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, 2007
Commission File Number 0-17555
THE EVEREST FUND, L.P.
(Exact name of registrant as specified in its charter)
Iowa 42-1318186
State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1100 North 4th Street, Suite 143, Fairfield, Iowa 52556
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (641) 472-5500
Not Applicable
(Former name, former address and former fiscal year, if changed
since last report.)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
Indicate by check mark whether the registrant is a large accelerated filer,
an accelerated filer, or a non-accelerated filer (as defined
in Rule 12b-2 of the Exchange Act). (Check one):
Large accelerated filer Accelerated filer
Non-accelerated filer X
Indicate by check mark whether the registrant is a shell company (as defined
in Rule 12b-2 of the Act). Yes No X
2
PART I. FINANCIAL INFORMATION
Item 1 Financial Statements
Following are financial Statements for the fiscal quarter ending
September 30, 2006
Fiscal Quarter Year to Date Fiscal Year Fiscal Quarter Year to Date
Ended 9/30/07 to 9/30/07 Ended 12/31/06 Ended 9/30/06 to 9/30/06
------------- ------------ -------------- -------------- -------------
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, 2007 DECEMBER 31, 2006
----------------- -----------------
ASSETS
Cash and cash equivalents $ 8,081,016 $13,513,720
Equity in commodity trading accounts:
Cash 2,495,373 4,204,891
Net unrealized trading gains (losses) on open contracts 1,763,565 328,654
Receivable from Refco Capital Markets, Ltd. (Note 1) 247,665 1,627,407
Interest receivable 66,601 94,086
----------- -----------
TOTAL ASSETS $12,654,221 $19,768,758
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
LIABILITIES:
Redemptions payable $ 2,611,683 $ 898,266
General partner management fee payable 32,864 72,484
Advisor's management fee payable 19,977 31,286
Accrued expenses 82,607 55,424
----------- -----------
TOTAL LIABILITIES 2,747,131 1,057,460
----------- -----------
PARTNERS' CAPITAL
General partners, I shares (0 and 0 units outstanding) -- --
Limited partners, A Shares (4,648.498 and 7,712.69 units
outstanding) 9,203,910 14,785,460
Limited partners, I Shares (48.149 and 932.14 units
outstanding) 105,448 1,930,473
Limited partners, AA Shares (542.898 and 1,786.21 units
outstanding) 537,071 1,792,866
Limited partners, II Shares (58.954 and 193.97 units
outstanding) 60,660 202,499
----------- -----------
TOTAL PARTNERS' CAPITAL 9,907,089 18,711,298
----------- -----------
TOTAL LIABILITIES AND PARTNERS'
CAPITAL $12,654,221 $19,768,758
=========== ===========
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, 2007
------------------
UNAUDITED
NUMBER OF MARKET VALUE % OF PARTNERS'
EXPIRATION DATES CONTRACTS (OTE) CAPITAL
---------------- --------- ------------ --------------
LONG POSITIONS:
FUTURES POSITIONS
Interest rates Dec 07 - Jun 08 260 $ (78,180) -0.79%
Metals Dec 07 77 328,205 3.31%
Energy Dec 07 - Jan 08 116 273,411 2.76%
Agriculture Nov 07 - Dec 07 295 1,000,479 10.10%
Currencies Sep 08 80 (14,000) -0.14%
Indices Dec 07 40 191,512 1.93%
----------- -----
1,701,427 17.17%
FORWARD POSITIONS
Currencies Dec 07 281,449 2.84%
----------- -----
Total long positions 1,982,876 20.01%
----------- -----
SHORT POSITIONS:
FUTURES POSITIONS
Interest rates Dec 07 - Jan 08 107 (24,394) -0.25%
Energy Jan 08 17 7,670 0.08%
Agriculture Dec 07 - Mar 08 53 (16,986) -0.17%
Indices Dec 07 8 (73,713) -0.74%
----------- -----
(107,423) -1.08%
FORWARD POSITIONS
Currencies Dec 07 (111,888) -1.13%
----------- -----
Total short positions (219,311) -2.21%
----------- -----
TOTAL OPEN CONTRACTS 1,763,566 17.80%
CASH AND CASH EQUIVALENTS 8,081,016 81.57%
CASH ON DEPOSIT WITH BROKERS 2,495,373 25.19%
LESS LIABILITIES IN EXCESS OF OTHER ASSETS (2,432,865) -24.56%
----------- -----
NET ASSETS $ 9,907 089 100.00%
=========== =====
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, 2007 THROUGH SEPTEMBER 30, 2007
-------------------------------------------------------
UNAUDITED
JULY 1, 2007 JANUARY 1, 2007
THROUGH THROUGH
SEPTEMBER 30, 2007 SEPTEMBER 30, 2007
---------------- ---------------
TRADING INCOME (LOSS)
Net realized trading loss
on closed contracts $(309,012) $(1,089,543)
Change in net unrealized trading gain
(loss) on open contracts 832,646 1,434,847
Net foreign currency translation loss 14,092 4,536
Brokerage Commissions (30,084) (107,760)
----------- ------------
NET TRADING INCOME (LOSS) 507,643 242,080
Interest income, net of cash management fees 147,738 513,368
----------- ------------
TOTAL INCOME (LOSS) 655,381 755,448
----------- ------------
EXPENSES:
General partner management fees 118,117 429,898
Advisor Management fees 57,617 207,253
Administrative expenses 25,937 132,273
----------- ----------
TOTAL EXPENSES 201,671 $ 769,424
----------- ----------
NET INCOME (LOSS) $ 453,710 $ (13,976)
=========== ===========
NET INCOME (LOSS) PER UNIT OF PARTNERSHIP INTEREST
A SHARES, OUTSTANDING ENTIRE PERIOD $ 82.26 $ 62.94
=========== ==========
NET INCOME (LOSS) PER UNIT OF PARTNERSHIP INTEREST
I SHARES, OUTSTANDING ENTIRE PERIOD $ 107.27 $ 119.02
=========== ==========
NET INCOME (LOSS) PER UNIT OF PARTNERSHIP INTEREST
AA SHARES, OUTSTANDING ENTIRE PERIOD $ (7.51) $ (14.46)
=========== ==========
NET INCOME (LOSS) PER UNIT OF PARTNERSHIP INTEREST
II SHARES, OUTSTANDING ENTIRE PERIOD $ (7.81) $ (15.04)
=========== ==========
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 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 gain (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.
7
EVEREST FUND, L.P.
(An Iowa Limited Partnership)
STATEMENT OF CHANGES IN PARTNERS' CAPITAL
FOR THE PERIOD JANUARY 1, 2007 THROUGH SEPTEMBER 30, 2007
----------------------------------------------------
UNAUDITED
LIMITED
UNITS LIMITED PTRS UNITS PTRS
A SHARES A SHARES I SHARES I SHARES
---------- ------------ -------- ----------
BALANCES, January 1, 2007 7,712.69 14,785,461 932.14 1,930,473
Additional Units Sold 25.51 50,000 23.78 50,000
Redemptions (3,375.76) (6,043,832) (945.72) (2,068,043)
Transfers Between Classes 286.07 527,556 37.95 75,760
Less Offering Costs -- (495) -- (1,430)
Net profit (Loss) -- (114,780) -- 118,687
---------- ------------ -------- ----------
BALANCES, SEPTEMBER 30,2007 4,648.50 $ 9,203,910 48.15 $ 105,448
========== ============ ======== ==========
Net asset value per unit,
January 1, 2007 $ 1,917.03 $ 2,071.02
Net profit (loss) per unit 62.94 119.02
Net asset value per unit
September 30, 2007 $ 1,979.97 $2,190.04
============ ==========
UNITS LIMITED UNITS LIMITED
AA PTRS AA II PTRS II
SHARES SHARES SHARES SHARES TOTAL
-------- ---------- ------ --------- ------------
BALANCES, January 1, 2007 1,786.21 1,792,866 193.97 202,499 18,711,298
Additional Units Sold -- -- -- -- 100,000
Redemptions (354.61) (712,171) (43.56) (64,263) (8,888,308)
Transfers Between Classes (888.70) (527,556) (91.45) (75,760) 0
Less Offering Costs -- -- -- -- (1,925)
Net Profit (Loss) -- (16,069) -- (1,815) (13,977)
-------- ---------- ------ --------- ------------
BALANCES, SEPTEMBER 30, 2007 542.90 $ 537,070 58.95 $ 60,660 $ 9,907,089
======== ========== ====== ========= ============
Net asset value per unit,
January 1, 2007 $ 1,003.73 $1,043.98
Net profit (loss) per unit (14.46) (15.04)
---------- ----------
Net asset value per unit
SEPTEMBER 30, 2007 $ 989.27 $1,028.94
========== ==========
The accompanying notes are an integral part of these statements.
8
EVEREST FUND, L.P.
(An Iowa Limited Partnership)
STATEMENTS OF CASH FLOWS-CONTINUED
FOR THE PERIOD JANUARY 1, 2007 THROUGH SEPTEMBER 30, 2007
---------------------------------------------------------
UNAUDITED
JULY 1, 2007 JANUARY 1, 2007
THROUGH THROUGH
SEPTEMBER 30, 2007 SEPTEMBER 30, 2007
----------------- -----------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 453,710 $ (13,976)
Adjustments to reconcile net income (loss) to net cash
used in operating activities:
Decrease (increase) in commodity futures trading accounts:
Cash 56,653 1,709,518
Unrealized gain or loss on open commodity futures contracts (832,711) (1,434,911)
Decrease (increase) in interest receivable 14,028 27,485
Decrease (increase) in receivable from Refco Capital Markets, Ltd. 342,691 1,379,742
Decrease (increase) in incentive fees payable -- --
(Decrease) increase in management fees payable (1,546) (11,309)
(Decrease) increase in General Partner management fees payable (204) (39,620)
(Decrease) increase in other accrued expenses (54,634) 27,184
------------ ------------
NET CASH USED IN OPERATING ACTIVITIES (22,013) 1,644,113
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Redemption of partnership units (1,688,113) (7,174,892)
Sale of partnership units, net (494) 98,075
------------ ------------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES (1,688,607) (7,076,817)
------------ ------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (1,710,620) (5,432,704)
CASH AND CASH EQUIVALENTS, AT BEGINNING OF PERIOD 9,791,636 13,513,720
------------ ------------
CASH AND CASH EQUIVALENTS, AT END OF PERIOD $ 8,081,016 $ 8,081,016
============ ============
The accompanying notes are an integral part of these statements
9
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
10
EVEREST FUND, L.P.
NOTES TO FINANCIAL STATEMENTS
September 30, 2007
(1) GENERAL INFORMATION AND SUMMARY
Everest Fund, L.P. (the "Partnership") is a limited partnership organized on
June 20, 1988 under the Iowa Uniform Limited Partnership Act (the Act). The
business of the Partnership is the speculative trading of commodity futures
contracts and other commodity interests, including forward contracts on
foreign currencies ("Commodity Interests") either directly or through
investing in other, including subsidiary, partnerships, funds or other
limited liability entities. The Partnership commenced its trading operations
on February 1, 1989 and its general partner is Everest Asset Management, Inc.
(the "General Partner") a Delaware corporation organized in December 1987.
The Partnership was initially organized on June 20, 1988 under the name
Everest Energy Futures Fund, L.P. On September 12, 1991, the Partnership
changed its name to "Everest Futures Fund, L.P." The Partnership thereafter
has traded futures contracts and options on futures contracts on a
diversified portfolio of financial instruments and precious metals as well as
forward contracts on currencies. In November 2003 the Partnership changed its
name to its present form.
On July 1, 1995, the Partnership recommenced its offering under a
Regulation D, Rule 506 private placement. The private placement offering is
continuing at a gross 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 on going compensation fee equal
to 3% of the net asset value of Class A Units sold. The Class A Units
(retail shares) continue to be charged an initial 1% Offering and
Organization fee as a reduction to capital.
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.
Since 1995, the Fund had cleared its commodity future trades through
Cargill Investors Services, Inc. ( CIS ) and its foreign exchange/currency
forwards through CIS Financial Services, Inc. On June 22, 2005 Refco
Group Ltd., LLC ( Refco Group ) announced that it had entered into a
definitive agreement to acquire the global brokerage operations of CIS
and that clearing and related services provided previously by CIS would
henceforth be performed by Refco, in particular the futures commission
subsidiary Refco, LLC ( Refco LLC ) and RCM. By supplements to the
Confidential Offering Memorandums for Class A Interests nd Class I
Interests in the Fund dated September 1, 2005, we advised investors
of this change to the Fund s commodity brokerage arrangements. On that
date Cargill Investor Services, Inc. effectively became Refco, LLC and
CIS Financial Services, Inc. became Refco Capital Markets, Ltd.
On October 10, 2005, Refco, the parent company of Refco Group and Refco LLC,
announced that it had discovered through an internal review an accounting
issue involving a receivable owed to Refco by an entity controlled by
Philip R. Bennett, the then Chief Executive Officer and Chairman of the
Board of Directors of Refco. The amount at issue was approximately $430
million and was repaid by Mr. Bennett on October 11, 2005. Mr. Bennett
was subsequently relieved of his duties and has been charged with
securities fraud in connection with this matter. In addition, various
legal actions have been filed against Refco in this regard.
On October 13, 2005, 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 acts as the Fund s foreign currency
broker and as of such date, approximately 20% of the Fund s assets were
held on deposit in accounts at RCM.
On October 17, 2005, Refco and certain subsidiaries filed in New York
a bankruptcy petition seeking protection from creditors under Chapter
11 of the United States Bankruptcy Code. Although Refco LLC was not
included in this filing, RCM was and as a result all dealings with
RCM are subject to control by the Bankruptcy Court. The Fund is not
able to determine at this time when or how much of the funds held
on deposit with RCM will be available for distribution.
In light of these events, the Fund terminated Refco LLC as its futures
broker and RCM as its foreign currency broker. In their places, the
Fund engaged Calyon Financial, Inc. and Calyon Financial SNC,
respectively. Calyon is one of the largest FCMs and is the subsidiary
of one of the world s largest banks. The Fund intends to transfer assets
held with RCM to the control of the Everest Fund once transfers from
accounts at RCM are approved by the Bankruptcy Court. At this time the
financial position of RCM and when and if the Fund will be able
to transfer assets cannot be ascertained. Although we regret these
circumstances, the Fund had no prior knowledge of the events alleged
to have occurred at Refco and of the potential impact such events would
have on Refco s operating subsidiaries.
The Fund has been advised by its trading manager, John W. Henry &
Company, Inc. ( JWH ) that all positions at Refco LLC are closed and
all positions in foreign currency for the Fund held at RCM were offset
as of October 19, 2005. Statements provided by RCM show that the
Fund s remaining assets at RCM consist of cash and forward open trade
equity on neutral currency positions of approximately $7.5 million.
Subject to the uncertainty of the amount ultimately recoverable from
RCM, the Fund intends to continue providing daily net asset values.
Any reliance on the net asset value calculations issued by the Fund
must be qualified to the extent of the assets held on deposit at RCM
until such time as such assets can be transferred to another entity.
Therefore, any outstanding or future request for redemption from
investors in the Fund as of October 17, 2005 will be subject to a
holdback in an amount that represents a proportionate reduction for
the percentage of assets remaining in RCM over the total assets of
the Fund together with a proportionate share of a reserve of $400,000
for unusual operating expenses. Payment of the remaining portion
of redemption proceeds will be delayed until, and if, the assets on
deposit at RCM become available to the Fund.
The Fund described the foregoing events in more detail in a general letter to
Limited Partners October 20, 2005 (the Letter ). The Letter appears as an
attachment to a filing on Form 8-K by the Fund on October 21, 2005. Both the
substance of the Form 8-K and its attached letter exhibit have
been incorporated into this Form 10-K by reference.
Mr. Lamoureux was appointed by the U.S. Trustee s Office as a member of the
Official Committee of Unsecured Creditors in the Refco bankruptcy on October
28, 2005.
Refco , Inc. filed a plan under Chapter 11 ( the Plan ) and a Disclosure
Document with the Bankruptcy Court. The Plan was confirmed by the Bankruptcy
Court, and became effective December 26, 2006. Based on the estimated
recovery amounts contained in the schedules of the Plan and Disclosure
Document the General Partner as of October 31, 2006 (but effective
September 30, 2006) 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 accordance with Generally Accepted
Accounting Principles and in particular rule FAS 5-3 paragraph 105,
the write down was 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 was reflected in the statement of operations at
September 30, 2006. Everest has 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 Everest s
September 30, 2006 investor account statements, and therefore the October
investor statements that were issued in November reflected the revised
Net Asset Values for September 30, 2006.
The Fund described the foregoing events in more detail in a general
letter that appears as an attachment to a filing on Form 8-K by the
Fund on November 6, 2006 The Form 8-K has been incorporated into
this Form 10-K by reference.
On December 28, 2006, The Everest Fund, L.P. received the first in a series of
anticipated distributions in the Refco matter. Of the approximately $7,500,000
that became inaccessible in October 2005, the first distribution received by
the Fund in the amount of $1,365,525.51 was equal to approximately 18% of
the frozen assets. The December 2006 statement reflected a prorata decrease
in the number of AA and II shares, and a corresponding increase in the A
units or I units to reflect their pro rata share of the distribution for
investors who have been in the Fund since October 12, 2005. For investors
who were in the Fund on October 12, 2005 and have since redeemed, the
Partnership redeemed a portion of their AA and II shares effective December
31,2006 and sent out checks for their pro rata share of the distribution
in January 2007. These changes do not apply to those who have come into
the Fund after October 2005.
On March 29, 2007 The Everest Fund, L.P. received the second in a series of
anticipated distributions in the Refco matter in the amount of $368,878.96 for a
cumulative total received of $1,734,404.47. That represents an amount equal to
approximately 23% of the frozen assets. The Fund has increased the Class A
units for each investor in the Fund by their pro rata share of the
distribution. Checks have been mailed for the benefit of any investors who
have redeemed. These changes do not apply to those who have come into the
Fund after October 2005.
On June 28, 2007 Everest received a third distribution from Refco in the
amount of $668,172.21. That amount is equal to approximately 9 cents on the
dollar of the original amount that was frozen in October 2005. This, in
addition to the other distributions, brings the recovery to approximately
32 cents on the dollar so far. The Fund has increased the Class A units
for each investor in the Fund by their pro rata share of the distribution.
Checks have been mailed for the benefit of any investors who have redeemed.
These changes do not apply to those who have come into the Fund after
October 2005.
On September 20, 2007 Everest received another distribution
from Refco in the amount of $342,696.03. That amount is equal to
approximately 4.55 cents on the dollar of the original amount that
was frozen in October 2005. This, in addition to the other distributions,
brings the recovery to approximately 36.55 cents on the dollar so far.
The Fund has increased the Class A units for each investor in the
Fund by their pro rata share of the distribution. Checks have been
mailed for the benefit of any investors who have redeemed. These
changes do not apply to those who have come into the Fund after
October 2005.
(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. CSAP was eliminated as a trading program on January 1st, 2007, and
WBP was dropped on May 31st 2007, leaving GAP as the sole JWH program.
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.
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 Septmber 30, 2007 and 2006 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
$1,232,560.08 as of September 30, 2007 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 0.25 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, 2007. 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:
9/30/07 9/30/06
1. Total return: A Shares 3.28% -7.79%
I Shares 5.75% -5.55%
AA Shares -1.44% -57.09%
II Shares -1.44% -57.09%
2. Ratio to average net assets:
Total income A Shares 5.05% -0.86%
I Shares 10.78% -2.42%
AA Shares 1.40% 0.19%
II Shares 1.40% 0.19%
3. Expenses, excluding incentive fees:
A Shares 6.10% 6.04%
I Shares 3.98% 3.64%
AA Shares 2.65% 60.70%
II Shares 2.65% 60.70%
4. Incentive fees 0.00% 0.00%
5. Total expenses
A Shares 6.10% 6.04%
I Shares 3.98% 3.64%
AA Shares 2.65% 60.70%
II Shares 2.65% 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, 2007 and 2006.
(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, 2006, as filed with the Securities and Exchange
Commission on March 30, 2007, as part of its Annual Report on
Form 10-K.
The results of operations for interim periods are not necessarily
indicative of the operating results to be expected for the fiscal year.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operation
3 months ended September 30, 2007
The Partnership recorded a gain of $453,710 or $ 82.26 per Unit
of Class A Units $107.27 for Class I Units, loss of $7.51 for Class AA
Units and loss of $7.81 for Class II Units) for the fiscal quarter ended
September 30, 2007. This compares to a loss of $ 4,750,979or $(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. The quarter ended September 30, 2007
showed a gain of 4.33%( total return) for the Class A Units of the
fund (a gain of 5.15% for the Class I Units, a loss of 0.75% for Class AA Units
and a loss of 0.75% for Class II Units).
The Partnership continued to employ John W. Henry & Company, Inc. ' s
(JWH) GlobalAnalyticsR Family of Programs.
Class A Units were negative 1.78% in July 2007 resulting in a Net
Asset Value per unit of $1,863.90 as of July 31, 2007.
Class I Units were negative 1.52% resulting in a Net Asset Value of
$2,051.12 as of July 31, 2007.
After a positive +10.87 performance in June, the Fund declined in July
as many of the financial market trends that contributed to the Fund s
second quarter gains were significantly disrupted or ended during the
month. Although the Fund was down for the month, JWH gave back
less of the June gains than many of their peers in the managed futures
industry. Some of the largest managers in the industry had losses greater
than 10% in July, and even large funds with multiple advisors had
similar declines.
For the month of July, concerns about strains in the U.S. housing market,
exposure to sub-prime mortgages and excess leverage in the financial
system resurfaced prompting investors to reduce positions in risky assets.
The manifestation of this flight to quality was most noticeable in the
credit markets where market forces pushed borrowing costs significantly
higher. In this volatile trading environment, government bond prices rose
while global equities and higher yielding currencies declined. The Fund
benefited from the diversification associated with its commodity allocation.
While the financial sectors of the Fund were negatively impacted by trend
reversals and rising volatility, overall Fund losses were partially mitigated by
gains resulting from the rising price of crude oil and trends in the
grain markets.Strong global growth, rising inflationary concerns and
vigilant central banks were three factors that combined to drive global
interest rates higher during the second quarter of 2007. Festering near
the surface of the market consciousness however, was real concern about
the state of the U.S. housing market, hedge fund and investment bank
exposure to sub-prime mortgages and the fragility of the liquidity
dependent capital markets. These fears increased in July resulting
in higher bond prices and a clear re-pricing of risk. The benchmark
U.S. 10-year yield fell from a high of 5.19 percent during the month to
close at 4.74 percent. At the same time bond yields were falling,
spreads were rising at an even faster pace. Mortgage, high yield and
swap spreads also widened during the month.The broad-based trend
reversals in global bonds caused the Fund to incur losses in the
interest rate sector.
Trading in currencies was also unprofitable. The turmoil in the credit markets
had a collateral effect on the currency markets as investors bought back
short positions in low yielding currencies that were used to finance long
positions in higher yielding currencies. The Fund s largest loss was in
the Japanese yen.
Trading in the metal markets was negative for the month as precious metals
reversed their downward trend. Gold led the sectors negative performance as
it rose to an 11-week high in New York during the month as the dollar tumbled
to a record low against the euro and the British pound. The dollars fall
boosted the appeal of the precious metal as an alternative investment as
gold generally moves in the opposite direction of the U.S. currency. The
metal finished the month up 4.1 percent as the dollar fell 1.1 percent
against the euro.
Global equity prices suffered a significant setback in July, and trading in this
sector was difficult in for the month as a number of long held positions were
stopped out.
In summary, trends in global bonds and equities were halted when
problems in the U.S. housing market and sub-prime mortgages spread
throughout the global financial markets. This contagion led to a
broad-based reduction in risk. The Fund s diversification and risk
management techniques helped to minimize losses in this difficult
environment. It is hard to know where the markets will go from
here but it is possible that elevated levels of volatility will persist
in certain sectors that could be a positive development for the Fund.
The Fund stands ready to potentially take advantage of new opportunities
as they arise.
Clearing Broker News
The Fund s futures clearing broker, Calyon Financial, Inc. has announced
plans to merge with the clearing broker Fimat, a subsidiary of Societe
Generale. The Merger will create a new firm to be known as Newedge
and should be completed sometime in the 1st quarter of 2008. We believe
that the merger will provide even greater financial strength for our
clearing broker relationship. The merger will create one of the top 5
FCM s in the world.
New Allocation
We are very pleased to announce that the Fund will be making an allocation
to the Morningstar Long / Short Commodity Index. The Index is a momentum
based strategy that holds a basket of 19 physical commodity contracts either
long or short.
We will send more information about the allocation and the Morningstar
Commodity Index in the next few weeks. We anticipate an allocation within
the next few months.
Class A Units were negative 8.25% in August 2007 resulting in a Net
Asset Value per unit of $1,710.05 as of August 31, 2007.
Class I Units were negative 7.99% resulting in a Net Asset Value of
$1,887.20 as of August 31, 2007.
The Fund s performance was impacted as the crisis that began
in the sub-prime mortgage market continued spreading globally,
undermining demand for corporate bonds, equities and commercial paper.
The spread of the U.S. contagion produced short-lived, sharp and unusually
well correlated spikes in volatility throughout global financial markets.
As a result, the Fund s long-term diversified trend-following methodology
suffered losses as the market dislocations forced the exiting of positions.
The energy sector was the Fund s worst performer for the month
as petroleum products suffered strong trend reversals. Crude oil finished
the month down 5.3 percent. The currency sector was negative for the
month as the credit debacle sparked extreme short-term moves in global
currencies. The long-term nature of the Fund s models seek to capitalize
on market trends that have both sufficient price amplitude and extended
duration. The metals and stock indices sectors were negative for the month
as range-bound markets and trend reversals dominated these sectors.
The interest rate sector was the Fund s strongest performer for the
month as investors sought the relative safety of government debt as
concerns increased over a global credit crisis. Japanese Government
10-year bonds (JGBs) were the sector s best performer. The agriculture
sector was slightly positive as CBOT wheat exhibited the most noteworthy
performance.
In conclusion, the far reaching influence of the sub-prime mortgage crisis
spread throughout global financial markets. While such market dislocations
often portend strong structural shifts in trends, thus far the emergence of
such trends has been short-lived and filled with extreme price volatility.
This volatility is not unusual in times of significant market realignment
and the Fund will continue to apply its disciplined systematic trading
approach to potentially take advantage of new opportunities as they present
themselves.
Auditors
Due to regulatory circumstances beyond Everest or Spicer Jeffries
control, Spicer Jeffries LLP have ceased to serve the Fund as
accountants effective September 17, 2007. The Sarbanes-Oxley Act of
2002 has mandatory rules on partner rotation in order for auditors to
be considered independent, and those rules have forced this decision. We
have begun the process of selecting a new firm and we will notify all
investors as to who will replace Spicer asthe Fund s new independent
auditors. It should be noted that Spicer s opinion in 2006, 2005 and
2004 was that The Everest Fund, L.P. financial statements present
fairly, in all material respects, the financial position of the Fund and
the results of its cash flows have been in conformity with accounting
principles generally accepted in the United States.
New Allocation
We are very pleased to announce that the Fund will be making an
allocation to the Morningstar Long / Short Commodity Index. The
Index is a momentum based strategy that holds a basket of 19
physical commodity contracts either long or short.
We will send more information about the allocation and the
Morningstar Commodity Index in the next few weeks. We anticipate
an allocation within the next few months.
Offering Memorandum
In anticipation of adding the Morningstar Long/Short Commodity
Index strategy to the Fund,we have not updated our offering documents.
Therefore at this time, we cannot accept new subscriptions. As soon
as the new document is available we will let you know.
Class A Units were positive 15.78 % in September 2007 resulting
in a Net Asset Value per unit of $1,979.97 as of September 30, 2007.
Class I Units were positive 16.05% resulting in a Net Asset Value of
$2,190.04 as of September 30, 2007.
The Fund posted significant gains in excess of 15% for the month of
September as the U.S. Federal Reserve Board (the Fed) cut its benchmark
rate on September 18th by 50 basis points to 4.75 percent in an attempt
to shore up an economy threatened by a housing recession. The rate cut
sparked concerns about inflation as some investors bought commodities
to hedge against rising consumer prices. The falling U.S. dollar made
raw materials priced in dollars cheaper for buyers holding foreign currencies.
The Fund gained for a second quarter in a row, as its systematic
trend-following approach capitalized on the dollar s plunge and also
benefited from the enhanced appeal of energies, grains and precious metals.
The agriculture sector was the Fund s strongest performer for the month
as the slumping dollar, which enhanced the appeal of grains as an inflation
hedge, and a global grain shortfall drove wheat and soybean prices to
record highs. The currency sector was positive for the month as the U.S.
dollar hit record lows in the wake of the larger-than-expected interest rate
cut by the Fed. The weakness of the dollar against the euro was a significant
contributor to this month s gains as its downward trend led to an all-time
low of $1.4278 per euro. The energy sector was positive in September as
petroleum products rose to record highs on speculation that the combination
of U.S. interest rate cuts and a falling dollar would boost demand. The falling
dollar makes oil cheaper in countries using foreign currencies. Crude oil
reached a record-breaking $83.90 a barrel on September 20th. This record
high was less than a dollar from the all-time inflation-adjusted high reached
in 1981, when prices jumped because Iran cut oil exports. Both the stock
indices and metal sectors were positive for the month as stocks rose to
complete their steepest September advance since 1998. The Fed s interest
rate cut helped energy and raw-material companies lead the market s recovery
after a summer rout. Gold extended its rally to its highest price since 1980 due
to speculation that a weakening dollar and surging energy costs will boost
demand for the precious metal as an alternative investment. The interest rate
sector was negative for September.
In conclusion, the Fund exhibited strong performance for the month
of September as the larger-than-expected interest rate cut by the Fed drove
the U.S. dollar lower, sparking inflationary fears and driving commodity
prices to record highs. The Fund s systematic trend-following approach
profited as trends strengthened. As always, the Fund stands ready to
potentially take advantage of any continuing or new trends that may emerge.
Refco Distribution (For those investors in the Fund in
October 2005)
Refco, Inc. filed a plan under Chapter 11 ( the Plan ) and
a Disclosure Document with the Bankruptcy Court. The Plan was
confirmed by the Bankruptcy Court and became effective December
26, 2006. An initial distribution was made to investors in
December 2006. The Plan Administration Committee, of which Peter
Lamoureux is a member, is actively liquidating other assets.
On March 29, The Everest Fund, L.P. received the second in
a series of anticipated distributions in the Refco matter in the
amount of $368,878.96. Of the approximately $7,500,000 that became
inaccessible in October 2005, we have now received
$1,743,404.47. That represents an amount equal to approximately
23% of the frozen assets. The Fund has increased the Class A units
for each investor in the Fund by their pro rata share of the
distribution. Checks have been mailed for the benefit of any
investors who have redeemed. We expect additional distributions
between now and the end of June 2007
On June 28th, 2007 Everest received a third distribution from
Refco in the amount of $668,172.21. That amount is equal to
approximately 9 cents on the dollar of the original amount that was
frozen in October 2005. This, in addition to the other distributions,
brings the recovery to approximately 32 cents on the dollar so far.
The Fund has increased the Class A units for each investor in the
Fund by their pro rata share of the distribution. Checks have been
mailed for the benefit of any investors who have redeemed.
On September 20, 2007 Everest received another distribution
from Refco in the amount of $342,699.06. That amount is equal to
approximately 4.55 cents on the dollar of the original amount that
was frozen in October 2005. This, in addition to the other distributions,
brings the recovery to approximately 36.55 cents on the dollar so far.
The Fund has increased the Class A units for each investor in the
Fund by their pro rata share of the distribution. Checks have been
mailed for the benefit of any investors who have redeemed. The
Plan Administration Committee is working with the other estate
professionals to effect additional distributions. We will continue
to keep you informed. These changes do not apply those who
have come into the Fund after October 2005.
New Allocation
We are very pleased to announce that the Fund will be
making an allocation to the Morningstar Long / Short Commodity
Index. The Index is a momentum based strategy that holds
a basket of 20 physical commodity contracts either long or short.
Auditors
Due to regulatory circumstances beyond Everest or Spicer Jeffries
control, Spicer Jeffries LLP have ceased to serve the Fund as
accountants effective September 17, 2007. The Sarbanes-Oxley
Act of 2002 has mandatory rules on partner rotation in order for
auditors to be considered independent, and those rules have forced
this decision. We have begun the process of selecting a new firm
and we will notify all investors as to who will replace Spicer as the
Fund s new independent auditors. It should be noted that Spicer s
opinion in 2006, 2005 and 2004 was that The Everest Fund, L.P.
financial statements present fairly, in all material respects, the financial
position of the Fund and the results of its cash flows have been in
conformity with accounting principles generally accepted in the
United States.
Offering Memorandum
In anticipation of adding the Morningstar Long/Short
Commodity Index strategy to the Fund, we have not updated
our offering documents. Therefore at this time, we cannot accept
new subscriptions. As soon as the new document is available we will
let you know.
During the reporting period, fiscal quarter ended September 30, 2007,
additional Units sold consisted of zero limited partnership Units;
there were zero general partnership Units sold during the period.
Additional Units sold during the period represented a total of
$ zero. Investors redeemed a total of 1630.38 Units during the period
and the General Partner redeemed zero Units. At the end of the period
there were 5,298.499 Units outstanding (including zero Units owned by
the General Partner). As of September 30, 2007 the estimated Class AA
NAV per unit was $989.27 and Class II NAV per unit was $1,028.94.
During the fiscal quarter ended September 30, 2007, 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.
3 months ended 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.
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.
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.
3 months ended ended June 30, 2007
The Partnership recorded a gain of $ 1,255,628 or $195.26 per Unit of
Class A Units ($ 228.44 for Class I Units, a loss of $8.39 for Class
AA Units and a loss of $8.72 for Class II Units) for the fiscal quarter
ended June 30, 2007. This compares to a loss of $420,650 or $77.87 per
Unit of Class A Units ($64.19 for Class I Units, .80 for Class AA
Units and .84 for Class II Units) for the fiscal quarter ended June
30, 2006. The quarter ended June 30, 2007 showed a gain of 11.47%
( total return) for the Class A Units of the fund (12.32% for the
Class I Units, -0.83% for Class AA Units and -0.83% for Class II Units).
The Partnership continued to employ John W. Henry & Company, Inc. ' s (JWH)
GlobalAnalyticsR Family of Programs, Worldwide Bond Program.
Class A Units were negative -0.06 % in April 2007 resulting in a
Net Asset Value per unit of $ 1,701.514 as of April 30, 2007.
Class I Units were positive 0.21 % resulting in a Net Asset Value
per unit of $1,858.17 as of April 30, 2007.
The Fund s performance was essentially even for the month of April.
The Fund s disciplined systematic trading approach took
advantage of opportunities that emerged as global financial markets
recovered from the explosion in volatility that occurred at the end
of February and continued into March. The temporary dislocation of
the financial markets appears to have laid the foundation for a
major shift in trends. The currency, indices and agriculture sectors
all achieved gains as various components of each sector developed
and sustained profitable trends. The currency sector was the Fund s
best performer as various previously range-bound currencies set
historic highs and lows. The euro reached an all-time high against
both the U.S. dollar and the Japanese yen, while the British pound
reached a 25-year high against the dollar. The stock indices sector
was positive for April as stronger-than-expected 1st quarter
earnings, an increase in mergers and acquisitions, economic growth
in Europe, and benign inflation in the U.S. drove global equity
prices higher. The agriculture sector was slightly positive for
the month as the majority of the gains achieved in N.Y. cotton and
coffee were partially offset by losses in CBOT wheat. The metals
sector was negative for the month. Gold slightly offset losses as the
precious metal reached an 11 month high when demand for a hedge against
the weakness in the dollar increased. The energy sector
was negative for the month as weather and geopolitical events once
again were the driving force behind price movements. The
interest rate sector was negative for the month as uncertainty grew
over the interest rate policy of the central banks of the world s two
largest economies.
In conclusion, the Fund s performance was essentially even for
the month as new trends materialized in the aftermath of the
dislocation of the markets caused by the overreaction to the drop
in global equity markets towards the end of the first quarter. The
Fund benefited as range-bound markets, which have been detrimental
to the Fund s performance, gave way to potentially strong
directional movements. The Fund will continue to apply its disciplined
systematic trading approach to potentially take advantage of
continuing or new opportunities as they present themselves.
Trading Allocation
At the end of May 2007 we will redeem our allocation to the World
Wide Bond Program and be invested 100% in the Global Analytics Program
(GAP). The JWH GAP has been JWH s most efficient program as measured
by various risk/reward parameters and it trades a diverse portfolio of
bonds, currencies and commodities.
We would like all investors to know that although we are trying
to stay the course with JWH and exercise patience, we are also
exploring the possibility of adding other managers who may complement
JWH due to their differences in style, holding periods and
markets traded. Before we make a decision (if any) to add other
managers, we will keep you informed.
Class A Units were positive 0.60 % in May 2007 resulting in a Net Asset
Value per unit of $1,711.64 as of May 31, 2007.
Class I Units were positive 0.86% resulting in a Net Asset Value per
unit of $1,874.11 as of May 31, 2007.
The Fund s performance was positive for the month of May. The interest
rate sector drove performance with strong gains as the
Fund s disciplined systematic trend-following approach enabled it to
profit from falling bond markets in the U.S. and Europe. The
stock indices sector also added to positive performance as
better-than-expected earnings and stronger-than-expected economic growth
sent equity indexes across the globe to new highs. The currency sector
was slightly positive for the month also as the dollar
strengthened against the Japanese yen.
The energy sector was negative for the month as energy markets remained
range-bound. The metals sector was negative for the month
as a reversal in precious metals hurt performance as the Fund exited
positions. The agriculture sector was negative for the month as
supply once again drove price action.
In conclusion, performance was positive for the month as the Fund s
systematic trading approach benefited from continued strong
directional movements in European debt markets, and the apparent
emergence of a weakened trend in U.S. debt markets. While we
cannot say how long this trend will last, this sector s move is
encouraging. The Fund will continue to apply its trading approach to
potentially take advantage of continuing or new opportunities as
they present themselves.
Trading Manager Allocation
We are very pleased to announce that the Fund will be making an
allocation to the Morningstar Long / Short commodity Index. The
Index is a momentum based strategy that holds a basket of 19
physical commodity contracts either long or short.
We will send more information about the allocation and the Morningstar
Commodity Index in the next few weeks. We anticipate an
allocation on or about the 1st of August.
Class A Units were positive 10.87 % in June 2007 resulting in a
Net Asset Value per unit of $1,897.72 as of June 30, 2007.
Class I Units were positive 11.13 % resulting in a Net Asset Value per unit
of $2,082.77 as of June 30, 2007.
The Fund s performance was positive for the month of June. Despite
potentially market-dislocating events, including terrorism
incidents in the United Kingdom and the subprime mortgage problems
in the United States, the Fund was able to profit as its long-
term trend-following approach excelled, holding profitable positions
through the market turmoil. The Fund s systematic approach has
profited over the past few months since the equity induced dislocation
of financial markets that occurred towards the end of the 1st
quarter, which we suggested might be a precursor for a major shift
in market trends. While discretionary funds and shorter-term
trend-followers may have been forced out of profitable positions due
to instability in the market, the Fund s clients were rewarded for
its longer-term focus. The fixed income, energy, agriculture and
currency sectors all achieved gains as various components of each
sector sustained previously existing or developed new profitable trends.
The interest rate sector was one of the Fund s best
performing sectors for the second consecutive month as it continued
to take advantage of the fall in U.S. and European bond markets.
The energy sector was the Fund s best performing sector in June as
increased terrorism fears combined with lower-than-expected
supplies in petroleum-based products and higher-than-expected
supplies in natural gas drove the sector s performance. The currency
sector was positive for the month as the Japanese yen suffered
its biggest quarterly loss against the euro and the dollar since
2001. The agriculture sector was positive for the month as cotton
and CBOT wheat drove performance.
The metals sector was basically flat for the month while the
stock indices sector was negative as range-bound markets
and trend reversals dominated both these sectors.
In conclusion, the Fund s systematic long-term trading approach
profited from strong trends that have developed in various
components of the fixed income, energy, agriculture and currency
sectors, while avoiding the short-term effects of financial market
dislocations that occurred during the month. The Fund s long-term
trend following philosophy has allowed it to post gains as many
trends have extended through the 2nd quarter and we remain optimistic
that this is only the beginning. The Fund will continue to apply
its disciplined trading philosophy to potentially take advantage
of any new or continuing opportunities as they present themselves.
New Allocation
We are very pleased to announce that the Fund will be making an
allocation to the Morningstar Long / Short Commodity Index. The
Index is a momentum based strategy that holds a basket of 19
physical commodity contracts either long or short.
We will send more information about the allocation and the Morningstar
Commodity Index in the next few weeks. We anticipate an
allocation within the next few months.
Update on the RCM recovery efforts (For those investors in the
Fund in October 2005)
Refco, Inc. filed a plan under Chapter 11 ( the Plan ) and
a Disclosure Document with the Bankruptcy Court. The Plan was
confirmed by the Bankruptcy Court and became effective December
26, 2006. An initial distribution was made to investors in
December 2006. The Plan Administration Committee, of which Peter
Lamoureux is a member, is actively liquidating other assets.
On March 29, The Everest Fund, L.P. received the second in
a series of anticipated distributions in the Refco matter in the
amount of $368,878.96. Of the approximately $7,500,000 that became
inaccessible in October 2005, we have now received
$1,743,404.47. That represents an amount equal to approximately
23% of the frozen assets. The Fund has increased the Class A units
for each investor in the Fund by their pro rata share of the
distribution. Checks have been mailed for the benefit of any
investors who have redeemed. We expect additional distributions
between now and the end of June 2007
On June 28th, 2007 Everest received a third distribution from
Refco in the amount of $668,172.21. That amount is equal to
approximately 9 cents on the dollar of the original amount that was
frozen in October 2005. This, in addition to the other distributions,
brings the recovery to approximately 32 cents on the dollar so far.
The Fund has increased the Class A units for each investor in the
Fund by their pro rata share of the distribution. Checks have been
mailed for the benefit of any investors who have redeemed.
The Plan Administration Committee is working with the other
estate professionals to effect additional distributions. We will
continue to keep you informed.
3 months ended June 30, 2006
The Partnership recorded a loss of $420,650 or $77.87 per Unit of Class A Units
($64.19 for Class I Units, $0.80 for Class AA Units and $0.84 for Class II
Units) for the fiscal quarter ended June 30, 2006. This compares to a gain of
$1,781,153 or $113.12 per Unit of Class A Units ($134.00 for Class I Units) for
the fiscal quarter ended June 30, 2005. The quarter ended June 30, 2006
showed a loss of 3.59%( total return) for the Class A Units of the fund (2.81%
for the Class I Units, 0.03% for Class AA Units and 0.03% for Class II Units).
The Partnership continued to employ John W. Henry & Company, Inc. ' s (JWH)
GlobalAnalyticsR Family of Programs, Worldwide Bond Program and Currency
Strategic Allocation Program.
Class A Units were positive 13.63% in April 2006 resulting in a Net Asset Value
per unit of $2,463.35 as of April 30, 2006.
Class I Units were positive 13.50% resulting in a Net Asset Value
per unit of $2,594.70 as of April 30, 2006.
The interest rate sector led performance in April with strong gains as
the Fund's systematic trend-following approach enabled it to profit
from higher global interest rates. The metal and currency sectors
also added to performance as both gold and silver continued to trend
higher on inflationary fears and increased demand, while currencies
benefited from a weakening U.S. dollar. The energy sector had gains
due to increased concerns over Iran's nuclear program. The indices
sectors had more modest gains, while the agriculture sector incurred
losses as performance within these sectors was hampered by volatility.
The fixed-income sector was the Fund's strongest performing sector as European,
Japanese and U.S. fixed income markets sold off. The metals sector was also
profitable as all components were positive for the month. Gold climbed above
$650/oz for the first time in 25-years after Iran failed to meet an April 28th
deadline to cooperate with United Nations inspectors who are trying to
determine if the country is enriching uranium for military purposes.
Also adding to performance was silver which rallied on speculation investor
demand willgrow as Barclays Bank PLC began offering an exchange-traded fund
backed by the metal. Silver has rallied 51 percent this year, and rose 17%
this month alone.
The currency sector was also positive on the month as the U.S. dollar fell on
expectations of narrowing interest rate differentials. The dollar fell 4.1
percent against the euro, the biggest monthly decline since December 2003 and
the British pound gained against the dollar for a fourth week, its longest
winning streak in a year. The largest gain in this sector was the euro, while
the largest loss was in the Japanese yen. Keeping with the prevailing theme
performance in the energy sector was also positive during the month. Concerns
that the UN Security Council will impose sanctions that could lead Iran, the
fourth-largest oil producer, to cut shipments drove crude oil for June delivery
to a new high of $75.35 a barrel on April 21st and 24th. Crude oil for June
delivery ended up 7.8% this month. The global stock indices sector was
slightly positive for the month as the Fund's performance was hindered by
increased geopolitical instability in the global stock markets, as well
as a volatile interest rate environment.
The agriculture sector was the Fund's worst performing sector for the month as
volatility hurt performance. Cotton limited the sectors losses, with the
largest loss occurring in N.Y. coffee as growers in Latin America and Africa
took advantage of a recent rally to sell beans.
In conclusion, the Fund's performance was strong for the month of April with
interest rates, metals and currencies leading profitability. As always, the
Fund stands ready to potentially take advantage of any continuing or new trends
that may emerge.
Class A Units were negative 3.85% in May 2006 resulting in a Net Asset
Value per unit of $2,368.52 as of May 31, 2006.
Class I Units were negative 3.24% resulting in a Net Asset Value per
unit of $2,510.69 as of May 31, 2006.
The Fund's performance was negative in May as the interest rate, metal,
agriculture and stock indices sectors suffered from large market corrections
during the second half of the month. Increased inflationary fears and concerns
over the global economy led investors to take profits and reduce risk
exposure. A major catalyst for the reversal was the news that the
Federal Reserve on May 10th signaled that "further policy firming may
yet be needed" instead of signaling a possible "pause" at it's next
meeting at the end of June. This caught the market by surprise causing
equity markets, which had been near or at record highs, to fall in
response. This news also eventually caused a "contagion effect" in
the metal and currency sectors.
The currency sector was positive for the month despite the extreme volatility
that dominated the sector. The fixed income sector was the Fund's worst
performing sector as uncertainty surrounding inflation prospects and global
growth led to increased volatility. Performance in the energy sector was also
negative for the month as petroleum products retreated from record or near
record highs during the month. The metal sector was also negative
for the month as precious metals fell from record highs set towards the
beginning of the month. Gold fell 12% after reaching a 26-year high of
$732 an ounce on May 12th. The largest loss in this sector occurred
in silver.
Global 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
Recent Progress in the Recovery of Assets:
* The ongoing dispute at the Refco Capital Markets (RCM) between the securities
customers and the FX customers (Everest) has been resolved after much
negotiation. This should greatly facilitate the distribution of assets at hand
and the distribution of future recoveries. This agreement should avoid much
costly litigation and time delays.
* The 'bar date' for the filing of all claims against RCM has been set for July
17th. Everest has already filed it's claim. It may take six to eight weeks to
process and verify all claims. Although there could be further delays, it is
possible that we will see a distribution of the assets on hand at RCM by the
fourth quarter of this year, maybe as early as October.
* The Bankruptcy court approved a settlement whereby the Sphinx entities have
agreed to pay back $262 million to the Refco estates.
* The Austrian Bank BAWAG settled with the creditors committee and the
Department of Justice (DOJ) and agreed to pay up to $675 million. Please keep
in mind that a portion of the BAWAG settlement goes to the DOJ and some to the
Refco estate, not directly to the Refco Capital Markets. However, most of the
other bankrupt Refco entities owe RCM money so there should be benefits coming
down to the RCM level, which is where Everest money is frozen.
The agreement between parties at RCM and the two substantial recoveries of
assets are some of the most significant steps of progress in the recovery
of our assets since the events of October 2005. The Committee (and Peter
Lamoureux, president of the Fund's general partner, as a member of
the Committee) is continuing to work hard to recover assets in a
timely manner.
Class A Units were negative 11.76% in June 2006 resulting in a Net Asset Value
per unit of $2,089.94 as of June 30, 2006.
Class I Units were negative 11.50% resulting in a Net Asset Value per unit
of $2,221.98 as of June 30, 2006.
The Fund's performance was negative for the month of June. All six sectors were
negative with the currency sector, and to a lesser extent the interest rate
sector, responsible for the majority of the Fund's losses. These sectors were
affected by trend-reversing markets caused by anticipated, but unrealized,
fears that the Federal Reserve would not only raise rates at its June 29th
meeting, but also reinforce expectations for further rate increases to curb
inflation.
Currencies were the Fund's worst performing sector as the U.S. dollar spent the
majority of the month strengthening against most major currencies. The
interest rate sector was also unprofitable for the month as U.S.
10-year and 30-year treasury bonds led the sector's decline. The interest
rate speculation that dominated the currency markets also affected
the U.S. treasury markets.
The metals sector was also negative for the month as precious metals
continued to retreat from highs set in May. Gold fell to a three month
low of $542.45 an ounce on June 14th after reaching a 26-year high of
$732 an ounce on May 12th. The dramatic sell-off was caused by the
combination of a stronger dollar, as investors bought dollars as an
alternative to gold, and increased speculation that the Federal Reserve
could hike interest rates as much as 50 basis points. Despite the recent
weakness in the precious metal, gold is up 18 percent for the
year. All components of this sector were negative with the largest loss coming
from gold. The agriculture sector also underperformed during the month as
weather conditions had severe affects on various crops in the U.S. and around
the world. Global Stock Indices were slightly negative for the month as
speculation over the outcome of the June 29th Federal Reserve meeting caused
severe market fluctuations. The energy sector was also slightly negative for
the month as choppy market conditions hindered performance. All of the
petroleum based products were negative for the month.
The combined losses in the currency and interest rate sectors drove the Fund's
negative performance. Comments from the Federal Reserve combined with stronger
than expected economic data caused speculation that the Federal Reserve might
raise interest rates 50 basis points instead of previously
expected 25 at the June 29th meeting. The possibility of a larger than
expected interest rate move sent the U.S. dollar and U.S. treasury yields
higher. However, the markets reversed themselves upon the announcement
that the Federal Reserve had raised rates by 25 basis points, and
signaled to the markets that they have possibly reached the end of
the rate hiking cycle. The resulting increase in uncertainty and
speculation led to volatility in the markets and caused several
reversals making it difficult for our disciplined systematic
investment style to capitalize on longer-term trends. As always,
the Fund stands ready to potentially take advantage from any continuing
or new trends that may emerge.
Update on the RCM recovery efforts
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.
3 months ended March 31, 2007
The Partnership recorded a loss of $1,723,314 or $214.58 per Unit of Class A
Units ( $216.69 for Class I Units, a gain of $1.43 for Class AA Units
and a gain of $1.49 for Class II Units ) for the fiscal quarter ended
March 31, 2007. This compares to a loss of $ 767,181 or $70.29 per
Unit of Class A Units ($55.42 for Class I Units, a gain of $2.03
for Class AA Units and a gain of $2.11 for Class II Units) for
the fiscal quarter ended March 31, 2006. The quarter ended
March 31, 2007 showed a loss of 11.19% (total return) for the
Class A Units of the fund ( 10.46% for the Class I Units, a gain
of 0.14% for Class AA Units and a gain of 0.14% 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. The Partnership has changed it s allocation
to the Fund s investment firm, the John W. Henry & Company, Inc. (JWH).
To reiterate, the Partnership has dropped the Fund s allocation to the
Currency Strategic Allocation Program (CSAP) and increased the allocation
to the Global Analytics Program (GAP) to 75% with the remaining 25% going
to the World Wide Bond Program. We look forward to the possibility of
better risk adjusted returns from the new allocation.
JWH is taking steps to reduce the volatility so long associated
with JWH investment programs. The first step has been to install a new
management team. As of January 2007, Mark Rzepsinski, the former President
and Chief Investment Officer, has been replaced by Ken Webster as the new
President and Matt Driscoll as the new Chief Investment Officer. Mr.
Webster, who has been with the firm 12 years, is the former Senior Vice
President and Chief Operating Officer. Mr. Driscoll, who has been with the
firm 15 years, was the Senior Vice President of trading and research. We
believe these changes will be productive for our Fund s investment at JWH.
Class A Units were positive 1.24% in January 2007 resulting in a Net Asset
Value per unit of $ 1,940.87 as of January 31, 2007.
Class I Units were positive 1.51% resulting in a Net Asset Value of $2,102.21
as of January 31, 2007.
The Fund s performance was positive for the month of January. The interest
rate sector led performance with strong gains as the program s systematic
trend following approach enabled it to profit from a weakening trend in
European and U.S. fixed income markets. The Fund s disciplined systematic
investment style was able to profit despite short-term market moving events
that caused spikes in volatility resulting in strong reversals. This type of
activity diminished the Funds returns as the currency sector experienced
losses due to a continuation of the reversal in the U.S. dollar s weakening
trend (which started in December) against major European currencies.
The equity indices sector was slightly positive for the month despite losses
in the Nasdaq E-mini which partially offset gains of the other components in
the sector. The energy sector was slightly positive for the month despite
changing weather conditions which caused extreme volatility within the
sector. Despite the volatility within the sector, crude oil and London gas
oil were able to offset the losses caused by natural gas which was the
sectors worst performer. The currency sector was negative for the month as
currency markets continued to oscillate. Towards the end of January, the
dollar had its largest fall against the Japanese yen in more than two months
after U.S. Treasury Secretary Henry Paulson said he would be watching the
Japanese currency very carefully. This decline limited the Fund s gain in
this market. The Japanese yen was the best performer in the sector, while
the euro suffered the largest loss. The metals sector was negative for the
month as precious metal prices reacted to fluctuations in the U.S. dollar.
The early January reversal in the U.S. dollar s weakening trend reduced the
appeal of gold as an alternative investment. Gold generally moves in the
opposite direction of the dollar. However, gold rose 3.9 percent for the
month of January as the dollar once again weakened and speculation increased
that the precious metal s decline was excessive. All components of the
sector were negative for the month as a result of the increased volatility.
The agriculture sector was negative for the month as price instability hurt
performance. The sector s negative performance was limited by New York
sugar, which was the sector s best performer, as prices continued to fall due
to a global surplus of the commodity continued.
In conclusion, performance was positive for the month as the Fund benefited
from the continued sell-off in U.S., European and British fixed income
markets. The indices and energy sectors also added to performance and helped
to offset losses in the currency sector which suffered sharp reversals as
markets continued to speculate about the health of the world s industrialized
economies. The agriculture and metals sectors also limited gains as short-
term marketmoving events resulted in strong reversals or trend-less markets.
As always, the program stands ready to potentially take advantage of any
continuing or new trends that may emerge.
Class A Units were negative 4.77% in February 2007 resulting in a Net Asset
Value per unit of $1,848.37 as of February 28, 2007.
Class I Units were negative 4.50% resulting in a Net Asset Value of
$2,007.54 as of February 28, 2007.
The Fund s performance was negative for the month of February. This negative
performance was a direct result of the explosion in volatility accompanying
the last week of the month. Trading up to that point was positive for the
month, but the events of the week reverberated throughout global markets and
reversed what few trends had been evident earlier in the month. The events
were primarily portrayed in the U.S. media as a stock market decline, but the
issues were far broader than that. Whether pundits cared to lay the blame on
the Chinese stock market or the trouble in the sub-prime loan sector, global
markets awoke to a measure of short-term volatility not seen for many months
which was not confined simply to the equities markets. As an example, the
gold market hovered around the high $690s, a level not seen since May of last
year. Similarly, the wheat, corn and soybean markets were hitting full-year
highs as the last week of February opened. All of these markets suffered
sharp declines during the last week, which translated to losses for the Fund.
Another example of this sudden reversal in price behavior was the Japanese
yen which was at its yearly low, but strengthened over 2 percent against the
dollar in the last three trading sessions. These examples in unconnected
markets give a flavor of how widespread the difficulty was in the last three
days of the month. As long-term trend followers, JWH will position the Fund
in the direction of a lasting move, so the Fund will be long a market that is
reaching new yearly highs or short a market that is reaching new yearly lows.
Part of the Funds strategy rests in investing in markets that behave
differently from each other. In the unusual circumstances where historical
uncorrelated markets reverse in lockstep, the Funds systematic approach will
be susceptible to setbacks.
The metals sector was the best performing sector despite strong reversals in
precious metals. The agriculture sector was also positive for the month as
corn rose to a 10-year high in Chicago and soybeans reached $8.0775, their
highest level since June 2004. The stock indices sector was slightly
positive for the month despite the severe volatility in global equity
markets.
The currency sector was negative for the month as the yen rallied against the
dollar to its highest level in more than 19 months on February 27th amid a
correction in U.S. stocks. The energy sector was negative for the month as
natural gas reversed its strengthening trend and had its biggest loss in more
than six weeks in New York. Crude oil s reversal also hurt performance as it
rose to $61.79 a barrel, its highest closing price this year. All components
of this sector exhibited negative performance for the month. The interest
rate sector was also negative for the month as global bond markets reversed
their weakening trend as the sell-off in the global equity markets at the end
of the month fueled demand for government debt.
In conclusion, the Fund finished negative for the month as the weakness in
global equity markets increased volatility in financial markets around the
world. What does this sudden burst of volatility across markets mean? No
one can be sure. Sometimes it is unexpected turbulence along the current
path. Other times it is a harbinger of a major shift in direction. In the
latter case, while the short-term performance is uncomfortable, the long-term
trends which come from the change can more than make up for the discomfort.
The Fund looks to the markets for its signals, and continues to apply its
disciplined systematic trading approach. The Fund was not positioned for this
sudden turn of events. However, an element of turmoil has been injected into
the markets, which if it persists, has the potential to be a positive
development for the Fund s style of trading. The Fund remains poised to
potentially take advantage of new opportunities as they present themselves.
Class A Units were negative 7.89% in March 2007 resulting in a Net Asset
Value per unit of $1,702.45 as of March 31, 2007.
Class I Units were negative 7.63% resulting in a Net Asset Value per unit
of $1,854.33 as of March 31, 2007.
The Fund experienced losses in March as the explosion in volatility that
occurred at the end of February continued into early March. On February 27th,
the largest drop in China s stock market in a decade and the global sell-off
that followed seemed to shift market sentiment towards fears about the
slowdown in the U.S. housing market and the overall health of the U.S.
economy. The sudden reappearance of risk in the world financial markets
caused losses in various sectors as the Fund s systematic trading approach
was not positioned for this sudden turn of events. The currency, metal and
agriculture sectors all suffered losses at the beginning of the month as
sharp reversals, which carried over from February, led to the exiting of
positions. The markets quickly stabilized and spent the remainder of the
month retracing their overextended moves. Performance suffered even further
towards the end of the month as global fixed-income markets weakened. The
energy sector was positive for the month as weather and geopolitical events
were the driving forces of price movements.
In conclusion, the Fund s performance was negative for the month as the drop
in global equity markets, which increased volatility in financial markets
around the world, carried over into the first few days of March. The Fund s
systematic trend following methodology caused it to exit positions during
this difficult turn of events. Short-term market dislocations can be a
harbinger of a major shift in trends. However, the dislocation of the
markets thus far has been a short-lived phenomenon, resulting in a temporary
spike in volatility. The Fund will continue to apply our disciplined
systematic trading approach to potentially take advantage of new
opportunities as they present themselves.
3 months 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.
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.
Class A Units were positive 5.81% in March 2006 resulting in a Net Asset
Value per unit of $2,167.80 as of March 31, 2006.
Class I Units were positive 6.08% resulting in a Net Asset Value per unit
of $2,286.17 as of March 31, 2006.
The fixed income sector led performance with robust gains as the Fund ' s
systematic trend-following approach enabled it to profit from rising global
interest rates. The indices and metal sectors also added to the positive
performance as silver continued to trend higher, and the indices sector
benefited from stronger economic data in Europe. The indices sector also
profited from the continued strength of commodity stocks on the back of
global growth in China. Limiting the Fund ' s gains for the month was the
currency sector, which continued to suffer from range-bound trading, along
with underperformance in both the energy and agriculture sectors.
The fixed income sector was the Fund ' s strongest performer for month as
Japanese, German and U.S. government debt endured stronger than expected
consumer confidence and rising inflationary fears. The indices sector was
also positive for the month as Asian stocks approached a 16-year high on
surging demand for metals and oil, and the Nikkei 225 climbed above 17,000
for the first time in more than five years. The metals sector was also
profitable for the month as silver reached $11.66 on March
30th, the highest intraday price since September 1983.
The energy sector was the Fund ' s worst performer as geopolitical induced
volatility limited gains within the sector. Performance in the currency
sector was also negative for the month as range-bound trading continued to
negatively affect the Fund ' s long term trend following approach. Although
some currencies had directional moves during the month, they were then
accompanied by strong reversals. The agriculture sector also underperformed
for the month as gains made in London sugar were not enough to offset the
underperformance caused by the weakness in CBOT wheat and corn.
In conclusion, the Fund was positive for the month, with the fixed income
sector leading performance as Japanese, German and U.S. fixed income markets
fell. As always, the Fund stands ready to potentially take advantage from any
continuing or new trends that may emerge.
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.
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 of approximately $247,665 remaining at RCM.
In addition, the partnership has an interest in the Litigation Trust
at Refco which has commenced actions against alleged ' wrongdoers '
involved with Refco, and is entitled to share in such proceeds, if any.
The amount of such assets which the Partnership will ultimately recover,
if any, is unknown at this time.
In October 2000, there was a discrepancy between the performance of the
Barclay Futures Index Program ("BFIP") as traded for the Partnership
and the Barclay Futures Index (BFI). Certain transactions executed by
Trilogy on behalf of the Partnership resulted in a loss of
approximately $520,000 that was recorded in the statement of
operations. The General Partner believes that these transactions were
not executed in accordance with the provisions of BFIP and has
demanded that Trilogy reimburse the Partnership for the loss.
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, but no date has been set for the hearing.
At the present time, the General Partner is unable to
determine whether any of the losses will be recovered.The
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, 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 Amended filed on September 25, 2007
On September 18, 2007, Spicer Jeffries LLP resigned as The Everest
Fund, LP's principal independent accountant.
Spicer Jeffries LLP resigned due to the rules under the
Sarbanes-Oxley Act of 2002 regarding partner rotation. Spicer
Jeffries LLP will not be considered independent with respect to
the Everest Fund, LP. for the December 31, 2007 audit. The
report on the financial statements prepared by Spicer Jeffries
LLP for the years ended December 31, 2006, 2005 and 2004 did
not contain an adverse opinion or a disclaimer of opinion, nor
was it qualified or modified as to audit scope or accounting
principles. During the two most recent fiscal years 2005 and 2006,
and subsequent interim period through the date of
resignation - September 17,2007, we did not have any
disagreements with Spicer Jeffries LLP onany accounting
principles or practices, financial statement disclosure,
or auditing scope or procedure.
We provided Spicer Jeffries LLP with a copy of this
Form 8-K prior to its filing with the Securities and Exchange
Commission and requested that they furnish us with a letter
addressed to the Securities and Exchange Commission stating
whether they agreed with the statements made in this Form
8-K and, if not, stating the aspects with which they do not
agree. A copy of the letter provided by Spicer Jeffries LLP
is attached to this Form 8-K as Exhibit A.
Neither Everest Fund, LP nor anyone on our
behalf consulted Spicer Jeffries LLP on any matter relating
to the application of accounting principles to a specific
completed or contemplated transaction or the type of audit
opinion that might be rendered on our financial statements.
Exhibit A
Securities and Exchange Commission
Washington, D.C. 20549
Ladies and Gentlemen:
We were previously the principal accountants for Everest
Fund, LP and, under the date of March 15, 2007, we reported
on the financial statements of Everest Fund, LP as of and
for the years ended December 31, 2006, 2005 and 2004.
Effective September 17, 2007, Spicer Jeffries LLP is
resigning as the principal accountants due to the rules
under the Sarbanes-Oxley Act of 2002 regarding partner
rotation. We regret taking this action but due to the
partner rotation rule as stated above, Spicer Jeffries
LLP will not be considered independent with respect to
the Everest Fund, LP s December 31, 2007 audit. We
have read Everest Fund, LP s statements included under
Item 4 of its Amended Form 8-K dated September 25,
2007, and we agree with such statements.
/s/ SPICER JEFFRIES LLP
Greenwood Village, Colorado
September 25, 2007
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, 2007 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