SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly report pursuant to Section 12(b) or (g) of the
Securities Exchange Act of 1934
For the quarterly period ended September 30, 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
DRAFT
for Financials
2
PART I. FINANCIAL INFORMATION
Item 1 Financial Statements
Following are financial Statements for the fiscal quarter ending
September 30, 2006
Fiscal Quarter Year to Date Fiscal Year Fiscal Quarter Year to Date
Ended 9/30/06 to 9/30/06 Ended 12/31/05 Ended 9/30/05 to 9/30/05
------------- ------------ -------------- -------------- -------------
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
SEPTEMBER 30, 2006 DECEMBER 31, 2005
----------------- -----------------
ASSETS
Cash and cash equivalents $15,139,490 $21,483,743
Equity in commodity trading accounts:
Cash 2,877,896 4,102,121
Net unrealized trading gains (losses) on open contracts 1,097,223 31,920
Receivable from Refco Capital Markets, Ltd. (Note 1) 2,992,933 7,482,332
Interest receivable 99,324 92,364
----------- -----------
TOTAL ASSETS $22,206,865 $33,192,480
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
LIABILITIES:
Redemptions payable $ 181,722 $ 426,556
General partner management fee payable 69,987 120,693
Advisor's management fee payable 35,305 48,461
Accrued expenses 33,341 57,519
----------- -----------
TOTAL LIABILITIES 320,355 653,229
----------- -----------
PARTNERS' CAPITAL
General partners, I shares (0 and 0 units outstanding) -- --
Limited partners, A Shares (8,024.266 and 9,879.80 units
outstanding) 16,560,909 22,111,952
Limited partners, I Shares (883.736 and 1,097.96 units
outstanding) 1,954,564 2,570,984
Limited partners, AA Shares (3,008.60 and 3,008.60 units
outstanding) 3,028,930 7,059,021
Limited partners, II Shares (326.71 and 326.71 units
outstanding) 342,108 797,294
----------- -----------
TOTAL PARTNERS' CAPITAL 21,886,511 32,539,251
----------- -----------
TOTAL LIABILITIES AND PARTNERS'
CAPITAL $22,206,865 $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
SEPTEMBER 30, 2006
------------------
UNAUDITED
NUMBER OF MARKET VALUE % OF PARTNERS'
EXPIRATION DATES CONTRACTS (OTE) CAPITAL
---------------- --------- ------------ --------------
LONG POSITIONS:
FUTURES POSITIONS
Interest rates Dec 06 - Jun 07 1,019 $ 581,929 2.66%
Agriculture Nov 06 - Mar 07 122 28,568 0.13%
Currencies Sep 07 96 48,588 0.22%
Indices Dec 06 15 15,779 0.07%
----------- -----
674,864 3.08%
FORWARD POSITIONS
Currencies Dec 06 (213,331) -0.97%
----------- -----
Total long positions 461,533 2.11%
----------- -----
SHORT POSITIONS:
FUTURES POSITIONS
Interest rates Jun 07 30 (10,463) -0.05%
Metals Dec 06 90 (157,100) -0.72%
Energy Dec 06 - Jan 07 140 377,841 1.73%
Agriculture Nov 06 - Mar 07 296 235,497 1.08%
----------- -----
445,775 2.04%
FORWARD POSITIONS
Currencies Dec 06 189,916 0.87%
----------- -----
Total short positions 635,691 2.90%
----------- -----
TOTAL OPEN CONTRACTS 1,097,224 5.01%
CASH AND CASH EQUIVALENTS 15,139,490 69.17%
CASH ON DEPOSIT WITH BROKERS 5,870,829 26.82%
LESS LIABILITIES IN EXCESS OF OTHER ASSETS (221,031) -1.01%
----------- -----
NET ASSETS $21,886,512 100%
=========== =====
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 JULY 1, 2006 THROUGH SEPTEMBER 30, 2006
-------------------------------------------------------
UNAUDITED
JULY 1, 2006 JANUARY 1, 2006
THROUGH THROUGH
SEPTEMBER 30, 2006 SEPTEMBER 30, 2006
---------------- ---------------
TRADING INCOME (LOSS)
Net realized trading loss
on closed contracts $(1,725,425) $(1,887,609)
Change in net unrealized trading gain
(loss) on open contracts 1,580,764) 1,065,303
Net foreign currency translation loss 41,435 9,190
Brokerage Commissions (36,825) (112,756)
----------- ------------
NET TRADING INCOME (LOSS) (140,051) (925,872)
Interest income, net of cash management fees 222,018 719,818
----------- ------------
TOTAL INCOME (LOSS) 81,966 (206,054)
----------- ------------
EXPENSES:
General partner management fees 219,709 806,440
Advisor Management fees 103,203 369,336
Administrative expenses 20,634 67,581
Bad Debt expense 4,489,399 4,489,399
----------- ----------
TOTAL EXPENSES 4,832,945 $ 5,732,756
----------- ----------
NET INCOME (LOSS) $(4,750,979) $(5,938,810)
=========== ===========
NET INCOME (LOSS) PER UNIT OF PARTNERSHIP INTEREST
A SHARES, OUTSTANDING ENTIRE PERIOD $ (26.08) $ (174.24)
=========== ==========
NET INCOME (LOSS) PER UNIT OF PARTNERSHIP INTEREST
I SHARES, OUTSTANDING ENTIRE PERIOD $ (10.28) $ (129.89)
=========== ==========
NET INCOME (LOSS) PER UNIT OF PARTNERSHIP INTEREST
AA SHARES, OUTSTANDING ENTIRE PERIOD $ (1,340.75) $(1,339.52)
=========== ==========
NET INCOME (LOSS) PER UNIT OF PARTNERSHIP INTEREST
II SHARES, OUTSTANDING ENTIRE PERIOD $ (1,394.52) $(1,393.25)
=========== ==========
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
JULY 1, 2005 JANUARY 1, 2005
THROUGH THROUGH
SEPTEMBER 30, 2005 SEPTEMBER 30, 2005
---------------- ---------------
TRADING INCOME (LOSS)
Net realized trading loss
on closed contracts $ 1,848,789 $ 702,883
Change in net unrealized trading gain
(loss) on open contracts (609,144) 14,578
Net foreign currency translation gain (loss) (12,399) (57,221)
Brokerage Commissions (52,517) (183,867)
----------- ------------
NET TRADING INCOME (LOSS) 1,174,729 476,373
Interest income, net of cash management fees 285,826 741,479
----------- ------------
TOTAL INCOME (LOSS) 1,460,555 1,217,852
----------- ------------
EXPENSES:
General partner management fees 463,251 1,314,750
Advisor Management fees 182,092 522,333
Administrative expenses 13,822 47,646
----------- ----------
TOTAL EXPENSES 659,165 1,884,729
----------- ----------
NET INCOME (LOSS) $ 801,390 $ (666,877)
=========== ===========
NET INCOME (LOSS) PER UNIT OF PARTNERSHIP INTEREST
A SHARES, OUTSTANDING ENTIRE PERIOD $ 49.22 $ (55.89)
=========== ==========
NET INCOME (LOSS) PER UNIT OF PARTNERSHIP INTEREST
I SHARES, OUTSTANDING ENTIRE PERIOD $ 69.81 $ 0.98
=========== ==========
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 SEPTEMBER 30, 2006
----------------------------------------------------
UNAUDITED
LIMITED
UNITS LIMITED PTRS UNITS PTRS
A SHARES A SHARES I SHARES I SHARES
---------- ------------ -------- ----------
BALANCES, January 1, 2006 9,879.80 22,111,952 1,097.96 2,570,984
Additional Units Sold 459.53 1,001,000 32.17 75,000
Redemptions (2,315.07) (5,223,884) (246.40) (554,414)
Less Offering Costs -- (9,911) -- (1,721)
Net profit (Loss) -- (1,318,248) -- (135,285)
---------- ------------ -------- ----------
BALANCES, SEPTEMBER 30,2006 8,024.26 $ 16,560,909 883.74 $1,954,564
========== ============ ======== ==========
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 (174.24) (129.89)
Net asset value per unit
September 30, 2006 $ 2,063.85 $2,211.70
============ ==========
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 -- -- -- -- 1,076,000
Redemptions -- -- -- -- (5,778,298)
Less Offering Costs -- -- -- -- (11,632)
Net Profit (Loss) -- (4,030,091) -- (455,186) (5,938,810)
-------- ---------- ------ --------- ------------
BALANCES, SEPTEMBER 30, 2006 3,008.60 $3,028,930 326.71 $ 342,108 $ 21,886,511
======== ========== ====== ========= ============
Net asset value per unit,
January 1, 2006 $ 2,346.28 $2,440.38
Net profit (loss) per unit (1,339.52) (1,393.25)
---------- ----------
Net asset value per unit
SEPTEMBER 30, 2006 $ 1,006.76 $1,047.13
========== ==========
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 SEPTEMBER 30, 2006
---------------------------------------------------------
UNAUDITED
JULY 1, 2006 JANUARY 1, 2006
THROUGH THROUGH
SEPTEMBER 30, 2006 SEPTEMBER 30, 2006
----------------- -----------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (4,750,979) $ (5,938,810)
Adjustments to reconcile net loss to net cash provided by
(used in) operating activities:
Decrease (increase) in commodity futures trading accounts:
Cash 556,825 1,224,225
Unrealized gain or loss on open commodity futures contracts (1,617,752) (1,065,303)
Decrease (increase) in receivable from Refco 4,489,399 4,489,399
Decrease (increase) in interest receivable 3,367 ( 6,960)
(Decrease) increase in management fees payable (24,291) (63,862)
(Decrease) increase in other accrued expenses 9,940 (24,179)
------------ ------------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES (1,333,491) (1,385,490)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Redemption of partnership units (1,220,287) (6,023,131)
Sale of partnership units, net 140,123 1,064,368
------------ ------------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES (1,080,164) (4,958,763)
------------ ------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (2,413,655) (6,344,253)
CASH AND CASH EQUIVALENTS, AT BEGINNING OF PERIOD 17,553,145 21,483,743
------------ ------------
CASH AND CASH EQUIVALENTS, AT END OF PERIOD $ 15,139,490 $ 15,139,490
============ ============
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 SEPTEMBER 30, 2005
---------------------------------------------------------
UNAUDITED
JULY 1, 2005 JANUARY 1, 2005
THROUGH THROUGH
SEPTEMBER 30, 2005 SEPTEMBER 30, 2005
----------------- -----------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 801,389 $ (666,878)
Adjustments to reconcile net income (loss) to net cash
used in operating activities:
Decrease (increase) in commodity futures trading accounts:
Cash 1,627,480 2,342,563
Unrealized gain or loss on open commodity futures contracts 609,903 1,946
Decrease (increase) in interest receivable 14,558 (24,594)
Decrease (increase) in incentive fees payable -- (85,111)
(Decrease) increase in management fees payable 14,935 13,563
(Decrease) increase in other accrued expenses 2,122 (17,995)
------------ ------------
NET CASH USED IN OPERATING ACTIVITIES 3,070,387 1,563,494
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Redemption of partnership units (2,629,775) (4,547,114)
Sale of partnership units, net 1,914,052 5,824,935
------------ ------------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES (715,723) 1,277,821
------------ ------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 2,354,664 2,841,315
CASH AND CASH EQUIVALENTS, AT BEGINNING OF PERIOD 25,385,617 24,898,966
------------ ------------
CASH AND CASH EQUIVALENTS, AT END OF PERIOD $ 27,740,281 $ 27,740,281
============ ============
The accompanying notes are an integral part of these statements
10
EVEREST FUND, L.P.
NOTES TO FINANCIAL STATEMENTS
September 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 the offering under a
Regulation D, Rule 506 private placement. The private placement
offering is continuing at a gross subscription 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 ongoing
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 as 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.
Refco, Inc. filed a plan under Chapter 11 (the Plan ) and a
Disclosure Document with the Bankruptcy Court. The Plan is slated to
be confirmed by the Bankruptcy Court on or before December 15, 2006.
Based on the estimated recovery amounts contained in the schedules of
the Plan and Disclosure Document which the Bankruptcy Court is being
asked to approve in the Refco case, the General Partner as of October
31, 2006 (but effective September 30, 2006) has reduced the value of
the Class AA and Class II assets to 40% of the amounts at which such
assets held at Refco were valued as of October 17, 2005. In accordanmce
with Generally Accepted Accounting Principles and in particular rule
FAS 5-3 paragraph 105, the write down is been taken at September 30, 2006
As of October 17, 2005 the assets were valued at $7,482,332. The
adjustment is $4,489,399 with a remaining asset balance of $2,992,933.
This write down is only an estimate and has been reflected in the
statement of operations at September 30, 2006. We have not included
litigation recoveries, if any, in the write down, because the success
of such actions cannot be estimated at this time. No assurances can
be made that there will be any further recoveries for Everest from
these efforts.
The write down amount was determined after the issuance of our
September 30, 2006 investor account statements, and therefore the
October investor statements that will be issued in November will
reflect the revised Net Asset Values for September 30, 2006.
(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 September 30, 2006 JWH ' s allocation was approximately $21.1
million (including approximately $2.63 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 September 30, 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
$1,226,405 as of September 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 nine months ended September 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:
9/30/06 9/30/05
1. Total return: A Shares -7.79% -2.30%
I Shares -5.55% 0.04%
AA Shares -57.09%
II Shares -57.09%
2. Ratio to average net assets:
Total income A Shares -6.90% -2.12%
I Shares -6.06% 0.42%
AA Shares -60.51%
II Shares -60.51%
3. Expenses, excluding incentive fees:
A Shares 6.04% 5.59%
I Shares 3.64% 3.15%
AA Shares 60.70%
II Shares 60.70%
4. Incentive fees 0.00% 0.00%
5. Total expenses
A Shares 6.04% 5.59%
I Shares 3.64% 3.15%
AA Shares 60.70%
II Shares 60.70%
The total income and general and expense ratios are computed based upon
the weighted average net assets for the Partnership for the period
ended September 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 September 30, 2006
The Partnership recorded a loss of $4,750,979 or $ (26.08) per Unit
of Class A Units ($ (10.28) for Class I Units, $1,340.82 for Class AA
Units and $1,394.52 for Class II Units) for the fiscal quarter ended
September 30, 2006. This compares to a gain of $801,389 or $49.22 per
Unit of Class A Units ($69.81 for Class I Units) for the fiscal quarter
ended September 30, 2005. The quarter ended September 30, 2006
showed a loss of 1.25 %( total return) for the Class A Units of the
fund (a loss of 0.46% for the Class I Units, 57.09% for Class AA Units
and 57.09% 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 11.06% in July 2006 resulting in a Net
Asset Value per unit of $1,858.73 as of July 31, 2006.
Class I Units were negative 10.80% resulting in a Net Asset Value of
$1,982.00 as of July 31, 2006.
We are aware of the Fund s volatility in the last few months. From our
daily review of the equity runs and our conversations with John W.
Henry & Company (JWH), we do not believe that there are any changes in
their strategies or discipline which would be directly related to
recent performance. Instead it is a result of abrupt price reversals
and trendless markets. Although the recent performance is at the high
end of the historical volatility for the three strategies we invest in
at JWH, the results have not materially exceeded former drawdowns.
Keep in mind that choppy and reversing markets are what make
performance difficult for trend following firms like JWH. If any of
the markets break out in one direction for a sustained period, we
remain convinced that the JWH programs will capitalize on those trends.
We have seen over the years that patience is required as we wait for
price trends to reemerge.
The Fund s performance was negative for the month of July. All six
sectors traded were negative, with the interest rate, agriculture and
currency sectors responsible for the majority of the Fund s losses.
While some markets had strong directional moves, the overall trading
environment was unfavorable for the Fund s long-term trend following
approach. Geopolitical events, extreme weather conditions, and
speculation over U.S. interest rate policy caused harmful spikes in
volatility within the sectors traded by the Fund.
The interest rate sector was the Fund s worst performing sector as
speculation of a slowing U.S. economy and the crisis in the Middle East
attracted investors to the perceived safety in fixed-income markets.
The agriculture sector was also negative for the month. The currency
sector also underperformed for the month as fighting between Israel and
Hezbollah caused a sharp reversal in the weakening U.S. dollar trend.
Performance in the energy sector was negative for the month as
geopolitical events and a record-breaking heat wave in the Midwest and
Northeastern U.S. caused volatility throughout the entire energy
sector. The metals sector was also negative for the month as increased
volatility in gold hurt the sector s performance. Gold was up 5
percent in July after dropping 5.1 percent in June. The indices sector
was only slightly negative for the month as the Nasdaq slumped about
3.7 percent.
In conclusion, performance was negative for the month as volatility
affected trends throughout markets traded by the Fund. Concern
surrounding the U.S. economy continued to keep the markets speculating
about the Federal Reserve s next move, causing uncertainty within the
interest rate, currency and indices sectors. Meanwhile, the eruption
of violence in the Middle East added to the Fund s losses as investors
fled from equities into safe haven investments such as gold and
treasuries. Finally, the Fund also suffered as a heat wave swept across
the nation driving energy and agricultural prices suddenly higher. As
a result, short-term market moving events increased volatility and
induced strong reversals making it difficult for JWH s disciplined
systematic investment style to capitalize on longer-term trends.
Update on the RCM recovery efforts
* On June 30th the two groups of creditors at Refco Capital Markets
(RCM) entered into a Settlement Agreement. This concluded months
of negotiating between the Securities Customers and the
FX/General Unsecured Creditors of RCM, Everest being in the
second group.
* On July 24th the Rogers funds agreed to become parties to the
Settlement Agreement.
* Immediately thereafter the Official Committee of Unsecured
Creditors began to attempt to reach a global consensual
settlement agreement with the other Refco bankrupt
entities. Everest's claims at Refco are at the RCM level, however
there are 23 other bankrupt entities. Most of the parties to the
case are attempting to reach a global consensus involving all the
Refco estates.
* The RCM Settlement Agreement, if approved by the Judge, provides
for a schedule of payments to be made from the assets on hand at
RCM, and it provides a formula for sharing the anticipated
intercompany receivables and finally the third party recoveries.
I am still hopeful for an initial distribution of the assets on
hand by the end of the 4th quarter of this year, but many things
may impact that time frame.
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 July 06; a calendar of events for August 06; a
bankruptcy basics primer; FAQs; and a section to ask questions. The
site is at: www.refcocommittee.com
Class A Units were positive 7.63% in August 2006 resulting in a Net
Asset Value per unit of $2,000.56 as of August 31, 2006.
Class I Units were positive 7.89% resulting in a Net Asset Value of
$2,138.44 as of August 31, 2006.
The Fund s performance was positive in August as four out of the six
sectors traded were profitable for the month. The fixed-income sector
led performance with robust gains as U.S., Japanese, and European bond
markets trended higher on signs that inflationary pressures in the
world s largest economies are receding. The currency sector also added
to the Fund s positive performance as the Japanese yen weakened against
the U.S. dollar and euro on speculation that Japan s central bank
wouldn t raise interest rates again this year. The Fund s performance
was further enhanced by more modest gains in the metals and agriculture
sectors, while the Fund suffered small loses in the indices and energy
sectors.
The fixed-income sector was the Fund s strongest performer as Japanese
government bonds (JGBs), German bunds, and the U.S. benchmark 10-year
bond all rallied for the month. The currency sector was the Fund s
other solid performer for the month, as the Japanese yen fell against
the U.S. dollar and euro on increased speculation that the BOJ would
keep interest rates at their current level. The metals sector was also
profitable for the month as silver futures for December delivery
reached $13 an ounce, the highest price since May 30th. The precious
metal has gained 90 percent in the past year. Silver s rally is due to
increased demand throughout the world, and expectations of continued
economic expansion in developing nations. The largest gain in this
sector was achieved in silver, while the only loss occurred in gold as
geopolitical tension in the Middle East, due to Iran s continued
pursuit of uranium enrichment, kept the metal vulnerable to price
fluctuations. The agriculture sector was also positive for the month
as losses in CBOT wheat were offset by gains made in London and New
York sugar. Sugar prices in London have dropped almost 25 percent in
the past three months after rising to a record $497 a metric ton on May
12th. The global stock indices sector was slightly negative for the
month as global equity markets reversed the recent losing trend and
rallied on decreased fears of inflation. The energy sector was the
Fund s worst performing sector as higher price trends at the beginning
of the month experienced strong reversals. Natural gas soared on
August 2nd in New York on concern s that Tropical Storm Chris could
strengthen into the season s first hurricane and track towards the Gulf
of Mexico where about a quarter of the United States gas supply is
produced. However by August 31st, natural gas closed at a six-week low
in New York as Tropical Storm Chris was a non-event and mild weather
across the central and eastern U.S. reduced demand for the fuel to be
sent to power stations.
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 trended higher on contained inflation fears. The
currency sector also helped profitability as the Japanese yen weakened
on speculation that interest rates in Japan will remain at their
current level. 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
Although a stand alone RCM plan has been negotiated, it has yet to be
approved by the court. All efforts are focused on a global plan for
all of the bankrupt Refco entities, which would include the RCM plan.
We hope to have a global plan term sheet that is not contested by any
of the major parties in front of the Judge on Thursday, September 14th.
Class A Units were positive 3.16% in September 2006 resulting in a Net
Asset Value per unit of $2,063.85 as of September 30, 2006.
Class I Units were positive 3.43% resulting in a Net Asset Value of
$2,211.71 as of September 30, 2006.
The Fund s performance was positive for the month of September.
Although four out of the six sectors traded by the Fund were negative,
the gains made in the energy and interest rate sectors, which benefited
from a sharp drop in natural gas prices and rallies in European and
American fixed-income markets respectively, more than offset the other
sector losses.
712:
The energy sector was the Fund s strongest performer in September.
Natural gas and crude oil prices tumbled as mild weather in the U.S.
Midwest cut demand and allowed inventories to climb toward an all-time
high. All components of the energy sector were positive for the month.
Performance in the interest rate sector was also positive for the month
as U.S. treasuries had their biggest quarterly gains in four years and
European 10-year bonds posted their first quarterly gain since June
2005.
The metals sector was the Fund s worst performing sector for the month.
Base and precious metals suffered as commodities, as an asset class,
had their biggest quarterly decline in more than 50 years. The
Commodity Research Bureau index ended the third quarter down 12
percent, its largest decline since at least 1956. Gold and silver
prices continued to fall as lower energy prices and a stronger dollar
eroded the appeal of the precious metals as an alternative to U.S.
stocks and bonds. Gold prices are down 18 percent from a 26-year high
of $732 an ounce in May as oil slid from its record highs, easing the
risk of accelerating inflation. Performance in the currency sector was
negative for the month as well. Markets gyrated over speculation
surrounding the health of the U.S. economy and uncertainty surrounding
global inflation. The stock indices sector was also negative for the
month. The agriculture sector was negative for the month as gains in
cotton and N.Y. sugar were more than offset by the underperformance in
CBOT wheat. In conclusion, the Fund s performance was positive for the
month of September. The energy and interest rate sector gains were due
to the sharp drop in natural gas prices over the month, and the rally
in the European and American fixed-income markets. The gains were more
than enough to offset the combined losses in the remaining sectors as
global currency markets continued to look for a clear direction and
speculation surrounding the health of the U.S. economy caused trendless
markets. 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
There has been a substantial development in the Refco case. After
weeks of intensive efforts, on September 14, 2006 Refco, Inc. and all
of its subsidiaries and affiliates who are the Debtors, filed a plan of
Chapter 11 ( the Plan ) and a Disclosure Document with the bankruptcy
Court. The Plan has the support of the Creditor Committees, the
Debtors, the RCM Trustee and has signatures of a 'supermajority' of
creditors at the RCM level.
A hearing for approval of the Disclosure Statement is scheduled for
October 16, 2006, at which time any objections will be heard. It
cannot be determined in advance whether any objections will become an
obstacle, or whether the Court will approve the Plan. If it moves
forward, the Plan is slated to be confirmed by the Court on or before
December 15, 2006, and it should become effective on or before December
31, 2006 (Effective Date). Although I am hopeful that getting
distributions will be an expedited process, we do not yet have a
timetable for distributions to be made. One thing that could impact
the timeliness of distributions is that the processing of claims and
the objections to claims have not been completed. To the extent that
the process continues beyond the Effective Date, it could either delay
distributions or cause distributions to be diluted due to the need to
reserve amounts equal to any disputed claims.
The schedules show initial distributions of assets on hand at RCM for
creditors like Everest who had margin money for the purposes of foreign
exchange trading at RCM/FX will be in the range of 26 cents on the
dollar. An exact figure is difficult to determine as all the claims
have not been processed yet and all the legal fees are not calculated
yet. The Plan calls for a second level of recovery for the intercompany
receivables that are owed to RCM by the other Refco entities. It is
anticipated that this second distribution will bring the Everest
recovery to the range of 36 to 40 cents on the dollar, again subject to
the total claims allowed. Looking beyond those two distributions, we
anticipate additional recoveries from litigation proceeds against
various parties. The amount of those recoveries is obviously dependent
on the success of the litigation. In either case the amount cannot be
determined at this time.
It is my belief that the Court will approve the Plan or a plan that is
close to the current draft. I remain available to answer any questions
that you may have.
During the reporting period, fiscal quarter ended September 30, 2006,
additional Units sold consisted of 70.08 limited partnership Units;
there were zero general partnership Units sold during the period.
Additional Units sold during the period represented a total of
$150,505. Investors redeemed a total of 374.02 Units during the period
and the General Partner redeemed zero Units. At the end of the period
there were 12,243.312 Units outstanding (including zero Units owned by
the General Partner). As of September 30, 2006 the estimated Class AA
NAV per unit was $1,006.76 and Class II NAV per unit was $1,047.13.
During the fiscal quarter ended September 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 September 30, 2005
The Partnership recorded a gain of $801,389 or $49.22 per Unit of Class
A Units ($69.81 for Class I Units) for the fiscal quarter ended
September 30, 2005. This compares to a gain of $1,689,808 or $113.60
per unit of Class A Units ($129.94 for Class I Units) for the fiscal
quarter ended September 30, 2004. The quarter ended September 30, 2005
showed a loss of 2.30% (total return) for the Class A Units of the fund
(a gain of 0.04% (total return) for the Class I Units).
The third quarter 2005 showed a gain of 2.12% for Class A (2.91% for
Class I).
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 2.18% for the month of July 2005 resulting
in a net asset value per unit of $2,276.28 as of July 31, 2005.
Class I Units were negative 1.92% for July 2005 resulting in a net
asset value per unit of $2,349.25 as of July 31, 2005.
The Fund s performance was negative for the month of July. The Fund s
systematic trading approach enabled it to contain losses caused by
volatile market conditions that resulted from terror attacks in London
and a surprise devaluation of the Chinese yuan. Losses in the interest
rate, metal, and agricultural sectors limited the Fund s overall
returns, as stronger economic conditions in Europe, Japan and the US
led to weakening in the global bond markets. The energy and currency
sectors led the positive performing sectors along with more moderate
gains in the indices sector. Currencies benefited from the continued
strength of the US dollar, while energies profited from higher trending
prices.
Currencies were the Fund s strongest performer for the month in the
face of extremely volatile markets. The violent price moves were a
reaction to China ending its long-standing policy of pegging its
currency at 8.3 yuan to the US dollar. China revalued the yuan for the
first time in a decade. Nevertheless, the Fund profited in this sector
as the dollar continued to benefit from the growing yield advantage
against the Japanese yen, British pound and Swiss franc. The energy
sector was also profitable during the month, with positive returns in
every market traded within the sector. Natural gas and crude oil had
the most significant impact, as crude oil futures surpassed $62 a
barrel on July 7, 2005, the highest price at the time since trading
began on the New York Mercantile Exchange in 1983. Economic growth in
the two largest oil consumers, the US and China, was a main contributor
to the record prices. Performance in global stock indices was positive
during the month. The rally in the global equity markets contributed to
the Fund s profitable performance, as the majority of the markets
traded within the sector were positive for the month. Stocks rose as
companies posted better-than-expected earnings while economic reports
showed tame inflation and growth in retail sales. The Nikkei (Osaka)
was the sector s top performer, as the index rose 2.7 percent for the
month.
The fixed income sector was unprofitable for the month, as stronger-
than-expected economic growth in the US, Europe and Japan caused a sell
off in global bond markets. US Treasuries fell for the fifth week in a
row, the longest slump this year, as reports showed the economy may be
growing fast enough to spur inflation. The Fund s performance in the
agriculture sector was slightly negative during the month, as
volatility in various markets prevented the Fund from achieving any
returns. The metals sector was unprofitable for the month. Gold prices
fell from recent highs as the US dollar strengthened, reducing the
metal s appeal as an alternative investment. Silver, the only other
market traded within the metal sector was also negative on the month.
In conclusion, the performance was negative for the month as the Fund s
trend-following approach enabled it to withstand extreme market
volatility in the currency sector.
Class A Units were positive 3.43% for August 2005, resulting in a net
asset value per unit of $2,354.33 as of August 31, 2005.
Class I Units were positive 3.69% for August 2005, resulting in a net
asset value per unit of $2,435.97 as of August 31, 2005.
The Fund s performance was positive for the month of August 2005. The
systematic trading approach employed by the Fund s Trading Advisor
enabled it to withstand volatile market conditions that resulted from
Hurricane Katrina. The energy sector was the Fund s best performer,
along with smaller gains achieved in both the indices and agricultural
sectors. The Fund s exposure to the energy sector helped performance
as Hurricane Katrina affected the U.S. gulf coast, shutting oil and gas
production, as well as creating spot fuel shortages throughout the U.S.
The storm s impact also added to some of the losses in the remaining
sectors thus hindering the Fund s overall return.
Performance in the agriculture sector was positive on the month as
trading in N.Y coffee, London sugar and cotton helped bolster returns
within the sector. Performance in the global stock indices sector was
positive during the month as the Nikkei (Osaka) rose to a four year
high on signs that the world s second largest economy grew for the
third straight quarter. Nevertheless, the sector s gains were limited
as the majority of world s equity markets weakened during the month on
concerns that record oil prices, caused by Hurricane Katrina, may slow
global economic growth.
The currency sector was the Fund s most unprofitable sector for the
month as the U.S. dollar fell 1.8% against the euro and 1.7% against
the yen. The dollar s weakness was a result of speculation that the
record high oil prices would slow U.S. economic growth thereby reducing
expectations for how much the Federal Reserve will raise interest rates
this year, if at all. The fixed income sector was also unprofitable
for the month, as Hurricane Katrina sparked an unexpected rally in
global bond markets. The month began with an expected 25 basis point
rate hike by the Federal Reserve and for the majority of the month both
the U.S. and Japanese bond markets were falling. However, as it became
apparent that Hurricane Katrina would make landfall and cause
widespread damage to the U.S. gulf coast region and its industries
global bond markets rallied. The metals sector was unprofitable for
the month as volatility typified trading in gold during the month. The
cumulative effects of violent price action in the currencies and fixed
income markets, along with the market impact of Hurricane Katrina, led
gold to be the worst performer in the sector. However, the positive
performance of silver helped to limit the losses within the sector.
In conclusion, the Fund finished positive for the month of August 2005,
as global markets saw extreme volatility as a result of Hurricane
Katrina.
Class A Units were positive 0.93% for September 2005, resulting in a
net asset value per unit of $2,376.16 as of September 30, 2005.
Class I Units were positive 1.19% for September 2005, resulting in a
net asset value per unit of $2,464.94 as of September 30, 2005.
The Fund s performance was positive for the month of September 2005.
The stock indices, energy and currency sectors led performance along
with more moderate gains in agriculture and metals. Energies benefited
from record high natural gas prices that occurred as a result of
Hurricane Katrina and the threat of Hurricane Rita, while metals
profited from higher trending prices in gold. The Fund s overall
returns in September 2005 were limited however, as the storms induced
volatility and fear grew over increased global inflation. This resulted
in losses in the interest rate sector.
During the quarter ended September 30, 2005, additional Units sold
consisted of 809.81 limited partnership Units; there were no general
partnership Units sold during the period. Additional Units sold during
the period represented a total of $1,914,840. Investors redeemed a
total of 899.71 Units during the period and the General Partner
redeemed no Units. At the end of the period there were 15,354.29 Units
outstanding (including zero Units owned by the General Partner).
During the fiscal quarter ended September 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.
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 of
$2,594.70 as of April 30, 2006.
The interest rate sector led performance 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 will grow 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 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 Stock
Indices 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 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. to 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
unitof $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.
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.
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 BFIP and has
demanded that Trilogy reimburse the Partnership for the loss. The
parties are currently attempting to resolve the issue.
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: November 14, 2006 By: Everest Asset Management, Inc.,
its General Partner
By:__/s/ Peter Lamoureux_____
Peter Lamoureux
President
EXHIBIT INDEX
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