***Exhibit13.01***

*** ***

*** ***

*** ***

*** ***

***Nestor Partners***

** **

***FinancialStatements for the Years Ended***

***December31, 2006, 2005 and 2004 and***

***Reportof Independent Registered Public***

***AccountingFirm***

----

**NESTORPARTNERS**
| TABLE OF CONTENTS                                        |
|----------------------------------------------------------|
| ** **                                               | ** ** | **Page** |
| ** **                                               | ** ** | ** ** |
| AFFIRMATION OF MILLBURN RIDGEFIELD CORPORATION           |   |   |
|                                                     |   |   |
| REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING  FIRM |   | 1 |
|                                                     |   |   |
| FINANCIAL STATEMENTS:                                    |   |   |
|                                                     |   |   |
| Statements of  Financial Condition                       |   | 2 |
|                                                     |   |   |
| Condensed  Schedules of Investments                      |   | 3–6 |
|                                                     |   |   |
| Statements of  Operations                                |   | 7 |
|                                                     |   |   |
| Statements of  Changes in Partners’ Capital         |   | 8 |
|                                                     |   |   |
| Statements of  Financial Highlights                      |   | 9 |
|                                                     |   |   |
| Notes to  Financial Statements                           |   | 10–15 |

 

----

**AFFIRMATIONOF MILLBURN RIDGEFIELD CORPORATION**

In compliance with theCommodity Futures Trading Commission’s regulations, I hereby affirm that to thebest of my knowledge and belief, the information contained in the statements offinancial condition of Nestor Partners at December 31, 2006 and 2005,including the condensed schedules of investments, and the related statements ofoperations, changes in partners’ capital, and financial highlights for theyears ended December 31, 2006, 2005, and 2004, are complete and accurate.

 

 

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

----

** **

** **

** **

** **

** **

**REPORTOF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**

To the Partners of Nestor Partners:

We have audited theaccompanying statements of financial condition of Nestor Partners (the “Partnership”) as of December 31, 2006and 2005, including the condensed schedules of investments, and the relatedstatements of operations, changes in partners’ capital, and financialhighlights for the years ended December 31, 2006, 2005 and 2004. Thesefinancial statements and financial highlights are the responsibility of thePartnership’s management. Our responsibility is to express an opinion on thesefinancial statements and financial highlights based on our audits.

We conducted our audits inaccordance with the standards of the Public Company Accounting Oversight Board(United States). Those standards require that we plan and perform the audit toobtain reasonable assurance about whether the financial statements andfinancial highlights are free of material misstatement. The Partnership is notrequired to have, nor were we engaged to perform, an audit of its internalcontrol over financial reporting. Our audits included consideration of internalcontrol over financial reporting as a basis for designing audit procedures thatare appropriate in the circumstances, but not for the purpose of expressing anopinion on the effectiveness of the Partnership’s internal control overfinancial reporting. Accordingly, we express no such opinion. An audit alsoincludes examining, on a test basis, evidence supporting the amounts anddisclosures in the financial statements and financial highlights, assessing theaccounting principles used and significant estimates made by management, aswell as evaluating the overall financial statement presentation. We believethat our audits provide a reasonable basis for our opinion.

In our opinion, thefinancial statements and financial highlights referred to above present fairly,in all material respects, the financial position of Nestor Partners at December 31, 2006 and 2005, and theresults of its operations, changes in partners’ capital, and financialhighlights for the years ended December 31, 2006, 2005 and 2004 inconformity with accounting principles generally accepted in the United Statesof America.

Deloitte & Touche LLP

New York, New York

February 15, 2007

----

**NESTORPARTNERS**

**STATEMENTS OF FINANCIAL CONDITION**

**AT DECEMBER 31, 2006 AND 2005**

----

| ** **                                                                                              | ** ** | **2006**    | ** **  | **2005**    | ** ** |
|---------------------------------------------------------------------------------------------------------|------------|-------------|-------------|-------------|------------|
| **ASSETS**                                                                                              |       |        |        |        |       |
|                                                                                                    |       |        |        |        |       |
| EQUITY IN TRADING  ACCOUNTS:                                                                            |       |        |        |        |       |
|                                                                                                    |       |        |        |        |       |
| Investments in  U.S. Treasury notes―at market value (amortized cost $45,775,054 and  $63,348,239) |       | $           | 45,761,875  |        | $          | 63,181,691 |   |
| Net unrealized  appreciation (depreciation) on open futures and forward currency contracts              |       | 9,240,848   |        | (1,371,678  | )          |
| Due from brokers                                                                                        |       | 6,847,054   |        | 3,923,683   |       |
| Cash denominated  in foreign currencies (cost $3,216,906 and $2,589,356)                                |       | 3,222,378   |        | 2,553,075   |       |
|                                                                                                    |       |        |        |        |       |
| Total equity in  trading accounts                                                                       |       | 65,072,155  |        | 68,286,771  |       |
|                                                                                                    |       |        |        |        |       |
| INVESTMENTS IN U.S.  TREASURY NOTES―at market value (amortized cost $92,232,843 and  $96,770,338) |       | 92,198,954  |        | 96,642,066  |       |
|                                                                                                    |       |        |        |        |       |
| CASH AND CASH  EQUIVALENTS                                                                              |       | 5,105,014   |        | 15,359,071  |       |
|                                                                                                    |       |        |        |        |       |
| ACCRUED INTEREST  RECEIVABLE                                                                            |       | 936,128     |        | 677,070     |       |
|                                                                                                    |       |        |        |        |       |
| TOTAL                                                                                                   |       | $           | 163,312,251 |        | $          | 180,964,978 |   |
|                                                                                                    |       |        |        |        |       |
|                                                                                                    |       |        |        |        |       |
| **LIABILITIES AND PARTNERS’  CAPITAL**                                                             |       |        |        |        |       |
|                                                                                                    |       |        |        |        |       |
| LIABILITIES:                                                                                            |       |        |        |        |       |
| Capital  contributions received in advance                                                              |       | $           | 725,000     |        | $          | 3,987,000 |   |
| Accrued  brokerage fees                                                                                 |       | 325,946     |        | 389,427     |       |
| Accrued expenses                                                                                        |       | 387,775     |        | 373,843     |       |
| Capital  withdrawals payable                                                                            |       | 14,171,689  |        | 5,187,787   |       |
| Other  liabilities                                                                                      |       | —      |        | 75,000      |       |
|                                                                                                    |       |        |        |        |       |
| Total  liabilities                                                                                      |       | 15,610,410  |        | 10,013,057  |       |
|                                                                                                    |       |        |        |        |       |
| PARTNERS’ CAPITAL                                                                                  |       | 147,701,841 |        | 170,951,921 |       |
|                                                                                                    |       |        |        |        |       |
| TOTAL                                                                                                   |       | $           | 163,312,251 |        | $          | 180,964,978 |   |

 

See notes to financialstatements.

2

----

**NESTOR PARTNERS**

** **

**CONDENSED SCHEDULE OF INVESTMENTS**

**AT DECEMBER 31, 2006**
| ** **                                       | ** ** | **Net Unrealized**         | ** ** | ** **         | ** ** |
|--------------------------------------------------|------------|---------------------------------|------------|--------------------|------------|
| ** **                                       | ** ** | **Appreciation**                | ** ** | **Net**            | ** ** |
| ** **                                       | ** ** | **(Depreciation)**              | ** ** | **Unrealized**     | ** ** |
| ** **                                       | ** ** | **as a % of**    | ** ** | **Appreciation**   | ** ** |
| ** **                                       | ** ** | **Partners’ Capital** | ** ** | **(Depreciation)** | ** ** |
| **FUTURES  AND FORWARD CURRENCY CONTRACTS**      | ** ** | ** **                      | ** ** | ** **         | ** ** |
| ** **                                       | ** ** | ** **                      | ** ** | ** **         | ** ** |
| LONG FUTURES CONTRACTS:                          |       |                            |       |               |       |
| Grains                                           |       | 0.22                            | %          | $                  | 321,754    |   |
| Interest rates                                   |       | (0.76                           | )          | (1,123,031         | )          |
| Metals                                           |       | (0.09                           | )          | (131,262           | )          |
| Softs                                            |       | —                          |       | 6,188              |       |
| Stock indices                                    |       | 1.44                            |       | 2,120,454          |       |
|                                             |       |                            |       |               |       |
| Total long futures contracts                     |       | 0.81                            |       | 1,194,103          |       |
|                                             |       |                            |       |               |       |
| SHORT FUTURES  CONTRACTS:                        |       |                            |       |               |       |
| Energies                                         |       | 0.57                            |       | 840,877            |       |
| Interest rates                                   |       | 1.63                            |       | 2,403,088          |       |
| Livestock                                        |       | —                          |       | 2,430              |       |
| Metals                                           |       | —                          |       | (2,950             | )          |
| Softs                                            |       | (0.16                           | )          | (226,786           | )          |
|                                             |       |                            |       |               |       |
| Total short futures contracts                    |       | 2.04                            |       | 3,016,659          |       |
|                                             |       |                            |       |               |       |
| TOTAL  INVESTMENTS IN FUTURES CONTRACTS—Net |       | 2.85                            |       | 4,210,762          |       |
|                                             |       |                            |       |               |       |
| FORWARD CURRENCY  CONTRACTS:                     |       |                            |       |               |       |
| Total long forward currency contracts            |       | 2.67                            |       | 3,933,503          |       |
| Total short forward currency contracts           |       | 0.74                            |       | 1,096,583          |       |
|                                             |       |                            |       |               |       |
| TOTAL  INVESTMENTS IN FORWARD                    |       |                            |       |               |       |
| CURRENCY CONTRACTS—Net                      |       | 3.41                            |       | 5,030,086          |       |
|                                             |       |                            |       |               |       |
| TOTAL                                            |       | 6.26                            | %          | $                  | 9,240,848  |   |

 

(Continued)

3

----

**NESTORPARTNERS**

**CONDENSED SCHEDULE OF INVESTMENTS**

**AT DECEMBER 31, 2006**

----

** **

**U.S. TREASURY NOTES**

 

 
| ** **        | ** ** | ** **                                | ** ** | **Value as a % of** | ** ** | ** ** | ** **  |
|-------------------|------------|-------------------------------------------|------------|---------------------|------------|------------|-------------|
| **Face**          | ** ** | ** **                                | ** ** | **Partners’**  | ** ** | ** ** | ** **  |
| **Amount**        | ** ** | **Description**                           | ** ** | **Capital**         | ** ** | **Value**  | ** **  |
|              |       |                                      |       |                |       |       |        |
| $ 35,205,000 |       | U.S. Treasury  notes, 2.250%, 02/15/07    |       | 23.76               | %          | $          | 35,089,484  |   |
| 34,730,000        |       | U.S. Treasury  notes, 3.125%, 05/15/07    |       | 23.35               |       | 34,485,805 |        |
| 34,730,000        |       | U.S. Treasury  notes, 2.750%, 08/15/07    |       | 23.19               |       | 34,247,036 |        |
| 34,730,000        |       | U.S. Treasury  notes, 3.000%, 11/15/07    |       | 23.11               |       | 34,138,504 |        |
|              |       |                                      |       |                |       |       |        |
|              |       | Total  investments in U.S. Treasury notes |       |                |       |       |        |
|              |       | (amortized cost  $138,007,897)            |       | 93.41               | %          | $          | 137,960,829 |   |

 

(Concluded)

Seenotes to financial statements.

4

----

**NESTOR PARTNERS**

**CONDENSEDSCHEDULE OF INVESTMENTS**

**AT DECEMBER 31, 2005**

 

 
| ** **                                                | ** ** | **Net Unrealized**         | ** ** | ** **         | ** ** |
|-----------------------------------------------------------|------------|----------------------------|------------|--------------------|------------|
| ** **                                                | ** ** | **Appreciation**           | ** ** | **Net**            | ** ** |
| ** **                                                | ** ** | **(Depreciation)**         | ** ** | **Unrealized**     | ** ** |
| ** **                                                | ** ** | **as a% of**               | ** ** | **Appreciation**   | ** ** |
| ** **                                                | ** ** | **Partners’ Capital** | ** ** | **(Depreciation)** | ** ** |
| ** **                                                | ** ** | ** **                 | ** ** | ** **         | ** ** |
| **FUTURES AND FORWARD CURRENCY  CONTRACTS**               | ** ** | ** **                 | ** ** | ** **         | ** ** |
| ** **                                                | ** ** | ** **                 | ** ** | ** **         | ** ** |
| LONG FUTURES CONTRACTS:                                   |       |                       |       |               |       |
| Energies                                                  |       | 0.03                       | %          | $                  | 57,335     |   |
| Grains                                                    |       | 0.12                       |       | 206,573            |       |
| Interest rates                                            |       | 0.22                       |       | 379,281            |       |
| Livestock                                                 |       | (0.02                      | )          | (33,020            | )          |
| Metals                                                    |       | 1.07                       |       | 1,833,136          |       |
| Softs                                                     |       | 0.89                       |       | 1,527,165          |       |
| Stock indices                                             |       | 0.59                       |       | 986,160            |       |
|                                                      |       |                       |       |               |       |
| Total long  futures contracts                             |       | 2.90                       |       | 4,956,630          |       |
|                                                      |       |                       |       |               |       |
| SHORT FUTURES  CONTRACTS:                                 |       |                       |       |               |       |
| Grains                                                    |       | (0.31                      | )          | (530,337           | )          |
| Interest rates                                            |       | 0.41                       |       | 703,356            |       |
| Metals                                                    |       | 0.01                       |       | 18,590             |       |
| Softs                                                     |       | (0.18                      | )          | (307,159           | )          |
|                                                      |       |                       |       |               |       |
| Total short  futures contracts                            |       | (0.07                      | )          | (115,550           | )          |
|                                                      |       |                       |       |               |       |
| Total  investments in futures contracts—net          |       | 2.83                       |       | 4,841,080          |       |
|                                                      |       |                       |       |               |       |
| FORWARD CURRENCY  CONTRACTS:                              |       |                       |       |               |       |
| Total long  forward currency contracts                    |       | (2.65                      | )          | (4,536,349         | )          |
| Total short  forward currency contracts                   |       | (0.98                      | )          | (1,676,409         | )          |
|                                                      |       |                       |       |               |       |
| Total  investments in forward currency contracts—net |       | (3.63                      | )          | (6,212,758         | )          |
|                                                      |       |                       |       |               |       |
| TOTAL                                                     |       | (0.80                      | )%         | $                  | (1,371,678 | ) |

 

(Continued)

 

5

----

 

**NESTORPARTNERS**

** **

**CONDENSED SCHEDULE OF INVESTMENTS**

**AT DECEMBER 31, 2005**

**U.S. TREASURY NOTES**
| ** **  | ** ** | ** **                                | ** ** | **Value as a% of** | ** ** | ** ** | ** **  |
|-------------|------------|-------------------------------------------|------------|-----------------------------------|------------|------------|-------------|
| **Face**    | ** ** | ** **                                | ** ** | **Partners’**                | ** ** | ** ** | ** **  |
| **Amount**  | ** ** | **Description**                           | ** ** | **Capital**                       | ** ** | **Value**  | ** **  |
|        |       |                                      |       |                              |       |       |        |
| $34,055,000 |       | U.S. Treasury  notes, 1.625%, 02/28/06    |       | 19.85                             | %          | $          | 33,927,294  |   |
| 44,680,000  |       | U.S. Treasury  notes, 2.500%, 05/31/06    |       | 25.94                             |       | 44,344,900 |        |
| 28,230,000  |       | U.S. Treasury  notes, 2.375%, 08/15/06    |       | 16.31                             |       | 27,877,125 |        |
| 54,440,000  |       | U.S. Treasury  notes, 2.875%, 11/30/06    |       | 31.39                             |       | 53,674,438 |        |
|        |       |                                      |       |                              |       |       |        |
|        |       | Total  investments in U.S. Treasury notes |       |                              |       |       |        |
|        |       | (amortized cost  $160,118,577)            |       | 93.49                             | %          | $          | 159,823,757 |   |

 

(Concluded)

See notes to financialstatements.

6

----

**NESTOR PARTNERS**

**STATEMENTS OF OPERATIONS**

**YEARSENDED DECEMBER 31, 2006, 2005 AND 2004**

 
| ** **                                                                                              | ** ** | **2006**   | ** ** | **2005**   | ** ** | **2004**   | ** ** |
|---------------------------------------------------------------------------------------------------------|------------|------------|------------|------------|------------|------------|------------|
|                                                                                                    |       |       |       |       |       |       |       |
| INVESTMENT  INCOME:                                                                                     |       |       |       |       |       |       |       |
| Interest income                                                                                         |       | $          | 8,039,516  |       | $          | 4,819,054  |       | $ | 2,406,435 |   |
|                                                                                                    |       |       |       |       |       |       |       |
| EXPENSES:                                                                                               |       |       |       |       |       |       |       |
| Brokerage fees                                                                                          |       | 4,317,248  |       | 4,802,240  |       | 5,497,025  |       |
| Administrative expenses                                                                                 |       | 448,912    |       | 434,264    |       | 499,091    |       |
| Custody fees                                                                                            |       | 26,883     |       | 26,346     |       | 29,493     |       |
|                                                                                                    |       |       |       |       |       |       |       |
| Total expenses                                                                                          |       | 4,793,043  |       | 5,262,850  |       | 6,025,609  |       |
|                                                                                                    |       |       |       |       |       |       |       |
| NET INVESTMENT  INCOME (LOSS)                                                                           |       | 3,246,473  |       | (443,796   | )          | (3,619,174 | )          |
|                                                                                                    |       |       |       |       |       |       |       |
| NET REALIZED AND  UNREALIZED GAINS (LOSSES):                                                            |       |       |       |       |       |       |       |
| Net realized gains (losses) on closed positions:                                                        |       |       |       |       |       |       |       |
| Futures and forward currency contracts                                                                  |       | 3,165,360  |       | 15,906,728 |       | 4,721,012  |       |
| Foreign exchange translation                                                                            |       | (204,576   | )          | (159,844   | )          | 219,374    |       |
| Net change in unrealized appreciation  (depreciation):                                                  |       |       |       |       |       |       |       |
| Futures and forward currency contracts                                                                  |       | 10,612,526 |       | (5,895,404 | )          | (5,227,037 | )          |
| Foreign exchange translation                                                                            |       | 41,753     |       | (76,974    | )          | 6,791      |       |
| Net gains (losses) from U.S. Treasury notes—net  change  in unrealized appreciation (depreciation) |       | 247,752    |       | (97,880    | )          | (230,211   | )          |
|                                                                                                    |       |       |       |       |       |       |       |
| Total net realized and unrealized gains (losses)                                                        |       | 13,862,815 |       | 9,676,626  |       | (510,071   | )          |
|                                                                                                    |       |       |       |       |       |       |       |
| NET INCOME  (LOSS)                                                                                      |       | 17,109,288 |       | 9,232,830  |       | (4,129,245 | )          |
|                                                                                                    |       |       |       |       |       |       |       |
| LESS PROFIT  SHARE TO GENERAL PARTNER                                                                   |       | 2,092,010  |       | 1,140,619  |       | 484,760    |       |
|                                                                                                    |       |       |       |       |       |       |       |
| NET INCOME  (LOSS) AFTER PROFIT SHARE TO  GENERAL PARTNER                                               |       | $          | 15,017,278 |       | $          | 8,092,211  |       | $ | (4,614,005 | ) |

 

See notes tofinancial statements.

7

----

**NESTOR PARTNERS**

**STATEMENTS OFCHANGES IN PARTNERS’ CAPITALYEARS ENDED DECEMBER 31, 2006, 2005 AND 2004**
| ** **                                               | ** ** | ** **   | ** **  | **Special**  | ** ** | **New Profit** | ** ** | ** **  | ** ** | ** **  | ** ** |
|----------------------------------------------------------|------------|--------------|-------------|--------------|------------|---------------------|------------|-------------|------------|-------------|------------|
| ** **                                               | ** ** | **Limited**  | ** **  | **Limited**  | ** ** | **Memo**            | ** ** | **General** | ** ** | ** **  | ** ** |
| ** **                                               | ** ** | **Partners** | ** **  | **Partners** | ** ** | **Account**         | ** ** | **Partner** | ** ** | **Total**   | ** ** |
|                                                     |       |         |        |         |       |                |       |        |       |        |       |
| PARTNERS’ CAPITAL—January  1, 2004             |       | $            | 158,551,000 |         | $          | 47,828,770          |       | $           | —     |        | $          | 4,284,428 |   | $ | 210,664,198 |   |
|                                                     |       |         |        |         |       |                |       |        |       |        |       |
| Contributions                                            |       | 47,947,926   |        | 1,205,657    |       | —              |       | —      |       | 49,153,583  |       |
| Withdrawals                                              |       | (48,474,692  | )           | (12,528,306  | )          | —              |       | (1,107,400  | )          | (62,110,398 | )          |
| Net income  (loss)                                       |       | (5,215,301   | )           | 1,036,942    |       | (1,047              | )          | 50,161      |       | (4,129,245  | )          |
| General  Partner’s allocation—profit share     |       | (484,760     | )           | —       |       | 484,760             |       | —      |       | —      |       |
| Transfer of New  Profit Memo Account to  General Partner |       | —       |        | —       |       | (483,713            | )          | 483,713     |       | —      |       |
|                                                     |       |         |        |         |       |                |       |        |       |        |       |
| PARTNERS’  CAPITAL—December 31, 2004           |       | 152,324,173  |        | 37,543,063   |       | —              |       | 3,710,902   |       | 193,578,138 |       |
|                                                     |       |         |        |         |       |                |       |        |       |        |       |
| Contributions                                            |       | 12,748,963   |        | 2,007,151    |       | —              |       | —      |       | 14,756,114  |       |
| Withdrawals                                              |       | (43,567,219  | )           | (1,422,830   | )          | —              |       | (1,625,112  | )          | (46,615,161 | )          |
| Net income                                               |       | 5,221,311    |        | 3,700,476    |       | 779                 |       | 310,264     |       | 9,232,830   |       |
| General Partner’s  allocation—profit share     |       | (1,140,619   | )           | —       |       | 1,140,619           |       | —      |       | —      |       |
| Transfer of New  Profit Memo Account to  General Partner |       | —       |        | —       |       | (1,141,398          | )          | 1,141,398   |       | —      |       |
|                                                     |       |         |        |         |       |                |       |        |       |        |       |
| PARTNERS’  CAPITAL—December 31, 2005           |       | 125,586,609  |        | 41,827,860   |       | —              |       | 3,537,452   |       | 170,951,921 |       |
|                                                     |       |         |        |         |       |                |       |        |       |        |       |
| Contributions                                            |       | 16,121,682   |        | 3,138,546    |       | —              |       | —      |       | 19,260,228  |       |
| Withdrawals                                              |       | (56,887,936  | )           | (631,001     | )          | —              |       | (2,100,659  | )          | (59,619,596 | )          |
| Net income                                               |       | 10,668,416   |        | 5,935,379    |       | 8,650               |       | 496,843     |       | 17,109,288  |       |
| General  Partner’s allocation—profit share     |       | (2,043,240   | )           | (48,770      | )          | 2,092,010           |       | —      |       | —      |       |
| Transfer of New  Profit Memo Account to  General Partner |       | —       |        | —       |       | (2,100,660          | )          | 2,100,660   |       | —      |       |
|                                                     |       |         |        |         |       |                |       |        |       |        |       |
| PARTNERS’ CAPITAL—December 31, 2006            |       | $            | 93,445,531  |         | $          | 50,222,014          |       | $           | —     |        | $          | 4,034,296 |   | $ | 147,701,841 |   |

 

See notes tofinancial statements.

8

----

**NESTOR PARTNERS**

**STATEMENTS OFFINANCIAL HIGHLIGHTSYEARS ENDED DECEMBER 31, 2006, 2005 AND 2004**
| ** **                                                   | ** ** | ** **   | ** ** | **Special**  | ** ** |
|--------------------------------------------------------------|------------|--------------|------------|--------------|------------|
| ** **                                                   | ** ** | **Limited**  | ** ** | **Limited**  | ** ** |
| ** **                                                   | ** ** | **Partners** | ** ** | **Partners** | ** ** |
|                                                         |       |         |       |         |       |
| YEAR ENDED  DECEMBER 31, 2006:                               |       |         |       |         |       |
| Ratios to average capital—net investment income         |       | 1.11         | %          | 3.60         | %          |
|                                                         |       |         |       |         |       |
| Total expenses                                               |       | 3.39         |       | 0.88         |       |
| Profit share allocation                                      |       | 1.59         |       | 0.11         |       |
|                                                         |       |         |       |         |       |
| Total expenses and profit share allocation                   |       | 4.98         |       | 0.99         |       |
|                                                         |       |         |       |         |       |
| Total return before profit share allocation                  |       | 10.82        |       | 13.61        |       |
| Profit share allocation                                      |       | (2.02        | )          | (0.11        | )          |
|                                                         |       |         |       |         |       |
| TOTAL RETURN  AFTER PROFIT SHARE ALLOCATION                  |       | 8.80         | %          | 13.50        | %          |
|                                                         |       |         |       |         |       |
| YEAR ENDED  DECEMBER 31, 2005:                               |       |         |       |         |       |
| Ratios to average capital—net investment income  (loss) |       | (1.03        | )%         | 2.24         | %          |
|                                                         |       |         |       |         |       |
| Total expenses                                               |       | 3.81         |       | 0.57         |       |
| Profit share allocation                                      |       | 0.85         |       | —       |       |
|                                                         |       |         |       |         |       |
| Total expenses and profit share allocation                   |       | 4.66         |       | 0.57         |       |
|                                                         |       |         |       |         |       |
| Total return before profit share allocation                  |       | 6.13         |       | 9.61         |       |
| Profit share allocation                                      |       | (0.90        | )          | —       |       |
|                                                         |       |         |       |         |       |
| TOTAL RETURN  AFTER PROFIT SHARE ALLOCATION                  |       | 5.23         | %          | 9.61         | %          |
|                                                         |       |         |       |         |       |
| YEAR ENDED  DECEMBER 31, 2004:                               |       |         |       |         |       |
| Ratios to average capital—net investment income  (loss) |       | (2.43        | )%         | 0.52         | %          |
|                                                         |       |         |       |         |       |
| Total expenses                                               |       | 3.65         |       | 0.67         |       |
| Profit share allocation                                      |       | 0.31         |       | —       |       |
|                                                         |       |         |       |         |       |
| Total expenses and profit share allocation                   |       | 3.96         |       | 0.67         |       |
|                                                         |       |         |       |         |       |
| Total return before profit share allocation                  |       | (1.63        | )          | 1.38         |       |
| Profit share allocation                                      |       | (0.28        | )          | —       |       |
|                                                         |       |         |       |         |       |
| TOTAL RETURN AFTER  PROFIT SHARE ALLOCATION                  |       | (1.91        | )%         | 1.38         | %          |

 

See notes to financial statements.

9

----

**NESTOR PARTNERS**

**NOTES TO FINANCIAL STATEMENTSYEARS ENDED DECEMBER 31, 2006, 2005 AND 2004**

 

**1.**                       ORGANIZATION OF THE PARTNERSHIP

Nestor Partners (the “Partnership”) is a limitedpartnership, which was organized in 1976 under the New Jersey Uniform LimitedPartnership Act. The Limited Partnership Agreement (the “Agreement”) wasamended and restated as of April 5, 2004. The Partnership engages in thespeculative trading of futures and forward currency contracts. The instrumentsthat are traded by the Partnership are volatile and involve a high degree ofmarket risk.

The General Partner of the Partnership is MillburnRidgefield Corporation (the “General Partner”). Principals, employees, formeremployees, and other affiliates of the General Partner have invested in thePartnership as special limited partners.

The Agreement provides that subject to certainlimitations, the General Partner shall conduct and manage the business of thePartnership. The General Partner has the right to make all investment decisionsregarding the Partnership, authorize the payments of distributions to partners,enter into customer agreements with brokers, and take such other actions, as itdeems necessary or desirable, to manage the business of the Partnership.

The limited partners, special limited partners, NewProfit Memo Account, and the General Partner share in the profits and losses ofthe Partnership, which are determined before brokerage fees (Note 2) andprofit share allocations on the basis of their proportionate interests of Partnershipcapital (Note 3). The General Partner and special limited partners arecharged lower brokerage fees than limited partners, which in 2004 resulted inthe General Partner and special limited partners experiencing net gains and thelimited partners, in aggregate, net losses. No limited partner or speciallimited partner shall be liable for Partnership obligations in excess of theircapital contribution plus profits allocated to their capital accounts, if any.

Subject to certain conditions, a partner has the rightto redeem all or a portion of its partnership capital as of any month-end uponfifteen days’ prior written notice to the General Partner. In its solediscretion, the General Partner may permit redemptions on shorter notice or asof a date other than month-end. Partners who purchased their interests throughcertain selling agents and redeem their partnership capital prior to theone-year anniversary of their subscription will pay the applicable earlyredemption fee. Redemptions will be made as of the last day of the month for anamount equal to the net asset value of the portion of a partner’s capital beingredeemed; a redeeming partner shall receive such redeemed capital less theredemption fee, if any.

The General Partner, subject to Commodity FuturesTrading Commission requirements, may (at its discretion) sell additionalLimited Partnership Interests to persons desiring to become limited partners.

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

** **

10

----

** **

**2.**                       SUMMARY OF SIGNIFICANTACCOUNTING POLICIES

***Investments***—ThePartnership records its transactions in futures and forward currency contracts,including related income and expenses, on a trade-date basis.

Open futures contracts are valued at market value andopen forward currency contracts are valued at fair value which is based onpricing models that consider the time value of money and the current market andcontractual prices of the underlying financial instruments. Realized gains (losses)and changes in unrealized appreciation (depreciation) on futures and forwardcurrency contracts are recognized in the periods in which the contracts areclosed or the changes occur, and are included in net realized and unrealizedgains (losses) in the statements of operations.

Investments in U.S. Treasury notes are valued at themarket value based on bid quotations reported daily in The Wall Street Journal.The Partnership amortizes premiums and accretes discounts on U.S. Treasurynotes using the effective interest method. Such securities are normally ondeposit with financial institutions as collateral for performance of thePartnership’s trading obligations with respect to derivative contracts and areheld for safekeeping in a custody account.

***Foreign Currency Translation***—Assetsand liabilities denominated in foreign currencies are translated to U.S.Dollars at quoted prices of such currencies. Purchases and sales of investmentsare translated to U.S. Dollars at the exchange rate prevailing when suchtransactions occurred.

***Brokerage Fees***—TheAgreement provides that the Partnership shall charge the limited partners’capital accounts and pay the General Partner brokerage fees at a fixed rate of0.542% per month of net asset value (6.5% per annum) of limited partnershipinterests. Effective July 1, 2003, the General Partner reduced thebrokerage fee rate to 0.458% per month of net asset value (5.5% per annum). TheGeneral Partner retains the right to charge less than the annual brokerage rateexcept as specified in the Agreement. The General Partner bears all commissionand clearing charges due to third-party brokers.

***Administrative Expenses***—ThePartnership bears expenses, including periodic legal, accounting and filingfees, up to an amount equal to 1⁄4 of 1% per annum of the average net assets ofthe Partnership. The General Partner bears any excess over such amounts. ThePartnership will pay any extraordinary expenses applicable to it.

The Partnership’s administrative expenses included$308,037, $317,619, and $263,807 in 2006, 2005, and 2004, respectively, whichrelates to legal and accounting services provided to the Partnership by anaffiliate of the General Partner.

***Income Taxes***—Incometaxes have not been provided, as partners are individually liable for thetaxes, if any, on their share of the Partnership’s income and expenses.

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

***Estimates***—Thepreparation of financial statements in conformity with accounting principles generallyaccepted in the United States of America requires management to make estimatesand assumptions that affect the amounts and disclosures reported in thefinancial statements. Actual results could differ from these estimates.

*** ***

11

----

*** ***

***Right of Offset***—Thecustomer agreements between the Partnership and its brokers give thePartnership the legal right to net unrealized gains and losses. Unrealizedgains and losses related to offsetting transactions with these brokers arereflected on a net basis in the equity in trading accounts in the statements offinancial condition.

***Recently Issued Pronouncements***—InJuly 2006, the Financial Accounting Standards Board (“FASB”) issuedInterpretation No. 48 (“FIN 48”) entitled “Accounting For Uncertainty in IncomeTaxes—an interpretation of FASB Statement No. 109.” FIN 48 prescribes theminimum recognition threshold a tax position must meet in connection withaccounting for uncertainties in income tax positions taken or expected to betaken by an entity before being measured and recognized in the financialstatements. Adoption of FIN 48 is required for fiscal years beginning afterDecember 15, 2006. The implementation of FIN 48 is not expected to have amaterial impact on the Partnership’s financial statements.

In September 2006, the FASB issued Statement ofFinancial Accounting Standards No. 157, “Fair Value Measurements” (“FAS 157”).FAS 157 defines fair value, establishes a framework for measuring fair value inaccounting principles generally accepted in the United States of America, andexpands disclosures about fair value measurements. While FAS 157 does notrequire any new fair value measurements, for some entities, the application ofFAS 157 may change current practice. FAS 157 is effective for financialstatements issued for fiscal years beginning after November 15, 2007, andinterim periods within those fiscal years. The implementation of FAS 157 is notexpected to have a material impact on the Partnership’s financial statements.

**3.**                      PROFIT SHARE ALLOCATION

The Agreement provides that the General Partner’sprofit share equal to 20% of Trading Profits (as defined in the Agreement) atthe end of each year is charged to the limited partners’ capital accounts.However, for limited partners’ withdrawals during the year, the profit sharecalculation shall be computed as though the withdrawal date was at year end.Because limited partners may purchase their partnership interests at differenttimes, they may recognize different amounts of Trading Profits. Each limitedpartner pays a profit share only on Trading Profits applicable to itspartnership interest. Limited partners who make multiple investments in thePartnership receive separate partnership interests for purposes of tracking theprofit share. Accordingly, in any given year, some limited partners mayexperience net gains and be charged the 20% profit share allocation for all ora portion of their interests where limited partners in the aggregateexperienced net losses.

Any profit share charged is added to the GeneralPartner’s capital account to the extent net taxable capital gains are allocatedto the General Partner, and the remainder, if any, of such profit share isadded to the New Profit Memo Account. The General Partner may not make anywithdrawal from the balance in the New Profit Memo Account. If, at the end of asubsequent year, net taxable gains are allocated to the General Partner inexcess of such year’s profit share, a corresponding amount is transferred fromthe New Profit memo account to the General Partner’s capital account.

**4.**                       DUE FROM/TO BROKERS

At December 31, 2006 and 2005, the due frombrokers balances in the statements of financial condition include cashreceivable from brokers.

** **

12

----

** **

**5.**                       TRADING ACTIVITIES

The Partnership conducts its trading activities withvarious brokers acting either as a broker or counterparty to varioustransactions. At December 31, 2006 and 2005, cash, due from brokers andTreasury notes aggregating $55,831,307 and $69,658,449, respectively, includedin the Partnership’s equity in trading accounts, were held by such brokers insegregated accounts as collateral as required by U.S. Commodity Futures TradingCommission’s regulations or by the counterparty bank or broker. Such collateralcan be sold or repledged by the counterparties, at their discretion.

The Partnership enters into contracts with variousfinancial institutions that contain a variety of indemnifications. ThePartnership’s maximum exposure under these arrangements is unknown. However,the Partnership has not had prior claims or losses pursuant to these contractsand expects the risk of loss to be remote.

**6.**                       DERIVATIVE INSTRUMENTS

The Partnership is party to derivative financialinstruments in the normal course of its business. These financial instrumentsinclude futures and forward currency contracts which may be traded on anexchange (“exchange-traded contracts”) or over-the-counter (“OTC contracts”).

The Partnership records its derivative activities on amark-to-market basis as described in Note 2. For OTC contracts, the Partnershipenters into master netting agreements with its counterparties. Therefore,assets represent the Partnership’s unrealized gains, less unrealized losses forOTC contracts in which the Partnership has a master netting agreement.Similarly, liabilities represent net amounts owed to counterparties on OTCcontracts.

Futures contracts are agreements to buy or sell anunderlying asset or index for a set price in the future. Initial margindeposits are made upon entering into futures contracts and can be either incash or treasury securities. Open futures contracts are revalued on a dailybasis to reflect the market value of the contracts at the end of each tradingday. Variation margin payments are received or made, depending upon whetherunrealized gains or losses are incurred. When the contract is closed, thePartnership records a realized gain or loss equal to the difference between thevalue of the contract at the time it was opened and the time it was closed. ThePartnership bears the market risk that arises from changes in the value ofthese financial instruments.

Forward currency contracts entered into by thePartnership represent a firm commitment to buy or sell an underlying currencyat a specified value and point in time based upon an agreed or contractedquantity. The ultimate gain or loss is equal to the difference between thevalue of the contract at the onset and the value of the contract at settlementdate.

Each of these financial instruments is subject tovarious risks similar to those related to the underlying financial instruments,including market risk, credit risk, concentration risk, and sovereign risk.

Market risk is the potential change in the value ofthe instruments traded by the Partnership due to market changes, includinginterest and foreign exchange rate movements and fluctuations in futures orsecurity prices. Market risk is directly impacted by the volatility andliquidity in the markets in which the related underlying assets are traded. Thefinancial instruments traded by the Partnership contain varying degrees ofoff-balance sheet risk whereby changes in the market values of the futures andforward currency contracts and the Partnership’s satisfaction of its 

 

13

----

 

obligations related to such market value changes mayexceed the amount recognized in the statements of financial condition.

Credit risk is the possibility that a loss may occurdue to the failure of a counterparty to perform according to the terms of acontract. Credit risk is normally reduced to the extent that an exchange orclearing organization acts as a counterparty to futures transactions, sincetypically the collective credit of the members of the exchange is pledged tosupport the financial integrity of the exchange. In the case of OTCtransactions, the Partnership must rely solely on the credit of the individualcounterparties. The contract amounts of the forward currency and futurescontracts do not represent the Partnership’s risk of loss due to counterpartynonperformance. The Partnership’s exposure to credit risk associated withcounterparty nonperformance of these contracts is limited to the unrealizedgains inherent in such contracts, which are recognized in the statements offinancial condition, plus the value of margin or collateral held by thecounterparty. The amount of such credit risk was $29,077,055 and $43,906,779 atDecember 31, 2006 and 2005, respectively.

The General Partner has established procedures toactively monitor market risk and minimize credit risk, although there can be noassurance that it will, in fact succeed in doing so. The General Partner’smarket risk control procedures include diversification of the Partnership’sportfolio and continuously monitoring the portfolio’s open positions,historical volatility and maximum historical loss. The General Partner seeks tominimize credit risk primarily by depositing and maintaining the Partnership’sassets at financial institutions and brokers which the General Partner believesto be creditworthy. The Partnership’s trading activities are primarily withbrokers and other financial institutions located in North America, Europe andAsia. All futures transactions of the Partnership are cleared by majorsecurities firms pursuant to customer agreements. For all forward currencytransactions, the Partnership utilizes a single clearing broker which is amajor financial institution.

The Partnership is subject to sovereign risk such asthe risk of restrictions being imposed by foreign governments on therepatriation of cash and the effects of political or economic uncertainties.Net unrealized appreciation (depreciation) on futures and forward currencycontracts are denominated in the Partnership’s functional currency (U.S.Dollar). Cash settlement of futures and forward currency contracts is made inthe local currency (settlement currency) and then translated to U.S. Dollars.

 

14

----

 

Netunrealized appreciation (depreciation) on futures and forward currencycontracts by settlement currency type, denominated in U.S. Dollars, is detailedbelow:

|                        | ** ** | **December 31,** | ** ** |
|------------------------|------------|-----------------------|------------|
| ** **             | ** ** | **2006**              | ** ** | **2005** | ** ** |
| ** **             | ** ** | **Total Net**    | ** ** | ** ** | ** ** | **Total Net** | ** ** | ** ** | ** ** |
| ** **             | ** ** | **Unrealized**        | ** ** | ** ** | ** ** | **Unrealized** | ** ** | ** ** | ** ** |
| ** **             | ** ** | **Appreciation**      | ** ** | **Percent of** | ** ** | **Appreciation** | ** ** | **Percent of** | ** ** |
| **Currency Type** | ** ** | ** **            | ** ** | **(Depreciation)** | ** ** | **Total** | ** ** | **(Depreciation)** | ** ** | **Total** | ** ** |
| ** **             | ** ** | ** **            | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Aussie dollar          |       | $                     | 397,950    |   | 4.31 | % | $ | 408,298 |   | (29.77 | )% |
| British pound          |       | 671,168               |       | 7.26 |   | (14,230 | ) | 1.04 |   |
| Canadian dollar        |       | (694,556              | )          | (7.52 | ) | 335,830 |   | (24.48 | ) |
| Euro                   |       | 1,984,900             |       | 21.48 |   | 1,424,609 |   | (103.86 | ) |
| Hong Kong dollar       |       | 549,899               |       | 5.95 |   | (239,809 | ) | 17.48 |   |
| Hungarian forint       |       | 313,424               |       | 3.39 |   | — |   | — |   |
| Japanese yen           |       | 2,233,502             |       | 24.17 |   | (2,706,149 | ) | 197.29 |   |
| New Zealand  dollar    |       | 96,156                |       | 1.04 |   | — |   | — |   |
| Norwegian krona        |       | —                |       | — |   | (198,360 | ) | 14.46 |   |
| Polish zloty           |       | —                |       | — |   | 125,813 |   | (9.17 | ) |
| South African  rand    |       | 172,414               |       | 1.87 |   | 260,592 |   | (19.00 | ) |
| Swedish krona          |       | 52,291                |       | 0.57 |   | (382 | ) | 0.03 |   |
| Swiss franc            |       | 927,525               |       | 10.04 |   | — |   | — |   |
| Turkish lira           |       | (130,175              | )          | (1.41 | ) | — |   | — |   |
| U.S. dollar            |       | 2,666,350             |       | 28.85 |   | (767,890 | ) | 55.98 |   |
|                   |       |                  |       |   |   |   |   |   |   |
| Total                  |       | $                     | 9,240,848  |   | 100.00 | % | $ | (1,371,678 | ) | 100.00 | % |
|                        |            |                       |            |  |  |  |  |  |  |  |  |  |  |

 

**7.**                       FINANCIAL HIGHLIGHTS

The ratios are calculated based on limited partners’capital and special limited partners’ capital taken as a whole. The computationof such ratios based on the amount of expenses and profit share allocationassessed to an individual partner’s capital account may vary from these ratiosbased on the timing of capital transactions and differences in individualpartner’s brokerage fees and profit share allocation arrangements.

Returns are calculated for limited partners andspecial limited partners taken as a whole. An individual partner’s returns mayvary from these returns based on the timing of capital transactions anddifferences in individual partners’ brokerage fees and profit share allocationarrangements.

******

15

----