SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly report pursuant to Section 12(b) or (g) of the
Securities Exchange Act of 1934
For the quarterly period ended September 30, 2001
Commission File Number 0-17555
EVEREST FUTURES FUND, L.P.
(Exact name of registrant as specified in its charter)
Iowa 42-1318186
State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2280 West Tyler Street, Suite 105, Fairfield, Iowa 52556
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (641) 472-5500
Not Applicable
(Former name, former address and former fiscal year, if changed
since last report.)
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
EVEREST FUTURES FUND, L.P.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2001
(1) GENERAL INFORMATION AND SUMMARY
Everest Futures Fund, L.P. (the "Partnership") is a limited partnership
organized on June 20, 1988 under the Iowa Uniform Limited Partnership Act.
The business of the Partnership is the speculative trading of commodity
futures contracts and other commodity interests, including forward contracts
on foreign currencies ("Commodity Interests") either directly or through
investing in other, including subsidiary, partnerships, funds or other limited
liability entities. The Partnership commenced its trading operations on
February 1, 1989 and its general partner is Everest Asset Management, Inc.
(the "General Partner") a Delaware corporation organized in December 1987.
The Partnership was initially organized on June 20, 1988 under the name
Everest Energy Futures Fund, L.P. and its initial business was the speculative
trading of Commodity Interests, with a particular emphasis on the trading of
energy-related commodity interests. However, effective September 12, 1991,
the Partnership changed its name to "Everest Futures Fund, L.P." and at the
same time eliminated its energy concentration trading policy. The Partnership
thereafter has traded futures contracts and options on futures contracts on a
diversified portfolio of financial instruments and precious metals and trades
forward contracts on currencies.
The public offering of the Partnership's units of limited partnership interest
("Units") commenced on or about December 6, 1988. On February 1, 1989, the
initial offering period for the Partnership was terminated, by which time the
Net Asset Value of the Partnership was $2,140,315.74. Beginning February 2,
1989, an extended offering period commenced which terminated on July 31, 1989,
by which time a total of 5,065.681 Units of Limited Partnership Interest were
sold. Effective May 1995 the Partnership ceased to report as a public
offering. On July 1, 1995 the Partnership recommenced the offering of its
Units as a Regulation D, Rule 506 private placement, which continues to the
present with a total of $74,734,407 for 42,552.87 Units sold July 1, 1995
through September 30, 2001.
During its operation, the Partnership has had various advisors. In December
1990, John W. Henry & Company, Inc. (JWH) began trading for the Partnership as
one of the Partnership's trading advisors. In May 1994, JWH became the sole
advisor to the Partnership. In March 1996, the Partnership transferred all of
its assets to, and became the sole limited partner of, Everest Futures Fund
II, L.P. (Everest II) and JWH began trading for Everest II. In July 2000, the
Partnership redeemed approximately 50% of its assets from Everest II and
allocated them to Trilogy's Barclay Futures Index Program. The Partnership
instructed Trilogy to trade its account using twice the leverage of Trilogy's
unleveraged portfolio to attempt to achieve a return greater than the return
of the Index before fees and expenses. Effective as of the close of business
August 31, 2000, the Partnership liquidated the balance of its investment in
Everest II and opened a trading account directly with JWH. JWH used its
Financial and Metals Portfolio while trading for Everest II and the
Partnership through June 30, 2001. Beginning July 1, 2001, JWH employed its
Strategic Allocation Program in trading for the Partnership. Trilogy Capital
Management, LLC was terminated as trading advisor for the Partnership June 30,
2001. Beginning September 1, 2001, Mount Lucas Management Corporation began
trading its proprietary MLM Index Trading Program (Unleveraged) for the
Partnership.
The Partnership clears all of its futures and options on futures trades
through Cargill Investor Services, Inc. (CIS), its clearing broker, and all of
its cash trading through CIS Financial Services, Inc. (CISFS), an affiliate of
CIS.
On September 13, 1996 the Securities and Exchange Commission accepted for
filing a Form 10 -- Registration of Securities for the Partnership. Public
reporting of Units of the Partnership sold as a private placement commenced at
that time and has continued to the present.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying financial statements are prepared on a combined basis and
include the accounts of Everest Futures Fund, L.P. and Everest Futures Fund
II, L.P. All significant intercompany transactions and balances have been
eliminated in the accompanying combined financial statements. Effective
September 11, 2000, Everest Futures Fund II, L. P. was dissolved.
Cash Equivalents
Cash equivalents represent short-term highly liquid investments with remaining
maturities of 60 days or less and include money market accounts, securities
purchased under agreements to resell, commercial paper, and U.S. Government
and agency obligations with variable rate and demand features that qualify
them as cash equivalents. These cash equivalents, with the exception of
securities purchased under agreement to resell, are stated at amortized cost,
which approximates fair value. Securities purchased under agreements to
resell, with overnight maturity, are collateralized by U.S. Government and
agency obligations, and are carried at the amounts at which the securities
will subsequently be resold plus accrued interest. For purposes of the
statements of cash flows, cash and cash equivalents includes cash and cash
equivalents and cash on deposit with Brokers in the equity in commodity
futures trading accounts.
Fair Value of Financial Instruments
The financial instruments held by the Company are reported in the statement of
financial condition at market or fair value, or at carrying amounts, which
approximate fair value, because of their highly liquid nature and short-term
maturity.
Revenue Recognition
Commodity futures contracts, forward contracts, physical commodities, and
related options are recorded on the trade date. All such transactions are
recorded on the identified cost basis and marked to market daily. Unrealized
gains and losses on open contracts reflected in the statements of financial
condition represent the difference between original contract amount and market
value (as determined by exchange settlement prices for futures contracts and
related options and cash dealer prices at a predetermined time for forward
contracts, physical commodities, and their related options) as of the last
business day of the year or as of the last date of the financial statements.
Foreign Currency Translation
Assets and liabilities denominated in foreign currencies are translated at the
prevailing exchange rates as of the valuation date. Gains and losses on
investment activity are translated at the prevailing exchange rate on the date
of each respective transaction while year-end balances are translated at the
year-end currency rates.
Income Taxes
Income taxes are not provided for by the Partnership because taxable income of
the Partnership is includable in the income tax returns of the partners.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of increase and decrease in net assets from operations
during the period. Actual results could differ from those estimates.
(3) THE LIMITED PARTNERSHIP AGREEMENT
The Limited Partners and General Partner share in the profits and losses of
the Partnership in proportion to the number of Units or Unit equivalents held
by each. However, no Limited Partner is liable for obligations of the
Partnership in excess of his or her capital contribution and profits, if any,
and such other amounts as he may be liable for pursuant to the Iowa Uniform
Limited Partnership Act. Distributions of profits are made solely at the
discretion of the General Partner.
Responsibility for managing the Partnership is vested solely in the General
Partner; however, the General Partner has delegated complete trading authority
to an unrelated party (note 4).
The Partnership bears all expenses incurred in connection with its trading
activities, including commodity brokerage commissions and fees payable to the
trading advisor, as well as legal, accounting, auditing, printing, mailing and
extraordinary expenses.
Limited Partners may cause any or all of their Units to be redeemed as of the
end of any month at net asset value on fifteen days' prior written notice.
The Partnership will be dissolved at December 31, 2020, or upon the occurrence
of certain events, as specified in the Limited Partnership Agreement.
(4) OTHER AGREEMENTS
John W. Henry & Company, Inc. was the Partnership's sole trading advisor from
May 1, 1994 through July 31, 2000. Effective August 1, 2000 through June 30,
2001, approximately 50% of the Partnership's assets were allocated to Trilogy
Capital Management, LLC's Barclay Futures Index Program. On June 30, 2001,
Trilogy was terminated as trading advisor. JWH's trading allocation was
increased to $40 million for its Strategic Allocation Program. Effective
September 1, 2001, the Partnership allocated $10 million in assets to Mount
Lucas Management Corporation's proprietary MLM Index Trading Program
(Unleveraged)(MLM).
JWH receives a monthly management fee equal to 0.167 (2% annually) (4% prior
to October 1, 2000) of the Partnership's month-end allocated assets, as
defined, and a quarterly incentive fee of 20% (15% April 1, 1995 through
October 1, 2000) of the Partnership's trading profits allocable to its trading
exclusive of interest income on allocated assets, as defined. The incentive
fee is retained by JWH even though trading losses may occur in subsequent
quarters; however, no further incentive fees are payable until any such
trading losses (other than losses attributable to redeemed units and losses
attributable to assets reallocated to another advisor) are recouped by the
Partnership.
MLM receives a monthly management fee of 0.0625% (approximately 0.75%
annually) of the Partnership's allocated assets.
The Clearing Broker charges the Partnership monthly brokerage commissions
equal to 0.5208% (1.0833% prior to April 1, 1995 and 0.50% from April 1, 1995
to August 31, 2001) of the Partnership's beginning-of-month net asset value,
as defined. Effective November 1, 1995, the General Partner receives a
management fee from the Clearing Broker of approximately 83% of the brokerage
commission charged by the Clearing Broker. Prior to November 1, 1995, the
General Partner received no management fee.
A portion of assets are deposited with a commercial bank and invested under
the direction of Horizon Cash Management, Inc. ("Horizon"). Horizon will
receive a monthly cash management fee equal to 1/12 of .25% (.25% annually) of
the average daily assets under management if the accrued monthly interest
income earned on the Partnership's assets managed by Horizon exceeds the 91-
day U.S. Treasury bill rate.
(5) FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK
The Partnership was formed to speculatively trade commodity interests. The
Partnership's commodity interest transactions and related cash balances are on
deposit with the Clearing Broker or CIS Financial Services, Inc. ("CISFS" or
"Forward Currency Broker" and collectively, the "Brokers") at all times. In
the event that volatility of trading of other customers of the Brokers
impaired the ability of the Brokers to satisfy the obligations to the
Partnership, the Partnership would be exposed to off-balance sheet risk. Such
risk is defined in Statement of Financial Accounting Standards No. 105 (SFAS
105) as a credit risk. To mitigate this risk, the Clearing Broker, pursuant
to the mandates of the Commodity Exchange Act, is required to maintain funds
deposited by customers, relating to futures contracts in regulated
commodities, in separate bank accounts which are designated as segregated
customers' accounts. In addition, the Clearing Broker has set aside funds
deposited by customers relating to foreign futures and options in separate
bank accounts, which are designated as customer secured accounts. Lastly, the
Clearing Broker is subject to the Securities and Exchange Commission's Uniform
Net Capital Rule, which requires the maintenance of minimum net capital at
least equal to 4% of the funds, required to be segregated pursuant to the
Commodity Exchange Act. The Clearing Broker and Forward Currency Broker both
have controls in place to make certain that all customers maintain adequate
margin deposits for the positions, which they maintain at each Broker. Such
procedures should protect the Partnership from the off-balance sheet risk as
mentioned earlier. Neither the Clearing Broker or the Forward Currency Broker
engage in proprietary trading and thus have no direct market exposure.
The counter party of the Partnership for futures contracts traded in the
United States and most non-U.S. exchanges on which the fund trades is the
Clearing House associated with the exchange. In general, Clearing Houses are
backed by the membership and will act in the event of nonperformance by one of
its members or one of the members' customers and as such should significantly
reduce this credit risk. In the cases where the Partnership trades on
exchanges on which the Clearing House is not backed by the membership, the
sole recourse of the Partnership for nonperformance will be the Clearing
House. The Forward Currency Broker is the counter party for the Partnership's
forward transactions. CISFS policies require that they execute transactions
only with top rated financial institutions with assets in excess of
$100,000,000.
The Partnership holds futures and futures options positions on the various
exchanges throughout the world and forward positions with CISFS, which
transacts with various top rated banks throughout the world. As defined by
SFAS 105, futures and foreign currency contracts are classified as financial
instruments. SFAS 105 requires that the Partnership disclose the market risk
of loss from all of its financial instruments. Market risk is defined as the
possibility that future changes in market prices may make a financial
instrument less valuable or more onerous. If the markets should move against
all of the futures positions held by the Partnership at the same time, and if
the markets moved such that the trading advisor was unable to offset the
futures positions of the Partnership, the Partnership could lose all of its
assets and the partners would realize a 100% loss. The Partnership has a
contract with one trading advisor who makes the trading decisions on behalf of
the Partnership. That trading advisor trades a program, which is diversified
among the various futures, contracts in the financials and metals group on
exchanges both in the U.S. and outside the U.S. Such diversification should
greatly reduce this market risk.
The following chart discloses the dollar amount of the unrealized gain or loss
on open contracts related to Commodity Interests for the Partnership as of
September 30, 2001:
COMMODITY GROUP UNREALIZED GAIN/(LOSS)
FOREIGN CURRENCIES (9,149)
STOCK INDICES 574,189
METALS 398,521
INTEREST RATE INSTRUMENTS 865,330
ENERGIES 228,953
AGRICULTURAL 573,838
____________
TOTAL 2,631,682
The range of maturity dates of these exchange traded open contracts is October
of 2001 to September of 2002. The average open trade equity for the period of
July 1, 2001 to September 30, 2001 was $2,382,380.
The margin requirement at September 30, 2001 was $6,977,484. To meet this
requirement, the Partnership had on deposit with the Clearing Broker
$1,303,233 in segregated funds, $1,218,611 in secured
funds and $1,701,600 in non-regulated funds.
(6) FINANCIAL STATEMENT PREPARATION
The interim financial statements are unaudited but reflect all adjustments
that are, in the opinion of management, necessary for a fair statement of the
results for the interim periods presented. These adjustments consist
primarily of normal recurring accruals. These interim financial statements
should be read in conjunction with the audited financial statements of the
Partnership for the year ended December 31, 2000, as filed with the Securities
and Exchange Commission on March 31, 2001, as part of its Annual Report on
Form 10-K.
The results of operations for interim periods are not necessarily indicative
of the operating results to be expected for the fiscal year.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operation
Fiscal Quarter ended September 30, 2001
The Partnership recorded a gain of $2,164,094 or $84.89 per Unit for the third
quarter of 2001. This compares to a loss of $1,597,603 or $58.14 per Unit for
the third quarter of 2000.
At September 30, 2001, John W. Henry & Company, Inc. (JWH) was managing
approximately $42 million in allocated assets for the Partnership, and Mount
Lucas Management Corporation's MLM Index (MLM) was managing approximately $10
million in allocated assets. As of September 30, the Partnership had
approximately $44 million in assets.
In July, the Partnership had a loss of 3.92%. The JWH Strategic Allocation
Program replaced the JWH Financial and Metals Program beginning in July. The
month was one of transition, especially for the currency markets, with a key
reversal in the dollar's upward movement and growing talk that the dollar
trend may be reaching an end. The currency sector under performed, while
diversified programs had more modest declines.
In July the MLM Index Program had not yet begun trading. The Partnership had
a loss of 1,651,375 or $64.87 per Unit in July.
In August, the Partnership had a gain of 5.63%. The monthly performance was
dominated by the active behavior of the central banks, with easing by the Fed,
the Bank of Japan, and the European Central Bank (ECB). These actions drove
trends in interest rates and currencies. The most significant gains came in
European interest rates and the dollar/Euro exchange rate.
The MLM Program did not trade in August. The Partnership had a gain of
$2,282,136 or $89.45 per Unit in August.
In September, the Partnership had a gain of 3.59%. The JWH SAP Program had a
gain of 3.69%, making profits in the global bond markets. Bond prices rose as
investors came out of equities and into bonds after the September 11th attacks
on America. Profits were made in precious metals, where prices rose as they
often do in a crisis. Profits were also made in overseas stock indices, which
tended to sell off as a reaction to the economic uncertainties of the month.
The MLM Index Program received its first allocation in the month of September
and posted a gain of 0.67%. The Partnership recorded a gain of
$1,533,334 or $60.16 per Unit in September.
During the quarter, additional Units sold consisted of 78.71 limited
partnership units; and 0 general partnership units. Additional Units sold
during the quarter represented a total of $125,000. Investors redeemed a
total of 268.67 Units during the quarter. At the end of the quarter
there were 25,327.03 Units outstanding (including 198.49 Units
owned by the General Partner).
During the fiscal quarter ended September 30, 2001, the Partnership had no
material credit exposure to a counter-party, which is a foreign commodities
exchange, or to any counter-party dealing in over the counter contracts, which
was material.
Fiscal Quarter ended September 30, 2000
The Partnership recorded a loss of $1,597,603 or $58.14 per Unit for the third
quarter of 2000. This compares to a loss of $6,815,439 or $284.10 per Unit for
the third quarter of 1999.
At September 30, 2000, John W. Henry & Company, Inc. (JWH) was managing
approximately 45% of the Partnership's assets using its Financial and Metals
Portfolio. Trilogy Capital Management, LLC (Trilogy) was managing
approximately 55% of the Partnership's assets.
In July, the Partnership had a loss of l.94%. JWH had a small gain in
currency trading which was not enough to offset losses of less than 1% each in
global interest rates, metals and foreign stock indices. The Partnership had
a loss of $726,174 or $26.26 per Unit in July.
In August, the Partnership had a gain of 2.07%. This was the first month that
the assets were allocated to both JWH and Trilogy's Barclay Futures Index
Program (BFIP). JWH had a loss of 0.56% from metals positions and a stock
index position in the Nikkei 225. JWH had gains in currencies as the Euro
reached three month lows versus the U.S. dollar and dragged the Swiss franc
and British pound with it. The BFIP had a gain of 4.45% for the month. The
long positions in the energy sector were responsible for the largest gains but
the Index had gains in seven of its nine sectors. The Index is composed of
the following sub indexes: Financials Index, Meats Index, Energies Index,
Currencies Index, Softs Index, Grains Index and Metals Index. The Partnership
had a gain of $809,507 or $28.50 per Unit in August.
In September, the Partnership had a loss of 4.31% as both JWH and the BFIP had
losing months. JWH was down 6.42% from losses in interest rates and
currencies. Both sectors had profits in the first few weeks of the month.
However, European Central Bank intervention to boost the Euro drove both
sectors to unprofitability for the month. Reverberations from the currency
markets were felt in the interest rate markets. Positions in non-U.S. stock
indices were essentially flat and metals positions were slightly profitable.
The BFIP had a smaller loss of 2.57% as long positions in energy and softs
(particularly sugar) had price corrections toward the end of the month.
Profits had been posted in both energy and softs in prior months. The
Partnership recorded a loss of $1,680,935 or $60.38 per Unit in September.
During the quarter, additional Units sold consisted of 1,407.72 limited
partnership units; and 0 general partnership units. Additional Units sold
during the quarter represented a total of $1,924,229. Investors redeemed a
total of 1,943.48 Units during the quarter. At the end of the quarter there
were 27,122.19 Units outstanding (including 198.49 Units owned by the General
Partner).
During the fiscal quarter ended September 30, 2000, the Partnership had no
material credit exposure to a counter-party, which is a foreign commodities
exchange, or to any counter-party dealing in over the counter contracts, which
was material.
During the quarter ended September 30, 2000, the General Partner of the
Partnership added Janet A. Mullen as Vice President.
Fiscal Quarter ended June 30, 2001
The Partnership recorded a loss of $3,358,859 or $128.90 per Unit for the
second quarter of 2001. This compares to a loss of $4,221,518 or $151.95 per
Unit for the second quarter of 2000.
The Partnership continued to employ two different trading advisors for the
second quarter 2001. The Fund had a loss of 7.31% in April as both advisors
suffered losses. The JWH firm had reversals of trends that had created
profits in the first quarter, mostly in currencies and interest rates. The
Barclay Futures Index Program (BFIP) gave back most of its gains from March
with losses in six out of seven sectors traded. The Partnership recorded a
loss of $3,394,496 or $130.21 per unit in April.
May was a positive month for the Fund (up 1.51%), with both JWH and the BFIP
showing profits. On the JWH side, currencies led the way with the dollar
showing strength against the Euro and Swiss franc. Profits were also seen in
the British pound. Interest rate positions were slightly negative for JWH, as
were overseas stock indexes and metals. The BFIP had gains in 5 out of 7
sectors traded. They were, in this order, softs, energies, grains, financials
and currencies. The two losing sectors were metals and meats. The Partnership
recorded a gain of $641,062 or $24.92 per unit in May.
June saw a loss of 1.41% for the Fund. The JWH programs were down 4.29%
coming from losses in interest rate and currency sectors. However, the JWH
losses were somewhat offset by the BFIP gain of 1.92% coming in six of their
seven sectors traded. The largest gain for BFIP came in softs, following by
metals and energies. The Partnership recorded a loss of $605,424 or $23.61 per
Unit in June.
During the quarter, no additional Units were sold. Investors redeemed a total
of 553.01 Units during the quarter. At the end of the quarter there were
25,516.98 Units outstanding (including 198.49 Units owned by the General
Partner).
During the fiscal quarter ended June 30, 2001, the Partnership had no material
credit exposure to a counter-party, which is a foreign commodities exchange,
or to any counter-party dealing in over the counter contracts, which was
material.
Fiscal Quarter ended June 30, 2000
The Partnership recorded a loss of $4,221,518 or $151.95 per Unit for the
second quarter of 2000. This compares to a gain of $6,901,733 or $281.62 per
Unit for the second quarter of 1999.
At June 30, 2000, John W. Henry & Company, Inc. (JWH) was managing 100% of the
Partnership's assets using its Financial and Metals Portfolio. Effective in
the near future, a portion of the Partnership's assets will be re-allocated
from John W. Henry Company's Financial and Metals Portfolio to Trilogy Capital
Management. Exact allocations will be reported in the 3rd quarter report.
In April, volatility in stocks led to a stronger U.S. dollar versus Euro and
profits for the Partnership. Despite an interest rate increase by European
central banks, the dollar reached an all time high versus the Euro. Additional
profits were accrued in long dollar positions against the British, Swiss, and
Australian currencies. Stock index trading suffered, especially in Japan.
Despite the metals being up slightly, trading in non-financial markets was
down. The Partnership recorded a gain of $739,206 or $25.36 per unit in April.
In May, mixed inflationary signals set the scene for two major trend
reversals. The U.S. interest rate market had a volatile change of direction as
rates headed lower and the Euro abruptly reversed its long term down trend
versus the U.S. dollar. After having been profitable for the majority of May,
the Trust closed lower when both trends reversed. Trading in U.S. bonds was
down sharply, as was Euro denominated interest rate trading. After hitting
all-time lows against the dollar in April, the Euro appreciated and profits
accumulated in April by the Partnership were given back. Short positions in
the Nikkei made the stock index sector the only positive performing financial
area. Trading in metals was flat. The Partnership recorded a loss of
$1,053,813 or $37.30 per unit in May.
In June, uncertainty regarding an economic slowdown in the U.S. and an
interest rate rise in Europe provided a conflicting climate for trading. These
events created problems in the currency sector, which was the worst performing
area in June. The concentration of trading losses occurred in the Euro. The
Partnership's positions in interest rates, metals and stock indices were
unprofitable as well. The Partnership recorded a loss of $3,906,010 or $140.01
per Unit in June.
During the quarter, additional Units sold consisted of 6.34 limited
partnership units; and 0 general partnership units. Additional Units sold
during the quarter represented a total of $10,000. Investors redeemed a total
of 1,496.46 Units during the quarter. At the end of the quarter there were
27,657.95 Units outstanding (including 198.49 Units owned by the General
Partner).
During the fiscal quarter ended June 30, 2000, the Partnership had no material
credit exposure to a counter-party, which is a foreign commodities exchange,
or to any counter-party dealing in over the counter contracts, which was
material.
Fiscal Quarter ended March 31, 2001
The Partnership recorded a gain of $4,275,321 or $163.15 per Unit for the
first quarter of 2001. This compares to a loss of $5,502,945 or $200.52 per
Unit for the first quarter of 2000.
The Partnership continued to employ two different trading strategies for the
first quarter 2001. The Fund was down 1.08% in January. The John W. Henry &
Company Financial and Metals Portfolio (JWH) was profitable for the month due
to interest rate positions. A significant portion of the positive returns
occurred during the last days of the month surrounding the Fed cut in rates on
January 21st. In spite of the unusual action of two 50 basis point rate cuts
by the Fed in a single month, bond prices actually declined by just over 2
points for January. All the remaining sections traded, currencies, non-US
stock indices and metals, incurred losses. The Barclay Futures Index Program
(BFIP) had an allocation of approximately 50% of the Fund's assets for the
first quarter 2001. In January the Index had a decline for the Fund of 6.03%.
The largest losses came in the energies and grains and overall six of the
seven sub-indexes (or sectors) were negative. The only exception was profits
in softs, especially sugar. All in all, the Partnership posted a loss of
$455,012 or $17.43 per Unit in January.
The Fund was up 0.78% in February. The JWH allocation was again positive with
gains in short term interest rates. The short term rates reacted to central
bank easing and the massive rally in the Japanese government Bond as the
Japanese economy showed signs of sputtering, realized gains. After
eliminating their zero interest rate policy last August because of the belief
that a recovery was around the corner, the Bank of Japan is again following a
monetary policy of easing as rates were brought down 15 basis points. The
Japanese stock market reacted and the Nikkei stock index hit a 15 year low
during February. Currencies suffered losses for the month as they were
affected by a weakening in the euro, which offset some of the earlier gains
from the beginning of the year. Late in the month, the euro tumbled to two-
month lows against the dollar in the wake of Turkey's lira currency float.
Market concerns about European bank exposure to Turkish assets helped push the
euro, already trending lower during the month, to fresh troughs. Metals were
slightly unprofitable for the month. The BFIP allocation of the Fund lost
1.35%. The passive index had losses in metals and currencies and profits in
meats, softs, and energies. Overall, the Partnership posted a gain of
$318,381 or $12.51 per Unit in February.
The Fund was up 10.42% in March. The JWH program was up 12.88% with all four
sectors being profitable. Currencies led the way due to continued weakness in
the Japanese yen, although the other currencies were also profitable.
Declining interest rates also helped for the month, led by the Euro Bund and
the Japanese government bond. Many attributed the strength in bond prices to
be the result of the 'flight to safety' due to continued weakness in the
equity markets. Stock index trading was mixed and there was a small gain in
metals. The BFIP gained back its losses from January and February with a
positive 7.49% result in March. The gains came in the softs, metals, grains,
currencies and energies. Smaller losses came in meats and financials.
Overall, the Partnership posted a gain of $4,411,952 or $168.07 per Unit in
March.
During the quarter, additional Units sold consisted of 1026.49 limited
partnership units; there were no general partnership units sold during the
quarter. Additional Units sold during the quarter represented a total of
$1,656,356. Investors redeemed a total of 1,060.18 Units during the quarter.
At the end of the quarter there were 26,069.99 Units outstanding (including
198.49 Units owned by the General Partner).
During the fiscal quarter ended March 31, 2000, the Partnership had no credit
exposure to a counterparty, which is a foreign commodities exchange, or to any
counter party dealing in over the counter contracts, which was material.
Fiscal Quarter ended March 31, 2000
The Partnership recorded a loss of $5,502,945 or $200.52 per Unit for the
first quarter of 2000. This compares to a loss of $3,835,309 or $151.17 per
Unit for the first quarter of 1999.
In the first month of the quarter the Partnership posted a loss resulting
primarily from volatility in the currency sector. The Partnership posted a
loss for the second month of the quarter resulting primarily from trading in
global interest rates. During the third month of the quarter currency
destabilization and massive capital shifts out of the U.S. dollar resulted in
a loss for the Partnership. Overall, the first quarter of fiscal 2000 ended
negatively for the Partnership accounts managed by JWH. At March 31, 2000,
John W. Henry & Company, Inc. was managing 100% of the Partnership's assets
using its Financial and Metals Portfolio.
January 2000 marked the turning of the millennium. This coupled with the
build-up to Y2K came and went without a hitch. However, the currency sector
was all but quiet as extreme volatility prompted large swings in the price of
the U.S. dollar relative to the Japanese yen. Within the first couple of
days of the New Year, the Japanese banks intervened and started pouring money
into the dollar. This abrupt reversal in the dollar/yen relationship resulted
in a reversal of the Partnership positions from long yen to short yen within a
matter of days. Similarly, yen trading relative to the euro and Swiss franc
contributed to Partnership losses. Short Australian dollar positions proved
difficult and also resulted in losses. Stock indices, namely the Nikkei fell
in response to volatility in the tech sector, which is factored into that
index. Long positions hurt the Partnership performance. Despite realizing
profits from short U.S. bond and long Japanese Government Bond positions, the
Partnership posted overall losses. All in all, the Partnership posted a loss
of $1,624,69 or $71.22 per Unit in January.
Changing expectations regarding economic growth and inflation created a
difficult trading environment in February. The strategic news item was the
U.S. Federal Reserve's decision to buy back part of the debt, which led to a
powerful rally in the U.S.30-year bond. The decision by the Fed created havoc
in the Partnership interest rate portfolio, which was dominated by short
positions. Losses were taken in North American, Asian, and European interest
rates. The yield on the 10-year U.S. government bond currently exceeds that
of the 30-year, creating an inverted yield curve, which is a very unusual
occurrence. Currency trading was mixed. Profitable long U.S. dollar positions
were bolstered by the revised 4th quarter Gross National Product number, which
reflected a robust economy. However, gains in the dollar were offset by losses
incurred by long Europe/short Japan positions. Precious metals trading
suffered as gold prices rallied and then fell sharply. On March 2, the
General Partner received a letter from Verne Sedlacek, President of John W.
Henry & Company, Inc. detailing modifications to the Financial and Metals
trading program. All changes are designed to add balance to the program
without giving up any upside potential. Most noteworthy are the dramatic
reductions in precious metals and Far Eastern interest rate trading as well as
the addition of offshore stock indices, base metals, and the expansion of non-
dollar currency trading. JWH remains steadfast in their commitment to
research. Overall, the Partnership posted a loss of $2,925,475 or $97.24 per
Unit in February.
In March, profit taking in U.S. tech stocks led to massive capital shifts out
of the dollar and into yen. These events destabilized currency and stock
markets worldwide. The appreciation of the yen contributed the majority of the
losses to the Partnership in that long positions in dollar and euro versus the
yen both suffered. Marginal gains in dollar positions against Europe and
Australia's currencies proved inadequate in offsetting these losses.
Performance in precious, as well as industrial metals was down slightly.
Positive performance in March came from the interest rate sector. The 7%
correction in tech stocks coupled with the U.S. Treasury's continued buying of
longer dated bonds led to positive performance in our bond position. The
European Central Bank's decision to raise short-term interest rates led to
purchasing European bonds, which assisted our position as well. Overall, the
Partnership posted a loss of $952,778 or $32.06 per Unit in March.
During the quarter, additional Units sold consisted of 8,388.88 limited
partnership units; there were no general partnership units sold during the
quarter. Additional Units sold during the quarter represented a total of
$14,033,699. Investors redeemed a total of 2,054.59 Units during the quarter.
At the end of the quarter there were 29,148.08 Units outstanding (including
198.49 Units owned by the General Partner).
During the fiscal quarter ended March 31, 2000, the Partnership had no credit
exposure to a counter party, which is a foreign commodities exchange, or to
any counter party dealing in over the counter contracts, which was material.
See Footnote 5 of the Financial Statements for procedures established by the
General Partner to monitor and minimize market and credit risks for the
Partnership. In addition to the procedures set out in Footnote 5, the General
Partner reviews on a daily basis reports of the Partnership's performance,
including monitoring of the daily net asset value of the Partnership. The
General Partner also reviews the financial situation of the Partnership's
Clearing Broker on a monthly basis. The General Partner relies on the
policies of the Clearing Broker to monitor specific credit risks. The
Clearing Broker does not engage in proprietary trading and thus has no direct
market exposure, which provides the General Partner assurance that the
Partnership will not suffer trading losses through the Clearing Broker.
Item 3. Quantitative and Qualitative Disclosures
About Market Risk
There has been no material change with respect to market risk since the
"Quantitative and Qualitative Disclosures About Market Risk" was made in the
Form 10K of the Partnership dated December 31, 2000.
Part II. OTHER INFORMATION
Item 1. Legal Proceedings
The Partnership and its affiliates are from time to time parties
to various legal actions arising in the normal course of business. The
General Partner believes that there is no proceedings threatened or pending
against the Partnership or any of its affiliates which, if determined
adversely, would have a material adverse effect on the financial condition or
results of operations of the Partnership.
Item 2. Changes in Securities
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits
Exhibit-27
b) Reports on Form 8-K
None
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 and thereunto duly authorized.
EVEREST FUTURES FUND, L.P.
Date: November 13, 2001 By: Everest Asset Management, Inc.,
its General Partner
By: ____________________________
Peter Lamoureux
President
Part I. Financial Information
Item 1. Financial Statements
"Following are Financial Statements for the fiscal quarter ending Sep 30,
2001"
Fiscal Quarter Year to Date Fiscal Year
Fiscal Quarter Year to Date
Ended 9/30/01 to 9/30/01 Ended 12/31/00 Ended
9/30/00 to 9/30/00
Statement of
Financial Condition X X
Statement of
Operations X X X X
Statement of Changes
in Partners' Capital X
Statement of
Cash Flows X X
Notes to Financial
Statements X
"EVEREST FUTURES FUND, LP"
COMBINED STATEMENTS OF FINANCIAL CONDITION
UNAUDITED
"Sep 30, 2001" "Dec 31, 2000"
ASSETS
Cash and cash equivalents "32,922,705 " "19,699,842 "
Equity in commodity trading accounts:
Amount Due from broker "4,203,444 " "3,679,722 "
Net unrealized trading gains on open contracts "2,631,682 "
"5,019,780 "
"Investments, at fair value" "4,714,945 " "14,340,365 "
Tax receivable 0 "36,445 "
Interest receivable "91,329 " "299,333 "
Total assets "44,564,105 " "43,075,487 "
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Accrued expenses "20,633 " "25,700 "
Commissions payable "177,972 " "160,192 "
Advisor's management fee payable "76,564 " "68,143 "
Advisor's incentive fee payable 0 0
Redemptions payable "278,528 " "572,530 "
Deferred Partnership offering proceeds 0 0
Selling and Offering Expenses Payable "1,250 " 0
Total liabilities "554,947 " "826,565 "
Partners' Capital:
" Limited partners (25,128.54 and 25,905.20 units"
" outstanding at 9/30/01 and 12/31/00, respectively)" " 43,664,253 "
"41,927,664 "
(see Note 1)
General partners (198.49 units outstanding
at 9/30/01 and 12/31/00.) " 344,905 " "321,258 "
(see Note 1)
Total partners' capital "44,009,158 " "42,248,922 "
" Total liabilities, minority interest,"
and partners' capital "$44,564,105 " "$43,075,487 "
Net asset value per outstanding unit of Partnership
interest "$1,737.64 " "$1,618.50 "
"This Statement of Financial Condition, in the opinion of management, reflects
all adjustments necessary"
to fairly state the financial condition of Everest Futures Fund. (See Note 6)
"EVEREST FUTURES FUND, L.P."
COMBINED STATEMENTS OF OPERATIONS
"For the period January 1, 2001 through Sep 30, 2001"
UNAUDITED
"Jul 1, 2001" "Jan 1, 2001" "Jul 1, 2000"
"Jan 1, 2000"
through through through through
"Sep 30, 2001" "Sep 30, 2001" "Sep 30, 2000"
"Sep 30, 2000"
REVENUES
Gains on trading of commodity futures
" and forwards contracts, physical"
commodities and related options:
Realized gain (loss) on closed positions "152,628 " "6,373,810 "
"286,559 " "(7,077,577)"
Change in unrealized trading gain (loss)
on open contracts "2,390,907 " "(2,388,098)"
"(1,597,528)" "(2,762,900)"
Change in net unrealized gain (loss) on investments "(46,189)"
"(41,997)" "6,470 " "37,442 "
Net foreign currency translation gain (loss) "92,050 " "135,998 "
"(60,260)" "(332,305)"
Brokerage Commissions "(629,458)" "(1,915,921)"
"(587,180)" "(1,950,492)"
Total trading income (loss) "1,959,939 " "2,163,791 "
"(1,951,940)" "(12,085,833)"
" Interest income, net of cash management fees" "427,716 "
"1,523,056 " "610,584 " "1,804,811 "
Total income (loss) "2,387,655 " "3,686,847 "
"(1,341,356)" "(10,281,022)"
General and administrative expenses
Advisor's management fees "208,423 " "531,318 " "250,745 "
"1,129,651 "
Advisor's incentive fees 0 "29,399 " 0 0
Administrative expenses "15,138 " "45,573 " "14,141 "
"10,411 "
Total general and administrative expenses "223,561 " "606,291 "
"264,886 " "1,140,062 "
Minority Interest 0 0 "8,639 " "99,920 "
Net income (loss) "2,164,094 " "3,080,556 "
"(1,597,603)" "(11,321,164)"
PROFIT (LOSS) PER UNIT OF
PARTNERSHIP INTEREST $84.89 $119.14 ($58.14)
($410.61)
(see Note 1) (see Note 1)
"This Statement of Operations, in the opinion of management, reflects all
adjustments "
necessary to fairly state the financial condition of Everest Futures Fund.
(See Note 6)
"EVEREST FUTURES FUND, LP"
COMBINED STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
"For the period January 1, 2001 through Sept 30, 2001"
UNAUDITED
Limited General
Units* Partners Partners Total
"Partners' capital at Jan 1, 2001" "26,103.69 " "41,927,664 "
"$321,258 " "$42,248,922 "
Net profit (loss) "3,056,909 " "23,647 "
"3,080,555 "
Additional Units Sold "1,105.20 " "1,781,356 " 0
"1,781,356 "
(see Note 1)
Redemptions (see Note 1) "(1,881.86)" "(3,101,676)"
0 "(3,101,676)"
"Partners' capital at Sept 30, 2001" "25,327.03 " "$43,664,253
" "$344,905 " "$44,009,158 "
Net asset value per unit
" January 1, 2001(see Note 1)" "1,618.50 " "1,618.50 "
Net profit (loss) per unit (see Note 1) 119.14 119.14
Net asset value per unit
" Sept 30, 2001" "$1,737.64 " "$1,737.64 "
* Units of Limited Partnership interest.
"This Statement of Changes in Partners' Capital, in the opinion of management,
reflects all"
adjustments necessary to fairly state the financial condition of Everest
Futures Fund. (See Note 6)
"EVEREST FUTURES FUND, LP"
COMBINED STATEMENTS OF CASH FLOWS
UNAUDITED
"Jan 1, 2001" "Jan 1, 2000"
through through
"Sept 30, 2001" "Sept 30, 2000"
Net profit (loss) "3,080,556 " " (11,321,164)"
Adjustments to reconcile net profit
(loss) to net cash provided by
(used in) operating activities:
Change in assets and liabilities:
Unrealized gain (loss) on open
futures contracts "2,388,098 " " 2,762,900 "
Interest receivable "208,004 " " 441,697 "
Taxes Receivable "36,445 " -
Accrued liabilities "21,134 " " (109,686)"
Redemptions payable "(294,002)" " 313,993 "
" Investments, at fair value" "9,625,420 " " 6,470,745 "
Deferred Offering Proceeds 0
Selling and Offering Expenses Payable "1,250 " " 16,322 "
Change in Minority Interest " (452,105)"
Net cash provided by (used in)
operating activities "15,066,906 " "(1,877,298)"
Cash flows from financing activities:
Units Sold "1,781,356 " "15,967,928 "
Partner redemptions "(3,101,676)" "(8,232,970)"
Net cash provided by (used in)
financing activities "(1,320,320)" "7,734,958 "
Net increase (decrease) in cash "13,746,586 " "5,857,660 "
Cash at beginning of period "$23,379,564 " "$21,692,642 "
Cash at end of period "$37,126,150 " "$27,550,302 "
"This Statement of Cash Flows, in the opinion of management, reflects all
adjustments "
necessary to fairly state the financial condition of Everest Futures Fund.
(See Note 6)