Frontier Funds 10Q 2006 Q3 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

x	Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the Period Ended September 30, 2006

¨	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 000-51274

THE FRONTIER FUND

(a Delaware Statutory Trust)

(Exact name of registrant as specified in its charter)


Delaware		38-6815533
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

c/o Equinox Fund Management, LLC 1660 Lincoln Street, Suite 100 Denver, Colorado		80264
(Address of principal executive offices)		(Zip Code)

(303) 837-0600

(Registrant’s telephone number, including area code)

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. (Check one):

Large accelerated filer ¨ Accelerated filer ¨ Non-accelerated filer x

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 x No ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Securities Exchange Act of 1934). Yes ¨ or No x

TABLE OF CONTENTS


PART I – FINANCIAL INFORMATION

	Item 1.	Financial Statements

		Statements of Financial Condition, September 30, 2006 (Unaudited) and December 31, 2005	3

		Statements of Operations for the Three Months and Nine Months Ended September 30, 2006 and 2005 (Unaudited)	6

		Statements of Changes in Owners’ Capital for the Nine Months Ended September 30, 2006 (Unaudited)	12

		Notes to Financial Statements as of September 30, 2006 (Unaudited)	17

	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	27

	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	57

	Item 4.	Controls and Procedures	64

PART II – OTHER INFORMATION

	Item 1.	Legal Proceedings	65

	Item 1A.	Risk Factors	65

	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	65

	Item 3.	Defaults Upon Senior Securities	65

	Item 4.	Submission of Matters to a Vote of Security Holders	65

	Item 5.	Other Information	65

	Item 6.	Exhibits	65

SIGNATURES			68

This Report includes forward-looking statements that reflect the Managing Owner’s (as hereinafter defined) current expectations about the future results, performance, prospects and opportunities of the Trust (as hereinafter defined). The Managing Owner has tried to identify these forward-looking statements by using words such as “may,” “will,” “expect,” “anticipate,” “believe,” “intend,” “should,” “estimate” or the negative of those terms or similar expressions. These forward-looking statements are based on information currently available to the Managing Owner and are subject to a number of risks, uncertainties and other factors, both known, such as those described in this Report, and unknown, that could cause the Trust’s actual results, performance, prospects or opportunities to differ materially from those expressed in, or implied by, these forward-looking statements.

You should not place undue reliance on any forward-looking statements. Except as expressly required by the Federal securities laws, the Managing Owner undertakes no obligation to publicly update or revise any forward-looking statements or the risks, uncertainties or other factors described in this Report, as a result of new information, future events or changed circumstances or for any other reason after the date of this Report.

PART I. FINANCIAL INFORMATION

ITEM 1. Financial Statements

The Frontier Fund

Statements of Financial Condition

September 30, 2006 and December 31, 2005


	Balanced Series				Winton Series (2)				Campbell/Graham Series (1)
	9/30/2006		12/31/2005		9/30/2006		12/31/2005		9/30/2006		12/31/2005
	(Unaudited)				(Unaudited)				(Unaudited)
ASSETS

Cash and cash equivalents	$	47,815,176	$	12,994,278	$	261,265	$	198,255	$	13,760,722	$	3,114,605
Short-term investments		108,758,871		99,549,452		—		1,413,937		31,471,672		16,436,045
Cash held at futures commodity merchants		24,102,302		19,097,934		—		—		8,653,770		5,019,359
Open trade equity		2,280,466		7,145,996		—		—		416,029		97,185
Investments in unconsolidated trading companies		—		3,949,182		55,712		626,070		7,946,464		5,129,155
Inter-series receivables		68,537,289		—		—		—		—		—
Prepaid service fees - Class 1		1,670,491		1,034,673		26		10,946		385,415		294,429
Incentive fees receivable from Managing Owner		—		—		532		—		—		—
Receivable from related parties		1,119,382		—		—		329		514,779		110,889
Other assets		92,157		82,549		249		2,063		26,313		18,257

Total Assets	$	254,376,134	$	143,854,064	$	317,784	$	2,251,600	$	63,175,164	$	30,219,924

LIABILITIES & OWNERS’ CAPITAL

LIABILITIES
Inter-series payables	$	—	$	—	$	—	$	—	$	5,227,298	$	—
Pending owner additions		680,184		1,368,927		—		5,000		144,500		586,595
Owner redemptions payable		106,793		10,588		—		—		136,022		9,687
Incentive fees payable to Managing Owner		29,127		654,345		—		12,209		—		—
Management fees payable to Managing Owner		69,190		54,370		163		3,282		106,341		47,266
Interest fees payable to Managing Owner		288,611		133,428		188		3,753		86,180		39,251
Trading fees payable to Managing Owner		77,484		54,371		41		821		21,266		9,453
Payables to related parties		13,300		20,690		5,676		922		149,535		2,547
Other liabilities		193,932		2,416		32		60		31,016		535

Total Liabilities		1,458,621		2,299,135		6,100		26,047		5,902,158		695,334

MINORITY INTERESTS		3,248,736		5,588,701				—		9,069,799		5,116,544

OWNERS’ CAPITAL
Managing Owner Units - Class 1		183		—		1,003		—		—		—
Managing Owner Units - Class 2		1,683,832		1,087		310,681		1,163		594,939		968
Limited Owner Units - Class 1		206,577,926		114,741,316		—		2,047,247		42,189,229		21,561,490
Limited Owner Units - Class 2		41,406,836		21,223,825		—		177,143		5,419,039		2,845,588

Total Owners’ Capital		249,668,777		135,966,228		311,684		2,225,553		48,203,207		24,408,046

Total Liabilities, Minority Interests and Owners’ Capital	$	254,376,134	$	143,854,064	$	317,784	$	2,251,600	$	63,175,164	$	30,219,924

Units Outstanding
Class 1		2,006,406		1,097,178		10		18,290		470,166		228,642
Class 1a		31,517		N/A		N/A		N/A		N/A		N/A
Class 2		394,834		195,216		3,086		1,533		63,832		29,396
Class 2a		5,165		N/A		N/A		N/A		N/A		N/A

Net Asset Value per Unit
Class 1	$	101.52	$	104.58	$	100.32	$	111.93	$	89.73	$	94.30
Class 1a	$	91.49		N/A		N/A		N/A		N/A		N/A
Class 2	$	107.92	$	108.73	$	100.68	$	116.27	$	94.22	$	96.83
Class 2a	$	92.62		N/A		N/A		N/A		N/A		N/A

(1)

The Campbell/Graham Series of the Trust commenced trading operations on February 11, 2005.

(2)

The Beach Series was renamed the Winton Series in May, 2006. (See Note 1)

The accompanying notes are an integral part of these statements.

The Frontier Fund

Statements of Financial Condition

September 30, 2006 and December 31, 2005


	Currency Series				Dunn Series				Graham Series
	9/30/2006		12/31/2005		9/30/2006		12/31/2005		9/30/2006		12/31/2005
	(Unaudited)				(Unaudited)				(Unaudited)
ASSETS
Cash and cash equivalents	$	6,769,197	$	483,973	$	190,750	$	98,068	$	6,109,600	$	822,215
Short-term investments		11,399,735		1,490,688		340,202		403,646		13,709,276		5,015,459
Cash held at futures commodity merchants		1,543,854		875,159		—		—		—		—
Open trade equity		721,111		19,481		—		—		—		—
Investments in unconsolidated trading companies		—		—		—		—		4,452,889		1,640,031
Prepaid service fees - Class 1		47,233		2,804		60		1,464		19,923		31,998
Receivable from related parties		1,337		91		28		—		1,293		1,917
Other assets		4,007		52		215		55		15,295		4,365

Total Assets	$	20,486,474	$	2,872,248	$	531,255	$	503,233	$	24,308,276	$	7,515,985

LIABILITIES & OWNERS’ CAPITAL

LIABILITIES
Liability to unconsolidated trading company	$	—	$	472,669	$	136,530	$	166,524	$	—	$	—
Inter-series payables		13,046,989		—		—		—		16,154,336		—
Pending owner additions		64,400		53,750		—		6,000		5,000		50,000
Owner redemptions payable		—		—		—		—		30,091		13,892
Incentive fees payable to Managing Owner		—		—		—		—		—		—
Management fees payable to Managing Owner		7,443		1,307		—		—		51,149		18,964
Interest fees payable to Managing Owner		33,267		1,519		404		577		39,202		12,542
Trading fees payable to Managing Owner		7,369		327		121		133		10,230		3,793
Payables to related parties		1,039,253		—		150,853		204		238,693		1,981
Other liabilities		6,062		—		1,415		354		7,233		129

Total Liabilities		14,204,783		529,572		289,323		173,792		16,535,934		101,301

MINORITY INTERESTS		—		—		—		—		—		—

OWNERS’ CAPITAL
Managing Owner Units - Class 2		87,995		2,059,895		833		902		368,210		857
Limited Owner Units - Class 1		5,856,564		276,762		125,754		193,425		5,699,664		5,642,080
Limited Owner Units - Class 2		337,132		6,019		115,345		135,114		1,704,468		1,771,747

Total Owners’ Capital		6,281,691		2,342,676		241,932		329,441		7,772,342		7,414,684

Total Liabilities, Minority Interests and Owners’ Capital	$	20,486,474	$	2,872,248	$	531,255	$	503,233	$	24,308,276	$	7,515,985

Units Outstanding
Class 1		60,474		2,834		1,603		2,227		70,719		68,058
Class 2		4,134		20,370		1,395		1,509		24,319		20,676
Net Asset Value per Unit
Class 1	$	96.85	$	97.66	$	78.46	$	86.83	$	80.60	$	82.90
Class 2	$	102.83	$	101.42	$	83.30	$	90.15	$	85.23	$	85.73

The accompanying notes are an integral part of these statements.

The Frontier Fund

Statements of Financial Condition

September 30, 2006


	Long Only Commodity Series (1) 9/30/2006		Long/Short Commodity Series (1) 9/30/2006		Managed Futures Index Series (1) 9/30/2006
	(Unaudited)		(Unaudited)		(Unaudited)
ASSETS

Cash and cash equivalents	$	2,858,986	$	11,058,216	$	2,529,461
Short-term investments		4,649,858		24,063,365		5,627,283
Cash held at futures commodity merchants		4,355		4,680,761		1,698,889
Open trade equity		1,010,576		524,294		89,689
Prepaid service fees - Class 1		31,929		291,588		935
Receivable from related parties		1,343		30,597		22
Other assets		4,964		18,509		7,073

Total Assets	$	8,562,011	$	40,667,330	$	9,953,352

LIABILITIES & OWNERS’ CAPITAL

LIABILITIES

Inter-series payables	$	5,507,416	$	18,995,293	$	9,605,957
Pending owner additions		49,000		208,200		—
Incentive fees payable to Managing Owner		—		48,020		—
Management fees payable to Managing Owner		8,184		108,973		16,998
Interest fees payable to Managing Owner		6,620		31,237		8,022
Trading fees payable to Managing Owner		3,282		15,567		4,250
Payables to related parties		3,055		—		3,359
Other liabilities		36		1,810		112

Total Liabilities		5,577,593		19,409,100		9,638,698

MINORITY INTERESTS		—		—		—

OWNERS’ CAPITAL
Managing Owner Units - Class 2		47,585		214,586		48,989
Limited Owner Units - Class 1		2,758,433		18,939,882		263,205
Limited Owner Units - Class 2		178,400		2,103,762		2,460

Total Owners’ Capital		2,984,418		21,258,230		314,654

Total Liabilities, Minority Interests and Owners’ Capital	$	8,562,011	$	40,667,330	$	9,953,352

Units Outstanding
Class 1		28,784		199,744		2,771
Class 2		2,329		24,026		535

Net Asset Value per Unit
Class 1	$	95.83	$	94.82	$	95.00
Class 2	$	97.03	$	96.49	$	96.17

(1)

The Long Only Commodity Series, Long/Short Commodity Series and the Managed Futures Index Series of the Trust received additional capital contributions to commence trading operations on February 24, 2006.

The accompanying notes are an integral part of these statements.

The Frontier Fund

Condensed Statements of Operations

For the Three Months Ended September 30, 2006 and 2005


	Balanced Series						Winton Series (2)					Campbell/Graham Series (1)
	(Unaudited)						(Unaudited)					(Unaudited)
	9/30/2006			9/30/2005			9/30/2006		9/30/2005			9/30/2006			9/30/2005
Investment Income:
Interest - net	$	1,213,667		$	303,549		$	1,258	$	4,142		$	379,188		$	35,023

Total Income		1,213,667			303,549			1,258		4,142			379,188			35,023

Expenses:
Incentive Fees		54,761			497,283			—		16,328			8,429			54,292
Management Fees		203,999			116,543			181		6,672			323,515			70,032
Service Fees - Class 1		1,462,094			546,246			4		9,547			304,531			76,282
Trading Fees		211,881			122,082			45		1,668			64,677			14,012

Total Expenses		1,932,735			1,282,154			230		34,215			701,152			214,618

Investment gain/(loss) - net		(719,068	)		(978,605	)		1,028		(30,073	)		(321,964	)		(179,595	)

Realized and unrealized gain (loss) on investments:
Net realized gain/(loss) on investments		(7,940,108	)		(2,043,407	)		—		—			(1,178,800	)		—
Net change in open trade equity		(334,745	)		2,752,929			—		—			146,518			—
Trading commissions		(277,199	)		(345,129	)		—		—			(31,919	)		—
Net change in inter-series receivables		(2,587,733	)		—			—		—			—			—
Net change in inter-series payables		—			—			—		—			299,003			—
Equity in earnings/(loss) from trading company		—			—			536		208,706			(2,293,289	)		388,044

Net gain/(loss) on investments		(11,139,785	)		364,393			536		208,706			(3,058,487	)		388,044

Minority interests		2,311,199			106,287			—		—			1,064,201			—

NET INCREASE/(DECREASE) IN OWNERS’ CAPITAL RESULTING FROM OPERATIONS	$	(9,547,654	)	$	(507,925	)	$	1,564	$	178,633		$	(2,316,250	)	$	208,449

NET INCOME/(LOSS) PER UNIT
Class 1	$	(4.27	)	$	(1.17	)	$	0.32	$	10.31		$	(4.65	)	$	(0.41	)
Class 1a	$	(4.01	)		N/A			N/A		N/A			N/A			N/A
Class 2	$	(3.71	)	$	(0.43	)	$	0.68	$	11.33		$	(4.13	)	$	0.31
Class 2a	$	(3.33	)		N/A			N/A		N/A			N/A			N/A

(1)

The Campbell/Graham Series of the Trust commenced trading operations on February 11, 2005.

(2)

The Beach Series was renamed the Winton Series in May, 2006. (See Note 1.)

The accompanying notes are an integral part of these statements.

The Frontier Fund

Condensed Statements of Operations

For the Three Months Ended September 30, 2006 and 2005


	Currency Series						Dunn Series						Graham Series
	(Unaudited)						(Unaudited)						(Unaudited)
	9/30/2006			9/30/2005			9/30/2006			9/30/2005			9/30/2006			9/30/2005
Investment Income:
Interest - net	$	138,977		$	418		$	1,799		$	6,577		$	149,454		$	27,632

Total Income		138,977			418			1,799			6,577			149,454			27,632

Expenses:
Incentive Fees		300			(387	)		—			—			—			16,989
Management Fees		28,469			2,073			—			—			140,871			59,856
Service Fees - Class 1		39,006			575			971			1,457			42,718			32,851
Trading Fees		22,337			518			374			2,981			28,176			11,981

Total Expenses		90,112			2,779			1,345			4,438			211,765			121,677

Investment gain/(loss) - net		48,865			(2,361	)		454			2,139			(62,311	)		(94,045	)

Realized and unrealized gain (loss) on investments:
Net realized gain/(loss) on investments		(187,882	)		—			—			—			—			770,787
Net change in open trade equity		218,051			—			—			—			—			(152,995	)
Trading commissions		—			—			—			—			—			(21,933	)
Net change in inter-series payables		(82,589	)		—			—			—			639,456			—
Equity in earnings/(loss) from trading company		—			921			(18,446	)		(360,390	)		(1,064,201	)		—

Net gain/(loss) on investments		(52,420	)		921			(18,446	)		(360,390	)		(424,745	)		595,859

Minority interests		—			—			—			—			—			(343,330	)

NET INCREASE/(DECREASE) IN OWNERS’ CAPITAL RESULTING FROM OPERATIONS	$	(3,555	)	$	(1,440	)	$	(17,992	)	$	(358,251	)	$	(487,056	)	$	158,484

NET INCOME/(LOSS) PER UNIT
Class 1	$	(0.10	)	$	(0.95	)	$	(6.08	)	$	(15.47	)	$	(5.28	)	$	0.71
Class 2	$	0.65		$	(0.20	)	$	(5.79	)	$	(15.15	)	$	(4.91	)	$	1.38

The accompanying notes are an integral part of these statements.

The Frontier Fund

Condensed Statements of Operations

For the Three Months Ended September 30, 2006


	Long Only Commodity Series (1) (Unaudited) 9/30/2006			Long/Short Commodity Series (1) (Unaudited) 9/30/2006			Managed Futures Index Series (1) (Unaudited) 9/30/2006
Investment Income:
Interest - net	$	73,659		$	352,326		$	97,233

Total Income		73,659			352,326			97,233

Expenses:
Incentive Fees		—			61,818			—
Management Fees		23,393			307,355			51,212
Service Fees - Class 1		7,457			112,290			948
Trading Fees		9,370			43,887			12,803

Total Expenses		40,220			525,350			64,963

Investment gain/(loss) - net		33,439			(173,024	)		32,270

Realized and unrealized gain (loss) on investments:
Net realized gain/(loss) on investments		24,887			(751,290	)		(522,087	)
Net change in open trade equity		(1,097,133	)		(244,236	)		108,632
Trading commissions		—			(75,003	)		(12,466	)
Net change in inter-series payables		756,585			594,191			381,087

Net gain/(loss) on investments		(315,661	)		(476,338	)		(44,834	)

Minority interests		—			—			—

NET INCREASE/(DECREASE) IN OWNERS’ CAPITAL RESULTING FROM OPERATIONS	$	(282,222	)	$	(649,362	)	$	(12,564	)

NET INCOME/(LOSS) PER UNIT
Class 1	$	(13.63	)	$	(3.69	)	$	(4.26	)
Class 2	$	(13.25	)	$	(3.02	)	$	(3.81	)

(1)

The Long Only Commodity Series, Long/Short Commodity Series and the Managed Future Index Series of the Trust commenced trading operations February 24, 2006.

The accompanying notes are an integral part of these statements.

The Frontier Fund

Condensed Statements of Operations

For the Nine Months Ended September 30, 2006 and 2005


	Balanced Series						Winton Series (2)						Campbell/Graham Series (1)
	(Unaudited)						(Unaudited)						(Unaudited)
	9/30/2006			9/30/2005			9/30/2006			9/30/2005			9/30/2006			9/30/2005
Investment Income:
Interest - net	$	2,956,610		$	519,652		$	33,769		$	9,515		$	830,638		$	48,340

Total Income		2,956,610			519,652			33,769			9,515			830,638			48,340

Expenses:
Incentive Fees		2,869,054			1,339,173			67,885			16,488			184,247			173,231
Management Fees		542,106			252,880			11,946			16,876			793,490			106,306
Service Fees - Class 1		3,701,182			1,082,283			17,802			23,795			765,572			113,590
Trading Fees		549,693			253,005			2,986			4,216			158,685			21,248

Total Expenses		7,662,035			2,927,341			100,619			61,375			1,901,994			414,375

Investment gain/(loss) - net		(4,705,425	)		(2,407,689	)		(66,850	)		(51,860	)		(1,071,356	)		(366,035	)

Realized and unrealized gain (loss) on investments:
Net realized gain/(loss) on investments		2,756,369			(3,861,234	)		—			—			(944,627	)		—
Net change in open trade equity		(4,752,980	)		5,680,144			—			—			201,942			—
Trading commissions		(1,014,872	)		(728,617	)		—			—			(72,604	)		—
Net change in inter-series receivables		(3,212,711	)		—			—			—			—			—
Net change in inter-series payables		—			—			—			—			772,702			—
Equity in earnings/(loss) from trading company		22,289			—			376,000			79,435			(2,260,385	)		950,290

Net gain/(loss) on investments		(6,201,905	)		1,090,293			376,000			79,435			(2,302,972	)		950,290

Minority interests		1,898,877			(155,512	)		—			—			815,289			—

NET INCREASE/(DECREASE) IN OWNERS’ CAPITAL RESULTING FROM OPERATIONS	$	(9,008,453	)	$	(1,472,908	)	$	309,150		$	27,575		$	(2,559,039	)	$	584,255

NET INCOME/(LOSS) PER UNIT
Class 1	$	(3.06	)	$	(7.76	)	$	0.32		$	(6.06	)	$	(4.57	)	$	(5.17	)
Class 1a	$	(8.51	)		N/A			N/A			N/A			N/A			N/A
Class 2	$	(0.81	)	$	(5.46	)	$	0.68		$	(3.79	)	$	(2.61	)	$	(3.36	)
Class 2a	$	(7.38	)		N/A			N/A			N/A			N/A			N/A

(1)

The Campbell/Graham Series of the Trust commenced trading operations on February 11, 2005.

(2)

The Beach Series was renamed the Winton Series in May, 2006. (See Note 1.)

The accompanying notes are an integral part of these statements.

The Frontier Fund

Condensed Statements of Operations

For the Nine Months Ended September 30, 2006 and 2005


	Currency Series						Dunn Series						Graham Series
	(Unaudited)						(Unaudited)						(Unaudited)
	9/30/2006			9/30/2005			9/30/2006			9/30/2005			9/30/2006			9/30/2005
Investment Income:
Interest - net	$	287,073		$	1,585		$	5,316		$	19,390		$	262,706		$	50,249

Total Income		287,073			1,585			5,316			19,390			262,706			50,249

Expenses:
Incentive Fees		19,672			(303	)		—			12			—			—
Management Fees		98,128			5,169			—			—			262,409			153,839
Service Fees - Class 1		74,065			1,034			3,583			3,457			131,203			83,211
Trading Fees		51,830			1,292			1,126			8,735			52,577			30,829

Total Expenses		243,695			7,192			4,709			12,204			446,189			267,879

Investment gain/(loss) - net		43,378			(5,607	)		607			7,186			(183,483	)		(217,630	)

Realized and unrealized gain (loss) on investments:
Net realized gain/(loss) on investments		28,234			—			—			—			—			(1,216,989	)
Net change in open trade equity		(21,940	)		—			—			—			—			787,952
Trading commissions		—			—			—			—			—			(43,248	)
Net change in inter-series payables		(46,989	)		—			—			—			845,664			—
Equity in earnings/(loss) from trading company		—			222			(14,492	)		(392,352	)		(815,289	)		—

Net gain/(loss) on investments		(40,695	)		222			(14,492	)		(392,352	)		30,375			(472,285	)

Minority interests		(22,289	)		—			—			—			—			(481,782	)

NET INCREASE/(DECREASE) IN OWNERS’ CAPITAL RESULTING FROM OPERATIONS	$	(19,606	)	$	(5,385	)	$	(13,885	)	$	(385,166	)	$	(153,108	)	$	(1,171,697	)

NET INCOME/(LOSS) PER UNIT
Class 1	$	(0.81	)	$	(2.13	)	$	(8.37	)	$	(18.71	)	$	(2.30	)	$	(17.90	)
Class 2	$	1.41		$	0.15		$	(6.85	)	$	(16.88	)	$	(0.50	)	$	(15.99	)

The accompanying notes are an integral part of these statements.

The Frontier Fund

Condensed Statements of Operations

For the Nine Months Ended September 30, 2006


	Long Only Commodity Series (1) (Unaudited) 9/30/2006			Long/Short Commodity Series (1) (Unaudited) 9/30/2006			Managed Futures Index Series (1) (Unaudited) 9/30/2006
Investment Income:
Interest - net	$	146,215		$	570,920		$	192,914

Total Income		146,215			570,920			192,914

Expenses:
Incentive Fees		—			107,965			—
Management Fees		46,684			493,762			90,180
Service Fees - Class 1		10,132			154,107			1,643
Trading Fees		18,691			70,503			22,548

Total Expenses		75,507			826,337			114,371

Investment gain/(loss) - net		70,708			(255,417	)		78,543

Realized and unrealized gain (loss) on investments:
Net realized gain/(loss) on investments		24,887			(1,357,761	)		(563,881	)
Net change in open trade equity		(605,958	)		(253,432	)		89,688
Trading commissions		—			(125,408	)		(21,903	)
Net change in inter-series payables		242,584			1,004,707			394,043
Equity in earnings/(loss) from trading company		—			—			—

Net gain/(loss) on investments		(338,487	)		(731,894	)		(102,053	)

Minority interests		—			—			—

NET INCREASE/(DECREASE) IN OWNERS’ CAPITAL RESULTING FROM OPERATIONS	$	(267,779	)	$	(987,311	)	$	(23,510	)

NET INCOME/)LOSS) PER UNIT
Class 1	$	(4.17	)	$	(5.18	)	$	(5.00	)
Class 2	$	(2.97	)	$	(3.51	)	$	(3.83	)

(1)

The Long Only Commodity Series, Long/Short Commodity Series and the Managed Future Index Series of the Trust commenced trading operations February 24, 2006.

The accompanying notes are an integral part of these statements.

The Frontier Fund

Statements of Changes in Owners’ Capital

For the Nine Months Ended September 30, 2006 (Unaudited)


	Balanced Series (1)
	Class 1					Class 1a						Class 2						Class 2a
	Managing Owner		Limited Owners			Managing Owner			Limited Owners			Managing Owner			Limited Owners			Managing Owner			Limited Owners
Owners’ Capital, December 31, 2005		—		114,741,316			—			—			1,087			21,223,825			—			—

Sale of Units		—		107,861,997			200			2,988,442			1,700,000			21,780,503			50,000			445,000
Redemption of Units		—		(11,025,507	)		—			—			—			(1,089,633	)		—			—
Net (decrease) in Owners’ Capital resulting from operations		—		(7,883,189	)		(17	)		(105,133	)		(63,567	)		(939,910	)		(3,688	)		(12,949	)

Owners’ Capital, September 30, 2006	$	—	$	203,694,617		$	183		$	2,883,309		$	1,637,520		$	40,974,785		$	46,312		$	432,051

Owners’ Capital - Units, December 31, 2005		—		1,097,178			—			—			10			195,206			—			—

Sale of Units		—		1,012,888			2			31,515			15,163			194,240			500			4,665
Redemption of Units		—		(103,660	)		—			—			—			(9,785	)		—			—

Owners’ Capital - Units, September 30, 2006		—		2,006,406			2			31,515			15,173			379,661			500			4,665

Net asset value per unit at December 31, 2005 or at commencement of operations			$	104.58					$	100.00					$	108.73					$	100.00

Change in net asset value per unit for three months ended March 31, 2006				4.23						N/A						5.23						N/A

Net asset value per unit at March 31, 2006			$	108.81					$	100.00					$	113.96					$	100.00

Change in net asset value per unit for three months ended June 30, 2006				(3.02	)					(4.50	)					(2.33	)					(4.05	)

Net asset value per unit at June 30, 2006			$	105.79					$	95.50					$	111.63					$	95.95

Change in net asset value per unit for three months ended September 30, 2006				(4.27	)					(4.01	)					(3.71	)					(3.33	)

Net asset value per unit at September 30, 2006			$	101.52					$	91.49					$	107.92					$	92.62

(1)	The Balanced Series Classes 1a and 2a of the Trust commenced trading operations on April 26, 2006

The accompanying notes are an integral part of these statements.

The Frontier Fund

Statements of Changes in Owners’ Capital

For the Nine Months Ended September 30, 2006 (Unaudited)


	Winton Series (1)											Campbell/Graham Series
	Class 1					Class 2						Class 1					Class 2
	Managing Owner		Limited Owners			Managing Owner			Limited Owners			Managing Owner		Limited Owners			Managing Owner			Limited Owners
Owners’ Capital, December 31, 2005		—		2,047,247			1,163			177,143			—		21,561,490			968			2,845,588

Sale of Units		1,000		771,916			310,000			30,200			—		25,088,298			600,000			3,114,172
Redemption of Units		—		(3,102,189	)		—			(233,946	)		—		(2,133,217	)		—			(315,053	)
Net increase (decrease) in Owners’ Capital resulting from operations		3		283,026			(482	)		26,603			—		(2,327,342	)		(6,029	)		(225,668	)

Owners’ Capital, September 30, 2006	$	1,003	$	—		$	310,681		$	—		$	—	$	42,189,229		$	594,939		$	5,419,039

Owners’ Capital - Units, December 31, 2005		—		18,290			10			1,523			—		228,642			10			29,386

Sale of Units		10		6,451			3,086			251			—		264,482			6,305			31,297
Redemption of Units		—		(24,741	)		(10	)		(1,774	)		—		(22,958	)		—			(3,166	)

Owners’ Capital - Units, September 30, 2006		10		—			3,086			—			—		470,166			6,315			57,517

Net asset value per unit at December 31, 2005 or commencement of operations			$	100.00					$	100.00				$	94.30					$	96.83

Change in net asset value per unit for three months ended March 31, 2006				N/A						N/A					2.60						3.40

Net asset value per unit at March 31, 2006			$	100.00					$	100.00				$	96.90					$	100.23

Change in net asset value per unit for three months ended June 30, 2006				N/A						N/A					(2.52	)					(1.88	)

Net asset value per unit at June 30, 2006			$	100.00					$	100.00				$	94.38					$	98.35

Change in net asset value per unit for three months ended September 30, 2006				0.32						0.68					(4.65	)					(4.13	)

Net asset value per unit at September 30, 2006			$	100.32					$	100.68				$	89.73					$	94.22

(1)

The Winton Series began trading on August 11, 2006. (See Note 1.)

The accompanying notes are an integral part of these statements.

The Frontier Fund

Statements of Changes in Owners’ Capital

For the Nine Months Ended September 30, 2006 (Unaudited)


	Currency Series											Dunn Series
	Class 1					Class 2						Class 1					Class 2
	Managing Owner		Limited Owners			Managing Owner			Limited Owners			Managing Owner		Limited Owners			Managing Owner			Limited Owners
Owners’ Capital, December 31, 2005		—		276,762			2,059,895			6,019			—		193,425			902			135,114

Sale of Units		—		5,762,247			—			331,000			—		—			—			—
Redemption of Units		—		(134,626	)		(2,000,000	)		—			—		(63,624	)		—			(10,000	)
Net increase (decrease) in Owners’ Capital resulting from operations		—		(47,819	)		28,100			113			—		(4,047	)		(69	)		(9,769	)

Owners’ Capital, September 30, 2006	$	—	$	5,856,564		$	87,995		$	337,132		$	—	$	125,754		$	833		$	115,345

Owners’ Capital - Units, December 31, 2005		—		2,834			20,311			59			—		2,227			10			1,499

Sale of Units		—		59,039			—			3,219			—		—			—			—
Redemption of Units		—		(1,399	)		(19,455	)		—			—		(624	)		—			(114	)

Owners’ Capital - Units, September 30, 2006		—		60,474			856			3,278			—		1,603			10			1,385

Net asset value per unit at December 31, 2005 or at commencement of operations			$	97.66					$	101.42				$	86.83					$	90.15

Change in net asset value per unit for three months ended March 31, 2006				0.57						1.35					(0.72	)					(0.08	)

Net asset value per unit at March 31, 2006			$	98.23					$	102.77				$	86.11					$	90.07

Change in net asset value per unit for three months ended June 30, 2006				(1.28	)					(0.59	)				(1.57	)					(0.98	)

Net asset value per unit at June 30, 2006			$	96.95					$	102.18				$	84.54					$	89.09

Change in net asset value per unit for three months ended September 30, 2006				(0.10	)					0.65					(6.08	)					(5.79	)

Net asset value per unit at September 30, 2006			$	96.85					$	102.83				$	78.46					$	83.30

The accompanying notes are an integral part of these statements.

The Frontier Fund

Statements of Changes in Owners’ Capital

For the Nine Months Ended September 30, 2006 (Unaudited)


	Graham Series											Long Only Commodity Series (1)
	Class 1					Class 2						Class 1					Class 2
	Managing Owner		Limited Owners			Managing Owner			Limited Owners			Managing Owner		Limited Owners			Managing Owner			Limited Owners
Owners’ Capital, December 31, 2005		—		5,642,080			857			1,771,747			—		—			—			—

Sale of Units		—		1,621,285			391,309			1,167,697			—		3,095,483			51,000			199,250
Redemption of Units		—		(1,442,411	)		—			(1,227,114	)		—		(93,536	)		—			—
Net increase (decrease) in Owners’ Capital resulting from operations		—		(121,290	)		(23,956	)		(7,862	)		—		(243,514	)		(3,415	)		(20,850	)

Owners’ Capital, September 30, 2006	$	—	$	5,699,664		$	368,210		$	1,704,468		$	—	$	2,758,433		$	47,585		$	178,400

Owners’ Capital - Units, December 31, 2005		—		68,058			10			20,666			—		—			—			—
								��
Sale of Units		—		19,362			4,310			12,923			—		29,657			490			1,839
Redemption of Units		—		(16,701	)		—			(13,590	)		—		(873	)		—			—

Owners’ Capital - Units, September 30, 2006		—		70,719			4,320			19,999			—		28,784			490			1,839

Net asset value per unit at December 31, 2005 or at commencement of operations (1)			$	82.90					$	85.73				$	100.00					$	100.00

Change in net asset value per unit for three months ended March 31, 2006				1.15						1.83					3.82						4.08

Net asset value per unit at March 31, 2006			$	84.05					$	87.56				$	103.82					$	104.08

Change in net asset value per unit for three months ended June 30, 2006			$	1.83					$	2.58				$	5.64					$	6.20

Net asset value per unit at June 30, 2006			$	85.88					$	90.14				$	109.46					$	110.28

Change in net asset value per unit for three months ended September 30, 2006			$	(5.28	)				$	(4.91	)			$	(13.63	)				$	(13.25	)

Net asset value per unit at September 30, 2006			$	80.60					$	85.23				$	95.83					$	97.03

(1)

The Long Only Commodity Series of the Trust commenced trading operations on February 24, 2006

The accompanying notes are an integral part of these statements.

The Frontier Fund

Statements of Changes in Owners’ Capital

For the Nine Months Ended September 30, 2006 (Unaudited)


	Long/Short Commodity Series (1)											Managed Futures Index Series (1)
	Class 1					Class 2						Class 1					Class 2
	Managing Owner		Limited Owners			Managing Owner			Limited Owners			Managing Owner		Limited Owners			Managing Owner			Limited Owners
Owners’ Capital, December 31, 2005		—		—			—			—			—		—			—			—

Sale of Units		—		20,042,399			221,000			2,224,225			—		375,679			51,000			2,500
Redemption of Units		—		(202,083	)		—			(40,000	)		—		(91,015	)		—			—
Net increase (decrease) in Owners’ Capital resulting from operations		—		(900,434	)		(6,414	)		(80,463	)		—		(21,459	)		(2,011	)		(40	)

Owners’ Capital, September 30, 2006	$	—	$	18,939,882		$	214,586		$	2,103,762		$	—	$	263,205		$	48,989		$	2,460

Owners’ Capital - Units, December 31, 2005		—		—			—			—			—		—			—			—

Sale of Units		—		201,839			2,224			22,210					3,716			509			26
Redemption of Units		—		(2,095	)		—			(408	)				(945	)		—			—

Owners’ Capital - Units, September 30, 2006		—		199,744			2,224			21,802			—		2,771			509			26

Net asset value per unit at commencement of operations (1)			$	100.00					$	100.00				$	100.00					$	100.00

Change in net asset value per unit for three months ended March 31, 2006				0.94						1.20					(0.11	)					0.11

Net asset value per unit at March 31, 2006			$	100.94					$	101.20				$	99.89					$	100.11

Change in net asset value per unit for three months ended June 30, 2006				(2.43	)					(1.69	)				(0.63	)					(0.13	)

Net asset value per unit at June 30, 2006			$	98.51					$	99.51				$	99.26					$	99.98

Change in net asset value per unit for three months ended September 30, 2006				(3.69	)					(3.02	)				(4.26	)					(3.81	)

Net asset value per unit at September 30, 2006			$	94.82					$	96.49				$	95.00					$	96.17

(1)

The Long/Short Commodity Series and the Managed Futures Index Series of the Trust commenced trading operations on February 24, 2006

The accompanying notes are an integral part of these statements.

The Frontier Fund

Notes to Financial Statements

As of September 30, 2006 (Unaudited)

1. Organization

The Frontier Fund, or the Trust, was formed as a Delaware statutory trust on August 8, 2003, with separate Series of Units. Its term will expire on December 31, 2053 (unless terminated earlier in certain circumstances). The Trust is a multi-advisor commodity pool as described in CFTC Regulation § 4.10(d)(2).

The Trust manages nine separate and distinct Series: Balanced Series, Winton Series, Campbell/Graham Series, Currency Series, Dunn Series, Graham Series, Long Only Commodity Series, Long/Short Commodity Series and the Managed Futures Index Series (each, a “Series”). The Units of each Series are separated into two sub-classes of Units, except the Balanced Series which has four sub-classes of Units.

On September 24, 2004, the Trust commenced operations for Balanced Series, Winton Series (formerly Beach Series, as described below), Currency Series and Dunn Series. The Graham Series commenced operations as of November 19, 2004. The Campbell/Graham Series commenced operations on February 11, 2005. On February 24, 2006, the Trust commenced operations for the Long Only Commodity, Long/Short Commodity and the Managed Futures Index Series. On May 1, 2006, two new classes of the Balanced Series commenced operations: Balanced Series 1a, and Balanced Series 2a.

The Continuous Offering Period of the Dunn Series was terminated by the Managing Owner in February 2006.

Effective as of April 13, 2006, (i) the Advisory Agreement dated as of March 1, 2004 by and among the Trust, Frontier Trading Company II LLC (the “Trading Company II”), the Managing Owner and Beach Capital Management Limited (“Beach”), which set forth the terms and conditions upon which Beach would render and implement trading advisory services on behalf of the Trading Company II and the Trust with respect to the Beach Series of the Trust and (ii) the Advisory Agreement dated as of March 1, 2004 by and among the Trust, Frontier Trading Company I LLC (the “Trading Company I”), the Managing Owner and Beach, which set forth the terms and conditions upon which Beach would render and implement trading advisory services on behalf of the Trading Company I and the Trust with respect to the assets of the Balanced Series of the Trust allocated to Beach (collectively, the “Agreements”) were terminated. The Agreements were terminated because Beach informed the Managing Owner that Beach had ceased trading pursuant to its Discretionary Program, which was the trading program Beach utilized in providing the trading advisory services under the Agreements.

As a result of the termination of the Agreements, the Trust ceased accepting new subscriptions for the Units in the Beach Series, and, effective April 1, 2006, the Trust ceased assessing all fees on the Beach Series. Upon termination of the Agreements, the Managing Owner delivered written notice to the existing investors in the Beach Series informing them of their exchange and redemption rights as disclosed in the Trust’s prospectus (the “Prospectus”). In addition, the assets of the Balanced Series which had previously been allocated to Beach were reallocated to one or more of the other trading advisors pursuant to the Managing Owner’s asset allocation discretion as disclosed in the Prospectus. On July 31, 2006, all remaining investor accounts in the Beach Series were redeemed.

In May 2006, Beach Series was renamed as Winton Series. For purposes of this report, Beach Series is referred to as Winton Series, regardless of whether the applicable time period referred to is prior or subsequent to the name change, unless explicitly set forth otherwise.

2. Significant Accounting Policies

Basis of Presentation

The interim financial statements of the Series included herein have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and Rule 10-01 of Regulation S-X. Accordingly, they do not include all the information and footnotes required by generally accepted accounting principles for complete financial statements. These condensed financial statements are unaudited and should be read in conjunction with the audited financial statements and notes thereto included in the Trust’s Annual Report on Form 10-K for the year ended December 31, 2005. The Series follow the same accounting policies in the preparation of interim reports as set forth in the annual report. In the opinion of management, the financial statements reflect all adjustments, which are of a normal recurring nature, necessary for a fair presentation of the financial position, results of operation and changes in owners’ capital for the interim periods presented and are not necessarily indicative of a full year’s results. Certain prior year numbers have been reclassified to conform to current year presentation.

The Series, through investing in a subsidiary limited liability trading company or companies (“Trading Company”), place assets under management of certain independent commodity trading advisor(s) (Trading Advisors). The Trading Companies were organized by Equinox Fund Management, LLC (the “Managing Owner”) for the purpose of investing in futures contracts and derivative instruments, and have no operating income or expenses, except for trading income and expenses, all of which is allocated to the Series. Trading Companies in which a Series has a majority equity interest are consolidated by such Series. Investments in Trading Companies in which a Series does not have a controlling or majority interest are accounted for under the equity method and are carried in the statement of financial condition of such Series at fair value based on the interest of each Series in such Trading Company.

The consolidated financial statements of Balanced Series include the assets, liabilities and earnings of its wholly-owned or majority owned Trading Companies, Frontier Trading Company I, LLC, Frontier Trading Company II, LLC, Frontier Trading Company IV, LLC and Frontier Trading Company VI, LLC.

The consolidated financial statements of Currency Series, Campbell/Graham Series, Long Only Commodity Series, Long/Short Commodity Series and Managed Futures Index Series include the assets, liabilities and earnings of their wholly owned or majority owned trading companies, Frontier Trading Company III, LLC, Frontier Trading Company V, LLC, Frontier Trading Company VII, LLC, Frontier Trading Company VIII, LLC and Frontier Trading Company IX, LLC, respectively.

Transactions are recorded on a trade date basis and all investments are recorded at fair value in the financial statements, with changes in fair value reported as a component of Realized and Unrealized Gain / (Loss) on Investments in the Statements of Operations. Generally, fair values will be based on quoted market prices; however, in certain circumstances, significant judgments and estimates may be required in determining fair value in the absence of an active market closing price.

The Managing Owner may make judgments that can frequently require estimates about matters that are inherently uncertain. The Managing Owner provides a good faith estimate of the daily net asset value (NAV) for each Series based on such uncertain information. The Managing Owner’s good faith estimates of each Series’ NAV is published daily by the Trust and is used for subscriptions, redemptions and exchanges of all Trust Units, and such Unit transactions are final and not subject to subsequent adjustment unless the estimate of NAV varies from the actual NAV by more than one percent (1.0%) of the Actual NAV as described within the Prospectus.

3. Investments in Unconsolidated Trading Companies

The following table summarizes the Balanced Series, Winton Series, Campbell/Graham Series, Dunn Series and Graham Series investments in unconsolidated trading companies as of September 30, 2006, and December 31, 2005. These investments represent cash and open trade equity invested in the trading companies by the Series and cumulative trading profits or losses allocated to the Series by the trading companies. Trading companies allocate trading profits or losses on the basis of the proportion of each Series’ capital allocated for trading to each respective trading company, including both cash and notional funds, which bears no relationship to the amount of cash invested by the Series in the trading company.


	As of September 30, 2006					As of December 31, 2005
Trading Company⁽¹⁾	Percentage of Net Assets		Fair Value			Percentage of Net Assets		Fair Value
	(Unaudited)		(Unaudited)			(Unaudited)		(Unaudited)
Balanced Series -
Frontier Trading Company I, LLC	—			—		2.90	%	$	3,949,182

Winton Series -
Frontier Trading Company II, LLC	17.87	%	$	55,712		28.13	%	$	626,070

Campbell/Graham Series
Frontier Trading Company VI, LLC	16.49	%	$	7,946,464		21.01	%		5,129,155

Dunn Series -
Frontier Trading Company IV, LLC	N/M	⁽²⁾	$	(136,530	)	N/M	⁽²⁾	$	(166,524	)

Graham Series -
Frontier Trading Company V, LLC	57.29	%	$	4,452,889		22.12	%	$	1,640,031

⁽¹⁾	The Frontier Trading Company VI, LLC commenced operations on February 11, 2005.

^(2).

Not meaningful.

The following tables summarize the Winton Series, Campbell/Graham Series, Currency Series, Dunn Series and Graham Series equity in earnings from trading companies for the three months ended September 30, 2006 and 2005.


	Three Months Ended September 30, 2006												Three Months Ended September 30, 2005
Trading Company⁽¹⁾	Trading Commissions			Realized Gain (Loss)			Change in Unrealized Gain (Loss)			Net Income (Loss)			Trading Commissions			Realized Loss			Change in Unrealized Gain (Loss)			Net Income (Loss)
	(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)
Winton Series -
Frontier Trading Company II, LLC	$	(77	)	$	(3,385	)	$	3,998		$	536		$	(9,002	)	$	20,326		$	197,382		$	208,706

Campbell/Graham Series -
Frontier Trading Company V, LLC		—			—			—			—		$	(8,602	)	$	338,175		$	14,053		$	343,626
Frontier Trading Company VI, LLC		(48,821	)		(2,013,325	)		(231,143	)		(2,293,289	)		(5,049	)		4,182			45,285			44,418

Total Series	$	(48,821	)	$	(2,013,325	)	$	(231,143	)	$	(2,293,289	)	$	(13,651	)	$	342,357		$	59,338		$	388,044
Currency Series -
Frontier Trading Company III, LLC		—			—			—			—		$	0		$	1,831		$	(910	)	$	921

Dunn Series -
Frontier Trading Company IV, LLC	$	(409	)	$	(25,884	)	$	7,847		$	(18,446	)	$	(6,709	)	$	(183,182	)	$	(170,499	)	$	(360,390	)

Graham Series -
Frontier Trading Company V, LLC	$	(31,919	)	$	(1,178,800	)	$	146,518		$	(1,064,201	)		—			—			—			—

⁽¹⁾	The Frontier Trading Company VI, LLC commenced operations on February 11, 2005.

The following tables summarize the Balanced Series, Winton Series, Campbell/Graham Series, Currency Series, Dunn Series and Graham Series equity in earnings from trading companies for the nine months ended September 30, 2006 and 2005.


	Nine Months Ended September 30, 2006												Nine Months Ended September 30, 2005
Trading Company⁽¹⁾	Trading Commissions			Realized Gain (Loss)			Change in Unrealized Gain (Loss)			Net Income (Loss)			Trading Commissions			Realized Loss			Change in Unrealized Gain (Loss)			Net Income (Loss)
	(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)
Balanced Series –
Frontier Trading Company III, LLC	$	0		$	24,411		$	(2,122	)	$	22,289			—			—			—			—

Winton Series -
Frontier Trading Company II, LLC	$	(16,229	)	$	1,012,474		$	(620,245	)	$	376,000		$	(18,749	)	$	(61,410	)	$	159,594		$	79,435

Campbell/Graham Series -
Frontier Trading Company V, LLC		—			—			—			—		$	(11,418	)	$	116,252		$	377,245		$	482,079
Frontier Trading Company VI, LLC		(156,039	)		(2,476,487	)		372,141			(2,260,385	)		(8,209	)		200,842			275,578			468,211

Total Series	$	(156,039	)	$	(2,476,487	)	$	372,141		$	(2,260,385	)	$	(19,627	)	$	317,094		$	652,823		$	950,290

Currency Series -
Frontier Trading Company III, LLC		—			—			—			—		$	0		$	5,003		$	(4,781	)	$	222

Dunn Series -
Frontier Trading Company IV, LLC	$	(1,570	)	$	(46,746	)	$	33,824		$	(14,492	)	$	(17,753	)	$	(420,901	)	$	46,302		$	(392,352	)

Graham Series -
Frontier Trading Company V, LLC	$	(72,604	)	$	(944,627	)	$	201,942		$	(815,289	)		—			—			—			—

⁽¹⁾	The Frontier Trading Company VI, LLC commenced operations on February 11, 2005.

The unaudited condensed statements of financial condition as of September 30, 2006, and December 31, 2005 for the unconsolidated trading companies are as follows:


Condensed Statements of Financial Condition – September 30, 2006	Frontier Trading Company II, LLC		Frontier Trading Company IV, LLC		Frontier Trading Company V, LLC		Frontier Trading Company VI, LLC
	(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)
Cash held at futures commodities merchants	$	4,701,440	$	1,544,538	$	8,653,770	$	12,253,987
Open trade equity		1,499,197		465,169		416,029		(547,677	)

Total Assets	$	6,200,637	$	2,009,708	$	9,069,799	$	11,706,310

Members’ equity	$	6,200,637	$	2,009,708	$	9,069,799	$	11,706,310


Condensed Statements of Financial Condition – December 31, 2005	Frontier Trading Company II, LLC		Frontier Trading Company IV, LLC		Frontier Trading Company V, LLC		Frontier Trading Company VI, LLC
	(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)
Cash held at futures commodities merchants	$	3,604,769	$	1,939,800	$	5,019,359	$	8,077,776
Open trade equity		3,527,640		187,880		97,185		(1,222,005	)

Total Assets	$	7,132,409	$	2,127,680	$	5,116,544	$	6,855,771

Members’ equity	$	7,132,409	$	2,127,680	$	5,116,544	$	6,855,771

⁽¹⁾	The Frontier Trading Company VI, LLC commenced operations on February 11, 2005.

The unaudited condensed statements of income for the three and nine months ended September 30, 2006, for the unconsolidated trading companies are as follows:


	Frontier Trading Company II, LLC			Frontier Trading Company III, LLC		Frontier Trading Company IV, LLC			Frontier Trading Company V, LLC			Frontier Trading Company VI, LLC
	(Unaudited)			(Unaudited)		(Unaudited)			(Unaudited)			(Unaudited)
Condensed Statements of Income – For the Three Months Ended September 30, 2006
Interest income	$	5,824		$	—	$	30,553		$	67,283		$	133,191
Net realized gain (loss) on investments, less commissions		(1,232,247	)				(1,648,350	)		(2,654,190	)		(1,843,478	)
Change in open trade equity		1,440,321			—		406,154			139,258			(680,898	)

Net income (loss)	$	213,898			—	$	(1,211,643	)	$	(2,447,649	)	$	(2,391,185	)

Condensed Statements of Income – For the Nine Months Ended September 30, 2006
Interest income	$	135,023		$	—	$	78,369		$	218,968		$	344,469
Net realized loss on investments, less commissions		5,814,902			—		(2,296,725	)		(1,947,785	)		(5,048,642	)
Change in open trade equity		(2,087,641	)		—		277,406			318,844			683,987

Net income (loss)	$	3,862,284		$	—	$	(1,940,950	)	$	(1,409,973	)	$	(4,020,186	)


	Frontier Trading Company II, LLC			Frontier Trading Company III, LLC			Frontier Trading Company IV, LLC			Frontier Trading Company V, LLC			Frontier Trading Company VI, LLC
	(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)
Condensed Statements of Income – For the Three Months Ended September 30, 2005
Interest income	$	39,232		$	4,663		$	23,985		$	45,165		$	34,124
Net realized gain (loss) on investments, less commissions		189,969			45,544			(1,010,027	)		748,824			75,671
Change in open trade equity		2,411,201			(16,101	)		(891,438	)		(152,995	)		43,372

Net income (loss)	$	2,640,402		$	34,106		$	(1,877,480	)	$	640,994		$	153,167

Condensed Statements of Income – For the Nine Months Ended September 30, 2005
Interest income	$	73,161		$	11,189		$	57,254		$	78,036		$	60,783
Net realized loss on investments, less commissions		(885,219	)		88,297			(2,185,804	)		(1,260,237	)		953,289
Change in open trade equity		1,802,513			(10,900	)		555,355			787,952			1,351,163

Net income (loss)	$	990,455		$	88,586		$	(1,573,195	)	$	(394,249	)	$	2,365,235

4. Transactions with Affiliates

Equinox Fund Management LLC contributes funds to the Trust in order to have a 1% interest in the aggregate capital, profits and losses of all Series and in return will receive units designated as general units in the Series in which the Managing Owner invests such funds. The general units may only be purchased by the Managing Owner and may be subject to no advisory fees or advisory fees at reduced rates. Otherwise, the general units hold the same rights as the limited units. The Managing Owner is required to maintain at least a 1% interest (“Minimum Purchase Commitment”) in the aggregate capital, profits and losses of all Series so long as it is acting as the Managing Owner of the Trust. Such contribution was made by the Managing Owner before trading commenced for the Trust and will be maintained throughout the existence of the Trust, and the Managing Owner will make such purchases as are necessary to effect this requirement. Additionally, during 2006, the Managing Owner agreed with certain regulatory bodies to maintain a 1% interest specifically in the Balanced Series Class 1a Units and Balanced Series Class 2a Units, aggregated, and each of the Long Only Commodity Series, Long/Short Commodity Series and Managed Futures Index Series. The 1% interest in these specific Series is included in computing the Minimum Purchase Commitment in aggregate capital. In addition to the General Units the Managing Owner receives in respect of its Minimum Purchase Commitment, the Managing Owner may purchase Limited Units in any Series as a Limited Owner. All Units purchased by the Managing Owner are held for investment purposes only and not for resale.

On February 24, 2006, the Managing Owner invested $1,000 in each of the Long Only Commodity Series, Class 2, Long/Short Commodity Series, Class 2 and the Managed Futures Index Series, Class 2. On March 31, 2006, the Managing Owner invested $1.2 million in the Balanced Series, Class 2, $100,000 in the Campbell Graham Series, Class 2 and $50,000 in each of the Long Only Commodity Series, Class 2, Long/Short Commodity Series, Class 2 and the Managed Futures Index Series, Class 2. Also, on March 31, 2006, the Managing Owner redeemed $1.0 million of its interest in the Currency Series, Class 2. On April 28, 2006, the Managing Owner invested $1,309 in the Graham Series, Class 2 and redeemed a like amount in the Winton Series, Class 2. On May 1, 2006 the Managing Owner invested $200 in the Balanced Series, Class 1a and $50,000 in the Balanced Series, Class 2a. On May 31, 2006, the Managing Owner invested $260,000 in the Graham Series, Class 2 and $50,000 in the Long/Short Commodity Series, Class 2. On June 30, 2006, the Managing Owner invested $130,000 in the Graham Series, Class 2 and $20,000 in the Long/Short Commodity Series, Class 2. On August 11, 2006, the Managing Owner invested $30,000 in the Long/Short Commodity Series, Class 2, $1,000 in the Winton Series, Class 1 and $100,000 in the Winton Series, Class 2. On September 29, 2006, the Managing Owner invested $70,000 in the Long/Short Commodity Series, Class 2 and $210,000 in the Winton Series, Class 2. On that same date, the Managing Owner invested $500,000 in each of the Balanced Series, Class 2 and the Campbell Graham Series, Class 2 and redeemed $1,000,000 in the Currency Series, Class 2. The Managing Owner may make purchases or redemptions at any time on the same terms as any Limited Owner.

On January 13, 2006, Richard E. Bornhoft, President of the Managing Owner, redeemed $4,165 from the Graham Series, Class 1. On January 17, 2006, Mr. Bornhoft invested $4,165 in the Campbell/Graham Series, Class 2. Mr. Bornhoft exchanged all of his Winton Series Units for the same class of Units in the Graham Series on April 28, 2006: $1,251 Class 1 and $1,309 Class 2. On June 7, 2006, Mr. Bornhoft redeemed $250 from Balanced Series, Class 1, $750 from Campbell/Graham Series, Class 1, $750 from Dunn Series, Class 1 and $1,000 from Graham Series, Class 1. Mr. Bornhoft

redeemed $17,500 from Graham Series, Class 2 on June 14, 2006. On August 11, 2006, Mr. Bornhoft redeemed $5,000 from the Campbell/Graham Series, Class 2 and $10,000 from the Dunn Series, Class 2. Mr. Bornhoft may make purchases or redemptions at any time on the same terms as any Limited Owner. No other principal of the Managing Owner or affiliates own any beneficial interest in the Trust but are allowed to do so.

The Balanced Series, in order to make investments in the Campbell/Graham Series, Currency Series, Graham Series, Long Only Commodity Series, Long/Short Commodity Series and Managed Futures Index Series, advances funds to such Series, for the purpose of investing in the respective Trading Company or Trading Companies for such Series on behalf of the Balanced Series. The Balanced Series advanced $8,000,000 to the Currency Series on January 31, 2006, $5,000,000 to the Long Only Commodity Series on February 24, 2006, $10,000,000 to the Long/Short Commodity Series on March 3, 2006, $10,000,000 to the Managed Futures Index Series on March 29, 2006, $5,000,000 to the Currency Series on April 24, 2006, $8,000,000 to the Campbell/Graham Series on April 26, 2006, $5,000,000 to the Graham Series on April 28, 2006, $5,000,000 to the Long/Short Commodity Series on May 8, 2006, $5,000,000 to the Long/Short Commodity Series on May 26, 2006, $10,000,000 to the Graham Series on July 17, 2006 and $750,000 to the Long Only Commodity Series on July 28, 2006. In addition, on August 30, 2006, the Balanced Series advanced $2,000,000 to the Graham Series while withdrawing $2,000,000 it had previously advanced to the Campbell/Graham Series. The amount of the funds advanced by the Balanced Series to each of the Campbell/Graham Series, Currency Series, Graham Series, Long Only Commodity Series, Long/Short Commodity Series and Managed Futures Index Series participates on apari passu basis with the Class 2 Units of such investee Series. The Balanced Series reflects the change in value of these investments as “Net change in inter-series receivables” in the Statement of Operations. The Balanced Series is subject to the same allocations of income and fees as the Limited Owners of such Series. As a result of fees charged by the investee Series, fees are not charged by the Balanced Series on the capital allocated to investments in affiliated Series, and the Managing Owner monitors such allocations so that aggregate fees of the investee Series on the Balanced Series investments do not exceed the allowable fees of the Balanced Series as provided in the Trust’s Prospectus.

The following table summarizes the Balanced Series advances to and reductions from other Series of the Trust as of September 30, 2006

Nine Months Ending September 30, 2006

(Unaudited)


Name of Series	Amount of Investment January 1, 2006		Additions During Period		Reductions During Period		Amount of Investment September 30, 2006		Earnings in Investments in Inter-Series Receivables Net P/L for the Period			Amount of Dividends or Interest		Value September 30, 2006
Campbell/Graham Series	$	0	$	8,000,000	$	2,000,000	$	6,000,000	$	(772,702	)	$	0	$	5,227,298
Currency Series	$	0	$	13,000,000	$	0	$	13,000,000	$	46,989		$	0	$	13,046,989
Graham Series	$	0	$	17,000,000	$	0	$	17,000,000	$	(845,664	)	$	0	$	16,154,336
Long Only Commodity Series	$	0	$	5,750,000	$	0	$	5,750,000	$	(242,584	)	$	0	$	5,507,416
Long/Short Commodity Series	$	0	$	20,000,000	$	0	$	20,000,000	$	(1,004,707	)	$	0	$	18,995,293
Managed Futures Index Series	$	0	$	10,000,000	$	0	$	10,000,000	$	(394,043	)	$	0	$	9,605,957

							$	71,750,000	$	(3,212,711	)	$	0	$	68,537,289

Each Series of Units pays to the Managing Owner a monthly management fee equal to a certain percentage of such Series’ assets, calculated on a daily basis. The annual rate of the management fee is 0.5% for the Balanced Series, 2.0% for the Winton Series, Currency Series, Long Only Commodity Series and the Managed Futures Index Series, 2.5% for the Graham Series and Campbell/Graham Series, and 3.5% for the Long/Short Commodity Series. There is no management fee for the Dunn Series. The Managing Owner may pay all or a portion of such management fees to the Trading Advisor(s) for such Series. For the three months ended September 30, 2006, management fees incurred were $203,999 by the Balanced Series, $181 by the Winton Series, $323,515 by the Campbell/Graham Series, $28,469 by the Currency Series, $140,871 by the Graham Series, $23,393 by the Long Only Commodity Series, $307,355 by the Long/Short Commodity Series and $51,212 by the Managed Futures Index Series. For the nine months ended September 30, 2006, management fees incurred were $542,106 by the Balanced Series, $11,946 by the Winton Series, $793,490 by the Campbell/Graham Series, $98,128 by the Currency Series, $262,409 by the Graham Series, $46,684 by the Long Only Commodity Series, $493,762 by the Long/Short Commodity Series and $90,180 by the Managed Futures Index Series. Amounts payable at September 30, 2006 to the Managing Owner for management fees were $69,190 by the Balanced Series, $163 by the Winton Series, $106,341 by the Campbell/Graham Series, $7,443 by the Currency Series, $51,149 by the Graham Series, $8,184 by the Long Only Commodity Series, $108,973 by the Long/Short Commodity Series and $16,998 by the Managed Futures Index Series.

Each Series pays to the Managing Owner a monthly trading fee (FCM Fee) equal to 1/12^th of 0.50% of such Series’ Net Asset Value, calculated daily. For the three months ended September 30, 2006, FCM fees incurred were $211,811 by the Balanced Series, $45 by the Winton Series, $64,677 by the Campbell/Graham Series, $22,337 by the Currency Series, $374 by the Dunn Series, $28,176 by the Graham Series, $9,370 by the Long Only Commodity Series, $43,887 by the Long/Short Commodity Series and $12,803 by the Managed Futures Index Series. For the nine months ended September 30, 2006, FCM fees incurred were $549,693 by the Balanced Series, $2,986 by the Winton Series, $158,685 by the Campbell/Graham Series, $51,830 by the Currency Series, $1,126 by the Dunn Series, $52,577 by the Graham Series, $18,691 by the Long Only Commodity Series, $70,503 by the Long/Short Commodity Series and $22,548 by the Managed Futures Index Series. Amounts payable at September 30, 2006 to the Managing Owner for FCM fees were $77,484 by the Balanced Series, $41 by the Winton Series, $21,266 by the Campbell/Graham Series, $7,369 by the Currency Series, $121 by the Dunn Series, $10,230 by the Graham Series, $3,282 by the Long Only Commodity Series, $15,567 by the Long/Short Commodity Series and $4,250 by the Managed Futures Index Series.

In addition, some Series pay to the Managing Owner an incentive fee of a certain percentage of new net trading profits generated by such Series, monthly or quarterly. Because the Balanced Series and Long/Short Commodity Series each employ multiple Trading Advisors, these Series will pay the Managing Owner a monthly incentive fee calculated on a Trading Advisor by Trading Advisor basis. It is therefore possible that in any given period the Balanced Series or the Long/Short Commodity Series may pay incentive fees to the Managing Owner for one or more Trading Advisors while each of these Series as a whole experiences losses. The incentive fee is 25% for the Balanced and Dunn Series and 20% for the Winton, Currency, Graham, Campbell/Graham Series and Long/Short Commodity Series. There is no incentive fee for the Long Only Commodity Series or the Managed Futures Index Series. The Managing Owner may pay all or a portion of such incentive fees to the Trading Advisor(s) for such Series. For the three months ended September 30, 2006, incentive fees incurred were $54,761 by the Balanced Series, $0 by the Winton Series, $8,429 by the Campbell/Graham Series, $300 by the Currency Series, $0 for the Dunn Series, $0 by the Graham Series and $61,818 by the Long/Short Commodity Series. For the nine months ended September 30, 2006, incentive fees incurred were $2,869,054 by the Balanced Series, $67,885 by the Winton Series, $184,247 by the Campbell/Graham Series, $19,672 by the Currency Series, $0 for the Dunn Series, $0 for the Graham Series and $107,965 by the Long/Short Commodity Series. Amounts payable at September 30, 2006 to the Managing Owner for incentive fees were $29,127 by the Balanced Series, and $48,020 by the Long/Short Series. Amounts receivable at September 30, 2006 from the Managing Owner for incentive fees were $532 for the Winton Series.

Aggregate interest income from all sources, including assets held at clearing brokers, up to 2% (annualized) is paid to the Managing Owner by the Balanced Series (Class 1 and Class 2 only), Winton Series, Campbell/Graham Series, Currency Series, Dunn Series and Graham Series. For the Balanced Series (Class 1a and Class 2a only), Long Only Commodity Series, Long/Short Commodity Series and Managed Futures Index Series, 20% of the total interest allocated to each Series is paid to the Managing Owner. During the three months ended September 30, 2006, the Trust paid $1,466,823 of such interest income to the Managing Owner. During the nine months ended September 30, 2006, the Trust paid $3,685,216 of such interest income to the Managing Owner.

With respect to Class 1 of each Series, the Series pays monthly to the Managing Owner a service fee at an annualized rate of up to 3.0% (2% for the Long Only Commodity Series and Managed Futures Index Series), which the Managing Owner pays to selling agents of the Trust. For the three months ended September 30, 2006, service fees incurred were $1,462,094 by the Balanced Series, $4 by the Winton Series, $304,531 by the Campbell/Graham Series, $39,006 by the Currency Series, $971 by the Dunn Series, $42,718 by the Graham Series, $7,457 by the Long Only Commodity Series, $112,290 by the Long/Short Commodity Series and $948 by the Managed Futures Index Series. For the nine months ended September 30, 2006, service fees incurred were $3,701,182 by the Balanced Series, $17,802 by the Winton Series, $765,572 by the Campbell/Graham Series, $74,065 by the Currency Series, $3,583 by the Dunn Series, $131,203 by the Graham Series, $10,132 by the Long Only Commodity Series, $154,107 by the Long/Short Commodity Series and $1,643 by the Managed Futures Index Series. Amounts payable at September 30, 2006 to the Managing Owner for service fees (included in other liabilities on the Statements of Financial Condition) were $179,099 by the Balanced Series, $0 by the Winton Series, $29,539 by the Campbell Graham Series, $697 by the Currency Series, $279 by the Dunn Series, $7,233 by the Graham Series, $36 by the Long Only Commodity Series, $1,810 by the Long/Short Commodity Series and $112 by the Managed Futures Index Series. The initial service fee (for the first 12 months) relating to a sale of the Units is prepaid to the Managing Owner by each Series, and paid to the selling agents by the Managing Owner in the month following sale. Since the Managing Owner is prepaying the initial service fee for the first year and is being reimbursed therefore by the Series monthly in arrears based upon a corresponding percentage of net asset value, it bears the risk and the upside potential of any difference between the amount of the initial service fee prepaid and the amount of the reimbursement thereof as a result of variations in net asset value. For the three months ended September 30, 2006, due to variations in net asset values, amounts received or receivable from the Managing Owner for the difference in monthly service fees from the prepaid initial service fees were $47,925 for Balanced Series, $21,859 for Campbell Graham Series, $42 for Dunn Series, $2,570

for Graham Series, $631 for Long Only Series, $747 for Long/Short Series and $1,635 for Managed Futures Index Series. For the three months ended September 30, 2006, amounts paid or owing the Managing Owner for excess of monthly service fees over prepaid initial service fees were $30 for Winton Series and $1,538 for the Currency Series.

On September 29, 2006, the Managing Owner exchanged $1.0 million of its interest in Currency Series Class 2 Units for $500,000 interest each in Balanced Series Class 2 Units and Campbell Graham Class 2 Units. The Statements of Financial Condition at September 30, 2006 reflect a payable to related parties by the Currency Series of $1.0 million and a corresponding receivable from related parties of $500,000 for each of the Balanced Series and the Campbell Graham Series.

The Managing Owner pays to The Bornhoft Group Corporation, an affiliate of the Trust, a monthly fee of 0.25% (annualized) of the net asset value of the Trust, for services in connection with the daily valuation of each Series and Class. The amount paid under this agreement was $200,986 and $489,970, respectively, for the three months and nine months ended September 30, 2006. Additionally, The Bornhoft Group Corporation provides office space to the Managing Owner, prorates office expenses, and advances certain direct expenses on behalf of the Managing Owner. Under this agreement, the Managing Owner reimbursed The Bornhoft Group Corporation $128,663 for the nine months ended September 30, 2006.

Solon Capital, LLC, an affiliate of the Trust, serves as wholesaler of the Trust by marketing to broker/dealer organizations. For these services, the Managing Owner paid Solon Capital, LLC, $602,959 and $1,469,910, respectively, for the three months and nine months ended September 30, 2006.

5. Off-Balance Sheet Risk

The term “off-balance sheet risk” refers to an unrecorded potential liability that, even though it does not appear on the balance sheet, may result in future obligation or loss. Each Trading Company trades in futures, forward and swap contracts and is therefore a party to financial instruments with elements of off-balance sheet market and credit risk. In entering into these contracts there exists a market risk that such contracts may be significantly influenced by market conditions, such as interest rate volatility, resulting in such contracts being less valuable. If the markets should move against all of the futures interests positions held by a Trading Company in respect of any Series at the same time, and if the Trading Advisor(s) of such Trading Company are unable to offset such futures interests positions, such Trading Company could lose all of its assets and the holders of Units of such Series would realize a 100% loss. The Managing Owner seeks to minimize market risk through real-time monitoring of open positions and the level of diversification of each Trading Advisor’s portfolio. It is anticipated that any Trading Advisor’s margin-to-equity ratio will typically not exceed approximately 35% although the actual ratio could be higher or lower from time to time.

In addition to market risk, trading futures, forward and swap contracts entails credit risk in that a counterparty will not be able to meet its obligations to a Trading Company. The counterparty for futures contracts traded in the United States and on most foreign exchanges is the clearinghouse associated with such exchange. In general, clearinghouses are backed by the corporate members of the clearinghouse who are required to share any financial burden resulting from the non-performance by one of their members and, as such, should significantly reduce this credit risk. In cases where the clearinghouse is not backed by the clearing members, like some foreign exchanges, it is normally backed by a consortium of banks or other financial institutions. Some non-U.S. exchanges, in contrast to U.S. exchanges are principals’ markets in which performance is the responsibility only of the individual counterparty with whom the Trading Company has entered into the transaction with and not of the exchange or clearing corporation. In these kinds of markets, there is risk of bankruptcy or other failure or refusal to perform by the counterparty.

In the case of forward contracts traded on the interbank market and swaps, neither is traded on an exchange. The counterparty is generally a single bank or other financial institution, rather than a group of financial institutions; thus there may be a greater counterparty credit risk. The Managing Owner expects the Trading Advisors to trade only with those counterparties which it believes to be creditworthy. All positions of each Trading Company are valued each day on a mark-to-market basis. There can be no assurance that any clearing member, clearinghouse or other counterparty will be able to meet its obligations to any Trading Company.

6. Subsequent Events

The Balanced Series advanced $7,000,000 to the Graham Series on October 19, 2006 and withdrew $3,000,000 it had previously advanced to the Long Only Commodity Series on October 18, 2006.

The Managing Owner invested $100,000 in Units of the Campbell Graham Series, Class 2 and $20,000 in Units of the Long/Short Commodity Series, Class 2 on October 31, 2006.

The Trust commenced accepting Limited Owner subscriptions for the Winton Series on November 1, 2006.

Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Introduction

The Frontier Fund, or the Trust, is a Delaware statutory trust formed August 8, 2003. The Trust is a multi-advisor commodity pool, as described in CFTC Regulation § 4.10(d)(2). The Trust is authorized to issue multiple Series of Units in segregated pools of assets of the Trust, pursuant to the requirements of the Trust Act. The assets of each Series are segregated from the assets of other Series. The Trust is managed by the Managing Owner, and its term will expire on December 31, 2053 (unless terminated earlier in certain circumstances).

As of September 30, 2006, the Trust had nine separate and distinct Series of Units issued and outstanding: Balanced Series, Winton Series, Campbell/Graham Series, Currency Series, Dunn Series, Graham Series, Long Only Commodity Series, Long/Short Commodity Series and the Managed Futures Index Series. Each Series of Units, except for the Balanced Series have two separate sub-classes issued and outstanding—Class 1 and Class 2. The Balanced Series has four separate sub-classes of Units issued and outstanding—Class 1, Class 1a, Class 2 and Class 2a. The Trust, with respect to 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;

•

Allocates funds to a subsidiary limited liability Trading Company or Companies. Each Trading Company has one-year renewable contracts with its own independent commodity trading advisor(s), or each, a Trading Advisor, that will manage all or a portion of such Trading Company’s assets, make the trading decisions for the assets of each Series vested in such Trading Company, segregate its assets from any other Trading Company and maintain separate, distinct records for each Series, and account for its assets separately from the other Series and the other Trust assets;

•

Calculates the net assets, or the Net Asset Value, of its Units separately from the other Series; and

•

Has an investment objective of increasing the value of the Units over the long term (capital appreciation), while controlling risk and volatility, and to offer exposure to the investment programs of individual Trading Advisors and to specific instruments (currencies).

•

Aggregates all cash and equivalents for purposes of maximizing returns at an equal rate for all Series. The assets of any particular Series include only those funds and other assets that are paid to, held by or distributed to the Trust on account of and for the benefit of that Series. Under the “Inter-Series Limitation on Liability” expressly provided for under Section 3804(a) of the Trust Act, strict segregation of the cash and equivalents, though pooled for maximizing returns, is maintained in the books and records of each Series.

The Initial Offering Period for the Balanced Series, Winton Series, Currency Series and Dunn Series closed in September 2004. The Initial Offering Period for the Graham Series closed in November 2004. The Initial Offering Period for the Campbell/Graham Series closed in February 2005. The Initial Offering Period for the Long Only Commodity Series, Long/Short Commodity Series and the Managed Futures Index Series closed in February 2006. Currently, Units in the Balanced Series, Campbell/Graham Series, Currency Series, Graham Series, Long Only Commodity Series, Long/Short Commodity Series and the Managed Futures Index Series are being offered as of each day of each week and will continue to be offered until the maximum amount of each such Series’ Units which are registered are sold. The Managing Owner may terminate the Continuous Offering Period, as defined in the Prospectus, of any Series at any time.

The Continuous Offering Period of the Dunn Series was terminated by the Managing Owner in February 2006.

Effective as of April 13, 2006, (i) the Advisory Agreement dated as of March 1, 2004 by and among the Trust, Frontier Trading Company II LLC (the “Trading Company II”), the “Managing Owner and Beach Capital Management Limited (“Beach”), which set forth the terms and conditions upon which Beach would render and implement trading advisory services on behalf of the Trading Company II and the Trust with respect to the Beach Series of the Trust and (ii) the Advisory Agreement dated as of March 1, 2004 by and among the Trust, Frontier Trading Company I LLC (the “Trading Company I”), the Managing Owner and Beach, which set forth the terms and conditions upon which Beach would render and implement trading advisory services on behalf of the Trading Company I and the Trust with respect to the assets of the Balanced Series of the Trust allocated to Beach (collectively, the “Agreements”) were terminated. The Agreements were terminated because Beach informed the Managing Owner that Beach had ceased trading pursuant to its Discretionary Program, which was the trading program Beach utilized in providing the trading advisory services under the Agreements.

As a result of the termination of the Agreements, the Trust ceased accepting new subscriptions for the Units in the Beach Series, and the Trust ceased assessing all fees on the Beach Series. Upon termination of the Agreements, the Managing Owner delivered written notice to the existing investors in the Beach Series informing them of their exchange and redemption rights as disclosed in the Trust’s prospectus (the “Prospectus”). In addition, the assets of the Balanced Series which had previously been allocated to Beach were reallocated to one or more of the other trading advisors pursuant to the Managing Owner’s asset allocation discretion as disclosed in the Prospectus. On July 31, 2006, all remaining investor accounts in the Beach Series were redeemed.

Liquidity and Capital Resources

The Trust will raise additional capital only through the sale of Units offered pursuant to the continuing offering, and does not intend to raise any capital through borrowing. Due to the nature of the Trust’s business, it makes no capital expenditures and has no capital assets which are not operating capital or assets.

The Managing Owner is responsible for the payment of all of the ordinary expenses associated with the organization of the Trust and the offering of each Series of Units, except for the initial and ongoing service fee, if any, and no Series will be required to reimburse these expenses. As a result, 100% of each Series’ offering proceeds are initially available for that Series’ trading activities.

A portion of each Trading Company’s assets is used as margin to maintain that Trading Company’s forward currency contract positions, and another portion is deposited in cash in segregated accounts in the name of each Trading Company maintained for each Trading Company at the futures commodity merchants in accordance with CFTC segregation requirements. At September 30, 2006, cash deposited at the clearing brokers was $24,102,302 for the Balanced Series, $8,653,770 for the Campbell/Graham Series, $1,543,854 for the Currency Series, $4,680,761 for the Long/Short Commodity Series, $4,355 for the Long Only Commodity Series and $1,698,889 for the Managed Futures Index Series. The clearing brokers are expected to credit each Trading Company with approximately 80%-100% of the interest earned on its average net assets on deposit with the clearing brokers each week. In an attempt to increase interest income earned, the Managing Owner also may invest the non-margin assets in U.S. government securities which include any security issued or guaranteed as to principal or interest by the United States, or by a person controlled by or supervised by and acting as an instrumentality of the government of the United States pursuant to authority granted by Congress of the United States or any certificate of deposit for any of the foregoing, including U.S. treasury bonds, U.S. treasury bills and issues of agencies of the United States government, and certain cash items such as money market funds, certificates of deposit (under nine months) and time deposits. Aggregate interest income from all sources, including assets held at clearing brokers, up to 2% (annualized) is paid to the Managing Owner by the Balanced Series (Class 1 and Class 2 only), Winton Series, Campbell/Graham Series, Currency Series, Dunn Series and Graham Series. For the Balanced Series (Class 1a and Class 2a only), Long Only Commodity Series, Long/Short Commodity Series and Managed Futures Index Series, 20% of the total interest allocated to each Series is paid to the Managing Owner.

Approximately 10% to 20% of the Trust’s assets are expected to be committed as required margin for futures contracts and forward and options trading and held by the respective broker, although the amount committed may vary significantly. Such assets are maintained in the form of cash or U.S. Treasury bills in segregated accounts with the futures broker pursuant to the Commodity Exchange Act and regulations thereunder. Approximately 2% to 6% of the Trust’s assets are expected to be deposited with over-the-counter counterparties in order to initiate and maintain forward and swap contracts. Such assets are not held in segregation or otherwise regulated under the Commodity Exchange Act, unless such over-the-counter counterparty is registered as a futures commission merchant. These assets are held either in U.S. government securities or short-term time deposits with U.S.-regulated bank affiliates of the over-the-counter counterparties. The remaining approximately 74% to 88% of the Trust’s assets will normally be invested in cash equivalents and short term

investments, such as money market funds, certificates of deposit (under nine months) and time deposits and held by the futures commodity merchants, the over-the-counter counterparties and by U.S. Federally chartered banks. As of September 30, 2006, such cash equivalents and short term investments included time deposits at Merrill Lynch Bank USA, and money market funds held at Merrill Lynch Investment Managers. Including cash held at US Bank, total cash and cash equivalents and short term investments held at these institutions were $156,574,047 for the Balanced Series, $261,265 for the Winton Series, $45,232,394 for the Campbell/Graham Series, $18,168,932 for the Currency Series, $530,952 for the Dunn Series, $19,818,876 for the Graham Series, $7,508,844 for the Long Only Commodity Series, $35,121,581 for the Long/Short Commodity Series and $8,156,744 for the Managed Futures Index Series.

Results of Operations

Three Months Ended September 30, 2006 Compared to Three Months Ended September 30, 2005

Balanced Series

The Balanced Series – Class 1 Net Asset Value lost 4.0% and 1.2%, respectively, for the three months ended September 30, 2006 and 2005, net of fees and expenses; the Balanced Series – Class 1a Net Asset Value lost 4.2% for the three months ended September 30, 2006, net of fees and expenses; the Balanced Series – Class 2 Net Asset Value lost 3.3% and 0.4%, respectively, for the three months ended September 30, 2006 and 2005, net of fees and expenses; the Balanced Series – Class 2a Net Asset Value lost 3.5% for the three months ended September 30, 2006, net of fees and expenses .

For the three months ended September 30, 2006, the Balanced Series recorded net loss on investments of $11,139,785, net interest of $1,213,667, and total expenses of $1,932,735, resulting in a net decrease in Owners’ capital from operations of $9,547,654 after minority interests of $2,311,199. For the three months ended September 30, 2005, the Balanced Series recorded net gain on investments of $364,393, net interest of $303,549, and total expenses of $1,282,154, resulting in a net decrease in Owners’ capital from operations of $507,925 after minority interests of $106,287.

Please see additional discussion under “Nine Months Ended September 30, 2006 Compared to Nine Months Ended September 30, 2005 – Balanced Series.”

Winton Series

The Winton Series – Class 1 Net Asset Value gained 0.3% and 11.5%, respectively, for the three months ended September 30, 2006 and 2005, net of fees and expenses; the Winton Series – Class 2 Net Asset Value gained 0.7% and 12.4%, respectively, for the three months ended September 30, 2006 and 2005, net of fees and expenses.

For the three months ended September 30, 2006, the Winton Series recorded net gain on investments of $536, net interest of $1,258, and total expenses of $230, resulting in a net increase in Owners’ capital from operations of $1,564. For the three months ended September 30, 2005, the Winton Series recorded net gain on investments of $208,706, net interest of $4,142, and total expenses of $34,215, resulting in a net increase in Owners’ capital from operations of $178,633.

Please see additional discussion under “Nine Months Ended September 30, 2006 Compared to Nine Months Ended September 30, 2005 – Winton Series.”

Campbell Graham Series

The Campbell/Graham Series – Class 1 Net Asset Value lost 4.9% and 0.4%, respectively, for the three months ended September 30, 2006 and 2005, net of fees and expenses; the Campbell/Graham Series – Class 2 Net Asset Value lost 4.2% and gained 0.3%, respectively for the three months ended September 30, 2006 and 2005, net of fees and expenses.

For the three months ended September 30, 2006, the Campbell/Graham Series recorded net loss on investments of $3,058,487, net interest of $379,188, and total expenses of $701,152, resulting in a net decrease in Owners’ capital from operations of $2,316,250 after minority interests of $1,064,201. For the three months ended September 30, 2005, the Campbell/Graham Series recorded net gain on investments of $388,044, net interest of $35,023, and total expenses of $214,618, resulting in a net increase in Owners’ capital from operations of $208,449.

Please see additional discussion under “Nine Months Ended September 30, 2006 Compared to Nine Months Ended September 30, 2005 – Campbell Graham Series.”

Currency Series

The Currency Series – Class 1 Net Asset Value lost 0.1% and 0.9%, respectively, for the three months ended September 30, 2006 and 2005, net of fees and expenses; the Currency Series – Class 2 Net Asset Value gained 0.6% and lost 0.2%, respectively for the three months ended September 30, 2006 and 2005, net of fees and expenses.

For the three months ended September 30, 2006, the Currency Series recorded net loss on investments of $52,420, net interest of $138,977, and total expenses of $90,112, resulting in a net decrease in Owners’ capital from operations of $3,555. For the three months ended September 30, 2005, the Currency Series recorded net gain on investments of $921, net interest of $418, and total expenses of $2,779, resulting in a net decrease in Owners’ capital from operations of $1,440.

Please see additional discussion under “Nine Months Ended September 30, 2006 Compared to Nine Months Ended September 30, 2005 – Currency Series.”

Dunn Series

The Dunn Series – Class 1 Net Asset Value lost 7.2% and 15.2%, respectively, for the three months ended September 30, 2006 and 2005, net of fees and expenses; the Dunn Series – Class 2 Net Asset Value lost 6.5% and 14.6%, respectively for the three months ended September 30, 2006 and 2005, net of fees and expenses.

For the three months ended September 30, 2006, the Dunn Series recorded net loss on investments of $18,446, net interest of $1,799, and total expenses of $1,345, resulting in a net decrease in Owners’ capital from operations of $17,992. For the three months ended September 30, 2005, the Dunn Series recorded net loss on investments of $360,390, net interest of $6,577, and total expenses of $4,438, resulting in a net decrease in Owners’ capital from operations of $358,251.

Please see additional discussion under “Nine Months Ended September 30, 2006 Compared to Nine Months Ended September 30, 2005 – Dunn Series.”

Graham Series

The Graham Series – Class 1 Net Asset Value lost 6.1% and gained 0.8%, respectively, for the three months ended September 30, 2006 and 2005, net of fees and expenses; the Graham Series – Class 2 Net Asset Value lost 5.4% and gained 1.6%, respectively for the three months ended September 30, 2006 and 2005, net of fees and expenses.

For the three months ended September 30, 2006, the Graham Series recorded net loss on investments of $424,745, net interest of $149,454, and total expenses of $211,765, resulting in a net decrease in Owners’ capital from operations of $487,056. For the three months ended September 30, 2005, the Graham Series recorded net gain on investments of $595,859, net interest of $27,632, and total expenses of $121,677, resulting in a net increase in Owners’ capital from operations of $158,484, net of minority interests of ($343,330).

Please see additional discussion under “Nine Months Ended September 30, 2006 Compared to Nine Months Ended September 30, 2005 – Graham Series.”

Long Only Commodity Series

The Long Only Commodity Series commenced operations on February 24, 2006. The Long Only Commodity Series – Class 1 Net Asset Value lost 12.5% for the three months ended September 30, 2006, net of fees and expenses; the Long Only Commodity Series – Class 2 Net Asset Value lost 12.0% for the three months ended September 30, 2006, net of fees and expenses.

For the three months ended September 30, 2006, the Long Only Commodity Series recorded net loss on investments of $315,661, net interest of $73,659, and total expenses of $40,220, resulting in a net decrease in Owners’ capital from operations of $282,222.

Please see additional discussion under “Nine Months Ended September 30, 2006 Compared to Nine Months Ended September 30, 2005 – Long Only Commodity Series.”

Long/Short Commodity Series

The Long/Short Commodity Series commenced operations on February 24, 2006. The Long/Short Commodity Series – Class 1 Net Asset Value lost 3.7% for the three months ended September 30, 2006, net of fees and expenses; the Long/Short Commodity Series – Class 2 Net Asset Value lost 3.0% for the three months ended September 30, 2006, net of fees and expenses.

For the three months ended September 30, 2006, the Long/Short Commodity Series recorded net loss on investments of $476,338, net interest of $352,326, and total expenses of $525,350, resulting in a net decrease in Owners’ capital from operations of $649,362.

Please see additional discussion under “Nine Months Ended September 30, 2006 Compared to Nine Months Ended September 30, 2005 – Long/Short Commodity Series.”

Managed Futures Index Series

The Managed Futures Index Series commenced operations on February 24, 2006. The Managed Futures Index Series – Class 1 Net Asset Value lost 4.3% for the three months ended September 30, 2006, net of fees and expenses; the Managed Futures Index Series – Class 2 Net Asset Value lost 3.8% for the three months ended September 30, 2006, net of fees and expenses.

For the three months ended September 30, 2006, the Managed Futures Index Series recorded a net loss on investments of $44,834, net interest of $97,233, and total expenses of $64,963, resulting in a net decrease in Owners’ capital from operations of $12,564.

Please see additional discussion under “Nine Months Ended September 30, 2006 Compared to Nine Months Ended September 30, 2005 – Managed Futures Index Series.”

Nine Months Ended September 30, 2006 Compared to Nine Months Ended September 30, 2005

Balanced Series

2006

The Balanced Series – Class 1 Net Asset Value lost 2.9% for the nine months ended September 30, 2006, net of fees and expenses; the Balanced Series – Class 1a Net Asset Value lost 8.5% from the beginning of operations through September 30, 2006, net of fees and expenses; the Balanced Series – Class 2 Net Asset Value lost 0.7% for the nine months ended September 30, 2006, net of fees and expenses; the Balanced Series – Class 2a Net Asset Value lost 7.4% from the beginning of operations through September 30, 2006, net of fees and expenses .

For the nine months ended September 30, 2006, the Balanced Series recorded net loss on investments of $6,201,905, net interest of $2,956,610, and total expenses of $7,662,035, resulting in a net decrease in Owners’ capital from operations of $9,008,453 after minority interests of $1,898,877. The Net Asset Value per Unit, Class 1, decreased from $104.58 at December 31, 2005, to $101.52 at September 30, 2006 and the Class 1a Net Asset Value per Unit decreased from $100.00 at the beginning of operations to $91.49 at September 30, 2006. For Class 2, the Net Asset Value per Unit decreased from $108.73 at December 31, 2005, to $107.92 at September 30, 2006 and the Class 2a Net Asset Value per Unit decreased from $100.00 at the beginning of operations to $92.62 at September 30, 2006. Total Class 1 subscriptions and redemptions for the nine months were $107,861,997 and $11,025,507, respectively. Total Class 1a subscriptions from the beginning of operations to September 30, 2006 were $2,988,642. There were no redemptions. Total Class 2 subscriptions and redemptions for the nine month period were $23,480,503 and $1,089,633, respectively. Total Class 2a subscriptions from the beginning of operations to September 30, 2006 were $495,000. There were no redemptions. Ending capital at September 30, 2006, was $203,694,617 for Class 1, $2,883,492 for Class 1a, $42,612,305 for Class 2 and $478,363 for Class 2a. At December 31, 2005, ending capital was $114,741,316 for Class 1 and $21,224,912 for Class 2.

Strong January and March performances outweighed February losses to give investors a positive first quarter of 2006. Metals continued to be the most profitable sector, followed by interest rates and stock indices. Copper continued to extend the uptrend that began November 2001, while the gold market took a breather and traded in a range of approximately $540 - $580 during the quarter (June delivery). Worldwide bond prices continued to slide, and European and Japanese equity markets rallied, giving traders plenty of opportunity to profit.

Losses in May and June outweighed a profitable April to bring second quarter performance into the red for the Balanced Series. Metals continued to be the most profitable sector year-to-date, closely followed by interest rates. The currency sector has been the most difficult. While global markets in nearly all sectors were difficult to trade in June, losses were kept small.

Net performance in the third quarter was negative, as losses in the energy and interest rate sectors dominated performance. Sharp reversals in energy prices in August adversely affected many of the Balanced Series’ Trading Advisors, and those losses continued in September. After small losses in each of July and August, the currency sector began to recover in September. It remains, however, the worst-performing sector for the year. Range-bound trading limited performance in precious metals, although losses were kept small. Metals remained the most profitable sector for the year, followed by interest rates.

2005

The Balanced Series – Class 1 lost 7.3% for the nine months ended September 30, 2005, net of fees and expenses; the Balanced Series – Class 2 lost 5.1% for the nine months ended September 30, 2005, net of fees and expenses.

For the nine months ended September 30, 2005, the Balanced Series recorded net gain on investments of $1,090,293, net interest of $519,652, and total expenses of $2,927,341, resulting in a net decrease in Owners’ capital from operations of $1,472,908 after minority interests of ($155,512). The Net Asset Value per Unit, Class 1, decreased from $106.03 at December 31, 2004, to $98.27 at September 30, 2005. For Class 2 the Net Asset Value per Unit decreased from $106.85 at December 31, 2004, to $101.39 at September 30, 2005. Total Class 1 subscriptions and redemptions for the nine months were $76,820,687 and $2,207,891, respectively. Total Class 2 subscriptions and redemptions for the period were $13,997,778 and $1,859,147, respectively. Ending capital at September 30, 2005, was $85,916,477 for Class 1 and $32,019,227 for Class 2. At December 31, 2004, ending capital was $11,772,262 for Class 1 and $20,884,923 for Class 2.

The first quarter of 2005 was difficult for the managed futures industry as a whole, and the Balanced Series was no exception. Reversals and range-bound trading in stock indices, currencies, and interest rate futures hampered performance, as trend-following programs suffered through unfavorable market conditions. Energy was the sole significant profit-generating sector, but profits in this area could only temper the otherwise poor performance.

The second quarter started badly, as broad-based losses in stock index futures throughout the world combined with losses from the energy sector to drag April performance down. Metals and currencies also contributed losses. Interest rates and the currency sector contributed significant profits throughout the rest of the quarter, more than making up for the poor beginning and leading to a profitable quarter for the Balanced Series.

The world’s equity markets recovered quickly from the London bombings and rallied throughout July, showing unexpected strength. Balanced Series trading advisors reaped significant profits from the stock index sector throughout the third quarter. The energy sector was also profitable in the third quarter, as an uptrend in prices accelerated with the arrival of hurricane Katrina. Heavy losses in the interest rate sector, however, pulled performance into negative territory for the quarter.

Winton Series (formerly Beach Series)

2006

The Winton Series – Class 1 Net Asset Value gained 0.3% for the nine months ended September 30, 2006, net of fees and expenses; the Winton Series – Class 2 Net Asset Value gained 0.7% for the nine months ended September 30, 2006, net of fees and expenses.

For the nine months ended September 30, 2006, the Winton Series recorded net gain on investments of $376,000, net interest of $33,769, and total expenses of $100,619, resulting in a net increase in Owners’ capital from operations of $309,150. The Net Asset Value per Unit, Class 1, increased from $100.00 at August 11, 2006 (the date when Winton began trading activities on behalf of the Winton Series), to $100.32 as of September 30, 2006. The Net Asset Value per Unit, Class 2, increased from $100.00 at August 11, 2006, to $100.68 as of September 30, 2006. Total Class 1 subscriptions for the nine months were $772,916, and redemptions were $3,102,189. Total Class 2 subscriptions and redemptions for the nine month period were $340,200, and $233,946, respectively. Ending capital at September 30, 2006, was $1,003 for Class 1 and $310,681 for Class 2. Ending capital at December 31, 2005, was $2,047,247 for Class 1 and $178,306 for Class 2.

January saw a positive start for the Winton Series. The upward trends in both the precious and base metals continued from the last quarter and the portfolio was well positioned to take advantage of these moves; making metals the best performing sector of the month. Currencies remain difficult to trade and after ending 2005 with a 12.6% rise, the dollar index declined sharply in January. Market participants remained highly sensitive to relative economic data and the prospects for shifts in interest rate differentials, Central Bank policy and leadership changes and global political developments. Global equity markets continued to perform well with North American stock indices amongst the strongest performers. Energy had a mixed month with crude oil moving higher but natural gas fell sharply on the month. Sugar climbed to a 25 year high in January as Brazil, the world’s largest producer of cane sugar, diverted roughly 50% of cane to the production of ethanol on the back of high energy prices.

Some of the trends consolidated in February. While in Europe the stock indices continued to perform well, Japan was a slightly different story with the Topix and Nikkei indices falling nearly 3% on the month. The U.S. markets also ended the month in negative territory. The interest rate sector had a positive month as global interest rates continued to rise in February. The largest percentage yield increase took place in Japan where 2-year Japan Government Bonds (“JGB’s”) went from 0.3% to 0.475% on the back of the Japanese government’s upgrading its economic assessment, characterizing the recovery as under way and broadening. The U.S. dollar performed well, erasing most of its January decline. The Japanese yen was the only major currency to appreciate vs. the U.S. dollar. A combination of warmer than normal temperatures and a continued restoration of hurricane damaged refining and distribution capacity saw a fall in energy prices. Both base metals, with the exception of zinc, and precious metals fell in February; giving back some of the gains of last month. Sugar, one of the best performing commodities this year, also gave back some of its recent gains.

On March 31, 2006, Beach Capital Management Limited (“Beach”) ceased trading pursuant to its discretionary program, which was the trading program used by the Beach Series. David Beach has made a decision to engage in other pursuits. Therefore, Beach is no longer engaged in trading for the Beach Series.

There was no trading in the Winton Series in April, May, or June 2006 other than for cash management purposes pursuant to the Managing Owner’s cash management strategies employed for the Trust.

In May 2006, Beach Series was renamed as Winton Series. The Trust commenced accepting subscriptions for the Winton Series on November 1, 2006.

For purposes of this report, Beach Series is referred to as Winton Series, regardless of whether the applicable time period referred to is prior or subsequent to the name change, unless explicitly set forth otherwise.

The Winton Series began trading again on August 23, 2006. Trading in the last week of August was profitable.

The growing perception that the interest rate cycle has turned in the US was the dominant theme within the global fixed income markets in September. This was driven by the slowing of the US housing market and the ensuing drag on consumer spending that resulted in a solid performance from the bond portfolio which was up over 1% over the course of the month, producing the highest sector return. This was followed by the equities, which rallied across much of Europe and the Far East. The expectation of lower US interest rates was the main cause of this optimism over stock valuations. A combination of factors, including the calming of the situation in the Middle East and growing levels of inventories, led to a strong decline in the price of oil. This briefly led to crude trading below the $60 level for the first time since March. As a result, the energy portfolio was the worst performing sector for the month. Precious metals also declined across the board, with gold down 5% and silver falling by over 12%. Currency markets were tentatively range bound. The continuing strength of sterling has led to some questioning of its current levels. The ongoing backdrop of the Chinese stance towards its currency bands came to the forefront at the end of the month and led to some short term volatility in yen valuations.

2005

The Winton Series – Class 1 lost 5.7% for the nine months ended September 30, 2005, net of fees and expenses; the Winton Series – Class 2 lost 3.5% for the nine months ended September 30, 2005, net of fees and expenses.

For the nine months ended September 30, 2005, the Winton Series recorded net gain on investments of $79,435, net interest of $9,515, and total expenses of $61,375, resulting in a net increase in Owners’ capital from operations of $27,575. The Net Asset Value per Unit, Class 1, decreased from $106.01 at December 31, 2004, to $99,95 as of September 30, 2005. The Net Asset Value per Unit, Class 2, decreased from $106.84 at December 31, 2004, to $103.05 as of September 30, 2005. Total Class 1 subscriptions for the nine months were $1,063,669, and redemptions were $49,854. Total Class 2 subscriptions and redemptions for the period were $61,500, and $83,490, respectively. Ending capital at September 30, 2005, was $1,539,393 for Class 1 and $147,428 for Class 2. Ending capital at December 31, 2004, was $488,932 for Class 1 and $178,489 for Class 2.

After ending 2004 on a nine-year low the U.S. dollar index rebounded sharply in the first week of January as the currency made over 3% against the Swiss franc and the euro. The U.S. dollar had plunged in the fourth quarter on the back of concerns over the U.S. balance of payments and the Bush administration’s seeming indifference to the currency’s decline. The start of the New Year has focused investors on the prospect of economic growth and rising interest rates in the U.S., which stands in sharp contrast to the outlook for Europe and Japan. The prospect of future interest rate hikes upset the U.S. stock markets and all the indices declined. Base metals also reacted to the currency moves; with aluminum falling over 6% on the month. Bond markets continued to exhibit an unusual degree of independence and for the most part maintained relatively narrow trading ranges. Other commodities put in a small gain on the back of our short positions in soybeans and wheat. The first week of January defined the performance for the month as the U.S. dollar strengthened against the euro. Base metals were also affected by the U.S. dollar move and aluminum was the poorest performer in that sector. Small gains were made on our T-Bond, Bund & JGB positions. In February, the stock index sector had a good month with the majority of markets moving higher, the Hang Seng was our best performing market. We had a quiet month in the interest rates sector, whilst good performance came from our Eurodollar positions our T-Bond positions faired less well leaving the sector slightly positive on the month. Oil prices headed higher during February, benefiting our positions primarily in heating oil and Brent crude. The Metals sector was the best performing sector with both base metals and precious metals moving higher, the portfolio was well positioned to capture moves in nickel, copper and aluminum. Silver climbed over 10% during the month. Other commodities were a little disappointing; profits were recorded from our long coffee positions but these were cancelled out by losses in the grain and oilseed sector. Currencies had a mixed month with profits coming from our Australian dollar positions which were offset by our yen positions and the sector was slightly down on the month for the discretionary programme. Base and precious metals performed well; as prices moved higher during the month. Heating oil performed as inventories were still below the 5-year average benchmarks, leaving the market vulnerable to additional cold weather. March started well with the trends of February following through to the first half of the month. The final two weeks of the month saw reversals of these trends leading to an overall loss in the programme. The global equity markets started declining mid month, particularly in the U.S. as investors became increasingly nervous about the Federal Reserve’s ongoing policy of interest rate increases and the erosion of corporate profits resulting from rising energy and other commodity prices. The European and Far East markets were not immune to the decline as investors are becoming more sensitive to weak economic data from these regions. The rate increase by the Federal Open Market Committee saw the U.S. dollar move sharply higher against the European and Asian / Pacific currencies, affecting our long euro and British pound positions. The interest rate hike was also felt in the other commodities sector as both base (with the exception of aluminum) and precious metals fell following the news. Energy markets had a sharp sell off but ended the month higher with gasoline leading the way as, from a futures prospective, the summer driving season is approaching in the U.S. Energy was the best sector with good profits in gasoline and heating oil. Currencies lost money as the U.S. dollar surged higher following the U.S. rate hike. Aluminum performed well in the metals sector but the gains were offset by losses in gold and silver.

Markets remained very volatile and counter trending over the month of April leading to losses in Beach’s programs. Energy reversed its recent gains as heating oil and unleaded gasoline fell sharply during the month. In the metals sector, aluminum was hit the hardest as significant producer selling came into the market. Indices, with a few exceptions, declined during the month with the Nikkei recording a new low for the year. Fixed income yields declined significantly across the maturity and geographic spectrum in April with the exception of the short end in the U.S. The markets focused on the disappointing IFO business climate index for Germany combined with a possible no vote in the upcoming European referendums on the European constitution. In Japan an unexpectedly weak CPI and Tokyo department store sales drove the yield on the JGB lower. In the currency sector yen strength hurt our positions as the market focused on continuing U.S. efforts to persuade the Chinese to let the Renminbi float or at least appreciate vis-à-vis the dollar.

All sectors in the discretionary program performed poorly in April; aluminum was the worst individual market for the reasons stated above. In the currency sector our short yen positions were responsible for the performance. Reversals in heating oil, crude and gasoil sent the energy sector lower.

Early May saw a continuation of the difficult trading conditions prevalent in earlier months. The second half of the month saw an improvement in performance as the U.S. dollar climbed through its previous high for the year, performing the best relative to the European currencies but also making gains against the major Asia/Pacific currencies. Beach’s programs reversed their long euro positions half way through the month making the sector a profitable one. Stock indices suffered on the back of our short NASDAQ position as equity markets rallied. Fixed income yields extended the decline that began in mid-March with the move being most dramatic at the long end of the European and North American markets. Gasoline and crude drifted lower during the month causing the energy sector to make a loss on the month. The metals sector was primarily affected by positions in gold and silver. Other commodities were slightly negative as profits in soybean meal, feeder cattle and London coffee were offset by losses in corn and soybean oil.

The Discretionary program reversed its currency position to a long U.S. dollar bias during May. Reversals in N.Y. coffee and the NASDAQ were primarily responsible for the loss in the commodity and stock indices sectors.

June was a better month for Beach’s programs. Performance mainly came from the financial sectors. The Currency sector benefited mainly from positions in the yen and the euro as the U.S. dollar strengthened during the early part of the month. European and Asia / Pacific equity indices moved higher despite rising energy costs. The FTSE and the IBEX index in Spain were the best performing markets in that sector. Fixed income yields extended their declines during the month, profits came from positions both at the long end and the short end with the Bund and Short sterling being the main drivers. Energy prices continued to rise during the month, as market participants believe that OPEC does not have the ability to hold prices below $50 per barrel through increased production. Gasoline was the best performing market in June. The commodity sector was disappointing, both base and precious metals put in a mixed performance with gold and copper rising but silver and nickel falling. The soybean complex was affected by weather implications, as the market watched to see what the impact of the various hurricanes would be.

In the discretionary program, the currency sector was the best overall performing sector in June on the back of positions in €/Canada $/Yen. All financial sectors performed well as did the energy sector where prices continued to climb during the month.

The main story for July was the dramatic move in bond yields in the USA. The initial catalyst appears to have been a stronger-than-expected June ISM Purchasing Managers Survey which drove 10-year Treasury yields back above 4.0%. Other positive surprises throughout the month appear to have bolstered the economy - Retail Sales and University of Michigan confidence are notable examples. On the positive side, for the Beach Programs, this improved outlook for the economy helped push the S&P to its best level in over 4 years. European & Asia/Pacific Indices also moved substantially higher during the month as upbeat economic data and generally positive second quarter earnings reports fed the market. The US dollar maintained a broad consolidation range for most of the month, and the losses in the Programs came mainly from positions in the Canadian dollar and the Euro/Sterling cross. The energy complex had a relatively quiet month although heating oil fell back from its seasonally unusual parity with gasoline. Metals and commodities had a quiet month.

The Discretionary Program lost -2.74% in July, bringing year to date performance to -17.09%. Stock indices were the best performer with good profits coming from the European and Far East Indices. In the interest rate sector the main losses came from positions in T-Bonds and Euribor.

The main story for August was the large upward move in energy prices towards the end of the month. The DJ-AIG index jumped 5.9% on August 29th when Hurricane Katrina hit the Gulf Coast, shutting off 1.4 million barrels per day of oil production and 8.3 billion cubic feet of natural gas production. While the oil shortage may be eased by drawing on the strategic oil reserves, natural gas has no such buffer. Global equity markets exhibited an increased sensitivity to rising energy prices earlier in the month and therefore declined. Japan proved an exception, recording meaningful gains after a surprisingly upbeat report from the BOJ and a sharp rise in machinery orders. The US dollar Index declined over 1% in August; the main beneficiaries being the European currencies. Yields on fixed income securities with maturities of 3-years or longer began to decline with the most dramatic move being in the US. Metals, with the exception of Silver, moved higher. Industrial metals are becoming increasingly responsive to demand and economic cycles and the emergence of China have helped refocus attention to them. Other Commodities had a quiet month with prices generally declining over the month.

The Discretionary Program gained 4.19% in August, bringing year to date performance to -13.62%. Good performance came from the Energy Sector with Unleaded Gasoline being the main performance driver. Currencies were the poorest sector with the main loss coming from a British pound position. Stock Indices performed on the back of our long Topix and Nikkei holdings.

Global stock indices provided the main performance in September. Whilst the US stock indices were generally lower on the month, European and Asian markets surged higher. In Japan, the LDP’s victory appears to have added psychological support to already growing economic momentum. The Currency sector also had a good month as the dollar index erased its August decline. The US dollar, which had fallen on the back of rising oil prices, rallied as these settled down. European currencies also took an additional knock after Angela Merkel failed to win a decisive majority in the German elections. The Japanese yen also fell against both the US and Canadian dollars. Interest rates had a flat month as the Discretionary portfolio received some good short-term signals to reduce its positions, therefore managing to avoid potential losses. Energy prices, with the exception of natural gas, fell during September, giving back some of their recent gains. The metals

sector was mixed with precious metals performing well and base metals having a mixed time as copper moved higher but nickel fell back. Other commodities also had a diversified performance; sugar performed well as did the meat sector but grains and oilseeds put in a mixed performance.

The stock indices sector was the main profit driver with the TOPIX and IBEX indices being the best performers. In the currency sector the portfolio’s positions in the Canadian dollar and euro performed well.

Campbell Graham Series

2006

The Campbell/Graham Series – Class 1 Net Asset Value lost 4.8% for the nine months ended September 30, 2006, net of fees and expenses; the Campbell/Graham Series – Class 2 Net Asset Value lost 2.7% for the nine months ended September 30, 2006, net of fees and expenses.

For the nine months ended September 30, 2006, the Campbell/Graham Series recorded net loss on investments of $2,302,972, net interest of $830,638, and total expenses of $1,901,994, resulting in a net decrease in Owners’ capital from operations of $2,559,039 after minority interests of $815,289. The Net Asset Value per Unit, Class 1, decreased from $94.30 at December 31, 2005, to $89.73 as of September 30, 2006. The Net Asset Value per Unit, Class 2, decreased from $96.83 at December 31, 2005, to $94.22 as of September 30, 2006. Total Class 1 subscriptions for the nine months ended September 30, 2006 were $25,088,298, and redemptions were $2,133,217. Total Class 2 subscriptions and redemptions for the nine months ended September 30, 2006 were $3,714,172, and $315,053, respectively. Ending capital at September 30, 2006 was $42,189,229 for Class 1 and $6,013,978 for Class 2. Ending capital at December 31, 2005, was $42,189,229 for Class 1 and $11,241,276 for Class 2.

2006 began on a positive note, as good performance in the energy and stock index sectors in January was the primary driver in a profitable month. The U.S. dollar experienced significant volatility during the month and moved sharply lower versus the major European currencies. The global bond markets also experienced short-term price volatility, as global bond prices declined sharply amid ongoing inflationary concerns. Global equity prices, however, continued to rally, as European and Japanese equity indices continued to trend higher despite significant mid-month price volatility resulting from a broad sell-off in Japan, a flurry of weak earnings reports, and higher energy prices.

Performance was negative in February, although returns remained slightly positive overall for 2006. Prices for crude oil and natural gas fell sharply in February as inventory build-ups weighed on the market in the midst of one of the mildest winters on record in the northeastern U.S. Concern over geopolitical tensions also eased somewhat. While this brought welcome relief at the gas pumps, the trend reversal caused energy sector performance to suffer. Ben Bernanke’s first official appearances as Chairman of the Fed and the reintroduction of the U.S. 30 year bond were digested by the bond markets, as interest rate sector performance was slightly positive. February was a volatile month for U.S. equities, but Euro stocks enjoyed another strong month and contributed solid gains to the portfolio. February’s returns highlighted the downside of trading in energy, which is one of the most volatile market sectors.

Strong performance from several sectors contributed to a strong March and a solid finish to the first quarter. The biggest gains in March were in the interest rate sector, as U.S. and euro fixed income instruments had their worst quarter in several years, which benefited short futures positions. Energy prices rebounded profitably from February’s sell-off on renewed production and supply concerns, but this was not enough to restrain equity prices, and the equity indices sector also finished higher. Many of the base and precious metals again made new highs, and contributed positively to our returns.

A strong performance from Graham Capital Management in April outweighed losses in the Campbell & Co. portion of the portfolio to result in a positive month for the Campbell/Graham Series. Major global bond markets continued to move lower amid ongoing speculation that the U.S. Federal Reserve, the European Central Bank and the Bank of Japan will continue to tighten global interest rates throughout the remainder of 2006. The decline in global bond prices continued to result in higher yields throughout the U.S., Europe and Japan. Major U.S. equity indices finished the month relatively mixed as the specter of higher interest rates and soaring energy prices ultimately weighed on U.S. equity markets. Elsewhere, European equity prices declined modestly amid sagging investor confidence in Germany, while the Nikkei posted 16-year highs before selling off in response to China’s decision to raise its benchmark interest rate. The U.S. dollar declined sharply versus the major global currencies. The dollar posted 11-month lows versus the euro and 3-month lows versus Japanese yen amid ongoing speculation concerning higher global interest rates and renewed concerns regarding the long-term outlook for the dollar. Crude oil prices posted record highs during the month amid continuing global unrest, increased demand among China and India, and reports of declining U.S. inventories. Natural gas prices, however, turned

bearish, as mild weather and ample inventories led to a major sell off. In the metals markets, gold soared to 25-year highs, as investors sought refuge from a weakening dollar, and base metals surged to multi-year highs amid increased industrial demand worldwide.

The favorable market conditions experienced throughout the first four months of 2006 abruptly gave way to a volatile and choppy environment during May, as renewed doubts concerning the U.S. economy and rising geopolitical tensions led to extremely difficult trading conditions during the latter half of the month. Losses for the month were primarily attributable to unexpected volatility within the global fixed income sector and a sharp and sudden decline in global equity prices. Major global bond markets experienced significant volatility during the latter half of the month, as the release of weaker-than-expected economic data triggered renewed uncertainty concerning the strength of the U.S. economy and the pace of U.S. Federal Reserve policy. Global bond yields finished the month relatively mixed, as yields in the U.S. rose slightly while those in Japan and Europe declined. Major global equity indices finished the month markedly lower amid growing economic uncertainty and rising geopolitical tensions. In the U.S., the NASDAQ declined 6%, the S&P 500 fell 3%, and the Dow Jones Industrial Average lost nearly 2%. Elsewhere, the EuroStoxx 50 declined more than 5% while the Nikkei plunged 8.5%. The U.S. dollar continued to decline versus the major global currencies. The U.S. dollar posted 12-month lows versus the euro and 8-month lows versus the Japanese yen, as recent economic data continued to foster a sense of pessimism concerning the long-term outlook for the dollar. Energy prices retreated slightly from record highs amid rising U.S. inventories and easing demand forecasts. In the metals markets, the price of gold posted 26-year highs as investors continued to seek solace from a weakening dollar and rising global tensions, while the price of copper, nickel and zinc surged between 12% and 17%, respectively, amid increased industrial demand worldwide.

Volatile markets across the globe resulted in modest losses for the month of June. Losses for the month were primarily attributable to an increase in volatility across the global equity, fixed income, currency and commodities markets, as growing economic uncertainty and rising geopolitical tensions roiled global markets. Major global bond markets continued to experience significant volatility during the month. The release of stronger-than-expected economic data contributed to a sharp mid-month sell-off in the U.S. Treasury market, only to be followed by a late-month rally amid renewed optimism concerning a temporary pause in the U.S. rate tightening cycle following the Federal Open Market Committee’s (“FOMC”) decision to raise interest rates to 5.25%. Global bond yields generally finished the month higher throughout Europe and Japan. Major global equity indices extended losses early in the month amid inflationary fears and lingering concerns regarding the potential for higher global interest rates. Prices soon reversed, however, as the prospect of a temporary pause in the U.S. rate tightening cycle spurred prices higher late in the month. The U.S. dollar rallied versus many of the major global currencies, rebounding from 12-month lows versus the euro and 8-month lows versus the Japanese yen. The dollar’s rally proved to be rather short-lived, however, as renewed speculation concerning U.S. interest rate policy led to a modest decline from its intra-month highs. The commodities markets experienced significant volatility during the month. Metals prices declined precipitously for most of the month, only to subsequently rally amid rising geopolitical tensions and renewed global demand concerns. The energy markets experienced similar volatility, as seasonal demand concerns and continued unrest in the Middle East at times spurred prices higher, while increased inventories and renewed diplomatic initiatives often dragged prices lower. Many of the agricultural markets also experienced significant volatility during the month.

Unusually difficult trading conditions continued throughout July. The specter of economic uncertainty in the U.S. and expanding hostilities globally continued to plague many global markets, resulting in excessive price volatility across nearly all market sectors. North Korean missile tests, continuing Iranian nuclear defiance, renewed turbulence in Nigeria and the Israel/Lebanon tinderbox all pushed energy prices higher before finding resistance and finishing virtually unchanged for the month. Equity indices were also volatile but ended the month largely unchanged, leading to flat performance.

The economic and geopolitical uncertainty which clouded the global landscape for much of the summer continued into August, and the trading systems used in the Campbell/Graham Series continued to experience mediocre performance. Losses during August were primarily attributable to trading in the global fixed income markets, with smaller losses experienced across the global equity index, currency, soft commodities, and agricultural markets. The Energy sector was dominated by perceptions of an easing in global geopolitical tensions, a mild hurricane season, and steadily rising inventories. These factors led to a sharp sell-off in natural gas (down by 30%) and Crude Oil (fell below $70 per barrel). Unleaded gasoline traded down more than 40 cents in August alone. Profits from Graham in the energy markets were offset by Campbell’s losses in the same sector.

Energy losses overshadowed equity gains in September. The biggest losses occurred in the energy complex where crude prices fell over 11% and heating oil and unleaded gasoline both fell around 14%. The drop in prices was driven by the lack of hurricane activity, a further easing of geopolitical tensions, and adequate physical supplies amid the warmer-than-normal autumn season. Trading in equity indices was positive as economic data (with the exception of housing related figures) continued to show moderate growth with restrained inflation. Small gains were also recorded in currency markets,

where losses on cross rates exposures were more than offset by gains on outright positions, despite the historically low volatilities in many of these markets. Small losses were recorded in fixed income as the market continued to believe that the US Fed will not raise rates again in the foreseeable future.

2005

The Campbell/Graham Series commenced operations on February 11, 2005. The Campbell/Graham Series – Class 1 lost 5.2% for the period since commencement of operations through September 30, 2005, net of fees and expenses; the Campbell/Graham Series – Class 2 lost 3.4% for the period since commencement of operations through September 30, 2005.

For the period from commencement of operations through September 30, 2005, the Campbell/Graham Series recorded net gain on investments of $950,290, net interest of $48,340, and total expenses of $414,375, resulting in a net increase in Owners’ capital from operations of $584,255. The Net Asset Value per Unit, Class 1, decreased from $100.00 at commencement of operations on February 11, 2005, to $94.83 as of September 30, 2005. The Net Asset Value per Unit, Class 2, decreased from $100.00 at commencement of operations on February 11, 2005, to $96.64 as of September 30, 2005. Total Class 1 subscriptions for the nine months were $13,873,030, and redemptions were $254,803. Total Class 2 subscriptions and redemptions for the period were $2,061,939, and $0, respectively. Ending capital at September 30, 2005, was $14,101,649 for Class 1 and $2,162,772 for Class 2.

For the month of February, it was a difficult interest rate environment, with different pressures observable at different points along the yield curve. Consequently, our short-term interest rate positions were profitable in February, but not profitable enough to overcome the losses at the longer end of the curve. The rally in the U.S. dollar failed early in February and the dollar ended the month lower. However, small gains on our dollar shorts were offset by losses in our non-dollar (cross) currency pairs, resulting in losses in the currency sector overall. Equity markets were our best performers in February as they reversed again and traded higher, reclaiming the losses sustained in January. We also earned profits in the energy sector as the rally continued from the December lows, and crude oil again topped $50 a barrel. The K4 portfolio incurred a loss during February. Performance was primarily attributable to an abrupt price drop in global bond futures markets. Trending conditions in the equity index, zinc, and copper markets resulted in profits that offset much of the portfolio’s losses during the month. March ended almost flat as the theme of range-bound, choppy markets continued in most sectors. Our gains were primarily in interest rates, as both short-term and long-term positions proved profitable, and the energy sector where crude and products prices made new highs. The U.S. dollar closed higher for the month, reversing the long-term downtrend, and was a negative for our positions. We also incurred losses in our non-dollar currency positions, making this the worst performing sector in the first quarter. Equity index markets also reversed and ended the month lower, with resultant losses to our portfolios. The current interest rate environment continues to be a very difficult one and has arguably contributed to the lack of direction in many of the other markets we trade. This condition may continue for some time. While reporting monthly flat performance is certainly easier than reporting losses, delivering attractive absolute and risk-adjusted returns remains our primary goal. Extended periods of flat or poor returns along the way are inevitable, and we shall not falter in our commitment to maintain the discipline which we know is so important for success in the longer term. March was a mixed month for Graham’s long-term trend-following programs. Losses recorded by our trend-following programs during the period were driven primarily by continued trendless price movements in global currencies, equity indices, and bonds. Spanning the two-month period from February 1 to March 31, 2005, the S&P 500 Composite Price Index, the U.S. Dollar Trade Weighted Index, and the J.P. Morgan Global Government Bond Index price movement has been choppy, with price trends not being sustained for much more than a few weeks. Our trend-following programs generally exhibited positive performance in the energy, metals, and short-term fixed income markets, offsetting a portion of the losses recorded during the month. While recent performance has been adversely affected by sharp trend reversals and general short-term choppy price patterns across a number of markets, we remain confident that the discipline to adhere to our successful systematic strategies will continue to serve us and our clients well over the long-term. Of course, we are actively conducting research to ensure that we continue to learn from the experiences that the markets provide us.

The U.S. dollar ended the month only slightly higher, but currencies were Campbell’s best performing sector in April. Fixed income instruments continued the rally that began in late March and were also profitable. The energy sector, one of our best performers in March, was the worst performer in April. Crude oil prices fell by almost $8 a barrel, which combined with the related sell-off in other energy products, left us with losses in this sector. Equity indices were also negative with stock prices ending lower following sharp declines mid-month.

The extremely choppy market conditions exhibited during the month throughout all major sectors provided a difficult environment for Graham’s long-term trend-following strategies. K4 (at 1.5x leverage) declined 11.22%. Losses in trend-based strategies were primarily driven by a sudden drop in global equity index prices and sharp price reversals in the energy sector. Volatility within the U.S. equity markets was attributed to several factors including inflationary concerns and weak earnings reports. The sharp decline of crude oil prices was a reaction to U.S. crude inventories reaching three year highs and speculation emerging that OPEC production would be sufficient to enable these inventories to meet seasonal energy needs this summer.

Campbell’s May performance was strong, with sharply higher returns across a broad spectrum of their programs, resulting in positive year-to-date returns as of the end of the month.

The apparent breakdown of the EU constitutional ratification process was a key development late in the month causing investors to readjust their expectations for the euro. The shift in favor of the U.S. dollar topped off a six-week rally that led the greenback to its highest levels since before the U.S. elections last year. The strong reassertion of the dollar’s strength benefited our positions in the currency sector.

The fixed income sector was Campbell’s best performer in May. Sustained strength at the long end of the yield curve in the face of relentless Fed tightening continues to confound a large part of the investment community. And while recent economic reports have been ambiguous, traders managed to push the benchmark U.S. 10-year Treasury yield once again below 4%. Even though such a low level is more than a bit surprising this late in the cycle, the move has been persistent enough for our models to benefit.

The markets’ sharp response to economic and political events during the course of the month evidenced a certain degree of investor surprise.

Graham’s trend-following strategies recorded profits during May as the month was generally characterized by bullish price moves in global bond futures and a sharp surge in the value of the U.S. dollar late in the month.

Notably, Graham’s trend-following programs recorded profits in the global bond futures and currency markets. In global bond futures, long positions in U.S. treasury note and bond futures were profitable as prices moved higher throughout May. Trading in currencies was also profitable, most significantly from long U.S. dollar positions held by each of Graham’s programs versus the euro and other major European currencies as these currencies fell sharply late in the month in response to French voters rejecting the proposed new European constitution (Dutch voters agreed with the rejection on June 1, furthering the euro’s decline). Modest losses recorded by the trend-following programs were incurred by positions held in the global equity index and commodity futures markets.

Campbell reported another month of strong returns in June, as a surge in global volatility continued to fuel strong performance. Substantial moves in the currency, fixed income and energy markets enabled Campbell to end the second quarter at or near new highs and to report solid year-to-date gains in most portfolios.

Campbell’s most profitable positions were in the U.S. dollar, up sharply in June to new six-month highs, as the euro and yen continued a steep six-week slide. A further flattening of the yield curve provided a profitable opportunity for Campbell’s models and the fixed income sector was one of the best performers for the month. Several energy markets made new all-time highs in June and continued to generate positive returns for Campbell’s portfolios.

Graham’s portfolios enjoyed generally positive performance during June. Graham’s trend-following strategies posted gains as global bond futures, equity indices, and the U.S. dollar continued their recent bullish trends despite some mid-month volatility. Graham’s systematic trend-following programs generally experienced good results during June. Performance was attributable to continued bullish trends within the fixed income, equity, and currency markets. Specifically, rising prices in U.S. and European bond futures and the European equity index markets resulted in notable profits during the month. Additional gains resulted from long U.S. dollar positions versus the euro and Swiss franc as the euro continued to slide during the month following the rejection of the proposed new European constitution by French and Dutch voters. Trading in tangible commodities markets resulted in small losses that offset a portion of the month’s gains.

Campbell & Company reported their fourth consecutive monthly gain in July. Markets were rattled following the Chinese currency revaluation, but much of the initial decline in the US dollar was recovered the following day. Equity markets ended the month broadly higher and were Campbell’s most profitable sector while the Interest Rates sector traded lower and generated their largest losses. Energy markets traded lower early in the month, but ended near all-time highs and at a profit for long positions. July returns demonstrated the virtue of diversification as some of the best performing sectors year-to-date posted losses, while the most difficult sector this year (Equities) delivered the best return in July.

Graham’s systematic trend-following programs generally encountered losses during the month of July, with the exception of the GST program, which reported a net gain of 1.5%. Overall, the trend-following programs incurred losses in global bond futures as prices in the U.S. reversed recent bullish trends and prices in Europe and Japan exhibited short-term trendless patterns during the month. In the U.S. fixed income markets, yields moved higher in reaction to generally positive U.S. economic news released throughout the month and statements by FOMC Chairman Alan Greenspan indicating the U.S. economy is strong and is expected to remain so. After declining during the first half of the month, bond prices in Europe and Japan rose following China’s decision to end the decade long peg of the yuan to the U.S. dollar, but ultimately prices drifted lower after subsequent indications of economic growth in those regions. Solid profits that resulted from continued bullish trends in global equity indices offset a sizable portion of the losses incurred in the fixed income markets. Positions held in the Japanese yen were also profitable despite significant short-term volatility spurred by China’s announcement regarding the yuan.

For Campbell, August was a disappointing month in which sharp trend reversals occurred in each of the major financial sectors, resulting in significant losses in all of the portfolios. The tragedy that struck the US Gulf Coast at the end of the month was stunning in scope, and its impact will be felt for many months, but it was a series of major trend reversals that generated the losses in August.

Currencies was the worst performing sector. The US dollar peaked at the end of July, then reversed sharply and traded close to its recent lows at the end of August. A similar reversal occurred in the Interest Rates sector, resulting in losses at both ends of the yield curve. Equities trended higher in July, but record energy prices caused a sharp sell-off and resulted in losses in this sector. Energy was the only profitable sector in Campbell’s portfolios in August, but the size of positions was not sufficient to offset the losses incurred in the financial sectors.

Three of Graham’s four systematic trend-following programs recorded positive performance during August due to significant bullish price moves in the energy markets throughout the month, led by natural gas futures, which surged 45%. However, the K4 program reported a net loss of -1.65% (at 1.5x) as losses recorded in currencies and global bond futures outweighed strong profits from positions in the energy sector. The sharp increases in energy prices were mainly attributed to supply concerns that arose due to a variety of unrelated factors including the disruptive affects of Hurricane Katrina, gasoline demand in the U.S. during the end of the summer driving season, and the death of Saudi Arabia’s King Fahd early in the month. Losses during the month were primarily attributed to volatility in the currency markets which concluded with the U.S. dollar falling between 1% and 3% versus the euro, Swiss franc, and Japanese yen amid signs of improving economic conditions in Europe and Japan combined with mixed economic reports in the United States. The global bond futures markets were also affected by these economic reports as well as Hurricane Katrina as prices rallied sharply after the first week of the month resulting in small losses for Graham’s trend-following programs.

Campbell reported positive returns in September as many of the trends in the major financial sectors resumed their course. The same sectors that reversed so sharply in August were the most profitable for September, while energy, the only sector that was profitable in August, made losses in September as crude oil prices finally settled lower.

The US dollar rallied strongly from the start of the month following the late-August sell-off, and again approached the highs for the year. Although Campbell lost money on some non-dollar trades, the currency sector proved profitable overall. Equally profitable for the portfolios and a welcome relief for many investors, equities also finished mostly higher. Fixed income instruments ended lower after the sharp reversals in August, and provided solid gains for short positions.

Graham’s system trend-following programs recorded profits during September, with the K4 (1.5x), Diversified, and GST portfolios reporting particularly strong gains. The K4 (1.5x) program, used in The Frontier Fund, increased 1.8%.

Graham’s performance during September was primarily attributable to continued strong upward trends in the Japanese and European equity index markets. In Europe, prices moved higher early in the month on optimism regarding economic growth as elections in Germany approached during mid-month. European equities also reacted favorably to better than expected U.S. economic reports released in the aftermath of Hurricane Katrina. In Japan, the Nikkei and Topix equity indices climbed to four-year highs on continued expectations of economic growth following comments from Japan’s central bank suggesting deflation may be subsiding in the near future. The re-election of Japan’s current Prime Minister, who has overseen much of its recent economic growth, bolstered Japanese equity markets early in the month. Smaller gains recorded by Graham’s trend-following programs resulted from bullish trends by the U.S. and Canadian dollars versus major global currencies. These trends were enhanced, in part, by the impasse of Germany’s election and China’s announcement to widen the trading band of the yuan against the Japanese yen and the euro. Extreme short-term volatility in crude oil and the European fixed income markets and sharp price reversals in U.S. fixed income markets led to losses during the month that offset a portion of the profits recorded by the trend-following programs. The choppy conditions in

crude oil, which declined 4% in September, were caused by continued supply uncertainties following the destruction in the Gulf of Mexico brought on by Hurricanes Katrina and Rita coupled with the U.S. and other nations making emergency crude oil stockpiles available for U.S. consumption.

Currency Series

2006

The Currency Series – Class 1 Net Asset Value lost 0.1% for the nine months ended September 30, 2006, net of fees and expenses; the Currency Series – Class 2 Net Asset Value gained 0.6% for the nine months ended September 30, 2006, net of fees and expenses.

For the nine months ended September 30, 2006, the Currency Series recorded net loss on investments of $40,695, net interest of $287,073, and total expenses of $243,695, resulting in a net decrease in Owners’ capital from operations of $19,606, after minority interests of ($22,289). The Net Asset Value per Unit, Class 1, decreased from $97.66 at December 31, 2005, to $96.85 as of September 30, 2006. The Net Asset Value per Unit, Class 2, increased from $101.42 at December 31, 2005, to $102.83 as of September 30, 2006. Total Class 1 subscriptions and redemptions for the nine months ending September 30, 2006 were $5,762,247, and $134,626, respectively. Total Class 2 subscriptions and redemptions for the nine months ending September 30, 2006 were $331,000 and $0, respectively. Ending capital at September 30, 2006, was $5,856,564 for Class 1 and $425,127 for Class 2. Ending capital at December 31, 2005 was $276,762 for Class 1 and $2,065,914 for Class 2.

The new year saw a resurgence of old themes as the market moved once more in the direction of yield hunting, and interest rate differentials continued to dominate even short term trading within the foreign exchange markets. Traders remained preoccupied with the path of Federal Reserve interest rate policy with the dollar experiencing a sizeable drop in the first few days of the year as the Fed minutes from December suggested that they were closer to the end of the tightening cycle. The U.S. unit weakened further towards the middle of the month to a four month low against the euro on the further belief that the ECB would tighten to combat inflationary pressures. Overall the signals from U.S. economic output remained mixed , and the surprising strength shown in fourth quarter new home sales reversed the U.S. dollar fortunes by prompting a strong dollar rally. Asian currencies continued to display resilience and gave up little ground despite U.S. dollar strength elsewhere, and the Brazilian real continued to attract buying interest as the appetite for yield continued.

Reversing its January weakness, the U.S. dollar showed strength in the first half of February and held onto its gains, with the dollar index finishing the month up nearly 1.3%. The euro was down approximately 2% against the U.S. dollar, while the British pound fell by 1.4% and the Swiss franc lost 2.6% during the month. The Japanese yen rallied against the U.S. dollar, gaining 1.2%. The Canadian dollar, while little changed relative to its U.S. cousin, gained nearly 2.2% against the euro but lost 1% against the yen.

Currency trading was more difficult in March, with the U.S. dollar characterized by high volatility and little directional movement throughout the month. The euro was up 1.7% during the month, the British pound fell by 0.9%, and the Swiss franc gained 0.6% against the US dollar. The Japanese yen lost 1.7% against the U.S. dollar in a volatile, range-bound month. The Canadian dollar had a more difficult time of it, losing 2.7% against the U.S. dollar and losing 4.3% against the euro.

The U.S. dollar broke from a trading range and plunged in the second half of April, with the dollar index losing 4% of its value by the end of the month. The British pound gained 5.1% against the greenback, the euro was up 4.3%, and the Japanese yen finished the month ahead by 3.5%. The Canadian dollar was up 4.7% against U.S. dollar and up 0.3% against the euro.

The U.S. dollar continued to weaken during the first half of May and then remained in a narrow range for rest of the month, with the dollar index losing 1.6% of it’s value by the end of the month. The British pound gained 2.4% against the U.S. dollar, the euro was up 1.4%, and the Japanese yen finished the month ahead by 1.1%. The Canadian dollar was up 1.3% against the U.S. dollar and nearly unchanged against the euro.

With currency movements closely related to interest rates, the uncertainty in the interest rate outlook in June spilled over into the global currency markets. The U.S. dollar broke out of a trading range and strengthened through most of June, but gave much of those gains back in the last three trading sessions of the month. The British pound lost 1.1% against the U.S. dollar, the euro was off 0.1%, and the Japanese yen finished the month down by 2.0%. The Canadian dollar was down 1.3% against both the U.S. dollar and the euro.

In spite of considerable volatility in the middle of the month that led to small losses in the Currency Series, currencies ended July mixed and little changed. While the British pound increased 1% against the US dollar, both the euro and Japanese yen were down -0.2%. The Canadian dollar was down 1.3% against U.S. dollar and down 1.1% against the euro.

The Currency Series recovered strongly in August with profits in Class 2 of 2.29% and Class 1 of 2.03%. While the British pound climbed by 2% and the Japanese yen fell by 2.3%, the euro was little changed against the U.S. dollar during August. In spite of a dramatic decline in crude oil prices, the Canadian dollar displayed real strength as it was up 2.5% against the U.S. dollar and 2.1% against the euro.

The U.S. dollar shirked off continuing structural imbalances and a cooling of the U.S. housing market to show surprising strength in September, gaining 1.1% for the month. The British pound fell 1.7%, the Japanese yen was down by 0.7%, and the euro declined by 1.1% against the U.S. dollar. With a continuing drop in energy prices, the Canadian dollar was down 1.3% against the U.S. dollar and 0.2% against the euro. The unexpected strength in the U.S. dollar led to Class 1 and Class 2 losses of 1.51% and 1.29%, respectively.

2005

The Currency Series – Class 1 lost 2.1% for the nine months ended September 30, 2005, net of fees and expenses; the Currency Series – Class 2 gained 0.1% for the nine months ended September 30, 2005, net of fees and expenses.

For the nine months ended September 30, 2005, the Currency Series recorded net gain on investments of $222, net interest of $1,585, and total expenses of $7,192, resulting in a net decrease in Owners’ capital from operations of $5,385. The Net Asset Value per Unit, Class 1, decreased from $102.67 at December 31, 2004, to $100.54 as of September 30, 2005. The Net Asset Value per Unit, Class 2, increased from $103.47 at December 31, 2004, to $103.62 as of September 30, 2005. Total Class 1 subscriptions and redemptions for the nine months were $134,792, and $16,279, respectively. There were no Class 2 subscriptions; Class 2 redemptions were $375,000. Ending capital at September 30, 2005, was $133,648 for Class 1 and $63,135 for Class 2. Ending capital at December 31, 2004 was $16,586 for Class 1 and $442,069 for Class 2.

The first week of January saw a sizeable recovery in the U.S. dollar with the euro registering its greatest decline in one week since inception. This was caused by both a liquidation of heavily U.S. dollar negative positioning and also the genesis of a belief that the U.S. dollar may at present levels have fallen far enough to help in addressing the sizeable U.S. trade and current account deficit. Some faint signs that the U.S. administration is also starting to focus on addressing this issue domestically also helped the recovery. As a component of U.S. dollar strength was the development of a theme that we expect to progress through the year of general Asian currency strength versus European currencies. After an unsteady start the market has already started to place a reliance on the positive progression of higher yielding minor currencies with a confidence to which we do not fully subscribe. The sharp U.S. dollar recovery did not suit our positions and it was this and the decline in the value of some of our cross currency strategies that caused the first few days of the year to be negative. However with some judicious shorter term trading and the development of the Asian versus European theme to which we more fully subscribe that allowed us to finish the month with only a marginally negative result. From a portfolio perspective, we made gains in exposures short of U.S. dollar versus Indian rupee, Philippine peso and Brazilian real but we suffered a moderate loss being short Chilean peso. Small losses in the U.S. dollar against Argentinean and Chinese yuan were partially offset against small profits made in U.S. dollar against Thai bait, Singapore and Taiwan dollar. Our perception that the South African rand was too strong proved incorrect and we generated losses in short positions. In euro crosses we made gains in the Czech koruna, Polish zloty, Slovakian koruna but experienced offsetting losses as the euro rose against the Norwegian and Swedish krone. There was also a gain in Turkish lira against the euro. In short term trading strategies we made solid gains in euro versus Japanese yen and U.S. dollar but a loss in euro versus Swiss franc. We had successful trading Swiss franc versus GB sterling and U.S. dollar against the Japanese yen, but had losses in euro against GB sterling and GB sterling against the U.S. dollar. February was an inconclusive month in the foreign exchange market. In the early part of the month the U.S. dollar continued the recovery which had commenced in January. However, and in spite of generally good economic numbers out of the U.S., the U.S. dollar commenced a decline from higher levels from the middle of the month. It may well be that the overwhelming weight of a poor trade, current account and budget deficits are burdens that are still too great to allow for any protracted recovery in the U.S. dollar. Some tentative early signs of a further backing up in U.S. long rates also failed to assist the U.S. dollar and the majority of opportunities in the Foreign Exchange market were frequently yield driven. As we have mentioned before we do not at present share the markets enthusiasm for extensive yield plays in an environment where we anticipate increasing U.S. rates so a number of our portfolio strategies this year are focused upon relative value opportunities. From a portfolio perspective the continued appreciation of Asian currencies contributed to gains and we generated positive returns in positions long of New Zealand dollar, Philippine peso, Singapore dollar, Taiwan dollar, this was somewhat offset by a loss in U.S. dollar versus Indonesian rupiah. We also generated gains being long Mexican peso and short South African rand both against the U.S.

dollar and GB pounds. A position long of Brazilian real was profitable but was offset by our being stopped out of a short Chilean peso position. In euro crosses we made gains in the Norwegian krone, Polish zloty, Slovakian koruna and Turkish lira versus the euro but experienced offsetting losses as the euro declined against the Hungarian forint. There was also a gain in Turkish lira against the euro. In short term trading strategies we made solid gains in euro versus the U.S. dollar, GB pound versus the U.S. dollar and in euro versus Swiss franc. We had losses in U.S. dollar and GB pound versus Japanese yen and Australian dollar versus the U.S. dollar. The month of March, in which the competing influences of the weight of the U.S. trade, current account and budget deficits having a negative effect on the U.S. dollar and steadily increasing U.S. interest rates and lackluster economic performance elsewhere in the euro zone and Japan having a positive effect failed to be resolved. The result of this was that U.S. dollar weakness in the early part of the month was followed by some strengthening toward the end of the month. The rising oil price was considered by the markets at the margin to be U.S. dollar positive. The main feature of the month was a fall in the value of a number of yield and emerging market currencies which reacted badly to the prospect of higher oil prices and higher U.S. interest rates, together with a market that had built up substantial long yield currency positions. As we had anticipated weaker minor currencies and have been positioned more in relative value opportunities we were not initially impacted by this deterioration. However we accumulated some new positions before the weakening had run its course and these caused some portfolio losses. Coupled with a lackluster month in trading the result was that we posted a weak result. From a portfolio perspective we experienced losses in U.S. dollar versus Indonesian rupiah and U.S. dollar versus Taiwan dollar as the U.S. dollar reversed toward the end of the month. We were also affected by attempting long Brazilian real against the U.S. dollar, and long Turkish lire against the euro before the U.S. dollar rally had run its course. There were gains in U.S. dollar versus New Zealand dollar, Philippine peso and Polish zloty but these were partially offset by a loss in U.S. dollar versus Singapore dollar. In euro crosses we made gains in the Canadian dollar, Swiss franc, Czech koruna and Hungarian forint, versus the euro, but experienced offsetting losses as the euro rallied against the Polish zloty, Swedish krone, Norwegian krone, and Slovakian koruna. In short term trading strategies we made gains in euro versus the U.S. dollar, GB pound and Swiss franc versus the U.S. dollar. We had losses in euro versus GB pound and U.S. dollar, GB pound and euro versus Japanese yen.

The release of U.S. economic data throughout April, although relatively poor, was offset by weaker economic numbers from the Euro zone, leaving the foreign exchange market to drift fairly aimlessly throughout the month. Concern about upward pressures on U.S rates continued in the early part of April, causing liquidation of minor currency yield positions and leading to increased volatility in those markets. Talk of early redemption of Russia’s Paris debt prompted a recovery in the euro which caused some portfolio losses. The possibility of a peg adjustment from China continued, but mitigating this were concerns about higher rates which meant that volatility remained high in the regional currencies, especially the Asian pairings. This resulted in some appreciation of the Japanese yen. The whipsaw actions that were evident across the markets in general not only damaged some of Currency’s core portfolio positions but had a generally detrimental affect on their trading, leading them to post a weak performance result.

From a portfolio perspective Currency was adversely affected by long Taiwan dollar and long Philippine peso positions, experienced losses in maintaining a long Turkish lira position against the euro, and also gave back gains from long Polish zloty against the euro. There were some gains in the U.S. dollar against the Argentine peso, Canadian dollar and Swedish krone, and euro versus Swedish krone and Norwegian krone.

Currency’s short term trading results were mixed with gains in U.S. dollar against Australian dollar and in the euro versus the Swiss franc and Japanese yen, these gains, however, were partially offset by losses in euro against GB sterling. Gains in short term trading were largely negated by losses in euro/dollar and U.S. dollar against GB sterling.

May started with a repeat of the range bound trading conditions Currency had experienced for most of the early part of 2005 but became quite different due to two factors. Firstly an improvement in the economic data out of the U.S. coincided with further evidence that the Euro zone economy was at best limping along.

On the economic front we saw better than expected trade figures and very robust retail sales data from the U.S along with strong payrolls. Secondly and more importantly the prospect and then the reality of the French referendum on the European Constitution proved a catalyst for markets to reassess the prospects for the Euro zone from a political as well as economic perspective. This prompted a fall in the euro versus the U.S. dollar and a number of other currencies toward the end of the month and underscored U.S. dollar strength in general. Continued talk of a yuan revaluation was the initial focus of the markets in May, causing continued volatility in Asian pairings, and an extension of the whipsawing actions that we experienced during April. The GB pound came under renewed selling pressure with talk of a Euro parliament veto of the ability of the U.K to opt out of the proposed working week limitations.

From a mediocre start to the month, where range bound markets made it difficult for Currency to generate consistent revenues from both a portfolio and short term perspective, they were well positioned for the decline in the euro and GB pound and the associated U.S. dollar strength.

From a portfolio perspective, Currency managed to capture good returns from the decline in the Australian dollar, New Zealand dollar and South African rand, along with the continued weakening of the GB pound.

Currency posted good returns in positions long of Mexican peso versus both euro and GB pounds. On the negative side maintaining long euro versus Polish zloty was detrimental but this was more than offset by gains in short euro versus Norwegian krone positions which benefited from the first signs of the authorities being prepared to raise interest rates.

Short term trading results were again mixed as the U.S. dollar tended to trade in a whipsaw fashion during the first half of the month. We saw short term gains in Eur/Usd, Gbp/Usd, and Australian dollar, but saw losses in Canadian dollar.

In June, there was a continuation of the U.S. dollar rally that started in April. Although we continued to experience underlying strength in the U.S. unit, the move higher was not as impulsive as many commentators expected. A further rate rise from the FOMC and an unchanged bias provided further incentive for U.S. dollar buying, but despite this and talk of rate cuts in Euroland, a break of the psychological 1.20 level in Eur/Usd proved elusive. Economic data out of the U.S. was on the whole positive while European figures remained weak, and the negative sentiment regarding EU continued. Elsewhere, from an interest rate perspective, a 25 bp hike from the Norges bank prompted some profit taking from short euro/ kroner positions, but overall the currency remained strong, while a 50 bp cut from the Riksbank was the precursor to further weakness of the Swedish kroner. In the Latin sphere the Brazilian real continued to attract the yield hunters despite talk of increased U.S. dollar buying interest from the Central bank for the remainder of 2005, and the Mexican peso also extended its gains, even though the tightening cycle was perceived to have ended. Despite a fairly strong start to the month, Currency struggled with some of their shorter term trading, and consequently their overall returns for the month were satisfactory rather than exceptional.

From a portfolio perspective we again realized strong revenues from the continued decline in the New Zealand and Australian dollars, and we also maintained long Brazilian real positions against the U.S. dollar and the Chilean peso. From an Asian perspective we benefited from the continued strength of the Philippine peso, and the Indonesian rupee, but gave up some of these gains in Thai batt. Maintaining short euro positions against the Hungarian florint and Polish zloty, proved successful, but these gains were partly offset by losses in short euro / Japanese yen positions. In short term trading results were again mixed. Despite realizing good gains in short British pound position against the U.S. dollar, euro and Swedish krone, we experienced losses in euro/Swiss franc and Australian dollar.

Despite the fact that cyclical data out of the US remained robust in July, which had the effect of keeping equities near their four year highs and prompting bond yields higher, the US currency began to struggle to post any new gains. There was continued talk within the FX market that reserve management / diversification had started to cap dollar strength, and the euphoric forecasts of sustained US dollar strength began to fade towards the end of the month.

The long awaited announcement from the Chinese on the loosening of its exchange rate regime had a limited impact and there was some disappointment within the market with the lack of reaction from other Asian units, especially the Japanese Yen, as upcoming political worries in respect of the Postal Vote damaged positive Yen sentiment.

Currency posted a strong start to July, but as the momentum in the strength of the dollar subsided they gave up some gains and the remainder of the month provided less opportunity with the market becoming range bound.

From a portfolio perspective, Currency continued to realize good returns from the strength in the Brazilian real. Weakness in both Australian and New Zealand dollars was another theme from which they continued to benefit during the first half of the month with notable gains from short New Zealand dollar versus the Canadian dollar. They also benefited from the Chinese adjustment to the yuan peg, and the positive affect the realignment had on other Asian currencies and showed gains in the Singapore dollar, Korean won and the Hong Kong dollar. On the negative side we suffered from the continuing strength displayed by the Chilean peso.

Short euro positions against the Polish zloty and short British pound/Swedish krone positions also produced some added gains, but on the negative side, continued strength in euro/sterling proved difficult. In short term trading, there were losses in Japanese yen against both the US dollar and euro and the Canadian dollar, offset by realized gains in long euro/ dollar views.

August proved to be an uninspiring month for the Foreign Exchange market with range trades holding sway for the most part. The exception to this theme was predominately the Asian currency block that displayed weakness against the US dollar, partially due to the higher oil and also as a number of Asian currencies displayed a somewhat negative reaction to the relatively small size of the prior month’s Chinese revaluation. The Japanese yen weakened after the Japanese

governments defeat in the postal vote, despite the continued, positive improvement in the Nikkei. The price of crude also had a positive influence on the Norwegian kroner, while on the negative side it also contributed to an 8% decline in the value of the Indonesian rupiah.

The British pound displayed renewed strength following improved PPI and trade numbers although Currency continued to view the rally in sterling as a selling opportunity.

Currency’s performance for the August was somewhat disappointing because after a robust beginning they experienced a number of trading setbacks caused by short term moves.

From a portfolio perspective, Currency realized good gains in short Indonesia rupiah and Taiwan dollar versus US dollar as the Asian currencies weakened. Their continued belief in the strength of the Norwegian kroner also proved well founded both against the US dollar and the euro. They also realized gains on Brazilian real long positions and long Swiss franc positions against the Japanese yen. On the negative side, they experienced losses on Chilean peso and long Australian dollar positions against the New Zealand dollar and US dollar.

In shorter term trading, Currency suffered losses in the British pound as it strengthened against both the euro and US dollar as well as the Canadian dollar and the euro against the Japanese yen.

Early September trading was heavily impacted by the arrival of Hurricane Katrina and the subsequent devastation in Louisiana. The resultant spike in the price of crude oil, along with perceived poor response from the Bush administration, prompted a sell off in the US dollar. Elsewhere, while the Japanese yen, Indonesian rupiah and Korean won also weakened with the rise in crude, the major beneficiary was the Canadian dollar, which continued to show fundamental strength on the back of higher energy and commodity prices. The effects of Katrina also caused some concerns that the Federal Reserve might alter policy slightly to cope with any detrimental effects the storm might have on the US economy in the near future, again causing selling pressure on the US unit, the Fed’s statement however, retained a hawkish tone.

In the UK, economic data continued to show a soft tone increasing concerns about the future strength of the economy.

Overall trading results for September were disappointing, as Currency was unable to capitalize on a robust start and gave up too much alpha in their short term trading results.

From a portfolio perspective Currency produced good revenues from short sterling against Canadian dollar views. They also continued to benefit from the continued weakness in the New Zealand Dollar, as well as renewed strength in the Norwegian kroner. These gains were negated, however, by losses from short sterling positions against the Japanese yen.

Currency’s short term trading results in the dollar block caused the biggest drain on the month as they realized losses in the US unit against the Swiss franc, Japanese yen and Australian dollar. On the positive side, shorter term euro and pound sterling views proved more productive.

Dunn Series

2006

The Dunn Series – Class 1 Net Asset Value lost 9.6% for the nine months ended September 30, 2006, net of fees and expenses; the Dunn Series – Class 2 Net Asset Value lost 7.6% for the nine months ended September 30, 2006, net of fees and expenses.

For the nine months ended September 30, 2006, the Dunn Series recorded net loss on investments of $14,492, net interest of $5,316, and total expenses of $4,709, resulting in a net decrease in Owners’ capital from operations of $13,885. The Net Asset Value per Unit, Class 1, decreased from $86.83 at December 31, 2005, to $78.46 as of September 30, 2006. The Net Asset Value per Unit, Class 2, decreased from $90.15 at December 31, 2005, to $83.30 as of September 30, 2006. There were no Class 1 subscriptions for the nine months. Total Class 1 redemptions were $63,624 for the nine month period. There were no Class 2 subscriptions for the nine month period ending September 30, 2006. Redemptions for this period were $10,000. Ending Capital at September 30, 2006, was $125,754 for Class 1 and $116,178 for Class 2. Ending capital at December 31, 2005, was $193,425 for Class 1 and $136,016 for Class 2.

Dunn Series performance was negative in January. The strength in Global bond markets subsided in January as economic strength and a resurgence in energy prices dampened demand for fixed income investments. Concern about instability in Nigeria and the escalation of nuclear tension in Iran drove energy prices higher in January. The U.S. Federal Reserve

(“Fed”) raised its Fed Funds rate to 4.5% at Chairman Alan Greenspan’s last Fed meeting. Subtle changes in its accompanying statement after the rate hike suggest that the Fed may not be finished raising rates, but will likely be reactive going forward.

Dunn Series performance was negative again in February. Global fixed income prices continued to move lower during February benefiting predominately short fixed income positions. Several Fed governors cited continued strength in the U.S. economy, suggesting that the Fed will continue its tightening bias, with the goal of preemptively suppressing even the intimation of inflation. Short dollar positions suffered from expectations that still higher U.S. interest rates would strengthen the U.S. dollar against most currencies.

Excellent performance in the interest rate sector in March led to Dunn Series gains in March, as Central Banks interest rate increases were the driving force for fixed income markets. The European Central Bank, Bank of Canada, Swiss National Bank, Norges Bank (Norway) and the US Federal Reserve all raised their respective overnight rates 25 basis points in March. Also, the Bank of Japan (BOJ) officially ended its quantitative easing program which has been in place since March of 2001. Since that time, the BOJ has altered its basic monetary approach by targeting the base of money supply instead of short term interest rates. Although this does not necessarily imply there will be higher interest rates in Japan, it removes a significant obstacle in the path toward them.

The Dunn Series gained in April, as short fixed income positions benefited from increasing yields. Participants expected the normalization of global monetary policy to continue, particularly outside the U.S. These same positions benefited from strong U.S. economic data in the form of March’s Producer Price Index and retail sales figures, pushing the long end of the US yield curve above 5%. The Federal Open Market Committee (“FOMC”) minutes from the Fed’s March meeting suggested the Fed would possibly take a pause in their rate hike cycle. This news was viewed as dollar bearish, thus producing gains in predominantly long foreign currency positions. New all time highs in copper and crude oil led the metal and energy sectors gains.

The Dunn Series had negative performance in May. The FOMC raised its fed funds rate for the 16th time, as expected, to 5.0%. In its accompanying statement, the FOMC suggested future rate increases may yet be needed to address inflation risks, depending on economic outlook. Equity markets surrendered early month gains as inflation concerns gained steam after a strong U.S. Consumer Price Index (CPI) was released. This along with comments by several FOMC members expressing concern over levels of inflation in the U.S. brushed aside any notion of a FOMC pause in raising rates.

The Dunn Series had negative performance in June. Weaker than expected economic data, in the form of a sub-par U.S. unemployment report, boosted fixed income prices which, in turn led to losses in short U.S. bond positions. The program’s short U.S. dollar positions suffered when, despite a 25 basis point increase in Refi rate by the European Central Bank (ECB), analysts interpreted ECB President Trichet’s post-ECB meeting comments as more of a wait-and-see approach to inflation-quenching rate hikes, in contrast to the FOMC’s more aggressive policy as reflected by now 17 consecutive rate hikes. The US PPI and CPI numbers brought attention to the warnings of several FOMC members that inflation should be a concern, as both core numbers were again above the perceived Fed comfort level. This brought back into the spotlight the end of the month FOMC meeting, as expectations of another Fed rate hike gained momentum. The FOMC did not disappoint and raised the Fed Funds rate 25 bps to 5.25% on June 29th.

The Dunn Series was down in July. No single contract experienced a significant gain or loss but losing contracts outnumbered winning contracts 2 to 1. The Bank of Japan (BOJ) raised its overnight rate by 25 basis points to 0.25% (from zero); this was the first rate hike in Japan in six years. The BOJ’s accompanying statement said further rate hikes would be gradual. Bernard Bernanke, the relatively new chairman of the Federal Reserve System, testified that he expects core inflation and growth to moderate in coming quarters. Also the Peoples Bank of China raised its reserve requirement ratio to 0.5 percentage points, for the stated purpose of decelerating its economy, as days earlier China reported an annual GDP growth of 11.3%, year to year.

Losses continued in the Dunn Series in August. Small gains in interest rates, currencies and metals were offset by losses in agriculturals, stock indices and, in particular, energies. Currencies gains were mainly attributable to long British pound and short Japanese yen positions. The Bank of England surprised the market with a rate hike while the yen weakened on no rate hike from the BOJ. Interest rate gains were helped by our long 10-Year Japanese government bonds positions as Japan’s consumer price index (CPI) was rebased (reformulated) and the predicted change in the CPI due to the rebasing was larger than expected. Losses experienced by the energy sector were primarily due to the sell off of natural gas after prices had peaked earlier this summer due to increased demand for electricity caused by a widespread heat wave. Strength early in the month in crude oil and related products—caused by Middle East conflict and the partial shut down of Prudhoe Bay oil field in Alaska gave way to weakness later in the month as cooler heads prevailed in the Middle East and the initial concerns regarding the Prudhoe Bay situation turned out to be overestimated, leading to net losses in long energy positions.

The return for the Dunn Series was negative in September. Energy prices continued to weaken this month, benefiting short positions. Bearish news of a substantial new oil field in the Gulf of Mexico and a mid-month OPEC meeting with no change in output quotas left crude prices $8 dollars a barrel lower on the month. The FOMC left rates unchanged for a second meeting in a row, but continued to have a tightening bias on the basis that some inflation risk remain. This coupled with weaker than expected economic data, produced losses in our fixed income positions. The Philadelphia Federal Reserve Bank business outlook survey showed manufacturing had slowed to 3-year lows in that region, and the August US housing starts report was weaker than expected.

2005

The Dunn Series – Class 1 lost 17.8% for the nine months ended September 30, 2005, net of fees and expenses; the Dunn Series – Class 2 lost 16.0% for the nine months ended September 30, 2005, net of fees and expenses.

For the nine months ended September 30, 2005, the Dunn Series recorded net loss on investments of $392,352, net interest of $19,390, and total expenses of $12,204, resulting in a net decrease in Owners’ capital from operations of $385,166. The Net Asset Value per Unit, Class 1, decreased from $104.96 at December 31, 2004, to $86.25 as of September 30, 2005. The Net Asset Value per Unit, Class 2, decreased from $105.77 at December 31, 2004, to $88.89 as of September 30, 2005. Total Class 1 subscriptions for the nine months were $100,793, and redemptions were $19,430. Total Class 2 subscriptions and redemptions for the period were $5,061 and $1,781,795, respectively. Ending Capital at September 30, 2005, was $176,496 for Class 1 and $136,636 for Class 2. Ending capital at December 31, 2004, was $117,047 for Class 1 and $2,276,622 for Class 2.

The Dunn combined financial portfolio experienced losses in January. Gains in U.S. and non-U.S. interest rates were cancelled out by losses in equities and energies leaving the choppy currency market to dominate the month’s results as foreign currencies sold off against the dollar. These moves were largely supported by comments made by Secretary Snow that the administration wants a strong dollar, adding that the focus will be on deficit reduction and other steps to sustain the dollar’s strength. These comments caught many investors off guard as most market participants expected the dollar to continue declining as it did in 2004. Energies bottomed out early in the month, largely supported by production cuts that were enacted in early January by OPEC producers. Continued tensions in Iraq, particularly the assassination of the Governor of Baghdad and impending elections at the end of the month kept an added premium in the market. Bonds staged quite a comeback of their own in January, as December’s non-farm payroll numbers were pretty much in line with expectations. Economic releases point to growth while inflation and inflationary expectations look to be in check. Fed officials are standing pat on their “measured pace” stance, but continue to monitor economic data. The bond markets certainly are not trading like they are concerned about inflation. Stocks gave back most of their December gains. The Dunn combined financial portfolio experienced losses in February. In February the Federal Reserve raised the Fed Funds rate by 25 basis points to 2.5% as expected. The dollar showed strength earlier in the month on Greenspan’s comments that market forces may be on the verge of stabilizing the current account deficit. Bush’s budget forecast also appeared to boost the dollar. The strong dollar trend reversed sharply late in the month largely due to the rumor that South Korea was diversifying its foreign reserves out of dollars and into other currencies creating fear that Japan and China would follow suit. In short, sustained trends have yet to materialize this year. The Dunn combined financial portfolio experienced losses in March. A strong February non-farm payroll and surging raw commodity prices pressured the U.S. Treasury market, providing positive traction to our short U.S. sovereign debt positions. Also the FOMC raised the fed funds rate another 25 basis points as expected. Interest rate differentials helped the dollar stage a rally mid-month as the European Central Bank and the Bank of England passed on raising rates at their monthly meeting. As a result we experienced losses in our short non-U.S. interest rate positions and long foreign currency positions. Even though OPEC increased its production quota by 500,000 barrels per day, crude oil prices kept their torrid pace, and we were able to profit from it. All-in-all major trends are yet to develop this year.

Strong gains in non-U.S. sovereign debt sector were insufficient to offset losses in others sectors for April. Energy prices weakened in response to build-ups in oil stocks coupled with downgraded forecasts of oil demand by the International Energy Agency. Softer economic data, including a weaker than expected non-farm payroll print, facilitated a U.S. Treasury market rally, which pressured our short U.S. sovereign debt positions. Currency markets continue to look for direction as interest rate differentials and a revaluation of the yuan in China continue to be the focus.

The U.S. Federal Reserve raised its overnight lending rate to 3.0% during May while the Bank of England and the European Central Bank both left their rates unchanged. Dunn benefited from its long U.S. and foreign bond positions, and short foreign currency positions, as the dollar’s rally against the euro, Swiss franc and Japanese yen continued in May. France’s decision not to ratify the European Union constitution also undermined the euro.

The Dunn combined financial program gained in June. The words of various central bankers spoke louder than any concrete actions, but seemingly were sufficient to propel global fixed income markets higher. First, comments by U.S. Federal Reserve (Fed) member Richard Fisher suggested that the Fed was nearing the end of its rate hike cycle. This was followed by a statement from the European Central Bank’s (ECB) chief economist, Otmar Issing, that the markets almost always correctly predicted the ECB’s actions, suggesting to many that a rate cut was in the cards for the European Union (EU), particularly after Sweden’s central bank, the Riskbank, cut its repo rate by 50 basis points. The Bank of England’s minutes from its June monetary policy meeting showed that two of its nine members voted to cut rates at its last meeting. Currency markets continued to see the U.S. dollar rally as the possibility of lower rates in the EU and UK coupled with the expectation of at least one more rate hike in the U.S. favored the greenback.

The Dunn combined financial portfolio lost 4.12% in July. Stronger than expected economic data provided strength to global stock markets, adversely pressuring Dunn’s long global fixed income positions. In his semiannual testimony before Congress, Fed Chairman Alan Greenspan re-emphasized that the Fed’s outlook is one of sustained economic growth and contained inflationary pressures. The dollar moved somewhat higher during the month on expectations that the Fed would continue to increase the Fed Funds rate at future Federal Open Market Committee meetings, benefiting Dunn’s long dollar positions. The dollar’s strength was tested late in the month as China announced a revaluation of the yuan. The revaluation, a higher yuan versus the US dollar, was smaller than most had expected, only 2.1%. Energy prices firmed in July primarily on scattered refinery and production problems and continued terror concerns.

The Dunn combined financial portfolio lost 5.45% in August. A host of events, including the death of Saudi King Fahd, gasoline refining capacity problems, various acts of terror, and Hurricane Katrina contributed to rising energy costs. As a result, the program benefited from its pre-existing long energy positions. Unfortunately, these factors also convinced markets that the US economy would slow, which was contrary to Dunn’s interest rate and currency positions. Performance in the stock index sector was positive, mainly on the strength of Japan’s improving economic outlook.

The Dunn combined financial portfolio lost 5.38% in September. The beginning of the month was distinguished by market expectations that interest rates would rise in the U.S.; accordingly the program reduced many of its long U.S. (and foreign) sovereign debt positions. Later in the month the Federal Reserve did indeed raise the Federal Funds rate by 25 basis points to 3.75% as inflation concerns outweighed the potential for an economic slowdown. The Federal Reserve also said its policy is still accommodative and expected to continue raising rates at a measured pace. As Japan continues its path toward economic recovery and reform, the ruling Liberal Democratic Party handily won a majority of the seats in the lower house of the Diet. As a result, established long positions in the Japanese TOPIX and NIKKEI stock indices led the way in their sector.

Graham Series

2006

The Graham Series – Class 1 Net Asset Value lost 2.8% for the nine months ended September 30, 2006, net of fees and expenses; the Graham Series – Class 2 Net Asset Value lost 0.6% for the nine months ended September 30, 2006, net of fees and expenses.

For the nine months ended September 30, 2006, the Graham Series recorded net gain on investments of $30,375, net interest of $262,706, and total expenses of $446,189, resulting in a net decrease in Owners’ capital from operations of $153,108. The Net Asset Value per Unit, Class 1, decreased from $82.90 at December 31, 2005, to $80.60 as of September 30, 2006. The Net Asset Value per Unit, Class 2, decreased from $85.73 at December 31, 2005, to $85.23 as of September 30, 2006. Total Class 1 subscriptions and redemptions for the nine months were $1,621,285 and $1,442,411, respectively. Total Class 2 subscriptions and redemptions for the nine months were $1,559,006 and $1,227,114, respectively. Ending capital at September 30, 2006 was $5,699,664 for Class 1 and $2,072,678 for Class 2. Ending capital at December 31, 2005, was $5,642,080 for Class 1 and $1,772,604 for Class 2.

2006 began on a positive note, as the Graham Series recorded gains during the month of January. The U.S. dollar experienced significant volatility during the month and moved sharply lower versus the major European currencies. The dollar fell to a 4-month low versus the euro amid continuing speculation concerning the direction of interest rates in the United States. The global bond markets also experienced short-term price volatility, as global bond prices declined sharply amid ongoing inflationary concerns. The decline in prices led to rising yields, as the German bund and U.S. 10-Year Treasury note yields advanced 15 basis points and 12 basis points, respectively, during the month. Global equity prices continued to rally, as European and Japanese equity indices continued to trend higher despite significant mid-month price volatility resulting from a broad sell-off in Japan, a flurry of weak earnings reports, and higher energy prices. Commodities prices, particularly those in the energy and metals sectors, continued to rally amid lingering supply concerns linked to severe weather disruptions, labor unrest, and renewed inflationary fears. Most notably, copper and zinc posted record highs, gold rallied to a 25-year high, and coffee and sugar prices rose 10% and 23%, respectively.

In February, global bond markets experienced short-term volatility as prices were marginally lower amid ongoing speculation concerning global interest rates. The modest decline in prices led to higher yields, as the Japanese 10-Year Government bond and U.S. 10-Year Treasury note yield advanced 7 basis points and 5 basis points, respectively, during the month. European equity indices continued to rally following the release of better-than-expected earnings reports, while Japanese equity indices generally declined amid speculation that the Bank of Japan may soon shift away from a long standing policy of extreme accommodation. Major equity indices in the U.S. were mixed as questions remain concerning the direction of U.S. interest rates. The U.S. dollar experienced significant volatility during the month amid continuing uncertainty with respect to U.S. interest rates. Ultimately, the dollar rebounded from last month’s 4-month low to finish February at a 7-week high versus the euro. Energy prices declined sharply amid unseasonably warm weather in the U.S. and reports of ample inventories for the remainder of the winter season. Metals prices experienced significant volatility amid concerns that the bullish trends experienced in January may ultimately translate to increased supplies.

The first quarter of 2006 was positive for the Graham Series as strong gains in the interest rate sector led to a profitable March. Major global bond markets finished the month significantly lower amid ongoing speculation concerning higher global interest rates following the 15^th consecutive rate increase by the United States FOMC. The decline in global bond prices resulted in higher yields throughout Europe, Japan and the U.S. Major global equity indices in the United States and Europe finished the month higher as equity prices rallied following the release of positive economic data in the U.S. In Japan, the Nikkei index surged more than 5% amid renewed optimism concerning the pace of Japanese economic growth. The U.S. dollar experienced significant volatility and moved in a trading range versus major global currencies amid lingering concerns regarding higher global interest rates. The U.S. dollar finished the month gaining 1% to 2% versus the yen and the sterling, while declining versus the euro and the Swiss franc. Energy prices finished the month higher amid weather-related concerns, declining inventories and continuing geopolitical unrest in the Middle East. Precious metals prices generally rallied as the price of gold approached $600 an ounce. Base metals also continued to rally as the price of zinc and copper again posted record highs, rising 13% and 11.5%, respectively.

April proved to be a strong month for the Graham Series, largely due to significant profits from trends in the fixed income and metals markets. Major global bond markets continued to move lower amid ongoing speculation that the U.S. Federal Reserve, the European Central Bank and the Bank of Japan would continue to tighten global interest rates throughout the remainder of 2006. The decline in global bond prices continued to result in higher yields throughout the U.S., Europe and Japan. Major U.S. equity indices finished the month relatively mixed as the specter of higher interest rates and soaring energy prices ultimately weighed on U.S. equity markets. Elsewhere, European equity prices declined modestly amid sagging investor confidence in Germany, while the Nikkei posted 16-year highs before selling off in response to China’s decision to raise its benchmark interest rate. The U.S. dollar declined sharply versus the major global currencies. The U.S dollar posted 11-month lows versus the euro and 3-month lows versus the Japanese yen amid ongoing speculation concerning higher global interest rates and renewed concerns regarding the long-term outlook for the U. S. dollar. Crude oil prices posted record highs during the month amid continuing global unrest, increased demand among China and India, and reports of declining U.S. inventories. Natural gas prices, however, turned bearish, as mild weather and ample inventories led to a major sell off. In the metals markets, gold soared to 25-year highs, as investors sought refuge from a weakening U.S. dollar, and base metals surged to multi-year highs amid increased industrial demand worldwide.

The favorable market conditions experienced throughout the first four months of 2006 abruptly gave way to a volatile and choppy environment during May, as renewed doubts concerning the U.S. economy and rising geopolitical tensions led to extremely difficult trading conditions during the latter half of the month. Losses for the month were primarily attributable to unexpected volatility within the global fixed income sector and a sharp and sudden decline in global equity prices. Major global bond markets experienced significant volatility during the latter half of the month, as the release of weaker-than-expected economic data triggered renewed uncertainty concerning the strength of the U.S. economy and the pace of U.S. Federal Reserve policy. Global bond yields finished the month relatively mixed, as yields in the U.S. rose slightly while those in Japan and Europe declined. Major global equity indices finished the month markedly lower amid growing economic uncertainty and rising geopolitical tensions. In the U.S., the NASDAQ declined 6%, the S&P 500 fell 3%, and the Dow Jones Industrial Average lost nearly 2%. Elsewhere, the EuroStoxx 50 declined more than 5% while the Nikkei plunged 8.5%. The U.S. dollar continued to decline versus the major global currencies. The dollar posted 12-month lows versus the euro and 8-month lows versus the Japanese yen, as recent economic data continued to foster a sense of pessimism concerning the long-term outlook for the dollar. Energy prices retreated slightly from record highs amid rising U.S. inventories and easing demand forecasts. In the metals markets, the price of gold posted 26-year highs as investors continued to seek solace from a weakening dollar and rising global tensions, while the price of copper, nickel and zinc surged between 12% and 17%, respectively, amid increased industrial demand worldwide.

The considerable uncertainty which plagued the global markets during June resulted in difficult trading conditions. Losses for the month were primarily attributable to an increase in volatility across the global equity, fixed income, currency and commodities markets, as growing economic uncertainty and rising geopolitical tensions roiled global markets. Major global bond markets continued to experience significant volatility during the month. The release of stronger-than-expected economic data contributed to a sharp mid-month sell-off in the U.S. Treasury market, only to be followed by a late-month rally amid renewed optimism concerning a temporary pause in the U.S. rate tightening cycle following the FOMC’s decision to raise interest rates to 5.25%. Global bond yields generally finished the month higher throughout Europe and Japan. Major global equity indices extended losses early in the month amid inflationary fears and lingering concerns regarding the potential for higher global interest rates. Prices soon reversed, however, as the prospect of a temporary pause in the U.S. rate tightening cycle spurred prices higher late in the month. The U.S. dollar rallied versus many of the major global currencies, rebounding from 12-month lows versus the euro and 8-month lows versus the Japanese yen. The U.S. dollar’s rally proved to be rather short-lived, however, as renewed speculation concerning U.S. interest rate policy led to a modest decline from its intra-month highs. The commodities markets experienced significant volatility during the month. Metals prices declined precipitously for most of the month, only to subsequently rally amid rising geopolitical tensions and renewed global demand concerns. The energy markets experienced similar volatility, as seasonal demand concerns and continued unrest in the Middle East at times spurred prices higher, while increased inventories and renewed diplomatic initiatives often dragged prices lower. Many of the agricultural markets also experienced significant volatility during the month.

The unusually difficult trading conditions encountered since May continued throughout July, as the Graham Series experienced losses for the month. The specter of economic uncertainty in the U.S. and expanding hostilities globally continued to plague many global markets, resulting in excessive price volatility across nearly all market sectors. Major global bond markets experienced significant volatility during the latter half of the month, as the release of weaker-than-expected economic data triggered renewed uncertainty concerning the strength of the U.S. economy and the pace of U.S. Federal Reserve policy. Global bond yields finished the month relatively mixed, as yields in the U.S. rose slightly while those in Japan and Europe declined. Major global equity indices continued to experience significant volatility during the month. Although many global equity markets declined sharply mid-month amid growing inflationary fears and widening global conflict, equity prices generally rallied later in the month as weaker-than-expected second quarter economic data calmed interest rates concerns. The U.S. dollar finished the month mixed versus many of the major global currencies. The dollar experienced a decidedly turbulent month in the wake of conflicting economic data and shifting global tensions, initially posting near 3-month highs versus the euro, the Japanese yen and the Swiss franc, only to reverse sharply lower. The dollar finished the month with only modest gains versus the euro, the yen and the franc, and experienced fairly significant declines versus the Mexican peso, the South African rand, the Australian dollar and the British pound. Weather-related concerns, global unrest and economic uncertainty wreaked havoc on the commodity markets, resulting in excessive volatility across the energy, metals and agricultural sectors. Natural gas prices surged nearly 35% as temperatures throughout much of the U.S. soared to triple-digit heights, while crude oil prices posted record highs amid the outbreak of fighting in Lebanon. Metals prices proved exceedingly volatile in response to changing demand forecasts, while many of the agricultural markets ebbed and flowed in response to seasonal factors.

The economic and geopolitical uncertainty which clouded the global landscape for much of the previous three months continued into August. Losses during August were primarily attributable to trading in the global fixed income markets, with smaller losses experienced across the global equity index, currency, soft commodities, and agricultural markets. A portion of the portfolios’ overall losses for the month was offset by gains attributable to emerging trends across the energy markets as prices declined sharply.

The economic and geopolitical uncertainty gave way to a more favorable climate during September. Profitable trading opportunities re-emerged across the equity, global fixed income, and commodity markets, as market participants began to forego rumor and conjecture in favor of a renewed emphasis on existing fundamentals. Major global bond markets generally advanced during the month amid ongoing speculation concerning the relative strength of the world’s major industrial economies and the future direction of global interest rates. The U.S. Treasury market continued to march higher, as relatively mild inflation readings and a deepening slump in the housing sector reinforced the prevailing notion that U.S. monetary policy will remain unchanged through the end of the year. European and Japanese bonds generally moved higher, despite indications from both the European Central Bank and the BOJ that further rate hikes may be imminent. Global bond yields generally moved lower, as the yield of the benchmark 10-year U.S. Treasury note shed 9 basis points to finish the month at the lowest levels since late-February, while the yields of the euro bund and the Japanese government bond shed 6 basis points and 2 basis points, respectively. Major global equity indices finished the month decidedly higher as declining bond yields and falling energy prices spawned the rebirth of investor optimism. In the U.S., the NASDAQ, Dow Jones Industrial Average, and S&P 500 recorded gains of 3.4%, 2.6%, and 2.5%, respectively, as investors generally ignored signs of a cooling U.S. economy and focused on the potential for a more favorable interest rate environment in the months ahead. Elsewhere, the EuroStoxx 50 advanced in line with U.S. equity markets, gaining 2.4%, while the Nikkei

concluded the month essentially unchanged. The U.S. dollar strengthened versus many of the major global currencies during September, although the currency markets continued to be characterized by a relatively low volatility trading environment. Conflicting U.S. economic data and cautionary statements from both the European Central Bank and the BOJ led many market participants to speculate concerning the future of interest rate differentials among the world’s leading industrial nations. The dollar recorded its largest monthly gain versus the euro since February, and advanced versus each of the Japanese yen, Swiss franc, British pound, and Australian dollar. Relative to other currencies, the dollar also experienced gains versus the Mexican peso, the Canadian dollar, and the South African rand. The commodity markets continued to experience significant volatility throughout the month. Energy prices continued to fall amid improving supply and demand fundamentals and severe price dislocations. Natural gas prices tumbled in excess of 30%, while crude oil prices declined approximately 10%. Gold prices shed nearly 5% in the wake of a stronger U.S. dollar and a rally in global equity prices, and base metal prices generally declined amid waning global demand. Soft commodities and agricultural markets similarly experienced a significant degree of short-term price volatility during the month in response to a variety of seasonal factors.

2005

The Graham Series – Class 1 lost 17.3% for the nine months ended September 30, 2005, net of fees and expenses; the Graham Series – Class 2 lost 15.4% for the nine months ended September 30, 2005, net of fees and expenses.

For the nine months ended September 30, 2005, the Graham Series recorded net loss on investments of $472,285, net interest of $50,249, and total expenses of $267,879, resulting in a net decrease in Owners’ capital from operations of $1,171,697, net of minority interests of ($481,782). The Net Asset Value per Unit, Class 1, decreased from $103.57 at December 31, 2004, to $85.67 as of September 30, 2005. The Net Asset Value per Unit, Class 2, decreased from $103.92 at December 31, 2004, to $87.93 as of September 30, 2005. Total Class 1 subscriptions and redemptions for the nine months were $4,110,299 and $739,500, respectively. Total Class 2 subscriptions and redemptions for the nine months were $1,534,710 and $78,617, respectively. Ending capital at September 30, 2005 was $4,859,050 for Class 1 and $5,646,932 for Class 2. Ending capital at December 31, 2004, was $1,961,583 for Class 1 and $4,889,204 for Class 2.

With the backdrop of the U.S. Presidential inauguration and hopeful prospects for successful Iraqi elections, U.S. economic reports released during January were mixed. In the global equity markets, the major U.S. indices declined sharply, reversing rising price trends. Bond prices moved modestly higher in the U.S. and Japan for the second consecutive month, while they were mixed in Europe. In the currency markets, the U.S. dollar sharply reversed its recent bearish trend as it surged versus many major global currencies, most notably the euro, against which the U.S. dollar had reached a record low during December. Energy prices continued to move in a volatile pattern as crude oil rose 10% and natural gas increased 2% following double-digit declines in December. Base metal prices reversed their recent bullish price moves as aluminum fell 5%, nickel lost more than 2%, and copper declined slightly. In precious metals, gold fell almost 4%, its second consecutive monthly decline after reaching 17-year highs in late November. The agricultural markets finished the month with mixed results. The K4 portfolio incurred a loss during January. Negative results were primarily attributable to the abrupt rise of U.S. dollar versus the euro, following several months of declines. Price reversals within the global equity index markets as well as short-term volatility within the energy and aluminum markets also resulted in losses. Gains recorded by positions in the global fixed income markets offset a portion of the portfolio’s losses. Commodity prices moved generally higher during February. Energy prices advanced for the second consecutive month as natural gas rose 6% and crude oil rose almost 7%. Base metal prices resumed their recent bullish price moves led by nickel, which rose nearly 13%, copper and zinc, which advanced more than 6%, and aluminum, which increased by approximately 4%. In precious metals, gold followed suit, rising 3%, its first increase in three months. The agricultural markets also moved generally higher as they exhibited large net price moves. Wheat, cotton, cocoa, and coffee rose between about 13% and 16%, and corn rose 9%, while sugar declined about 4% for the month. The K4 portfolio incurred a loss during February. Performance was primarily attributable to an abrupt price drop in global bond futures markets. Trending conditions in the equity index, zinc, and copper markets resulted in profits that offset much of the portfolio’s losses during the month. March was a mixed month for Graham’s long-term trend-following programs. Losses recorded by our trend-following programs during the period were driven primarily by continued trend-less price movements in global currencies, equity indices, and bonds. Spanning the two-month period from February 1 to March 31, 2005, the S&P 500 Composite Price Index, the U.S. Dollar Trade Weighted Index, and the J.P. Morgan Global Government Bond Index price movement has been choppy, with price trends not being sustained for much more than a few weeks. Our trend-following programs generally exhibited positive performance in the energy, metals, and short-term fixed income markets, offsetting a portion of the losses recorded during the month. While recent performance has been adversely affected by sharp trend reversals and general short-term choppy price patterns across a number of markets, we remain confident that the discipline to adhere to our successful systematic strategies will continue to serve us and our clients well over the long-term. Of course, we are actively conducting research to ensure that we continue to learn from the experiences that the markets provide us.

April was a difficult month for Graham’s long-term trend-following strategies as the month was characterized by a sharp decline in global equity index prices and generally trendless price volatility in currencies, fixed income, and commodities. The extremely choppy market conditions exhibited during the month throughout all major sectors provided a difficult environment for Graham’s long-term trend-following strategies. K4 (at 1.5x leverage) declined 11.22%. Losses in trend based strategies were primarily driven by a sudden drop in global equity index prices and sharp price reversals in the energy sector. Volatility within the U.S. equity markets was attributed to several factors including inflationary concerns and weak earnings reports. The sharp decline of crude oil prices was a reaction to U.S. crude inventories reaching three year highs and speculation emerging that OPEC production would be sufficient to enable these inventories to meet seasonal energy needs this summer.

Notably, Graham’s trend-following programs recorded profits in the global bond futures and currency markets. In global bond futures, long positions in U.S. Treasury note and bond futures were profitable as prices moved higher throughout May. Trading in currencies was also profitable, most significantly from long U.S. dollar positions held by each of Graham’s programs versus the euro and other major European currencies as these currencies fell sharply late in the month in response to French voters rejecting the proposed new European constitution (Dutch voters agreed with the rejection on June 1, furthering the euro’s decline). Modest losses recorded by Graham’s trend-following programs were incurred by positions held in the global equity index and commodity futures markets.

Graham’s systematic K4 trend-following program generally encountered losses during the month of July. Overall, the K4 trend-following program incurred losses in global bond futures as prices in the U.S. reversed recent bullish trends and prices in Europe and Japan exhibited short-term trend less patterns during the month. In the U.S. fixed income markets, yields moved higher in reaction to generally positive U.S. economic news released throughout the month and statements by FOMC Chairman Alan Greenspan indicating the U.S. economy is strong and is expected to remain so. After declining during the first half of the month, bond prices in Europe and Japan rose following China’s decision to end the decade long peg of the yuan to the U.S. dollar, but ultimately prices drifted lower after subsequent indications of economic growth in those regions. Solid profits that resulted from continued bullish trends in global equity indices offset a sizable portion of the losses incurred in the fixed income markets. Positions held in the Japanese yen were also profitable despite significant short-term volatility spurred by China’s announcement regarding the yuan.

During August, the Graham K4 program reported a net loss of -1.65% as losses recorded in currencies and global bond futures outweighed strong profits from positions in the energy sector. The sharp increases in energy prices were mainly attributed to supply concerns that arose due to a variety of unrelated factors including the disruptive affects of Hurricane Katrina, gasoline demand in the U.S. during the end of the summer driving season, and the death of Saudi Arabia’s King Fahd early in the month. Losses during the month were primarily attributed to volatility in the currency markets which concluded with the U.S. dollar falling between 1% and 3% versus the euro, Swiss franc, and Japanese yen amid signs of improving economic conditions in Europe and Japan combined with mixed economic reports in the United States. The global bond futures markets were also affected by these economic reports as well as Hurricane Katrina as prices rallied sharply after the first week of the month resulting in small losses for Graham’s K4 trend-following program.

Graham’s K4 trend-following program recorded gains in September, increasing 1.8%. Graham’s performance during September was primarily attributable to continued strong upward trends in the Japanese and European equity index markets. In Europe, prices moved higher early in the month on optimism regarding economic growth as elections in Germany approached during mid-month. European equities also reacted favorably to better than expected U.S. economic reports released in the aftermath of Hurricane Katrina. In Japan, the Nikkei and Topix equity indices climbed to four-year highs on continued expectations of economic growth following comments from Japan’s central bank suggesting deflation may be subsiding in the near future. The re-election of Japan’s current Prime Minister, who has overseen much of its recent economic growth, bolstered Japanese equity markets early in the month. Smaller gains resulted from bullish trends by the U.S. and Canadian dollars versus major global currencies. These trends were enhanced, in part, by the impasse of

Germany’s election and China’s announcement to widen the trading band of the yuan against the Japanese yen and the euro. Extreme short-term volatility in crude oil and the European fixed income markets and sharp price reversals in U.S. fixed income markets led to losses during the month that offset a portion of the profits recorded by the trend-following program. The choppy conditions in crude oil, which declined 4% in September, were caused by continued supply uncertainties following the destruction in the Gulf of Mexico brought on by Hurricanes Katrina and Rita coupled with the U.S. and other nations making emergency crude oil stockpiles available for U.S. consumption.

Long Only Commodity Series

2006

The Long Only Commodity Series commenced operations on February 24, 2006. The Long Only Commodity Series – Class 1 Net Asset Value lost 4.2% from the start of operations through September 30, 2006, net of fees and expenses; the Long Only Commodity Series – Class 2 Net Asset Value lost 3.0% from the start of operations through September 30, 2006, net of fees and expenses.

For the nine months ended September 30, 2006, the Long Only Commodity Series recorded net loss on investments of $338,487, net interest of $146,215, and total expenses of $75,507, resulting in a net decrease in Owners’ capital from operations of $267,779. The Net Asset Value per Unit, Class 1, decreased from $100.00 at the beginning of operations to $95.83 as of September 30, 2006. The Net Asset Value per Unit, Class 2, decreased from $100.00 at the beginning of operations to $97.03 as of September 30, 2006. Total Class 1 subscriptions and redemptions for the nine months were $3,095,483 and $93,536, respectively. Total Class 2 subscriptions and redemptions for the nine months were $250,250 and $0, respectively. Ending capital at September 30, 2006 was $2,758,433 for Class 1 and $225,985 for Class 2.

Both the Reuters/Jefferies-CRB and Jefferies-CPI indices were up strongly in March, leading to a positive month and first quarter for the Long-Only Series.

Gains in metals and energy resulted in a strong performance in April. Crude oil futures followed through on the previous month’s breakout, peaking at more than $75/bbl before pulling back to finish the month at $71.88/bbl, up 5.8%. Heating oil and gasoline continued trending upward, with the latter peaking just above $2.20/gal and closing the month at $2.09/gal. Lack of demand continued to push natural gas lower, falling more than 11% during April. (All contracts June delivery.) Copper continued its meteoric rise in April, with the July contract gaining more than 31% to close the month at $3.22/lb. Most other base metals moved higher in April, as well. In precious metals, the June gold contract tacked on 11.5% to finish at $654/oz. Silver prices plunged on April 20, losing more than 17% in a single day and causing many to wonder if the party was over. It recovered toward the end of the month, however, and finished higher by 17.4% to $13.63/oz. While most soft commodities were range-bound and directionless during April, cotton prices continued a downtrend begun in February and dropped another 5.3%.

Performance was mixed in May. Crude oil futures were volatile, finishing the month at $71.29/bbl, down $5 from the intraday high on May 2. Heating oil and gasoline were both range-bound with high volatility, finishing the month little changed from April’s close. Natural gas futures prices continued to fall, losing more than 6% during the month. (All contracts July delivery.) The metals markets have been overheated for weeks, and prices peaked on May 11 and beat a hasty retreat after that. In spite of the reversal and a drop of 10% from the intraday high, copper finished the month 12% higher. In precious metals, the August gold contract lost $87 from the May 11 high to finish at $649/oz. Silver prices ended at $12.45/oz., down 8.6% from the April close. Grains were mixed in April, with wheat breaking out of a trading range, but unable to follow through. Cattle heated up, reversing a downtrend and moving impressively upward through the month, while coffee lost ground, finishing the month down 9.4%.

Energy futures continued to be volatile in June, with crude oil finishing the month at $73.93/bbl, up $1.64 from May’s close. Heating oil was nearly unchanged, and gasoline was up $0.14/gal to $2.22/gal. Natural gas futures prices continued to fall, losing nearly 8% during the month. (All contracts August delivery.) Precious metals prices continued to fall in the first days of the month. Prices moved up after that, although not enough to recover the earlier losses. Copper finished the month 6.5% lower. The August gold contract was lower by 5.1% to finish at $616/oz. September silver prices ended at $10.92/oz., down 13.1% from the May close and off 27.2% from the May 11 high. The grain complex displayed volatile prices with little directional movement. Cattle futures continued to move upward in June. Cocoa futures broke out of a trading range and moved sharply upward.

Energy futures continued to be volatile in July, with tropical weather concerns and Middle East conflict pushing crude oil to an intraday high of nearly $80/bbl in the middle of the month. Prices then retreated sharply to finish July little changed at $74.40/bbl. Heating oil was down just over 2% and gasoline was up slightly to $2.21/gal. With a midsummer heat wave

gripping most of the U.S., demand for electricity to drive air conditioners drove natural gas futures sharply higher, up nearly 29% by the end of the month. (All contracts September delivery.) Metals prices began to recover in July. Copper finished the month 6.4% higher. The December gold contract was higher by 2.8% to finish at $646.80/oz. September silver prices ended at $11.37/oz., up 4.1%. After streaking upward in June, cattle futures took a breather and consolidated their gains in July. The grains complex was uneventful during the month, with the exception of soybean meal, which broke sharply out of a trading range and continued down. Following a sharp run-up in the previous four weeks, cocoa prices collapsed on July 17, losing 9% in one day.

Energy futures fell across the board in August, coming off all-time highs in crude oil prices in July. The apparent end to the most recent Middle East war combined with a milder-than-expected hurricane season through August allowed crude oil prices to fall more than 7.1% to $70.26/bbl. Heating oil was down just over 4.6% and gasoline fell by 15% to $1.78/gal. With the summer heat wave abating, natural gas futures fell sharply, down 28% by the end of the month. (All contracts October delivery.) Although gold prices fell slightly to $634/oz, silver futures were higher by 13% to $13.03/oz. Copper futures were range-bound, finishing the month off 1.6%. (All contracts December delivery.) Feeder cattle was up only slightly, but live cattle futures climbed steadily and finished the month higher by nearly 5%. Lean hogs climbed by more than 8% during August. Corn and the soybean complex declined steadily during the month, while wheat finished up slightly to $4.22/bu. Orange juice prices hit a 14-year high, topping out at $1.85/lb.

Energy futures continued to fall sharply in September. Crude oil fell nearly 12% to $62.91/bbl. Heating oil was down just over 15.2% and gasoline fell by 13.6% to $1.55/gal. Natural gas futures set new two-year lows, down 31.7% by the end of the month. (All contracts November delivery.) Precious metals prices fell in September, with gold down 4.7% to $604/oz and silver lower by 11.4% to $11.54/oz. Copper futures continued to be range-bound, finishing the month little changed. (All contracts December delivery.) After setting new contract highs early in the month, cattle futures fell in September. While corn and wheat broke out to the upside, soybeans continued to exhibit range-bound trading. Sugar and cotton prices continued to fall, while orange juice prices also backed off from the 14-year highs set in the previous month, falling 6.3%.

Long/Short Commodity Series

2006

The Long/Short Commodity Series commenced operations on February 24, 2006. The Long/Short Commodity Series – Class 1 Net Asset Value lost 5.2% from the start of operations through September 30, 2006, net of fees and expenses; the Long/Short Commodity Series – Class 2 Net Asset Value lost 3.5% from the start of operations through September 30, 2006, net of fees and expenses.

For the nine months ended September 30, 2006, the Long/Short Commodity Series recorded net loss on investments of $731,894, net interest of $570,920, and total expenses of $826,337, resulting in a net decrease in Owners’ capital from operations of $987,311. The Net Asset Value per Unit, Class 1, decreased from $100.00 at the beginning of operations to $94.82 as of September 30, 2006. The Net Asset Value per Unit, Class 2, decreased from $100.00 at the beginning of operations to $96.49 as of September 30, 2006. Total Class 1 subscriptions and redemptions for the nine months were $20,042,399 and $202,083, respectively. Total Class 2 subscriptions and redemptions for the nine months were $2,445,225 and $40,000, respectively. Ending capital at September 30, 2006 was $18,939,882 for Class 1 and $2,318,348 for Class 2.

The energy and commodities sectors led the way in March as the Long-Short Commodity Series got off to a strong start.

In April, crude oil futures followed through on the previous month’s breakout, peaking at more than $75/bbl before pulling back to finish the month at $71.88/bbl, up 5.8%. Heating oil and gasoline continued trending upward, with the latter peaking just above $2.20/gal and closing the month at $2.09/gal. Lack of demand continued to push natural gas lower, falling more than 11% during April. (All contracts June delivery, prices in U.S. dollars.) Copper continued its meteoric rise in April, with the July contract gaining more than 31% to close the month at $3.22/lb. Most other base metals moved higher in April as well. In precious metals, the June gold contract tacked on 11.5% to finish at $654/oz. Silver prices plunged on April 20, losing more than 17% in a single day. It recovered toward the end of the month, however, and finished higher by 17.4% to $13.63/oz. While most soft commodities were range-bound and directionless during April, cotton prices continued a downtrend which began in February and dropped another 5.3%.

Performance was negative in May. Crude oil futures were volatile and difficult to trade, finishing the month at $71.29/bbl, down $5 from the intraday high on May 2. Heating oil and gasoline were both range-bound with high volatility, finishing the month little changed from April’s close. Natural gas futures prices continued to fall, losing more than 6% during the month. (All contracts July delivery.) The metals markets have been overheated for weeks, and prices peaked on May 11 and beat a hasty retreat after that. In spite of the reversal and a drop of 10% from the intraday high, Copper finished the

month 12% higher. In precious metals, the August gold contract lost $87 from the May 11 high to finish at $649/oz. Silver prices ended at $12.45/oz., down 8.6% from the April close. Grains were mixed in April, with wheat breaking out of a trading range, but unable to follow through. Cattle heated up, reversing a downtrend and moving impressively upward through the month. Coffee lost ground, finishing the month down 9.4%.

Energy futures continued to be volatile and difficult to trade in June, with crude oil finishing the month at $73.93/bbl, up $1.64 from May’s close. Heating oil was nearly unchanged, and gasoline was up $0.14/gal to $2.22/gal. Natural gas futures prices continued to fall, losing nearly 8% during the month. (All contracts August delivery.) Precious metals prices continued to fall in the first days of the month, with longs apparently capitulating on June 13. Prices moved up after that, although not enough to recover the earlier losses. Copper finished the month 6.5% lower. The August gold contract was lower by 5.1% to finish at $616/oz. September silver prices ended at $10.92/oz., down 13.1% from the May close and off 27.2% from the May 11 high. The grain complex was just as difficult as every other sector in June, with wheat, corn, and soybeans all displaying volatile prices with little directional movement from which to profit. Cattle futures continued to move upward in June, providing one of very few directional opportunities during the month. Cocoa futures broke out of a trading range and moved sharply upward.

Energy futures continued to be volatile and difficult to trade in July, with tropical weather concerns and Middle East conflict pushing crude oil to an intraday high of nearly $80/bbl in the middle of the month. Prices then retreated sharply to finish July little changed at $74.40/bbl. Heating oil was down just over 2% and gasoline was up slightly to $2.21/gal. With a midsummer heat wave gripping most of the US, demand for electricity to drive air conditioners drove natural gas futures sharply higher, up nearly 29% by the end of the month. (All contracts September delivery.) Metals prices began to recover in July, although elevated volatility continued to provide a difficult environment for traders. Copper finished the month 6.4% higher. The December gold contract was higher by 2.8% to finish at $646.80/oz. September silver prices ended at $11.37/oz., up 4.1%. After streaking upward in June, cattle futures took a breather and consolidated their gains in July. The grains complex was uneventful during the month, with the exception of soybean meal, which broke sharply out of a trading range and continued down. Following a sharp run-up in the previous four weeks, cocoa prices collapsed on July 17, losing 9% in one day.

Managed Futures Index Series

2006

The Managed Futures Index Series commenced operations on February 24, 2006. The Managed Futures Index Series – Class 1 Net Asset Value lost 5.0% from the start of operations through September 30, 2006, net of fees and expenses; the Managed Futures Index Series – Class 2 Net Asset Value lost 3.8% from the start of operations through September 30, 2006, net of fees and expenses.

For the nine months ended September 30, 2006, the Managed Futures Index Series recorded net loss on investments of $102,053, net interest of $192,914, and total expenses of $114,371, resulting in a net decrease in Owners’ capital from operations of $23,510. The Net Asset Value per Unit, Class 1, decreased from $100.00 at the beginning of operations to $95.00 as of September 30, 2006. The Net Asset Value per Unit, Class 2, decreased from $100.00 at the beginning of

operations to $96.17 as of September 30, 2006. Total Class 1 subscriptions and redemptions for the nine months were $375,679 and $91,015, respectively. Total Class 2 subscriptions and redemptions for the nine months were $53,500 and $0, respectively. Ending capital at September 30, 2006 was $263,205 for Class 1 and $51,449 for Class 2.

Trading activity in the Managed Futures Index Series began in late April 2006. Performance in April and May was positive. June performance, as expected, reflected the performance of the industry as a whole and was down for the month.

Net performance in the third quarter was negative, as losses in the currency and interest rate sectors dominated performance. As has been the case all year, the currency sector was negatively affected by range-bound trading during the third quarter. A strong performance in the energy sector in September made it the most profitable since the Series began trading in April. Currencies is the most negative sector, reflecting the difficult trading conditions that have affected many trading advisors since before the beginning of the year.

Critical Accounting Policies and Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires the Managing Owner to adopt accounting policies and make estimates and assumptions that affect amounts reported in the Trust’s financial statements. The Trust’s critical accounting policies and related estimates and judgments underlying the financial statements are as identified below.

Investment Transactions and Valuation—The Trust records investment transactions on a trade date basis and all investments are recorded at fair value in its financial statements, with changes in fair value reported as a component of Trading Profits (Losses) and unrealized equity in earnings on investments in affiliated Series in the Statements of Operations. Generally, fair values are based on quoted market prices; however, in certain circumstances, significant judgments and estimates may be required in determining fair value in the absence of an active market closing price.

Allocation of Trading Profits or Losses—Each Series of the Trust offers two sub-classes of Units – Class 1 and Class 2. All classes have identical voting, dividend, liquidation and other rights and the same terms and conditions, except that Class 1 Units of each Series bear certain expenses related to the servicing of such Units. Revenues, expenses (other than expenses attributable to a specific class), and realized and unrealized trading profits and losses of each Series are allocated daily to Class 1 and Class 2 Units based on each Class’ relative owners’ capital balance.

Each Series allocates funds to a subsidiary Trading Company, or Trading Companies, of the Trust. Each Trading Company allocates all of its daily trading profits or losses to the Series in proportion to each Series’ funds allocated to the Trading Company, adjusted on a daily basis. As of September 30, 2006, the value of all open contracts and cash held at clearing brokers is similarly allocated to the Series in proportion to each Series’ funds allocated to the Trading Company, or Companies.

Interest Income—Interest income from all sources, including assets held at clearing brokers and cash and cash equivalents held at banks, is aggregated and allocated across all Series in proportion to their daily NAV.

In applying these policies, the Managing Owner may make judgments that can frequently require estimates about matters that are inherently uncertain.

Off-Balance Sheet Risk

In the case of forward contracts traded on the interbank market and swaps, neither are traded on exchanges. The counterparty is generally a single bank or other financial institution, rather than a group of financial institutions; thus there may be a greater counterparty credit risk. The Managing Owner expects the Trading Advisors to trade only with those counterparties which it believes to be creditworthy. All positions of each Trading Company are valued each day on a mark-to-market basis. There can be no assurance that any clearing member, clearinghouse or other counterparty will be able to meet its obligations to any Trading Company.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Series are speculative commodity pools. The market sensitive instruments which are held by the Trading Companies in which the Series are invested are acquired for speculative trading purposes, and all or a substantial amount of the Series’ 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 Series’ main line of business.

Market movements result in frequent changes in the fair market value of each Trading Company’s open positions and, consequently, in each Series of the Trust’s earnings and cash flow. The Trading Companies’ and consequently the Series’ market risk is influenced by a wide variety of factors, including the level and volatility of exchange rates, interest rates, equity price levels, the market value of financial instruments and contracts, the diversification effects among the open positions and the liquidity of the markets in which trades are made.

Each Trading Company 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 future market scenario will affect performance, and the past performance for any Series is not necessarily indicative of the future results of such Series.

The Trading Companies’ and consequently the Series’ primary market risk exposures as well as the strategies used and to be used by the Trading Advisors for managing such exposures are subject to numerous uncertainties, contingencies and risks, any one of which could cause the actual results of the Trust’s and the Managing Owner’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 Trading Companies and consequently the Trust. There can be no assurance that the Trading Companies’ 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 a Series.

Quantitative Market Risk

Trading Risk

The Series’ approximate risk exposure in the various market sectors traded by its trading advisors is quantified below in terms of value at risk. Due to the Series’ mark-to-market accounting, any loss in the fair value of the Series’ (through the Trading Companies) open positions is directly reflected in the Series’ earnings, realized or unrealized.

Exchange maintenance margin requirements have been used by the Trust 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% to 99% of any one-day interval. The maintenance margin levels are established by brokers, dealers and exchanges using historical price studies as well as an assessment of current market volatility 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 that is not relevant to value at risk.

In the case of market sensitive instruments that are not exchange-traded, including currencies and some energy products and metals, the margin requirements for the equivalent futures positions have been used as value at risk. In those cases in which a futures-equivalent margin is not available, dealers’ margins have been used.

In the case of contracts denominated in foreign currencies, the value at risk figures include foreign currency margin amounts converted into U.S. dollars with an incremental adjustment to reflect the exchange rate risk inherent to the Series, which is valued in U.S. dollars, in expressing value at risk in a functional currency other than U.S. dollars.

In quantifying each Series’ 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 Series’ positions held through the Trading Companies are rarely, if ever, 100% positively correlated have not been reflected.

Value at Risk by Market Sectors

The following table presents the trading value at risk associated with the each Series’ exposure to open positions (as held by the Trading Companies) by market sector as of June 30, 2006. All open position trading risk exposures of the Series have been included in calculating the figures set forth below.

Balanced Series: (1)


MARKET SECTOR	VALUE AT RISK		% OF TOTAL CAPITALIZATION
Interest Rates	$	5,774,935	2.3	%
Currencies	$	6,598,804	2.6	%
Stocks / Stock Indices	$	5,430,562	2.2	%
Metals	$	1,381,002	0.6	%
Agriculturals/Softs	$	1,393,429	0.6	%
Energy	$	1,690,214	0.7	%
Total:	$	22,268,946	9.0	%

Winton Series:


MARKET SECTOR	VALUE AT RISK		% OF TOTAL CAPITALIZATION
Interest Rates	$	2,111,271	1.7	%
Currencies	$	844,401	0.7	%
Stocks / Stock Indices	$	2,190,872	1.8	%
Metals	$	563,467	0.5	%
Agriculturals/Softs	$	242,230	0.2	%
Energy	$	108,000	0.1	%
Total:	$	6,060,241	5.0	%

Currency Series:


MARKET SECTOR	VALUE AT RISK		% OF TOTAL CAPITALIZATION
Interest Rates	$	0	0	%
Currencies	$	1,194,575	6.2	%
Stocks / Stock Indices	$	0	0	%
Metals	$	0	0	%
Agriculturals/Softs	$	0	0	%
Energy	$	0	0	%
Total:	$	1,194,575	6.2	%

Dunn Series:


MARKET SECTOR	VALUE AT RISK		% OF TOTAL CAPITALIZATION
Interest Rates	$	22,697	9.4	%
Currencies	$	3,857	1.6	%
Stocks / Stock Indices	$	10,463	4.3	%
Metals	$	1,398	0.6	%
Agriculturals/Softs	$	4,638	1.9	%
Energy	$	9,854	4.1	%
Total:	$	52,907	21.9	%

Graham Series:


MARKET SECTOR	VALUE AT RISK		% OF TOTAL CAPITALIZATION
Interest Rates	$	781,249	3.3	%
Currencies	$	1,044,964	4.4	%
Stocks / Stock Indices	$	1,555,583	6.5	%
Metals	$	81,396	0.3	%
Agriculturals/Softs	$	152,763	0.6	%
Energy	$	48,745	0.2	%
Total:	$	3,664,700	15.3	%

Campbell/Graham Series:


MARKET SECTOR	VALUE AT RISK		% OF TOTAL CAPITALIZATION
Interest Rates	$	998,516	1.9	%
Currencies	$	3,140,476	5.9	%
Stocks / Stock Indices	$	2,485,187	4.7	%
Metals	$	209,278	0.4	%
Agriculturals/Softs	$	160,317	0.3	%
Energy	$	396,076	0.7	%
Total:	$	7,389,850	13.9	%

Long Only Commodity Series:


MARKET SECTOR	VALUE AT RISK		% OF TOTAL CAPITALIZATION
Interest Rates	$	0	0.0	%
Currencies	$	0	0.0	%
Stocks / Stock Indices	$	0	0.0	%
Metals	$	242,538	2.9	%
Agriculturals/Softs	$	343,596	4.0	%
Energy	$	424,442	5.0	%
Total:	$	1,010,576	11.9	%

Long/Short Commodity Series:


MARKET SECTOR	VALUE AT RISK		% OF TOTAL CAPITALIZATION
Interest Rates	$	47,316	0.1	%
Currencies	$	258,688	0.6	%
Stocks / Stock Indices	$	138,751	0.3	%
Metals	$	368,267	0.9	%
Agriculturals/Softs	$	955,657	2.4	%
Energy	$	590,240	1.5	%
Total:	$	2,358,919	5.8	%

Managed Futures Index Series:


MARKET SECTOR	VALUE AT RISK		% OF TOTAL CAPITALIZATION
Interest Rates	$	298,347	3.0	%
Currencies	$	444,458	4.5	%
Stocks / Stock Indices	$	294,626	3.0	%
Metals	$	94,536	1.0	%
Agriculturals/Softs	$	44,771	0.5	%
Energy	$	148,750	1.5	%
Total:	$	1,325,488	13.5	%

(1)

The Balanced Series invests in the Currency Series, Graham Series, Campbell/Graham Series, Long Only Commodity Series, Long/Short Commodity Series and Managed Futures Index Series. The Balanced Series effective ownership in these Series as of June 30, 2006 was: 67.5% of the Currency Series, 67.5% of the Graham Series, 9.8% of the Campbell/Graham Series, 64.9% of the Long Only Commodity Series, 47.2% of the Long/Short Commodity Series and 96.8% of the Managed Futures Index Series. Including its investment in other Series, total value at risk for the Balanced Series would be $29,744,257, or 11.9% of capitalization as of September 30, 2006.

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

The face value of the market sector instruments held on behalf of the Series is typically many times the applicable maintenance margin requirement, which generally ranges between approximately 1% and 10% of contract face value, as well as many times the capitalization of the Series. The magnitude of each Series’ open positions creates a risk of loss not typically found in most other investment vehicles. Because of the size of their positions, certain market conditions, although unusual, but historically recurring from time to time, could cause a Series to incur severe losses over a short period of time. The value at risk tables above, as well as the past performance of the Series, gives no indication of this risk of loss.

Non-Trading Risk

The Series have non-trading market risk on their foreign cash balances not needed for margin. However, these balances, as well as the market risk they represent, are immaterial. The Series also have non-trading market risk as a result of investing a portion of their available assets in U.S. government securities which include any security issued or guaranteed as to principal or interest by the United States, or by a person controlled by or supervised by and acting as an instrumentality of the government of the United States pursuant to authority granted by Congress of the United States or any certificate of deposit for any of the foregoing, including U.S. treasury bonds, U.S. treasury bills and issues of agencies of the United States government, and certain cash items such as money market funds, certificates of deposit (under nine months) and time deposits. The market risk represented by these investments is also immaterial.

Qualitative Market Risk

The following are the primary trading risk exposures of the Series of the Trust as of September 30, 2006, by market sector.

Interest rates

Interest rate risk is one of the principal market exposures of each Series. Interest rate movements directly affect the price of interest rate futures positions held and indirectly the value of a Trading Company’s stock index and currency positions. Interest rate movements in one country as well as relative interest rate movements between countries materially impact profitability. The primary interest rate exposure is to interest rate fluctuations in the United States and the other G-8 countries. However, the Trading Companies also may take futures positions on the government debt of smaller nations. The Managing Owner anticipates that G-8 interest rates will remain the primary market exposure of each Trading Company and accordingly each Series for the foreseeable future. The changes in interest rates which are expected to have the most effect on the Series are changes in long-term, as opposed to short-term rates. Most of the speculative positions to be held by the Trading Companies will be in medium- to long-term instruments. Consequently, even a material change in short-term rates is expected to have little effect on the Series if the medium- to long-term rates remain steady. The first two percent (2.0%) of interest income per annum earned by the Trust for the Balanced Series, Winton Series, Campbell Graham Series, Currency Series, Dunn Series and Graham Series is paid to the Managing Owner. In addition, if interest rates fall below 0.75%, the Managing Owner is paid the difference between the Trust’s annualized income interest and 0.75%. Interest income above 2.0% per these Series is retained by the Series. Interest income earned by the Trust for the Long Only Commodity Series, Long/Short Commodity Series and the Managed Futures Index Series is allocated twenty percent (20.0%) being paid to the Managing Owner and eighty percent (80.0%) retained by these Series.

Currencies

Exchange rate risk is a significant market exposure of each Series of the Trust in general and the Currency Series in particular. For each Series of the Trust in general and the Currency Series in particular currency exposure is 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 Trading Advisors on behalf of a Series trade in a large number of currencies, including cross-rates, which are positions between two currencies other than the U.S. dollar. The Managing Owner does not anticipate that the risk profile of the Series’ currency sector will change significantly in the future.

Stock Indices

For each Series (other than the Currency Series), its primary equity exposure is equity price risk in the G-8 countries as well as other smaller jurisdictions. Each Series of the Trust (other than the Currency Series) is primarily exposed to the risk of adverse price trends or static markets in the major U.S., European and Japanese indices.

Metals

For each Series (other than the Currency Series), its metals market exposure is fluctuations in the price of both precious metals, including gold and silver, as well as base metals including aluminum, copper, nickel and zinc. Some metals, such as gold, are used as surrogate stores of value, in place of hard currency, and thus have an associated currency or interest rate risk associated with them relative to their price in a specific currency. Other metals, such as silver, platinum, copper and steel, have substantial industrial applications, and may be subject to forces affecting industrial production and demand.

Agriculturals/Softs

Each Series (other than the Currency Series) may also invest in raw commodities and may thus have exposure to agricultural price movements, which are often directly affected by severe or unexpected weather conditions or by political events in countries that comprise significant sources of commodity supply.

Energy

For each Series (other than the Currency Series), its primary energy market exposure is in oil, gas and other energy product price movements, often resulting from political developments and ongoing conflicts in the Middle East. Oil and gas prices can be volatile and substantial profits and losses have been and are expected to continue to be experienced in this market.

Other Trading Risks

As a result of leverage, small changes in the price of a Trading Company’s positions may result in substantial losses for a Series. Futures, forwards and options are typically traded on margin. This means that a small amount of capital can be used to invest in contracts of much greater total value. The resulting leverage means that a relatively small change in the market price of a contract can produce a substantial loss. Like other leveraged investments, any purchase or sale of a contract may result in losses in excess of the amount invested in that contract. The Trading Companies may lose more than their initial margin deposits on a trade.

The Trading Companies’ trading is subject to execution risks. Market conditions may make it impossible for the Trading Advisors to execute a buy or sell order at the desired price, or to close out an open position. Daily price fluctuation limits are established by the exchanges and approved by the Commodity Futures Trading Commission. When the market price of a contract reaches its daily price fluctuation limit, no trades can be executed at prices outside the limit. The holder of a contract may therefore be locked into an adverse price movement for several days or more and lose considerably more than the initial margin put up to establish the position. Thinly traded or illiquid markets also can make it difficult or impossible to execute trades.

The Trading Advisor’s positions are subject to speculative limits. The Commodity Futures Trading Commission and domestic exchanges have established speculative position limits on the maximum futures position which any person, or group of persons acting in concert, may hold or control in particular futures contracts or options on futures contracts traded on U.S. commodity exchanges. Under current regulations, other accounts of the Trading Advisors are combined with the positions held by them on behalf of the applicable Trading Company for position limit purposes. This trading could preclude additional trading in these commodities by the Trading Advisors for the accounts of the Series.

Systematic strategies do not consider fundamental types of data and do not have the benefit of discretionary decision making. The assets of the Series are allocated to Trading Advisors that rely on technical, systematic strategies that do not take into account factors external to the market itself (although certain of these strategies may have minor discretionary elements incorporated into their systematic strategy). The widespread use of technical trading systems frequently results in numerous trading advisors attempting to execute similar trades at or about the same time, altering trading patterns and affecting market liquidity. Furthermore, the profit potential of trend-following systems may be diminished by the changing character of the markets, which may make historical price data (on which technical programs are based) only marginally relevant to future market patterns. Systematic strategies are developed on the basis of a statistical analysis of market prices. Consequently, any factor external to the market itself that dominates prices that a discretionary decision maker may take into account may cause major losses for a systematic strategy. For example, a pending political or economic event may be very likely to cause a major price movement, but a systematic strategy may continue to maintain positions indicated by its trading method that might incur major losses if the event proved to be adverse.

However, because certain of the Trading Advisors’ strategies involve some discretionary aspects in addition to their technical factors, certain of the Trading Advisors may occasionally use discretion in investing the assets of a Series. For example, the Trading Advisors often use discretion in selecting contracts and markets to be followed. In exercising such discretion, such Trading Advisor may take positions opposite to those recommended by the Trading Advisor’s trading system or signals. Discretionary decision making may also result in a Trading Advisor failing to capitalize on certain price trends or making unprofitable trades in a situation where another trader relying solely on a systematic approach might not have done so. Furthermore, such use of discretion may not enable the relevant Series of the Trust to avoid losses, and in fact, such use of discretion may cause such Series to forego profits which it may have otherwise earned had such discretion not been used.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of disclosure controls and procedures

Under the supervision and with the participation of the management of the Managing Owner, including its Chief Executive Officer and Chief Financial Officer, the Trust evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13(a)-15(e) under the Securities Exchange Act of 1934) as of September 30, 2006 (the “Evaluation Date”). Any control system, no matter how well designed and operated, can provide only reasonable (not absolute) assurance that its objectives will be met. Furthermore, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. Based upon our evaluation, the Chief Executive Officer and Chief Financial Officer of the Managing Owner concluded that, as of the Evaluation Date, our disclosure controls and procedures were effective to provide reasonable assurance that they are timely alerted to the material information relating to the Trust required to be included in the Trust’s periodic SEC filings.

Changes in Internal Control Over Financial Reporting

There were no changes made in our internal controls during the third quarter that have materially affected or are reasonably likely to materially affect the Trust’s internal controls or financial reporting.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

None

ITEM 1A. RISK FACTORS.

There have been no material changes to the risk factors relating to The Frontier Fund from those previously disclosed in the Trust’s Annual Report on Form 10-K for its fiscal year ended December 31, 2005, under the caption “Item 1A. Risk Factors.”

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

None

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

Not applicable.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

None

ITEM 5. OTHER INFORMATION.

None

ITEM 6. EXHIBITS.

Exhibits (numbered in accordance with Item 601 of Regulation S-K)


1.1		Form of Selling Agent Agreement among the Registrant, Equinox Fund Management, LLC and the Selling Agents****

1.2		Form of Amendment Agreement among the Registrant, Equinox Fund Management, LLC and the Selling Agents**

1.3		Form of Amendment Agreement among the Registrant, Equinox Fund Management, LLC and the Selling Agents***

1.4		Form of Amendment Agreement among the Registrant, Equinox Fund Management, LLC and the Selling Agents****

4.1		Declaration of Trust and Amended and Restated Trust Agreement of the Registrant (annexed to the Prospectus as Exhibit A)*****

4.2		Form of Subscription Agreement (annexed to the Prospectus as Exhibit B)****

4.3		Form of Exchange Request (annexed to the Prospectus as Exhibit C)****

4.4		Form of Request for Redemption (annexed to the Prospectus as Exhibit D)****

4.5		Form of Request for Additional Subscription (annexed to the Prospectus as Exhibit E)****


4.6		Form of Application for Transfer of Ownership / Re-registration Form (annexed to the Prospectus as Exhibit F)****

4.7		Form of Privacy Notice (annexed to the Prospectus as Exhibit G)****

10.1		Form of Amended and Restated Escrow Agreement among the Registrant, Equinox Fund Management, LLC, Bornhoft Group Securities Corporation and the U.S. Bank National Association, Denver Colorado***

10.2		Form of Brokerage Agreement between each Trading Company and UBS Securities, LLC*

10.21		Form of Brokerage Agreement between each Trading Company and Banc of America Futures Incorporated*

10.22		Form of Brokerage Agreement between the Managing Owner, acting as agent on behalf of certain Trading Companies, and Deutsche Bank AG London**

10.23		Form of Brokerage Agreement between each Trading Company and Man Financial Inc. ***

10.24		Form of Amendment Agreement between the Managing Owner, acting as agent on behalf of certain Trading Companies, and Deutsche Bank AG London****

10.3		Form of Advisory Agreement among the Registrant, the Trading Company, Equinox Fund Management, LLC, and each Trading Advisor*

10.31		Form of International Swaps and Derivatives Association Master Agreement, including all Schedules thereto and the Credit Support Annex thereto entered into for the Long Only Commodity Series of the Registrant***

10.32		Form of License Agreement among Jefferies Financial Products, LLC, Reuters America LLC, the Registrant and Equinox Fund Management, LLC***

10.33		Form of License Agreement among Jefferies Financial Products, the Registrant and Equinox Fund Management, LLC***

10.34		Form of Guaranty made by Jefferies Group, Inc. in favor of Frontier Trading Company VIII, LLC***

10.35		Form of International Swaps and Derivatives Association Master Agreement, including all Schedules thereto and the Credit Support Annex thereto entered into for the Currency Series of the Registrant***

10.36		Form of International Swaps and Derivatives Association Master Agreement, including all Schedules thereto and the Credit Support Annex thereto entered into for the Managed Futures Index Series of the Registrant****

10.4		Form of Cash Management Agreement between Equinox Fund Management, LLC and Merrill Lynch**

10.41		Form of Cash Management Agreement between Equinox Fund Management, LLC and STW Fixed Income Management Ltd.***

10.5		Form of single-member limited liability company operating agreement governing each Trading Company***

31.1		Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002^

31.2		Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002^

32.1		Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002^

32.2		Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002^

*	Previously filed as like-numbered exhibit to the initial filing or the first, second, third or fourth pre-effective amendment or the first or second post-effective amendment to Registration Statement No. 333-108397 and incorporated by reference herein.

**	Previously filed as like-numbered exhibit to the initial filing or the first pre-effective amendment or the first or second post-effective amendment to Registration Statement No. 333-119596 and incorporated by reference herein.

***	Previously filed as like-numbered exhibit to the initial filing or the first pre-effective amendment of Registration Statement No. 333-129701 and incorporated by reference herein.

****	Previously filed as like-numbered exhibit to the first post-effective amendment to Registration Statement No. 333-129701 and incorporated by reference herein.

^	Filed herewith.

SIGNATURES

Pursuant to the requirements 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.


Date: November 20, 2006	The Frontier Fund
	(Registrant)

	By:	/s/ Brent Bales
		Brent Bales
		Chief Financial Officer of Equinox Fund Management, LLC, the Managing Owner of The Frontier Fund

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Frontier Funds (FRFD) 10-Q2006 Q3 Quarterly report

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