**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

 

**FORM 10-K**

** **

**ý****  Annual Report Pursuant toSection 13 or 15(d)**

**of****the Securities Exchange Act of1934**

 

**For theFiscal Year Ended:  December 31,2004**

 

**or**

 

**o****  Transition Report Pursuant toSection 13 or 15(d)**

**of****the Securities Exchange Act of1934**

 

**Commission File Number:  000-50725**

 

**NESTOR PARTNERS**

(Exact name of registrant as specified in its charter)

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

 

**c/o****MILLBURN RIDGEFIELD CORPORATION**

**411 West Putnam Avenue**

**Greenwich, Connecticut  06830**

(Address of principal executive offices)

 

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

 

Securities registered pursuant to Section 12(b) of theAct:   **None**

 

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

  (Titleof Class)

 

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

 

Yes    ý                 No  o

 

Indicate by check mark if disclosure of delinquentfilers pursuant to Item 405 of Regulations S-K is not contained herein, andwill not be contained, to the best of registrant’s knowledge, in definitiveproxy or information statements incorporated by reference in Part III of thisForm 10-K or any amendment to this Form 10-K. ý

 

Indicate by check mark whether the registrant is anaccelerated filer (defined in Rule 12b-2 of the Act).

 

Yes    o                 No  ý 

 

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

 

Not applicable.

 

Documents Incorporated by Reference

 

Registrant’s FinancialStatements for the years ended December 31, 2004, 2003 and 2002 with Report ofIndependent Registered Public Accounting Firm, the annual report to securityholders for the fiscal year ended December 31, 2004, is incorporated byreference into Part II Item 8 and Part IV hereof and filed as an exhibitherewith.

 

 

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PART I

 

Item 1.   Business

 

(a)   General development of business

 

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

 

The Partnership’s business is trading a diversifiedportfolio of futures, forward and related option contracts on currencies,metals, financial instruments, stock indices, energy and agriculturalcommodities.  Approximately 30%-45% 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 trading decisionsare made by the General Partner.

 

The General Partner was organized in May 1982 tomanage discretionary 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 September 13, 1984 and as a “commodity trading advisor”since July 1, 1982 and is a member of National Futures Association.  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, 2004, the aggregate net asset valueof the Partnership was $193,578,138.  Thevalue at December 31, 2004 of a limited partner’s initial $1,000 investment inthe Partnership on February 1, 1977 would be $39,116.45, based on the actualrate of return a limited partner’s investment in the Partnership would haverecognized, net of the highest charges applicable to a limited partner, duringeach month in the calculation period from February 1977 to December 31, 2004.

 

The Partnership’s fiscal year ends on December 31.

 

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

 

The Partnership is not a registeredinvestment 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’s business constitutes onlyone 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 asExhibit 13.01 to this report.

 

(c)   Narrative description of business

 

ThePartnership engages in the speculative trading of futures, options on futuresand forward contracts.  The Partnership’ssole trading adviser is the General Partner. The Partnership trades, pursuant to the GeneralPartner’s Diversified Portfolio, in the agricultural, metals, energy, interestrate and stock index futures and futures options markets and in the currencymarkets, trading primarily forward contracts in the interbank market.  The General Partner regards its approach aslong-term in nature.

 

 

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The objective of the General Partner’s trading methodis to participate in all major sustained price moves in the markets traded. TheGeneral Partner regards its as long-term in nature.The General Partner makes trading decisions pursuant to its trading method,which includes technical trend analysis, certain non-trend-following technicalsystems, and the money management principles described below, which may berevised from time to time.

 

The first step in the trading methodology isdeveloping trading systems which generate buy or sell decisions in a particularmarket based on the direction of price trends occurring over differenttime-frames. Over the last 30 years, the General Partner has developed hundredsof trading systems. These “heritage” systems are augmented from time to timewith the results of research. The General Partner tests the full range of thesystems in each market against five, ten or fifteen years of historical data tosimulate the results the system would have achieved in the markets had thesystem been used to make trading decisions during the simulation period. It thencalculates (i) the profitability of the systems and (ii) a number of statisticsdesigned to identify high quality profits such as (a) the percentage ofprofitable trades, (b) the worst losses experienced, (c) the average givebackof maximum profits on profitable trades and (d) Sharpe ratio (risk-adjustedreturns).

 

The General Partner selects multiple systems after a review ofstatistical data for the heritage systems in an effort to diversify away fromreliance on a single system. The General Partner attempts to select systemswith different characteristics to smooth the return stream. The General Partnerthen selects its portfolio weightings taking into account statistical data onthe systems’ returns, the relative volatility of the markets, liquidity constraintsand the General Partner’s judgment and experience.

 

Risk is a function of both price level and pricevolatility.  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.

 

In addition to the volatility overlay, the GeneralPartner’s risk management focuses on money management principles applicable tothe portfolio as a whole rather than to individual markets and control ofleverage and portfolio size.  There are,however, no restrictions on the amount of leverage the General Partner may useat any given time.

 

Pursuant to the Amended and RestatedAgreement of Limited Partnership (the “Limited Partnership Agreement”), theGeneral Partner receives a flat-rate monthly brokerage fee equal to 0.458 of 1%of the month-end Net Assets (a 5.5% annual rate).  The General Partner 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 its administrativeexpenses, including costs incurred in connection with the continuing offeringof the limited partnership interests (“Interests”), and any extraordinaryexpenses which it may incur.  The GeneralPartner pays all the routine costs of executing and clearing the Partnership’strades and all compensation due to the selling agents.

 

UBS Financial Services Inc., Deutsche BankSecurities, Inc. and Merrill Lynch, Pierce, Fenner & Smith Inc. act as thefutures brokers for the Partnership.  ThePartnership executes currency forward trades with several brokers and banks,including Morgan Stanley & Co. Incorporated and clears all such trades withMorgan Stanley & Co. Incorporated, serving as prime broker.  The Partnership pays “bid asked” spreads onits forward trades, as such spreads are incorporated into the pricing offorward contracts.  The General Partnermonitors the Partnership’s trades to ensure that the prices it receives arecompetitive.

 

Each partner has a capital account, and itsinitial balance is the amount of his contribution to the Partnership.  There is also a new profit memo account whichis credited with the General Partner’s profit share on redeemed Interests andany excess of the General Partner’s profit share over the Partnership’s taxablegains at year-end.  The Net Assets of thePartnership are determined monthly, and any increase or decrease from the endof the

 

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precedingmonth is added to or subtracted from the accounts (including the new profitmemo account) of the partners in the ratio that each account bears to allaccounts.  The credits to the new profitmemo account are charged to the accounts of the limited partners.

 

At the end of each fiscal year the Partnership’staxable capital gain or loss (including gains and losses on open positions in certainfutures and forward contracts which are “marked-to-market” at the end of thePartnership’s fiscal year) and ordinary income and expense are allocated amongthe partners for tax purposes, and each partner who is a United States citizenor resident is required to include on his personal income tax return hisdistributive share of such items.  Itemsof operating income such as interest and items of operating expense such aslegal, accounting and filing fees that accrued during each month will beallocated among the persons who were partners during each month in the ratiothat each partner’s capital account bears to all partners’ capital accounts.

 

Net capital gain is allocated first to the GeneralPartner up to the amount of the General Partner’s profit share for the year andthen up to the amount of any balance in the new profit memo account.  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.  A partner’s Tax Basis is theamount paid for the Interests redeemed plus net taxable income less taxablelosses previously allocated to such Interests and lessamounts previously distributed to the partner with respect to the redeemedInterests.  Remaining net capital gain isallocated among the partners whose capital accounts have increased from theirTax Basis.  The allocation to eachpartner is in the ratio that his increase bears to all partners’increases.  Net capital gain remaining isallocated to each partner in the ratio that his capital account value bears tothe total capital account value of all partners.

 

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

 

The Partnership’s cash and Treasury instruments areused by the Partnership to engage in its trading activities and as reserves tosupport that trading.  The Partnership’sassets deposited with the Partnership’s futures brokers as margin aremaintained in “customer segregated funds accounts” or “foreign futures andforeign options secured amount accounts” and are held in cash, or U.S. Treasuryinstruments.  Partnership assets notdeposited as margin are maintained in bank or brokerage accounts and are heldprimarily in bank money market funds or U.S. Treasury instruments.

 

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

 

Regulation

 

Under the Commodity Exchange Act, as amended(the “CEA”), commodity exchanges and futures trading are subject to regulationby the CFTC.  National FuturesAssociation (“NFA”), a “registered futures association” under the CEA, is theonly non-exchange self-regulatory organization for futures industryprofessionals.  The CFTC has delegated toNFA responsibility for the registration of “commodity trading advisors,” “commoditypool operators,” “futures commission merchants,” “introducing brokers” andtheir respective 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 the UBS Financial Services Inc. andDeutsche Bank A.G., to be registered and to comply with various reporting andrecord keeping requirements.  The CFTCmay suspend 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 GeneralPartner would be unable to continue to manage the business of thePartnership.  Should the General Partner’sregistration be suspended, termination of the Partnership might result.

 

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In addition to such registrationrequirements, the CFTC and certain commodity exchanges have established limitson the maximum net long or net short position which any person may hold orcontrol in particular commodities.  Mostexchanges also limit the changes in futures contract prices that may occurduring a single trading day.   Currencyforward contracts are not subject to regulation by any United States Governmentagency.

 

(i)   through(xii) - not applicable.

 

(xiii)   thePartnership has no employees.

 

(d)   Financial informationabout geographic areas

 

The Partnership does not engage in materialoperations in foreign countries (although it does trade from the United Statesin foreign currency forward contracts and on foreign futures exchanges), nor isa material portion of its revenues derived from foreign customers.

 

(e)   Available information

 

The Partnership files quarterly, annual andcurrent reports with the Securities and Exchange Commission (“SEC”).  These reports are available to read and copyat the SEC’s Public Reference Facilities in Washington, D.C. at 450 FifthStreet, N.W., Washington, D.C. 20549. Please call the SEC’s toll free number, 1-800-SEC-0330, for furtherinformation.  The Partnership does notmaintain a website where these reports are posted.  However, the Partnership’s filings are postedon the SEC’s website at http://www.sec.gov.

 

Item 2.   Properties

 

The Partnership does not own or use anyphysical properties in the conduct of its business.  The General Partner or anaffiliate perform administrative services for the Partnership from theiroffices.

 

Item 3.   Legal Proceedings

 

The General Partner is not aware of anypending legal proceedings to which either the Partnership is a party or towhich any of its assets are subject.  Inaddition there are no pending material legal proceedings involving the GeneralPartner.

 

Item 4.   Submissionof Matters to a Vote of Security Holders

 

None.

 

PART II

 

Item 5.   Market for the Registrant’s Common Equity and

          Related Stockholder Matters

 

(a)   Market Information.

 

There is no trading market for the Interests,and none is likely to develop.  Interestsmay be redeemed upon 15 business days’ written notice to the General Partner at theirnet asset value as of the last day of any month, subject to certain earlyredemption charges.

 

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(b)   Holders.

 

As of December 31, 2004, there were 887holders of Interests.

 

(c)   Dividends.

 

No distributions or dividends have been madeon the Interests, and the General Partner has no present intention to make any.

 

(d)   Securities Authorizedfor Issuance Under Equity Compensation Plans.

 

None.

 

(e)   Recent Sales ofUnregistered Securities; Use of Proceeds from Registered Securities.

 

The Partnership did not sell any unregisteredsecurities within the past three years which have not previously been includedin the Partnership’s Quarterly Reports on form 10Q or in a Current Report onForm 8-K.

 

Item 6.   Selected Financial Data

 

The following is a summary of operations forthe fiscal years 2004, 2003, 2002, 2001 and 2000 and total assets of thePartnership at December 31, 2004, 2003, 2002, 2001 and 2000.

 

 
| ** **                                         | ** ** | **For the Year  Ended  December 31,  2004** | ** **  | **For the Year  Ended  December 31,  2003** | ** ** | **For the Year  Ended  December 31,  2002** | ** ** | **For the Year  Ended  December 31,  2001** | ** **  | **For the Year  Ended  December 31,  2000** | ** ** |
|----------------------------------------------------|------------|---------------------------------------------|-------------|---------------------------------------------|------------|---------------------------------------------|------------|---------------------------------------------|-------------|---------------------------------------------|------------|
| Income Statement Items:                            |       |                                        |        |                                        |       |                                        |       |                                        |        |                                        |       |
|                                               |       |                                        |        |                                        |       |                                        |       |                                        |        |                                        |       |
| Interest income                                    |       | $                                           | 2,406,435   |                                        | $          | 2,061,312                                   |       | $                                           | 2,985,561   |                                        | $          | 7,983,764 |   | $ | 9,145,428 |   |
| Total net realized and unrealized gains  (losses)* |       | $                                           | (510,071    | )                                           | $          | 6,747,761                                   |       | $                                           | 38,834,784  |                                        | $          | (9,865,332 | ) | $ | 21,012,397 |   |
|                                               |       |                                        |        |                                        |       |                                        |       |                                        |        |                                        |       |
| Expenses:                                          |       |                                        |        |                                        |       |                                        |       |                                        |        |                                        |       |
| Brokerage commissions                              |       | $                                           | 5,497,025   |                                        | $          | 5,378,592                                   |       | $                                           | 4,580,773   |                                        | $          | 5,834,846 |   | $ | 6,254,028 |   |
| Administrative expenses (including custody  fees)  |       | $                                           | 528,584     |                                        | $          | 456,873                                     |       | $                                           | 393,610     |                                        | $          | 422,147 |   | $ | 427,852 |   |
| Profit share                                       |       | $                                           | 484,760     |                                        | $          | 668,526                                     |       | $                                           | 3,393,398   |                                        | $          | 65,922 |   | $ | 3,379,278 |   |
|                                               |       |                                        |        |                                        |       |                                        |       |                                        |        |                                        |       |
| Net Income (loss)                                  |       | $                                           | (4,614,005  | )                                           | $          | 2,305,082                                   |       | $                                           | 33,452,564  |                                        | $          | (8,204,483 | ) | $ | 20,096,667 |   |
|                                               |       |                                        |        |                                        |       |                                        |       |                                        |        |                                        |       |
| Balance Sheet Items:                               |       |                                        |        |                                        |       |                                        |       |                                        |        |                                        |       |
|                                               |       |                                        |        |                                        |       |                                        |       |                                        |        |                                        |       |
| Total assets                                       |       | $                                           | 209,518,483 |                                        | $          | 214,486,737                                 |       | $                                           | 145,414,744 |                                        | $          | 155,687,931 |   | $ | 183,175,008 |   |
| Total partners’ capital                       |       | $                                           | 193,578,138 |                                        | $          | 210,664,198                                 |       | $                                           | 140,956,833 |                                        | $          | 153,581,240 |   | $ | 176,649,020 |   |

 

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*From tradingof futures and forward contracts, foreign exchange transactions and U.S.Treasury obligations

 

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

 

Reference is made to “Item 6.  Selected Financial Data” and “Item8.  FinancialStatements and Supplementary Data.” The information contained therein is essential to, and should be read inconjunction with, the following analysis.

 

Capital Resources

 

Interests may be offered for sale as of thebeginning, and may be redeemed as of the end, of each month.

 

The amount of capital raised for thePartnership should not have a significant impact on its operations, as thePartnership has no significant capital expenditure or working capitalrequirements other than for monies to pay trading losses, brokerage commissionsand charges.  Within broad ranges ofcapitalization, the General Partner’s trading positions should increase ordecrease in approximate proportion to the size of the Partnership.

 

The Partnership raises additional capitalonly through the sale of Interests and capital is increased through tradingprofits (if any).  The Partnership doesnot engage in borrowing.

 

The Partnership trades futures, options andforward contracts on interest rates, commodities, currencies, metals, energyand stock indices.  Risk arises fromchanges in the value of these contracts (market risk) and the potentialinability of counterparties or brokers to perform under the terms of theircontracts (credit risk).  Market risk isgenerally to be measured by the face amount of the futures positions acquiredand the volatility of the markets traded. The credit risk from counterparty non-performance associated with theseinstruments is the net unrealized gain, if any, on these positions plus thevalue of the margin or collateral held by the counterparty.  The risks associated with exchange-tradedcontracts are generally perceived to be less than those associated withover-the-counter transactions, because exchanges typically (but notuniversally) provide clearinghouse arrangements in which the collective credit(in some cases limited in amount, in some cases not) of the members of theexchange is pledged to support the financial integrity of the exchange.  In over-the-counter transactions, on theother hand, traders must rely solely on the credit of their respectiveindividual counterparties.  Margins whichmay be subject to loss in the event of a default, aregenerally required in exchange trading, and counterparties may require marginor collateral in the over-the-counter markets.

 

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

 

The financial instruments traded by thePartnership contain varying degrees of off-balance sheet risk whereby changesin the market values of the futures and forward contracts underlying thefinancial instruments or the Partnership’s satisfaction of the obligations mayexceed the amount recognized in the statement of financial condition of thePartnership.

 

Due to the nature of the Partnership’s business,substantially all its assets are represented by cash and United Statesgovernment obligations, while the Partnership maintains its market exposurethrough open futures and forward contract positions.

 

The Partnership’s futures contracts aresettled by offset and are cleared by the exchange clearinghouse function.  Open futures positions are marked to marketeach trading day and the Partnership’s trading accounts are

 

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debitedor credited accordingly.  Options onfutures 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.  The Partnership’sspot and forward currency transactions conducted in the interbank market aresettled by netting offsetting positions or payment obligations and by cashpayments.

 

The value of the Partnership’s cash andfinancial instruments is not materially affected by inflation.  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 limited extent.  More important, changes in interest ratescould cause periods of strong up or down market price trends, during which thePartnership’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 assets are generally heldas cash or cash equivalents which are used to margin the Partnership’s futurespositions and withdrawn, as necessary, to pay redemptions and expenses.  Other than potential market-imposed  limitations on liquidity, due, for example,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 throughDecember 31, 2004, the Partnership experienced no meaningful periods ofilliquidity in any of the numerous markets traded by the General Partner.

 

CriticalAccounting Estimates

 

The Partnership records its transactions in futuresand forward currency contracts, including related income and expenses, on atrade date basis.  Open futures contractstraded on an 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 marketprices (“Spot Prices”) plus the time value of money (“Forward Points”) andcontractual prices of the underlying financial instruments.  The Spot Prices and Forward Points for openforward currency contracts are generally based on the 3:00 P.M. New York timeprices provided by widely used quotation service providers on the day withrespect to which Net Assets are being determined.  The Forward Points from the quotation serviceproviders are generally in periods of one month, two months, three months andsix months forward while the contractual forward delivery dates for the foreigncurrency contracts traded by the Partnership may be in between these periods.

 

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

 

The preparation of financial statements in conformitywith accounting principles generally accepted in the United States of Americarequires management to make estimates and assumptions, such as accrual of expenses, that affect the amounts and disclosures reportedin the financial statements.  Based onthe nature of the business and operations of the Partnership, the GeneralPartner believes that the estimates utilized in preparing the Partnership’sfinancial statements are appropriate and 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’s criticalaccounting estimates other than those currently used would likely result inmaterially different amounts from those reported.

 

Off-Balance SheetArrangements

 

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

 

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Contractual Obligations

 

The Partnership does not enter into anycontractual obligations or commercial commitments to make future payments of atype that would be typical for an operating company or that would affect itsliquidity or capital resources.  ThePartnership’s sole business is trading futures and forward currency contracts,both long (contracts to buy) and short (contracts to sell).  All such contracts are settled by offset, notdelivery.  Substantially all suchcontacts are for settlement within four months of the trade date andsubstantially all such contracts are held by the Partnership for less than fourmonths before being offset or rolled over into new contracts with similarmaturities.   The Partnership’s FinancialStatements, included as Exhibit 13.01 to this report,present a Condensed Schedule of Investments setting forth net unrealizedappreciation (depreciation) of the Partnership’s open future and forwardcurrency contracts, both long and short, at December 31, 2004.

 

Results of Operations

 

*PerformanceSummary*

 

The Partnership’s success depends on theGeneral Partner’s ability to recognize and capitalize on trends and otherprofit 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.

 

*2004*

 

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

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

 

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*                 Whilethe Partnership had a net dollar trading loss during 2004, there was apercentage trading gain in the aggregate sectors due to the timing ofadditional capital contributions and monthly volatility.

 

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

 

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

 

From March through August, a number of uncertaintiesplagued market participants including: the June Iraqi elections, the U.S. Presidential elections in November,the strength of the American economy and thrust of Federal Reserve policy, andChina’s foreign exchange, industrial and monetary policy directions.  As a result, markets across the boarddisplayed unprofitable, directionless price action.  Trading of currencies, interest rates, stockindices, metals and agricultural commodities produced losses.  Energy trading was the only profitable sectorfor this period.

 

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

 

*2003*

 

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

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

 

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

 

On a sector basis, currency trading was profitable for2003. Long positions in the euro and commodity currencies (South African rand,Australian and New Zealand dollars) were quite profitable as the U.S. currencyfell. 

 

10

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On the other hand, trading of Far Eastern currencies (yen, Korean won,and the Singapore dollar) produced losses, since heavy Central Bankintervention throughout the region counterbalanced much of the downwardpressure on the U.S. unit and led to erratic rate fluctuations.

 

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

 

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

 

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

 

Lastly, trading of agricultural commodities producedlosses throughout the year.

 

*2002*

 

During 2002, the Partnership achieved net realized andunrealized gains of $38,834,784 from its trading operations (including foreignexchange transactions and translations). Brokerage commissions of $4,580,773 and administrative expenses of$393,610 were paid or accrued.  ThePartnership paid a profit share to the General Partner of $3,393,398.  Interest income of $2,985,561 partiallyoffset the Partnership’s expenses resulting in a net gain of $33,452,564.  An analysis of  trading gain (loss) by sector is asfollows:

 
| **Sector**    | ** ** | **% Gain (Loss)** | ** ** |
|---------------|------------|-------------------|------------|
| ** **    | ** ** | ** **        | ** ** |
| Interest Rate |       | 18.15             | %          |
| Currencies    |       | 12.94             | %          |
| Stock Indices |       | 1.74              | %          |
| Metals        |       | (0.38             | )%         |
| Energy        |       | 0.18              | %          |
| Grains        |       | 0.52              | %          |
| Softs         |       | (2.75             | )%         |
|          |       |              |       |
| Total         |       | 30.40             | %          |

 

The Partnership’s net asset value advanced sharply in2002 as interest rate trading and currency trading were highly profitable.  Stock index and energy trading were alsoprofitable, while trading of agricultural commodities and metals producedlosses.

 

Long positions in U. S., European, and Japaneseinterest rate futures generated sizable gains. Sluggish worldwide economic activity, the continuing plunge of stockprices and the flight to safety and quality prompted by geopoliticaluncertainties triggered large, persistent capital flows into government bills,notes and bonds worldwide.

 

The U. S. dollar weakened during 2002 because marketparticipants came to doubt the likelihood of a quick economic recovery inAmerica; because of mushrooming global political tensions; and because of themassive swing from surplus to deficit in the federal and state governmentbudgets.  Hence, the capital inflows thathad supported the dollar, despite America’s huge current account deficit,shrank and reversed.  As a result, shortdollar positions relative to the euro, Swiss franc were very profitable.  A short dollar/long South African randposition was also profitable for the same reasons and also because gold priceswere boosted by safe haven buying.

 

Equity trading was moderately profitable due to shortpositions in German and U. S. equity futures. Meanwhile, long energy positions were slightly profitable as pricesgained in the wake of Middle Eastern turmoil, particularly near yearend.

 

11

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Despite strong profits from long goldpositions, metals trading lost money as non-precious metals prices fluctuatederratically.  Finally, in theagricultural sector, losses from trading sugar and cotton outweighed gains fromtrading corn.

 

Item 7A.  Quantitative and Qualitative Disclosures About Market Risk

 

**Introduction**

 

***Past Results Are Not Necessarily Indicativeof Future Performance***

 

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

 

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

 

The Partnership can rapidly acquire and/orliquidate both long and short positions in a wide range of differentmarkets.  Consequently, it is notpossible 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 a measure of the maximumamount which the Partnership could reasonably be expected to lose in a givenmarket sector.  However, the inherentuncertainty of the Partnership’s speculative trading and the recurrence in themarkets traded by the Partnership of market movements far exceedingexpectations could result in actual trading or non-trading losses far beyondthe indicated Value at Risk or the Partnership’s experience to date (*i.e.,* “risk of ruin”). In light of the foregoing as well as the risks and uncertaintiesintrinsic to all future projections, the inclusion of the quantificationincluded in this section should not be considered to constitute any assuranceor representation that the Partnership’s losses in any market sector will be limitedto Value at Risk or by the Partnership’s attempts to manage its market risk.

 

Materiality, as used in this section “Quantitativeand 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

 

***Quantitative Forward-Looking Statements***

*** ***

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

 

The Partnership’s risk exposure in thevarious market sectors traded by the General Partner is quantified below interms of Value at Risk.  Due to thePartnership’s mark-to-market accounting, any loss in the fair value of thePartnership’s open positions is directly reflected in the Partnership’searnings (realized or unrealized) and cash flow (at least in the case ofexchange-traded contracts in which profits and losses on open positions aresettled daily through variation margin).

 

Exchange maintenance margin requirements havebeen used by the Partnership as the measure of its Value at Risk.  Maintenance margin requirements are set byexchanges to equal or exceed 95-99% of the maximum one-day

 

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lossesin the fair value of any given contract incurred during the time period overwhich historical price fluctuations are researched for purposes of establishingmargin levels.  The maintenance marginlevels are established by dealers and exchanges using historical price studiesas well as an assessment of current market volatility (including the impliedvolatility of the options on a given futures contract) and economicfundamentals to provide a probabilistic estimate of the maximum expectednear-term one-day price fluctuation.

 

In the case of market sensitive instrumentswhich are not exchange traded (almost exclusively currencies in the case of thePartnership), dealers’ margins have been used as Valueat Risk.

 

The fair value of the Partnership’s futuresand forward positions does not have any optionality component.  However, the General Partner may also tradecommodity options on behalf of the Partnership. The Value at Risk associated with options would be reflected in the marginrequirement attributable to the instrument underlying each option.

 

In quantifying the Partnership’s Value atRisk, 100% positive correlation in the different positions held in each marketrisk category has been assumed. Consequently, the margin requirements applicable to the open contractshave simply been aggregated to determine each trading category’s aggregateValue at Risk.  The diversificationeffects resulting from the fact that the Partnership’s positions are rarely, ifever, 100% positively correlated have not been reflected.

 

***The Partnership’s Trading Value at Risk in Different MarketSectors***

*** ***

The following table indicates the average,highest and lowest amounts of trading Value at Risk associated with thePartnership’s open positions by market category for fiscal year ended December31, 2004.  During fiscal year 2004, thePartnership’s average total capitalization was approximately $198,100,000. 

 
| **Fiscal Year 2004** | ** ** |
|----------------------|------------|
| **Market Sector**    | ** ** | **Average  Value at Risk** | ** ** | **% of Average  Capitalization** | ** ** | **Highest  Value At Risk** | ** ** | **Lowest  Value At Risk** | ** ** |
| ** **           | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Interest Rates       |       | $ | 6.4 |   | 3.2 | % | $ | 8.4 |   | $ | 5.2 |   |
|                 |       |   |   |   |   |   |   |   |   |   |   |   |
| Currencies           |       | $ | 28.8 |   | 14.4 | % | $ | 37.3 |   | $ | 22.3 |   |
|                 |       |   |   |   |   |   |   |   |   |   |   |   |
| Stock Indices        |       | $ | 5.6 |   | 2.8 | % | $ | 9.1 |   | $ | 2.2 |   |
|                 |       |   |   |   |   |   |   |   |   |   |   |   |
| Metals               |       | $ | 1.1 |   | 0.5 | % | $ | 1.4 |   | $ | 0.9 |   |
|                 |       |   |   |   |   |   |   |   |   |   |   |   |
| Softs                |       | $ | 0.6 |   | 0.3 | % | $ | 0.8 |   | $ | 0.3 |   |
|                 |       |   |   |   |   |   |   |   |   |   |   |   |
| Grains               |       | $ | 0.5 |   | 0.3 | % | $ | 0.5 |   | $ | 0.5 |   |
|                 |       |   |   |   |   |   |   |   |   |   |   |   |
| Energies             |       | $ | 1.4 |   | 0.7 | % | $ | 2.5 |   | $ | 0.9 |   |
|                 |       |   |   |   |   |   |   |   |   |   |   |   |
| Livestock            |       | $ | 0.2 |   | 0.1 | % | $ | 0.2 |   | $ | 0.2 |   |
|                 |       |   |   |   |   |   |   |   |   |   |   |   |
| Total                |       | $ | 44.6 |   | 22.3 | % |   |   |   |   |

 

Average, highest and lowest Value at Riskamounts relate to the quarter-end amounts during the fiscal year.  Average Capitalization is the average of thePartnership’s capitalization at the end of each month during the fiscal year2004.  Dollar amounts represent millionsof dollars.

 

13

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The following table indicates the amount of tradingValue at Risk associated with the Partnership’s open positions by marketcategory as of the year ended December 31, 2003.  As of December 31, 2003, the Partnership’stotal capitalization was $210,664,198.

 
| **Fiscal Year 2003** | ** ** |
|----------------------|------------|
| **Market Sector**    | ** ** | **Value at Risk** | ** ** | **% of  Capitalization** | ** ** |
| ** **           | ** ** | ** ** | ** ** | ** ** | ** ** |
| Interest Rates       |       | $ | 8,396,699 |   | 3.7 | % |
|                 |       |   |   |   |   |
| Currencies           |       | $ | 37,271,270 |   | 16.4 | % |
|                 |       |   |   |   |   |
| Stock Indices        |       | $ | 6,443,465 |   | 2.8 | % |
|                 |       |   |   |   |   |
| Metals               |       | $ | 973,000 |   | 0.4 | % |
|                 |       |   |   |   |   |
| Commodities          |       | $ | 332,300 |   | 0.1 | % |
|                 |       |   |   |   |   |
| Energy               |       | $ | 2,548,800 |   | 1.1 | % |
|                 |       |   |   |   |   |
| Total                |       | $ | 55,965,534 |   | 24.5 | % |

 

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

*** ***

The face value of the market sectorinstruments held by the Partnership is typically many times the applicablemaintenance margin requirement (maintenance margin requirements generallyranging between approximately 1% and 10% of contract face value) as well asmany times the capitalization of the Partnership.  The magnitude of the Partnership’s openpositions creates 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 — give no indication of this “risk of ruin.”

 

***Non-Trading Risk***

*** ***

The Partnership has non-trading market riskon its foreign cash balances not needed for margin.  However, these balances (as well as anymarket risk they represent) are immaterial.

 

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

 

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

 

*The following qualitative disclosuresregarding the Partnership’s market risk exposures — except for (i) thosedisclosures that are statements of historical fact and (ii) the descriptions ofhow the General Partner manages the Partnership’s primary market risk exposures— constitute forward-looking statements within the meaning of Section 27A ofthe Securities Act and Section 21E of the Securities Exchange Act.  The Partnership’s primary market risk exposuresas well as the strategies used and to be used by the General Partner*for*managing such exposures are subject to numerous uncertainties,contingencies and risks, any one of which could cause the actual*

 

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*results**of the Partnership’s risk controls to differ materially from theobjectives of such strategies. Government interventions, defaults and expropriations, illiquid markets,the emergence of dominant fundamental factors, political upheavals, changes inhistorical price relationships, an influx of new market participants, increasedregulation and many other factors could result in material losses as well as inmaterial changes to the risk exposures and the risk management strategies ofthe Partnership.  There can be noassurance that the Partnership’s current market exposure and/or risk managementstrategies will not change materially or that any such strategies will beeffective in either the short- or long-term. Investors must be prepared to lose all or substantially all of theirinvestment in the Partnership.*

 

The following were the primary trading riskexposures of the Partnership as of December 31, 2004, by market sector.

 

FinancialInstruments. 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 movements betweencountries 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 smaller 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 marketexposure of the Partnership.  ThePartnership’s currency exposure is to exchange rate fluctuations, primarilyfluctuations which disrupt the historical pricing relationships betweendifferent currencies and currency pairs. These fluctuations are influenced by interest rate changes as well aspolitical and general economic conditions. The Partnership trades in a large number of currencies, includingcross-rates — i.e., positions between two currencies other than the U.S.dollar.  As of December 31, 2004 thePartnership’s primary currency exposures were in the U.S. dollar versus theEuro, Yen, Swiss Franc, Czech Krone, Korean Won, Singapore Dollar, SouthAfrican Rand, New Zealand Dollar and Australian Dollar.  The primary exposures in the currency crosseswere in the Yen versus the Canadian Dollar and in the Euro versus the Yen,British Pound, and Norwegian Krone.

 

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, 2004, the Partnership’sprimary exposures were in the E Mini Nasdaq 100(United States), Simex (Singapore), TOPIX (Japan), DAX (German) and Hang Seng(Hong Kong) stock indices.  ThePartnership is primarily exposed to the risk of adverse price trends or staticmarkets in the major U.S., European and Asian indices.  (Static markets would not cause major marketchanges but would make it difficult for the Partnership to avoid numerous smalllosses.)

 

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

 

Agricultural.  The Partnership’s primary commoditiesexposure is to agricultural price movements, which are often directly affectedby severe or unexpected weather conditions. Grains, coffee and cotton accounted for the substantial bulk of thePartnership’s commodities exposure as of December 31, 2004.  The Partnership also has market exposure toother agricultural commodities including live cattle, cocoa and the soybeancomplex.

 

Energy.  The Partnership’s primary energy marketexposure is to gas and oil price movements, often resulting from politicaldevelopments in the Middle East and economic conditions worldwide.  Energy prices are volatile and substantialprofits and losses have been and are expected to continue to be experienced inthis market.

 

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

 

The following were the only non-trading riskexposures of the Partnership as of December 31, 2004.

 

15

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ForeignCurrency Balances.  The Partnership’s primary foreign currencybalances are in Japanese yen, euro, British pounds 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).

 

SecuritiesPositions. The Partnership’s only market exposure in instruments held other thanfor trading is in its securities portfolio. The Partnership holds only cash or interest-bearing, credit risk-free,short-term paper — typically U.S. Treasury instruments with durations no longerthan 1 year.  Violent fluctuations inprevailing interest rates could cause immaterial mark-to-market losses on thePartnership’s securities, although substantially all of these short-terminstruments are held to maturity.

 

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

*** ***

The General Partner attempts to control riskthrough the systematic application of its trading method, which includes amulti-system approach to price trend recognition, an analysis of marketvolatility, the application of certain money management principles, which maybe revised from time to time, and adjusting leverage or portfolio size.  In addition, the General Partner limits itstrading to markets which it believes are sufficiently liquid in respect of theamount of trading it contemplates conducting.

 

The General Partner develops trading systemsusing various quantitative models and data and tests those systems in numerousmarkets against historical data to simulate trading results.  The General Partner then analyzes theprofitability of the systems looking at such features as the percentage ofprofitable trades, the worst losses experienced, the average giveback ofmaximum profits on profitable trades and risk adjusted returns.  The General Partner selects multiple systemsin each market after a review of statistical data for the systems in an effortto diversify away from reliance on a single system.  The General Partner attempts to select systemswith different characteristics to smooth the return stream.

 

The General Partner also attempts to assessmarket volatility as a means of monitoring and evaluating risk.  In doing so, the General Partner uses avolatility overlay system which is designed to measure the risk in a portfolio’sposition in a market and to signal a decrease in position size when riskincreases and an increase in position size when risk decreases.  The General Partner’s volatility overlaymaintains overall portfolio risk and distribution of risk across markets withindesignated ranges.

 

The General Partner’s risk management alsofocuses on money management principles applicable to a portfolio as a wholerather than to individual markets.  Thefirst principle is reducing overall portfolio volatility throughdiversification among markets.  TheGeneral Partner seeks a portfolio in which returns from trading in differentmarkets are not highly correlated, that is, in which returns are not all positiveor negative at the same time.  Additionalmoney management principles include limiting the assets committed as margin orcollateral, generally within a range of 15% to 35% of an account’s net assets;avoiding the use of unrealized profits in a particular market as margin foradditional positions in the same market; and changing the equity used fortrading an account solely on a controlled periodic basis, not automatically dueto an increase in equity from trading profits.

 

Another important risk management function isthe careful control of leverage or portfolio size.  Leverage levels are determined by simulatingthe entire portfolio over the past five or ten years to determine the worstcase experienced by the portfolio in the simulation period.  The worst case or peak-to-trough drawdown, is measured from a daily high in portfolio assetsto the subsequent daily low whether that occurs days, weeks or months after thedaily high.  If the General Partnerconsiders the drawdown too severe, it reduces the leverage or portfolio size.

 

The General Partnerdetermines asset allocation among markets taking into account statistical dataon the system’s returns, the relative volatility of the markets, liquidityconstraints and the General Partner’s judgment and experience.  From time to time the General Partner mayadjust the size of a position, long or short, in any given market.  This exercise of discretion generally occursonly in response to unusual market conditions that may not have been factoredinto the design of the portfolio and trading systems and is generally intendedto reduce risk exposure.  Decisions tomake such adjustments require the exercise of judgment and may includeconsideration of the volatility of the particular market; the pattern of pricemovements, both inter-day and intra-day; open interest; volume of trading;changes in spread relationships between various forward contracts; and overallportfolio balance and risk exposure.

 

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Item 8.   Financial Statements and Supplementary Data

 

Financial statements required by this item,including the report of Deloitte & Touche LLP for the fiscal year endedDecember 31, 2004, are included as Exhibit 13.01 to this report.  The report of Ernst & Young LLP for thefiscal year ended December 31, 2003 is filed as Exhibit 13.02 to this report.

 

The following summarized quarterly financialinformation presents the results of operations for the three month periodsended March 31, June 30, September 30 and December 31, 2004 and 2003.  This information has not been audited.

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

 

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

 
| ** **                                  | ** ** | **Fourth Quarter  2003** | ** ** | **Third Quarter  2003** | ** ** | **Second Quarter  2003** | ** ** | **First Quarter  2003** | ** ** |
|---------------------------------------------|------------|--------------------------|------------|-------------------------|------------|--------------------------|------------|-------------------------|------------|
| Interest Income:                            |       | $                        | 516,615    |                    | $          | 511,434                  |       | $                       | 511,318    |   | $ | 521,945 |   |
| Net Realized and Unrealized Gains (Losses): |       | (13,620,938              | )          | 7,541,067               |       | 10,846,285               |       | 1,981,347               |       |
| Expenses*:                                  |       | 1,646,852                |       | 1,541,824               |       | 1,426,957                |       | 1,219,832               |       |
| Net Income (Loss):                          |       | (13,338,863              | )          | 5,807,969               |       | 8,766,621                |       | 1,069,355               |       |
|                                             |            |                          |            |                         |            |                          |            |                         |            |  |  |  |  |

 

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

 

There were no extraordinary, unusual or infrequently occurring itemsrecognized in any quarter within the two most recent fiscal years, and thePartnership has not disposed of any segments of its business.  There have been no year-end adjustments thatare material to the results of any fiscal quarter reported above.

 

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

 

On August 25, 2004, Ernst & Young LLP  notified the Board of Directors of theGeneral Partner that it had resigned as the independent auditor for thePartnership.  On August 26, 2004, theBoard of Directors of the General Partner approved the engagement of Deloitte& Touche LLP as independent registered public accounting firm for thePartnership.

 

Disclosure regarding the change of the Partnership’s auditors waspreviously reported on the Partnership’s current report on Form 8-K filedAugust 26, 2004, as amended by Amendment No. 1 thereto filed on September 2,2004.  There were no disagreements withErnst & Young LLP regarding accounting principles or practices, financialstatement disclosure or audit scope or procedure.

 

Item 9A.   Controlsand Procedures

 

The General Partner, with the participationof the General Partner’s principal executive officers and principal financialofficer, has evaluated the effectiveness of the design and operation of itsdisclosure controls and procedures with respect to the Partnership within 90days of the filing date of this Annual Report, and, based on

 

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theirevaluation, have concluded that these disclosure controls and procedures areeffective.  There were no significantchanges in the General Partner’s internal controls with respect to thePartnership or in other factors applicable to the Partnership that could significantlyaffect these controls subsequent to the date of their evaluation.

 

PART III

 

Item 10.   Directors and Executive Officers of the Registrant

 

(a,b)  Identification of Directors and ExecutiveOfficers

 

The Partnership has no directors or executiveofficers.  The Partnership is controlledand managed by the General Partner.

 

The General Partner,is a Delaware 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 senior officers of theGeneral Partner as of December 31, 2004 are as follows:

 

***Harvey Beker, age51.***  Mr. Beker is Co-Chief Executive Officer and Co-Chairman of the GeneralPartner and The Millburn Corporation, and a partner of their affiliate,ShareInVest Research L.P.  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 and traded silverarbitrage strategies.  From July 1977 toJune 1978, Mr. Beker was a futures trader at Clayton Brokerage Co. of St.Louis.  Mr. Beker has been employed byThe Millburn Corporation since June 1978 and initially served as the Directorof operations for its affiliate, Millburn Partners.  During his tenure at Millburn (including itsaffiliates, Millburn Partners and CommInVest Research Limited Partnership (“CommInVest”))he has been instrumental in the development of the research, trading andoperations areas.  Mr. Beker became aprincipal of the firm in June 1982, and a partner in ShareInVest, thepredecessor of ShareInVest Research L.P. (“ShareInVest”), in April 1982.

 

***Gregg R. Buckbinder,age 46.***  Mr. Buckbinder is Senior Vice-President and Chief Operating Officer ofthe General Partner and The Millburn Corporation and a partner, since January2000, of ShareInVest.  He graduated cumlaude 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 The Millburn Corporation in January1998 from Odyssey Partners, L.P. where he was responsible for the operation,administration and accounting of the firm’s merchant banking and managedaccount businesses from July 1990 through December 1997.  Mr. Buckbinder was employed by TuckerAnthony, a securities broker and dealer, from June 1985 to July 1990 where hewas First Vice President and Controller, and from August 1983 to June 1984where he designed and implemented various operations and accounting systems.  He was with the public accounting firm ofErnst & Whinney from June 1984 to June 1985 as a manager in the taxdepartment and from September 1980 to August 1983 as a senior auditor, with anemphasis on clients in the financial services business.  He is a Certified Public Accountant and amember of the American Institute of Certified Public Accountants.

 

***George E. Crapple,age 60.***  Mr. Crapple is Co-Chief Executive Officer and Co-Chairman of the GeneralPartner and The Millburn Corporation and a partner of ShareInVest.  In 1966 he graduated with honors from theUniversity of Wisconsin where his field of concentration was economics and hewas elected to Phi Beta Kappa.  In 1969 hegraduated from Harvard Law School, **magnacum laude**, where he was a member of the Harvard Law Review.  He was a lawyer with Sidley & Austin,Chicago, Illinois, from 1969 until April 1, 1983, as a partner since 1975,specializing in commodities, securities, corporate and tax law.  He was first associated with the GeneralPartner in 1976 and joined General Partner and The Millburn Corporation(including its affiliates, Millburn Partners and CommInVest) on April 1, 1983on a full-time basis.  He became apartner in ShareInVest in April 1984. Mr. Crapple is a Director, Member of the Executive Committee, Chairmanof the Appeals Committee and a former Chairman of the Eastern Regional BusinessConduct Committee of the NFA, past Chairman of the Managed Funds

 

18

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Association, amember of the Global Markets Advisory Committee of the CFTC and a member of theboard of directors of the Futures Industry Association (“FIA”).

 

***Steven M.Felsenthal, age 35.*** Mr. Felsenthal is General Counsel and ChiefCompliance Officer of the General Partner, The Millburn Corporation andShareInVest.  Prior to joining Millburnin January 2004, Mr. Felsenthal was a senior associate in the investmentmanagement group at Schulte Roth & Zabel LLP (September 1999- January2004), where he represented and advised hedge funds, registered investmentcompanies, investment advisers, broker-dealers and banks in connection with allfacets of their asset management businesses, and a member of the tax departmentof Kramer, Levin, Naftalis & Frankel LLP (October 1996- September 1999).  He graduated**cum laude** from Yeshiva University in 1991 with a bachelor of arts degree in political science, and **order of the coif** from FordhamUniversity School of Law in 1996, where he also served as an editor of theFordham Environmental Law Journal.  Mr.Felsenthal received an LL.M degree in taxation from NYU School of Law in 2001and has written and been quoted in numerous published articles on varioustopics related to investment management. Mr. Felsenthal is a member of the New York State Bar.

 

***Mark B. Fitzsimmons,age 57.****** ***Mr. Fitzsimmonsis a Senior Vice-President of the General Partner and The Millburn Corporationand a partner, since January 2000, of ShareInVest.  His responsibilities include both businessdevelopment and investment strategy.  Hejoined the General Partner and its affiliates in January 1990 from MorganStanley & Co. Incorporated where he was a Principal and Manager ofinstitutional foreign exchange sales and was involved in strategic trading forthe firm from October 1987 until January 1990. From September 1977 to October 1987 he was with Chemical Bank New YorkCorporation (“Chemical”), first as a Senior Economist in Chemical’s ForeignExchange Advisory Service and later as a Vice-President and Manager of Chemical’sCorporate Trading Group.  While atChemical he also traded both foreign exchange and fixed income products.  From September 1973 to September 1977 Mr.Fitzsimmons was employed by the Federal Reserve Bank of New York, dividing histime between the International Research Department and the Foreign ExchangeDepartment.  He graduated summa cum laudefrom the University of Bridgeport, Connecticut in 1970with a B.S. in economics.  His graduatework was done at the University of Virginia, where he received a certificate ofcandidacy for a Ph.D. in economics in 1973.

 

***Barry Goodman, age47.***  Mr. Goodman is Executive Vice-President,Director of Trading and Co-Director of Research of the General Partner and TheMillburn Corporation and a partner of ShareInVest .  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 1980 throughOctober 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 MillburnCorporation (including its affiliate, Millburn Partners) in November 1982 asAssistant Director of Trading.  He becamea partner in ShareInVest in January 1984.

 

***Dennis B. Newton, age53.*** Mr. Newton is a Senior Vice-President of theGeneral Partner and The Millburn Corporation. His primary responsibilities are in administration and businessdevelopment.  Prior to joining theGeneral Partner and The Millburn Corporation in September 1991, Mr. Newton wasPresident of Phoenix Asset Management, Inc. (“Phoenix”), a registered commoditypool operator from April 1990 to August 1991 and President of its affiliatedintroducing broker, Phoenix Futures Inc., from March 1990 to June 1991.  Prior to his employment with Phoenix, Mr.Newton was a Director of Managed Futures with Prudential-Bache Securities Inc.(“Prudential-Bache”) from October 1987 to March 1990 and was associated withits affiliated futures commission merchant entity, Prudential SecuritiesFutures Management, 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, age53.***  Mr. Smith is Executive Vice-President and Co-Director of Research of theGeneral Partner and The Millburn Corporation and a partner of ShareInVest.  He is responsible for the design, testing andimplementation of quantitative trading strategies, as well as for planning andoverseeing the computerized decision-support systems of the firm.  He received a B.S. degree from theMassachusetts Institute of Technology (“M.I.T.”) in 1974 and an M.S. degreefrom M.I.T. in 1975.  While at M.I.T. heheld several teaching and research positions in the computer science field andparticipated in various projects relating to database 

 

19

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management.  He joined the predecessor entity to TheMillburn Corporation in June 1975, and has been continuously associated withthe General Partner, The Millburn Corporation and their affiliates since thattime.

 

***Tod A. Tanis, age 50.***   Mr. Tanis is a Vice President, PrincipalAccounting Officer and Director of Operations of the General Partner and TheMillburn Corporation.  He is responsiblefor overseeing operations and accounting for the firm’s commodity pools.  He graduated from Grove City College in May1976 with a B.A. in accounting and joined the General Partner and The MillburnCorporation in May of 1983.  Prior tojoining Millburn, he was with E.F. Hutton, where he was a Manager from December1982 to April 1983; a Supervisor from August 1982 to December 1982; anInternational Accountant from April 1979 to August 1982; and a staff accountantfrom June 1978 to April 1979.  As aManager at E.F. Hutton, he was responsible for all internal and externalcommodity reporting.  Mr. Tanis alsoserved as a Junior Accountant and then International Staff Accountant withMerrill Lynch & Company from September 1976 to May 1978.

 

(c)   Identificationof Certain Significant Employees

 

None.

 

(d)   Family Relationships

 

None.

 

(e)   Business Experience

 

See Item 10 (a,b)above.

 

(f)   Involvement inCertain Legal Proceedings

 

None.

 

(g)   Promoters and ControlPersons

 

The General Partner is the sole promoter andcontrol person of the Partnership.

 

(h)   Audit CommitteeFinancial Expert

 

Since the Partnership has no employees,officers or directors, the Partnership has no audit committee.  The Partnership is managed by the GeneralPartner.  Gregg Buckbinder serves as theGeneral 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 its shareholders.  It has no independent directors.

 

(j)   Code of Ethics

 

The Partnership has no employees, officers ordirectors and is managed by the General Partner.  The General Partner hasadopted an Executive Code of Ethics that applies to its principal executiveofficers, principal financial officer and principal accounting officer.  Acopy of this Executive Code of Ethics may be obtained at no charge by writtenrequest to Millburn Ridgefield Corporation, 411 West Putnam Avenue, Greenwich,Connecticut 06830 or by calling 203-625-7554 (ask for Client Services).

 

Item 11.  Executive Compensation

 

The Partnership has no directors orofficers.  None of the directors orofficers of the General Partner receive compensation from the Partnership.  The General Partner makes all tradingdecisions on behalf of the Partnership. The General Partner receives monthly brokerage commissions of 0.458 of1% of the Partnership’s Net Assets (which is reduced to 0.167 of 1% of NetAssets for partners who acquire their Interests directly through the GeneralPartner) and an annual profit share of 20% of any new trading profit asdefined.

 

20

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Item 12.   Security Ownership of Certain Beneficial Ownersand Management

 

(a)   Security Ownership of Certain Beneficial Owners

 

As of December 31, 2004, the General Partner knows ofthe following person who owns beneficially more than 5% of the Partnership’sInterests as follows: 

 
| **Name and Address**                                                              | ** **        | **Value of Interest** | ** **        | **Percentage of Limited Partnership** | ** **     |
|-----------------------------------------------------------------------------------|-------------------|-----------------------|-------------------|---------------------------------------|----------------|
| ** **                                                                        | ** **        | ** **            | **Held**          | ** **                            | **Interests**  | ** ** |
| ** **                                                                        | **Held Directly** | ** **            | **Indirectly(1)** | ** **                            | **% Directly** | ** ** | **% Indirectly** | ** ** |
|                                                                              |              |                  |              |                                  |           |   |   |   |   |   |   |
| Malcolm H. Wiener                                                                 |              |                  |              |                                  |           |   |   |   |   |   |   |
| c/o  Millburn Ridgefield Corporation

411  W. Putnam Avenue

Greenwich,  CT 06830 |              | $                     | 0                 |                                  | $              | 16,308,930 |   | 0 | % | 8.59 | % |

 

All of the Partnership’s general partnerinterest is held by the General Partner.

 

(b)   Security Ownership of Management

 

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, 2004, the General Partner’sinterest was valued at $3,710,902, which constituted 1.92% of the Partnership’scapital as of December 31, 2004.

 

As of December 31, 2004, the directors and executiveofficers of the General Partner own beneficially Limited Partnership Interestsas follows: 

 
| **Name**                                                            |               | **Value of  Interest** | ** **        | **Percentage  of Limited Partnership** | ** **      |
|---------------------------------------------------------------------|--------------------|------------------------|-------------------|----------------------------------------|-----------------|
| ** **                                                          | ** **         | ** **             | **Held**          | ** **                             | **Interests**   | ** ** |
| ** **                                                          | **Held  Directly** | ** **             | **Indirectly(2)** | ** **                             | **%  Directly** | ** ** | **%  Indirectly** | ** ** |
|                                                                |               |                   |              |                                   |            |   |   |   |   |   |   |
| Harvey Beker                                                        |               | $                      | 1,647,475         |                                   | $               | 4,538,876 |   | 0.87 | % | 2.39 | % |
|                                                                |               |                   |              |                                   |            |   |   |   |   |
| Gregg Buckbinder                                                    |               | $                      | 0                 |                                   | $               | 264,156 |   | 0.00 | % | 0.14 | % |
|                                                                |               |                   |              |                                   |            |   |   |   |   |
| George Crapple                                                      |               | $                      | 21,177            |                                   | $               | 4,158,664 |   | 0.01 | % | 2.19 | % |
|                                                                |               |                   |              |                                   |            |   |   |   |   |   |   |
| Steven M. Felsenthal                                                |               | $                      | 0                 |                                   | $               | 16,673 |   | 0.00 | % | 0.00 | % |
|                                                                |               |                   |              |                                   |            |   |   |   |   |   |   |
| Mark Fitzsimmons                                                    |               | $                      | 0                 |                                   | $               | 1,191,593 |   | 0.00 | % | 0.63 | % |
|                                                                |               |                   |              |                                   |            |   |   |   |   |   |   |
| Barry Goodman                                                       |               | $                      | 191,860           |                                   | $               | 1,723,864 |   | 0.10 | % | 0.91 | % |
|                                                                |               |                   |              |                                   |            |   |   |   |   |   |   |
| Dennis Newton                                                       |               | $                      | 0                 |                                   | $               | 182,230 |   | 0.00 | % | 0.10 | % |
|                                                                |               |                   |              |                                   |            |   |   |   |   |   |   |
| Grant Smith                                                         |               | $                      | 1,216,660         |                                   | $               | 726,497 |   | 0.64 | % | 0.38 | % |
|                                                                |               |                   |              |                                   |            |   |   |   |   |   |   |
| Tod Tanis                                                           |               | $                      | 0                 |                                   | $               | 431,574 |   | 0.00 | % | 0.23 | % |
|                                                                |               |                   |              |                                   |            |   |   |   |   |   |   |
| directors  and executive officers of the General Partner as a group |               | $                      | 3,077,172         |                                   | $               | 13,234,127 |   | 1.62 | % | 6.97 | % |

 

----

(1)           Interestsheld indirectly include Interests with respect to which Mr. Wiener holds votingor disposition power:  (i) by virtue ofserving as a trustee of The Malcolm Hewitt Wiener Trust, which in turn is thebeneficial owner of Interests; (ii) with respect to certain Interests owned bymembers of Mr. Wiener’s immediate family; or (iii) through a self directedbenefit plan. 

(2)           Interests held indirectly include Interests with respectto which a person holds voting or disposition power:  (i) by virtue of serving as one of two orfewer trustees, custodian or officer of the beneficial owner which is a charitableentity, 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.

 

21

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(c)   Changes in Control

 

None.

 

(d)   Securities Authorizedfor Issuance Under Equity Compensation Plans

 

None.

 

Item 13.   Certain Relationships and Related Transactions

 

See “Item 11. Executive Compensation” and “Item 12.  Security Ownership ofCertain Beneficial Owners and Management.”  The Partnership allocated to the GeneralPartner $5,497,025 in brokerage fees and allocated $484,760 in profit share tothe New Profits Memo Account for the year ended  December 31, 2004.  The General Partner’s general partnerinterest showed an allocation of income of $49,114 for the year ended December31, 2004.  The General Partner has paidcertain administrative expenses to third-parties on behalf of the Partnership,related to legal, accounting, auditing, printing, postage and similaradministrative expenses, and has been or will be reimbursed without interest bythe Partnership.  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 $528,584 during theyear ended 2004 of which $263,807 was paid or was payable to The MillburnCorporation.  The General Partner paysall administrative expenses in excess of 0.25 of 1% per annum of thePartnership’s average month-end net assets. The Partnership is prohibited from making any loans.

 

Item 14.   PrincipalAccountant Fees and Services

 

(1)           AuditFees

 

The aggregate fees for professional servicesrendered by Deloitte & Touche LLP in connection with their audit of thePartnership’s financial statements in connection with the statutory andregulatory filings for the year ended December 31, 2004 was approximately$30,000.

 

The aggregate fees for professional servicesrendered by Ernst & Young LLP in connection with their audit of thePartnership’s financial statements and reviews of the financial statementsincluded in the quarterly reports on Form 10-Q and in connection with thestatutory and regulatory filings for the years ended December 31, 2004 andDecember 31, 2003 were approximately $20,167 and $55,500, respectively.

 

22

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(2)           Audit-RelatedFees

 

There were no fees for assurance and relatedservices rendered by Deloitte & Touche LLP or Ernst & Young LLP for theyears ended December 31, 2004 and December 31, 2003.

 

(3)           TaxFees

 

The aggregate fees for professional servicesrendered by Deloitte & Touche LLP for tax compliance, advice or planningservices rendered by Deloitte & Touche LLP for the benefit of thePartnership for the year ended December 31, 2004 was approximately $7,353.

 

Neither Deloitte & Touch LLP nor Ernst& Young LLP rendered tax compliance, advice or planning services for thebenefit of the Partnership for the year ended December 31, 2003.

 

(4)           AllOther Fees

 

None

 

(5)           Pre-ApprovalPolicies

 

The board of directors of the General Partnerpre-approves the engagement of the Partnership’s auditor for all services to beprovided by the auditor.

 

PART IV

 

Item 15.   Exhibitsand Financial Statement Schedules

 

(a)(1)   Financial Statements

 

The following areincluded with the 2004 Report of Independent Registered Public Accounting Firm,a copy of which is filed herewith as Exhibit 13.01.

 

Affirmation of Millburn RidgefieldCorporation

Report of Independent Registered PublicAccounting Firm

Statements of Financial Condition

Condensed Schedules of Investments

Statements of Operations

Statements of Changes in Partners’ Capital

Statements of Financial Highlights

Notes to Financial Statements

 

(a)(2)   Financial Statement Schedules

 

All Schedules are omitted for the reason thatthey are not required or are not applicable because equivalent information hasbeen included in the financial statements or the notes thereto.

 

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

 

The following exhibits are included herewith.

 

23

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| **Designation** | ** ** | **Description**                                                        |
|-----------------|------------|------------------------------------------------------------------------|
| ** **      | ** ** | ** **                                                             |
| 13.01           |       | 2004 Report of Independent Registered  Public Accounting Firm          |
|            |       |                                                                   |
| 13.02           |       | 2003 Report of Independent Auditors                                    |
|            |       |                                                                   |
| 31.1            |       | Rule 13a-14(a)/15d-14(a) Certification of  Principal Executive Officer |
|            |       |                                                                   |
| 31.2            |       | Rule 13a-14(a)/15d-14(a) Certification of  Principal Executive Officer |
|            |       |                                                                   |
| 31.3            |       | Rule 13a-14(a)/15d-14(a) Certification of  Principal Financial Officer |
|            |       |                                                                   |
| 32.1            |       | Section 1350 Certification of Principal  Executive Officer             |
|            |       |                                                                   |
| 32.2            |       | Section 1350 Certification of Principal  Executive Officer             |
|            |       |                                                                   |
| 32.3            |       | Section 1350 Certification of Principal  Financial Officer             |

 

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

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

 

24

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SIGNATURES

 

Pursuant to the requirements ofSection 13 or 15(d) of the Securities Exchange Act of 1934, the Registranthas duly caused this report to be signed on its behalf by the undersigned,thereunto duly authorized, on the 30th day of March, 2005.

 

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

 

Pursuant to the requirements of theSecurities Exchange Act of 1934, this report has been signed below by thefollowing persons on behalf of the General Partner of the Registrant in thecapacities and on the date indicated.

 
| ** **               | ** ** | **Title with**                 | ** **                            | ** ** |
|--------------------------|------------|--------------------------------|---------------------------------------|------------|
| **Signature**            | ** ** | **General Partner**       | ** **                            | **Date**   |
|                     |       |                           |                                  |       |
|                     |       |                           |                                  |       |
| /s/ Harvey Beker         |       |                           | Co-Chief                              |       | March 30, 2005 |
|  Harvey  Beker      |       | Executive Officer and Director |                                  |       |
|                     |       | (Principal Executive Officer)  |                                  |       |
|                     |       |                           |                                  |       |
| /s/ George E. Crapple    |       |                           | Co-Chief Executive                    |       | March 30, 2005 |
|  George  E. Crapple |       | Officer and Director           |                                  |       |
|                     |       | (Principal Executive Officer)  |                                  |       |
|                     |       |                           |                                  |       |
| /s/ Gregg Buckbinder     |       |                           | Chief Financial and Operating Officer |       | March 30, 2005 |
|  Gregg  Buckbinder  |       | (Principal Financial Officer)  |                                  |       |
|                     |       |                           |                                  |       |
| /s/ Tod A. Tanis         |       |                           | Vice President                        |       | March 30, 2005 |
|  Tod A.  Tanis      |       | (Principal Accounting Officer) |                                  |       |
|                          |            |                                |                                       |            |  |  |  |

 

(Being the principal executive officers, theprincipal financial officer and principal accounting officer, and a majority ofthe directors of Millburn Ridgefield Corporation)

 

Millburn Ridgefield Corporation

General Partner of Registrant

March 30, 2005

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

 

25

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EXHIBIT INDEX

 

The following exhibits are included herewith.

 
| **Designation** | ** ** | **Description**                                                        |
|-----------------|------------|------------------------------------------------------------------------|
| ** **      | ** ** | ** **                                                             |
| 13.01           |       | 2004 Report of Independent Registered  Public Accounting Firm          |
|            |       |                                                                   |
| 13.02           |       | 2003 Report of Independent Auditors                                    |
|            |       |                                                                   |
| 31.1            |       | Rule 13a-14(a)/15d-14(a) Certification of  Principal Executive Officer |
|            |       |                                                                   |
| 31.2            |       | Rule 13a-14(a)/15d-14(a) Certification of  Principal Executive Officer |
|            |       |                                                                   |
| 31.3            |       | Rule 13a-14(a)/15d-14(a) Certification of  Principal Financial Officer |
|            |       |                                                                   |
| 32.1            |       | Section 1350 Certification of Principal  Executive Officer             |
|            |       |                                                                   |
| 32.2            |       | Section 1350 Certification of Principal  Executive Officer             |
|            |       |                                                                   |
| 32.3            |       | Section 1350 Certification of Principal  Financial Officer             |

 

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

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

 

26

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