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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)



|x | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ------------------------------------------------------------------------------------

For the fiscal year ended December 31, 2006

OR



| ̈ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ----------------------------------------------------------------------------------------

For the transition period from  to

Commission
file number 000-51651

WORLD MONITOR TRUST III  SERIES J

(Exact name of Registrant as specified in its charter)



|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Delaware                                                       |  | 20-2446281                          
|(State or other Jurisdiction of Incorporation or organization) |  | (I.R.S. Employer Identification No.)



|                                                |  |           
|----------------------------------------------- |  | ----------
|900 King Street, Suite 100, Rye Brook, New York |  | 10573     
|(Address of principal executive offices)        |  | (Zip Code)

Registrants telephone number, including area code: (914) 307-7000

Securities registered pursuant to Section 12(b) of the Act:

None

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

Series J Units of Beneficial Interest, Class I and Class II

(Title of class)

Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405
of the Securities Act.  Yes ̈No  þ

Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the
Act.  Yes ̈No  þ

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter 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  þ    No ̈

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrants knowledge, in definitive proxy
or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K ̈

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of accelerated filer
and large accelerated filer in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer ̈Accelerated
filer ̈Non-accelerated filer  þ

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes ̈No  þ

DOCUMENTS INCORPORATED BY REFERENCE

Annual Report to Unitholders for the year ended December 31, 2006 is
incorporated by reference into Parts II and IV of this Annual Report on Form 10-K

Prospectus of the Registrant filed pursuant to Rule 424(b) under the
Securities Act of 1933 on January 12, 2007

Prospectus of the Registrant filed pursuant to Rule 424(b) under the Securities Act of 1933 on
December 22, 2006

Prospectus of the Registrant filed pursuant to Rule 424(b) under the Securities Act of 1933 on April 25, 2006

Prospectus of the Registrant filed pursuant to Rule 424(b) under the Securities Act of 1933 on January 6, 2006

Prospectus of the Registrant filed pursuant to Rule 424(b) under the Securities Act of 1933 on December 23, 2005

Prospectus of the Registrant filed pursuant to Rule 424(b) under the Securities Act of 1933 on May 13, 2005



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WORLD MONITOR TRUST III  SERIES J

(a Delaware Business Trust)



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TABLE OF CONTENTS



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|           |  |                                                                                                                   |  |     
|---------- |  | ----------------------------------------------------------------------------------------------------------------- |  | ----
|           |  |                                                                                                                   |  | PAGE
|PART I     |  |                                                                                                                   |  |     
|           |  |                                                                                                                  
|Item 1.    |  | Business                                                                                                          |  | 3   
|Item 1A.   |  | Risk Factors                                                                                                      |  | 5   
|Item 1B.   |  | Unresolved Staff Comments                                                                                         |  | 10  
|Item 2.    |  | Properties                                                                                                        |  | 10  
|Item 3.    |  | Legal Proceedings                                                                                                 |  | 10  
|Item 4.    |  | Submission of Matters to a Vote of Security Holders                                                               |  | 10  
|           |  |                                                                                                                  
|PART II    |  |                                                                                                                   |  |     
|           |  |                                                                                                                  
|Item 5.    |  | Market for the Registrants Common Equity, Related Stockholders Matters and Issuer Purchases of Equity Securities |  | 10  
|Item 6.    |  | Selected Financial Data                                                                                           |  | 11  
|Item 7.    |  | Managements Discussion and Analysis of Financial Condition and Results of Operation                              |  | 11  
|Item 7A.   |  | Quantitative and Qualitative Disclosures About Market Risk                                                        |  | 16  
|Item 8.    |  | Financial Statements and Supplementary Data                                                                       |  | 19  
|Item 9.    |  | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure                              |  | 20  
|Item 9A.   |  | Controls and Procedures                                                                                           |  | 20  
|Item 9B.   |  | Other Information                                                                                                 |  | 20  
|           |  |                                                                                                                  
|PART III   |  |                                                                                                                   |  |     
|           |  |                                                                                                                  
|Item 10.   |  | Directors, Executive Officers and Corporate Governance                                                            |  | 20  
|Item 11.   |  | Executive Compensation                                                                                            |  | 23  
|Item 12.   |  | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters                    |  | 23  
|Item 13.   |  | Certain Relationships and Related Transactions, and Director Independence                                         |  | 23  
|Item 14.   |  | Principal Accounting Fees and Services                                                                            |  | 24  
|           |  |                                                                                                                  
|PART IV    |  |                                                                                                                   |  |     
|           |  |                                                                                                                  
|Item 15.   |  | Exhibits, Financial Statement Schedules                                                                           |  | 25  
|           |  | Financial Statements and Financial Statement Schedules                                                            |  | 26  
|           |  | Exhibits                                                                                                          |  | 26  
|           | 
|SIGNATURES |  | 27                                                                                                               



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PART I



|Item 1. | Business
|------- | --------

General

World Monitor Trust III (the Trust) was formed as a Delaware Statutory Trust on September 28, 2004, with separate series (each, a
Series) of units of beneficial interest (Units or Interests). Its term will expire on December 31, 2054 (unless terminated earlier in certain circumstances). The trustee of the Trust is
Wilmington Trust Company. The Trusts fiscal year for book and tax purposes ends on December 31.

The Trusts Units are initially offered in
four (4) separate and distinct Series: Series G, Series H, Series I, and Series J (Registrant). The Trust may issue additional Series of Units in the future. Each Series will continue to exist until terminated pursuant to the
provisions of Article XIII of the Second Amended and Restated Declaration of Trust and Trust Agreement (the Trust Agreement). Each Series:



| |  |  | engages in the speculative trading of a diversified portfolio of futures, forward (including interbank foreign currencies) and options contracts and other
derivative instruments and may, from time to time, engage in cash and spot transactions;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | invests in a trading vehicle or vehicles which, in turn, has entered into a managed account agreement with its own independent commodity trading advisor that
manages such Series assets and makes the trading decisions in respect of the assets of such Series;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | segregates its assets from the assets of any other Series and maintains separate, distinct records from each other Series, and accounts for its assets separately
from each other Series;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | calculates its net assets and the Net Asset Value of its Units separately from each other Series;
| | - |  | -------------------------------------------------------------------------------------------------



| |  |  | has an investment objective of increasing the value of its Units over the long term (capital appreciation), while controlling risk and volatility; and
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | offers Units in two classes (each, a Class)Class I and Class II.
| | - |  | -------------------------------------------------------------------

Class I Units and Class II Units:



| |  |  | The Registrant pays a service fee with respect to Class I Units, monthly in arrears, equal to 1/12 of 2% (2% per annum)
of the Net Asset Value per unit of the outstanding Class I Units as of the beginning of the month. The service fee is paid directly by the Registrant to the Selling Agent, Kenmar Securities, Inc., an affiliate of the Managing Owner. The Selling
Agent is responsible for paying all commissions owing to the correspondent selling agents, who are entitled to receive from the Selling Agent an initial commission equal to 2% of the initial Net Asset Value per Unit of each Class I Unit sold by
them, payable on the date such Class I Units are purchased. Commencing with the 13thmonth after the purchase of a
Class I Unit, the correspondent selling agent receives an ongoing monthly commission equal to 1/12thof 2% (2% per
annum) of the Net Asset Value per Class I Unit as of the beginning of each month of the Class I Units sold by them. In addition to the above service fee, the Trust pays to the Selling Agent a Sales Commission, monthly in arrears, equal to 1/12th of
1.00% (1.00% per annum) of the Net Asset Value per Unit of the outstanding Class I Units as of the beginning of the month.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Class II Units may only be offered to investors who are represented by approved Correspondent Selling Agents who are directly compensated by the investor for
services rendered in connection with an investment in the Trust (such arrangements commonly referred to as wrap-accounts). Investors who purchase Class II Units of any series are not charged any service fee. However, the Trust pays to
the Selling Agent a Sales Commission, monthly in arrears, equal to 1/12th of 1.00% (1.00% per annum) of the Net Asset Value per Unit of the outstanding Class II Units as of the beginning of the month.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Series G, H, I and J commenced trading operations on December 1, 2005.

Units are offered as of the beginning of each month, and Units will continue to be offered in each Series until the maximum amount of each Series Units which are registered are sold. The Managing Owner may suspend or terminate the
offering of Units of any Series at any time or extend the offering by registering additional Units.

Effective December 1, 2005, the Registrant
contributed its net assets equally to WMT III Series G/J Trading Vehicle LLC (G/J Trading Vehicle), WMT III Series H/J Trading Vehicle LLC (H/J Trading Vehicle), and WMT III Series I/J Trading Vehicle LLC
(I/J Trading Vehicle and collectively, the Trading Vehicles) and received a Voting Membership Interest in each of the Trading Vehicles. Each Trading Vehicle was formed to function as an aggregate trading
vehicle. The sole members of G/J Trading Vehicle are Series G and the Registrant. The sole members of H/J Trading Vehicle are Series H, the Registrant and Futures Strategic Trust. The sole members of I/J Trading Vehicle are Series I and the
Registrant. Preferred Investment Solutions Corporation



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(Preferred or the Managing Owner) is the managing owner of the Trust and each of its Series (including the Registrant
and Futures Strategic Trust) and has been delegated administrative authority over the operations of the Trading Vehicles. The Trading Vehicles engage in the speculative trading of futures, options on futures contracts and forward currency contracts.
The financial statements of the Trading Vehicles, including the condensed schedules of investments, are included in Section II, III and IV of the Trading Vehicles financial statements and should be read in conjunction with the
Registrants financial statements.

All references herein to any Series relationship with a Trading Advisor (including the Registrants
relationship with the Trading Advisors) shall, unless the context states otherwise, refer to such Series relationship with the Trading Advisor through such Series investments in the Trading Vehicles.

Managing Owner and its Affiliates

The Managing Owner and or its
affiliates have agreed to purchase and maintain an interest in each Series in an amount not less than 1% of the Net Asset Value of such Series or $25,000, whichever is greater.

The Offering

Up to $37,500,000 Series G, Class I; $12,500,000 Series G, Class II; $37,500,000 Series H, Class I;
$12,500,000 Series H, Class II; $18,750,000 Series I, Class I; $6,250,000 Series I, Class II; $281,250,000 the Registrant, Class I; and $93,750,000 the Registrant, Class II of Units are being offered (totaling $500,000,000) (Subscription
Maximum). Units are being offered to investors who meet certain established suitability standards, with a minimum initial subscription of $5,000 (and for the Registrant, $2,000 for certain Benefit Plan Investors (including IRAs)), although
the minimum purchase for any single Series is $500. Limited Units and General Units are sometimes referred to as Units.

Initially, the
Limited Units for each Series were offered for a period ending December 1, 2005 (Initial Offering Period) at $100 per Interest. The Subscription Minimum of $30,000,000 for the Registrant was reached during the Initial
Offering Period permitting all Series to commence trading operations. The Registrant completed its initial offering on December 1, 2005 with gross proceeds of $31,024,443, which was fully allocated to the Trading Vehicles. Until the
subscription maximum for each Series is reached, each Series Units will continue to be offered on a monthly basis at the then current Net Asset Value per Unit.

The Trading Advisors

Each trading vehicle has its own independent commodity trading advisor that makes that trading
vehicles trading decisions. G/J Trading Vehicle, H/J Trading Vehicle and I/J Trading Vehicle entered into advisory agreements with Graham Capital Management, LP (Graham), Bridgewater Associates, Inc.
(Bridgewater) and Eagle Trading Systems Inc. (Eagle), respectively, (the Trading Advisors) to make the trading decisions for each Trading Vehicle. Graham trades 100% of the assets of G/J
Trading Vehicle pursuant to Grahams Global Diversified at 150% Leverage program, which is a technical, systematic, global macro program. Bridgewater trades 100% of the assets of H/J Trading Vehicle pursuant to Bridgewaters Aggressive
Pure Alpha Futures Only  A No Benchmark program, which is a fundamental, systematic, global macro program. Eagle trades 100% of the assets of I/J Trading Vehicle pursuant to Eagles Momentum Program, which is a technical, systematic,
global macro program. The advisory agreements may be terminated for various reasons, including at the discretion of the Trading Vehicles. The Trading Vehicles have allocated 100% of the proceeds from the initial and continuous offering of the
Registrant to the Trading Advisors. G/J Trading Vehicle pays Graham a monthly management fee equal to 1/12 of 2.5% (2.5% annually) of such Trading Vehicles Net Asset Value. H/J Trading Vehicle pays Bridgewater a monthly management fee equal to
1/12 of 3.0% (3.0% annually) of such Trading Vehicles Net Asset Value. I/J Trading Vehicle pays Eagle a monthly management fee equal to 1/12 of 2.0% (2.0% annually) of such Trading Vehicles Net Asset Value. Each Trading Vehicle also pays
the Trading Advisor an incentive fee of 20% of New High Net Trading Profits (as defined in the applicable advisory agreement) generated by such Trading Vehicle. Incentive fees will accrue monthly and be paid quarterly in arrears.

Competition

The Managing Owner and its affiliates have formed, and
may continue to form, various entities to engage in the speculative trading of futures, forward and options contracts which have certain of the same investment policies as the Registrant.

The Registrant is an open-end fund, which solicits the sale of additional Limited Interests on a monthly basis until the Subscription Maximum is reached. As such, the
Registrant may compete with other entities, whether or not formed by the Managing Owner, to attract new participants. In addition, to the extent that the Trading Advisor recommends similar or identical trades to the Registrant and other accounts
that it manages, the Registrant may compete with those accounts for the execution of the same or similar trades, as well as with other market participants.

Employees

The Registrant has no employees. Management and administrative services for the Registrant are performed by the Managing Owner or
third parties pursuant to the Trust Agreement, as further discussed in Notes 3, 4, 5 and 6 to the Registrants financial statements included in its annual report for the year ended December 31, 2006 (Registrants 2006 Annual
Report), which is filed as an exhibit hereto.



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Available information

The Trust files quarterly, annual and current reports with the Securities and Exchange Commission (SEC). These reports are available to read and copy at the SECs Public Reference Facilities in Washington, D.C. at 459
Fifth Street, N.W., Washington, D.C. 20549. Please call the SECs toll free number, 1-800-SEC-0330, for further information. The Trust does not maintain a website where these reports are posted. However, the Trusts filings are posted on
the SECs website at htttp://www.sec.gov.



|Item 1A. | Risk Factors
|-------- | ------------

THE RISKS YOU FACE

You Should Not Rely on Past Performance in Deciding Whether to Buy Units

Each Trading Advisor selected by the Managing Owner to manage the assets of each Series has a performance history through the date of its selection by The Managing Owner. You must consider, however, the uncertain significance of past
performance, and you should not rely on the Trading Advisors or the Managing Owners records to date for predictive purposes. You should not assume that any Trading Advisors future trading decisions will create profit, avoid
substantial losses or result in performance for the Series that is comparable to that Trading Advisors or to the Managing Owners past performance. In fact, as a significant amount of academic study has shown, futures funds more
frequently than not underperforms the past performance records included in their prospectuses.

Because you and other investors will acquire, exchange and
redeem Units at different times, you may experience a loss on your Units even though the Series in which you have invested as a whole is profitable and even though other investors in that Series experience a profit. The past performance of any
Series may not be representative of your investment experience in it.

Likewise, you and other investors will invest in different Series managed by
different Trading Advisors. The assets of each Series are, segregated from the other Series assets; and valued and accounted for separately from every other Series. Consequently, the past performance of one Series has no bearing on the past
performance of another Series.

The Trust has a limited operating history upon which to evaluate your investment in any Series.

Price Volatility May Possibly Cause the Total Loss of Your Investment

Futures and forward contracts have a high degree of price variability and are subject to occasional rapid and substantial changes. Consequently, you could lose all or substantially all of your investment in any Series of the Trust.

Speculative and Volatile Markets Combined With Highly Leveraged Trading May Cause the Trust to Incur Substantial Losses.

The markets in which each Series of the Trust trades are speculative, highly leveraged and involve a high degree of risk. Each Trading Advisors trading considered
individually involves a significant risk of incurring large losses, and there can be no assurance that any Series of the Trust will not incur such losses. Futures and forward prices are volatile. Volatility increases risk, particularly when trading
with leverage. Trading on a highly leveraged basis, as does each Series of the Trust, even in stable markets involves risk; doing so in volatile markets necessarily involves a substantial risk of sudden, significant losses. Due to such leverage,
even a small movement in price could cause large losses for the Trust. Market volatility will increase the potential for large losses. Market volatility and leverage mean that any Series of the Trust could incur substantial losses, potentially
impairing its equity base and ability to achieve its long-term profit objectives even if favorable market conditions subsequently develop.

In addition to
the leveraged trading described above, the Managing Owner has the ability to further increase the leverage of any Series of the Trust by allocating notional equity to its Trading Advisor(s) (in a maximum amount of up to 20% of the Series Net Asset
Value), which would then permit such Trading Advisor to trade the account of such Series as if more equity were committed to such accounts than is, in fact, the case. Although the Managing Owner has the option to allocate additional notional equity
to a Trading Advisor, the Managing Owner has no current plans to do so.

Fees and Commissions are Charged Regardless of Profitability and May Result in
Depletion of Trust Assets

Each Series of the Trust is subject to the fees and expenses described herein which are payable irrespective of profitability
in addition to performance fees which are payable based on the profitability of such Series, except that with respect to the Registrant such performance fees are payable to each Trading Advisor based on such Trading Advisors profitability and
not on the profitability of the Registrant as a whole. Such fees and expenses include asset-based fees of up to 6.50% per annum for Class I unitholders and up to 4.50% per annum for Class II unitholders as well as incentive fees equal to
20% of net profits on a cumulative high water mark basis. Included in these charges are brokerage fees and operating expenses. On the Trusts forward trading of each Series, bid-ask spreads are incorporated into the pricing of such
Series forward contracts by its counterparties in addition to the brokerage fees paid by such Series. It is not possible to quantify the bid-ask spreads paid by each Series because such Series cannot determine the profit its counterparty
is making on the forward trades into which it enters. Consequently, the expenses of each Series could, over time, result in significant losses to your investment therein.



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Market Conditions May Impair Profitability

The trading systems used by certain Trading Advisors are technical, trend-following methods. The profitability of trading under these systems depends on, among other things, the occurrence of significant price trends,
which are sustained movements, up or down, in futures and forward prices. Such trends may not develop; there have been periods in the past without price trends. The likelihood of the Units of any Series being profitable could be materially
diminished during periods when events external to the markets themselves have an important impact on prices. During such periods, Trading Advisors historic price analysis could establish positions on the wrong side of the price movements
caused by such events. Graham and Eagle employ technical programs and Bridgewater trades pursuant to systems that incorporate fundamental data.

Discretionary Trading Strategies May Incur Substantial Losses

Discretionary traders, while they may utilize market charts, computer
programs and compilations of quantifiable fundamental information to assist them in making trading decisions, make such decisions on the basis of their own judgment and trading instinct, not on the basis of trading signals generated by
any program or model. Such traders may be more prone to subjective judgments, which may have greater potentially adverse effects on their performance than systematic traders, which emphasize eliminating the effects of emotionalism on
their trading. Reliance on trading judgment may, over time, produce less consistent trading results than implementing a systematic approach. Discretionary traders, like trend-following traders, are unlikely to be profitable unless major price
movements occur. Discretionary traders are highly unpredictable, and can incur substantial losses even in apparently favorable markets.

Systematic
Trading Strategies May Incur Substantial Losses

A systematic trader will generally rely to some degree on judgmental decisions concerning, for example,
what markets to follow and commodities to trade, when to liquidate a position in a contract which is about to expire and how large a position to take in a particular commodity. Although these judgmental decisions may have a substantial effect on a
systematic traders performance, such traders primary reliance is on trading programs or models that generate trading signals. The systems utilized to generate trading signals are changed from time to time (although generally
infrequently), but the trading instructions generated by the systems being used are followed without significant additional analysis or interpretation. Therefore, systematic trading may incur substantial losses by failing to capitalize on market
trends that their systems would otherwise have exploited by applying their generally mechanical trading systems by judgmental decisions of employees. Furthermore, any trading system or trader may suffer substantial losses by misjudging the market.
Systematic traders tend to rely on computerized programs, and some consider the prospect of disciplined trading, which largely removes the emotion of the individual trader from the trading process, advantageous. Due to their reliance upon computers,
systematic traders are generally able to incorporate a significant amount of data into a particular trading decision. However, when fundamental factors dominate the market, trading systems may suffer rapid and severe losses due to their inability to
respond to such factors until such factors have had a sufficient effect on the market to create a trend of enough magnitude to generate a reversal of trading signals, by which time a precipitous price change may already be in progress, preventing
liquidation at anything but substantial losses. The programs utilized by Graham, Bridgewater and Eagle are systematic trading strategies.

Decisions
Based Upon Fundamental Analysis May Not Result in Profitable Trading

Traders that utilize fundamental trading strategies attempt to examine factors
external to the trading market that affect the supply and demand for a particular futures and forward contracts in order to predict future prices. Such analysis may not result in profitable trading because the analyst may not have knowledge of all
factors affecting supply and demand, prices may often be affected by unrelated factors, and purely fundamental analysis may not enable the trader to determine quickly that previous trading decisions were incorrect. In addition, because of the
breadth of fundamental data that exists, a fundamental trader may not be able to follow developments in all such data, but instead may specialize in analyzing a narrow set of data, requiring trading in fewer markets. Consequently, a fundamental
trader may have less flexibility in adverse markets to trade other futures and forward markets than traders that do not limit the number of markets traded as a result of a specialized focus. Bridgewater utilizes fundamental trading strategies on
behalf of its program.

Increase in Assets Under Management May Affect Trading Decisions

Many of the Trading Advisors current futures equity under management are at or near its all-time high. As of October 31, 2006 (except with respect to
Bridgewater, which is as of September 30, 2006), Graham, Bridgewater and Eagle each managed $4.9 billion, $97.9 billion and $1.3 billion respectively. Both Bridgewater and Graham are near their all time high with respect to assets under
management. The more equity a Trading Advisor manages, the more difficult it may be for that Trading Advisor to trade profitably because of the difficulty of trading larger positions without adversely affecting prices and performance. Accordingly,
such increases in equity under management may require one or more of the Trading Advisors to modify trading decisions for the relevant Series of the Trust, which could have a detrimental effect on your investment in such Series.

You cannot be assured of the Trading Advisors Continued Services Which May Be Detrimental to Trust

You cannot be assured that any Trading Advisor will be willing or able to continue to provide advisory services to any Series of the Trust for any length of time. There
is severe competition for the services of qualified trading advisors, and a Series of the Trust may not be able to retain satisfactory replacement or additional trading advisors on acceptable terms or a current Trading Advisor may require the Trust
to pay higher fees in order to be able to retain such Trading Advisor. The Managing



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Owner may either terminate a Trading Advisor upon 30 days prior written notice, or upon shorter notice, if for cause. Each Trading Advisor has the
right to terminate the Advisory Agreement in its discretion at any time for cause.

Limited Ability to Liquidate Your Investment

There is no secondary market for the Units. While the Units have redemption and exchange rights, there are restrictions, and possible fees assessed. For example, Units
may be redeemed only as of the close of business on the last Business Day of a calendar month provided a Request for Redemption is received at least five (5) Business Days prior to the end of such month excluding, the last Business Day of the
month. In addition, Units of Class I may be subject to redemption charges if redeemed prior to the first anniversary of their issuance in an amount equal to the product of (I) the Net Asset Value per Unit on the redemption date of the Units
being redeemed, multiplied by (ii) the number of months remaining before the first anniversary of the date such Units were purchased, multiplied by (iii) 1/12th of 2.00%.

Transfers of Units are subject to limitations, such as thirty (30) days advance notice of any intent to transfer. Also, the Managing Owner may deny a request to transfer if it determines that the transfer
may result in adverse legal or tax consequences for the Trust or any Series.

Possible Illiquid Markets May Exacerbate Losses

Futures and forward positions cannot always be liquidated at the desired price. It is difficult to execute a trade at a specific price when there is a relatively small
volume of buy and sell orders in a market. A market disruption, such as when foreign governments may take or be subject to political actions, which disrupt the markets in their currency or major exports, can also make it difficult to liquidate a
position. Such periods of illiquidity and the events that trigger them are difficult to predict and there can be no assurance that any Trading Advisor will be able to do so. There can be no assurance that market illiquidity will not cause losses for
one or more Series of the Trust. The large size of the positions which a Trading Advisor is expected to acquire for a Series of the Trust increases the risk of illiquidity by both making its positions more difficult to liquidate and increasing the
losses incurred while trying to do so.

Generally, none of the Trading Advisors selected to manage the assets of the various Series historically has
allocated more than 10% of the assets under such Trading Advisors management pursuant to the programs selected for the various Series to over-the-counter instruments. The risk of loss due to potentially illiquid markets is more acute in
respect of over-the-counter instruments than in respect of exchange-traded instruments because the performance of those contracts is not guaranteed by an exchange or clearinghouse and the Series will be at risk to the ability of the counterparty to
the instrument to perform its obligations thereunder. Because these markets are not regulated, there are no specific standards or regulatory supervision of trade pricing and other trading activities that occur in those markets.

Because No Series of the Trust Acquires Any Asset with Intrinsic Value, the Positive Performance of Your Investment Is Wholly Dependent Upon an Equal and Offsetting
Loss

Futures trading is a risk transfer economic activity. For every gain there is an equal and offsetting loss rather than an opportunity to
participate over time in general economic growth. Unlike most alternative investments, an investment in a Series of the Trust does not involve acquiring any asset with intrinsic value. Overall stock and bond prices could rise significantly and the
economy as a whole prospers; while any one or more Series of the Trust trades unprofitably.

Failure of Futures Trading to be Non-Correlated to General
Financial Markets Will Eliminate Benefits of Diversification

Historically, managed futures generally have been non-correlated to the performance of
other asset classes such as stocks and bonds. Non-correlation means that there is no statistically valid relationship between the past performance of futures and forward contracts on the one hand and stocks or bonds on the other hand.
Non-correlation should not be confused with negative correlation, where the performance would be exactly opposite between two asset classes. Because of this non-correlation, no Series of the Trust can be expected to be automatically profitable
during unfavorable periods for the stock market, or vice-versa. The futures and forward markets are fundamentally different from the securities markets in that for every gain in futures and forward trading, there is an equal and offsetting loss. If
a Series of the Trust does not perform in a manner non-correlated with the general financial markets or does not perform successfully, you will obtain no diversification benefits by investing in the Units of such Series and such Series may have no
gains to offset your losses from other investments.

Trading Advisors Trading Independently of Each Other May Reduce Profit Potential and Insurance
Risks Through Offsetting Positions

The Trading Advisors trade entirely independently of each other. Two Trading Advisors may, from time to time, take
opposite positions, eliminating any possibility of an investor who holds Units in each of the relevant single-Trading Advisor Series or who holds Units in the Registrant profiting from these positions considered as a whole but incurring the usual
expenses associated with taking such positions. The Trading Advisors programs may at times be similar to one another thereby negating the benefits of investing in more than one Trading Advisor by purchasing Units of more than one of Series G,
Series H and Series I or by purchasing Units of the Registrant, which may, in fact, increase risk. Two or more Trading Advisors may compete with each other to acquire the same position, thereby increasing the costs incurred by each of them to take
such position. It is also possible that two or more Trading Advisors, although trading independently, could experience drawdowns at



7



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the same time, thereby negating the potential benefit associated with exposure to more than one Trading Advisor and more than one program. the
Registrants multi-advisor structure will not necessarily control the risk of speculative futures trading. Multi-advisor funds may have significant volatility and risk despite being relatively diversified among trading advisors.

Trading on Commodity Exchanges Outside the United States is Not Subject to U.S. Regulation

Each of the Trading Advisors is expected to engage in some or all of its trading on behalf of the applicable Series on commodity exchanges outside the United States. Trading on such exchanges is not regulated by any
United States governmental agency and may involve certain risks not applicable to trading on United States exchanges. In trading contracts denominated in currencies other than U.S. dollars, each Series of the Trust will be subject to the risk of
adverse exchange-rate movements between the dollar and the functional currencies of such contracts. Investors could incur substantial losses from trading on foreign exchanges by any Series of the Trust to which such Investors would not have been
subject had the Trading Advisors limited their trading to U.S. markets.

Various Actual and Potential Conflicts of Interest May Be Detrimental to
Unitholders

The Trust is subject to actual and potential conflicts of interests involving the Managing Owner, the Trading Advisors, various brokers and
selling agents. The Managing Owner, the Trading Advisors, and their respective principals, all of which are engaged in other investment activities, are not required to devote substantially all of their time to the Trusts business, which also
presents the potential for numerous conflicts of interest with the Trust. As a result of these and other relationships, parties involved with the Trust have a financial incentive to act in a manner other than in the best interests of the Trust and
its unitholders. The Managing Owner has not established any formal procedure to resolve conflicts of interest. Consequently, investors will be dependent on the good faith of the respective parties subject to such conflicts to resolve them equitably.
Although the Managing Owner attempts to monitor these conflicts, it is extremely difficult, if not impossible, for the Managing Owner to ensure that these conflicts do not, in fact, result in adverse consequences to the various Series of the Trust.

The Trust may be subject to certain conflicts with respect to its clearing broker, its futures broker, and any executing broker including, but not limited
to, conflicts that result from receiving greater amounts of compensation from other clients, purchasing opposite or competing positions on behalf of third party accounts traded through the clearing broker, the futures broker and executing brokers.

The Selling Agent and the Correspondent Selling Agents will be entitled to ongoing compensation as a result of their clients remaining in any Series of
the Trust, so a conflict exists between their interest in maximizing compensation and in advising their clients to make investment decisions in such clients best interests.

The Managing Owner and the Selling Agent are both owned by Kenmar Holdings Inc., which could give rise to conflicts of interest because their compensation in each role is based on the Net Asset Value of Units
outstanding. Like the employees of the Correspondent Selling Agents, the employees of the Selling Agent may have a conflict of interest between acting in the best interest of their clients and assuring continued compensation to their employer.

Unitholders Taxed Currently

Unitholders of a Series
are subject to tax each year on their allocable share of the income or gains (if any) of such Series, whether or not they receive distributions. Moreover, the Managing Owner does not intend to make any distributions to unitholders in respect of any
Series. Consequently, unitholders of a Series will be required either to redeem Units or to make use of other sources of funds to discharge their tax liabilities in respect of any profits earned by such Series.

In comparing the profit objectives of each Series of the Trust with the performance of more familiar securities in which one might invest, prospective investors must
recognize that if they purchased equity or debt, there probably would be no tax due on the appreciation in the value of such holdings until disposition. In the case of each Series of the Trust, on the other hand, a significant portion of any
appreciation in the Net Asset Value per Unit must be paid in taxes by the unitholders of such Series every year, resulting in a substantial cumulative reduction in their net after-tax returns. Because unitholders of a Series will be taxed currently
on their allocable share of the income or gains of such Series, if any, the Trust may trade successfully but investors nevertheless would have recognized significantly greater gains on an after-tax basis had they invested in conventional stocks with
comparable performance.

Limitation on Deductibility of Investment Advisory Fees

Non-corporate unitholders of a Series may be required to treat the amount of Incentive Fees and other expenses of such Series as investment advisory fees
which may be subject to substantial restrictions on deductibility for federal income tax purposes. In the absence of further regulatory or statutory clarification, the Managing Owner is not classifying these expenses as investment advisory
fees, but this is a position to which the Internal Revenue Service (the IRS) may object. If a substantial portion of the fees and other expenses of a Series were characterized as investment advisory fees, an investment
in such Series might no longer be economically viable.

Taxation of Interest Income Irrespective of Trading Losses

With respect to each Series, the Net Asset Value per Unit reflects the trading profits and losses as well as the interest income earned and expenses incurred by such
Series. However, losses on such Series trading will be almost exclusively capital



8



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losses, and capital losses are deductible against ordinary income only to the extent of $3,000 per year in the case of non-corporate taxpayers. Consequently,
if a non-corporate unitholder had, for example, an allocable trading (i.e., capital) loss of $10,000 in a given fiscal year and allocable interest (i.e., ordinary) income (after reduction for expenses) of $5,000, the unitholder would have incurred a
net loss in the Net Asset Value of such unitholders Units equal to $5,000 but would recognize taxable income of $2,000 (assuming a 40% tax rate). The limited deductibility of capital losses for non-corporate unitholders could result in such
unitholders having a tax liability in respect of their investment in a Series of the Trust despite incurring a financial loss on their Units of such Series.

Possibility of a Tax Audit of Both the Series and the Unitholders

There can be no assurance that the tax returns of each Series of the
Trust will not be audited by the IRS. If such an audit results in an adjustment, unitholders of such Series could themselves be audited as well as being required to pay additional taxes, interest and possibly penalties.

Failure or Lack of Segregation of Assets May Increase Losses

The
Commodity Exchange Act (CEA) requires a clearing broker to segregate all funds received from customers from such brokers proprietary assets. If the clearing broker fails to do so, the assets of any Series of the Trust might
not be fully protected in the event of their bankruptcy. Furthermore, in the event of the clearing brokers bankruptcy, any Series of the Trust could be limited to recovering only a pro rata share of all available funds segregated on behalf of
the clearing brokers combined customer accounts, even though certain property specifically traceable to such Series of the Trust (for example, Treasury bills deposited by such Series of the Trust with the clearing broker as margin) was held by
the clearing broker. The clearing broker has been the subject of certain regulatory and private causes of action.

Default by Counterparty and Credit
Risk Could Cause Substantial Losses

Dealers in forward contracts are not regulated by the CEA and are not obligated to segregate customer assets. As a
result, unitholders do not have such basic protections with respect to the trading in forward contracts by any Series of the Trust. This lack of regulation in these markets could expose a Series in certain circumstances to significant losses in the
event of trading abuses or financial failure by the counterparties. Each Series also faces the risk of non-performance by the counterparties to the over-the-counter contracts. Unlike in futures contracts, the counterparty to these contracts is
generally a single bank or other financial institution, rather than a clearing organization backed by a group of financial institutions. As a result, there will be greater counterparty credit risk in these transactions. The clearing member, clearing
organization or other counterparty may not be able to meet its obligations, in which case the applicable Series could suffer significant losses on these contracts.

Regulatory Changes or Actions May Alter the Nature of an Investment in the Trust

Considerable regulatory attention has been focused on
non-traditional investment pools, in particular commodity pools such as each Series of the Trust, publicly distributed in the United States. There has been significant international governmental concern expressed regarding, for example, (i) the
disruptive effects of speculative trading on the central banks attempts to influence exchange rates and (ii) the need to regulate the derivatives markets in general. There is a possibility of future regulatory changes altering, perhaps to
a material extent, the nature of an investment in any Series of the Trust.

The futures markets are subject to comprehensive statutes, regulations, and
margin requirements. In addition, the Commodity Futures Trading Commission (CFTC) and the exchanges are authorized to take extraordinary actions in the event of a market emergency, including, for example, the retroactive
implementation of speculative position limits or higher margin requirements, the establishment of daily price limits and the suspension of trading. The regulation of futures and forward transactions in the United States is a rapidly changing area of
law and is subject to modification by government and judicial action. The effect of any future regulatory change on the Trust is impossible to predict, but could be substantial and adverse.

Trust Trading is Not Transparent

The trading decisions in respect of
each Series are made by a Trading Advisor or Trading Advisors. While the Managing Owner receives daily trade confirmations from the clearing broker and foreign exchange dealers, such information is not provided to unitholders and each Series
trading results are reported to the unitholders monthly. Accordingly, an investment in a Series does not offer you the same transparency, i.e., an ability to review all investment positions daily that a personal trading account offers.

Lack of Independent Experts Representing Investors

The Managing
Owner has consulted with counsel, accountants and other experts regarding the formation and operation of the Trust and each Series. No counsel has been appointed to represent you in connection with the offering of the Units of any Series.
Accordingly, you should consult your own legal, tax and financial advisers regarding the desirability of an investment in any Series of the Trust.

Forwards, Swaps, Hybrids and Other Derivatives are Not Subject to CFTC Regulation

Each Series of the Trust trades foreign exchange
contracts in the interbank market. Since forward contracts are traded in unregulated markets between principals, the commodity pools also assume the risk of loss from counterparty



9



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nonperformance. In the future, any Series of the Trust may also trade swap agreements, hybrid instruments and other off-exchange contracts. Swap agreements
involve trading income streams such as fixed rate or floating rate interest. Hybrids are instruments, which combine features of a security with those of a futures contract. The dealer market for off-exchange instruments is becoming more liquid.
Because there is no exchange or clearing house for these contracts, the Trust will be subject to the credit risk and nonperformance of the counterparty. Additionally, because these off-exchange contracts are not regulated by the CFTC, no Series of
the Trust will receive the protections, which are provided by the CFTCs regulatory scheme.

Possibility of Termination of the Trust or any Series
Before Expiration of its Stated Term

As managing owner, the Managing Owner may withdraw from the Trust upon 120 days notice, which would cause
the Trust and each Series to terminate unless a substitute managing owner were obtained. Other events, such as a long-term substantial loss suffered by any Series, could also cause such Series to terminate before the expiration of its stated term.
This could cause you to liquidate your investments and upset the overall maturity and timing of your investment portfolio. If the registrations with the CFTC or memberships in the National Futures Association (NFA) of the Managing
Owner or the clearing broker were revoked or suspended, such entity would no longer be able to provide services to the Trust.



|Item 1B. | Unresolved Staff Comments
|-------- | -------------------------

None



|Item 2. | Properties
|------- | ----------

The Registrant does not own or lease any properties in
the conduct of its business. The Registrants only place of business is the place of business of the Managing Owner.

Certain administrative services
are provided by DPM Mellon LLC, the Registrants administrator (the Administrator), which is located at 400 Atrium Drive, Somerset, New Jersey 08873.



|Item 3. | Legal Proceedings
|------- | -----------------

There are no material proceedings pending by or
against the Registrant or the Managing Owner.



|Item 4. | Submission of Matters to a Vote of Security Holders
|------- | ---------------------------------------------------

None

PART II



|Item 5. | Market for the Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
|------- | ----------------------------------------------------------------------------------------------------------------

Information with respect to the offering of Interests and the use of proceeds is incorporated by reference to Note 1 to the Registrants 2006 Annual Report, which is
filed as an exhibit hereto.

A significant secondary market for the Limited Units has not developed, and is not expected to develop in the future. There
are also certain restrictions set forth in the Trust Agreement limiting the ability of a unitholder to transfer Units. However, Limited Units may be redeemed on a monthly basis, but Class I Units are subject to a redemption fee if transacted within
one year of the effective date of purchase. Additionally, Units owned in one Series of the Trust (Series G, H, I and J) may be exchanged, without any charge, for Units of one or more other Series on a monthly basis for as long as Limited Units in
those Series are being offered to the public. Exchanges and Redemptions are calculated based on the applicable Series then current Net Asset Value per Interest as of the close of business on the last business day of the month in which the
exchange or redemption request is effected. The exchange of units is treated as a redemption in one Series (with the related tax consequences) and the simultaneous purchase of units in the other Series.



10



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The following table presents sales of unregistered interest (i.e., Managing Owner interests) exempt from registration
under Section 4(2) of the Securities Act of 1933 during the period from September 28, 2004 (inception) through December 31, 2006.



|                  |  |            |  |               |        
|----------------- |  | ---------- |  | ------------- | -------
|                  |  | Amount of 
|Date of Sale      |  | Units Sold |  | Cash Received
|March 10, 2005    |  | 10         |  | $             | 1,000  
|December 1, 2005  |  | 3,080      |  | $             | 308,000
|January 1, 2006   |  | 765        |  | $             | 74,535 
|February 1, 2006  |  | 416        |  | $             | 40,000 
|March 1, 2006     |  | 256        |  | $             | 24,489 
|April 1, 2006     |  | 223        |  | $             | 21,560 
|May 1, 2006       |  | 265        |  | $             | 27,537 
|June 1, 2006      |  | 454        |  | $             | 47,400 
|July 1, 2006      |  | 575        |  | $             | 59,000 
|August 1, 2006    |  | 530        |  | $             | 52,350 
|September 1, 2006 |  | 403        |  | $             | 39,200 
|October 1, 2006   |  | 374        |  | $             | 36,000 
|November 1, 2006  |  | 189        |  | $             | 18,000 
|December 1, 2006  |  | 11         |  | $             | 1,000  

There are no material restrictions upon the Registrants present or future ability to make distributions in
accordance with the provisions of the Trust Agreement. No distributions have been made since inception and no distributions are anticipated in the future.

As of February 1, 2007, there were 1,787 holders of record owning 738,141.709 Interests, which include 7,819.805 General Units



|Item 6. | Selected Financial Data
|------- | -----------------------

The following table presents selected
financial data of the Registrant for the year ended December 31, 2006 and for the period December 1, 2005 (commencement of operations) to December 31, 2005. This data should be read in conjunction with the financial statements of the
Registrant and the notes thereto on pages 3 through 13 of the Registrants 2006 Annual Report, which is filed as an exhibit hereto.



|                                                        |  |                            |            |   |                              |   |            |  
|------------------------------------------------------- |  | -------------------------- | ---------- | - | ---------------------------- | - | ---------- | -
|                                                        |  | Year EndedDecember 31,2006 |            |   | Period EndedDecember 31,2005 |  
|Total revenues/(losses) (including interest)            |  | $                          | 4,882,356  |   |                              | $ | (464,598   | )
|Net gain (loss)                                         |  | $                          | 120,705    |   |                              | $ | (800,564   | )
|Net gain (loss) per weighted average Interest  Class I |  | $                          | 0.32       |   |                              | $ | (2.58      | )
|Net (loss) per weighted average Interest  Class II     |  | $                          | (2.52      | ) |                              | $ | 0.00       |  
|Total assets                                            |  | $                          | 72,720,132 |   |                              | $ | 37,915,323 |  
|Net asset value per Interest  Class I                  |  | $                          | 98.20      |   |                              | $ | 97.38      |  
|Net asset value per Interest  Class II                 |  | $                          | 96.71      |   |                              | $ | 0.00       |  



|Item 7. | Managements Discussion and Analysis of Financial Condition and Results of Operation
|------- | ------------------------------------------------------------------------------------

Critical Accounting Policies

Preparation of the financial statements and related disclosures in compliance with
accounting principles generally accepted in the United States of America requires the application of appropriate accounting rules and guidance, as well as the use of estimates. The Registrants application of these policies involves judgments
and actual results may differ from the estimates used.

The Managing Owner has evaluated the nature and types of estimates that it makes in preparing the
Registrants financial statements and related disclosures and has determined that the valuation of its investments in the Trading Vehicles involve a critical accounting policy. The market values of futures (exchange traded) contracts is
verified by the Administrator who obtains valuation data from third party data providers such as Bloomberg and Reuters and compares those prices with the Registrants clearing broker. The market value of currency swap and forward (non-exchange
traded) contracts is extrapolated on a forward basis from the spot prices quoted as of 3 PM on the last business day of the reporting period. All values assigned by the Administrator and confirmed by the Managing Owner are final and conclusive as to
all unitholders.



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As such, if actual results vary from estimates used, they are anticipated to not have a material impact on the financial
statements and related disclosures.

The Registrant records all investments at fair value in its financial statements, with changes in fair value reported
as a component of Trading Profits (Losses) in the Statements of Operations. Generally, fair values are based on quoted market prices; however, in certain circumstances, significant judgments and estimates are involved in determining fair value in
the absence of an active market closing price.

The SEC Staff Accounting Bulletin 108 (SAB 108), Considering the Effects of Prior Year
Misstatements When Quantifying Misstatements in Current Year Financial Statements, which provides guidance on quantifying and evaluating the materiality of unrecorded misstatements. It is effective for the first annual period ending after
November 15, 2006. Preferred as Managing Owner of the Registrant has evaluated the impact, if any, the implementation of SAB 108 may have on its financial statements. In Preferreds opinion, no material unrecorded misstatements are in
existence as of December 31, 2006 that would require a cumulative effect adjustment to the financial statements.

In July 2006, the Financial
Accounting Standards Board (FASB) issued FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes - an interpretation of FASB Statement No. 109 (FIN 48), which clarifies the accounting for
uncertainty in tax positions. FIN 48 requires that the Registrant recognize in its financial statements, the impact of a tax position if that position is more likely than not of being sustained on audit, based on the technical merits of the
position. The provisions of FIN 48 are effective for fiscal years beginning after December 15, 2006, with the cumulative effect of the change in accounting principle recorded as an adjustment to opening retained earnings. Preferred as Managing
Owner of the Registrant has evaluated the impact of adopting FIN 48 on the Registrants financial statements. In Preferreds opinion as of December 31, 2006, FIN 48 has no material impact on the Registrant, as the Registrants
tax position is based on established tax precedence for the tax treatment of investment partnerships as flow through tax entities.

In September 2006, the
FASB issued SFAS No. 157, Fair Value Measurements, which defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. The provisions of SFAS No. 157 are effective
for fiscal years beginning after November 15, 2007. The Registrant is currently evaluating the impact of adopting SFAS No. 157 on its financial statements. At this time, the impact to the Registrants financial statements has not been
determined.

Liquidity and Capital Resources

The
Registrant commenced operations on December 1, 2005 with gross proceeds of $31,024,443 allocated to commodities trading. Additional contributions raised through the continuous offering from the sales of Interests for the year ended
December 31, 2006 and the period December 1, 2005 (commencement of operations) through December 31, 2006 resulted in additional gross proceeds to the Registrant of $46,887,024 and $77,911,467, respectively.

Limited Interests in the Registrant may be redeemed on a monthly basis, but are subject to a redemption fee if transacted within one year of the effective date of
purchase. Redemptions of Limited interests for the year ended December 31, 2006 and the period from December 1, 2005 (commencement of operations) to December 31, 2005 were $9,642,247 and $0, respectively, and redemptions of General
Interests for the year ended December 31, 2006 and the period from December 1, 2005 (commencement of operations) to December 31, 2005 were $1000 and $0, respectively. Additionally, Interests owned in any series of World Monitor Trust
III (Series G, H, I or J) may be exchanged, without any charge, for Interests of one or more other series of World Monitor Trust III on a monthly basis for as long as Limited Interests in those Series are being offered to the public.

At December 31, 2006 and 2005, 100% of the Registrants net assets were allocated to commodities trading through its investment in the Trading
Vehicles. The clearing broker credits the Registrant with interest income on 100% of its average daily equity maintained in its accounts with the clearing broker at prevailing rates.

The commodities contracts may be subject to periods of illiquidity because of market conditions, regulatory considerations and other reasons. For example, commodity exchanges limit fluctuations in certain commodity
futures contract prices during a single day by regulations referred to as daily limits. During a single day, no trades may be executed at prices beyond the daily limit. Once the price of a futures contract for a particular commodity has
increased or decreased by an amount equal to the daily limit, positions in the commodity can neither be taken nor liquidated unless traders are willing to effect trades at or within the limit. Commodity futures prices have occasionally moved the
daily limit for several consecutive days with little or no trading. Such market conditions could prevent the Registrant from promptly liquidating its commodity futures positions.

Since the Registrants business is to trade futures and forward contracts, primarily through its investment in the Trading Vehicle, its capital is at risk due to changes in the value of these contracts (market
risk) or the inability of counterparties to perform under the terms of the contracts (credit risk). The Registrants exposure to market risk is influenced by a number of factors including the volatility of interest rates and foreign currency
exchange rates, the liquidity of the markets in which the contracts are traded and the relationships among the contracts held. The inherent uncertainty of the Registrants speculative trading as well as the development of drastic market
occurrences could result in monthly losses considerably beyond the Registrants experience to date and could ultimately lead to a loss of all or substantially all of investors capital. The Managing Owner attempts to minimize these risks
by requiring the Registrant and its trading advisor to abide by various trading limitations and policies which include limiting margin amounts, trading only in liquid markets and permitting the use of stop



12



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loss provisions. See Note 8 to the financial statements for a further discussion on the credit and market risks associated with the Registrants futures
contracts.

The Registrant does not have, nor does it expect to have, any capital assets.

Off-Balance Sheet Arrangements and Contractual Obligations

As of December 31, 2006, the Registrant had not
utilized special purpose entities to facilitate off-balance sheet financing arrangements and has no loan guarantee arrangements or off-balance sheet arrangements of any kind other than agreements entered into in the normal course of business, which
may include indemnification provisions related to certain risks service providers, such as our accountants, undertake in performing services which are in the best interests of the Registrant. While the Registrants exposure under such
indemnification provisions cannot be estimated, these general business indemnifications are not expected to have material impact on the Registrants financial position.

The Registrants contractual obligations are with the Trading Advisors and its commodity brokers. Payments made under the Registrants agreements with the Trading Advisors are at a fixed rate, calculated as
a percentage of the Registrants New High Net Trading Profits. Management fee payments made to the Trading Advisors are calculated as a fixed percentage of the Registrants Net Asset Values. As such, the Managing Owner
cannot anticipate the amount of payments that will be required under these agreements for future periods as Net Asset Values are not known until a future date. These agreements are effective for one-year terms, renewable automatically for
additional one-year terms unless terminated. Additionally, these agreements may be terminated by either party for various reasons.

Results of
Operations

The Net Asset Value per Interest of Class I as of December 31, 2006 was $98.20, a increase of 0.84% from the December 31, 2005 Net
Asset Value per Interest of $97.38, which in turn was a decrease of 2.62% from the December 1, 2005 Net Asset Value per Interest of $100.00. The Net Asset Value per Interest of Class II as of December 31, 2006 was $96.71, a decrease of
3.29% from the beginning Net Asset Value per Interest of $100.00 as of the start of trading on May 1, 2006. The CISDM CPO Asset Weighted Index (formerly known as the Zurich Fund/Pool Qualified Universe Index) returned 8.30% for the year ended
December 31, 2006 and (0.57)% for the one-month ended December 31, 2005. The CISDM CPO Asset Weighted Index is the dollar weighted, total return of all commodity pools tracked by Managed Account Reports, LLC. Past performance is not
necessarily indicative of future results.

The Registrants trading gains and losses before commissions and related fees for the year ended
December 31, 2006 and the period December 1, 2005 (commencement of operations) to December 31, 2005 were a gain of $2,276,806 and a loss of $733,306, respectively. A detailed discussion of the trading results for the year ended
December 31, 2006 is presented below.

General Economy

The U.S. Federal Reserve (Fed) ceased raising rates in the fourth quarter. The perception remains that although the economy is slowing, there is no danger of a recession and that a soft landing is the most likely scenario. Range
trading may be the dominant pattern for the next few months as prices react to the economic data. The yield on the benchmark U.S. 10-Year note finished November at an 11-month low. A weaker U.S. dollar failed to dampen enthusiasm for U.S.
Treasuries. The latest data available shows capital flows to the U.S. rose in October.

On the employment front, job growth accelerated in December as
non-farm payrolls rose while the unemployment rate held steady at 4.5%. This is down from 4.9% at the start of 2006. Of some concern was a 0.5% jump in average hourly earnings, taking them up 4.2% over the past 12 months. Overall, the employment
picture persists as healthy but the construction, manufacturing and retail sectors all lost jobs in December.

Regarding U.S. inflation, the November
Consumer Price Index (CPI) was unchanged and the Core CPI, which factors out the more volatile food and energy prices, was also flat. This is the lowest reading for the core rate since November 2005. There were clearly no inflation
worries in this data. The Producer Price Index (PPI) was not as controlled, climbing 2.0%, the most since 1974. The surge was caused by a jump in energy, car and truck prices.

Housing has been a major economic concern in 2006. November Housing Starts rose following a big drop in October. November Housing Permits, however, fell slightly.
Over the past 11 months, Housing Starts were 12.5% below 2005 levels while Housing Permits were off 14.1%. Homebuilders confidence, as indicated by the NAHB/Wells Fargo Index fell in December.

The overall consumer confidence picture remained mixed with the high end and electronics sectors doing well. November Retail Sales rose 1.0%. The unusually warm weather
hurt clothing sales in department stores. Third quarter Gross Domestic Product, a measure of economic growth, was revised downwards to the lowest level since the fourth quarter of 2005. Home building remains the main drag on growth.

While the Fed was on hold with respect to interest rate policy, the European Central Bank (ECB), the Bank of England (BOE) and the Peoples Bank
of China (PBC) all raised interest rates. British housing prices and CPI growth continue to be high. Germany continues to exhibit growth, and leads the increasingly strong Eurozone. The Bank of Japan (BOJ) remained cautious,
with no additional rate hikes following the July increase to 0.25%. The economy appears mixed, with



13



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consumer spending still less than the economy requires. The Bank of Canada, Reserve Bank of Australia and New Zealand central bank all remained on hold in
December.

Currencies

The euro strengthened versus the
U.S. dollar in 2006, reversing the pattern from 2005. The euro also strengthened against the Japanese yen, achieving record levels in December. Germany, the engine of Eurozone growth, has been the strongest European economy this year. Interest rate
differential factors supported the euro through much of the fourth quarter of 2006. Of great significance, central banks around the globe have initiated a policy of diversification out of the U.S. dollar and into the euro, the British pound, and to
a lesser extent, the Japanese yen.

The British pound ended the year slightly off its high, after rising approximately 14% versus the U.S. dollar. British
housing prices have been surging and the CPI came in above the BOEs target.

The Japanese yen fell against the U.S. dollar, euro and British pound
during the fourth quarter of 2006. Japan exited its deflationary era in 2006, although the fourth quarter saw less than robust growth on the consumer side. Other Asian currencies were better performers, with the Korean won having a particularly
solid December and fourth quarter.

The Peoples Bank of China continues to tighten the reins on the economy. Most recently, the PBC increased the reserve
requirement ratio for banks and raised the base interest rate 50 points to 6.72%. The yuan has shown an accumulative appreciation of about 3.7% since the July 2005 revaluation.

Energies

Crude oil was strong during the first half of the year and weakened during the second half, with the
exception of a brief respite during November. Crude ended December around $60 per barrel, which contrasts to its mid-July peak of nearly $78 per barrel. Record warm weather in key consuming regions in the U.S. put pressure on the market during the
fourth quarter, as did a generally benign geopolitical scene and poor member compliance with OPECs announced production cuts.

The unusually warm
weather kept heating oil under pressure during December. Heating oil will be dependent on a general recovery in commodity prices and a sudden weather shift in coming weeks. Department of Energy gasoline inventories are 0.5% below last season. The
driving season was extended by the warm weather conditions.

Natural gas fell during the fourth quarter with the weather weighing heavily on investor
sentiment. Inventories are still burdensome and demand is slowing rather than rising during the normally strong seasonal demand time frame. What remains to be seen is whether the markets have discounted the majority of these bearish fundamentals.

Grains

While Decembers performance was mixed,
corn trended upwards for the fourth quarter as a whole. The last week of the month, quarter, and year saw the posting of a multi-year high, with the final price for 2006 settling at the highest weekly close on the charts since the drought-driven
summer rally in July of 1996. The main drivers behind the re-awakening of corn prices were threefold: 1) an increase in overseas demand due to improving global economic conditions; 2) the expansion of the production of ethanol; and 3) the ongoing
increase in hedge fund and money managers investing in alternative non-correlated asset classes. For the quarter as a whole, despite a large trading range, the wheat market put in somewhat disappointing, albeit upward trending performance. The
uncertainty caused by ongoing drought conditions in Australia, the relatively high price for wheat and tight global stocks had an effect on supply and demand. The trend for soybean prices was higher for the fourth quarter of 2006. Export demand for
soybeans, soybean oil and soybean meal all appear to be increasing. As corn production is increasingly diverted to the production of ethanol, substitute feedstuffs, with soybeans as the closest surrogate, may also feel the upward pull of prices. As
the global supply of foreign cotton sold out late in the year, prices began to move higher from mid-November through the end of the year. The lethargy that characterized most of 2006 was a product of a massive carryover of last years crop,
along with last summers unfortunate elimination of a marketing program which left U.S. cotton uncompetitively priced.

Indices

U.S. equities recorded their best gains in three years during the fourth quarter of 2006. The weakness in real estate that may have caused a shift into equities, large
levels of global liquidity, a drop in oil prices, a quiet geopolitical atmosphere, solid earnings and a brisk mergers and acquisitions calendar all added to the positive performance. A shift out of commodities also aided the tone of global equities.
Blue chips, financials, oil and big caps did well, and at the end of the quarter technology names took a leading role.

It was also a very good December,
fourth quarter and year for the European equity markets. Markets in Germany, the U.K. and France all ended higher for the fourth quarter. Heavy merger and acquisition activity was a major feature in Europe, along with a solid run of earnings and
significant fund inflows. The strong U.S. market was also a psychological plus. The prospect of further rate hikes from the ECB, and to a lesser extent the BOE, failed to diminish enthusiasm.

Asian/Pacific Rim equities also recorded solid 2006 gains, despite volatile trading. Record highs were achieved in Singapore, Australia and New Zealand during the final
session of the year as well as for Chinas Shanghai Composite. A growing Japanese economy served to buoy enthusiasm and a modest 0.25% base interest rate was supportive. Thailands SET Index had a very volatile month after the central bank
attempted to impose controls on capital for foreign investors in the stock market, but that was quickly reversed when the SET tumbled 15%, and prices subsequently recovered. However, Thailand has seen continuing political unrest.



14



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Interest Rates

As
expected, the Fed remained on hold at its December 12 meeting. The minutes of the most recent Federal Open Market Committee (FOMC) meeting were virtually the same as the November meeting, indicating that the FOMC unanimously agreed
that inflation persists as the primary concern to the economy. However, at the same time they stated the economy might have been a bit softer than previously thought.

In the international arena, the ECB increased rates 25 basis points in December and the BOE raised rates 25 basis points in November. The BOJ made just one move to 0.25% in 2006. Japanese consumer data has been a bit
sluggish; something the BOJ will keep in focus. The Peoples Bank of China is currently engaged in a tightening process, and is actively draining liquidity by increasing reserve requirements.

Metals

A weak U.S. dollar helped support gold for most of the
quarter but during late December the dollar showed signs of a consolidation rally and gold fell. Plunging energy prices had a negative impact on gold prices as well. Silver traded at its best levels in more than six months during the quarter, but
ended the year off its highs. For the year, silver significantly outperformed gold. Speculative participation was heavy throughout the quarter, setting the stage for high volatility. A steady increase in inventories weighed on copper prices in the
fourth quarter. A lessening of labor concerns, particularly in Chile and Canada, and the fact that Chinas buying pace slowed in 2006 added to the negative tone. Zinc supplies remained tight and strong demand continued. Aluminum prices held up
well in the fourth quarter in the face of a general commodity weakness. Nickel was one of the strongest performers in the metals group due to tight supply and a strong pattern of stainless steel demand.

Softs

Forecasts for a significant global supply surplus of sugar
weighed on sentiment, causing prices to decline 29% on the year. This made sugar the weakest agricultural commodity in the Dow Jones/AIG Index. Coffee prices remained relatively flat for 2006 and overall global coffee demand was solid. Scaled back
cocoa crop prospects for the Ivory Coast, the worlds largest producer, added to the commoditys recent bullish tone. The political situation in the Ivory Coast continues fairly quiet but civil unrest remains a potential factor. The cattle
market traded sideways for most of the fourth quarter until severe weather conditions reduced cattle supply and caused prices to rise in the second half of December. Hog supply was ample during the quarter as the US entered a seasonally slow demand
period. On the bright side, the most recent USDA estimate is that US pork exports will rise in 2007 to follow the 2006 increase

Currencies: (-) The
currencies sector was down for the year. Long and short positions in the euro and the Swiss franc, and long positions in the Japanese yen contributed to the loss for the year.

Energies: (-) The sector was down for the year. Long and short positions in crude oil and unleaded gasoline contributed to the loss for the year.

Grains: (-)The sector was down for the year, with a majority of losses from long and short positions in corn, soybeans and wheat.

Indices: (+) The sector was up for the year. Long positions in the Hang Seng and the Taiwan Index, and long and short positions in the DAX and the IBEX indices contributed to the gain.

Interest Rates: (+) The sector was up for the year. Long and short positions in the German Bund, U.S. 10 year Treasury Note, Japanese Government Bond, and
short positions in Euribor contributed to the gain.

Metals: (+) The sector was up for the year, with a majority of the gain coming from long
positions in gold and zinc.

Softs: (-) The sector was down in 2006. Long and short positions in coffee, cocoa and cattle were the primary
contributors to the loss.

The Registrant completed its first full year of operations for the period ending December 31, 2006; therefore a
period-to-period comparison of prior years operations is not available.

Interest Income is earned on the average daily equity maintained in its
accounts with its broker at prevailing rates and therefore, varies weekly according to interest rates, trading performance, contributions and redemptions. Interest income was $2,605,550 for the year ended December 31, 2006 and $268,708 for the
period December 1, 2005 (commencement of operations) to December 31, 2005. During the period December 1, 2005 (commencement of operations) to December 31, 2005, interest income includes interest earned on subscription monies held
in escrow prior to December 1, 2005.

Commissions and other transaction fees, which consist of NFA, exchange and clearing fees as well as floor
brokerage costs and give-up charges, are based on the number of trades the Trading Advisors execute, as well as which exchange, clearing firm or bank on, or through, which the contract is traded. Commissions were $359,836 for the year ended
December 31, 2006 and $27,219 for the period December 1, 2005 (commencement of operations) to December 31, 2005.

All trading decisions for
the Registrant are made by the Trading Advisors through the Trading Vehicles. Trading Advisor fees are calculated on the Registrants Net Asset Value at the end of each month, and therefore, are affected by monthly trading



15



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performance, contributions and redemptions. Management fees were $1,426,762 for the year ended December 31, 2006 and $63,136 for the period
December 1, 2005 (commencement of operations) to December 31, 2005.

The Registrant pays the Managing Owner a management fee calculated on the
Registrants Net Asset Value at the beginning of each month, and therefore, such fee is affected by monthly trading performance, contributions and redemptions. Management fees to the Managing Owner were $283,430 for the year ended
December 31, 2006 and $12,927 for the period December 1, 2005 (commencement of operations) to December 31, 2005.

The Registrant pays a service fee with respect to Class I Units, monthly in arrears, equal to 1/12 of 2% (2% per annum) of the Net Asset Value per unit of the outstanding Class I Units as of the beginning of the
month. The service fee is paid directly by the Registrant to the Selling Agent, Kenmar Securities, Inc., an affiliate of the Managing Owner. The Selling Agent is responsible for paying all commissions owing to the correspondent selling agents, who
are entitled to receive from the Selling Agent an initial commission equal to 2% of the initial Net Asset Value per Unit of each Class I Unit sold by them, payable on the date such Class I Units are purchased. Commencing with the 13thmonth after the purchase of a Class I Unit, the correspondent selling agent receives an ongoing monthly commission equal to
1/12thof 2% (2% per annum) of the Net Asset Value per Class I Unit as of the beginning of each month of the Class I
Units sold by them. All unitholders will also pay Kenmar Securities Inc. a monthly sales commission equal to 1/12 of 1% (1% annually) of the Net Asset Value of the outstanding Units as of the beginning of each month. Services fees and sales
commissions were $1,105,257 and $566,859, respectively, for the year ended December 31, 2006 and $51,707 and $25,854, respectively, for the period December 1, 2005 (commencement of operations) to December 31, 2005.

Incentive fees are based on the New High Net Trading Profits generated by the Trading Advisors, as defined in the Advisory Agreements between the Trading
Vehicles and the Trading Advisors. Incentive fees were $594,086 for the year ended December 31, 2006 and $0 for the period December 1, 2005 (commencement of operations) to December 31, 2005.

Operating expenses were $425,421 for the year ended December 31, 2006 and $155,123 for the period December 1, 2005 (commencement of operations) to
December 31, 2005. These expenses include accounting, audit, tax and legal fees as well as printing and postage costs related to reports sent to Limited Owners.

Offering costs were $284,965 for the year ended December 31, 2006 and $12,927 for the period December 1, 2005 (commencement of operations) to December 31, 2005. Offering costs are advanced by the
Managing Owner and subject to reimbursement by the Trust, subject to certain limitations. For a further discussion of these payments, see Note 2.E. of the Registrants 2006 Annual Report.

Inflation

Inflation has had no material impact on operations or on
the financial condition of the Registrant for the year ended December 31, 2006 or for the period December 1, 2005 (commencement of operations) through December 31, 2005



|Item 7A. | Quantitative and Qualitative Disclosures About Market Risk
|-------- | ----------------------------------------------------------

Introduction

Past Results Not Necessarily Indicative of Future Performance

The Registrant is a speculative commodity pool. The market sensitive instruments held by it are acquired for speculative trading purposes, and substantially all of the
Registrants assets are subject to the risk of trading loss. Unlike an operating company, the risk of market sensitive instruments is integral, not incidental, to the Registrants main line of business.

Market movements result in frequent changes in the fair market value of the Registrants open positions and, consequently, in its earnings and cash flow. The
Registrants market risk is influenced by a wide variety of factors, including the level and volatility of interest rates, exchange rates, equity price levels, the market value of financial instruments and contracts, the diversification effects
among the Registrants open positions and the liquidity of the markets in which it trades.

The Registrant rapidly acquires and liquidates both long
and short positions in a wide range of different markets. Consequently, it is not possible to predict how a particular futures market scenario will affect performance, and the Registrants past performance is not necessarily indicative of its
future results.

Value at Risk is a measure of the maximum amount which the Registrant could reasonably be expected to lose in a given market sector.
However, the inherent uncertainty of the Registrants speculative trading and the recurrence in the markets traded by the Registrant of market movements far exceeding expectations could result in actual trading or non-trading losses far beyond
the indicated Value at Risk or the Registrants experience to date (i.e., risk of ruin). In light of the foregoing, as well as the risks and uncertainties intrinsic to all future projections, the quantification included in this
section should not be considered to constitute any assurance or representation that the Registrants losses in any market sector will be limited to Value at Risk or by the Registrants attempts to manage its market risk.



16



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Standard of Materiality

Materiality as used in this section, Quantitative and Qualitative Disclosures About Market Risk, is based on an assessment of reasonably possible market movements and the potential losses caused by such
movements, taking into account the leverage, optionality and multiplier features of the Registrants market sensitive instruments.

Quantifying The
Registrants Trading Value at Risk

Quantitative Forward-Looking Statements

The following quantitative disclosures regarding the Registrants market risk exposures contain forward-looking statements within the meaning of the
safe harbor from civil liability provided for such statements by the Private Securities Litigation Reform Act of 1995 (set forth in Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934).

The Registrants risk exposure in the various market sectors traded by the Trading Advisor is quantified below in terms of Value at Risk. Due to
the Registrants mark-to-market accounting, any loss in the fair value of the Registrants open positions is directly reflected in the Registrants earnings (realized or unrealized) and cash flow (at least in the case of
exchange-traded contracts in which profits and losses on open positions are settled daily through variation margin).

Exchange maintenance margin
requirements have been used by the Registrant as the measure of its Value at Risk. Maintenance margin requirements are set by exchanges to equal or exceed the maximum losses reasonably expected to be incurred in the fair value of any given contract
in 95%-99% of any one-day interval. The maintenance margin levels are established by dealers and exchanges using historical price studies as well as an assessment of current market volatility (including the implied volatility of the options on a
given futures contract) and economic fundamentals to provide a probabilistic estimate of the maximum expected near-term one-day price fluctuation. Maintenance margin has been used rather than the more generally available initial margin, because
initial margin includes a credit risk component, which is not relevant to Value at Risk.

In the case of market sensitive instruments that are not
exchange-traded (almost exclusively currencies in the case of the Registrant), the margin requirements for the equivalent futures positions have been used as Value at Risk. In those rare cases in which a futures-equivalent margin is not available,
dealers margins have been used.

In quantifying the Registrants Value at Risk, 100% positive correlation in the different positions held in
each market risk category has been assumed. Consequently, the margin requirements applicable to the open contracts have simply been aggregated to determine each trading categorys aggregate Value at Risk. The diversification effects resulting
from the fact that the Registrants positions are rarely, if ever, 100% positively correlated have not been reflected.

The Registrants
Trading Value at Risk in Different Market Sectors

The following table presents the trading value at risk associated with the Registrants open
positions by market sector at December 31, 2006 and 2005. All open position trading risk exposures of the Registrant have been included in calculating the figure set forth below. At December 31, 2006 and 2005, the Registrant had total
capitalization of approximately $67,228,000 and $30,211,000, respectively.



|               |  |                   |            |                          |                   |   |            |   |                          |  |       |  
|-------------- |  | ----------------- | ---------- | ------------------------ | ----------------- | - | ---------- | - | ------------------------ |  | ----- | -
|               |  | December 31, 2006 |            |                          | December 31, 2005 |  
|Market Sector  |  | Value Risk        |            | % of TotalCapitalization |                   |   | Value Risk |   | % of TotalCapitalization | 
|Interest rates |  | $                 | 4,155,508  |                          | 6.18              | % |            | $ | 2,233,336                |  | 7.39  | %
|Currencies     |  |                   | 2,303,369  |                          | 3.43              | % |            |   | 907,077                  |  | 3.00  | %
|Commodities    |  |                   | 1,572,743  |                          | 2.34              | % |            |   | 411,335                  |  | 1.36  | %
|Stock indices  |  |                   | 3,547,046  |                          | 5.28              | % |            |   | 974,869                  |  | 3.22  | %
|               |  |                   |            |                          |                   |   |            |   |                          |  |       |  
|Total          |  | $                 | 11,578,666 |                          | 17.23             | % |            | $ | 4,526,617                |  | 14.97 | %
|               |  |                   |            |                          |                   |   |            |   |                          |  |       |  

Material Limitations on Value at Risk as an Assessment of Market Risk

The notional value of the market sector instruments held by the Registrant is typically many times the applicable maintenance margin requirement (maintenance margin
requirements generally range between approximately 1% and 10% of the face value) as well as many times the total capitalization of the Registrant. The magnitude of the Registrants open positions creates a risk of ruin not typically
found in most other investment vehicles. Because of the size of its positions, certain market conditions, although unusual, but historically recurring from time to time, could cause the Registrant to incur severe losses over a short period of time.
The foregoing Value at Risk table, as well as the past performance of the Registrant give no indication of this risk of ruin.



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Non-Trading Risk

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

Qualitative Disclosures Regarding Primary Trading Risk Exposures

The following qualitative disclosures regarding
the Registrants market risk exposuresexcept for (i) those disclosures that are statements of historical fact and (ii) the descriptions of how the Registrant manages its primary market risk exposuresconstitute
forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. The Registrants primary market risk exposures as well as the strategies used and to be
used by the Managing Owner and the Trading Advisor for managing such exposures are subject to numerous uncertainties, contingencies and risks are one of which could cause the actual results of the Registrants risk controls to differ materially
from the objectives of such strategies. Government interventions, defaults and expropriations, illiquid markets the emergence of dominant fundamental factors, political upheavals, changes in historical price relationships, an influx of new market
participants, increased regulation and many other factors could result in material losses as well as in material changes to the risk exposures and the risk management strategies of the Registrant. There can be no assurance that the Registrants
current market exposure and/or risk management strategies will not change materially or that any such strategies will be effective in either the short- or long-term. Investors must be prepared to lose all or substantially all of their investment in
the Registrant.

The primary trading risk exposures of the Registrant at December 31, 2006 by market sector were:

Interest Rates:Interest rate movements directly affect the price of sovereign bond positions held by the Registrant and indirectly affect the value of its stock
index and currency positions. Interest rate movements in one country as well as relative interest rate movements between countries may materially impact the Registrants profitability. The Registrants primary interest rate exposure is to
interest rate fluctuations in the U.S. and other G-7 countries (including countries participating in the euro). The Managing Owner anticipates that G-7 interest rates will remain a primary market exposure of the Registrant in the foreseeable future.
At December 31, 2006, the Registrant had significant exposure to longer-term rates from positions in German Bunds, U.S. Treasuries, Australian Bonds, British Gilts and Japanese Government Bonds. It also had significant exposure to medium-term
rates from positions in the German Bobl and Schatz, and the U.S. 5-year Treasury Note. The Registrants exposure to short-terms rates was primary from positions in Euribor and Short Sterling.

Currencies:The Registrants currency exposure is due to exchange rate fluctuations, primarily fluctuations that disrupt the historical pricing relationships
between different currencies and currency pairs. These fluctuations are influenced by interest rate changes as well as political and general economic conditions. The Registrants major exposure has typically resulted from positions in the euro
and in local currencies of G-10 countries. These include outright, as well as, cross-rate positions  i.e., positions between two currencies other than the U.S. dollar. At December 31, 2006, the Registrant had significant exposure from
positions in several G-10 currencies including the Japanese yen, the Australian dollar, the Canadian dollar and the British pound. The Registrant also had some exposure at December 31, 2006 to the Mexican peso and the South African rand. The
currency trading Value at Risk figure includes foreign margin amounts converted into U.S. dollars with an incremental adjustment to reflect the exchange rate risk inherent to the dollar-based Registrant in expressing value at Risk in a functional
currency other than U.S. dollars.

Commodities:The Registrants primary commodities exposure is generally in energies, metals and
agriculturals. The energy market exposure results from gas and oil price movements, usually from global political, and supply and demand developments. The Registrants major energy exposure at year-end resulted from positions in natural gas,
heating oil and crude oil. In the metals sector, the Registrants risk exposure is a result of price movements due to perceptions of global growth and economic strength. The Registrants major metals exposure at year-end resulted from
positions in copper, gold, aluminum and zinc. In the agricultural sector, the Registrants market risk exposure is primarily due to price movements resulting from severe or unexpected weather conditions and from the increased research on and
usage of biofuels. At year-end, the Registrants major market risk exposure was due to price movements in corn, sugar and wheat.

Stock Indices:The Registrants primary equity exposure was due to equity price risk in the DAX Index, the Taiwan Index, the S&P 500 Index, the Dow Jones STOXX 50 Index and the Hang Seng Index. The Registrants stock exposure is currently limited
to futures on broadly based indices.

Qualitative Disclosures Regarding Means of Managing Risk Exposure

The means by which the Managing Owner and the Trading Advisors, severally, attempt to manage the risk of the Registrants open positions is essentially the same in
all market categories traded.

The Trading Advisors attempt to minimize market risk exposure by applying its own risk management trading policies, which
include the diversification of trading assets into various market sectors. Additionally, the Trading Advisors have an oversight committee broadly responsible for evaluating and overseeing the Trading Advisors trading policies. The oversight
committee meets periodically to discuss and analyze issues such as liquidity, position size, capacity, performance cycles, and new product and market strategies.

The Managing Owner attempts to minimize market risk exposure by requiring the Trading Advisors to abide by various trading limitations and policies. The Managing Owner monitors compliance with these trading limitations and policies which
include,



18



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but are not limited to, limiting the amount of margin or premium required for any one commodity or all commodities combined and generally limiting
transactions to contracts which are traded in sufficient volume to permit the taking and liquidating of positions. Additionally, the Managing Owner shall automatically terminate the Trading Advisors if the Net Asset Value of the Registrant declines
by 40% during any year or since the commencement of trading activities. Furthermore, the Trust Agreement provides that the Registrant will liquidate its positions, and eventually dissolve, if the Registrant experiences a decline in the Net Asset
Value of 50% in any year or since the commencement of trading activities. In each case, the decline in Net Asset Value is after giving effect for distributions, contributions and redemptions. The Managing Owner may impose additional restrictions
(through modifications of such trading limitations and policies) upon the trading activities of the Trading Advisors as it, in good faith, deems to be in the best interest of the Registrant.

Qualitative Disclosures Regarding Non-Trading Risk Exposure

At
December 31, 2006, the Registrants primary exposure to non-trading market risk resulted from foreign currency balances held in the Euro, British pound, Japanese yen, Australian dollars and Canadian dollar. As discussed above, these
balances, as well as any risk they represent, are immaterial.

At December 31, 2005, the Registrants primary exposure to non-trading market risk
resulted from foreign currency balances held in the Euro, British pound, Japanese yen, Australian dollars and Canadian dollar. As discussed above, these balances, as well as any risk they represent, are immaterial.



|Item 8. | Financial Statements and Supplementary Data
|------- | -------------------------------------------

The financial
statements are incorporated by reference to the Registrants 2006 Annual Report, which is filed as an exhibit hereto.

Selected audited quarterly
financial data for the year ended December 31, 2006 and audited financial data for the period December 1, 2005 (commencement of operations) to December 31, 2005 are summarized below:



|                                                     |  |                |          |   |                |   |           |                |  |   |                |   |                                                      |   |           |  |   |          |  
|---------------------------------------------------- |  | -------------- | -------- | - | -------------- | - | --------- | -------------- |  | - | -------------- | - | ---------------------------------------------------- | - | --------- |  | - | -------- | -
|                                                     |  | 1stQuarter2006 |          |   | 2ndQuarter2006 |   |           | 3rdQuarter2006 |  |   | 4thQuarter2006 |   | For theperiod fromDecember 1,2005 toDecember 31,2005 |  
|Total revenues (including interest)                  |  | $              | 820,187  |   |                | $ | 4,089,040 |                |  | $ | (2,663,087     | ) |                                                      | $ | 2,636,216 |  | $ | (464,598 | )
|Total revenues (including interest) less commissions |  |                | 747,771  |   |                |   | 4,012,480 |                |  |   | (2,757,935     | ) |                                                      |   | 2,520,204 |  |   | (491,817 | )
|Net income (loss)                                    |  |                | (138,544 | ) |                |   | 2,806,445 |                |  |   | (3,802,626     | ) |                                                      |   | 1,255,430 |  |   | (800,564 | )
|Net income (loss) per weighted average Interest      |  |                |          |   |                |   |           |                |  |   |                |   |                                                      |   |           |  |   |          |  
|Class I                                              |  |                | (.33     | ) |                |   | 5.78      |                |  |   | (6.15          | ) |                                                      |   | 1.75      |  |   | (2.58    | )
|Class II                                             |  |                |          |   |                |   | (2.73     | )              |  |   | (5.33          | ) |                                                      |   | 2.33      |  |   |          |  



19



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There were no extraordinary, unusual or infrequently occurring items recognized in any quarter reported above, and the
Trust has not disposed of any segments of its business. There have been no year-end adjustments that are material to the results of any fiscal quarter reported above.



|Item 9. | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
|------- | ------------------------------------------------------------------------------------

None



|Item 9A. | Controls and Procedures
|-------- | -----------------------

As of the end of the period covered by
this report, the Managing Owner carried out an evaluation, under the supervision and with the participation of the officers of the Managing Owner, including the Managing Owners Co-Chief Executive Officers and Director of Fund Administration
(who, in these capacities, function as the Co-Chief Executive Officers and Principal Financial/Accounting Officer, respectively, of Registrant), of the effectiveness of the design and operation of the Registrants disclosure controls and
procedures. Based upon that evaluation, the Managing Owners Co-Chief Executive Officers and Director of Fund Administration concluded that the Registrants disclosure controls and procedures are effective.

In designing and evaluating the Trusts disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) under the Securities Exchange Act of 1934, as
amended), the Managing Owner recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurances of achieving the desired control objectives, as ours are designed to do, and the Managing
Owner necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. We believe that our disclosure controls and procedures provide such reasonable assurance.

There have not been any changes in Registrants internal controls over financial reporting (as defined in Rules 13a  15(f) and 15d  15(f) under the
Securities Exchange Act of 1934, as amended) during the year ended December 31, 2006 that have materially affected, or are reasonably likely to materially affect, Registrants internal controls over financial reporting.



|Item 9B. | Other Information
|-------- | -----------------

None

PART III



|Item 10. | Directors, Executive Officers and Corporate Governance
|-------- | ------------------------------------------------------

The
Registrant had no directors or executive officers. The Registrant is managed by the Managing Owner.

The directors and executive officers of the Managing
Owner are as follows:

Mr. Kenneth A. Shewer (born 1953), Co-Chief Executive Officer of the Managing Owner, has been a principal,
associated person and NFA associate member of the Managing Owner since February 8, 1984, May 1,1985 and August 1, 1985, respectively. He has been Chairman and Co-Chief Executive Officer of the Managing Owner since February 1984.
Mr. Shewer was employed by Pasternak, Baum and Co., Inc. (Pasternak, Baum), an international cash commodity firm, from June 1976 until September 1983. Mr. Shewer created and managed Pasternak, Baums Grain Logistics
and Administration Department and created its Domestic Corn and Soybean Trading Department. Mr. Shewers responsibilities at Pasternak, Baum included merchandising South American grain and exporting United States corn and soybeans. In
1982, Mr. Shewer became co-manager of Pasternak, Baums F.O.B. Corn Department. In 1983, Mr. Shewer was made Vice President and Director of Pasternak, Baum. Mr. Shewer has traveled extensively in South America and Europe in
connection with the commodity business and has organized and effected grain and oilseed sales in those regions, the former Soviet Union, and the Far East. While at Pasternak, Baum, Mr. Shewer was a member of the St. Louis Merchants Exchange and
was associated with the National Grain and Feed Association and the North American Export Grain Association.

Mr. Shewer graduated from Syracuse
University with a B.S. degree in 1975. Mr. Shewer sits on the Board of the Stacy Joy Goodman Memorial Foundation, a non-profit charity committed to finding a cure for Juvenile Diabetes. He is also a member of the Board of the Diabetes Research
Institute Foundation, a not-for-profit organization affiliated with the University of Miami School of Medicine. Mr. Shewer is a founding member and a member of the Board of the Greenwich Roundtable.

Mr. Marc S. Goodman (born 1948), Co-Chief Executive Officer of the Managing Owner, has been a principal, associated person and NFA associate member of
the Managing Owner since February 7, 1984, May 1, 1985 and August 1, 1985, respectively. He has been President and Co-Chief Executive Officer of the Managing Owner since February 1984. Mr. Goodman joined Pasternak, Baum in
September 1974 and was a Vice President and Director from July 1981 until September 1983. While at Pasternak, Baum, Mr. Goodman was largely responsible for business development outside of the United States, for investment of its corporate
retirement funds, and for selecting trading personnel in the Vegetable Oil Division. Mr. Goodman also created and developed Pasternak, Baums Laric Oils Department. Mr. Goodman has conducted extensive business in South America, Europe
and the Far East; he has been a merchandiser of all major vegetable oils and their by-products, and of various other commodities such as sunflower seeds, frozen poultry, pulses and potatoes.



20



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Mr. Goodman graduated from the Bernard M. Baruch School of Business of the City University of New York with a B.B.A.
in 1969 and an M.B.A. in 1971 in Finance and Investments, where he was awarded an Economics and Finance Department Fellowship from September 1969 through June 1971. Mr. Goodman is a member of the American Arbitration Association; while at
Pasternak, Baum, he was a member of the National Institute of Oilseeds Products and the American Fats and Oils Association (including its Export Rules Committee).

Mr. Goodman is the Chairman of the Board of the Stacy Joy Goodman Memorial Foundation, a non-profit charity committed to finding a cure for Juvenile Diabetes. He is also Chairman of the Board of the Diabetes Research Institute
Foundation, a not-for-profit organization that is the principle source of funding for the Diabetes Research Institute, a world renowned cure based research center affiliated with the University of Miami School of Medicine.

Mr. Goodman is a founding member and member of the Board of the Greenwich Roundtable.

Messrs. Shewer and Goodman left Pasternak, Baum in September 1983 to form Kenmar Advisory Corp. (now known as Preferred Investment Solutions Corp., the Managing Owner) and they have occupied their present positions
with the Managing Owner since that time.

Ms. Esther Eckerling Goodman (born 1952), Senior Executive Vice President and Chief Operating Officer
of the Managing Owner, has been a principal, associated person and NFA associate member of the Managing Owner since May 12, 1988, July 17, 1986 and July 17, 1986, respectively. She joined the Managing Owner in July 1986 and is
its Chief Operating Officer and Senior Executive Vice President. Ms. Goodman has been involved in the futures industry since 1974. From 1974 through 1976, she was employed by Conti-Commodity Services, Inc. and ACLI Commodity Services, Inc., in
the areas of hedging, speculative trading and tax arbitrage. In 1976, Ms. Goodman joined Loeb Rhoades & Company, Inc. where she was responsible for developing and managing a managed futures program that, in 1979, became the trading
system for Westchester Commodity Management, an independent commodity-trading advisor of which Ms. Goodman was a founder and principal. From 1983 through mid-1986, Ms. Goodman was employed as a marketing executive at Commodities Corp.
(USA) of Princeton, New Jersey. Ms. Goodman was a Director of the Managed Futures Trade Association from 1987 to 1991 and a Director of its successor organization, the Managed Futures Association, from 1991 to 1995 (now the Managed Funds
Association). Ms. Goodman graduated from Stanford University with a B.A. degree in psychology in 1974.

Ms. Goodman is married to Mr. Marc
Goodman.

Mr. Braxton Glasgow III (born 1953) has been a principal, associated person, branch manager and NFA associate member of the Managing
Owner since June 21, 2001, June 21, 2001, July 13, 2004 and June 8, 2001, respectively. Mr. Glasgow has been an Executive Vice President of the Managing Owner since joining the Managing Owner in May 2001.
Mr. Glasgow is responsible for business development. Previously, he served as Executive Vice President, Director of Client Services and a Principal at Chesapeake Capital Corp., a commodities trading firm, and as Senior Managing Director at
Signet Investment Banking Co. Mr. Glasgow began his career at PricewaterhouseCoopers, where he specialized in mergers and acquisitions and private equity, including extensive work in Europe and the Far East. Mr. Glasgow received a B.S. in
Accounting from the University of North Carolina at Chapel Hill and is a Certified Public Accountant. From 1994 to 1995, he was President of the Jay Group Ltd. Mr. Glasgow received a B.S. degree in accounting from the University of North
Carolina in 1975.

Ms. Maureen D. Howley (born 1967) has been a principal of the Managing Owner since August 11, 2003. She has been a
Senior Vice President and Chief Financial Officer of the Managing Owner since joining the Managing Owner in July 2003. She is responsible for corporate finance. From July 2001 until July 2003, Ms. Howley was an Associate at Andor Capital
Management, LLC, an equity hedge fund company. At Andor, she was responsible for managing the corporate accounting functions. Previously, she was the Controller at John W. Henry & Company, Inc., a commodity-trading advisor
(JWH), where she held positions of increasing responsibility from September 1996 to July 2001. She began her career at Deloitte & Touche where she specialized in the financial services industry. She held many positions of
increasing responsibility for seven years, and left as an Audit Senior Manager in September 1996 to join JWH. Ms. Howley received a B.A. in Accounting from Muhlenberg College in 1989 and designation as a Certified Public Accountant in 1990.

Mr. Lawrence S. Block (born 1967) has been a Senior Vice President and General Counsel of the Managing Owner since joining the Managing
Owner in March 2005. Prior to joining the Managing Owner, Mr. Block was a Managing Director and General Counsel of Lipper & Company, L.P., a New York-based investment management firm, from January 1998 until March 2005. Prior to
joining Lipper & Company, Mr. Block was a senior associate at the law firm Cadwalader, Wickersham & Taft in New York from May 1996 through December 1997. Mr. Block also worked as an associate at the law firm Proskauer
Rose Goetz & Mendelsohn from September 1992 through May 1996. Mr. Block received a B.S. in Business Administration with a concentration in Accounting from the University of North Carolina at Chapel Hill in 1989 and a J.D. from the
University of Pennsylvania School of Law in 1992. Mr. Blocks registration as a principal of the Managing Owner has been effective since March 17, 2005.

Mr. David K. Spohr (born 1963), Senior Vice President and Director of Fund Administration of the Managing Owner, joined the Managing Owner in 2005. He is responsible for the development and execution
of the administration group support responsibilities and, as Director of Fund Administration, functions as the Principal Financial/Accounting Officer of Registrant. From 2002 to 2005, Mr. Spohr was a Vice President at Safra Group, where he was
responsible for the Alternative Investment operations, tax reporting and pricing valuation. From 2000 to 2002, he was a consultant to The Safra Group. From 1994-1999, he was Manager of Investment Services for the Bank of Bermuda, supporting private
client transactions. From 1993 to 1994,



21



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he was the Manager of Global Operations for Highbridge Capital Corporation during the funds infancy. Mr. Spohr received a B.S. in Business
Economics from The State University of New York College at Oneonta in 1985 and designation as a Chartered Financial Analyst in 1998.

Ms. Joanne D. Rosenthal (born 1965) has been a principal, associated person and NFA associate member of the Managing Owner since February 29, 2000, February 29, 2000 and November 30, 1999, respectively.
Ms. Rosenthal is Senior Vice President and Director of Portfolio Management and Implementation for the Managing Owner. Prior to joining the Managing Owner in October 1999, Ms. Rosenthal spent nine years at The Chase Manhattan Bank, in
various positions of increasing responsibility. From July 1991 through April 1994, she managed the Trade Execution Desk and from May 1994 through September 1999, she was a Vice President and Senior Portfolio Manager of Chase Alternative Asset
Management, Inc. Ms. Rosenthal received a Masters of Business Administration with a concentration in Finance from Cornell University and a Bachelor of Arts in Economics from Concordia University in Montreal, Canada.

Mr. Peter J. Fell (born 1960), Senior Vice President and Director of Due Diligence since joining the Managing Owner in September 2004. He is responsible
for manager selection and due diligence. Mr. Fell is a member of the Investment Committee. From 2000 through August 2004, Mr. Fell was a founding partner and Investment Director of Starview Capital Management. Prior to co-founding Starview
Capital Management, Mr. Fell was Vice President of Research and Product Development at Merrill Lynch Investment Partners Inc (MLIP). He was responsible for the investment evaluation and recommendation process pertaining to MLIP funds and sat on
MLIPs Investment Committee. Prior to joining MLIP, Mr. Fell had been with Deutsche Bank Financial Products Corporation for six years starting in 1989, where he was Vice President in the over-the-counter fixed income derivatives area. From
1985 to 1989, he was employed by Manufacturers Hanover Trust Company, ultimately holding the position of Assistant Vice President in the Swaps and Futures Group. Mr. Fell holds an A.B. cum laude in Music Theory and History and an M.B.A. in
Finance from Columbia University.

Ms. Melissa Cohn (born 1960), Vice President and Senior Research Analyst, joined the Managing Owner in 1988.
Her responsibilities include manager due diligence, manager analysis, and portfolio/risk management. Ms. Cohn has been involved in the futures industry for over 20 years. Prior to joining the Managing Owner, she spent six years in positions of
increasing responsibility in the Commodities Division at Shearson Lehman Hutton Inc. Her experience includes that of Sales Assistant, Assistant Commodity Trader and Trader executing orders from numerous CTAs that traded through Shearson.
Ms. Cohn graduated from the University of Wisconsin Madison with a B.S. in Agriculture in 1982.

Mr. James Dodd(born 1951), has been a
principal, associated person and NFA associate member of the Managing Owner since February 26, 2002, February 26, 2002 and January 25, 2002, respectively. He is responsible for structuring and marketing investment products to
financial institutions and to retail investors via the brokerage and financial consultant channels. Earlier in his career, Mr. Dodd was a senior marketing officer of the Capital Markets Group of Continental Bank in Chicago; President of Signet
Investment Banking in Richmond, Virginia; and Managing Director of Financial Institutions Marketing at Chesapeake Capital, a large Richmond-based CTA. Mr. Dodd received an AB degree from Cornell University in 1974 and a M.B.A. degree from the
University of Chicago in 1983.

Ms. Jennifer S. Moros (born 1970) has been a Senior Vice President, Marketing and Investor Relations of
the Managing Owner since joining the Managing Owner in January 2007. From October 2006 until December 2006, she worked at The Bank of New York. Previously, she was the Chief Operating Officer and Director of Marketing of Coronat Capital Management,
LLC, a small start-up hedge fund, from November 2004 until September 2005. Previously, she was Vice President and Product Manager at Credit Suisse in their Alternative Capital Division from February 2000 until November 2004, responsible for
marketing, new product development and reporting for their fund of hedge funds business. From June 1998 to January 2000, she was a Senior Associate in the Marketing and Business Development areas at Zweig-DiMenna, a large long/short equity hedge
fund. Prior to this, she was employed at Symphony Alternative Investments, an alternatives pension consulting firm, from July 1997 to June 1998, where she was responsible for quantitative and qualitative assessments and recommendations of
alternative investments including hedge funds, private equity and venture capital for large institutional clients. From November 1993 until July 1995, Ms. Moros was a Financial Analyst at Bankers Trust and a Business Applications Analyst at
National Westminster Bancorp from August 1992 until November 1993. Ms. Moros received an M.B.A in Finance from The Sloan School at the Massachusetts Institute of Technology in 1997 and a B.S. in Economics from The Wharton School of the
University of Pennsylvania in 1992.

Section 16(a) Beneficial Ownership Reporting Compliance

Certain of the Managing Owners directors and officers and any persons holding more than ten percent of the Registrants Limited Interests (Ten Percent
Owners) are required to report their initial ownership of Interests and any subsequent changes in that ownership to the Securities and Exchange Commission (the SEC) on Forms 3, 4 or 5. Such directors and officers and Ten
Percent Owners are required by SEC regulations to furnish the Registrant with copies of all Forms 3, 4 and 5 they file. A list of Ten Percent Owners of the Registrants Limited Interests is set forth below. Such Ten Percent Owners did not make
any filings on Form 3, 4 and 5. Other than as set forth above, all filing requirements of Section 16(a) of the Exchange Act were timely complied with during the fiscal year. In making these disclosures, the Registrant has relied solely on
written representations of the Managing Owners directors and officers and the Registrants Ten Percent Owners or copies of the reports that they have filed with the SEC during and with respect to its most recent fiscal year.



22



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Audit Committee Financial Expert

The Registrant itself does not have any employees. Preferred serves as Managing Owner of the Registrant. The Board of Directors of Preferred has delegated audit committee responsibilities to the Internal Controls and
Disclosure Committee. David K. Spohr is Preferreds Director of Fund Administration (and, in that capacity, functions as Registrants Principal Financial/Accounting Officer), is a member of the Internal Controls and Disclosure Committee,
and serves as the audit committee financial expert for Registrant. Mr. Spohr is not a member of Preferreds Board of Directors and he is not independent of management.

Code of Ethics

Preferred has adopted a Code of Ethics for its
Co-Chief Executive Officers and Director of Fund Administration (who, in these capacities, function as the Co-Chief Executive Officers and Principal Financial/Accounting Officer, respectively, of Registrant), accounting managers and persons
performing similar functions. A copy of the Code of Ethics is attached as an exhibit hereto.



|Item 11. | Executive Compensation
|-------- | ----------------------

The Registrant does not pay or accrue any
fees, salaries or any other form of compensation to officers of the Managing Owner for their services. (See also Item 13, Certain Relationships and Related Transactions, and Director Independence , for information regarding compensation
to the Managing Owner.)



|Item 12. | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
|-------- | ----------------------------------------------------------------------------------------------

As of February 1, 2007, Preferred maintains a 1% General Interest in the Registrant. As of February 1, 2007, all of Preferreds stock is owned indirectly and equally by Messrs. Goodman and Shewer,
Preferreds sole directors.

As of February 1, 2007, the following officers of the Managing Owner are deemed to own beneficially the following
number of General Interests issued by the Registrant:



|                  |  |                                        |  |                                           |  |                 |  
|----------------- |  | -------------------------------------- |  | ----------------------------------------- |  | --------------- | -
|Title of Class    |  | Name and Addresses of Beneficial Owner |  | Amount and Nature of Beneficial Ownership |  | Percent ofClass |  
|                  |  |                                        | 
|General Interests |  | Marc S. Goodman                        |  |                                           |  |                 |  
|                  |  | President & Co-Chief Executive         |  |                                           |  |                 |  
|                  |  | 900 King Street, Suite 100             |  |                                           |  |                 |  
|                  |  | Rye Brook, New York 10573              |  | 1,787 General Interests (*)               |  | 100             | %
|                  |  |                                        | 
|General Interests |  | Kenneth A. Shewer                      |  |                                           |  |                 |  
|                  |  | Chairman & Co-Chief Executive          |  |                                           |  |                 |  
|                  |  | 900 King Street, Suite 100             |  |                                           |  |                 |  
|                  |  | Rye Brook, New York 10573              |  | 1,787 General Interests (*)               |  | 100             | %
|                  |  |                                        | 
|General Interests |  | Esther E. Goodman                      |  |                                           |  |                 |  
|                  |  | Senior Executive Vice President &      |  |                                           |  |                 |  
|                  |  | Chief Operating Officer                |  |                                           |  |                 |  
|                  |  | 900 King Street, Suite 100             |  |                                           |  |                 |  
|                  |  | Rye Brook, New York 10573              |  | 1,787 General Interests (**)              |  | 100             | %



|(*) | These Interests are held indirectly through Preferred. The Beneficial Owner disclaims beneficial ownership over such securities for purposes of Section 16 of the Securities
Exchange Act of 1934, except to the extent of his pecuniary interest therein.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(**) | These Interests are held by the Beneficial Owners spouse indirectly through Preferred. The Beneficial Owner disclaims beneficial ownership over such securities for purposes of
Section 16 of the Securities Exchange Act of 1934, except to the extent of her pecuniary interest therein.
|---- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

As of February 1, 2007,
the following persons owned beneficially more than five percent (5%) of the outstanding limited Units issued by the Registrant:



|               |  |                              |  |            |  |                              |  
|-------------- |  | ---------------------------- |  | ---------- |  | ---------------------------- | -
|Class / Series |  | Investor                     |  | Units      |  | % Ownership ofClass / Series |  
|WMT III J2     |  | Benjamin Edward Jefferies    |  | 2,447.9725 |  | 5.52                         | %
|WMT III J2     |  | Pamela Hamlin Jefferies      |  | 2,447.9725 |  | 5.52                         | %
|WMT III J2     |  | Marian McCuiston Couch Trust |  | 3,744.3596 |  | 8.45                         | %
|WMT III J2     |  | Stanley Greenbaum IRA        |  | 2,584.9308 |  | 5.83                         | %
|WMT III J2     |  | PRT Communications LLC       |  | 3,656.7227 |  | 8.25                         | %



|Item 13. | Certain Relationships and Related Transactions, and Director Independence
|-------- | -------------------------------------------------------------------------

The Registrant has and will continue to have certain relationships with the Managing Owner and its affiliates. However, there have been no direct financial transactions between the Registrant and the directors or officers of the Managing
Owner.

Reference is made to Notes 1, 2, 3, 4 and 6 to the financial statements in the Registrants 2006 Annual Report which is filed as an exhibit
hereto, which identify the related parties and discuss the services provided by these parties and the amounts paid or payable for their services.



23



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Director Independence

David K. Spohr is Preferreds Director of Fund Administration (and, in that capacity, functions as Registrants Principal Financial/Accounting Officer), is a member of the Internal Controls and Disclosure Committee, and serves as
the audit committee financial expert for Registrant. Mr. Spohr is not a member of Preferreds Board of Directors and he is not independent of management.



|Item 14. | Principal Accounting Fees and Services
|-------- | --------------------------------------

The independent registered
public accounting firm for the years ended December 31, 2006 and 2005 was Deloitte & Touche LLP (D&T).



|(a) | Audit Fees.
|--- | -----------

The aggregate fees billed to Registrant by
Deloitte & Touche LLP (D&T) for professional services rendered for the audit of Registrants annual financial statements, review of Registrants interim financial statements, and services that are normally provided
in connection with statutory or regulatory filings or engagements, including consents and other services related to Securities and Exchange Commission matters totaled approximately $33,500 for the year ended December 31, 2006 and $18,500 for
the year ended December 31, 2005.



|(b) | Audit-Related Fees.
|--- | -------------------

The fees billed to Registrant by
Deloitte & Touche LLP for assurance and related services that are reasonably related to the performance of the audit or review of Registrants financial statements and are not reported under Audit Fees totaled $0 for the
year ended December 31, 2006 and approximately $0 for the year ended December 31, 2005.



|(c) | Tax Fees.
|--- | ---------

The aggregate fees billed to Registrant by Arthur F.
Bell, Jr. & Associates, L.L.C. for services for tax compliance, tax advice and tax planning totaled $7,000 for the year ended December 31, 2006 and $7,000 for the year ended December 31, 2005. These services include assistance
regarding federal and state tax compliance and tax audit issues.



|(d) | All Other Fees.
|--- | ---------------

The other fees billed to Registrant by D&T for
the last fiscal year for products and services other than the services reported above totaled $0 for the year ended December 31, 2006 and approximately $0 for the year ended December 31, 2005.



24



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PART IV



|           |  |                                                                                                                                                                                                                                                                                                                                    |  |                     
|---------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | --------------------
|           |  |                                                                                                                                                                                                                                                                                                                                    |  | Page inAnnual Report
|Item 15.   |  | Exhibits, Financial Statement Schedules                                                                                                                                                                                                                                                                                            |  |                     
|           |  |                                                                                                                                                                                                                                                                                                                                   
|(a)     1. |  | Financial Statements and Report of Independent Registered Public Accounting Firm  incorporated by reference to the Registrants 2006 Annual Report which is filed as an exhibit
hereto                                                                                                                                            |  |                     
|           |  |                                                                                                                                                                                                                                                                                                                                   
|           |  | Report of Independent Registered Public Accounting Firm  Deloitte & Touche LLP                                                                                                                                                                                                                                                    |  | 1                   
|           |  |                                                                                                                                                                                                                                                                                                                                   
|           |  | Financial Statements:                                                                                                                                                                                                                                                                                                              |  |                     
|           |  |                                                                                                                                                                                                                                                                                                                                   
|           |  | Statements of Financial Condition  December 31, 2006 and 2005                                                                                                                                                                                                                                                                     |  | 2                   
|           |  |                                                                                                                                                                                                                                                                                                                                   
|           |  | Statements of Operations  For the year ended December 31, 2006 and the period December 1, 2005 (commencement of operations) to December 31, 2005                                                                                                                                                                                  |  | 3                   
|           |  |                                                                                                                                                                                                                                                                                                                                   
|           |  | Statements of Changes in Unitholders Capital  For the year ended December 31, 2006 and the period December 1, 2005 (commencement of operations) to December 31, 2005                                                                                                                                                             |  | 4                   
|           |  |                                                                                                                                                                                                                                                                                                                                   
|           |  | Notes to Financial Statements                                                                                                                                                                                                                                                                                                      |  | 5  13              
|           |  |                                                                                                                                                                                                                                                                                                                                   
|           |  | Financial Statements of WMT III Series G/J Trading Vehicle LLC as of December 31, 2006 and 2005, and for the year ended December 31, 2006 and the period December 1, 2005 (commencement of
operations) to December 31, 2005  incorporated by reference to the Registrants 2006 Annual Report which is filed as an exhibit hereto |  | 1  11              
|           |  |                                                                                                                                                                                                                                                                                                                                   
|           |  | Financial Statements of WMT III Series H/J Trading Vehicle LLC as of December 31, 2006 and 2005 and for the year ended December 31, 2006 and the period December 1, 2005 (commencement of
operations) to December 31, 2005  incorporated by reference to the Registrants 2006 Annual Report which is filed as an exhibit hereto  |  | 1  11              
|           |  |                                                                                                                                                                                                                                                                                                                                   
|           |  | Financial Statements of WMT III Series I/J Trading Vehicle LLC as of December 31, 2006 and 2005 and for the year ended December 31, 2006 and the period December 1, 2005 (commencement of
operations) to December 31, 2005  incorporated by reference to the Registrants 2006 Annual Report which is filed as an exhibit hereto  |  | 1  11              



25



---

|2. | Financial Statement Schedules
|-- | -----------------------------

All schedules have been
omitted because they are not applicable or the required information is included in the financial statements or the notes thereto



|3. | Exhibits
|-- | --------



|(a) | Description:
|--- | ------------



|3.1 | Second Amended and Restated Declaration of Trust Agreement of World Monitor Trust III (annexed to the Prospectus as Exhibit A and incorporated by reference to Exhibit 4.1 to the
Trusts Post-Effective Amendment No. 2 on Form S-1 Registration Statement, File No. 333-119612, filed with the Commission on January 27, 2006)
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|4.2 | Subscription Requirements (annexed to the Prospectus as Exhibit B and incorporated by reference to Exhibit 4.2 to the Trusts Post-Effective Amendment No. 3 on S-1
Registration Statement, File No. 333-119612, filed with the Commission on April 25, 2006)
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|4.3 | Subscription instructions, Form of Subscription Agreement and Power of Attorney (annexed to the Prospectus as Exhibit C and incorporated by reference to Exhibit 4.3 to the
Trusts Post-Effective Amendment No. 3 on S-1 Registration Statement, File No. 333-119612, filed with the Commission on April 25, 2006)
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|4.4 | Form of Privacy Notices of the Managing Owner
|--- | ---------------------------------------------



|10.1 | Form of Subscription Escrow Agreement (incorporated by reference to Exhibit 10.1 to the Trusts Pre-Effective Amendment No. 2 on S-1 Registration Statement, File
No. 333-119612, filed with the Commission on March 14, 2005)
|---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|10.2 | Form of Advisory Agreement among WMT III Series G/J Trading Vehicle LLC, Preferred Investment Solutions Corp. (the Managing Owner) and Graham Capital Management, L.P.
(incorporated by reference to Exhibit 10.2 to the Trusts Pre-Effective Amendment No. 2 on S-1 Registration Statement, File No. 333-119612, filed with the Commission on March 14, 2005)
|---- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|10.3 | Form of Advisory Agreement among WMT III Series H/J Trading Vehicle LLC, the Managing Owner and Bridgewater Associates, Inc. (incorporation by reference to Exhibit 10.3 to the
Trusts Pre-Effective Amendment No. 2 on Registration Statement, File No. 333-119612, filed with the Commission on March 14, 2005)
|---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|10.4 | Form of Advisory Agreement among WMT III Series I/J Trading Vehicle LLC, the Managing Owner and Eagle Trading Systems Inc. (incorporation by reference to Exhibit 10.4 to the
Trusts Pre-Effective Amendment No. 2 on Registration Statement, File No. 333-119612, filed with the Commission on March 14, 2005)
|---- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|10.5 | Form of Customer Agreement between the World Monitor Trust III and UBS Securities LLC (incorporated by reference to Exhibit 10.5 to the Trusts Pre-Effective Amendment
No. 2 on S-1 Registration Statement, File No. 333-83017, filed with the Commission on March 14, 2005)
|---- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|10.4 | WMT III Series G/J Trading Vehicle LLC Organization Agreement dated March 10, 2005 (filed herewith)
|---- | ---------------------------------------------------------------------------------------------------



|10.5 | WMT III Series H/J Trading Vehicle LLC Organization Agreement dated March 10, 2005 (filed herewith)
|---- | ---------------------------------------------------------------------------------------------------



|10.6 | WMT III Series I/J Trading Vehicle LLC Organization Agreement dated March 10, 2005 (filed herewith)
|---- | ---------------------------------------------------------------------------------------------------



|14.1 | Preferred Investment Solutions Corp. Code Of Ethics (adopted pursuant to Section 406 of Sarbanes Oxley Act of 2002) as of October 10, 2006.
|---- | -------------------------------------------------------------------------------------------------------------------------------------------



|31.1 | Certification pursuant to Exchange Act Rules 13a-14 and 15d-14 (filed herewith)
|---- | -------------------------------------------------------------------------------



|31.2 | Certification pursuant to Exchange Act Rules 13a-14 and 15d-14 (filed herewith)
|---- | -------------------------------------------------------------------------------



|32.1 | Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith)
|---- | ------------------------------------------------------------------------------------------------------------------------------------------



|32.2 | Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith)
|---- | ------------------------------------------------------------------------------------------------------------------------------------------



26



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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d)
of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on the 30thday of March 2007.



|    |  |                                      |  |                                                           |  |  |  |  |  |                     
|--- |  | ------------------------------------ |  | --------------------------------------------------------- |  |  |  |  |  | --------------------
|    |  | WORLD MONITOR TRUST III  SERIES J   |  |                                                           |  | 
|By: |  | Preferred Investment Solutions Corp. |  |                                                           |  | 
|    |  | Managing Owner                       |  |                                                           |  | 
|    |  |                                      |  |                                                           | 
|    |  | By:                                  |  | /s/ David K. Spohr                                        |  |  |  |  |  | Date: March 30, 2007
|    |  |                                      |  | David K. Spohr                                            |  |  |  |  |  |                     
|    |  |                                      |  | Senior Vice President and Director of Fund Administration

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the
following persons on behalf of the Registrant in the capacities indicated on March 30, 2007.



|    |  |                                      |  |                                                           |  |  |  |  |  |                     
|--- |  | ------------------------------------ |  | --------------------------------------------------------- |  |  |  |  |  | --------------------
|    |  | WORLD MONITOR TRUST III  SERIES J   |  |                                                           |  | 
|By: |  | Preferred Investment Solutions Corp. |  |                                                           |  | 
|    |  | Managing Owner                       |  |                                                           |  | 
|    |  |                                      |  |                                                           | 
|    |  | By:                                  |  | /s/ Kenneth A. Shewer                                     |  |  |  |  |  | Date: March 30, 2007
|    |  |                                      |  | Kenneth A. Shewer                                         |  |  |  |  |  |                     
|    |  |                                      |  | Co-Chief Executive Officer                               
|    |  |                                      |  | (Principal Executive Officer)                            
|    |  |                                      |  |                                                           | 
|    |  | By:                                  |  | /s/ David K. Spohr                                        |  |  |  |  |  | Date: March 30, 2007
|    |  |                                      |  | David K. Spohr                                            |  |  |  |  |  |                     
|    |  |                                      |  | Senior Vice President and Director of Fund Administration
|    |  |                                      |  | (Principal Financial/Accounting Officer)                 



27



---

OTHER INFORMATION

The actual round-turn equivalent of brokerage commissions paid per contract for the year ended December 31, 2006 was $3.07

The Registrants Annual Report on Form 10-K as filed with the Securities and Exchange Commission is available to Limited Owners without charge upon written request to:

World Monitor Trust III  Series J

c/o
Preferred Investment Solutions Corp

900 King Street, Suite 100

Rye Brook, NY 10573