to March 1990 and was associated with its affiliated futurescommission merchant entity, Prudential Securities Futures Management, Inc. Mr.Newton joined Prudential-Bache from Heinold Asset Management, Inc. (“Heinold”),and its affiliated futures commission merchant, Heinold Commodities Inc., wherehe was a member of the senior management team from October 1974 to October 1987.Heinold was a pioneer and one of the largest sponsors of funds utilizingfutures and currency forward trading.

 

***Grant N. Smith, age 54.***Mr.Smith is Executive Vice-President and Co-Director of Research of the GeneralPartner and The Millburn Corporation and a partner of ShareInVest. He isresponsible for the design, testing and implementation of quantitative tradingstrategies, as well as for planning and overseeing the computerizeddecision-support systems of the firm. He received a B.S. degree from theMassachusetts Institute of Technology (“M.I.T.”) in 1974 and an M.S. degreefrom M.I.T. in 1975. While at M.I.T. he held several teaching and researchpositions in the computer science field and participated in various projectsrelating to database management. He joined the predecessor entity to TheMillburn Corporation in June 1975, and has been continuously associated withthe General Partner, The Millburn Corporation and their affiliates since thattime.

 

***Tod A. Tanis, age 51.***Mr. Tanisis a Vice President, Principal Accounting Officer and Director of Operations ofthe General Partner and The Millburn Corporation. He is responsible foroverseeing operations and accounting for the firm’s commodity pools. Hegraduated from Grove City College in May 1976 with a B.A. in accounting andjoined the General Partner and The Millburn Corporation in May of 1983. Priorto joining Millburn, he was with E.F. Hutton, where he was a Manager fromDecember 1982 to April 1983; a Supervisor from August 1982 to December 1982; anInternational Accountant from April 1979 to August 1982; and a staff accountantfrom June 1978 to April 1979. As a Manager at E.F. Hutton, he was responsiblefor all internal and external commodity reporting. Mr. Tanis also served as aJunior Accountant and then International Staff Accountant with Merrill Lynch& Company from September 1976 to May 1978.

 

(c)   Identification of Certain SignificantEmployees

 

None.

 

(d)   FamilyRelationships

 

None.

 

(e)   BusinessExperience

 

25

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SeeItem 10 (a,b) above.

 

(f)   Involvementin Certain Legal Proceedings

 

None.

 

(g)   AuditCommittee Financial Expert

 

Becausethe Partnership has no employees, officers or directors, the Partnership has noaudit committee. The Partnership is managed by the General Partner. GreggBuckbinder serves as the General Partner’s “audit committee financial expert.”  Mr. Buckbinder is not independent of themanagement of the General Partner. The General Partner is a privately ownedcorporation managed by its shareholders. It has no independent directors.

 

(h)   Codeof Ethics

 

ThePartnership has no employees, officers or directors and is managed by theGeneral Partner.  The General Partner has adopted an Executive Code ofEthics that applies to its principal executive officers, principal financialofficer and principal accounting officer.  A copy of this Executive Codeof Ethics may be obtained at no charge by written request to MillburnRidgefield Corporation, 411 West Putnam Avenue, Greenwich, Connecticut 06830 orby calling 203-625-7554 (ask for Client Services).

 

Item 11. Executive Compensation

 

ThePartnership has no directors or officers. None of the directors or officers ofthe General Partner receive compensation from the Partnership. The GeneralPartner makes all trading decisions on behalf of the Partnership. The GeneralPartner receives monthly brokerage commissions of 0.458 of 1% of thePartnership’s Net Assets (which is reduced to 0.167 of 1% of Net Assets forpartners who acquire their Interests directly through the General Partner) andan annual profit share of 20% of any new trading profit as defined.

 

Item12.   Security Ownership of Certain Beneficial Ownersand Management

 

(a)   Security Ownership of Certain Beneficial Owners

 

As of December 31, 2005, the General Partner knows ofthe following person who owns beneficially more than 5% of the Partnership’sInterests as follows: 

 
| ** **                                                                                        | ** ** | **Value of Interest** | ** ** | **Percentage of Limited Partnership  Interests** | ** ** |
|---------------------------------------------------------------------------------------------------|------------|---------------------------------|------------|-----------------------------------------------------------------|------------|
| **Name and Address**                                                                    | ** ** | **Held Directly**          | ** ** | **HeldIndirectly(1)**                                           | ** ** | **% Directly** | ** ** | **% Indirectly** | ** ** |
|                                                                                              |       |                            |       |                                                            |       |   |   |   |   |   |   |
| Malcolm H. Wiener  c/o Millburn Ridgefield Corporation  411 W. Putnam Avenue  Greenwich, CT 06830 |       | $                               | 0          |                                                            | $          | 18,230,973 |   | 0 | % | 10.89 | % |

 

All ofthe Partnership’s general partner interest is held by the General Partner.

 

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(1)           Interests heldindirectly include Interests with respect to which a person holds voting ordisposition power:  (i) by virtue ofserving as one of two or fewer trustees, custodian or officer of the beneficialowner which is a charitable entity, benefit plan or custody account for thebenefit of a minor; (ii) with respect to certain Interests owned by members ofa person’s immediate family; or (iii) through a self directed benefit plan.

 

26

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(b)   Security Ownership of Management

 

The Partnership has no officers or directors. Underthe terms of the Limited Partnership Agreement, the Partnership’s affairs aremanaged by the General Partner, which has discretionary authority over thePartnership’s trading. As of December 31, 2005, the General Partner’s interestwas valued at $3,537,452, which constituted 2.07% of the Partnership’s capitalas of December 31, 2005.

 

As of December 31, 2005, the directors and executiveofficers of the General Partner own beneficially Limited Partnership Interestsas follows: 

 
| ** **                                                          | ** ** | **Value of Interest** | ** ** | **Percentage of Limited Partnership  Interests** | ** ** |
|---------------------------------------------------------------------|------------|---------------------------------|------------|-----------------------------------------------------------------|------------|
| **Name**                                                            | ** ** | **Held Directly**          | ** ** | **HeldIndirectly(2)**                                           | ** ** | **% Directly** | ** ** | **% Indirectly** | ** ** |
|                                                                |       |                            |       |                                                            |       |   |   |   |   |
| Harvey Beker                                                        |       | $                               | 1,023,618  |                                                            | $          | 5,580,870 |   | 0.61 | % | 3.33 | % |
|                                                                |       |                            |       |                                                            |       |   |   |   |   |
| Gregg Buckbinder                                                    |       | $                               | 0          |                                                            | $          | 289,266 |   | 0 | % | 0.17 | % |
|                                                                |       |                            |       |                                                            |       |   |   |   |   |
| George Crapple                                                      |       | $                               | 23,214     |                                                            | $          | 4,534,854 |   | 0.01 | % | 2.71 | % |
|                                                                |       |                            |       |                                                            |       |   |   |   |   |
| Steven M.  Felsenthal                                               |       | $                               | 0          |                                                            | $          | 25,918 |   | 0 | % | 0 | % |
|                                                                |       |                            |       |                                                            |       |   |   |   |   |
| Mark Fitzsimmons                                                    |       | $                               | 0          |                                                            | $          | 1,678,570 |   | 0 | % | 1.00 | % |
|                                                                |       |                            |       |                                                            |       |   |   |   |   |
| Barry Goodman                                                       |       | $                               | 0          |                                                            | $          | 1,888,088 |   | 0 | % | 1.13 | % |
|                                                                |       |                            |       |                                                            |       |   |   |   |   |
| Dennis Newton                                                       |       | $                               | 0          |                                                            | $          | 211,169 |   | 0 | % | 0.13 | % |
|                                                                |       |                            |       |                                                            |       |   |   |   |   |
| Grant Smith                                                         |       | $                               | 1,333,629  |                                                            | $          | 1,540,076 |   | 0.80 | % | 0.92 | % |
|                                                                |       |                            |       |                                                            |       |   |   |   |   |
| Tod Tanis                                                           |       | $                               | 0          |                                                            | $          | 483,304 |   | 0 | % | 0.29 | % |
|                                                                |       |                            |       |                                                            |       |   |   |   |   |
| directors and executive officers of the General  Partner as a group |       | $                               | 2,380,461  |                                                            | $          | 16,232,115 |   | 1.42 | % | 9.68 | % |

 

(c)   Changes in Control

 

None.

 

(d)   SecuritiesAuthorized for Issuance Under Equity Compensation Plans

 

None.

 

Item13.   Certain Relationships and Related Transactions

 

See “Item11. Executive Compensation” and “Item 12. Security Ownership ofCertain Beneficial Owners and Management.” The Partnership allocated to the General Partner $4,802,240 in brokeragefees and allocated

 

----

(2)           Interests heldindirectly include Interests with respect to which a person holds voting ordisposition power:  (i) by virtue ofserving as one of two or fewer trustees, custodian or officer of the beneficialowner which is a charitable entity, benefit plan or custody account for thebenefit of a minor; (ii) with respect to certain Interests owned by members ofa person’s immediate family; or (iii) through a self directed benefit plan.

 

27

----

 

$1,140,619 in profit shareto the New Profits Memo Account for the year ended  December 31, 2005. The General Partner’sgeneral partner interest showed an allocation of income of $311,043 for theyear ended December 31, 2005. The General Partner has paid certainadministrative expenses to third-parties on behalf of the Partnership, relatedto legal, accounting, auditing, printing, postage and similar administrativeexpenses, and has been or will be reimbursed without interest by thePartnership. The Partnership pays administrative expenses for legal, audit andaccounting services, up to 0.25 of 1% per annum of the Partnership’s averagemonth-end net assets. A portion of such expenses are paid to an affiliate ofthe General Partner, The Millburn Corporation, for the provision of accountingservices to the Partnership. The Partnership incurred administrative expensesof $460,610 during the year ended 2005 of which $317,619 was paid or waspayable to The Millburn Corporation. The General Partner pays alladministrative expenses in excess of 0.25 of 1% per annum of the Partnership’saverage month-end net assets. The Partnership is prohibited from making anyloans.

 

Item14.   Principal Accountant Fees and Services

 

(1)           Audit Fees

 

Theaggregate fees for professional services rendered by Deloitte & Touche LLPin connection with their audit of the Partnership’s financial statements inconnection with the statutory and regulatory filings for the years endedDecember 31, 2005 and 2004 were approximately $39,600 and $30,000,respectively.

 

Theaggregate fees for professional services rendered by Ernst & Young LLP inconnection with their reviews of the financial statements included in thequarterly reports on Form 10-Q and in connection with the statutory andregulatory filings for the year ended December 31, 2004 was approximately$20,167.

 

(2)           Audit-Related Fees

 

Therewere no fees for assurance and related services rendered by Deloitte &Touche LLP or Ernst & Young LLP for the years ended December 31, 2005 and 2004.

 

(3)           Tax Fees

 

Theaggregate fees for professional services rendered by Deloitte & Touche LLPfor tax compliance, advice or planning services rendered by Deloitte &Touche LLP for the benefit of the Partnership for the years ended December 31, 2005and 2004 were approximately $10,000 and $7,353, respectively.

 

(4)           All Other Fees

 

None

 

(5)           Pre-Approval Policies

 

Theboard of directors of the General Partner pre-approves the engagement of thePartnership’s auditor for all services to be provided by the auditor.

 

PART IV

 

Item15.   Exhibitsand Financial Statement Schedules

 

(a)(1)   Financial Statements

 

The following areincluded with the 2005 Report of Independent Registered Public Accounting Firm,a copy of which is filed herewith as Exhibit 13.01.

 

28

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Affirmationof Millburn Ridgefield Corporation

Reportof Independent Registered Public Accounting Firm

Statementsof Financial Condition

CondensedSchedules of Investments

Statementsof Operations

Statementsof Changes in Partners’ Capital

Statementsof Financial Highlights

Notesto Financial Statements

 

(a)(2)   Financial Statement Schedules

 

AllSchedules are omitted for the reason that they are not required or are notapplicable because equivalent information has been included in the financialstatements or the notes thereto.

 

(a)(3)   Exhibits as required by Item 601 of Regulation S-K

 

Thefollowing exhibits are included herewith.

 
| **Designation** | ** ** | **Description**                                                        |
|-----------------|------------|------------------------------------------------------------------------|
|            |       |                                                                   |
| 13.01           |       | 2005 Report of  Independent Registered Public Accounting Firm          |
|            |       |                                                                   |
| 13.02           |       | 2003 Report of  Independent Auditors                                   |
|            |       |                                                                   |
| 31.1            |       | Rule  13a-14(a)/15d-14(a) Certification of Principal Executive Officer |
|            |       |                                                                   |
| 31.2            |       | Rule  13a-14(a)/15d-14(a) Certification of Principal Executive Officer |
|            |       |                                                                   |
| 31.3            |       | Rule  13a-14(a)/15d-14(a) Certification of Principal Financial Officer |
|            |       |                                                                   |
| 32.1            |       | Section 1350  Certification of Principal Executive Officer             |
|            |       |                                                                   |
| 32.2            |       | Section 1350  Certification of Principal Executive Officer             |
|            |       |                                                                   |
| 32.3            |       | Section 1350  Certification of Principal Financial Officer             |

 

The following exhibits were filed by the Partnershipas a part of its Registration Statement on Form 10 (Reg. No. 000-50725) onApril 29, 2004 and are incorporated herein by reference.

 
| **Exhibit Number** | ** ** | **Description  of Document**                                                                                                    |
|--------------------|------------|---------------------------------------------------------------------------------------------------------------------------------|
| ** **         | ** ** | ** **                                                                                                                      |
| 3.01               |       | Amended and Restated Certificate of Limited  Partnership of Nestor Partners                                                     |
|               |       |                                                                                                                            |
| 4.01               |       | Amended and Restated Agreement of Limited  Partnership of Nestor Partners                                                       |
|               |       |                                                                                                                            |
| 10.01              |       | Form of ISDA Master Agreement and Credit Support  Annex                                                                         |
|               |       |                                                                                                                            |
| 10.02              |       | ISDA Master Agreement, Schedule, and Credit Support  Annex between Nestor Partners and Merrill Lynch International Bank Limited |
|               |       |                                                                                                                            |
| 10.03              |       | ISDA Master Agreement, Schedule, and Credit Support  Annex between Nestor Partners and Dresdner Bank A.G.                       |
|               |       |                                                                                                                            |
| 10.04(a)           |       | Foreign Exchange Customer Agreement between Nestor  Partners and Morgan Stanley & Co. Incorporated                          |

 

29

----

 
| **Exhibit Number** | ** ** | **Description  of Document**                                                                                                           |
|--------------------|------------|----------------------------------------------------------------------------------------------------------------------------------------|
| ** **         | ** ** | ** **                                                                                                                             |
| 10.04(b)           |       | Customer Agreement Foreign Currency Option  Transactions between Nestor Partners and Morgan Stanley Capital Group Inc.                 |
|               |       |                                                                                                                                   |
| 10.05              |       | International Foreign Exchange and Options Master  Agreement between Deutsche Bank AG and Nestor Partners                              |
|               |       |                                                                                                                                   |
| 10.06              |       | Acknowledgement of Separate Risk Disclosure  Statements and Customer Agreement between Merrill Lynch Futures Inc. and  Nestor Partners |
|               |       |                                                                                                                                   |
| 10.07              |       | Customer Agreement between Warburg Dillon Reed LLC  and Nestor Partners                                                                |
|               |       |                                                                                                                                   |
| 10.08              |       | Futures and Options Agreement for Institutional  Customers between Deutsche Morgan Grenfell Inc. and Nestor Partners                   |

 

30

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SIGNATURES

 

Pursuantto the requirements of Section 13 or 15(d) of the Securities Exchange Actof 1934, the Registrant has duly caused this report to be signed on its behalfby the undersigned, thereunto duly authorized, on the 30th day ofMarch, 2006.

 

 
|   | NESTOR PARTNERS |
|--------|-----------------|
|   |            |
|   | By:             | Millburn  Ridgefield Corporation, |
|   |            | General Partner |
|   |            |   |
|   | By:             | /s/ Harvey Beker |   |
|   |            | Harvey Beker |
|   |            | Co-Chief  Executive Officer |

 

Pursuantto the requirements of the Securities Exchange Act of 1934, this report hasbeen signed below by the following persons on behalf of the General Partner ofthe Registrant in the capacities and on the date indicated.

 
| **Signature**         | ** **         | **Title with  General Partner** | ** **                             | **Date** |
|-----------------------|--------------------|--------------------------------------|----------------------------------------|----------|
|                  |               |                                 |                                   |     |
| /s/ Harvey Beker      |               |                                 | Co-Chief                               |     | March 30,  2006 |
|                  | Harvey Beker       |                                 | Executive  Officer and Director        |     |   |
|                  |               | (Principal  Executive Officer)       |                                   |     |
|                  |               |                                 |                                   |     |
| /s/ George E. Crapple |               |                                 | Co-Chief Executive                     |     | March 30, 2006 |
|                  | George E.  Crapple |                                 | Officer and  Director                  |     |   |
|                  |               | (Principal  Executive Officer)       |                                   |     |
|                  |               |                                 |                                   |     |
| /s/ Gregg  Buckbinder |               |                                 | Chief Financial  and Operating Officer |     | March 30,  2006 |
|                  | Gregg Buckbinder   |                                 | (Principal  Financial Officer)         |     |   |
|                  |               |                                 |                                   |     |
| /s/ Tod A. Tanis      |               |                                 | Vice President                         |     | March 30, 2006 |
|                  | Tod A. Tanis       |                                 | (Principal  Accounting Officer)        |     |   |
|                       |                    |                                      |                                        |          |  |  |  |  |  |  |

 

(Beingthe principal executive officers, the principal financial officer and principalaccounting officer, and a majority of the directors of Millburn RidgefieldCorporation)

 

Millburn RidgefieldCorporation

General Partner ofRegistrant

March 30, 2006

 
| By     | /s/ Harvey Beker            |   |
|--------|-----------------------------|--------|
|   | Harvey Beker                |
|   | Co-Chief  Executive Officer |

 

31

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EXHIBIT INDEX

 

Thefollowing exhibits are included herewith.

 

| **Designation** | ** ** | **Description**                                                        |
|-----------------|------------|------------------------------------------------------------------------|
|            |       |                                                                   |
| 13.01           |       | 2005 Report of  Independent Registered Public Accounting Firm          |
|            |       |                                                                   |
| 13.02           |       | 2003 Report of  Independent Auditors                                   |
|            |       |                                                                   |
| 31.1            |       | Rule  13a-14(a)/15d-14(a) Certification of Principal Executive Officer |
|            |       |                                                                   |
| 31.2            |       | Rule  13a-14(a)/15d-14(a) Certification of Principal Executive Officer |
|            |       |                                                                   |
| 31.3            |       | Rule  13a-14(a)/15d-14(a) Certification of Principal Financial Officer |
|            |       |                                                                   |
| 32.1            |       | Section 1350  Certification of Principal Executive Officer             |
|            |       |                                                                   |
| 32.2            |       | Section 1350  Certification of Principal Executive Officer             |
|            |       |                                                                   |
| 32.3            |       | Section 1350  Certification of Principal Financial Officer             |

 

The following exhibits were filed by the Partnershipas a part of its Registration Statement on Form 10 (Reg. No. 000-50725) onApril 29, 2004 and are incorporated herein by reference.

 
| **Exhibit Number** | ** ** | **Description  of Document**                                                                                                           |
|--------------------|------------|----------------------------------------------------------------------------------------------------------------------------------------|
|               |       |                                                                                                                                   |
| 3.01               |       | Amended and Restated Certificate of Limited  Partnership of Nestor Partners                                                            |
|               |       |                                                                                                                                   |
| 4.01               |       | Amended and Restated Agreement of Limited  Partnership of Nestor Partners                                                              |
|               |       |                                                                                                                                   |
| 10.01              |       | Form of ISDA Master Agreement and Credit Support  Annex                                                                                |
|               |       |                                                                                                                                   |
| 10.02              |       | ISDA Master Agreement, Schedule, and Credit Support  Annex between Nestor Partners and Merrill Lynch International Bank Limited        |
|               |       |                                                                                                                                   |
| 10.03              |       | ISDA Master Agreement, Schedule, and Credit Support  Annex between Nestor Partners and Dresdner Bank A.G.                              |
|               |       |                                                                                                                                   |
| 10.04(a)           |       | Foreign Exchange Customer Agreement between Nestor  Partners and Morgan Stanley & Co. Incorporated                                 |
|               |       |                                                                                                                                   |
| 10.04(b)           |       | Customer Agreement Foreign Currency Option  Transactions between Nestor Partners and Morgan Stanley Capital Group Inc.                 |
|               |       |                                                                                                                                   |
| 10.05              |       | International Foreign Exchange and Options Master  Agreement between Deutsche Bank AG and Nestor Partners                              |
|               |       |                                                                                                                                   |
| 10.06              |       | Acknowledgement of Separate Risk Disclosure  Statements and Customer Agreement between Merrill Lynch Futures Inc. and  Nestor Partners |
|               |       |                                                                                                                                   |
| 10.07              |       | Customer Agreement between Warburg Dillon Reed LLC  and Nestor Partners                                                                |
|               |       |                                                                                                                                   |
| 10.08              |       | Futures and Options Agreement for Institutional  Customers between Deutsche Morgan Grenfell Inc. and Nestor Partners                   |

 

32

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