**UNITED STATES**

**SECURITIES AND EXCHANGECOMMISSION**

**Washington, D.C. 20549**

 

**FORM 10-K**

** **
| **x**                                                  | **Annual Report Pursuant to  Section 13 or 15(d) of the Securities Exchange Act of 1934**     |
|--------------------------------------------------------|----------------------------------------------------------------------------------------------------|
|                                                   |                                                                                               |   |
| **For the  Fiscal Year Ended: December 31, 2007** |
|                                                   |                                                                                               |   |
| **or**                                                 |
|                                                   |                                                                                               |   |
| ** ̈**                                             | **Transition Report Pursuant to  Section 13 or 15(d) of the Securities Exchange Act of 1934** |
|                                                   |                                                                                               |   |
| **Commission  File Number: 000-50725**                 |

 

**NESTOR PARTNERS**

(Exact name of registrantas 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 RIDGEFIELDCORPORATION**

**411 West Putnam Avenue**

**Greenwich,Connecticut  06830**

(Address of principalexecutive offices)

 

Registrant’stelephone number, including area code:  **(203) 625-7554**

 

Securitiesregistered pursuant to Section 12(b) of the Act:   **None**

 

Securities registeredpursuant to Section 12(g) of the Act:

 

**Limited Partnership Interests**

(Title of Class)

 

Indicateby check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405of the Securities Act.

Yes o   No x

 

Indicate by check mark if the registrant is notrequired to file reports pursuant to Section 13 or Section 15(d) ofthe Act.

Yes o   No x

 

Indicateby check mark whether the registrant (1) has filed all reports required tobe filed by Section 13 or 15(d) of the Securities Exchange Act of1934 during the preceding 12 months (or for such shorter period that theregistrant was required to file such reports), and (2) has been subject tosuch filing requirements for the past 90 days. Yes x   No o

 

Indicateby check mark if disclosure of delinquent filers pursuant to Item 405 ofRegulation S-K (§229.405 of this chapter) is not contained herein, and will notbe contained, to the best of registrant’s knowledge, in definitive proxy orinformation statements incorporated by reference in Part III of this Form 10-Kor any amendment to this Form 10-K. x

 

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

| Large accelerated filer  o |   | Accelerated Filer o |   | Non-accelerated filer x  (Do not check if a smaller reporting company) |   | Smaller Reporting  Company o |
|----------------------------|--------|---------------------|--------|------------------------------------------------------------------------|--------|------------------------------|

 

Indicateby check mark whether the registrant is a shell company (as defined in Rule 12b-2of the Act).  Yes o   No x

 

State the aggregate market value of the voting and non-votingcommon equity held by non-affiliates computed by reference to the price atwhich the common equity was last sold, or the average bid and asked price ofsuch common equity, as of the last business day of the registrant’s mostrecently completed second fiscal quarter.

 

Not applicable.

 

Documents Incorporated byReference

 

Registrant’sFinancial Statements for the years ended December 31, 2007, 2006 and 2005with Report of Independent Registered Public Accounting Firm, the annual reportto security holders for the fiscal year ended December 31, 2007, isincorporated by reference into Part II Item 8 and Part IV hereof andfiled as an exhibit herewith.

 

----

PART I

 

Item 1.   Business

 

(a)   General development of business

 

Nestor Partners (the “Partnership”) is a limited partnership organized December 13,1976 under the New Jersey Uniform Limited Partnership Act.  The general partner of the Partnership is MillburnRidgefield Corporation, a Delaware corporation (the “General Partner”).

 

The Partnership’s business is trading a diversified portfolio (a “DiversifiedPortfolio”) of futures, forward and related option contracts on currencies,metals, financial instruments, stock indices, energy and agriculturalcommodities.  Approximately 30%-35% ofthe Partnership’s trading, measured by the General Partner’s assessment ofrisk, currently takes place in the currency markets.  The Partnership began its trading activitiesin February 1977.  All tradingdecisions are made by the General Partner.

 

The General Partner was organized in May 1982 to managediscretionary accounts in futures and forward markets.  It is the corporate successor to a futurestrading and advisory organization which has been continuously managing assetsin the currency and futures markets using quantitative, systematic techniquessince 1971.  The General Partner has beenregistered with the Commodity Futures Trading Commission (“CFTC”) as a “commoditypool operator” since July 1, 1982 and as a “commodity trading advisor”since September 13, 1984 and is a member of National Futures Association (“NFA”).  The Millburn Corporation, an affiliate of theGeneral Partner, performs certain accounting, administrative and operatingfunctions for the Partnership and other commodity pools and investmentpartnerships managed by the General Partner.

 

As of December 31, 2007, the aggregate Net Asset Value of thePartnership was $152,036,264.  The valueat December 31, 2007 of a limited partner’s initial $1,000 investment inthe Partnership on February 1, 1977 would be $48,373.37, based on theactual rate of return a limited partner’s investment in the Partnership wouldhave recognized, net of the highest charges applicable to a limited partner,during each month in the calculation period from February 1977 to December 31,2007.

 

The Partnership’s fiscal year ends on December 31.

 

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

 

The Partnership is not aregistered investment company or mutual fund. Accordingly, investors in the Partnership do not have the protectionsafforded by the Investment Company Act of 1940, as amended.

 

(b)   Financial information about industry segments

 

The Partnership’sbusiness constitutes only one segment, i.e., a speculative commodity pool.  The Partnership does not engage in sales ofgoods and services.  Financialinformation regarding the Partnership’s business is set forth in Item 6 “SelectedFinancial Data” and in the Partnership’s Financial Statements included as Exhibit 13.01to this report.

 

(c)   Narrative description of business

 

The Partnership engages in the speculative trading of futures, optionson futures and forward contracts.  ThePartnership’s sole trading 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 interbankmarket.  The objective of the GeneralPartner’s trading method is to participate in all major sustained price movesin the markets traded. The General Partner’s approach is medium-term tolong-term in nature. The General Partner makes trading decisions pursuant toits trading method, which includes technical trend analysis, certainnon-trend-following technical systems, and money management principles, whichmay be revised from time to time.

 

The General Partner is engaged in an ongoing research effort to improveits trading methods and to apply its quantitative analytic expertise to newfinancial products.

 

2

----

 

Successful systematic futures trading depends on two factors: 1)development and selection of the trading systems used in each market and 2)allocation of portfolio risk among the markets available for trading.

 

Market environments change over time, and particular systems mayperform well in one environment but poorly in another.  Likewise, portfolio sectors and individualmarkets go through periods where systematic trading is very profitable andother periods where no system makes any money.

 

The goal of the General Partner’s research has been to develop andselect a mix of systems in each market and allocate risk across a wide array ofmarkets, so as to contain overall portfolio risk in the targeted range, whileallowing exposure to profitable trend opportunities.  Over the last 30 years, the General Partnerhas developed hundreds of trading systems. These trading systems generate buyor sell decisions in a particular market based on the direction of pricemovements in the market.

 

Of course, systems can be materially different – better in some periodsand worse in others.  The maindistinguishing features are time-frame over which systems work (intra-day tolong-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 singleapproach will work all the time. Therefore, the General Partner’s objective is to have several approachesoperating at all times.  Since the early1980’s, the General Partner has selected multiple systems for each market.

 

When arriving at the portfolio allocation, the General Partner seeksmaximum diversification subject to liquidity constraints.  The markets traded and allocations arereviewed monthly, although changes may occur less frequently.  The following factors are considered inconstructing a universe of markets to trade for each portfolio:  profitability, correlation of marketperformance, liquidity of markets, professional judgment, desireddiversification and transaction costs. Once the universe of markets is established, the General Partner’ssimulation and optimization techniques help determine which markets to includein the portfolio.  The current allocationto any market in the portfolio does not exceed 2.0%.

 

Risk is a function of both price level and price volatility.  In attempting to assess market volatility asa means of monitoring and evaluating risk, the General Partner uses itsvolatility overlay as a part of individual market risk management. This systemis designed to measure the risk in the portfolio’s position in each market andsignals a decrease in position size when risk increases and an increase inposition size when risk decreases. The General Partner’s volatility overlaymaintains overall portfolio risk and distribution of risk across markets withindesignated ranges.  It is applied to thesystematic strategies described above.  Asecondary benefit of the volatility overlay can be timely profit taking.  Because markets tend to become more volatileafter a profitable trend has been long underway, the volatility overlay oftensignals position reductions before trend reversals.

 

In addition to thevolatility overlay, the General Partner’s risk management focuses on moneymanagement principles applicable to the portfolio as a whole such as portfoliodiversification and control of leverage and portfolio size.  There are, however, no restrictions on theamount of leverage the General Partner may use at any time.

 

Pursuant to the Amendedand Restated Agreement of Limited Partnership (the “Limited PartnershipAgreement”), the General Partner receives a flat-rate monthly brokerage feeequal to 0.458 of 1% of the month-end Net Assets (a 5.5% annual rate).  The General Partner charges less than theannual brokerage rate of 5.5% to those subscribers who subscribe withoutincurring the selling commission paid by the General Partner, or subscribeincurring reduced selling commissions paid by the General Partner.  These reductions have no effect on otherinvestors.  The General Partner alsoreceives a profit share equal to 20% of any new trading profit as defined,determined as of the end of each calendar year. The annual profit share is calculated net of brokerage fees andadministrative expenses.

 

The Partnership pays itsadministrative expenses, including costs incurred in connection with thecontinuing offering of the limited partnership interests (“Interests”), and anyextraordinary expenses which it may incur. The General Partner pays all the routine costs of executing and clearingthe Partnership’s trades for limited partners who acquire their Intereststhrough selling agents and all compensation due to the selling agents.

 

 

3

----

 

UBS Financial ServicesInc. (“UBS”), Deutsche Bank Securities Inc. (“Deutsche Bank”), Merrill Lynch,Pierce, Fenner & Smith Incorporated (“Merrill Lynch”) and NewedgeGroup, Newedge USA, LLC, Newedge Financial Inc. (together, the “Newedge Group”)act as the futures brokers for the Partnership. The Partnership executes currency forward trades with several brokersand banks, including Morgan Stanley & Co. Incorporated and clears allsuch trades with Morgan Stanley & Co. Incorporated and Deutsche BankAG, serving as prime brokers.  ThePartnership pays “bid asked” spreads on its forward trades, as such spreads areincorporated into the pricing of forward contracts.  The General Partner monitors the Partnership’strades to ensure that the prices it receives are competitive.

 

Each partner has acapital account, and its initial balance is the amount of his contribution tothe Partnership.  There is also a newprofit memo account which is credited with the General Partner’s profit shareon redeemed Interests and any excess of the General Partner’s profit share overthe Partnership’s taxable gains at year-end. The Net Assets of the Partnership are determined monthly, and anyincrease 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 to the new profit memo accountare charged to the accounts of the limited partners.

 

At the end of each fiscal year the Partnership’s taxable capital gainor loss (including gains and losses on open positions in certain futures andforward contracts which are “marked-to-market” at the end of the Partnership’sfiscal year) and ordinary income and expense are allocated among the partnersfor tax purposes, and each partner who is a United States citizen or residentis required to include on his personal income tax return his distributive shareof such items.  Items of operating incomesuch as interest and items of operating expense such as legal, accounting andfiling fees that accrued during each month will be allocated among the personswho were 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 General Partner up to theamount of the General Partner’s profit share for the year and then up to theamount of any balance in the new profit memo account.  Net capital gain is next allocated to eachpartner who has redeemed all or a portion of his Interests during the year tothe extent that the amount received on redemption exceeds the partner’s taxbasis (“Tax Basis”).  A partner’s TaxBasis is the amount paid for the Interests redeemed plus net taxable incomeless taxable losses previously allocated to such Interests and less amountspreviously distributed to the partner with respect to the redeemed Interests.  Remaining net capital gain is allocated amongthe partners whose capital accounts have increased from their Tax Basis.  The allocation to each partner is in theratio that his increase bears to all partners’ increases.  Net capital gain remaining is allocated to eachpartner in the ratio that his capital account value bears to the total capitalaccount value of all partners.

 

Net capital loss is allocated first to each limited partner who hasredeemed all or a portion of his Interests during the year to the extent thatthe amount the partner’s Tax Basis for the Interests redeemed exceeds theamount received on redemption.  Remainingnet taxable capital loss is allocated among the partners whose capital accountshave decreased from their Tax Basis.  Theallocation to each partner is in the ratio that his decrease bears to allpartners’ decreases.  Net capital lossremaining is allocated to each partner in the ratio that his capital accountvalue bears to the total capital account value of all partners.

 

The Partnership’s cash and U.S. Treasury instruments are used by thePartnership to engage in its trading activities and as reserves to support thattrading.  The Partnership’s assetsdeposited with the Partnership’s futures 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.  Partnership assets not deposited as marginare maintained in bank or brokerage accounts and are held primarily in bankmoney market funds or U.S. Treasury instruments.

 

The Partnership does not engage in lending (other than throughpermitted securities investments).  TheGeneral Partner does not anticipate making any distributions of Partnershipprofits, if any.

 

Regulation

 

Under the CommodityExchange Act, as amended (the “CEA”), commodity exchanges and futures tradingare subject to regulation by the CFTC. NFA, a “registered futures association” under the CEA, is the only non-

 

4

----

 

exchange self-regulatoryorganization for futures industry professionals.  The CFTC has delegated to NFA responsibilityfor the registration of “commodity trading advisors,” “commodity pooloperators,” “futures commission merchants,” “introducing brokers” and theirrespective associated persons 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 UBS, Deutsche Bank, Merrill Lynch andNewedge Group to be registered and to comply with various reporting and recordkeeping requirements.  The CFTC maysuspend a commodity pool operator’s or trading advisor’s registration if itfinds that its trading practices tend to disrupt orderly market conditions orin certain other situations.  In theevent that the registration of the General Partner as a commodity pool operatoror a commodity trading advisor were terminated or suspended, the General Partnerwould be unable to continue to manage the business of the Partnership.  Should the General Partner’s registration besuspended, termination of the Partnership might result.

 

In addition to suchregistration requirements, the CFTC and certain commodity exchanges haveestablished limits on the maximum net long or net short position which anyperson may hold or control in particular commodities.  Most exchanges also limit the changes infutures contract prices that may occur during a single trading day.   Currency forward contracts are not subjectto regulation by any United States Government agency.

 

(i)   through(xii) - not applicable.

 

(xiii)   thePartnership has no employees.

 

(d)   Financialinformation about geographic areas

 

The Partnership does not engagein material operations in foreign countries (although it does trade from theUnited States in foreign currency forward contracts and on foreign futuresexchanges), nor is a material portion of its revenues derived from foreigncustomers.

 

(e)   Availableinformation

 

The Partnership filesquarterly, annual and current reports with the Securities and ExchangeCommission (“SEC”).  These reports areavailable to read and copy at the SEC’s Public Reference Facilities inWashington, D.C. at 100 F Street, N.E., Room 1580, Washington, D.C.20549.  Please call the SEC’s toll freenumber, 1-800-SEC-0330, for further information.  The Partnership does not maintain a websitewhere these reports are posted.  However,the Partnership’s filings are posted on the SEC’s website athttp://www.sec.gov.

 

Item1A.   Risk Factors

 

***Risk of Loss***.  An investor may incursignificant losses on an investment in the Partnership.  The General Partner cannot provide anyassurance that investors will not lose all or substantially all of theirinvestment.

 

***Past Performance Records.***   Although the General Partner hassignificant experience trading customer funds in the futures markets, and thePartnership itself has traded successfully since inception, **PAST PERFORMANCE IS NOT NECESSARILYINDICATIVE OF FUTURE RESULTS. ****R**eturnsrecognized by any given investor are materially affected by when that investorinvested in the Partnership.

 

***Futures and Forward Contract Trading Is Volatile***. Trading in the futures and forward markets typically results in volatileperformance.  Several occasions in therecent past have witnessed sudden and major reversals in these markets,resulting in major losses for traders. The performance record of the General Partner’s trading has exhibited aconsiderable degree of volatility.

 

***Highly Leveraged Trading.***   The low margin deposits normallyrequired in futures and forward trading permit an extremely high degree ofleverage.  The Partnership may frequentlyhold positions with a gross value as much as ten or more times of thePartnership’s Net Assets.  Consequently,even a slight movement in the prices of its open positions could result insignificant losses.

 

5

----

 

***Markets May Be Illiquid or Disrupted.***   Most United Statesfutures exchanges limit fluctuations in some futures contract prices during asingle 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 of a futures contract hasincreased or decreased to the limit point, positions can be neither taken norliquidated.  Futures prices haveoccasionally moved to the daily limit for several consecutive days with littleor no trading.  Similar occurrences couldprevent the Partnership from promptly liquidating unfavorable positions andsubject the Partnership to substantial losses. Also, the CFTC or exchanges may suspend or limit trading.  Trading on non-United States exchanges mayalso be subject to price fluctuation limits and are otherwise subject toperiods of significant illiquidity. Trading in the forward currency markets is not subject to daily limits,although such trading is also subject to periods of significant illiquidity.

 

***Failure of Brokerage Firms and Forward Market Participants.***   The CEA requires aclearing broker to segregate all funds received from such broker’s customers inrespect of futures (but not forward) transactions from such broker’sproprietary funds.  If any of thePartnership’s commodity brokers were not to do so to the full extent requiredby law, or in the event of a substantial default by one or more of such broker’sother customers, the assets of the Partnership might not be fully protected inthe event of the bankruptcy of such broker. Furthermore, in the event of such a bankruptcy, the Partnership would belimited to recovering only a *pro rata* shareof all available funds segregated on behalf of the affected commodity broker’scombined customer accounts, even though certain property specifically traceableto the Partnership (for example, United States Treasury bills or cash depositedby the Partnership with such broker) was held by such broker.  Commodity broker bankruptcies have occurredin which customers were not able to recover from the broker’s estate the fullamount of their funds on deposit with such broker and owing to them.  Commodity broker bankruptcies are not insuredby any governmental agency, and investors would not have the benefit of anyprotection such as that afforded customers of bankrupt securitiesbroker-dealers by the Securities Investors Protection Corporation.

 

In respect of its forward trading, the Partnership will be subject tothe risk of the inability or refusal to perform with respect to such contractson the part of the principals or agents with or through which the Partnershiptrades.  Any failure or refusal todischarge their contractual obligations by the counterparties with which thePartnership deals on the forward markets, whether due to insolvency, bankruptcyor other causes, could subject the Partnership to substantial losses.  The Partnership will not be excused fromperformance under any forward contracts into which it has entered due todefaults under other forward contracts which in the General Partner’s strategywere to have substantially “covered” the former.  The Partnership deals in the forward marketsonly with major financial institution counterparties which the General Partnerconsiders to be creditworthy.  However, defaultshave occurred in the forward markets, and the risk of such defaults cannot beeliminated from the Partnership’s trading.

 

***Certain Special Considerations Related to Forward Trading.*** ** **None of the CFTC, NFA, futuresexchanges or banking authorities currently regulate forward trading.  Because a principal portion of thePartnership’s currency trading takes place in the forward markets, prospectiveinvestors must recognize that much of the Partnership’s activity takes place inunregulated markets rather than on futures exchanges subject to thejurisdiction of the CFTC or other regulatory bodies.  Partnership funds on deposit with thecurrency forward counterparties with which the Partnership trades are notprotected by the same segregation requirements imposed on CFTC regulatedcommodity brokers in respect of customer funds deposited with them.  Although the Partnership deals only withmajor financial institutions as currency forward counterparties, the insolvencyor bankruptcy of a currency forward counterparty could subject the Partnershipto the loss of its entire deposit with such counterparty.  The forward markets are wellestablished.  However, it is impossibleto predict how, given certain unusual market scenarios, the unregulated natureof these markets might affect the Partnership.

 

***Swap Trading***.  The Partnership may tradeswaps.  Swaps involve many of the samerisks as those described above with respect to forward trading.  Swap contracts are not traded on exchanges;rather, banks and dealers act as principals in the swap market.  As a result, the Partnership will be subjectto the risk of the inability or refusal to perform with respect to suchcontracts on the part of the counterparties with which the Partnership trades.  The Partnership intends to enter into swapsonly with highly creditworthy banks and dealers.  The swap market is generally not regulated byany U.S. or non-U.S. governmental authority. Speculative position limits are not applicable to swap transactions,although the counterparties with which the Partnership will deal may limit thesize or duration of positions available to the Partnership as a consequence ofcredit considerations.  Finally, swapsmay 

 

6

----

 

be illiquid and participants in the swap market arenot required to make continuous markets in the swap contracts they trade.

 

***Trading in Options.***   The General Partner has tradedfutures and forward options on behalf of the Partnership in the past and maytrade such instruments in the future. Although successful options trading requires many of the same skills assuccessful futures and forward trading, the risks involved are somewhatdifferent.  For example, the assessmentof near-term market volatility - which is directly reflected in the price ofoutstanding options - can be of much greater significance in trading optionsthan it is in many long-term futures strategies.  The use of options can be extremely expensiveif market volatility is incorrectly predicted.

 

***Trading on Futures Exchanges Outside the United States.***   The General Partnertrades on futures exchanges outside the United States on behalf of thePartnership.  Trading on such exchangesis not regulated by any United States government agency and may involve certainrisks not applicable to trading on United States exchanges.  For example, some non-U.S. exchanges, incontrast to United States exchanges, are “principals’ markets” similar to theforward markets in which performance is the responsibility only of theindividual member with whom the Partnership has entered into a futures contractand not of any exchange or clearing corporation.  In such cases, the Partnership will besubject to the risk of the inability or refusal to perform with respect to theindividual member with whom the Partnership has entered into a futurescontract.  Trading on foreign exchangesinvolves the additional risks of expropriation, burdensome or confiscatorytaxation, moratoriums, exchange or investment controls and political ordiplomatic disruptions, each of which might materially adversely affect thePartnership’s trading activities.  Intrading on foreign exchanges, the Partnership is also subject to the risk ofchanges in the exchange rates between the United States dollar and thecurrencies in which the foreign contracts are settled.

 

***Substantial Charges to Partnership.***   The Partnership is obligated to paythe General Partner brokerage commissions and annual operating expensesregardless of whether the Partnership is profitable.  (Operating expenses are limited to 1/4 of 1%per annum of the average month-end Net Assets of the Partnership.)  In addition, the General Partner receives,with respect to each Interest, a profit share of 20% of any increase in TradingProfits over the previous high point in Trading Profits at the end of eachfiscal year.  Trading Profits are basedupon the increase in value of each Interest at the end of each fiscal year (orwhen an Interest is redeemed) including any unrealized appreciation in openfutures and forward positions.  Suchappreciation may never be realized by the Partnership.

 

Because investors will purchase Interests at different times they mayrecognize different amounts of Trading Profits. Each limited partner will pay a profit share only on Trading Profitsapplicable to its Interests.  Investorswho make multiple investments in the Partnership will receive separateInterests for purposes of tracking the profit share.   As a result, investors who own multipleInterests may pay a profit share in respect of some of their Interests even ifthey experience a loss on an aggregate basis.

 

Forward trading is conducted in a principals’ market in whichcounterparties buy and sell currencies among each other, including a “bid-ask”spread in their pricing.  Institutionstrading in such markets do not pay brokerage commissions in addition to suchspreads.  It is not possible to quantifythe “bid-ask” spreads paid by the Partnership in respect of its currencytrading 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 representa significant execution cost to the Partnership.

 

***Trading Decisions Based on Technical Systems.***   Trading decisions ofthe General Partner are not determined by analysis of fundamental supply anddemand factors, general economic factors or anticipated world events, but bytechnical trading systems involving trend analysis and other factors and themoney management principles developed by the General Partner and itsaffiliates.  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 sustainedprice moves in at least some of the markets traded, the General Partner’strend-following systems are unlikely to produce profits and the Partnershipcould suffer significant losses.

 

***Discretionary Aspects of the General Partner’s Strategies***. Although the General Partner applies highly systematic strategies, thesestrategies retain certain discretionary aspects.  Decisions, for example, to adjust the size

 

7

----

 

of positions indicated by the systematic strategies,which futures contracts to trade and method of order entry, require judgmentalinput from the General Partner’s principals. Discretionary decision-making may result in the General Partner’s makingunprofitable trades in situations when a more wholly systematic approach wouldnot have done so.

 

***Possible Effects of Technical Trading Systems.***   There has been, inrecent years, a substantial increase in interest in technical futures tradingsystems, particularly trend-following systems. As the capital under the management of trading systems based on the samegeneral principles increases, an increasing number of traders may attempt toinitiate or liquidate substantial positions at or about the same time as thePartnership, or otherwise alter historical trading patterns or affect theexecution of trades, to the significant detriment of the Partnership.

 

Although the Partnership is as likely to be profitable as unprofitablein up or down markets, there is some tendency for managed futures products —particularly those managed by systematic, trend-following advisors — to performsimilarly during the same or approximately the same periods.  Prospective investors must recognize that,irrespective of the skill and expertise of the General Partner, the success ofthe Partnership may be substantially dependent on general market conditionsover which the General Partner has no control.

 

In addition, there has been an increase in the use of trading systemsemploying counter-trend techniques that attempt to profit from the wide use oftrend following systems by running stop points or otherwise.  The increased use of such techniques couldalter trading patterns the General Partner attempts to exploit to the detrimentof the Partnership.

 

***Changes in Trading Method.***   The General Partner may modify itstrading method without approval by or notice to limited partners.  Modifications may include changes in orsubstitution of technical trading systems, risk control overlays, money managementprinciples and markets traded and introduction of non-technical factors andmethods of analysis and non-trend-following technical systems and methods ofanalysis.  The trading systems to beutilized by the General Partner are proprietary and confidential.

 

***Possible Effects of Speculative Position Limits.***   The CFTC and UnitedStates exchanges have established limits referred to as “position limits” onthe maximum net long or net short speculative futures position which any personmay hold or control in particular futures contracts.  Generally, banks and dealers do not imposesuch limits with respect to forward contracts in currencies.  All futures accounts managed by the GeneralPartner and its affiliates are combined for position limit purposes.  With respect to trading in futures contractssubject to position limits (for example, corn, wheat, cotton, soybeans, soybeanmeal and oil), the General Partner may reduce the size of the positions whichwould otherwise be taken for the Partnership to avoid exceeding the limits.  If position limits are exceeded by theGeneral Partner in the opinion of the CFTC or any other regulatory body,exchange or board, the General Partner will liquidate positions in all accountsunder its management, including the Partnership, as nearly as possible in proportionto respective amounts of equity in each account to the extent necessary tocomply with applicable position limits.

 

***Other Clients of the General Partner and Its Affiliates.***   The General Partnermanages futures and forward accounts other than the Partnership, includingaccounts in which the General Partner, its principals and employees havesignificant investments.  The GeneralPartner and its affiliates may manage additional accounts in the future.  It is possible that such accounts may be incompetition with the Partnership for the same or similar positions in thefutures and forward markets.  The GeneralPartner intends generally to use similar trading methods for the Partnershipand all other systematic accounts the General Partner and its affiliatesmanage.  The General Partner will notknowingly or deliberately use systems for any account that are inferior tosystems employed for any other account or favor any account over any otheraccount.  No assurance is given, however,that the results of the Partnership’s trading will be similar to that of otheraccounts concurrently managed by the General Partner or its affiliates.

 

***Possible Adverse Effects of Increasing the Assets Managed by theGeneral Partner.***  The General Partner has not agreed to limitthe amount of additional equity which it may manage.  The rates of return achieved by tradingadvisors often tend to degrade as assets under management increase.  There can be no assurance that the GeneralPartner’s strategies will not be adversely affected by additional equity,including the Partnership’s account, accepted by the General Partner.

 

8

----

 

***Dependence on Key Personnel.***   Despite the systematic methods usedby the General Partner, it is dependent on the services of a limited number ofkey persons.  The loss of any suchpersons could make it more difficult for the General Partner to continue tomanage the Partnership.

 

***Limited Ability to Liquidate Investment in Interests.***   An investment in anInterest cannot be immediately liquidated by a limited partner.  Interests may be transferred only underlimited circumstances and no market for Interests will exist at any time.  A limited partner can liquidate hisinvestment through redemption of his Interest. A limited partner may require the Partnership to redeem all or a portionof his Interest as of the last day of any month on fifteen days’ written noticeto the General Partner.  Because noticesof redemption must be submitted significantly in advance of the actualredemption date, the value received upon redemption may differ significantlyfrom the value of the Interest at the time a decision to redeem is made.  Furthermore, because redemptions are onlypermitted at month-end, investors are not able to select the value, or even theapproximate value, at which they will redeem their Interests.

 

***Conflicts of Interest.***   The Partnership will be subject to anumber of actual and potential conflicts of interest.  Such conflicts may include, among otherthings, the possibility of the General Partner, a commodity broker for thePartnership or any of their respective affiliates favoring other customeraccounts or their own proprietary trading in certain respects over that of thePartnership.

 

***Limited Partners Will Not Participate in Management.***   Purchasers of Interestswill not be entitled to participate in the management of the Partnership or theconduct of its business.  Such authorityis vested solely in the General Partner.

 

***Profits Included in Taxable Income Whether or Not Cash or OtherProperty is Distributed.***   The Partnership is not required tomake any distributions of cash or other property to the partners.  If the Partnership has taxable income for afiscal year, such income will be taxable to limited partners who are U.S.taxpayers in accordance with their allocable shares of the Partnership’sprofits, irrespective of the fact that no cash or other property has beendistributed to them.  Accordingly, thetax liability of limited partners for any profits of the Partnership willalmost certainly exceed any distributions received from it.

 

***Possible Limitation on Deductibility of “Investment Advisory Fees.”***   Noncorporate investorsmay be required 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 such classification of these amounts couldsubstantially increase the amount of the Partnership’s profits (if any) subjectto tax.

 

***“Passive” Losses.***  Any income derived from the Partnership’strading activities will constitute “Portfolio Income” or other income not froma passive activity, which means that losses resulting from a limited partner’sother passive activities cannot be offset against such income.

 

***Possibility of Tax Audit.***  There can be no assurance that thePartnership’s tax returns will not be audited by the Internal Revenue Serviceor that adjustments to such returns will not be made as a result of such anaudit.  If an audit results in anadjustment, limited partners may be required to pay additional taxes, plusinterest and possibly penalties and additions to tax.

 

***Possible Changes in the Tax Code.***  In recent years, the United States federalincome tax law has undergone repeated and substantial changes, a number ofwhich have been materially adverse, or potentially materially adverse, toinvestment partnerships.  It isimpossible to predict what the effect of future changes in the Internal RevenueCode of 1986, as amended, will be on an investment in the Partnership.

 

***Statutory Regulation.***   Although the Partnership and theGeneral Partner are subject to regulation by the CFTC, the Partnership is notregistered under the Investment Company Act of 1940.  Investors are, therefore, not accorded theprotection provided by such legislation.

 

9

----

 

***Future Regulatory and Market Changes.***   The regulation of theUnited States commodities markets has undergone substantial change in recentyears, a process which is expected to continue. In addition, a number of substantial regulatory changes are pending orin progress in certain foreign markets. The effect of regulatory change on the Partnership is impossible topredict but could be material and adverse.

 

Some concern has been expressed by various governmental authoritiesthat the impact of speculative pools of capital, such as the Partnership, on internationalcurrency trading is making it significantly more costly and difficult forcentral banks and governments to influence exchange rates.  This and similar concerns could lead topressure to restrict the access of speculative capital to these markets.

 

In addition to regulatory changes, the economic features of the marketsto be traded by the Partnership have undergone, and are expected to continue toundergo, rapid and substantial changes as new strategies and instruments havebeen introduced.  Furthermore, the numberof participants, particularly institutional participants, in the futures andforward markets appears to have expanded substantially.  There can be no assurance as to how theGeneral Partner will perform given the changes to, and increased competitionin, the marketplace.

 

Item 2.   Properties

 

The Partnership does notown or use any physical properties in the conduct of its business.  The General Partner or an affiliate performadministrative services for the Partnership from their offices.

 

Item 3.   Legal Proceedings

 

The General Partner isnot aware of any pending legal proceedings to which either the Partnership is aparty or to which any of its assets are subject.  In addition there are no pending materiallegal proceedings involving the General Partner.

 

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.

 

There is no tradingmarket for the Interests, and none is likely to develop.  Interests may be redeemed upon 15 businessdays’ written notice to the General Partner at their Net Asset Value as of thelast day of any month, subject to certain early redemption charges.

 

(b)   Holders.

 

As of December 31,2007, there were 424 holders of Interests.

 

(c)   Dividends.

 

No distributions ordividends have been made on the Interests, and the General Partner has nopresent intention to make any.

 

(d)   SecuritiesAuthorized for Issuance Under Equity Compensation Plans.

 

None.

 

10

----

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

 

The Partnership did notsell any unregistered securities within the past three years which have notpreviously been included in the Partnership’s Quarterly Reports on Form 10-Qor in a Current Report on Form 8-K.

 

(f)   IssuerPurchases of Equity Securities.

 

Pursuant to thePartnership’s Agreement of Limited Partnership, limited partners may withdrawcapital from their capital accounts in the Partnership as of the end of eachcalendar month.  The withdrawal ofcapital by limited partners has no impact on the value of the capital accountsof other limited partners.

 

The following tablesummarizes limited partner withdrawals during the fourth calendar quarter of2007:

 
| **Month**              | ** ** | **Limited Partners   Amount withdrawn** | ** ** | **Special Limited Partners   Amount withdrawn** | ** ** |
|------------------------|------------|-----------------------------------------|------------|-------------------------------------------------|------------|
|                   |       |                                    |       |                                            |       |
| October 31, 2007  |       | $                                       | 485,214    |                                            | $          | 0 |   |
| November 30, 2007 |       | $                                       | 80,430     |                                            | $          | 0 |   |
| December 31, 2007 |       | $                                       | 726,073    |                                            | $          | 440,000 |   |
| Total                  |       | $                                       | 1,291,717  |                                            | $          | 440,000 |   |

 

Item 6.   Selected Financial Data

 

The following is asummary of operations for the fiscal years 2007, 2006, 2005, 2004 and 2003 andtotal assets of the Partnership at December 31, 2007, 2006, 2005, 2004 and2003.

 
| ** **                                         | ** ** | **For the Year  Ended  December 31,   2007** | ** **  | **For the Year  Ended  December 31,   2006** | ** ** | **For the Year  Ended  December 31,   2005** | ** ** | **For the Year  Ended  December 31,   2004** | ** **  | **For the Year  Ended  December 31,   2003** | ** ** |
|----------------------------------------------------|------------|---------------------------------------------------|-------------|---------------------------------------------------|------------|---------------------------------------------------|------------|---------------------------------------------------|-------------|---------------------------------------------------|------------|
| Income Statement Items:                            |       |                                              |        |                                              |       |                                              |       |                                              |        |                                              |       |
|                                               |       |                                              |        |                                              |       |                                              |       |                                              |        |                                              |       |
| Interest income                                    |       | $                                                 | 7,278,769   |                                              | $          | 8,039,516                                         |       | $                                                 | 4,819,054   |                                              | $          | 2,406,435 |   | $ | 2,061,312 |   |
| Total net  realized and unrealized gains (losses)* |       | $                                                 | 22,149,013  |                                              | $          | 13,862,815                                        |       | $                                                 | 9,676,626   |                                              | $          | (510,071 | ) | $ | 6,747,761 |   |
|                                               |       |                                              |        |                                              |       |                                              |       |                                              |        |                                              |       |
| Expenses:                                          |       |                                              |        |                                              |       |                                              |       |                                              |        |                                              |       |
| Brokerage commissions                              |       | $                                                 | 3,533,293   |                                              | $          | 4,317,248                                         |       | $                                                 | 4,802,240   |                                              | $          | 5,497,025 |   | $ | 5,378,592 |   |
| Administrative  expenses (including custody fees)  |       | $                                                 | 407,707     |                                              | $          | 475,795                                           |       | $                                                 | 460,610     |                                              | $          | 528,584 |   | $ | 456,873 |   |
| Profit share                                       |       | $                                                 | 3,048,112   |                                              | $          | 2,092,010                                         |       | $                                                 | 1,140,619   |                                              | $          | 484,760 |   | $ | 668,526 |   |
|                                               |       |                                              |        |                                              |       |                                              |       |                                              |        |                                              |       |
| Net Income (loss)                                  |       | $                                                 | 22,438,670  |                                              | $          | 15,017,278                                        |       | $                                                 | 8,092,211   |                                              | $          | (4,614,005 | ) | $ | 2,305,082 |   |
|                                               |       |                                              |        |                                              |       |                                              |       |                                              |        |                                              |       |
| Balance Sheet Items:                               |       |                                              |        |                                              |       |                                              |       |                                              |        |                                              |       |
|                                               |       |                                              |        |                                              |       |                                              |       |                                              |        |                                              |       |
| Total assets                                       |       | $                                                 | 159,583,247 |                                              | $          | 163,312,251                                       |       | $                                                 | 180,964,978 |                                              | $          | 209,518,483 |   | $ | 214,486,737 |   |
| Total partners’ capital                       |       | $                                                 | 152,036,264 |                                              | $          | 147,701,841                                       |       | $                                                 | 170,951,921 |                                              | $          | 193,578,138 |   | $ | 210,664,198 |   |

----

*From trading of futuresand forward contracts, foreign exchange transactions and U.S. Treasuryobligations

 

11

----

 

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

 

Reference is made to “Item6.  Selected Financial Data” and “Item8.  Financial Statements andSupplementary Data.”  The informationcontained therein is essential to, and should be read in conjunction with, thefollowing analysis.

 

Capital Resources

 

Interests may be offeredfor sale as of the beginning, and may be redeemed as of the end, of each month.

 

The amount of capitalraised for the Partnership should not have a significant impact on itsoperations, as the Partnership has no significant capital expenditure orworking capital requirements other than for monies to pay trading losses,brokerage commissions and charges. Within broad ranges of capitalization, the General Partner’s tradingpositions should increase or decrease in approximate proportion to the size ofthe Partnership.

 

The Partnership raisesadditional capital only through the sale of Interests and capital is increasedthrough trading profits (if any).  ThePartnership does not engage in borrowing.

 

The Partnership tradesfutures, options and forward contracts, and may trade swap contracts, oninterest rates, commodities, currencies, metals, energy and stock indices.  Risk arises from changes in the value ofthese contracts (market risk) and the potential inability of counterparties orbrokers to perform under the terms of their contracts (credit risk).  Market risk is generally to be measured bythe face amount of the futures positions acquired and the volatility of themarkets traded.  The credit risk fromcounterparty non-performance associated with these instruments is the netunrealized gain, if any, on these positions plus the value of the margin orcollateral held by the counterparty.  Therisks associated with exchange-traded contracts are generally perceived to beless than those associated with over-the-counter transactions, becauseexchanges typically (but not universally) provide clearinghouse arrangements inwhich the collective credit (in some cases limited in amount, in some casesnot) of the members of the exchange is pledged to support the financialintegrity of the exchange.  Inover-the-counter transactions, on the other hand, traders must rely solely onthe credit of their respective individual counterparties.  Margins which may be subject to loss in theevent of a default, are generally required in exchange trading, andcounterparties may require margin or collateral in the over-the-countermarkets.

 

The General Partner hasprocedures in place to control market risk, although there can be no assurancethat they will, in fact, succeed in doing so. These procedures primarily focus on (1) real time monitoring ofopen positions; (2) diversifying positions among various markets; (3) limitingthe assets committed as margin, generally within a range of 10% 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, using unrealizedprofits in a particular market as margin for additional positions in the samemarket); and (5) changing the equity utilized for trading by an accountsolely on a controlled periodic basis rather than as an automatic consequenceof an increase in equity resulting from trading profits.  The Partnership controls credit risk bydealing exclusively with large, well capitalized financial institutions asbrokers and counterparties.

 

The financial instrumentstraded by the Partnership contain varying degrees of off-balance sheet riskwhereby changes in the market values of the futures and forward contractsunderlying the financial instruments or the Partnership’s satisfaction of theobligations may exceed the amount recognized in the statement of financialcondition of the Partnership.

 

Due to the nature of thePartnership’s business, substantially all its assets are represented by cashand United States government obligations, while the Partnership maintains itsmarket exposure through open futures and forward contract positions.

 

The Partnership’s futurescontracts are settled by offset and are cleared by the exchange clearinghousefunction.  Open futures positions aremarked to market each trading day and the Partnership’s trading accounts aredebited or credited accordingly.  Optionson futures contracts are settled either by offset or by exercise.  If an option on a future is exercised, thePartnership is assigned a position in the underlying future which is thensettled by offset.  

 

12

----

 

The Partnership’s spotand forward currency transactions conducted in the interbank market are settledby netting offsetting positions or payment obligations and by cash payments.

 

The value of thePartnership’s cash and financial instruments is not materially affected byinflation.  Changes in interest rates,which are often associated with inflation, could cause the value of certain ofthe Partnership’s debt securities to decline, but only to a limitedextent.  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 tomarkets which have numerous short price trends followed by rapid reversals,markets in which the Partnership is likely to suffer losses.

 

Liquidity

 

The Partnership’s assetsare generally held as cash or cash equivalents which are used to margin thePartnership’s futures and forward currency positions and withdrawn, asnecessary, to pay redemptions and expenses. Other than potential market-imposed limitations on liquidity, due, forexample, to limited open interest in certain futures markets or to daily pricefluctuation limits, which are inherent in the Partnership’s futures and forwardtrading, the Partnership’s assets are highly liquid and are expected to remainso.  During its operations through December 31,2007, the Partnership experienced no meaningful periods of illiquidity in anyof the numerous markets traded by the General Partner.

 

Critical Accounting Estimates

 

The Partnership records its transactions in futures and forwardcurrency contracts, including related income and expenses, on a trade datebasis.  Open futures contracts traded onan exchange are valued at market, which is based on the closing settlementprice on the exchange where the futures contract is traded by the Partnershipon the day with respect to which Net Assets are being determined.  Open forward currency contracts are recordedat 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 Pricesand Forward Points for open forward currency contracts are generally based onthe 3:00 P.M. New York time prices provided by widely used quotationservice providers on the day with respect to which Net Assets are beingdetermined.  The Forward Points from thequotation service providers are generally in periods of one month, two months,three months and six months forward while the contractual forward deliverydates for the foreign currency contracts traded by the Partnership may be inbetween these periods.

 

The General Partner’s policy is to calculate the Forward Points foreach contract being valued by determining the number of days from the date theforward currency contract is being valued to its maturity date and then usingstraight-line interpolation to calculate the valuation of Forward Points forthe applicable forward currency contract. The General Partner will also compare the calculated price to theforward currency prices provided by dealers to determine whether the calculatedprice is fair and reasonable.

 

The preparation of financial statements in conformity with accountingprinciples generally accepted in the United States of America requiresmanagement to make estimates and assumptions, such as accrual of expenses, thataffect the amounts and disclosures reported in the financial statements.  Based on the nature of the business andoperations of the Partnership, the General Partner believes that the estimatesutilized in preparing the Partnership’s financial statements are appropriateand reasonable, however actual results could differ from these estimates.  The estimates used do not provide a range ofpossible results that would require the 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.

 

Off-Balance SheetArrangements

 

The Partnership does not engage in off-balance sheet arrangements withother entities.

 

13

----

 

Contractual Obligations

 

The Partnership does notenter into any contractual obligations or commercial commitments to make futurepayments of a type that would be typical for an operating company or that wouldaffect its liquidity or capital resources. The Partnership’s sole business is trading futures and forward currencycontracts, both long (contracts to buy) and short (contracts to sell).  All such contracts are settled by offset, notdelivery.  Substantially all suchcontacts are for settlement within four months of the trade date and substantiallyall such contracts are held by the Partnership for less than four months beforebeing offset or rolled over into new contracts with similar maturities.   The Partnership’s Financial Statements,included as Exhibit 13.01 to this report, present a Condensed Schedule ofInvestments setting forth net unrealized appreciation (depreciation) of thePartnership’s open future and forward currency contracts, both long and short,at December 31, 2007.

 

Results of Operations

 

*PerformanceSummary*

 

The Partnership’s successdepends on the General Partner’s ability to recognize and capitalize on trendsand other profit opportunities in different sectors of the world economy.  The General Partner’s trading methods areconfidential, so that substantially the only information that can be furnishedregarding the Partnership’s results of operations is its performancerecord.  Unlike most operatingbusinesses, general economic or seasonal conditions have no direct effect onthe profit potential of the Partnership, while, at the same time, its pastperformance is not necessarily indicative of future results.  Because of the speculative nature of itstrading, operational or economic trends have little relevance to thePartnership’s results.  The GeneralPartner believes, however, that there are certain market conditions — forexample, markets with strong price trends – in which the Partnership has abetter opportunity of being profitable than in others.

 

*2007*

 

During 2007, thePartnership achieved a net realized and unrealized gain of $22,149,013 from itstrading operations (including foreign exchange transactions andtranslations).  Brokerage commissions of$3,533,293, administrative expenses of $385,059 and custody fees of $22,648were paid or accrued.  The Partnershippaid a profit share to the General Partner of $3,048,112.  Interest income of $7,278,769 offset thePartnership’s expenses resulting in a net gain of $22,438,670.  An analysis of the trading gain (loss) bysector is as follows:

 

| **Sector**     | ** ** | **% Gain (Loss)** |
|----------------|------------|-------------------|
| ** **     | ** ** | ** **        |
| Currencies     |       | 4.17%             |
| Energies       |       | 1.57%             |
| Grains         |       | 3.92%             |
| Interest Rates |       | 2.20%             |
| Livestock      |       | 0.32%             |
| Metals         |       | 2.01%             |
| Softs          |       | (0.99%)           |
| Stock Indices  |       | 1.79%             |
|           |       |              |
| Total          |       | 14.99%            |

 

The Partnership produceda gain in 2007.  Strong returns wereobtained from trading currency forwards and grain futures.  Solid profits were also attributable tointerest rate, metal, energy and stock index futures trading.  The only sector to register a loss for theyear was soft commodities.

 

Duringthe first half of 2007, the Partnership’s positions, which are all driven byour technical models, reflected several themes: solid global growth, highworldwide liquidity, a gradual tightening of monetary policies worldwide, and adiminution of the dollar’s role in worldwide trade and reserve management.  As a result, the Partnership, in terms of its broad structure, took short positions ininterest rates, U.S. Dollar trading, except against low interest ratecurrencies such as the Japanese Yen and Swiss Franc, cross currency trading oflower interest rate 

 

14

----

 

currencies and natural gas futures; mixed positionsin softs and livestock; moderately long positions in crude oil and petroleumproducts futures; and long positions in high interest rate currencies, equityindex futures, grain futures and precious and industrial metal futures.

 

Thepositions in financials and metals were highly profitable, while energy, grainand livestock trading were unprofitable during the January-June period.

 

Duringthe summer, the spreading impact of the sub-prime problem triggered a sharp andwidespread drying up of liquidity, a broad based contraction of “risk-oriented”trades, and a flight to quality. In particular, equities were sold, governmentand short-term interest rate instruments were bought, the dollar was in demand,and carry trades were unwound. As the financial market turmoil spread, concernabout slowing growth caused metals and energy futures to be sold. All theseactions occurred simultaneously and produced trend reversals in virtually allof the positions held in the portfolio. Hence, while our portfolio is diversified across over 100 positions in 8sectors, diversification was ineffective and markets became almost universallycorrelated.  In response to these losses,our directional and volatility models substantially lowered our position sizes,reducing exposures by almost two-thirds.

 

Duringthe final four months of 2007, many of the trends which had been disrupted bythe market dislocations of August reasserted themselves. In particular,short dollar positions, long energy positions and long precious metal positionswere all profitable.  Interest ratetrading was profitable largely because a flight to quality and safety producedgains on new long positions, particularly in US Treasury and short-termfutures.  In addition, a profitable bullmarket in grains, which had arisen over the summer, continued and accelerated.On the other hand, the expanding turmoil in financial markets proved imperviousto the efforts of Central Banks, leading to a sell-off in equities thatgenerated losses as the Partnership’s long stock index positions were beingreduced and reversed.   Also, a continuedunwinding of carry trades led to losses in cross currency trading.

 

*2006*

 

During 2006, thePartnership achieved a net realized and unrealized gain of $13,862,815 from itstrading operations (including foreign exchange transactions andtranslations).  Brokerage commissions of$4,317,248, administrative expenses of $448,912 and custody fees of $26,883were paid or accrued.  The Partnershippaid a profit share to the General Partner of $2,092,010.  Interest income of $8,039,516 offset thePartnership’s expenses resulting in a net gain of $15,017,278.  An analysis of the trading gain (loss) bysector is as follows:

 

| **Sector**     | ** ** | **% Gain (Loss)** |
|----------------|------------|-------------------|
| ** **     | ** ** | ** **        |
| Currencies     |       | (5.88)%           |
| Energies       |       | 0.32%             |
| Grains         |       | (2.02)%           |
| Interest Rates |       | 1.26%             |
| Livestock      |       | (0.60)%           |
| Metals         |       | 8.78%             |
| Softs          |       | (0.31)%           |
| Stock Indices  |       | 8.01%             |
|           |       |              |
| Total          |       | 9.56%             |

 

The Partnership generateda moderate gain for the year.  Trading ofmetals and stock index futures produced significant profits, and trading ofinterest rate and energy futures added small gains.  On the other hand, currency trading resultedin a sizable loss, and trading activity in grains, livestock and softs wassomewhat negative.

 

Strong economicconditions worldwide underpinned industrial and precious metal prices.  Periodic fears of shortages also buoyed theprices of industrial metals.  Concernabout inflation, a weaker U.S. Dollar, and reserve diversification out ofdollars provided an added boost to precious metal prices.  In addition, introduction of a silver ETFalongside the existing gold ETFs increased the demand for precious metals.  Consequently, long positions in copper, zinc,nickel, tin, aluminum, lead, gold, silver, and platinum were profitable.

 

15

----

 

Broad based growth,encompassing the emerging markets–led by China and India–the U.S., Europe, andby year-end even Japan encouraged investors worldwide.  Hence, long positions in European, Chinese,Hong Kong, and U.S. stock index futures were profitable.

 

During the first half of2006, short positions in short-term and long-term interest rate futures werewidely profitable as interest rates rose on the back of strong growth,inflation worries, and Fed Funds rate increases.  By July, however, there was growing concernthat tighter Central Bank monetary policies throughout the world might induce agrowth slowdown.  As a result, interestrates, particularly long-term interest rates, came down and losses on shortpositions offset most of the earlier gains. The downward pressure on long-term interest rates was augmented by OPECand Bank of China purchases of longer term government bonds for reservemanagement purposes.  On balance, therewas still a modest profit for the year from interest rate trading.

 

Currency trading wasunprofitable throughout the year. Significant volatility without sustained trends characterized mostcurrency markets.  Market participantscontinued to discuss the likelihood of a weaker dollar, but with the Bank ofChina tightly controlling the movements of the Yuan, fluctuations in most majorcurrencies were restrained and no sustained dollar move occurred.

 

Elsewhere, trading ofgrains, softs, and livestock was somewhat unprofitable, while energy tradingproduced a fractional gain.

 

*2005*

 

During 2005, thePartnership achieved a net realized and unrealized gain of $9,676,626 from itstrading operations (including foreign exchange transactions andtranslations).  Brokerage commissions of$4,802,240, administrative expenses of $434,264 and custody fees of $26,346were paid or accrued.  The Partnershippaid a profit share to the General Partner of $1,140,619.  Interest income of $4,819,054 partiallyoffset the Partnership’s expenses resulting in a net gain of $8,092,211.  An analysis of the trading gain (loss) bysector is as follows:

 

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

 

The Partnership produceda modest gain for the year.  Stockindices were strongly profitable, and to a lesser extent so were cross ratecurrency positions, metals, energy and interest rates.  On the other hand, sizable losses resultedfrom trading dollar currency positions, and lesser shortfalls came from tradinggrains, softs, and livestock.

 

International equityindices were highly profitable in 2005. Following some consolidation early in the year, non-U.S. equity indexesmoved broadly higher through year-end. There were gains from long positions in Asian, European, and SouthAfrican stock indices.  Solid growthworldwide propelled equities forward despite the headwinds that came from highenergy prices and rising interest rates. Trading of U.S. stock indices, whichwere 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.  Continuing expansion of money supplyworldwide fueled demand for precious metals and long gold and silver positionswere also profitable.

 

16

----

 

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.  Bythe end of 2005, however, position sizes had been reduced significantly.

 

Interest rates were quitevolatile during 2005.  Early in the year,markets expected continuing declines in non-U.S. interest rates, and furtheradvances 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, by year-end, the portfolio’s interestrate positions had been reduced or reversed from long to short, anticipatinghigher 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 buying the Australian Dollar, CanadianDollar and British Pound was profitable, as was selling the Euro and buyingPolish Zlotys and Canadian Dollars.

 

Dollar trading, however,was unprofitable throughout the year. The U.S. currency was not able to sustain a trend and exhibitedsignificant volatility, especially during the second half of 2005. As a result,14 of the 17 currencies traded versus the dollar registered losses or noappreciable gain for the year.

 

Trading of agriculturalcommodities and livestock generated losses. Prices of corn, wheat and elements of the soybean complex experiencedwide swings in 2005, and modest losses were sustained across the grain sectorof the portfolio.  A long sugar positionwas quite profitable as weather related crop shortages in Brazil and Asiaincreased demand for the commodity and prompted short covering as well.  However, losses from trading coffee, cotton,and cocoa were more than offsetting. Livestock trading was marginally unprofitable.

 

Item 7A.  Quantitative and Qualitative DisclosuresAbout Market Risk

 

**Introduction**

 

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

 

The Partnership is aspeculative commodity pool.  Unlike anoperating company, the risk of market sensitive instruments is integral, notincidental, to the Partnership’s main line of business.

 

Market movements resultin frequent changes in the fair market value of the Partnership’s openpositions and, consequently, in its earnings and cash flow.  The Partnership’s market risk is influencedby a wide variety of factors, including the level and volatility of interestrates, exchange rates, equity price levels, the market value of financialinstruments and contracts, the diversification effects among the Partnership’sopen positions and the liquidity of the markets in which it trades.

 

The Partnership canrapidly acquire and/or liquidate both long and short positions in a wide rangeof different markets.  Consequently, itis not possible to predict how a particular future market scenario will affectperformance, and the Partnership’s past performance is not necessarilyindicative of its future results.

 

Value at Risk is ameasure of the maximum amount which the Partnership could reasonably beexpected to lose in a given market sector. However, the inherent uncertainty of the Partnership’s speculativetrading and the recurrence in the markets traded by the Partnership of marketmovements far exceeding expectations could result in actual trading ornon-trading losses far beyond the indicated Value at Risk or the Partnership’sexperience to date (*i.e.,* “risk ofruin”).  In light of the foregoing aswell as the risks and uncertainties intrinsic to all future projections, theinclusion of the quantification included in this section should not beconsidered to constitute any assurance or representation that the Partnership’slosses in any market sector will be limited to Value at Risk or by thePartnership’s attempts to manage its market risk.

 

17

----

Materiality, as used inthis section “Quantitative and Qualitative Disclosures About Market Risk,” isbased on an assessment of reasonably possible market movements and thepotential losses caused by such movements, taking into account the leverage,optionality and multiplier features of the Partnership’s market sensitiveinstruments.

 

Quantifying the Partnership’s Trading Value at Risk

 

***QuantitativeForward-Looking Statements***

*** ***

*Thefollowing quantitative disclosures regarding the Partnership’s market risk exposurescontain “forward-looking statements” within the meaning of the safe harbor fromcivil liability provided for such statements by the Private SecuritiesLitigation Reform Act of 1995 (set forth in Section 27A of the SecuritiesAct and Section 21E of the Securities Exchange Act of 1934).  All quantitative disclosures in this sectionare deemed to be forward-looking statements for purposes of the safe harbor,except for statements of historical fact.*

 

The Partnership’s riskexposure in the various market sectors traded by the General Partner isquantified below in terms of Value at Risk. Due to the Partnership’s mark-to-market accounting, any loss in the fairvalue of the Partnership’s open positions is directly reflected in thePartnership’s earnings (realized or unrealized) and cash flow (at least in thecase of exchange-traded contracts in which profits and losses on open positionsare settled daily through variation margin).

 

Exchange maintenancemargin requirements have been used by the Partnership as the measure of itsValue at Risk.  Maintenance marginrequirements are set by exchanges to equal or exceed 95-99% of the maximumone-day losses in the fair value of any given contract incurred during the timeperiod over which historical price fluctuations are researched for purposes ofestablishing margin levels.  Themaintenance margin levels are established by dealers and 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 the case of marketsensitive instruments which are not exchange traded (almost exclusivelycurrencies in the case of the Partnership), the Partnership calculates Value atRisk using exchange maintenance margin requirements for equivalent or similarfutures positions.

 

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

 

***ThePartnership’s Trading Value at Risk in Different Market Sectors***

*** ***

The following tablesindicate the average, highest and lowest amounts of trading Value at Riskassociated with the Partnership’s open positions by market category for fiscalyears ended December 31, 2007 and 2006. During fiscal year 2007 and 2006, the Partnership’s average totalcapitalization was approximately $153.4 million and $176.1 million,respectively.

 

18

----

 
| **Fiscal Year 2007** | ** ** |
|----------------------|------------|
| **Market Sector**    | ** ** | **Average   Value at Risk** | ** ** | **% of Average   Capitalization** | ** ** | **Highest  Value At Risk** | ** ** | **Lowest  Value At Risk** | ** ** |
| Currencies           |       | $ | 5.1 |   | 3.3 | % | $ | 7.3 |   | $ | 3.7 |   |
| Energies             |       | $ | 1.4 |   | 0.9 | % | $ | 1.8 |   | $ | 1.0 |   |
| Grains               |       | $ | 0.6 |   | 0.4 | % | $ | 0.7 |   | $ | 0.5 |   |
| Interest Rates       |       | $ | 3.4 |   | 2.2 | % | $ | 5.9 |   | $ | 1.7 |   |
| Livestock            |       | $ | 0.2 |   | 0.1 | % | $ | 0.3 |   | $ | 0.1 |   |
| Metals               |       | $ | 2.1 |   | 1.4 | % | $ | 2.4 |   | $ | 1.7 |   |
| Softs                |       | $ | 0.8 |   | 0.5 | % | $ | 1.1 |   | $ | 0.5 |   |
| Stock Indices        |       | $ | 4.7 |   | 3.1 | % | $ | 7.2 |   | $ | 2.5 |   |
| Total                |       | $ | 18.3 |   | 11.9 | % |   |   |   |   |

 
| **Fiscal  Year 2006** | ** ** |
|-----------------------|------------|
| **Market Sector**     | ** ** | **Average   Value at Risk** | ** ** | **% of  Average   Capitalization** | ** ** | **Highest   Value At Risk** |   | **Lowest   Value At Risk** |   |
| Interest Rates        |       | $ | 5.0 |   | 2.8 | % | $ | 7.8 |   | $ | 2.3 |   |
| Currencies            |       | $ | 7.4 |   | 4.2 | % | $ | 8.8 |   | $ | 5.9 |   |
| Stock Indices         |       | $ | 6.8 |   | 4.0 | % | $ | 11.1 |   | $ | 2.2 |   |
| Metals                |       | $ | 1.5 |   | 0.9 | % | $ | 1.8 |   | $ | 1.1 |   |
| Softs                 |       | $ | 0.9 |   | 0.5 | % | $ | 1.1 |   | $ | 0.6 |   |
| Grains                |       | $ | 0.6 |   | 0.3 | % | $ | 0.8 |   | $ | 0.4 |   |
| Energies              |       | $ | 1.7 |   | 1.0 | % | $ | 2.0 |   | $ | 1.0 |   |
| Livestock             |       | $ | 0.2 |   | 0.2 | % | $ | 0.3 |   | $ | 0.0 |   |
| Total                 |       | $ | 24.1 |   | 13.9 | % |   |   |   |   |

 

Average, highest andlowest Value at Risk amounts relate to the quarter-end amounts during eachfiscal year.  Average Capitalization isthe average of the Partnership’s capitalization at the end of each month duringthe fiscal years 2007 and 2006.  Dollaramounts represent millions of dollars.

 

***MaterialLimitations on Value at Risk as an Assessment of Market Risk***

*** ***

The face value of themarket sector instruments held by the Partnership is typically many times theapplicable maintenance margin requirement (maintenance margin requirementsgenerally ranging between approximately 1% and 10% of contract face value) aswell as many times the capitalization of the Partnership.  The magnitude of the Partnership’s open positionscreates a “risk of ruin” not typically found in most other investmentvehicles.  Because of the size of itspositions, certain market conditions – unusual, but historically recurring fromtime to time – could cause the Partnership to incur severe losses over a shortperiod of time.  The foregoing Value atRisk table – as well as the past performance of the Partnership – gives noindication of this “risk of ruin.”

 

***Non-TradingRisk***

*** ***

The Partnership hasnon-trading market risk on its foreign cash balances not needed formargin.  However, these balances (as wellas any market risk they represent) are immaterial.

 

The Partnership also hasnon-trading cash flow risk as a result of holding a substantial portion (over80%) of its assets in U.S. Treasury notes and other short-term debt instruments(as well as any market risk they represent) for margin and cash managementpurposes.  Although the General Partnerdoes not anticipate that, even in the case of major interest rate movements,the Partnership would sustain a material mark-to-market loss on its securities 

 

19

----

 

positions, if short-terminterest rates decline so will the Partnership’s cash management income.  The Partnership also maintains a portion (approximately3 - 10%) of its assets in cash in interest-bearing bank accounts.  These cash balances are also subject (as wellas any market risk they represent) to cash flow risk, which is not material.

 

***QualitativeDisclosures Regarding Primary Trading Risk Exposures***

*** ***

*Thefollowing qualitative disclosures regarding the Partnership’s market riskexposures – except for (i) those disclosures that are statements ofhistorical fact and (ii) the descriptions of how the General Partnermanages the Partnership’s primary market risk exposures – constituteforward-looking statements within the meaning of Section 27A of theSecurities Act and Section 21E 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 exposuresare subject to numerous uncertainties, contingencies and risks, any one ofwhich could cause the actual results of the Partnership’s risk controls todiffer materially from the objectives of such strategies.  Government interventions, defaults andexpropriations, illiquid markets, the emergence of dominant fundamentalfactors, political upheavals, changes in historical price relationships, aninflux of new market participants, increased regulation and many other factorscould result in material losses as well as in material changes to the riskexposures and the risk management 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 mustbe prepared to lose all or substantially all of their investment in the Partnership.*

 

The following were theprimary trading risk exposures of the Partnership as of December 31, 2007,by market sector.

 

Financial Instruments. Interest rate movements directly affect the price of the sovereign bondfutures positions held by the Partnership and indirectly the value of its stockindex and currency positions.  Interestrate movements in one country as well as relative interest rate movementsbetween countries may materially impact the Partnership’s profitability.  The Partnership’s primary interest rateexposure is to interest rate fluctuations in the United States and other majorindustrialized, or Group of Seven (Canada, France, Germany, Italy, Japan,United Kingdom and United States, collectively “G-7”), countries.  However, the Partnership also may takepositions in futures contracts on the government debt of other nations.  The General Partner anticipates that G-7interest rates, both long-term and short-term, will remain the primary marketexposure of the Partnership for the foreseeable future.

 

Currencies. Exchange rate risk is the principal market exposure of thePartnership.  The Partnership’s currencyexposure is to exchange rate fluctuations, primarily fluctuations which disruptthe historical pricing relationships between different currencies and currencypairs.  These fluctuations are influencedby interest rate changes as well as political and general economicconditions.  The Partnership trades in alarge number of currencies, including cross-rates – i.e., positions between twocurrencies other than the U.S. dollar. As of December 31, 2007 the Partnership’s primary currencyexposures were in the U.S. dollar versus the Euro, Swiss Franc, Czech Koruna,Polish Zloty, Norwegian Krone, Hungarian Forint, Swedish Krona, CanadianDollar, Korean Won, Singapore Dollar, South African Rand, New Zealand Dollar,Australian Dollar, Japanese Yen, Mexican Peso, Turkish Lira, Indian Rupee,Brazilian Real, Chilean Peso, Colombian Peso, Icelandic Krona, Israeli Shekel,Russian Ruble, Slovak Koruna and British Pound. The primary exposures in the currency crosses were in the Japanese Yenversus the Australian Dollar, Mexican Peso, New Zealand Dollar, Polish Zloty,Hungarian Forint, South African Rand, Turkish Lira and British Pound and in theEuro versus the British Pound, Polish Zloty, Mexican Peso, New Zealand Dollar,Swedish Krona, Turkish Lira, Australian Dollar, Czech Koruna, Icelandic Krona,Slovak Koruna and South African Rand.

 

Stock Indices. The Partnership’s primary equity exposure, through stock index futures,is to equity price risk in the G-7 countries. As of December 31, 2007, the Partnership’s primary exposures werein the E Mini NASDAQ 100, E-Mini S&P 500, E-Mini Russell 2000, and E-MiniDow (United States); FTSE 100 (United Kingdom); TOPIX and Nikkei (Japan); TSE60 (Canada); DAX (Germany); MIB 30 (Italy); and CAC-40 (France).  The Partnership’s exposure to stock indexfutures of other countries at December 31, 2007 were in the Simex TaiwanIndex (Taiwan), Simex (Singapore), ALL Shares (South Africa), SPI 200(Australia), IBEX 35 (Spain), 

 

20

----

 

Hang Seng and H-Shares(Hong Kong), AEX (Netherlands), OMX (Sweden) and the DJ Euro Stoxx 50 (EuroZone) stock indices.

 

Metals.  TheDiversified Portfolio used for the Partnership trades precious and basemetals.  As of December 31, 2007,the Partnership’s metals market exposure was 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 31,2007, the Partnership had exposure to agricultural commodities, includingcoffee, sugar, cocoa, cotton, wheat, corn, the soybean complex as well as livecattle and hogs.

 

Energy.  ThePartnership’s primary energy market exposure is to gas and oil price movements,often resulting from political developments in the Middle East and economicconditions worldwide.  Energy prices arevolatile and substantial profits and losses have been and are expected tocontinue to be experienced in this market.

 

***QualitativeDisclosures Regarding Non-Trading Risk Exposure***

*** ***

The following were theonly non-trading risk exposures of the Partnership as of December 31,2007.

 

Foreign Currency Balances. The Partnership’s primary foreign currency balances are in Japanese Yen,Euro, British Pounds, Australian Dollars, Canadian Dollars, Swiss Franc,Swedish Krona, South African Rand, Singapore Dollars and Hong Kong Dollars.  The Partnership controls the non-trading riskof these balances by regularly converting these balances back into dollars (noless frequently than twice a month).

 

Securities Positions. The Partnership’s only market exposure in instruments held other thanfor trading is in its securities portfolio. The Partnership holds only cash or a cash equivalent short-term U.S.government money market fund or interest-bearing, credit risk-free, short-termpaper – typically U.S. Treasury instruments with durations no longer than 1year.  Violent fluctuations in prevailinginterest rates could cause immaterial mark-to-market losses on the Partnership’ssecurities, although substantially all of these short-term instruments are heldto maturity.

 

***QualitativeDisclosures Regarding Means of Managing Risk Exposure***

*** ***

The General Partnerattempts to control risk through the systematic application of its tradingmethod, which includes a multi-system approach to price trend recognition, ananalysis of market volatility, the application of certain money managementprinciples, which may be revised from time to time, and adjusting leverage orportfolio size.  In addition, the GeneralPartner limits its trading to markets which it believes are sufficiently liquidin respect of the amount of trading it contemplates conducting.

 

The goal of the GeneralPartner’s research has been to develop and select a mix of systems in eachmarket and allocate risk across a wide array of markets, so as to containoverall portfolio risk within a targeted range, while allowing exposure toprofitable trend opportunities.  Over thelast 30 years, the General Partner has developed hundreds of trading systems.These trading systems generate buy or sell decisions in a particular marketbased on the direction of price movements in the market.

 

Of course, systems can bematerially different – better in some periods and worse in others.  The main distinguishing features aretime-frame over which systems work (intra-day to long-term), the type of datafed into them (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 single approach will work all thetime.  Therefore, the General Partner’sobjective is to have several approaches operating at all times.  Since the early 1980’s, the General Partnerhas selected multiple systems for each market.

 

When arriving at theportfolio allocation, the General Partner seeks maximum diversification subjectto liquidity constraints.  The marketstraded and allocations are reviewed monthly, although changes may occur less

 

21

----

 

frequently.  The following factors are considered in constructinga universe of markets to trade for each portfolio:  profitability, correlation of marketperformance, liquidity of markets, professional judgment, desireddiversification and transaction costs. Once the universe of markets is established, the General Partner’ssimulation and optimization techniques help determine which markets to includein the portfolio.  The current allocationto any market in the portfolio does not exceed 2.0%.

 

In attempting to assessmarket volatility as a means of monitoring and evaluating risk, the GeneralPartner uses its volatility overlay as a part of individual market riskmanagement. This system is designed to measure the risk in the portfolio’sposition in each market and signals a decrease in position size when riskincreases and an increase in position size when risk decreases. The GeneralPartner’s volatility overlay maintains overall portfolio risk and distributionof risk across markets within designated ranges.  It is applied to the systematic strategiesdescribed above.  A secondary benefit ofthe volatility overlay can be timely profit taking.  Because markets tend to become more volatileafter a profitable trend has been long underway, the volatility overlay oftensignals position reductions before trend reversals.

 

In addition to thevolatility overlay, the General Partner’s risk management focuses on moneymanagement principles applicable to the portfolio as a whole rather than toindividual markets.  The first principleis portfolio diversification, which attempts to improve the quality of profitsby reducing volatility.

 

Additional moneymanagement principles applicable to the portfolio as a whole include:  (1) limiting the assets committed asmargin or collateral, generally within a range of 10% to 35% of an account’snet assets, though the amount may at any time be substantially higher; (2) prohibitingpyramiding - that is, using unrealized profits in a particular market as marginfor additional positions solely in the same market; and (3) changing theequity used for trading by an account solely on a controlled periodic basis,not automatically due to an increase in equity from trading profits.

 

Another important riskmanagement function is the careful control of leverage or portfolio size.Leverage levels are determined by simulating the entire portfolio–all markets,all systems, all risk control overlays, the exact weightings of the markets inthe portfolio and the proposed level of leverage–over the past five or tenyears to determine the worst case experienced by the portfolio in thesimulation period.

 

The worst case orpeak-to-trough drawdown is measured from a daily high in portfolio assets tothe subsequent daily low whether that occurs days, weeks or months after thedaily high. If the General Partner considers the drawdown too severe, itreduces the leverage or portfolio size. There are, however, no restrictions onthe amount of leverage the General Partner may use at any given time.

 

Item8.   Financial Statements and Supplementary Data

 

Financial statementsrequired by this item, including the report of Deloitte & Touche LLPfor the fiscal years ended December 31, 2007, 2006 and 2005 are includedas Exhibit 13.01 to this report.

 

The following summarizedquarterly financial information presents the results of operations for thethree month periods ended March 31, June 30, September 30 and December 31,2007 and 2006.  This information has notbeen audited.

 
| ** **                                  | ** ** | **Fourth Quarter  2007** | ** ** | **Third Quarter  2007** | ** **  | **Second Quarter  2007** | ** ** | **First Quarter  2007** | ** ** |
|---------------------------------------------|------------|--------------------------|------------|-------------------------|-------------|--------------------------|------------|-------------------------|------------|
| Interest Income:                            |       | $                        | 1,722,083  |                    | $           | 1,960,789                |       | $                       | 1,836,605  |   | $ | 1,759,292 |   |
| Net Realized and Unrealized Gains (Losses): |       | $                        | 7,860,229  |                    | (18,461,414 | )                        | 30,539,057 |                    | 2,211,141  |   |
| Expenses*:                                  |       | $                        | 2,003,108  |                    | (1,484,051  | )                        | 5,199,343  |                    | 1,270,712  |   |
| Net Income (Loss):                          |       | $                        | 7,579,204  |                    | (15,016,574 | )                        | 27,176,319 |                    | 2,699,721  |   |
|                                             |            |                          |            |                         |             |                          |            |                         |            |  |  |  |  |

----

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

 

22

----

 
| ** **                                  | ** ** | **Fourth Quarter  2006** | ** ** | **Third Quarter  2006** | ** ** | **Second Quarter  2006** | ** ** | **First Quarter  2006** | ** ** |
|---------------------------------------------|------------|--------------------------|------------|-------------------------|------------|--------------------------|------------|-------------------------|------------|
| Interest Income:                            |       | $                        | 1,903,919  |                    | $          | 2,180,864                |       | $                       | 2,107,172  |   | $ | 1,847,561 |   |
| Net Realized and Unrealized Gains (Losses): |       | 16,790,125               |       | (9,661,082              | )          | (8,817,953               | )          | 15,551,725              |       |
| Expenses*                                   |       | 3,013,893                |       | 200,775                 |       | 204,207                  |       | 3,466,178               |       |
| Net Income (Loss):                          |       | 15,680,151               |       | (7,680,993              | )          | (6,914,988               | )          | 13,933,108              |       |
|                                             |            |                          |            |                         |            |                          |            |                         |            |  |  |  |  |

----

*  Expenses are inclusive of any realized andaccrued profit share to the General Partner. In the 3rd Quarter of 2007 reversal of the General Partner’srealized and accrued profit share resulted in negative Expenses.

 

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-end adjustments that are material to the resultsof any fiscal quarter reported above.

 

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

 

None.

 

Item9A.   Controls and Procedures

 

The General Partner, withthe participation of the General Partner’s principal executive officers andprincipal financial officer, has evaluated the effectiveness of the design andoperation of its disclosure controls and procedures with respect to thePartnership as of the end of the fiscal year covered by this Annual Report,and, based on their evaluation, have concluded that these disclosure controlsand procedures are effective.  There wereno significant changes in the General Partner’s internal controls with respectto the Partnership or in other factors applicable to the Partnership that couldsignificantly affect these controls subsequent to the date of their evaluation.

 

*Changesin Internal Control over Financial Reporting*

 

Section 404 of theSarbanes-Oxley Act of 2002 requires the General Partner to evaluate annuallythe effectiveness of its internal controls over financial reporting as of theend of each fiscal year, and to include a management report assessing theeffectiveness of its internal control over financial reporting in all annual reports. There were no changes in the Partnership’sinternal control over financial reporting during the quarter ended December 31,2007 that have materially affected, or are reasonably likely to materiallyaffect, our internal control over financial reporting.

 

*Management’sAnnual Report on Internal Control over Financial Reporting*

 

The General Partner isresponsible for establishing and maintaining adequate internal control over thePartnership’s financial reporting. Internal control over financial reporting isdefined in Rules 13a-15(f) and 15d-15(f) under the SecuritiesExchange Act of 1934 as a process designed by, or under the supervision of, acompany’s principal executive and principal financial officers and effected bya company’s board of directors, management and other personnel to providereasonable assurance regarding the reliability of financial reporting and thepreparation of financial statements for external purposes in accordance withgenerally accepted accounting principles. The General Partner’s internalcontrol over financial reporting includes those policies and procedures that:

 

 ·   pertain to the maintenanceof records that, in reasonable detail, accurately and fairly reflect thetransactions and dispositions of the Partnership’s assets;

 

 ·   provide reasonable assurancethat transactions are recorded as necessary to permit preparation of thePartnership’s financial statements in accordance with generally acceptedaccounting principles, and that the 

 

23

----

 

Partnership’s receiptsand expenditures are being made only in accordance with authorizations of theGeneral Partner’s management and directors; and

 

 ·   provide reasonable assuranceregarding prevention or timely detection of unauthorized acquisition, use ordisposition of the Partnership’s assets that could have a material effect onthe Partnership’s financial statements.

 

Because of its inherentlimitations, internal control over financial reporting may not prevent ordetect misstatements. Projections of any evaluation of effectiveness to futureperiods are subject to the risk that controls may become inadequate because ofchanges in conditions, or that the degree of compliance with the policies orprocedures may deteriorate.

 

The General Partnerassessed the effectiveness of its internal control over financial reportingwith respect to the Partnership as of December 31, 2007. In making thisassessment, management used the criteria set forth by the Committee ofSponsoring Organizations of the Treadway Commission (COSO) in Internal Control –Integrated Framework.  Based on its assessment, management has concludedthat, as of December 31, 2007, the General Partner’s internal control overfinancial reporting with respect to the Partnership is effective based on thosecriteria.

 

This annual report doesnot include an attestation report of the Partnership’s independent registeredpublic accounting firm regarding control over financial reporting.  TheGeneral Partner’s report was not subject to attestation by the Partnership’sregistered public accounting firm pursuant to rules of the SEC thattemporarily permit the Partnership to only provide the General Partner’s reportin this report.

 

Item9B.   Other Information.

 

None.

 

PART III

 

Item10.   Directors, Executive Officers andCorporate Governance

 

(a,b)  Identification of Directors and ExecutiveOfficers

 

The Partnership has nodirectors or executive officers.  ThePartnership is controlled and managed by the General Partner.

 

The General Partner, is aDelaware corporation organized in May 1982 to manage discretionaryaccounts in futures and forward markets. It is the corporate successor to a futures trading and advisoryorganization which has been continuously managing assets in the currency andfutures markets using quantitative, systematic techniques since 1971.

 

The principals and seniorofficers of the General Partner as of December 31, 2007 are as follows:

 

***Harvey Beker, age 54.***  Mr. Bekeris Co-Chief Executive Officer and Co-Chairman of the General Partner and TheMillburn Corporation.  He received aBachelor of Arts degree in economics from New York University (“NYU”) in 1974and a Master of Business Administration degree in finance from NYU in1975.  From June 1975 to July 1977,Mr. Beker was employed by Loeb Rhoades, Inc. where he developed andtraded silver arbitrage strategies.  FromJuly 1977 to June 1978, Mr. Beker was a futures trader atClayton Brokerage Co. of St. Louis.  Mr. Bekerhas been employed by The Millburn Corporation since June 1978 andinitially served as the Director of operations for its affiliate, MillburnPartners.  During his tenure at Millburn(including its affiliates, Millburn Partners and CommInVest Research LimitedPartnership (“CommInVest”)) he has been instrumental in the development of theresearch, trading and operations areas.  Mr. Bekerbecame a principal of the firm in June 1982.

 

***Gregg R. Buckbinder, age 49.***  Mr. Buckbinderis Senior Vice-President and Chief Operating Officer of the General Partner andThe Millburn Corporation.  He graduatedcum laude from Pace University (“Pace”) in 1980 with a B.B.A. in accounting andreceived an M.S. in taxation from Pace in 1988. He joined the General Partner and 

 

24

----

 

The Millburn Corporationin January 1998 from Odyssey Partners, L.P. where he was responsible forthe operation, administration and accounting of the firm’s merchant banking andmanaged account businesses from July 1990 through December 1997.  Mr. Buckbinder was employed by TuckerAnthony, a securities broker and dealer, from June 1985 to July 1990where he was First Vice President and Controller, and from August 1983 to June 1984where he designed and implemented various operations and accountingsystems.  He was with the publicaccounting firm of Ernst & Whinney from June 1984 to June 1985as a manager in the tax department and from September 1980 to August 1983as a senior auditor, with an emphasis on clients in the financial servicesbusiness.  He is a Certified PublicAccountant and a member of the American Institute of Certified PublicAccountants.

 

***George E. Crapple, age 63.***  Mr. Crappleis Co-Chief Executive Officer and Co-Chairman of the General Partner and TheMillburn Corporation.  In 1966 hegraduated with honors from the University of Wisconsin where his field ofconcentration was economics and he was elected to Phi Beta Kappa.  In 1969 he graduated from Harvard Law School,**magna cum laude**, where hewas a member of the Harvard Law Review. He was a lawyer with Sidley & Austin, Chicago, Illinois, from1969 until April 1, 1983, as a partner since 1975, specializing incommodities, securities, corporate and tax law. He was first associated with the General Partner in 1976 and joinedGeneral Partner and The Millburn Corporation (including its affiliates,Millburn Partners and CommInVest) on April 1, 1983 on a full-timebasis.  Mr. Crapple is a Director,Member of the Executive Committee, Chairman of the Appeals Committee and aformer Chairman of the Eastern Regional Business Conduct Committee of the NFA,past Chairman of the Managed Funds Association, a member of the Global MarketsAdvisory Committee of the CFTC and a member of the board of directors of theFutures Industry Association (“FIA”).

 

***Steven M. Felsenthal, age 38. ***Mr. Felsenthal is General Counsel and ChiefCompliance Officer of the General Partner and The Millburn Corporation.  Prior to joining Millburn in January 2004,Mr. Felsenthal was a senior associate in the investment management groupat Schulte Roth & Zabel LLP (September 1999 - January 2004),where he represented and advised hedge funds, registered investment companies,investment advisers, broker-dealers and banks in connection with all facets oftheir asset management businesses, and a member of the tax department ofKramer, Levin, Naftalis & Frankel LLP (October 1996- September 1999).  He graduated**cum laude** from Yeshiva University in 1991 with a bachelor ofarts degree in political science, and **orderof the coif** from Fordham University School of Law in 1996, where healso served as an editor of the Fordham Environmental Law Journal.  Mr. Felsenthal received an LL.M degreein taxation from NYU School of Law in 2001 and has written and been quoted innumerous published articles, and spoken at conferences, on various topicsrelated to investment management.  Mr. Felsenthalis a member of the New York State Bar and Co-Chairman of the Managed Funds AssociationCPO/CTA Advisory Committee.

 

***Mark B. Fitzsimmons, age 60.***  Mr. Fitzsimmonsis a Senior Vice-President of the General Partner and The MillburnCorporation.  His responsibilitiesinclude both business development and investment strategy.  He joined the General Partner and itsaffiliates in January 1990 from Morgan Stanley & Co. Incorporatedwhere he was a Principal and Manager of institutional foreign exchange salesand was involved in strategic trading for the firm from October 1987 untilJanuary 1990.  From September 1977to October 1987 he was with Chemical Bank New York Corporation (“Chemical”),first as a Senior Economist in Chemical’s Foreign Exchange Advisory Service andlater as a Vice-President and Manager of Chemical’s Corporate Trading Group.  While at Chemical he also traded both foreignexchange and fixed income products.  FromSeptember 1973 to September 1977 Mr. Fitzsimmons was employed bythe Federal Reserve Bank of New York, dividing his time between theInternational Research Department and the Foreign Exchange Department.  He graduated summa cum laude from theUniversity of Bridgeport, Connecticut in 1970 with a B.S. in economics.  His graduate work was done at the Universityof Virginia, where he received a certificate of candidacy for a Ph.D. ineconomics in 1973.

 

***Barry Goodman, age 50.*********  Mr. Goodmanis Executive Vice-President, Director of Trading and Co-Director of Research ofthe General Partner and The Millburn Corporation.  His responsibilities include overseeing thefirm’s trading operation and managing its trading relationships, as well as thedesign and implementation of trading systems. He graduated **magna cum laude**from Harpur College of the State University of New York in 1979 with a B.A. ineconomics.  From September 1980through October 1982 he was a commodity trader for E. F. Hutton &Co., Inc.   (“E.F. Hutton”).  At E.F. Hutton, he also designed andmaintained various technical indicators and coordinated research projectspertaining to the futures markets.  Hejoined the General Partner and The Millburn Corporation (including itsaffiliate, Millburn Partners) in November 1982 as Assistant Director ofTrading.

 

25

----

 

***Dennis B. Newton, age 56.*** Mr. Newtonis a Senior Vice-President of the General Partner and The MillburnCorporation.  His primaryresponsibilities are in administration and business development.  Prior to joining the General Partner and TheMillburn Corporation in September 1991, Mr. Newton was President ofPhoenix Asset Management, Inc. (“Phoenix”), a registered commodity pooloperator from April 1990 to August 1991 and President of itsaffiliated introducing broker, Phoenix Futures Inc., from March 1990 to June 1991.  Prior to his employment with Phoenix, Mr. Newtonwas a Director of Managed Futures with Prudential-Bache Securities Inc. (“Prudential-Bache”)from October 1987 to March 1990 and was associated with itsaffiliated futures commission merchant entity, Prudential Securities FuturesManagement, Inc.  Mr. Newtonjoined Prudential-Bache from Heinold Asset Management, Inc.  (“Heinold”), and its affiliated futurescommission merchant, Heinold Commodities Inc., where he was a member of thesenior management team from October 1974 to October 1987.  Heinold was a pioneer and one of the largestsponsors of funds utilizing futures and currency forward trading.

 

***Grant N. Smith, age 56.***  Mr. Smithis Executive Vice-President and Co-Director of Research of the General Partnerand The Millburn Corporation.  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.  Hereceived a B.S. degree from the Massachusetts Institute of Technology (“M.I.T.”)in 1974 and an M.S. degree from M.I.T. in 1975. While at M.I.T. he held several teaching and research positions in thecomputer science field and participated in various projects relating todatabase management.  He joined thepredecessor entity to The Millburn Corporation in June 1975, and has beencontinuously associated with the General Partner, The Millburn Corporation andtheir affiliates since that time.

 

***Tod A. Tanis, age 53.***   Mr. Tanisis a Vice President, Principal Accounting Officer and Director of Operations ofthe General Partner and The Millburn Corporation.  He is responsible for overseeing operationsand accounting for the firm’s commodity pools. He graduated from Grove City College in May 1976 with a B.A. inaccounting and joined the General Partner and The Millburn Corporation in May of1983.  Prior to joining Millburn, he waswith E.F. Hutton, where he was a Manager from December 1982 to April 1983;a Supervisor from August 1982 to December 1982; an InternationalAccountant from April 1979 to August 1982; and a staff accountantfrom June 1978 to April 1979. As a Manager at E.F. Hutton, he was responsible for all internal andexternal commodity reporting.  Mr. Tanisalso served as a Junior Accountant and then International Staff Accountant withMerrill Lynch & Company from September 1976 to May 1978.

 

(c)   Identification of Certain SignificantEmployees

 

None.

 

(d)   FamilyRelationships

 

None.

 

(e)   BusinessExperience

 

SeeItem 10 (a,b) above.

 

(f)   Involvementin Certain Legal Proceedings

 

None.

 

26

----

(g)   Codeof Ethics

 

The Partnership has noemployees, officers or directors and is managed by the General Partner. The General Partner has adopted an Executive Code of Ethics that applies to itsprincipal executive officers, principal financial officer and principalaccounting officer.  A copy of this Executive Code of Ethics may beobtained at no charge by written request to Millburn Ridgefield Corporation,411 West Putnam Avenue, Greenwich, Connecticut 06830 or by calling 203-625-7554(ask for Client Services).

 

(h)   AuditCommittee Financial Expert

 

Because the Partnershiphas no employees, officers or directors, the Partnership has no auditcommittee.  The Partnership is managed bythe General Partner.  Gregg Buckbinderserves as the General Partner’s “audit committee financial expert.”  Mr. Buckbinder is not independent of themanagement of the General Partner.  TheGeneral Partner is a privately owned corporation managed by itsshareholders.  It has no independent directors.

 

Item 11.   Executive Compensation

 

The Partnership has nodirectors, officers or employees.  Noneof the directors, officers or employees of the General Partner receivecompensation from the Partnership.  TheGeneral Partner makes all trading decisions on behalf of the Partnership.  The General Partner receives monthlybrokerage commissions of 0.458 of 1% of the Partnership’s Net Assets (which isreduced to 0.167 of 1% of Net Assets, plus the cost of all commissions andclearing charges due to third-party brokers, for partners who acquire theirInterests directly through the General Partner) and an annual profit share of20% 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, 2007, the General Partner knows of thefollowing persons who own beneficially more than 5% of the Partnership’sInterests as follows:

 
| **Name and Address**                                                             | ** ** | **Value of Interest** | ** ** | **Percentage of Limited Partnership Interests** | ** ** |
|----------------------------------------------------------------------------------|------------|-----------------------|------------|-------------------------------------------------|------------|
| ** **                                                                       | ** ** | **Held Directly**     | ** ** | **HeldIndirectly(1)**                           | ** ** | **% Directly** | ** ** | **% Indirectly** | ** ** |
| Malcolm H. Wiener                                                                | ** ** | $                     | 0          | ** **                                      | $          | 26,452,598 | ** ** |       0% | ** ** | 17.94% | ** ** |
| c/o Millburn Ridgefield Corporation   411 W. Putnam Avenue   Greenwich, CT 06830 |       |                  |       |                                            |       |   |   |   |   |
|                                                                             |       |                  |       |                                            |       |   |   |   |   |
| ALFA Investors                                                                   |       | $                     | 8,221,119  |                                            |       |   | 5.57% |   |   |   |
| 2108 E. South Blvd.   Montgomery, AL 36116                                       |       |                  |       |                                            |       |   |   |   |   |
|                                                                                  |            |                       |            |                                                 |            |  |  |  |  |  |  |

----

(1)           Interests held indirectly includeInterests with respect to which a person holds voting or dispositionpower:  (i) by virtue of serving asone of two or fewer trustees, custodian or officer of the beneficial ownerwhich is a charitable entity, benefit plan or custody account for the benefitof a minor; (ii) with respect to certain Interests owned by members of aperson’s immediate family; or (iii) through a self directed benefit plan.

 

All of the Partnership’sgeneral partner interest is held by the General Partner.

 

(b)   Security Ownership of Management

 

27

----

 

The Partnership has no officers or directors.  Under the terms of the Limited PartnershipAgreement, the Partnership’s affairs are managed by the General Partner, whichhas discretionary authority over the Partnership’s trading.  As of December 31, 2007, the GeneralPartner’s interest was valued at $4,570,266, which constituted 3.1% of the Partnership’scapital as of December 31, 2007.

 

As of December 31, 2007, the directors and executive officers ofthe General Partner own beneficially Limited Partnership Interests as follows:

 
| **Name**                                                            | ** ** | **Value of Interest** | ** ** | **Percentage of Limited Partnership Interests** | ** ** |
|---------------------------------------------------------------------|------------|-----------------------|------------|-------------------------------------------------|------------|
| ** **                                                          | ** ** | **Held Directly**     | ** ** | **HeldIndirectly(2)**                           | ** ** | **% Directly** | ** ** | **% Indirectly** | ** ** |
|                                                                |       |                  |       |                                            |       |   |   |   |   |
| Harvey Beker                                                        |       | $                     | 638,909    |                                            | $          | 8,311,315 |   | 0.43% |   | 5.64% |   |
| Gregg Buckbinder                                                    |       | $                     | 0          |                                            | $          | 397,567 |   |      0% |   | 0.27% |   |
| George Crapple                                                      |       | $                     | 31,960     |                                            | $          | 5,450,337 |   | 0.02% |   | 3.70% |   |
| Steven M. Felsenthal                                                |       | $                     | 0          |                                            | $          | 45,038 |   |      0% |   | 0.03% |   |
| Mark Fitzsimmons                                                    |       | $                     | 0          |                                            | $          | 2,380,858 |   |      0% |   | 1.61% |   |
| Barry Goodman                                                       |       | $                     | 0          |                                            | $          | 2,436,564 |   |      0% |   | 1.65% |   |
| Dennis Newton                                                       |       | $                     | 0          |                                            | $          | 314,560 |   |      0% |   | 0.21% |   |
| Grant Smith                                                         |       | $                     | 1,836,107  |                                            | $          | 1,127,578 |   | 1.25% |   | 0.76% |   |
| Tod Tanis                                                           |       | $                     | 0          |                                            | $          | 751,673 |   |      0% |   | 0.51% |   |
| directors and  executive officers of the General Partner as a group |       | $                     | 2,506,976  |                                            | $          | 21,215,490 |   | 1.70% |   | 14.38% |   |

----

(2)           Interests held indirectly includeInterests with respect to which a person holds voting or disposition power:  (i) by virtue of serving as one of twoor fewer trustees, custodian or officer of the beneficial owner which is acharitable entity, benefit plan or custody account for the benefit of a minor; (ii) withrespect to certain Interests owned by members of a person’s immediate family;or (iii) through a self directed benefit plan.

 

(c)   Changes in Control

 

None.

 

(d)   SecuritiesAuthorized for Issuance Under Equity Compensation Plans

 

None.

 

Item13.   Certain Relationships and Related Transactions

 

See “Item 11.  Executive Compensation” and “Item12.  Security Ownership of CertainBeneficial Owners and Management.” The Partnership allocated to the General Partner $3,533,293 in brokeragefees and allocated $3,048,112 in profit share to the New Profits Memo Accountfor the year ended  December 31,2007.  The General Partner’s generalpartner interest showed an allocation of income of $848,969 for the year ended December 31,

 

28

----

 

2007.  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 paysadministrative expenses for legal, audit and accounting services, up to 0.25 of1% per annum of the Partnership’s average month-end net assets.  A portion of such expenses are paid to anaffiliate of the General Partner, The Millburn Corporation, for the provisionof accounting services to the Partnership. The Partnership incurred administrative expenses of $385,059 during theyear ended December 31, 2007 of which $254,148 was paid or was payable toThe Millburn Corporation.  The GeneralPartner pays all administrative expenses in excess of 0.25 of 1% per annum ofthe Partnership’s average month-end net assets. The Partnership is prohibited from making any loans.

 

Item14.   Principal Accountant Fees and Services

 

(1)           Audit Fees

 

The aggregate fees forprofessional services rendered by Deloitte & Touche LLP in connectionwith their audit of the Partnership’s financial statements in connection withthe statutory and regulatory filings for the years ended December 31, 2007and 2006 were approximately $83,000 and $93,000, respectively.

 

(2)           Audit-Related Fees

 

There were no fees forassurance and related services rendered by Deloitte & Touche LLP forthe years ended December 31, 2007 and 2006.

 

(3)           Tax Fees

 

The aggregate fees forprofessional services rendered by Deloitte & Touche LLP for taxcompliance, advice or planning services rendered by Deloitte & ToucheLLP for the benefit of the Partnership for the years ended December 31,2007 and 2006 were approximately $7,900 and $7,600, respectively.

 

(4)           All Other Fees

 

None

 

(5)           Pre-Approval Policies

 

The board of directors ofthe General Partner pre-approves the engagement of the Partnership’s auditorfor all services to be provided by the auditor.

 

PART IV

 

Item15.   Exhibits and Financial Statement Schedules

 

(a)(1)   Financial Statements

 

The following areincluded with the 2007 Report of Independent Registered Public Accounting Firm,a copy of which is filed herewith as Exhibit 13.01.

 

Affirmation of MillburnRidgefield Corporation

Report of IndependentRegistered Public Accounting Firm

Statements of FinancialCondition

Condensed Schedules ofInvestments

Statements of Operations

Statements of Changes inPartners’ Capital

Statements of FinancialHighlights

 

 

29

----

 

Notes to FinancialStatements

 

(a)(2)   Financial Statement Schedules

 

All Schedules are omittedfor the reason that they are not required or are not applicable becauseequivalent information has been included in the financial statements or thenotes thereto.

 

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

 

The following exhibitsare included herewith.

 
| **Designation** | ** ** | **Description**                                                                  |
|-----------------|------------|----------------------------------------------------------------------------------|
|            |       |                                                                             |
| 13.01           |       | 2007 Report of  Independent Registered Public Accounting Firm                    |
|            |       |                                                                             |
| 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 Partnership as a part of itsRegistration Statement on Form 10 (Reg. No. 000-50725) on April 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 |
|                    |       |                                                                                                                                   |

 

30

----

| **Exhibit Number** | ** ** | **Description of Document**                                                                                          |
|-------------------------|------------|----------------------------------------------------------------------------------------------------------------------|
| ** **              | ** ** | ** **                                                                                                           |
| 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 |

 

31

----

 

SIGNATURES

 

Pursuant to therequirements of Section 13 or 15(d) of the Securities Exchange Act of1934, the Registrant has duly caused this report to be signed on its behalf bythe undersigned, thereunto duly authorized, on the 28th day of March, 2008.

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

 

Pursuant to therequirements of the Securities Exchange Act of 1934, this report has beensigned below by the following persons on behalf of the General Partner of theRegistrant and in the capacities and on the date indicated.

 
| **Signature**         | ** ** | **Title  with General Partner**   | ** ** | **Date**            |
|-----------------------|------------|----------------------------------------|------------|---------------------|
|                  |       |                                   |       |                |
|                  |       |                                   |       |                |
| /s/ Harvey Beker      |       | Co-Chief                               |       | March 28, 2008 |
| Harvey Beker          |       | Executive Officer and  Director        |       |                |
|                  |       | (Principal Executive  Officer)         |       |                |
|                  |       |                                   |       |                |
| /s/ George E. Crapple |       | Co-Chief Executive                     |       | March 28, 2008 |
| George E. Crapple     |       | Officer and Director                   |       |                |
|                  |       | (Principal Executive  Officer)         |       |                |
|                  |       |                                   |       |                |
| /s/ Gregg Buckbinder  |       | Chief Financial and  Operating Officer |       | March 28, 2008 |
| Gregg Buckbinder      |       | (Principal Financial  Officer)         |       |                |
|                  |       |                                   |       |                |
| /s/ Tod A. Tanis      |       | Vice President                         |       | March 28, 2008 |
| Tod A. Tanis          |       | (Principal Accounting  Officer)        |       |                |

 

(Being the principalexecutive officers, the principal financial officer and principal accountingofficer, and a majority of the directors of Millburn Ridgefield Corporation)

 

Millburn RidgefieldCorporation

General Partner ofRegistrant

March 28, 2008

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

 

32

----

 

EXHIBIT INDEX

 

The following exhibitsare included herewith.

 
| **Designation** | ** ** | **Description**                                                                  |
|-----------------|------------|----------------------------------------------------------------------------------|
|            |       |                                                                             |
| 13.01           |       | 2007 Report of  Independent Registered Public Accounting Firm                    |
|            |       |                                                                             |
| 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 Partnership as a part of itsRegistration Statement on Form 10 (Reg. No. 000-50725) on April 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                   |
|                         |            |                                                                                                                                        |  |

 

 

33

----