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 June 30, 2006
Commission File Number 0-17555
THE EVEREST 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.)
1100 North 4th Street, Suite 143, 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
Indicate by check mark whether the registrant is a large accelerated filer,
an accelerated filer, or a non-accelerated filer (as defined
in Rule 12b-2 of the Exchange Act). (Check one):
Large accelerated filer Accelerated filer
Non-accelerated filer X
Indicate by check mark whether the registrant is a shell company (as defined
in Rule 12b-2 of the Act). Yes No X
2
PART I. FINANCIAL INFORMATION
Item 1 Financial Statements
Following are financial Statements for the fiscal quarter ending June 30, 2006
Fiscal Quarter Year to Date Fiscal Year Fiscal Quarter Year to Date
Ended 6/30/06 to 6/30/06 Ended 12/31/05 Ended 6/30/05 to 6/30/05
------------- ------------ -------------- -------------- -------------
Statement of
Financial Condition X X
Schedule of Investments X
Statement of Operations X X X X
Statement of Changes
in Partner's Capital X
Statements of Cash Flows X X X X
Notes to Financial X
Statements
see accompanying notes to financial statements
3
EVEREST FUND, L.P.
(An Iowa Limited Partnership)
STATEMENTS OF FINANCIAL CONDITION
---------------------------------
UNAUDITED
JUNE 30, 2006 DECEMBER 31, 2005
----------------- -----------------
ASSETS
Cash and cash equivalents $17,553,145 $21,483,743
Equity in commodity trading accounts:
Cash 3,434,721 4,102,121
Net unrealized trading gains (losses) on open contracts (520,529) 31,920
Receivable from Refco Capital Markets, Ltd. (Note 1) 7,482,332 7,482,332
Interest receivable 102,691 92,364
----------- -----------
TOTAL ASSETS $28,052,360 $33,192,480
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
LIABILITIES:
Redemptions payable $ 668,790 $ 426,556
General partner management fee payable 91,013 120,693
Advisor's management fee payable 38,570 48,461
Accrued expenses 23,400 57,519
----------- -----------
TOTAL LIABILITIES 821,774 653,229
----------- -----------
PARTNERS' CAPITAL
General partners, I shares (0 and 0 units outstanding) -- --
Limited partners, A Shares (8,319.82 and 9,879.80 units
outstanding) 17,387,895 22,111,952
Limited partners, I Shares (892.125 and 1,097.96 units
outstanding) 1,982,283 2,570,984
Limited partners, AA Shares (3,008.60 and 3,008.60 units
outstanding) 7,062,699 7,059,021
Limited partners, II Shares (326.71 and 326.71 units
outstanding) 797,709 797,294
----------- -----------
TOTAL PARTNERS' CAPITAL 27,230,586 32,539,251
----------- -----------
TOTAL LIABILITIES AND PARTNERS'
CAPITAL $28,052,360 $33,192,480
=========== ===========
The accompanying notes are an integral part of these statements.
4
EVEREST FUND, L.P.
(AN IOWA LIMITED PARTNERSHIP)
CONDENSED SCHEDULE OF INVESTMENTS
JUNE 30, 2006
-------------
UNAUDITED
NUMBER OF MARKET VALUE % OF PARTNERS'
EXPIRATION DATES CONTRACTS (OTE) CAPITAL
---------------- --------- ------------ --------------
LONG POSITIONS:
FUTURES POSITIONS
Interest rates Sep 06 - Mar 07 9 $ (42,560) -0.16%
Energy Jun 06 - Jul 06 105 44,629 0.14%
Agriculture Sep 06 - Mar 07 42 14,010 0.05%
Currencies Jun 07 38 (9,547) -0.04%
----------- -----
18,455 0.07%
FORWARD POSITIONS
Currencies Sep 06 72,714 0.27%
----------- -----
Total long positions 91,169 0.33%
----------- -----
SHORT POSITIONS:
FUTURES POSITIONS
Interest rates Jun 06 - Dec 06 744 (34,423) -0.13%
Metals 31 (77,700) -0.29%
Energy Jul 06 24 102,840 0.38%
Agriculture May 06 191 (118,068) -0.43%
Currencies Mar 06 96 14,400 0.05%
Indices 33 (55,882) -0.21%
----------- -----
1,393,916 4.50%
FORWARD POSITIONS
Currencies Mar 06 - Jun 06 (442,865) -1.63%
----------- -----
Total short positions (611,698) -2.25%
----------- -----
TOTAL OPEN CONTRACTS (520,529) -1.91%
CASH AND CASH EQUIVALENTS 17,553,145 64.46%
CASH ON DEPOSIT WITH BROKERS 10,917,052 40.09%
LESS LIABILITIES IN EXCESS OF OTHER ASSETS (719,082) -2.64%
----------- -----
NET ASSETS $27,230,586 100%
=========== =====
The accompanying notes are an integral part of this statement.
5
EVEREST FUND, L.P.
(AN IOWA LIMITED PARTNERSHIP)
STATEMENTS OF OPERATIONS
FOR THE PERIOD APRIL 1, 2006 THROUGH JUNE 30, 2006
--------------------------------------------------
UNAUDITED
APRIL 1, 2006 JANUARY 1, 2006
THROUGH THROUGH
JUNE 30, 2006 JUNE 30, 2006
---------------- ---------------
TRADING INCOME (LOSS)
Net realized trading loss
on closed contracts $(2,133,711) $ (162,183)
Change in net unrealized trading gain
(loss) on open contracts (2,298,034) (515,461)
Net foreign currency translation loss (31,508) (32,245)
Brokerage Commissions (33,270) (75,931)
----------- ------------
NET TRADING INCOME (LOSS) (229,100) (785,820)
Interest income, net of cash management fees 265,028 497,800
----------- ------------
TOTAL INCOME (LOSS) 35,928 (288,020)
----------- ------------
EXPENSES:
General partner management fees 296,305 586,731
Advisor Management fees 132,731 266,133
Administrative expenses 27,541 46,947
----------- ----------
TOTAL EXPENSES 456,578 899,811
----------- ----------
NET INCOME (LOSS) $ (420,650) $(1,187,831)
=========== ===========
NET INCOME (LOSS) PER UNIT OF PARTNERSHIP INTEREST
A SHARES, OUTSTANDING ENTIRE PERIOD $ (77.87) $ (148.16)
=========== ==========
NET INCOME (LOSS) PER UNIT OF PARTNERSHIP INTEREST
I SHARES, OUTSTANDING ENTIRE PERIOD $ (64.19) $ (119.61)
=========== ==========
NET INCOME (LOSS) PER UNIT OF PARTNERSHIP INTEREST
AA SHARES, OUTSTANDING ENTIRE PERIOD $ (0.80) $ 1.22
=========== ==========
NET INCOME (LOSS) PER UNIT OF PARTNERSHIP INTEREST
II SHARES, OUTSTANDING ENTIRE PERIOD $ (0.84) $ 1.27
=========== ==========
The accompanying notes are an integral part of these statements.
6
EVEREST FUND, L.P.
(AN IOWA LIMITED PARTNERSHIP)
STATEMENTS OF OPERATIONS-CONTINUED
FOR THE PERIOD APRIL 1, 2005 THROUGH JUNE 30, 2005
--------------------------------------------------
UNAUDITED
APRIL 1, 2005 JANUARY 1, 2005
THROUGH THROUGH
JUNE 30, 2005 JUNE 30, 2005
---------------- ---------------
TRADING INCOME (LOSS)
Net realized trading loss
on closed contracts $ 246,241 $(1,145,905)
Change in net unrealized trading gain
(loss) on open contracts 1,891,027 623,722
Net foreign currency translation gain (loss) 69,253 (44,823)
Brokerage Commissions (54,585) (131,350)
----------- ------------
NET TRADING INCOME (LOSS) (2,151,936) (698,356)
Interest income, net of cash management fees 242,367 455,653
----------- ------------
TOTAL INCOME LOSS) (2,394,303) (242,703)
----------- ------------
EXPENSES:
General partner management fees 428,272 851,499
Advisor Management fees 171,220 340,241
Administrative expenses 13,658 33,824
----------- ----------
TOTAL EXPENSES 613,150 1,225,564
----------- ----------
NET INCOME (LOSS) $ 1,781,153 $(1,468,267)
=========== ===========
NET INCOME (LOSS) PER UNIT OF PARTNERSHIP INTEREST
A SHARES, OUTSTANDING ENTIRE PERIOD $ 113.12 $ (105.11)
=========== ==========
NET INCOME (LOSS) PER UNIT OF PARTNERSHIP INTEREST
I SHARES, OUTSTANDING ENTIRE PERIOD $ (134.00) $ (68.84)
=========== ==========
NET INCOME (LOSS) PER UNIT OF PARTNERSHIP INTEREST
AA SHARES, OUTSTANDING ENTIRE PERIOD $ $
=========== ==========
NET INCOME (LOSS) PER UNIT OF PARTNERSHIP INTEREST
II SHARES, OUTSTANDING ENTIRE PERIOD $ $
=========== ==========
The accompanying notes are an integral part of these statements.
7
EVEREST FUND, L.P.
(An Iowa Limited Partnership)
STATEMENT OF CHANGES IN PARTNERS' CAPITAL
FOR THE PERIOD JANUARY 1, 2006 THROUGH JUNE 30, 2006
----------------------------------------------------
UNAUDITED
LIMITED
UNITS LIMITED PTRS UNITS PTRS
A SHARES A SHARES I SHARES I SHARES
---------- ------------ -------- ----------
BALANCES, January 1, 2006 9,979.80 22,111,952 1,097.96 2,570,984
Additional Units Sold 389.45 850,495 32.17 75,000
Redemptions (1,949.44) (4,509,218) (238.01) (535,861)
Less Offering Costs -- -- -- (1,250)
Net Loss -- (1,065,334) -- (126,590)
---------- ------------ -------- ----------
BALANCES, June 30, 2006 8,319.82 $ 17,387,895 892.13 $1,982,283
========== ============ ======== ==========
Net asset value per unit,
January 1, 2006, or
since inception 10/31/05. $ 2,238.10 $ 2,341.59
Net profit (loss) per unit (148.16) (119.61)
Net asset value per unit
June 30, 2006 $ 2,089.94 $2,221.98
============ ==========
UNITS LIMITED UNITS LIMITED
AA PTRS AA II PTRS II
SHARES SHARES SHARES SHARES TOTAL
-------- ---------- ------ --------- ------------
BALANCES, January 1, 2006 3,008.60 7,059,021 326.71 797,294 32,539,251
Additional Units Sold -- -- -- -- 925,495
Redemptions -- -- -- -- (5,045,079)
Less Offering Costs -- -- -- -- (1,250)
Net Profit (Loss) -- 3,677 -- 415 (1,187,831)
-------- ---------- ------ --------- ------------
BALANCES, June 30, 2006 3,008.60 $7,062,699 326.71 $ 797,709 $ 27,230,586
======== ========== ====== ========= ============
Net asset value per unit,
January 1, 2006 $ 2,346.28 $2,440.38
Net profit (loss) per unit 1.22 1.27
---------- ----------
Net asset value per unit
June 30, 2006 $ 2,347.50 $2,441.65
========== ==========
The accompanying notes are an integral part of these statements.
8
EVEREST FUND, L.P.
(An Iowa Limited Partnership)
STATEMENTS OF CASH FLOWS
FOR THE PERIOD JANUARY 1, 2006 THROUGH JUNE 30, 2006
----------------------------------------------------
UNAUDITED
APRIL 1, 2006 JANUARY 1, 2006
THROUGH THROUGH
JUNE 30, 2006 JUNE 30, 2006
----------------- -----------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (420,650) $ (1,187,831)
Adjustments to reconcile net loss to net cash provided by
(used in) operating activities:
Decrease (increase) in commodity futures trading accounts:
Cash 832,165 667,400
Unrealized gain or loss on open commodity futures contracts 2,335,033 552,449
Decrease (increase) in interest receivable 5,697 (10,327)
(Decrease) increase in management fees payable (3,069) (39,571)
(Decrease) increase in other accrued expenses (18,518) (34,119)
------------ ------------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES 2,730,658 (51,999)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Redemption of partnership units (3,716,955) (4,802,844)
Sale of partnership units, net 355,066 924,245
------------ ------------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES (3,361,889) (3,878,599)
------------ ------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (631,231) (3,930,598)
CASH AND CASH EQUIVALENTS, AT BEGINNING OF PERIOD 18,184,376 21,483,743
------------ ------------
CASH AND CASH EQUIVALENTS, AT END OF PERIOD $ 17,553,145 $ 17,553,145
============ ============
The accompanying notes are an integral part of these statements
9
EVEREST FUND, L.P.
(An Iowa Limited Partnership)
STATEMENTS OF CASH FLOWS-CONTINUED
FOR THE PERIOD JANUARY 1, 2005 THROUGH JUNE 30, 2005
----------------------------------------------------
UNAUDITED
APRIL 1, 2005 JANUARY 1, 2005
THROUGH THROUGH
JUNE 30, 2005 JUNE 30, 2005
----------------- -----------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (1,781,153) $ (1,468,267)
Adjustments to reconcile net loss to net cash
used in operating activities:
Decrease (increase) in commodity futures trading accounts:
Cash (819,446) 715,083
Unrealized gain or loss on open commodity futures contracts (1,928,654) (607,957)
Decrease (increase) in interest receivable (33,641) (39,152)
Decrease (increase) in incentive fees payable -- (85,111)
(Decrease) increase in management fees payable 14,825 (1,372)
(Decrease) increase in other accrued expenses (6,075) (20,117)
------------ ------------
NET CASH USED IN OPERATING ACTIVITIES (991,838) (1,506,893)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Redemption of partnership units (1,172,086) (1,917,339)
Sale of partnership units, net 1,894,194 3,910,883
------------ ------------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 722,108 1,993,544
------------ ------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (269,730) 486,651
CASH AND CASH EQUIVALENTS, AT BEGINNING OF PERIOD 25,655,347 24,898,966
------------ ------------
CASH AND CASH EQUIVALENTS, AT END OF PERIOD $ 25,385,617 $ 25,385,617
============ ============
The accompanying notes are an integral part of these statements
10
EVEREST FUND, L.P.
NOTES TO FINANCIAL STATEMENTS
June 30, 2006
(1) GENERAL INFORMATION AND SUMMARY
Everest Fund, L.P. (the "Partnership") is a limited partnership organized on
June 20, 1988 under the Iowa Uniform Limited Partnership Act (the 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. On September 12, 1991, the Partnership
changed its name to "Everest Futures Fund, L.P." The Partnership thereafter
has traded futures contracts and options on futures contracts on a
diversified portfolio of financial instruments and precious metals as well as
forward contracts on currencies. In November 2003 the Partnership changed its
name to its present form.
On July 1, 1995, the Partnership recommenced its offering under a
Regulation D, Rule 506 private placement. The private placement offering is
continuing at a gross subscripton price per unit equal to the net asset
value (NAV) per unit, plus an organization and offering cost reimbursement
fee payable to the General Partner, and an on going compensation fee equal
to 3% of the net asset value of Class A Units sold. The Class A Units
(retail shares) continue to be charged an initial 1% Offering and
Organization fee as a reduction to capital.
Effective June 4, 2004, the Partnership introduced a new share category,
Class I Units, or Institutional Units which have an ongoing Offering
and Organization fee of 1/12 of 0.10% of the NAV per unit (as defined)
per month. The private placement is continuing at a gross subscription
price per unit equal to the net asset value per unit, plus an organization
and offering cost reimbursement to the General Partner, and an ongoing
compensation fee equal to 1% of the net asset value of Class I Units sold.
The Partnership clears all of its futures and options on futures trades
through Calyon Financial, Inc. (CFI), its clearing broker, and all of its
foreign currency trading through Calyon Financial SNC (CFS)an affiliate of
CFI.
Receivable from Refco Capital Markets, Ltd.
On October 13, 2005, Refco, Inc. ("Refco") announced that liquidity within
one of its operating subsidiaries, Refco Capital Markets, Ltd. ("RCM"), was
no longer sufficient to continue operations and that RCM was imposing a
fifteen day moratorium on all of its activities in an attempt to protect the
value of that business. RCM acted as the Partnership ' s foreign currency
broker at that time and as of such date, approximately 20% of the Partnership
' s assets were held on deposit in accounts at RCM.
On October 17, 2005, Refco and certain subsidiaries filed a bankruptcy
petition in New York seeking protection from creditors under Chapter 11 of
the United States Bankruptcy Code. RCM was included in this filing and as a
result, all of the dealings with RCM are subject to control by the Bankruptcy
Court. In connection with the bankruptcy, the president of the General
Partner was appointed to the Official Creditors Committee on October 28,
2005. Based on information provided to the Partnership by RCM, the
Partnership has cash and open trade equity in neutral currency positions of
approximately $7,500,000 remaining at RCM. Management believes there are
substantial assets at RCM, but the amount of such assets which the
Partnership will ultimately recover, if any, is unknown at the present time.
Due to the above, effective October 31, 2005, the Partnership has created
Classes AA and II of shares and transferred to such classes the value of
Partnership assets held in RCM as of October 17, 2005, together with a
reserve for the estimated expenses of collection and related matters. The
amount of such assets which will become available to the Partnership, if any,
is dependent on several matters associated with the bankruptcy of RCM.
Depending on the disposition of these matters, the final net asset value may
differ materially from the preliminary amounts which the Partnership has
published since October 31, 2005. Redemptions of Classes AA and II are
restricted until the final net asset value can be determined. Subsequent to
October 31, 2005, redemptions and certain fees will only be calculated and
paid on the net asset value of Class A and Class I units, thus segregating
the assets held by RCM and the reserve established in connection with the RCM
legal proceedings.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Cash and Cash Equivalents
Cash equivalents represent short-term highly liquid investments with
maturities of 90 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.
Reclassifications
Certain prior year amounts have been reclassified to conform with the
current year classifications.
Revenue Recognition
Commodity futures contracts, forward contracts, physical commodities, and
related options are recorded on the trade date basis. 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.
Net Income (Loss) Per Unit of Partnership Interest
Net income (loss) per unit of partnership interest is the difference between
the net asset value per unit at the beginning and end of each period for
both.
Fair Value of Financial Instruments
The financial instruments held by the Company are reported in the statements
of financial condition at market or fair value, or at carrying amounts that
approximate fair value, due to their highly liquid nature and short-term
maturity. Commodity futures contracts, forward contracts, physical
commodities, and related options are valued as described above. The
receivable from RCM is valued at management ' s best estimate as described
above.
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. Realized and unrealized foreign exchange gains
or losses are included in trading income (loss) in the statements of
operations.
Income Taxes
No provision for income taxes has been made in the accompanying financial
statements as each partner is responsible for reporting income (loss) based
upon the pro rata share of the profits or losses of the Partnership.
Use of Estimates
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America 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 revenues
and expenses during the reporting 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 their capital contribution and profits, if any, and
such other amounts, as they may be liable for pursuant to the 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. The General Partner has delegated complete trading authority to an
unrelated party (note 4).
Subject to restrictions on the redemption of Series AA or Series II units by
existing investors as mentioned above, Limited Partners may cause any or all
of their Class A Units to be redeemed as of the end of any month at net asset
value on fifteen days' prior written notice to the Partnership, (for Class I
Units, as of the end of any quarter on forty-five days ' notice), or such
lesser period as is acceptable to the Partnership. Although the Agreement
does not permit redemptions for the first six months following a Limited
Partner ' s admission to the Partnership, the Agreement does permit the
Partnership to declare additional regular redemption dates. Class I Limited
Partners may cause any or all of their Units to be redeemed as of the end of
any quarter on 45 days ' prior written notice to the Partnership or such
lesser period as is acceptable to the Partnership. The Partnership will be
dissolved at December 31, 2020, or upon the occurrence of certain events, as
specified in the Limited Partnership Agreement.
(4) CONTRACTS AND AGREEMENTS
John W. Henry & Company, Inc. (JWH) began trading its Strategic Allocation
Program with a trading allocation of $40 million on July 1, 2001. JWH
receives a monthly management fee equal to 0.167% (2% annually) of the
Partnership ' s month-end net asset value, (as defined), and a quarterly
incentive fee of 20% of the Partnership ' s new net trading profits, (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.
Beginning in June 2003, John W. Henry & Company, Inc. (" JWH ") began trading
JWH Global Analytics Program (" GAP "); Currency Strategic Allocation Program
(" CSAP ") and Worldwide Bond Program (" WBP ") with a trading allocation of
$27 million.
Net brokerage commissions are recorded in the statements of operations as a
reduction of trading income.
Effective November 2003, the General Partner charges the Partnership a
monthly management fee equal to 0.50% of the Partnership ' s Class A
beginning-of-month net asset value. Effective June 2004, the General Partner
charges the Partnership a monthly management fee equal to 0.229% of the
Partnership ' s Class I beginning-of-month net asset value. From the monthly
management fee the General Partner deducts the round turn trading costs
and related exchange fees (between $5.80 to $10.70 per round turn trade
on domestic exchanges, and higher for foreign exchanges) and pays the
selling agents and certain other parties, if any, up to 50% of the fee
retained by the General Partner.
As of March 31, 2006 JWH ' s allocation was approximately $26.4 (including
approximately $3.3 million in notional funding). The General Partner may
replace or add trading advisors at any time.
The Partnership, through August 31, 2005, cleared all of its futures trades
through Cargill Investor Services, Inc. (" CIS ") and all of its foreign
currency trading activity through CIS Financial Services, Inc. (" CISFS "),
an affiliate of CIS. In September
2005, Refco Group Ltd. acquired CIS and CISFS and the clearing and related
services previously performed by CIS were performed by REFCO, LLC and the
foreign currency trading previously performed by CISFS was provided by Refco
Capital Markets, Ltd. Beginning in mid-October 2005, the Partnership engaged
Calyon Financial, Inc. (" CFI ") as the Partnership ' s futures and options
on futures broker, and engaged Calyon Financial, SNC (" CFS ") as the
Partnership's foreign currency or forwards currency broker, (collectively
referred to as the " Clearing Brokers "). The agreements provide that the
Clearing Brokers charge the Partnership brokerage commissions at the rate of
between $5.80 to 10.70 per round-turn trade, plus applicable exchange, give
up fees and NFA fees for futures contracts and options on futures contracts
executed on domestic exchanges and over the counter markets. For trades on
certain foreign exchanges, the rates may be higher.
The Partnership also reimburses the Clearing Brokers for all delivery,
insurance, storage or other charges incidental to trading and paid to third
parties.
The Partnership earns interest on 95% of the Partnership's average monthly
cash balance on deposit with its Brokers at a rate equal to the average 91-
day Treasury Bill rate for US Treasury Bills issued during that month.
Excluding amounts held at RCM, substantially all of cash and cash equivalents
at March 31, 2006 and 2005 are funds deposited with a commercial bank and
invested under the direction of Horizon Cash Management, Inc. (Horizon).
Horizon receives 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) TRADING ACTIVITIES AND RELATED RISKS
The Partnership engages in the speculative trading of U.S. and foreign futures
contracts, options on U.S. and foreign futures contracts, and forward contracts
(collectively " derivatives "). These derivatives include both financial and
non-financial contracts held as part of a diversified trading strategy. The
Partnership is exposed to both market risk, the risk arising from changes
in the market value of the contracts; and credit risk, the risk of
failure by another party to perform according to the terms of a contract.
The purchase and sale of futures and options on futures contracts requires
margin deposits with a Futures Commission Merchant (" FCM "). Additional
deposits may be necessary for any loss on contract value. The Commodity
Exchange Act (" CEAct ") requires an FCM to segregate all customer transactions
and assets from the FCM ' s proprietary activities. A customer ' s cash and
other property such as U. S. Treasury Bills, deposited with an FCM are
considered commingled with all other customer funds subject to the FCM ' s
segregation requirements. In the event of an FCM ' s insolvency, recovery may
be limited to a pro rata share of segregated funds available. It is possible
that the recovered amount could be less than the total of cash and other
property deposited.
The Partnership has cash and open positions on deposit in the amount of
$1,411,530 as of June 30, 2006 with an interbank market maker (Calyon Financial
SNC) in connection with its trading of forward contracts. In the event of
interbank market maker ' s insolvency, recovery of the Partnership assets on
deposit may be subject to forfeiture. In the normal course of business, the
Partnership does not require collateral from such interbank market maker.
Because forward contracts are traded in unregulated markets between principals,
the Partnership also assumes a credit risk, on its entire amount on deposit
from counter party non-performance.
For derivatives, risks arise from changes in the market value of the
contracts. Theoretically, the Partnership is exposed to a market
risk equal to the value of futures and forward contracts purchased
and unlimited liability on such contracts sold short. As both a
buyer and seller of options, the Partnership pays or receives
a premium at the outset and then bears the risk of unfavorable
changes in the price of the contract underlying the option.
The Partnership ' s policy is to continuously monitor its exposure
to market and counterparty risk through the use of a variety of
financial, position and credit exposure reporting and control
procedures. In addition, the Partnership has a policy of reviewing
the credit standing of each clearing broker or counter party
with which it conducts business.
The limited partners bear the risk of loss only to the extent of
the net asset value of their Partnership units.
The Partnership receivable from RCM of approximately $7.5 million
represents the Partnership ' s receivable from RCM, who is
currently in bankruptcy. These funds are unavailable to the
Partnership until the bankruptcy proceedings are finalized.
Net trading results from derivatives for the periods presented are
reflected in the statement of operations and equal gains (losses)
from trading less brokerage commissions. Such trading results
reflect the net gain arising from the Partnership ' s speculative
trading of futures contracts, options on futures contracts, and
forward contracts.
(6)FINANCIAL HIGHLIGHTS
The following financial highlights show the Partnership ' s financial
performance for the six months ended June 30, 2006. Total return is calculated
as the change in a theoretical limited partner ' s investment over the entire
period. An individual partner ' s total returns and ratios may vary from the
total return based on the timing of contributions and withdrawals.
Selected Financial Statistics and Ratios:
6/30/06 6/30/05
1. Total return: A Shares -6.62% -4.32%
I Shares -5.11% -2.79%
AA Shares 0.05%
II Shares 0.05%
2. Ratio to average net assets:
Total income A Shares -5.21% -4.36%
I Shares -5.27% -3.09%
AA Shares 0.05%
II Shares 0.05%
3. Expenses, excluding incentive fees:
A Shares 4.16% 3.68%
I Shares 2.63% 2.11%
AA Shares 0.07%
II Shares 0.07%
4. Incentive fees 0.00% 0.00%
5. Total expenses
A Shares 4.16% 3.68%
I Shares 2.63% 2.11%
AA Shares 0.07%
II Shares 0.07%
The total income and general and expense ratios are computed based upon the
weighted average net assets for the Partnership for the period ended June 30,
2006 and 2005.
(7) 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, 2005,
as filed with the Securities and Exchange Commission on May 15, 2006,
as part of its amended Annual Report on Form 10-K/A.
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 June 30, 2006
The Partnership recorded a loss of $420,650 or $77.87 per Unit of Class A Units
($64.19 for Class I Units, $0.80 for Class AA Units and $0.84 for Class II
Units) for the fiscal quarter ended June 30, 2006. This compares to a gain of
$1,781,153 or $113.12 per Unit of Class A Units ($134.00 for Class I Units) for
the fiscal quarter ended June 30, 2005. The quarter ended June 30, 2006
showed a loss of 3.59%( total return) for the Class A Units of the fund (2.81%
for the Class I Units, 0.03% for Class AA Units and 0.03% for Class II Units).
The Partnership continued to employ John W. Henry & Company, Inc. ' s (JWH)
GlobalAnalyticsR Family of Programs, Worldwide Bond Program and Currency
Strategic Allocation Program.
Class A Units were positive 13.63% in April 2006 resulting in a Net Asset Value
per unit of $2,463.35 as of April 30, 2006.
Class I Units were positive 13.50% resulting in a Net Asset Value
per unit of $2594.70 as of April 30, 2006.
The interest rate sector led performance in April with strong gains as
the Fund's systematic trend-following approach enabled it to profit
from higher global interest rates. The metal and currency sectors
also added to performance as both gold and silver continued to trend
higher on inflationary fears and increased demand, while currencies
benefited from a weakening U.S. dollar. The energy sector had gains
due to increased concerns over Iran's nuclear program. The indices
sectors had more modest gains, while the agriculture sector incurred
losses as performance within these sectors was hampered by volatility.
The fixed-income sector was the Fund's strongest performing sector as European,
Japanese and U.S. fixed income markets sold off. The metals sector was also
profitable as all components were positive for the month. Gold climbed above
$650/oz for the first time in 25-years after Iran failed to meet an April 28th
deadline to cooperate with United Nations inspectors who are trying to
determine if the country is enriching uranium for military purposes.
Also adding to performance was silver which rallied on speculation investor
demand willgrow as Barclays Bank PLC began offering an exchange-traded fund
backed by the metal. Silver has rallied 51 percent this year, and rose 17%
this month alone.
The currency sector was also positive on the month as the U.S. dollar fell on
expectations of narrowing interest rate differentials. The dollar fell 4.1
percent against the euro, the biggest monthly decline since December 2003 and
the British pound gained against the dollar for a fourth week, its longest
winning streak in a year. The largest gain in this sector was the euro, while
the largest loss was in the Japanese yen. Keeping with the prevailing theme
performance in the energy sector was also positive during the month. Concerns
that the UN Security Council will impose sanctions that could lead Iran, the
fourth-largest oil producer, to cut shipments drove crude oil for June delivery
to a new high of $75.35 a barrel on April 21st and 24th. Crude oil for June
delivery ended up 7.8% this month. The global stock indices sector was
slightly positive for the month as the Fund's performance was hindered by
increased geopolitical instability in the global stock markets, as well
as a volatile interest rate environment.
The agriculture sector was the Fund's worst performing sector for the month as
volatility hurt performance. Cotton limited the sectors losses, with the
largest loss occurring in N.Y. coffee as growers in Latin America and Africa
took advantage of a recent rally to sell beans.
In conclusion, the Fund's performance was strong for the month of April with
interest rates, metals and currencies leading profitability. As always, the
Fund stands ready to potentially take advantage of any continuing or new trends
that may emerge.
Update on the RCM recovery efforts
The Official Committee of Creditors in the Refco case has posted a website for
information and updates. It has a summary of events in October 05 through
February 06; a calendar of events for March 06; a bankruptcy basics primer;
FAQs; and a section to ask questions. The site is at: www.refcocommittee.com.
This may be too much information in too legal a format, and it is not specific
to the recovery efforts of any one investment fund, but at least something has
been organized. The questions and the FAQ section may be more common sense
based and have less legal terminology.
The Committee has been successful in bringing money into the various Refco
estates during the last month, with two legal actions settled or pending
settlement. In addition, on May 2nd, the Judge in the case granted the two RCM
groups two more weeks to work out a consensual plan which would allow the case
to remain in a Chapter 11. The general partner remains available to answer any
questions specific to the Everest Fund.
Class A Units were negative 3.85% in May 2006 resulting in a Net Asset
Value per unit of $2,368.52 as of May 31, 2006.
Class I Units were negative 3.24% resulting in a Net Asset Value per
unit of $2,510.69 as of May 31, 2006.
The Fund's performance was negative in May as the interest rate, metal,
agriculture and stock indices sectors suffered from large market corrections
during the second half of the month. Increased inflationary fears and concerns
over the global economy led investors to take profits and reduce risk
exposure. A major catalyst for the reversal was the news that the
Federal Reserve on May 10th signaled that "further policy firming may
yet be needed" instead of signaling a possible "pause" at it's next
meeting at the end of June. This caught the market by surprise causing
equity markets, which had been near or at record highs, to fall in
response. This news also eventually caused a "contagion effect" in
the metal and currency sectors.
The currency sector was positive for the month despite the extreme volatility
that dominated the sector. The fixed income sector was the Fund's worst
performing sector as uncertainty surrounding inflation prospects and global
growth led to increased volatility. Performance in the energy sector was also
negative for the month as petroleum products retreated from record or near
record highs during the month. The metal sector was also negative
for the month as precious metals fell from record highs set towards the
beginning of the month. Gold fell 12% after reaching a 26-year high of
$732 an ounce on May 12th. The largest loss in this sector occurred
in silver.
Global StockIndices also underperformed for the month. Attributing to
the underperformance of the sector was the Federal Reserve's uncertainty
about inflation, which took the markets by surprise, and the lackluster
U.S. consumer confidence report. The agriculture sector was also negative
for the month as London and New York sugar hindered performance.
Sugar, whose demand has increased on its ability to be made into ethanol,
fell as energy prices dropped during the month.
In conclusion, the Fund's performance was negative for the month of May as
volatile market conditions and strong market reversals hindered the Fund's
systematic trading approach. However, as usual JWH stands ready to potentially
take advantage of any continuing or new trends that may emerge.
Update on the RCM recovery efforts
The Official Committee of Creditors in the Refco case has posted a website for
information and updates. It has a summary of events in October 05 through May
06; a calendar of events for June 06; a bankruptcy basics primer; FAQs; and a
section to ask questions. The site is at: www.refcocommittee.com. This may be
too much information in too legal a format, and it is not specific to the
recovery efforts of any one investment fund, but at least something has been
organized. The questions and the FAQ section may be more common sense
based and have less legal terminology.
Recent Progress in the Recovery of Assets:
* The ongoing dispute at the Refco Capital Markets (RCM) between the securities
customers and the FX customers (Everest) has been resolved after much
negotiation. This should greatly facilitate the distribution of assets at hand
and the distribution of future recoveries. This agreement should avoid much
costly litigation and time delays.
* The 'bar date' for the filing of all claims against RCM has been set for July
17th. Everest has already filed it's claim. It may take six to eight weeks to
process and verify all claims. Although there could be further delays, it is
possible that we will see a distribution of the assets on hand at RCM by the
fourth quarter of this year, maybe as early as October.
* The Bankruptcy court approved a settlement whereby the Sphinx entities have
agreed to pay back $262 million to the Refco estates.
* The Austrian Bank BAWAG settled with the creditors committee and the
Department of Justice (DOJ) and agreed to pay up to $675 million. Please keep
in mind that a portion of the BAWAG settlement goes to the DOJ and some to the
Refco estate, not directly to the Refco Capital Markets. However, most of the
other bankrupt Refco entities owe RCM money so there should be benefits coming
down to the RCM level, which is where Everest money is frozen.
The agreement between parties at RCM and the two substantial recoveries of
assets are some of the most significant steps of progress in the recovery
of our assets since the events of October 2005. The Committee (and Peter
Lamoureux, president of the Fund's general partner, as a member of
the Committee) is continuing to work hard to recover assets in a
timely manner.
Class A Units were negative 11.76% in June 2006 resulting in a Net Asset Value
per unit of $2,089.94 as of June 30, 2006.
Class I Units were negative 11.50% resulting in a Net Asset Value per unit
of $2,221.98 as of June 30, 2006.
The Fund's performance was negative for the month of June. All six sectors were
negative with the currency sector, and to a lesser extent the interest rate
sector, responsible for the majority of the Fund's losses. These sectors were
affected by trend-reversing markets caused by anticipated, but unrealized,
fears that the Federal Reserve would not only raise rates at its June 29th
meeting, but also reinforce expectations for further rate increases to curb
inflation.
Currencies were the Fund's worst performing sector as the U.S. dollar spent the
majority of the month strengthening against most major currencies. The
interest rate sector was also unprofitable for the month as U.S.
10-year and 30-year treasury bonds led the sector's decline. The interest
rate speculation that dominated the currency markets also affected
the U.S. treasury markets.
The metals sector was also negative for the month as precious metals
continued to retreat from highs set in May. Gold fell to a three month
low of $542.45 an ounce on June 14th after reaching a 26-year high of
$732 an ounce on May 12th. The dramatic sell-off was caused by the
combination of a stronger dollar, as investors bought dollars as an
alternative to gold, and increased speculation that the Federal Reserve
could hike interest rates as much as 50 basis points. Despite the recent
weakness in the precious metal, gold is up 18 percent for the
year. All components of this sector were negative with the largest loss coming
from gold. The agriculture sector also underperformed during the month as
weather conditions had severe affects on various crops in the U.S. and around
the world. Global Stock Indices were slightly negative for the month as
speculation over the outcome of the June 29th Federal Reserve meeting caused
severe market fluctuations. The energy sector was also slightly negative for
the month as choppy market conditions hindered performance. All of the
petroleum based products were negative for the month.
The combined losses in the currency and interest rate sectors drove the Fund's
negative performance. Comments from the Federal Reserve combined with stronger
than expected economic data caused speculation that the Federal Reserve might
raise interest rates 50 basis points instead of previously
expected 25 at the June 29th meeting. The possibility of a larger than
expected interest rate move sent the U.S. dollar and U.S. treasury yields
higher. However, the markets reversed themselves upon the announcement
that the Federal Reserve had raised rates by 25 basis points, and
signaled to the markets that they have possibly reached the end of
the rate hiking cycle. The resulting increase in uncertainty and
speculation led to volatility in the markets and caused several
reversals making it difficult for our disciplined systematic
investment style to capitalize on longer-term trends. As always,
the Fund stands ready to potentially take advantage from any continuing
or new trends that may emerge.
Update on the RCM recovery efforts
An agreement among securities customers and general unsecured creditors of RCM
was filed with the courts on June 30. A motion was filed seeking bankruptcy
court approval of the agreement. The terms of the agreement are complex, to say
the least. It is a settlement between certain parties claiming to be
'securities' customers of RCM and certain parties purporting to be foreign
exchange customers/general unsecured creditors of RCM. Everest would fall into
the latter camp. The agreement defers attempts to convert the current RCM
Chapter 11 case to a case in Chapter 7, but if a global consensus settlement in
Chapter 11 fails, a conversion to Chapter 7 would be on a more efficient pre-
planned basis. The agreement defines a process for allocating the assets on
hand at RCM, provides a mechanism for determining who is a securities customer
and who is an FX/unsecured customer, and sets a schedule for distributions of
other expected RCM assets such as intercompany claims and third party
(litigation) recoveries.
Although this agreement is a major step toward recovering Everest's assets,
keep in mind that it is contingent upon a number of things such as
Bankruptcy Court approval and the Rogers Raw Material Fund becoming a
party to the agreement. We will know more about the contingencies being
met by the next court date of August 10th.
The Official Committee of Creditors in the Refco case has posted a website for
information and updates. It has a summary of events in October 05 through June
06; a calendar of events for July 06; a bankruptcy basics primer; FAQs; and a
section to ask questions. The site is at: www.refcocommittee.com
During the reporting period, fiscal quarter ended June 30, 2006, additional
Units sold consisted of 156.72 limited partnership Units; there were zero
general partnership Units sold during the period. Additional Units sold during
the period represented a total of $350,495. Investors redeemed a total of
1,550.34 Units during the period and the General Partner redeemed zero
Units. At the end of the period there were 12,547.25 Units outstanding
including zero Units owned by the General Partner). As of June 30, 2006
the estimated Class AA NAV per unit was $2,347.50 and Class II NAV per unit
was $2,441.65.
During the fiscal quarter ended June 30, 2006, the Partnership was exposed to
credit risk in connection with the bankruptcy filing by RCM, the
Partnership ' s former foreign currency broker. See Note 1 of the
Notes to Financial Statements above for additional information.
See Note 5 of the Notes to 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 Note 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.
Fiscal Quarter ended June 30, 2005
The Partnership recorded a gain of $1,781,153 or $113.12 per Unit of Class A
Units ($134.00 for Class I Units) for the second quarter of 2005. This compares
to a loss of $6,680,337 or $443.36 per Class A Unit for the second quarter of
2004 ($137.75 for I shares from inception to June 30, 2004). The second
quarter 2005 showed a gain of 5.11% for the Class A Units of the fund
(a gain of 5.93% for the Class I Units).
The Partnership continued to employ John W. Henry & Company, Inc.'s (JWH)
GlobalAnalyticsR Family of Programs, Worldwide Bond Program and Currency
Strategic Allocation Program.
Class A Units were negative 6.97% for April 2005 resulting in a net asset value
per unit of $2,059.50 as of April 30, 2005.
The Fund's performance was negative for the month of April. Fixed-income was
the only sector that was positive for the month. However, this positive
performance was not enough to offset the losses in the other sectors.
The Fund's underperformance was driven by the Federal Reserve changing
its view on inflationary pressures. Economic data released in March
showed a pickup in inflation within the U.S. due to recent higher energy
prices, even as other reports indicated that an economic slowdown
was more pronounced than the markets had expected. Such divergent
statistics, combined with increased speculation over a possible Chinese
yuan revaluation, led to unfavorable and trendless markets for the Fund.
The fixed income sector posted positive returns during the month. The majority
of the sector's gains came from the strength in Germany's and Japan's fixed-
income markets. The energy sector was the most unprofitable sector during the
month. Energies which had been trending higher experienced a sudden turnaround
as supplies increased and OPEC boosted output in an effort to lower prices and
to ensure adequate inventories to meet summer fuel demands. Crude oil prices
plunged 15 percent after recording a high on April 4th, as U.S.
supplies jumped.
Currencies also contributed to the Fund's underperformance during April. This
was mainly due to the Japanese yen. The Japanese yen strengthened against the
dollar after a state-sponsored newspaper in China said the government may let
the yuan peg trade more freely. A stronger Chinese yuan could make China's
exports less competitive compared with those from Japan and other Asian
countries, giving those nations room to let their currencies appreciate versus
the dollar. Stock indices were also down for the month as volatility dominated
the equity markets around the world. IBM and 3M led the decline after missing
earnings estimates, while energy shares, such as Exxon Mobil Corp., fell along
with oil prices. The metals and agricultural sectors were unprofitable for the
month.
Class I Units were negative 6.71% for April 2005 resulting in a net asset value
per Unit of $2,109.44 as of April 30, 2005.
The Fund's Class I under performance for April was driven by the Federal
Reserve changing its view on inflationary pressures. Economic data released
in March showed a pickup in inflation within the U.S. due to recent higher
energy prices, even as other reports indicated that an economic slowdown
was more pronounced than the markets had expected. Such divergent statistics,
combined with increased speculation over a possible Chinese yuan revaluation,
led to unfavorable and trendless markets for the Fund.
Class A Units were up 6.53% for May 2005 resulting in a net asset value
per unit of $2,193.98 as of May 31, 2005.
The currency and fixed-income sectors led profitability with robust gains that
were more than enough to offset lackluster returns in the other sectors. The
substantial gains in currencies came at the expense of the euro and
Swiss franc. France's rejection of the European Union Constitution drove
the currency's weakness. In the fixed-income sector, a slowing European
economy, as well as diminishing fears about inflation in the U.S., were
the key factors that also drove performance for the month.
The currency sector was the Fund's strongest performer for the month, as the
euro fell to a seven-month low against the U.S. dollar and weakened
against most other major currencies. France's rejection of the European
Union constitution was the catalyst for the euro's dramatic move lower.
The fixed-income sector was the Fund's other solid performer, as both
European and American bonds rose during the month. The benchmark
German 10-year bund rose to a record high, as market conjecture grew
that the European Central Bank (ECB) would have to cut interest rates
as the European economy slowed. Further supporting the rally in
the German bund was the expected negative economic effects from the
rejection of the European Union Constitution in France. Meanwhile,
U.S. Treasuries also rallied as the 10-year note broke 4% for the first
time since February. U.S. fixed-income advanced on diminished inflation
fears and on the downgrade of both GM's and Ford's credit ratings
to below investment grade. The Fund's performance in the metals sector
was slightly positive during the month as volatility in various markets
limited the Fund's ability to achieve returns. The Fund was able to
benefit as gold traded near a three-month closing low as the U.S. dollar
strengthened.
The energy sector was negative, as energies weakened for the majority of the
month. Performance in the agriculture sector was negative for the month as
trading in cotton, NY coffee and CBOT wheat affected returns. Global Stock
Indices were negative for the month. Most of the world indices were higher on
the month, which was the cause of the sector's underperformance. Stock indices
rallied worldwide on lower inflation expectations: however, news of Ford's and
GM's credit rating downgrades caused the markets to trade lower before
recovering to end the month stronger.
Overall the Fund's performance was very strong for the month of May as JWH's
systematic trend following approach was able to profit as new trends emerged.
Class I Units were up 6.79% for May 2005 resulting in a net asset value
per unit of $2,252.70 as of May 31, 2005.
In May the Class I result came from the currency and fixed-income sectors with
robust gains that were more than enough to offset lackluster returns in the
other sectors. The substantial gains in currencies came at the expense of the
euro and Swiss franc. France's rejection of the European Union Constitution
drove the currency's weakness. In the fixed-income sector, a slowing European
economy, as well as diminishing fears about inflation in the U.S., were the key
factors that also drove performance for the month. The currency sector was the
Fund's strongest performer for the month, as the euro fell to a seven-month low
against the U.S. dollar and weakened against most other major currencies. The
fixed-income sector was the Fund's other solid performer, as both European and
American bonds rose during the month.
Class A Units were up 6.06% for June 2005 resulting in a net asset value per
unit of $2,326.94 as of June 30, 2005.
The currency and fixed income sectors led profitability on the strength of the
U.S. dollar and the global fixed income markets. These gains were mainly due to
the U.S. Federal Reserve raising interest rates another quarter point to 3.25
percent and reiterating its intention to continue to raise rates at
a "measured" pace. Hindering performance was volatility in the metals
and agriculture sectors.
The currency sector was the Fund's strongest performer for the month. The U.S.
dollar posted its largest quarterly gain against the euro since 2001 and rose
against the yen as the market anticipated the quarter point increase by the
Federal Reserve on June 30th. The dollar also benefited from the
yield advantage against the Japanese yen, Swiss franc and the euro.
The fixed income sector was the Fund's other solid performer, as global bond
markets continued to rally. The majority of the sector's gains came from the
strength in both Germany's and Japan's fixed income markets.
The energy sector was profitable for the month as volatility dominated these
markets. The entire sector rallied during the first half of the month as
expectations increased that global demand for oil would reach a record 86.4
million barrels a day in the 4th quarter. As a result, oil for August
delivery hit a record high $60.95 a barrel during the month. However,
energy prices fell towards the end of the month as many speculators
booked profits in addition to an Energy Department report that supplies
unexpectedly surged as refineries increased production of gasoline and
other fuels. Most components of this sector were positive; however the
loss from natural gas hindered the sector's returns.
Metals were negative for the month as volatility also hurt this sector's
performance. Gold rose for the majority of the month as crude oil surged,
boosting the precious metal as a hedge against inflation. However, towards the
later part of the month gold fell as the U.S. dollar strengthened and the U.S.
Federal Reserve raised interest rates. Higher interest rates make holding gold
and silver less attractive because the metals have no fixed returns, unlike
bonds. All components of this sector were negative during the month.
Performance in the agriculture sector was down for the month as trading in
cotton, CBOT wheat and soybeans hindered returns.
Performance was slightly positive in global stock indices during the month.
Overall, stocks fell during the month as the Federal Reserve raised its
benchmark interest rate for the ninth time this year and signaled that more
increases were to come.
In conclusion, performance was positive for the month of June as the Fund
continued to profit from strong trends that started to emerge in May. The fixed
income and currency sectors once again led profitability.
Class I Units were up 6.32% for June 2005 resulting in a net asset value per
unit of $2,395.13 as of June 30, 2005.
In June the Class I gain came again from the currency and fixed income sectors'
profitability on the strength of the U.S. dollar and the global fixed income
markets. These gains were mainly due to the U.S. Federal Reserve raising
interest rates another quarter point to 3.25 percent and reiterating its
intention to continue to raise rates at a "measured" pace. Hindering
performance was volatility in the metals and agriculture sectors.
The currency sector was the Fund's strongest performer for the month.
On June 22, 2005, CIS and Refco Group Ltd., LLC, ("Refco") a provider of
execution and clearing services for exchange-traded derivatives and one of the
world's largest independent derivative brokers, announced that they had entered
into a definitive agreement for Refco to acquire the global brokerage
operations of CIS, the current clearing broker for the Everest Fund.
After the closing, the futures broker for the Fund will be Refco, LLC,
a wholly-owned subsidiary of Refco Group Ltd., LLC and a registered
futures commission merchant. The transaction will close upon receipt of
necessary regulatory approvals and satisfaction of other contractual
closing conditions. The General Partner will inform the Fund's investors
when and if this transaction is finalized. The General Partner does not
anticipate that the change will negatively impact the Fund's business
in any way.
During the reporting period, additional Units sold consisted of 850.37 limited
partnership Units; there were no general partnership Units sold during the
period. Additional Units sold during the period represented a total of
$1,894,841. Investors redeemed a total of 971.42 Units during the period and
the General Partner redeemed no Units. At the end of the period there were
15,444.18 Units outstanding (including zero Units owned by the General Partner).
During the fiscal quarter ended June 30, 2005, 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.
See Note 5 of the Notes to 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 Note 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.
Fiscal Quarter ended March 31, 2006
The Partnership recorded a loss of $767,181 or $70.29 per Unit of Class A
Units ($55.42 for Class I Units, $2.03 for Class AA Units and $2.11
for Class II Units) for the fiscal quarter ended March 31, 2006. This
compares to a loss of $3,249,420 or $218.23 per Unit of Class A Units
($202.84 for Class I Units) for the fiscal quarter ended March 31, 2005. The
quarter ended March 31, 2006 showed a loss of 3.14% (total return) for the
Class A Units of the fund (-2.37% for the Class I Units, 0.09% for Class AA
Units and 0.09% for Class II Units).
The Partnership continued to employ John W. Henry & Company, Inc. ' s (JWH)
GlobalAnalyticsR Family of Programs, Worldwide Bond Program and Currency
Strategic Allocation Program.
Class A Units were negative 2.71% in January 2006 resulting in a Net Asset
Value per unit of $2,177.48 as of January 31, 2006.
Class I Units were negative 2.45% resulting in a Net Asset Value of $2,284.32
as of January 31, 2006.
The Fund ' s overall return was negative for the month of January as losses
in the interest rate, currency and energy sectors outweighed the gains
achieved in the other sectors. The interest rate sector led the Fund ' s
losses on increased speculation of rising global interest rates. The metals
sector led the positive performing sectors along with more moderate gains
achieved in both indices and agriculture. Metals benefited from gold rising
to a 25-year high as investors sought a " safe haven " in the precious metal.
This was due to increased fears about Iran ' s nuclear program and a Hamas
led-Palestinian government.
The fixed income sector was the Fund ' s worst performing sector as the fixed
income markets in the U.S., Europe and Japan sold-off over fears of their
respective central banks raising interest rates. The currency sector also
suffered losses as the U.S. dollar posted its biggest monthly decline against
the euro since November 2004. The dollar also suffered losses against the
Swiss franc, Japanese yen and the euro as investors no longer expected
interest rate differentials to benefit the dollar as the spread narrowed
between the U.S. and both European and Japanese interest rates. The Fund ' s
energy sector underperformed as volatility within the sector increased as oil
and natural gas are now being used as " geopolitical weapons " by Iran,
Russia, Venezuela and militants in Bolivia. Crude oil, which is up 41
percent from a year ago and 11 percent for the month, helped to limit losses
in this sector despite the increased volatility. However, the gains were not
enough to offset the losses incurred in natural gas, which for the first time
in almost 6 months dropped below $8 in New York. Natural gas fell 17 percent
for the month as mild weather in the largest U.S. consuming regions cut
demand which limited the need for utilities to pull from reserves stored in
underground aquifers and caverns.
The metals sector was the best performing sector for the month. Gold extended
its surge to a 25-year high, and silver climbed to its highest level since
March 1984. Gold's increase occurred on concerns that the dollar may weaken
because of higher oil prices, increasing the metal's appeal as a hedge
against further declines in the U.S. currency. Global Stock Indices were
positive for the month as European stock indices had their best January rally
in eight years as energy stocks along with miners and steelmakers gained on
expectations earnings would benefit from higher commodity prices. The
agriculture sector was also positive on the month as sugar reached a 16-year
high in London and a 25-year high in New York. The record highs were a
result of the surging cost of crude oil which increased the demand for
ethanol, a sugar cane by-product. Brazil, the biggest producer and exporter
of sugar, is converting more of its cane crop to ethanol to cope with record
gasoline prices.
In conclusion, the Fund finished negative for the month as the fixed income,
currency and energy sectors suffered losses. Although the Fund
underperformed, we remain confident that our trend following approach will
withstand the recent market volatility and remain poised to take advantage of
new opportunities as they present themselves.
Update on the RCM recovery efforts
The Official Committee of Creditors in the Refco case has posted a website
for information and updates. It has a summary of events in October, November
and December 05; a calendar of events for January and February of 06; a
bankruptcy basics primer; FAQs; and a section to ask questions. The site is
at: www.refcocommittee.com. This may be too much information in too legal a
format, and it is not specific to the recovery efforts of any one investment
fund, but at least something has been organized. The questions and the FAQ
section may be more common sense based and have less legal terminology.
The next issue to be determined by the court is a decision on whether Refco
Capital Markets (RCM) was acting as a stockbroker. If so, RCM would go into
a Chapter 7 liquidation. The Everest Fund has filed a motion objecting to
the conversion, as we do not believe that RCM was acting as a stockbroker.
The arguments are scheduled to be heard on February 14th. Everest Asset
Management, Inc. remains available to answer any questions specific to the
Everest Fund. The Fund's offering documents have been updated and we have
taken in investor money for January and February.
Class A Units were negative 5.91% in February 2006 resulting in a Net Asset
Value per unit of $2,048.72 as of February 28, 2006.
Class I Units were negative 5.65% resulting in a Net Asset Value of $2,155.24
as of February 28, 2006.
The Fund ' s performance was negative for the month as listless markets
continued to hamper the Fund ' s long-term trend following approach. The
majority of the losses were realized in the currency sector. Currency
markets gyrated over speculation surrounding potential global interest rate
moves. The energy sector incurred losses on concerns over geopolitical
events. While the market continued to be apprehensive over the situation in
Iran and Iraq, attacks in Nigeria and Saudi Arabia added to the market's
trepidation. Limiting losses in this sector was natural gas, as prices fell
to their lowest level in almost nine months. The metals sector was also
negative for the month as volatility hurt performance. Global Stock indices
did not perform well for the month as Asian stocks posted their first monthly
decline since October 2005 and the Nasdaq dropped 1.1 percent. Market
instability was also a factor in the indices sector as U.S. stocks suffered
their biggest loss in five weeks on the last day of trading in February. The
interest rate sector was slightly positive for the month as performance in
various markets counterbalanced each other. Performance in the agriculture
sector was slightly negative for the month as trading in N.Y coffee and N.Y.
sugar hindered returns, while trading in CBOT wheat limited losses.
In conclusion, the Fund finished negative for the month as market conditions
were unfavorable for JWH ' s systematic long-term following approach. As
always, the Fund stands ready to potentially profit from any new trends that
may emerge.
Update on the RCM recovery efforts
The Official Committee of Creditors in the Refco case has posted a website
for information and updates. It has a summary of events in October 05
through February 06; a calendar of events for March 06; a bankruptcy basics
primer; FAQs; and a section to ask questions. The site is at:
www.refcocommittee.com. This may be too much information in too legal a
format, and it is not specific to the recovery efforts of any one investment
fund, but at least something has been organized. The questions and the FAQ
section may be more common sense based and have less legal terminology.
The issue on whether the Refco Capital Markets (RCM) case should be converted
to Chapter 7 liquidation was heard by the courts during February and early
March. Closing arguments will be heard on Tuesday, March 14th. Everest Asset
Management, Inc., the Official Committee of Unsecured Creditors, and the
debtors (Refco) object to the conversion. We may know the Judge ' s ruling
on Tuesday the 14th, or shortly thereafter. Everest Asset Management, Inc.
remains available to answer any questions specific to the Everest Fund. The
Fund's offering documents have been updated and we have had new investments
for January, February and March.
Class A Units were positive 5.81% in March 2006 resulting in a Net Asset
Value per unit of $2,167.80 as of March 31, 2006.
Class I Units were positive 6.08% resulting in a Net Asset Value per unit
of $2,286.17 as of March 31, 2006.
The fixed income sector led performance with robust gains as the Fund ' s
systematic trend-following approach enabled it to profit from rising global
interest rates. The indices and metal sectors also added to the positive
performance as silver continued to trend higher, and the indices sector
benefited from stronger economic data in Europe. The indices sector also
profited from the continued strength of commodity stocks on the back of
global growth in China. Limiting the Fund ' s gains for the month was the
currency sector, which continued to suffer from range-bound trading, along
with underperformance in both the energy and agriculture sectors.
The fixed income sector was the Fund ' s strongest performer for month as
Japanese, German and U.S. government debt endured stronger than expected
consumer confidence and rising inflationary fears. The indices sector was
also positive for the month as Asian stocks approached a 16-year high on
surging demand for metals and oil, and the Nikkei 225 climbed above 17,000
for the first time in more than five years. The metals sector was also
profitable for the month as silver reached $11.66 on March
30th, the highest intraday price since September 1983.
The energy sector was the Fund ' s worst performer as geopolitical induced
volatility limited gains within the sector. Performance in the currency
sector was also negative for the month as range-bound trading continued to
negatively affect the Fund ' s long term trend following approach. Although
some currencies had directional moves during the month, they were then
accompanied by strong reversals. The agriculture sector also underperformed
for the month as gains made in London sugar were not enough to offset the
underperformance caused by the weakness in CBOT wheat and corn.
In conclusion, the Fund was positive for the month, with the fixed income
sector leading performance as Japanese, German and U.S. fixed income markets
fell. As always, the Fund stands ready to potentially take advantage from any
continuing or new trends that may emerge.
Update on the RCM recovery effort
The Official Committee of Creditors in the Refco case has posted a website
for information and updates. It has a summary of events in October 05
through February 06; a calendar of events for March 06; a bankruptcy basics
primer; FAQs; and a section to ask questions. The site is at:
www.refcocommittee.com. This may be too much information in too legal a
format, and it is not specific to the recovery efforts of any one investment
fund, but at least something has been organized. The questions and the FAQ
section may be more common sense based and have less legal terminology.
On March 14th the Judge tentatively ruled that Refco Capital Markets (RCM)
should be converted to a Chapter 7, but he agreed to give the parties 45 days
in order to try to work out a consensual plan for reorganizing RCM and
distributing the assets on hand. Everest Asset Management, Inc. remains
available to answer any questions specific to the Everest Fund. The Fund ' s
offering documents have been updated and we have had new investments for
January, February and March.
During the reporting period, fiscal quarter ended March 31, 2006, additional
Units sold consisted of 264.9 limited partnership Units; there were zero
general partnership Units sold during the period. Additional Units sold
during the period represented a total of $575,000. Investors redeemed a
total of 637.11 Units during the period and the General Partner redeemed zero
Units. At the end of the period there were 13,940.87 Units outstanding
(including zero Units owned by the General Partner). As of March 31, 2006
the estimated Class AA NAV per unit was $2,348.31 and Class II NAV per unit
was $2,442.49.
During the fiscal quarter ended March 31, 2006, the Partnership was exposed
to credit risk in connection with the bankruptcy filing by RCM, the
Partnership ' s former foreign currency broker. See Note 1 of the Notes to
Financial Statements above for additional information.
See Note 5 of the Notes to 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 Note 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.
Fiscal Quarter ended March 31, 2005
The Partnership recorded a loss of $3,249,420 or $218.23 per Unit of Class A
Units ($202.84 for Class I Units) for the first quarter of 2005. This
compares to a gain of $2,087,470 or $143.50 per Class A Unit for the first
quarter of 2004. The first quarter 2005 showed a loss of 8.97% for the Class
A Units of the fund (a loss of 8.23% for the Class I Units).
The Partnership continued to employ John W. Henry & Company, Inc. ' s (JWH)
GlobalAnalyticsR Family of Programs, Worldwide Bond Program and Currency
Strategic Allocation Program.
Class A Units were negative 6.29% for January 2005 resulting in a net asset
value per unit of $2,279.03 as of January 31, 2005.
The Fund ' s performance was negative in January. While both the fixed-income
and agricultural sectors had gains for the month, they weren ' t enough to
offset the losses in other sectors. The Fund ' s underperformance was driven
by the strength of the US dollar, which rebounded from last year ' s
weakening trend. The dollar ' s sudden turnaround was the dominant factor
that drove most market sectors during the month, and therefore resulted in
the overall loss for the program.
A significant portion of January ' s loss was directly related to the
strength of the US dollar against most major currencies. The weak US dollar
trend, which had dominated the markets during the second half of last year,
began to reverse itself as market expectations of a Yuan revaluation by the
Chinese central bank began to diminish. The largest gain was achieved in the
Brazilian real, while the largest loss occurred in the euro.
Trading in both metals and stock indices were also negative during the month.
The loss in metals was due to the weakness in both gold and silver. Gold,
which recently has had a strong inverse relationship with the US dollar, came
under pressure as the US dollar strengthened throughout the month. The Fund
' s returns in the indices sector further hindered performance. The loss in
indices resulted from a sell off in world equity markets as stocks weakened
because energy prices rose during the month. The largest gain in the indices
sector was achieved in the Eurostoxx 50, while the largest loss occurred in
the Nasdaq e-mini.
Higher prices in energies led to negative performance in this sector. In
addition to the events in the Middle East, weather dominated the sector ' s
price action. Oil prices surged as colder-than-expected weather, as well as
a blizzard, moved into the eastern U.S., which accounts for 80 percent of
residential heating oil usage.
Both the agricultural and fixed income sectors provided positive returns.
Wheat helped returns as prices fell to a 20-month low after a report showed
that U.S. exports slowed when the European Union indicated it would subsidize
exports of the grain for the first time since June 2003. Corn slightly
boosted returns as prices fell to the lowest level since June 2001 on
slumping demand for record supplies in the U.S., which is the world ' s
largest producer and exporter of the grain. In addition, in the fixed income
sector the Japanese Government bonds (JGBs) rose during the month after
Japanese government reports showed household spending and industrial
production fell. However, the positive returns in both sectors were not
enough to offset losses in the rest of the fund. The largest gain in the
agricultural sector was achieved in wheat, while the largest loss occurred in
cotton. In the fixed income sector the largest gain was achieved in the JGBs,
while the largest loss occurred in the Australian 10-year bond.
Class I Units for January 2005 were also negative with a loss of 6.03%
resulting in a net asset value per unit of $2,315.40. While both the fixed-
income and agricultural sectors had gains for the month, they weren ' t
enough to offset the losses in other sectors. The Fund ' s underperformance
was driven by the strength of the US dollar, which rebounded from last year '
s weakening trend. The dollar ' s sudden turnaround was the dominant factor
that drove most market sectors during the month, and therefore resulted in
the overall loss for the program. A significant portion of January ' s loss
was directly related to the strength of the US dollar against most major
currencies.
The Class I Units are traded with the same program as the Class A Units
above.
Class A Units showed a loss of 4.47% resulting in a net asset value per unit
of $2,177.09 as of February 28, 2005. The Fund ' s performance was negative
in February. While both stock indices and the energy sectors had gains for
the month, it wasn ' t enough to offset the combined losses in the other
sectors traded. The Fund ' s underperformance was driven by the apparent end
to some long-term trends in the global fixed-income market and the
unfavorable performance in the currency sector.
A significant portion of February ' s losses was directly related to the
fixed-income sector as the European, Japanese and U.S. bond markets sold off.
The catalyst for the dramatic move higher in world interest rates was the
cumulative effect of various events and economic data released during the
month.
Currencies were the other main contributor to the Fund ' s losses as the
weakness of the Japanese yen against the U.S. dollar during the first half of
February hurt performance. On February 10th, the U.S. dollar rose to a three-
month high against the yen after a Commerce Department report showed the U.S.
trade deficit narrowed in January from a previous record high. The recent
dollar strength began six days earlier when Chairman Alan Greenspan predicted
that the deficit in the U.S. current account, the broadest measure of trade,
may shrink. The energy sector had positive returns and was the Fund ' s best
performing sector. Energies rallied as commodity prices surged to a 24-year
high due to signs of growing global demand for everything energy-related.
The International Energy Agency raised its prediction for global consumption,
and forecasts of colder temperatures across Europe and the U.S. which also
helped to drive energy prices even higher. All components of this sector were
positive with the largest gain achieved in London gas oil.
The Fund ' s three other sectors, indices, metals, and agriculture all had
relatively little effect on overall performance during the month. Indices
posted gains as the Nikkei rallied throughout the month on hopes that quicker
U.S. growth would help Japan start an export-led economic recovery. The
metals sector posted negative returns, as inflation fears in the U.S. pushed
gold prices higher. All components of this sector were negative with the
largest loss coming from silver. Lastly, agriculture was slightly negative,
as profits from the rally in NY coffee caused by forecasts of a dry season in
Brazil, was offset by losses in various other agricultural markets.
For Class I the fund showed a loss of 4.21% in February. The net asset value
per unit was $2,217.90 as of February 28, 2005. While both stock indices and
the energy sectors had gains for the month, it wasn't enough to offset the
combined losses in the other sectors traded. The Fund ' s underperformance
was driven by the apparent end to some long-term trends in the global fixed-
income market and the unfavorable performance in the currency sector.A
significant portion of February's losses was directly related to the fixed-
income sector as the European, Japanese and U.S. bond markets sold off. The
catalyst for the dramatic move higher in world interest rates was the
cumulative effect of various events and economic data released during the
month. Currencies were the other main contributor to the Fund's losses as the
weakness of the Japanese yen against the U.S. dollar during the first half of
February hurt performance.
Class A Units showed a gain of 1.69% resulting in a net asset value per unit
of $2,213.82 as of March 31, 2005. The Fund's performance was positive for
the month of March. The energy sector exhibited strong returns and the
agricultural sector also contributed to the Fund's positive performance. The
combined positive performance in these two sectors was able to offset the
losses suffered in the other sectors. Continuing worries over supply drove
profits in energies, while a strengthening U.S. dollar, as well as increasing
inflation fears dominated performance in most other sectors.
The energy sector was the Fund's best performing sector as crude oil and
gasoline surged to near all-time highs on speculation that rising domestic
demand may outpace U.S. refinery production during peak summer demand
resulting in strained global oil supplies.
The Fund's performance in the agriculture sector was profitable for the
month. The Fund was able to benefit from rising New York coffee prices as
production declined and stocks held by roasters and producers fell to their
lowest level in 15 years. These profits combined with profits from cotton and
London coffee were enough to offset the negative returns in other markets
within the sector.
Currencies were the most unprofitable sector during the month. The single
most influential factor driving performance in this sector was the U.S.
dollar. At the start of the month, the dollar weakened against other major
currencies as the U.S. trade deficit widened to $58.3 billion, the second-
highest level ever. However, the weakening trend reversed itself as the
price of oil soared and the yield on the benchmark 10-year Treasury note rose
to its highest level in seven months. Furthermore, demand for the greenback
increased when the Federal Reserve raised borrowing costs by a quarter
percentage point for a seventh time since last June and indicated that
inflation pressures were picking up. The largest gain in this sector was
achieved in the Japanese yen, while the largest loss occurred in the Swiss
franc.
The Fund was unprofitable in the fixed income sector for the month as
European and Domestic markets sold off and the Japanese bond markets rallied.
Increases in both energy prices and inflation expectations were the catalyst
for the dramatic move higher in most of the world interest rates. The
largest gain in this sector was achieved in the U.S. ten-year note, while the
largest loss occurred in the bund.
Metals had losses for the Fund during March, as gold and silver were driven
by the volatility in the U.S. dollar during the month. Precious metals tend
to have an inverse relationship with the U.S. dollar. Thus, as the dollar
weakened at the beginning of the month gold and silver strengthened; and as
the dollar rallied, gold sold off when the dollar became a more attractive
asset to hold. All components of this sector were negative, with the largest
loss coming from silver.
Performance in stock indices was slightly down for the month as equity
markets weakened around the world. Higher bond yields and oil prices made
equities less attractive to investors as inflationary pressures started to
weigh on the global economy.
Class I Units showed a gain of 1.95% resulting in a net asset value per unit
of $2,261.13 as of March 31, 2005. The energy sector exhibited strong returns
and the agricultural sector also contributed to the Fund's positive
performance. The combined positive performance in these two sectors was able
to offset the losses suffered in the other sectors. Continuing worries over
supply drove profits in energies, while a strengthening U.S. dollar, as well
as increasing inflation fears dominated performance in most other sectors.
The energy sector was the Fund's best performing sector as crude oil and
gasoline surged to near all-time highs on speculation that rising domestic
demand may outpace U.S. refinery production during peak summer demand
resulting in strained global oil supplies.
The Everest Fund, L.P. Class A experienced a net loss of 8.97% for the
first quarter of 2005. The Class I Units experienced a net loss of
8.23% for the same period.
During the first quarter, additional Units sold consisted of 906.45 limited
partnership Units; there were zero general partnership Units sold during the
quarter. Additional Units sold during the quarter represented a total of
$2,017,381. Investors redeemed a total of 242.589 Units during the quarter
and the General Partner redeemed 12.32 Units. At the end of the quarter there
were 14,405.55 Units outstanding (including 0 Units owned by the general
partner).
During the fiscal quarter ended March 31, 2005, 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.
See Note 5 of the Notes to 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 Note 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
amended Form 10K/A of the Partnership dated May 15, 2006.
Item 4. Controls and Procedures
Within 90 days of the date of this report an evaluation was performed by the
company under the supervision and with the participation of management,
including the President of the Company, of the effectiveness of the design
and operation of the Company's disclosure controls and procedures. Based on
that evaluation, the Company's management, including the President, concluded
that the Company's disclosure controls and procedures are effective in timely
alerting them to material information relating to the Company that is
required to be included in the Company's period filings with the Securities
and Exchange Commission. There have been no significant changes in the
company's internal controls or in other factors that could significantly
affect those internal controls subsequent to the date the company carried out
its evaluation.
Part II. OTHER INFORMATION
Item 1. Legal Proceedings
The Partnership is a creditor of RCM in the bankruptcy case filed in the
United States Bankruptcy Court, Southern District of New York, captioned In
re Refco Inc., et al., case number 05-60006 (RDD). Based on information
provided to the Partnership by RCM, the Partnership has cash and open trade
equity in neutral currency positions of approximately $7,500,000 remaining at
RCM. The amount of such assets which the Partnership will ultimately
recover, if any, is unknown at this time.
In October 2000, there was a discrepancy between the performance of the Barclay
Futures Index Program (BFIP) as traded for the Partnership and the Barclay
Futures Index (BFI). Certain transactions executed by Trilogy on behalf of the
Partnership resulted in a loss of approximately $520,000 that was recorded
in the statement of operations. The General Partner believes that
these transactions were not executed in accordance with the provisions
of BFIPand has demanded that Trilogy reimburse the Partnership for the
loss. The parties are currently attempting to resolve the issue.
A demand for arbitration was filed with the NFA on October 3, 2002. Trilogy has
responded to the demand for arbitration and has counterclaimed for the amount of
$130,210, together with attorney's fees, interest and costs of suit. That figure
represents the amount of management fees, otherwise payable to Trilogy under its
advisory contract, that both parties agreed would be held as a credit to the
Partnership to offset the losses. The General Partner has a letter to that
effect which was signed by the president of Trilogy on January 29, 2001.
The General Partner anticipates a hearing in front of an NFA arbitration panel
in the coming months, but no date has been set for the hearing. At the present
time, the General Partner is unable to determine whether any of the losses will
be recovered.
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 are 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 1A. Risk Factors
There has been no material change with respect to risk factors since the
"Risk Factors" were disclosed in the Form 10K of the Partnership dated
December 31, 2005 and the amended Form 10K/A dated May 15, 2006.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
See Part I, Statement of Changes in Partner's
Capital
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 Number Description of Document Page Number
31 Certification by Chief Executive Officer
and Chief Financial Officer Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002 E- 1-2
32 Certification by Chief Executive Officer
and Chief Financial Officer Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002 E - 3
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 FUND, L.P.
Date: August 14, 2006 By: Everest Asset Management, Inc.,
its General Partner
By:/s/ Peter Lamoureux
-------------------------
Peter Lamoureux
President