SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10K
Annual report pursuant to Section 13 or 15(d) of the
Securities
Exchange Act of 1934
For the fiscal year ended Commission File Number 0-
17555
December 31, 2007
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
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Units of Limited Partnership Interest
Indicate by check mark if the registrant is a well-known
seasoned issuer, as defined in Rule 405 of the Securities
Act.
Yes No X
Indicate by check mark if the registrant is not required to
file reports pursuant to Section 13 or Section 15(d) of the
Act.
Yes X No
Note Checking the box above will not relieve any
registrant required to file reports pursuant to Section 13
or 15(d) of the Exchange Act from their obligations under
those Sections.
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 if disclosure of delinquent filers
pursuant to Item 405 of Regulation SK is not contained
herein and will not be contained to the best of the
Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of Form
10K or any amendment to this Form 10-K: [ X ]
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, or a non-
accelerated filer. See definition of accelerated filer and
large accelerated filer 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
State the aggregate market value of the voting and non-
voting common equity held by non-affiliates computed by
reference to the price at which the common equity was last
sold, or the average bid and asked price of such common
equity, as of the last business day of the registrant s
most recently completed second fiscal quarter. $9,491,938
Note If a determination as to whether a particular person
or entity is an affiliate cannot be made without involving
unreasonable effort and expense, the aggregate market value
of the common stock held by non-affiliates may be
calculated on the basis of assumptions reasonable under the
circumstances, provided that the assumptions are set forth
in this Form.
APPLICABLE ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all
documents and reports required to be filed by Section 12,
13 or15(d) of the Securities Exchange Act of 1934
subsequent to the distribution of securities under a plan
confirmed by a court.
Yes No
(APPLICABLE ONLY TO CORPORATE REGISTRANTS)
Indicate the number of shares outstanding of each of the
registrant s classes of common stock, as of the latest
practicable date.
DOCUMENTS INCORPORATED BY REFERENCE
List hereunder the following documents if incorporated by
reference and the Part of the Form 10-K (e.g., Part I, Part
II, etc.) into which the document is incorporated: (1) Any
annual report to security holders; (2) Any proxy or
information statement; and (3) Any prospectus filed
pursuant to Rule 424(b) or (c) under the Securities Act of
1933. The listed documents should be clearly described for
identification purposes (e.g., annual report to security
holders for fiscal year ended December 24, 1980). None
Part I
Item 1. Business
The Everest Fund, L.P. (the "Partnership") is a limited
partnership organized on June 20, 1988 under the Iowa
Uniform Limited Partnership Act. The business of the
Partnership is the speculative trading of commodity futures
contracts and other commodity interests, including forward
contracts on foreign currencies (Commodity Interests)
either directly or indirectly through other entities,
including subsidiaries, partnerships, funds or other
limited liability entities. The Partnership commenced its
trading operations on February 1, 1989. Its General
Partner is Everest Asset Management, Inc. (the "General
Partner") a Delaware corporation organized in December,
1987.
The Partnership was initially organized 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.
During its operation, the Partnership has had various
trading advisors. In December 1990, John W. Henry &
Company, Inc. (JWH) began trading for the Partnership as
one of the Partnership s trading advisors. In May 1994,
JWH became the sole trading advisor to the Partnership. In
March 1996, the Partnership transferred all of its assets
to, and became the sole limited partner of, Everest Futures
Fund II, L.P. (Everest II) and JWH began trading for
Everest II.
On September 13, 1996 the U.S. Securities and Exchange
Commission accepted a voluntary filing by the Partnership
of a Form 10 - General Form for Registration of Securities,
and public reporting of Units of the Partnership sold as a
private placement commenced at that time and has continued
to the present.
In July 2000, the Partnership redeemed approximately 50% of
its assets from Everest II and allocated them to Trilogy
Capital Management, LLC s (Trilogy) Barclay Futures Index
Program (BFIP). The Partnership instructed Trilogy to
trade its account using twice the leverage of Trilogy s un-
leveraged portfolio to attempt to achieve a return greater
than the return of the Index before fees and expenses.
Effective as of the close of business August 31, 2000, the
Partnership liquidated the balance of its investment in
Everest II and opened a trading account directly with JWH.
JWH has used its Financial and Metals Portfolio while
trading for Everest II and the Partnership through June 30,
2001. Beginning July 1, 2001, JWH began trading its
Strategic Allocation Program for the Partnership with a
trading allocation of $40 million. Trilogy was terminated
as trading advisor June 30, 2001. Effective September 1,
2001, Mount Lucas Management Corporation (MLM) was added as
trading advisor with an initial allocation of $10 million.
This allocation represented notional funding for the
Partnership. Effective June 12, 2003 JWH began trading its
GlobalAnalyticsR Family of Programs, Worldwide Bond Program
and Currency Strategic Allocation Programs for the
Partnership. Mount Lucas Management was terminated as
trading advisor on October 31, 2003. Effective June 4,
2004, the Partnership introduced a new share category,
Class I Units, or Institutional Units which have an ongoing
Offering and Organization fee of 1/12 of 0.10% of the NAV
per unit per month. The previously offered Partnership
units were re-titled Class A Units (retail shares) and
continue to be offered and charged an initial 1% Offering
and Organization fee as a reduction to capital.
Effective January 1, 2007 the Fund allocated 75% of its
assets to the JWH Global Analytics Program ( GAP ) and 25%
to the Worldwide Bond Program ( WBP ). The Currency
Strategic Allocation Program ( CSAP) was eliminated as a
trading program for the Fund.
Effective June 1, 2007 the Fund allocated 100% of its
assets to the JWH Global Analytics Program ( GAP ). The
Worldwide Bond Program ( WBP ) was eliminated as a trading
program for the Fund.
Prior to September 2005, the partnership cleared its
futures trades through Cargill Investor Services, Inc
( CIS ) and its foreign currency trades through CIS
Financial Services, Inc. (CISFS), an affiliate of CIS.
Between September 1, 2005 and mid October, 2005 the
Partnership cleared all of its futures trades through
Refco, LLC (RL) and all of its foreign currency trading
through Refco Capital Markets, Ltd. (RCM).
Subsequent to the purchase of Cargill Investor Services
( CIS ) by Refco, Inc. ( RI ) and the replacement of CIS by
RL as the Fund's futures clearing broker on September 1,
2005, RI, the parent company of RL, announced on October
10, 2005 that it had discovered through an internal review
an accounting issue involving a receivable owed to Refco,
Inc. by an entity controlled by Philip R. Bennett, the then
Chief Executive Officer and Chairman of the Board of
Directors of RI. 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. On February 15, 2008, Mr. Bennett plead
guilty to 20 counts of securities fraud and other charges.
In addition, various legal actions have been filed against
RI in this regard.
On October 13, 2005, RI announced that liquidity within
another of its operating subsidiaries, 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. As of such
date RCM was the Fund's acting foreign currency broker, and
the fund had approximately 20% (approximately $7,500,000)
of its total assets on deposit in the accounts at that
firm, which amount became frozen at that time.
On October 17, 2005, RI and certain subsidiaries (including
RCM) filed for bankruptcy protection in the State of New
York. Although RL was not involved in this filing, the
Fund nevertheless terminated RL as its futures clearing
broker and RCM as its foreign currency broker and replaced
them with Calyon Financial, Inc. (CFI) and Calyon
Financial, SNC, (CFS), respectively.
Effective October 31, 2005, the Partnership created Classes
AA and II of shares and transferred to such classes the
value of Partnership assets held in RCM as of October 17,
2005 together with a reserve for the estimated expenses of
collection and related matters. The amount of such assets
which will become available to the Partnership, if any, is
dependent on several matters associated with the bankruptcy
of RCM. Depending on the disposition of these matters, the
final net asset value may differ materially from the
preliminary amounts which the Partnership has published
since October 31, 2005. Until the final net asset value
can be determined, redemptions and certain fees will be
calculated and paid on a preliminary basis using the net
asset value of Class A and Class I units only, thus
excluding the assets held by RCM and the reserve
established in connection with the RCM legal proceedings.
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 Fund has received
$1,365,525.51. That represents an amount 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. 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.
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 increased the Class
A units for each investor in the Fund by their pro rata
share of the distribution. Checks were mailed for the
benefit of any investors who have redeemed.
On September 20, 2007 Everest received another distribution
from Refco in the amount of $342,696.03. 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, brought the recovery
to approximately 36.55 cents on the dollar so far.
The Fund increased the Class A units for each investor in
the Fund by their pro rata share of the distribution.
Checks were mailed for the benefit of any investors who
have redeemed.
On December 14, 2007 Everest received $1,912,484 upon the
final sale of the remaining Refco receivable. This brought
the total recovery from 36.69 cents on the dollar to 62.25
cents on the dollar and ends the Refco recovery effort. On
December 31, 2007 the Fund increased the Class A units for
each investor in the Fund by their pro-rate share of the
amount collected, and mailed checks for the benefit of
those investors who redeemed. These changes do not apply to
investors who came into the Fund after October 2005.
Upon the final sale of the Refco receivable, Class AA and
II units were terminated effective December 31, 2007. Also,
effective December 31, 2007, Class I units were also
terminated.
Upon fifteen days written notice, a Class A Limited Partner
may require the Partnership to redeem all or part of his
Units effective as of the close of business (as determined
by the General Partner) on the last day of any month at the
Net Asset Value thereof on such date. Upon forty-five days
written notice, a Class I Limited Partner may require the
Partnership to redeem all or part of his Units effective as
of the close of business of the last day of any quarter at
the Net Asset Value thereof on such date. Notwithstanding
the above, pursuant to the Amended and Restated Agreement
of Limited Partnership, the General Partner may, in its
sole discretion, and on ten days' notice, require a Limited
Partner to redeem all or part of his Units in the
Partnership as of the end of any month. There are no
additional charges to the Limited Partner at redemption.
The Partnership's Amended and Restated Agreement of Limited
Partnership contains a full description of redemption and
distribution procedures.
Since commencing trading operations, the Partnership has
engaged in the speculative trading of Commodity Interests
and will continue to do so until its dissolution and
liquidation, which will occur on the earlier of December
31, 2020 or the occurrence of any of the events set forth
in Paragraph 4(a) of the Agreement of Limited Partnership.
Such events are (i) an election to dissolve the Partnership
made by over 50% of the Limited Partnership Units at least
90 days prior to dissolution, (ii) withdrawal, insolvency,
or dissolution of the General Partner (unless a new general
partner is substituted), (iii) decline in the Net Asset
Value of the Partnership at the close of any business day
to less than $300,000, or (iv) any event which will make it
unlawful for the existence of the Partnership to be
continued or requiring termination of the Partnership.
The address of the General Partner and the Partnership is
1100 North 4th Street, Suite 143, Fairfield, Iowa 52556,
and the telephone number at such location is (641) 472-
5500. The General Partner changed its name as of March 1,
1994 and amended its Certificate of Incorporation, with no
other changes, accordingly. In accordance with the
provisions of the Commodity Exchange Act and the rules of
the National Futures Association (NFA), the General Partner
is registered as a commodity pool operator and a commodity
trading advisor, JWH is registered as a commodity trading
advisor and the Commodity Broker is registered as a futures
commission merchant, each subject to regulation by the
Commodity Futures Trading Commission (CFTC). Each is also
a member of the NFA in such capacity.
The General Partner, to the exclusion of the limited
partners of the Partnership (the Limited Partners ),
manages and conducts the business of the Partnership. Thus
the General Partner (i) selects and monitors the
independent commodity trading advisor(s) and the Commodity
Broker; (ii) allocates and/or reallocates assets of the
Partnership to or from JWH and/or the advisor(s); (iii)
determines if an advisor or commodity broker should be
removed or replaced; (iv) negotiates management fees,
incentive fees and brokerage commissions; (v) determines
its own compensation with respect to management and
administrative fees; and (vi) performs such other services
as the Partnership may from time to time request, except
that all trading decisions are made by JWH and not the
General Partner. In addition, the General Partner selects
the commodity broker(s) that will clear trades for the
advisor(s). Newedge Financial Inc., part of the Newedge
Group joint venture between Societe Generale and Calyon
currently acts as Everest's commodity broker.
The General Partner is responsible for the preparation of
monthly and annual reports to the Limited Partners; filing
reports required by the CFTC, the NFA, the SEC and any
other federal or state agencies having jurisdiction over
the Partnership's operations; calculation of the Net Asset
Value (meaning the total assets less total liabilities of
the Partnership ( for a more precise definition, see the
Exhibit Form 10 - General Form for Registration of
Securities incorporated by reference hereto ) and
directing payment of the management and incentive fees
payable to JWH or the advisor(s)under an advisory
agreement(s) entered into with the commodity trading
advisor(s).
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.
From May 2002 through October 2003, the General Partner
charged the Partnership a monthly management fee of either
0.5104% or 0.5156%, depending on the total amount which the
Partnership had allocated to trading, including notional
funding. Prior to May 2002, the General Partner charged
the Partnership a monthly management fee equal to 0.5052%
of the Partnership beginning-of-month net asset value, as
defined. Prior to September 1, 2001, the monthly
management fee was 0.5%. The General Partner pays a
portion of its fees for actual commission charges to its
Clearing Broker.
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 this amount 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.
In addition, the Partnership reimburses the General Partner
for the actual organization and offering expenses advanced
by it, not to exceed one percent of the Class A Net Asset
Value of Units sold. The Partnership reimburses the General
Partner for the actual organization and offering expenses
advanced by it, not to exceed one tenth of one percent of
the Class I Net Asset Value of Units sold annually.
Organization and offering expenses shall mean all expenses
incurred by the Partnership or the General Partner in
connection with and in preparation to offer and distribute
the Units to investors, including, but not limited to,
expenses for traveling, printing, engraving, mailing,
salaries of employees while engaged in sales activity,
charges of transfer agents, registrars, trustees, escrow
holder, depositories, experts, expenses of qualification of
the sales of its securities under state law, including
taxes and fees and accountants and attorneys fees.
Everest pays John W. Henry & Company, Inc., its current
commodity trading advisor, a monthly management fee equal
to 0.167% (approximately 2% annually) of Everest s month-
end Allocated Assets, as defined, and a quarterly incentive
fee equal to 20% of Everest s trading profits allocable to
its trading exclusive of interest income on Allocated
Assets, as defined. The incentive fee is retained by JWH
even though trading losses may occur in subsequent
quarters; however, no further incentive fees are payable
until any such trading losses (other than losses
attributable to redeemed units and losses attributable to
assets reallocated to another advisor) are recouped by
Everest.
MLM received a monthly management fee of 0.0625% (0.75%
annually) of the Partnership s month-end allocated assets
as defined. As MLM used the MLM Index-Unleveraged, they
did not receive an incentive fee. Effective February 2003,
the management fee was reduced to 0.04167% (0.50%
annually).
Trilogy received a monthly management fee equal to 0.075%
(approximately 0.90% annually) of Everest s month-end
allocated assets, as defined. Trilogy did not receive an
incentive fee.
The Commodity Broker has agreed to pay Everest interest on
95% of Everest assets (including open trade equity)
deposited with it during a month at the average of 91-day
U.S. Treasury Bills purchased by the Commodity Broker
during each month. The Commodity Broker will retain all
excess interest, if any, earned on the Everest assets,
above the amount of interest paid to Everest. The interest
rate to be paid by the Commodity Broker to Everest is a
negotiated rate which has been negotiated between the
Commodity Broker and the General Partner. The actual
interest income on Everest s assets earned by the Commodity
Broker may be greater than or less than the negotiated rate
to be paid by the Commodity Broker to Everest. The
Commodity Broker will also be responsible for execution and
clearance of futures contracts (and possibly certain other
Commodity Interests).
The Partnership pays no selling commission but does pay an
ongoing compensation fee equal to 3% of the Net Asset Value
of Class A Units sold, unless waived in whole or in part by
the General Partner, to the selling agents in connection
with the sale of the Units. The Partnership pays no
selling commission but does pay an ongoing compensation fee
equal to 1% of the Net Asset Value of Class I Units sold,
unless waived in whole or in part by the General Partner,
to the selling agents in connection with the sale of the
Units. The General Partner may pay up to 100% of the funds
it receives to the selling agents as additional selling
commission. The Partnership is obligated to pay its
periodic operating expenses and extraordinary expenses.
Although those expenses will vary depending on the
Partnership's size, it is estimated that the periodic
operating expenses will be approximately $80,000 annually.
Extraordinary expenses for these purposes include expenses
associated with significant non-recurring litigation
including, but not limited to, class action suits and suits
involving the indemnification provisions of the Agreement
of Limited Partnership or any other agreement to which the
Partnership is a party. By their nature, the dollar amount
of extraordinary expenses cannot be estimated. With
respect to Class AA and II, extraordinary expenses paid or
accrued were $ 69,449, for the year ended 12/31/07. All
expenses shall be billed directly and paid for by the
Partnership. The Partnership s operating expenses for the
years 2003-2007 can be found in the table in Item 6 below.
As of December 31, 2007, the General Partner had no
employees. Further, the General Partner, in its capacity as
a CFTC-regulated commodity pool operator, contracts certain
services of research, administration, client support and
management information systems and analysis to Capital
Management Partners, Inc. (Capital). Capital is a CFTC-
regulated introducing broker, and an NFA member. Capital
is also registered with the Financial Industry Regulatory
Authority, Inc. ( FINRA ) as a broker dealer. As of
December 31, 2007, Capital had 7 employees.
The Partnership s business constitutes only one segment for
financial reporting purposes; and the purpose of the
Partnership is to trade, buy, sell, spread or otherwise
acquire, hold or dispose of Commodity Interests including
futures contracts, forward contracts, physical commodities
and related options thereon. The objective of the
Partnership s business is appreciation of its assets
through speculative trading in such Commodity Interests.
Financial information about the Partnership s business, as
of December 31, 2007 is set forth under Items 6 and 7
herein.
For a description of commodity trading and its regulation,
see the Prospectus filed on Form S-18 and the Confidential
Private Placement Memorandum filed as part of the Form 10
and included in the exhibits hereto.
The Current Offering
On July 1, 1995 the Partnership reopened for investment as
a Regulation D, Rule 506 private placement offering an
unlimited amount of limited partnership interests. On
September 19, 1996 the Commission accepted a Form 10 -
General Form for Registration of Securities submitted by
the Partnership thereby making the Partnership a public
reporting private placement offering. It also qualified
the Partnership as a publicly offered security as defined
in the Employee Retirement Income Security Act of 1974
(ERISA) rules permitting it to accept investment of an
unlimited amount of plan assets as defined in ERISA.
Hitherto, as a private placement the Partnership could
accept ERISA plan assets representing no more than 25% of
the total investment in the Partnership. The limited
partnership interests are offered by the Selling Agent and
additional selling agents with a Class A minimum
subscription amount of $25,000. (The Class A minimum
subscription amount for employee benefit plans and
individual retirement accounts is $10,000). Class I minimum
subscription amount is $1,000,000, subject to the
discretion of the General Partner to accept subscriptions
of lesser amounts.
Competition
JWH and any other advisor(s) of the Partnership, its or
their respective principals, affiliates and employees are
free to trade for their own accounts and to manage other
commodity accounts during the term of the Advisory
Agreement and to use the same information and trading
strategy which JWH obtains, produces or utilizes in the
performance of services for the Partnership through its
investment in Everest. To the extent that JWH recommends
similar or identical trades to the Partnership and other
accounts which it manages, the Partnership may compete with
those accounts for the execution of the same or similar
trades.
Other trading advisors who are not affiliated with the
Partnership may utilize trading methods which are similar
in some respects to those methods used by JWH, or any other
future Partnership s advisor(s). These other trading
advisors could also be competing with the Partnership for
the same or similar trades as requested by the
Partnership s advisor(s).
Item 1A. Risk Factors
GENERAL
Trading in Commodity Interests Is Speculative. Commodity
interest prices are highly volatile. Price movements for
futures contracts, for example, which may fluctuate
substantially during a short period of time, are influenced
by numerous factors that affect the commodities markets,
including, but not limited to: changing supply and demand
relationships, government programs and policies, national
and international political and economic events, and
changes in interest rates. See, Risk Factors -- Commodity
Interests Trading May Be Illiquid.
Commodity Interests Trading Is Highly Leveraged. The low
margin deposits normally required in trading commodity
interests permit an extremely high degree of leverage.
Accordingly, a relatively small price movement in a
commodity interest may result in an immediate and
substantial loss to the investor. For example, if at the
time of purchase 5% of the price of a futures contract is
deposited as margin, a 5% decrease in the price of the
futures contract would, if the contract were then closed
out, result in a total loss of the margin deposit
(brokerage commission expense would also be incurred).
Like other leveraged investments, any commodity interest
trade may result in losses in excess of the amount
invested. Although more than the initial margin can be
lost on a trade, the Partnership, and not investors
personally, will be subject to margin calls.
The Partnership s Trading Account Will Be Leveraged. The
use of notional funds by the Partnership in its trading
account with JWH will result in increased trading leverage.
The Fund is currently trading approximately $1.08 for every
$1.00 in Class A and Class I, combined. The general partner
may, in its sole discretion, periodically adjust the size
of the trading account with JWH by increasing or decreasing
the cash, other assets or notional funds allocated to it
(and thus the amount by which the Partnership s assets are
leveraged). Because the trading account will be leveraged,
(i) the Partnership will incur greater risk since the
Partnership may experience greater losses, as measured by a
percentage of assets actually allocated to JWH, due to the
notional funds component; (ii) the Partnership s returns
may experience greater volatility compared to the returns
which the Partnership would have achieved on a non-
leveraged basis; and (iii) the Partnership may receive more
frequent and larger margin calls.
Commodity Interests Trading May Be Illiquid. Most U.S.
commodity futures exchanges impose daily limits regulating
the maximum amount above or below the previous day's
settlement price which a futures contract price may
fluctuate during a single day. During a single trading day
no trades may be executed at prices beyond the daily limit.
Once the price of a particular futures contract has
increased or decreased to the limit point, it may be
difficult, costly or impossible to liquidate a position.
Futures prices in particular contracts have occasionally
moved the daily limit for several consecutive days with
little or no trading. If this occurs, the Partnership
might be prevented from promptly liquidating unfavorable
positions, which could result in substantial losses. Those
losses could significantly exceed the margin initially
committed to the trades involved. In addition, even if
prices have not moved the daily limit or there are no
limits for the contracts traded, trades might not be able
to be executed at favorable prices if little trading in the
contracts is taking place. It is also possible that an
exchange or the Commodity Futures Trading Commission (CFTC)
may suspend trading in a particular contract, order
immediate settlement of a contract, or order the
liquidation of open positions only.
Exchange for Physical. JWH may make use of a trading
technique referred to as exchange for physical in which a
cash or spot market position (which may be a forward
contract) is exchanged, often outside of regular trading
hours, for a comparable futures position. The CFTC has
released a study of the exchange for physical market that
recommended that a number of new regulatory restrictions be
applied to it. If these recommendations or restrictions
are adopted, the ability of JWH to use this market may be
curtailed.
Trading Decisions Based on Technical Analysis. JWH uses
trading programs that employ technical factors in
identifying price moves. The success of technical analysis
depends upon the occurrence in the future of price
movements. Technical systems will not be profitable, and
may in fact produce losses, if there are no market moves of
the kind the system seeks to follow. Any factor that would
make it more difficult to execute the trades identified,
such as a reduction of liquidity, also would reduce
profitability. There is no assurance that the trading
systems of JWH will generate profits under all or any
market conditions.
Possible Effects of Other Similar Systems. Commodity
trading systems, which use market data like JWH uses, are
not new. If many traders follow similar systems, these
systems may generate similar buy and sell orders at the
same time. Depending on the liquidity of a market, this
could cause difficulty in executing orders. The General
Partner believes that, although there has been an increase
in the number of trading systems in recent years, there
also has been an increase in the overall trading volume and
liquidity in the futures markets. Any increase in the
proportion of funds traded using trend-following systems
could alter trading patterns or affect execution of trades
to the detriment of the Partnership.
No Assurance of JWH'S Continued Services. JWH has
exclusive responsibility for trading commodity interests
allocated to it. JWH is dependent on the services of
certain key persons. The loss of the services of such
persons would make it difficult or impossible for JWH to
continue to provide services to the Partnership. In
addition, the advisory contract between the Partnership and
JWH may be terminated by either party on sixty (60) days
written notice.
Changes in Trading Strategies. The trading strategies of
most trading advisors are continually developing. JWH is
free to make any changes in trading strategies. Changes in
commodity interests traded or leverage used are not
considered changes in trading strategy.
Possible Effects of Speculative Position Limits. The CFTC
and U.S. exchanges have established speculative position
limits. These limits control the number of net long or
net short speculative futures or options (on futures)
positions any person may hold or control in futures or
options contracts traded on U.S. exchanges. JWH controls
the commodity trading of other accounts. All positions and
accounts owned or controlled by JWH and its principals are
combined with the Partnership's positions established by
JWH for position limit purposes. In order to avoid
exceeding position limits, it is possible that JWH will
have to modify its trading instructions, and that positions
held by the Partnership will have to be liquidated. That
could have a negative effect on the operations of the
Partnership and its profitability. See, Risk Factors
Increase in Amount of Funds Managed. In addition, all
commodity accounts of the General Partner and its
affiliates may also be combined with the Partnership for
position limit purposes.
Increase in Amount of Funds Managed. JWH expects to manage
additional funds in the future. It is not known if
managing additional funds, including funds raised in this
offering, will have any effect on its performance or
trading strategies. In many cases, the rates of return
achieved by an advisor deteriorate as assets under
management increase. Increases in funds managed may affect
the number of futures or options positions an advisor would
otherwise hold for each account it manages because of
speculative position limits imposed by U.S. exchanges.
There is no assurance that changes in strategies, if any,
in response to increased funds will be successful. There
can be no guarantee that the investment results of that
portion of the assets allocated to JWH will be similar to
those achieved by it in the past in its other accounts.
Changes in the Number of Available Futures Contracts and
Related Options. U.S. and foreign exchanges have
established new futures and options contracts in the past
few years. This trend could continue. If JWH trades these
contracts in the future, there is no assurance that its
trading strategies will produce profits.
Past Performance Is Not Necessarily Indicative of Future
Results. Although some of the client accounts of JWH have
been profitable in the past, you should take seriously the
warning the CFTC and the NFA require. PAST PERFORMANCE IS
NOT NECESSARILY INDICATIVE OF FUTURE RESULTS. AN
INVESTMENT IN THE PARTNERSHIP IS SPECULATIVE AND INVOLVES A
SUBSTANTIAL RISK OF LOSS.
Horizon Cash Management, L.L.C. A substantial portion of
the Partnership's assets is held in an omnibus custody
account on behalf of the Partnership at The Northern Trust
Company in the name of the Partnership. The Partnership
has entered into an advisory contract with Horizon pursuant
to which Horizon manages such assets in an attempt to
maximize their yield through investment in various short-
term interest bearing instruments including U.S. Treasury
Securities, U.S. Government Agencies Securities, Bankers
Acceptances, Certificates of Deposit, Time Deposits,
Commercial Paper, Loan Participation Notes and Repurchase
Agreements U.S. Treasury Securities and U.S. Government
Agencies Securities. As a result, the Partnership s assets
managed by Horizon are subject to potential loss resulting
from interest rate fluctuations and default.
JWH PROGRAMS
Effects of Trading Multiple Investment Programs. JWH makes
trading decisions for each of its investment programs
independently of trading decisions for the other JWH
investment programs. Because the CSAP Program which JWH
employs in trading the Partnership s assets uses multiple
JWH investment programs, it could hold opposite positions
in the same or similar contracts at or about the same time
or during the same period of time, with no net change in
holdings.
In addition, due to similarities among JWH s investment
programs, the potential diversification benefits of trading
CSAP may be less than would be the case with multiple
trading programs offered by independent managers. The
Partnership loses risk control benefits of market
diversification during these periods when an investment
program s positions are concentrated in a limited number of
markets.
The CSAP Program Is Discretionary. CSAP employs
discretionary, judgmental asset allocation decisions among
the JWH investment programs and currency trading models.
The investment programs and models themselves are primarily
technical and systematic in character. Since CSAP's
discretion relates to allocations, not trading, reliance on
judgment and discretion may, over time, produce less
consistent results than implementing a systematic
allocation approach. JWH has more experience implementing
systematic methodologies as opposed to discretionary
strategies. The Partnership may incur losses due to JWH s
relative inexperience in implementing this discretionary
strategy.
The CSAP Program May Under Perform Individual Programs.
Even if individual JWH investment programs are successful,
there can be no assurance that CSAP will be successful.
The active allocation among the investment programs makes
it possible for the program to incur losses even during
periods in which a number of the individual investment
programs are profitable.
Mandatory Closing Out of Offsetting Positions. CFTC rules
require offsetting positions taken by JWH for clients be
closed out. This means that positions taken pursuant to
different investment programs included in CSAP must be
closed out, even though the positions are taken in
different investment programs. JWH does not believe that
the requirement of liquidating offsetting positions for
CSAP by the different investment programs will, at this
point, impede the operation of CSAP. It is possible under
certain circumstances that the requirement to close out
offsetting positions could adversely affect the performance
of the Partnership s account.
Swap Transactions. JWH may periodically enter into
transactions which are characterized as swap transactions
and which may involve interest rates, currencies,
securities interests, commodities, and other items. Swap
contracts are not traded on exchanges and are not regulated
by the CFTC. Swap transactions are individually negotiated,
non-standardized agreements between two parties to exchange
cash flows measured by different interest rates, exchange
rates or prices, with payments calculated by reference to a
principal amount or quantity. As a result, the Partnership
will not receive the protection afforded by the Commodity
Exchange Act in connection with this trading activity by
JWH. The absence of regulation could expose the Partnership
to significant losses in the event of trading abuses or
financial failure by participants in the swap markets. JWH
has not previously traded swaps and has no experience in
that market. Transactions in these markets also present
certain risks similar to those in the futures, forward and
options markets. Only the accounts of eligible swap
participants as defined in Part 35 of CFTC Regulations,
may engage in swaps.
Options Transactions. JWH may engage in the trading of
options (both puts and calls) on futures on behalf of the
Partnership. The value of an option depends largely upon
the likelihood of favorable price movements in the
underlying futures contract in relationship to the exercise
(or strike) price during the life of the option. Therefore
many of the risks applicable to trading the underlying
futures contract are also applicable to options trading. In
addition, there are a number of other risks associated with
the trading of options. For example, the purchaser of an
option runs the risk of loss of his/her entire investment
(the premium he pays). Similarly, the uncovered writer of
an option is subject to an adverse price movement in the
underlying futures position, any such movement may exceed
the premium income from the option transaction. Spread
positions using options are subject to the same risks
involved in the purchase and writing of options. In
addition, in the event the Partnership were to write
uncovered options as one part of a spread position and such
option were exercised by the purchasing party, the
Partnership would be required to purchase and deliver the
underlying futures contract in accordance with the terms of
the option. Finally, an options trader runs the risk of
market illiquidity preventing offsetting positions for any
particular option. (See Commodity Trading May Be Illiquid
above.)
Business Interruption Risk. During both 2004 and
2005, the operations of JWH at its Boca Raton, Florida,
offices were disrupted by hurricanes which required
recovery periods to re-establish communications and other
utilities. JWH continued its trading operations during
those periods without interruption from back up locations.
Any future business interruption events, whether weather-
related or otherwise, that affect the south Florida area
could similarly disrupt the trading operations of JWH,
despite the back up precautions it has established. JWH
has a business continuity plan, but it cannot guarantee
that business interruption events will not have an impact
on its operations.
Electronic Trading and Order Routing Systems. JWH may from
time to time trade on electronic trading and order routing
systems which differ from traditional open outcry pit
trading and manual order routing methods. Transactions
using an electronic system are subject to the rules and
regulations of the exchanges offering the system or listing
the contract. Characteristics of electronic trading and
order routing systems vary widely among the different
electronic systems with respect to order matching
procedures, opening and closing procedures and prices,
error trade policies and trading limitations or
requirements. There are also differences regarding
qualifications for access and grounds for termination and
limitations on the types of orders that may be entered into
the system. Each of these matters may present different
risk factors with respect to the trading on or using a
particular system. Each system may also present risks
related to system access, varying response times and
security. In the case of internet-based systems, there may
be additional risks related to service providers and the
receipt and monitoring of electronic mail.
Trading through an electronic trading or order routing
system is also subject to risks associated with system or
component failure. In the event of system or component
failure, it is possible that for a certain time period, it
might not be possible to enter new orders, execute existing
orders or modify or cancel orders that were previously
entered. System or component failure may also result in
loss of orders or order priority. Some contracts offered
on an electronic trading system may be traded
electronically and through open outcry during the same
trading hours. Exchanges offering an electronic trading or
order routing system and listing the contract may have
adopted rules to limit their liability, the liability of
futures brokers and software and communication system
vendors and the amount that may be collected for system
failures and delays. These limitation of liability
provisions vary among the exchanges.
Reliance on Timely and Accurate Market Data. JWH s
ability to detect market trends and trade them profitably
depends on its access to timely and accurate market price
data throughout the trend identification and trading
processes. If price data is not available or is delayed,
JWH would be unable to trade for client accounts until
reliable data sources have been restored. Data
reconciliation procedures are applied each day to confirm
accurate price quotations, and on the subsequent day prices
that were employed in the JWH systems are re-reconciled in
an attempt to identify changes from previously posted
prices. JWH's traders are required to confirm a price from
multiple sources before executing a trade, and, during
volatile market conditions, traders request confirmation of
high and low prices from the floor before placing a trade.
Inaccurate information may be generated by a data vendor,
or an exchange may transmit inaccurate prices that a vendor
then distributes to JWH, but which are later cancelled or
amended by the exchange. In addition, JWH may obtain from
third parties, such as clearing firms, information about
price or about contract specifications and changes to them.
Inaccurate price information may cause JWH to enter or
close trades that it would not otherwise have entered or
closed, to trade or fail to trade at times that would have
been indicated by accurate data, or to be completely unable
to place a trade. Communications or technical failure may
also cause an electronic trading tool to fail, which could
cause JWH to fail to act when a trading stop is reached.
As a result of such potential data problems, client
accounts may be unable to exit positions or miss the
opportunity to establish new positions. JWH receives price
data electronically. Data providers typically make no
representations or warranties about the accuracy or
timeliness of the data they provide, and assume no
financial liability for lost profits, trading losses or
other consequential damages. Data providers also disclaim
any responsibility for events of force majeure, as well as
for actions (or inaction) of third party information,
hardware and software providers, and for interruption of
means of communication. Because all of the data required
for JWH s trading is provided from third parties, JWH,
cannot, despite its employment of the precautions described
above, make any assurances that its efforts will detect
erroneous or incomplete data, or prevent client accounts
from incurring losses or missing profit opportunities.
PARTNERSHIP ISSUES
Substantial Charges to Partnership. The Partnership pays
substantial fees and charges and has substantial operating
costs. As a result, it must make substantial profits for
your units to increase in value. These include an
incentive fee to JWH that is based on, among other things,
unrealized appreciation in open commodity interest
positions. The incentive fee is paid (and retained by JWH)
even if that portion of the Partnership s assets traded by
it experience subsequent losses or the appreciation is
never realized. It is therefore possible that the
Partnership may pay an incentive fee in years in which the
Partnership breaks even or experiences losses.
Possible Misallocation of Incentive Fees. The Partnership
pays quarterly incentive fees on trading profits, if any,
earned by JWH. Trading profits are calculated on the
overall profits earned by JWH on its allocated assets and
not just on increases in the Net Asset Value of each unit.
As a result, the Partnership might pay incentive fees even
if Partnership units decline in value. In addition, if, at
the time limited partners purchase units, there is an
accrued incentive fee expense, that accrued expense will
reduce the purchase price of their units. If the accrual
is reversed because of later losses, the incentive fee will
be misallocated because the reversal of the accrued
incentive fee expense will be allocated equally to all
outstanding units rather than only to those outstanding
during the period when the incentive fee expense accrued.
Similarly, if you buy units after an incentive fee has been
paid and after a later loss attributable to JWH, your units
will not be assessed an incentive fee until there are new
trading profits, even if your units have increased in
value.
There Is No Intrinsic Value to the Partnership's
Investments. The Partnership must be profitable for it to
provide beneficial diversification to a limited partner's
portfolio. Trading in commodity interests is a zero-sum
activity in which for every gain there is an equal and
offsetting loss (disregarding transaction costs). This
differs from a typical securities investment, in which
there is an expectation of consistent yields (in the case
of bonds) or participation over time in general economic
growth (in the case of stocks). The Partnership could lose
money while stock and bond prices rise. Stocks and bonds
(except penny stocks) generally have some intrinsic value.
Limited partners generally can realize some value for their
stocks or bonds even if they sell in a down market. In
trading commodity interests, on the other hand, investors
risk losing all of their investment if prices move against
them. In general, performance statistics do not reflect
the different risk profiles or tax treatment of traditional
and managed commodity interest investments. See, Risk
Factors Limited Partners Will Be Taxed on Profits whether
or Not Distributed or Realized.
Fund Trading Is Not Transparent. JWH makes all of the
trading decisions for the portion of the Partnership's
assets allocated to it. While the General Partner receives
daily trade confirmations from the commodity broker, only
the monthly performance of the Partnership is reported to
limited partners. Accordingly, an investment in the
Partnership does not offer limited partners the same
transparency, i.e., an ability to review all investment
positions daily that a personal trading account offers.
Non-Correlated, Not Negatively Correlated, Performance
Objective. Historically, managed futures have been
generally non-correlated to the performance of other asset
classes such as stocks and bonds. Non-correlation means
that there is no statistically valid relationship between
the past performance of futures and forward contracts on
the one hand and stocks or bonds on the other hand (as
opposed to negative correlation, where the performance
would be exactly opposite between two asset classes).
Because of this non-correlation, the Partnership cannot be
expected to be automatically profitable during unfavorable
periods for the stock market, or vice versa. The futures
and forward markets are fundamentally different from the
securities markets in that for every gain in futures and
forward trading, there is an equal and offsetting loss. If
the Partnership's investments do not perform in a manner
non-correlated with the general financial markets, or do
not perform successfully, limited partners will obtain no
diversification benefits by investing in the units and the
Partnership may have no gains to offset their losses from
other investments.
Limited Partners Will Not Participate in Management.
Limited Partners will not participate in the management of
the Partnership. Under principles of limited partnership
law, limited partners participation in the Partnership's
management could result in unlimited liability for them.
The limited partnership agreement provides that certain
actions may be taken, or approved, by the vote of limited
partners owning more than 50% of the units, but their role
in the Partnership is passive and the profitability of
their investment depends entirely on the efforts of others.
Indemnification of Partnership by Limited Partners. If
someone signs the subscription agreement and the General
Partner accepts their subscription, they will become a
limited partner. Under the agreement, they will be
required to indemnify the Partnership for any liability
that it incurs as a result of their actions.
LIQUIDITY
Limited Ability to Liquidate Investment in Units. Limited
partners cannot immediately liquidate their units. There
is no market for the units and none is likely to develop.
They may, however, redeem their Class A units, without
penalty, on the last day of any month on fifteen (15) days
prior written notice to the General Partner or such lesser
time as is acceptable to the General Partner. For Class I,
they may redeem on the last day of any quarter on forty-
five (45) days prior written notice to the General Partner
or such lesser time as is acceptable to the General
Partner. Because of the time delay between your Class A
notice to the General Partner and the end of the month (or
for your Class I notice, the end of the quarter) when their
investment is redeemed, the value of their investment on
the date of redemption may be substantially less than at
the time they notify the General Partner of their request
to redeem.
Possible Effect of Redemptions on Unit Values. The
Partnership will lose money if it has to sell positions at
a loss in order to raise capital so that the Partnership
can pay substantial redemptions. If a large number of
redemptions occur simultaneously, the need to liquidate
positions could continue even after the redemption date.
The Partnership would have fewer assets to trade after a
high level of redemptions. This might make it more
difficult for it to recover losses or generate trading
profits. Market illiquidity could make it difficult to
liquidate positions on favorable terms, and may also result
in losses and thus a decline in the value of Partnership
units.
Automatic Trading Suspension. Limited Partners should buy
units only if you are looking for a long-term investment.
If the net asset value per unit declines as of the close of
business on any day to a trading suspension level (50% of
the highest prior month-end net asset value per unit, after
adjustment for prior distributions), the Partnership will
liquidate its open positions and notify limited partners.
The Partnership cannot assure limited partners that it can
liquidate its investments without incurring substantial
additional losses or that limited partner will receive any
specific value for the units they own. See, Risk Factors
Commodity Interest Trading May Be Illiquid.
Counterparty Creditworthiness -- U.S. Markets. Commodity
exchanges provide centralized market facilities for trading
in futures contracts relating to specified commodities.
Each of the commodity exchanges in the United States has an
associated clearinghouse. Once trades made between
members of an exchange have been confirmed, the clearing
house becomes substituted for the clearing member acting on
behalf of each buyer and each seller of contracts traded on
the exchange and in effect becomes the other party to the
trade. Thereafter, each clearing member firm party to the
trade looks only to the clearinghouse for performance.
Clearinghouses do not deal with customers, but only with
member firms, and the guarantee of performance under open
positions provided by the clearinghouse does not run to
customers. If a customer's commodity broker becomes
bankrupt or insolvent, or otherwise defaults on such
broker's obligations to such customer, the customer in
question may not receive all amounts owing to such customer
in respect of his or her trading, despite the clearing
house fully discharging all of its obligations.
A substantial portion of the Partnership s assets are held
in a custodial account and managed by Horizon. Failure of
this firm might result in losses to the Partnership.
FOREIGN INSTRUMENTS
Counterparty Creditworthiness -- Non-U.S. Markets. JWH may
trade commodity interests on foreign exchanges and in the
over-the-counter markets. Unlike U.S. exchange traded
futures contracts where the exchange clearing corporation
acts as the counterparty to each customer transaction, the
over-the-counter markets and some foreign markets are
principals markets. This means that the performance of
the contract is the responsibility only of the individual
firm or member on the other side of the trade and not of
any exchange or clearing corporation. In those
transactions, the Partnership will be subject to the risk
of the inability of, or refusal by, the counterparty to
perform.
Trading on Foreign Exchanges and Currency Exchange Rate
Fluctuations. Neither existing CFTC regulations nor
regulations of any other U.S. governmental agency apply to
transactions on foreign markets. If a foreign
clearinghouse default or bankruptcy occurs, the
Partnership s rights and responsibilities are likely to
differ from those existing on U.S. exchanges. The
Partnership is at risk for fluctuations in the exchange
rate between the currencies in which the commodity interest
is traded and U.S. dollars. It also is possible that in
the future, U.S. or foreign governments could impose
exchange controls. There is no restriction on how much of
the Partnership's trading can be conducted on foreign
markets. The Partnership may pay brokerage commissions in
foreign currencies. If the exchange rate of those
currencies and the U.S. dollar fluctuates, the commission
rate paid for those trades might increase (decrease).
Possibility of Forward and Cash Trading. The Partnership
might make spot and forward contracts for certain
commodities, primarily currencies with U.S. or foreign
banks or dealers. A forward contract is a contractual
right to purchase or sell a commodity, such as a currency,
at or before a specific date in the future at a specific
price. Because forward contracts are not traded on
exchanges, there is no regulatory protection provided by
any exchange or the CFTC. There is no limit on daily price
moves for forward contracts. Banks and dealers are not
required to continue to make markets in any commodity. In
the past, there have been times when certain banks have
refused to quote prices for forward contracts or have
quoted prices with an unusually wide spread between the
price at which the bank is prepared to buy and that at
which it is prepared to sell. There is a risk that the
banks or dealers through which the Partnership trades could
fail or refuse to perform.
The CFTC is studying questions about the regulation of
off-exchange instruments such as forward contracts. A
number of the major U.S. commodity exchanges have also
expressed concerns about these instruments. The CFTC has
indicated that it would regard marketing of forward
contracts on a retail basis to the U.S. public at large as
a violation of the CEAct. The CFTC might, in the future,
prohibit the Partnership from trading in the forward
markets.
TAX AND REGULATORY ISSUES
Possibility of Taxation as a Corporation. Everest believes
that under current federal income tax law and regulations
the Partnership will be classified as a partnership and not
as an association taxable as a corporation. The General
Partner will not obtain a ruling from the Internal Revenue
Service (IRS) or an opinion of counsel to confirm its
belief. If the Partnership is taxed as a corporation for
federal income tax purposes in any taxable year, its income
or losses will not be passed through to you, and the
Partnership will be subject to tax on its income at the
corporate tax rate. In addition, any distributions made to
you could be taxable to you as dividend or capital gain
income, and those distributions will not be deductible in
computing taxable income.
Possible Legislative Tax Changes. All of the statements in
this Memorandum about taxes are based upon the current
Internal Revenue Code (the Code). Congress and the IRS
regularly revise the Code and the regulations. Those
revisions could materially affect you and the Partnership.
Unrelated Business Taxable Income (UBTI) for Employee
Benefit Plans. If the Partnership were a publicly-traded
partnership and limited partners are a tax-exempt entity,
or if they are a tax-exempt entity and debt finance their
investment, their share of gross income less Partnership
deductions is treated as UBTI, and subject to tax. The
General Partner does not believe that the Partnership is
publicly-traded for this purpose. However, if it were
decided that the Partnership is publicly-traded, it may not
be an appropriate investment for employee benefit plans,
including individual retirement accounts (IRAs). In
addition, if investing in commodity interests results in
UBTI, each partner that is a tax-exempt entity would take
into account its share of the Partnership s UBTI and the
deductions attributable to that income (including a $1,000
deduction against UBTI which is generally available to all
tax-exempt entities) in computing its tax liability.
Benefit plan investors should consult with their own legal
and financial advisers about the tax consequences of plan
investments in the Partnership.
Limited Partners Will Be Taxed on Profits whether or Not
Distributed or Realized. The Partnership is not required,
and the General Partner does not intend, to distribute
profits. If the Partnership has taxable income for a
fiscal year, the income will be taxable to them based on
their distributive share of Partnership profit even if no
profits have been distributed. As a result, limited
partners might owe taxes on undistributed profits. It is
also possible that those profits could be lost by the
Partnership after the end of its fiscal year, so that
limited partners might never receive the profits on which
they are taxed. However, they may redeem units to pay
taxes, but this would result in a reduction in their
interest in the Partnership s future profits (if any).
Foreign Limited Partners. If limited partners are not
citizens or residents of the U.S. and are not otherwise
engaged in a trade or business in the U.S., they will
generally not be required to pay U.S. income tax on capital
gains from commodity interest trading. Interest income
will be taxable to them, if they are a foreign investor,
unless there is an exemption from tax in an appropriate tax
treaty. If the law requires the General Partner to
withhold a portion of the income they earn because they are
a foreign limited partner, the General Partner may redeem
their units to pay the U.S. Department of Treasury taxes
they owe. If a limited partner believes amounts were
improperly withheld, they must deal directly with the U.S.
Department of Treasury.
Failure of Commodity Brokerage Firms. Futures commission
merchants must maintain the Partnership s assets in a
segregated account. If CFI becomes bankrupt, the
Partnership could lose money. In addition, even if CFI
adequately segregates the assets of the Partnership, the
Partnership may be able to recover only a pro rata share of
the property available for distribution to all of CFI s
customers.
Forex Trading Counterparty Creditworthiness. The
Partnership will enter into an agreement with an equity in
the Newedge Group which will result in such entity acting
as the counter-party to the Partnership s foreign currency
transactions. That is, the counterparty will be the seller
of all forex instruments purchased by the Partnership and
the buyer of all forex instruments sold by the Partnership.
The counterparty's financial benefit from entering into
these transactions with the Partnership is derived from its
ability to participate in the foreign exchange interbank
markets, which are only available to large institutional
investors. The counterparty's compensation will be derived
from a mark-up on the bid/ask spread price quoted to the
Partnership on each transaction, and the counterparty's
ability to offset these transactions in the foreign
exchange interbank market. In the event that the
counterparty is unable to successfully participate in this
market, the ability of the counterparty to enter into
transactions with the Partnership may be interrupted. In
addition, the counterparty has entered into similar
agreements with other persons, and thus acts as the
counter-party in transactions effected by these other
persons. Because the counterparty acts as counter-party in
these transactions, the Partnership is subject to the
additional risk that the counterparty will be unable to
fulfill its obligations to the Partnership. Moreover, in
the event of a bankruptcy of the counterparty, the
Partnership may be unable to recover assets held at the
counterparty, even if such assets are directly traceable to
the Partnership. In the event of the counterparty s
bankruptcy, there is no equivalent of the Securities
Investors Protection Corporation insurance as applicable in
the case of securities broker dealers bankruptcies.
A substantial portion of the Partnership s assets are held
in a custodial account and managed by Horizon. Failure of
this firm might result in losses to the Partnership.
Possibility of Tax Audit. The IRS might audit the tax
returns of the Partnership, or adjustments to its returns
might be made as a result of an audit. Uncertainty
regarding the federal income tax treatment of certain
management and incentive fees paid by the Partnership, or
ongoing fees paid to others, may increase the likelihood of
an audit. If an audit results in an adjustment, limited
partners may be required to pay additional taxes, interest
and penalties and may be subject to audit. The IRS is
currently authorized to impose an interest penalty on tax
deficiencies based on prevailing private sector interest
rates.
Risk that Units Will Not Be Considered Publicly-Offered
Securities under the Employee Retirement Income Security
Act of 1974 (ERISA). The General Partner believes that it
is reasonable to take the position that the units qualify
as publicly-offered securities under Title I of ERISA,
and that the underlying assets of the Partnership will
therefore not be considered for any purposes of ERISA or
Section 4975 of the Code to be assets of employee benefit
plans and IRAs that purchase units. However, this position
is not binding on the Department of Labor (DOL) and,
therefore, there is no certainty that the units qualify.
If the units are determined not to qualify as such
publicly-offered securities, the General Partner intends
to redeem units held by certain limited partners that are
employee benefit plans or IRAs to the extent necessary to
prevent the underlying assets of the Partnership from
thereafter being considered for purposes of Title I of
ERISA or Section 4975 of the Code to be assets of such
employee benefit plans or IRAs. However, for any period
that the underlying assets of the Partnership are
considered to be assets of employee benefit plans or IRAs,
the provisions of Title I of ERISA and Section 4975 of the
Code would apply to the operation of the Partnership and
could adversely affect the Partnership's investments and
activities.
Absence of Regulation Applicable to Investment Companies.
The Partnership is not registered as an investment company
or mutual fund. Therefore, the SEC does not regulate it
under the Investment Company Act of 1940 (the 1940 Act).
Although the Partnership has the right to invest in
securities, limited partners are not protected by the 1940
Act. The General Partner is, however, registered with the
CFTC as commodity pool operator (CPO), JWH is registered
with the CFTC as a CTA and Newedge Financial Inc. is
registered with the CFTC as a futures commission merchant
(FCM).
Item 2. Properties
The Partnership does not utilize any physical properties in
the conduct of its business. The General Partner uses its
offices to perform its administrative functions.
Item 3. Legal Proceedings
In October 2000, there was a discrepancy between the
performance of the Barclay Futures Index Program (BFIP) as
traded for the Partnership and the Barclay Futures Index
(BFI). Certain transactions executed by Trilogy on behalf
of the Partnership resulted in a loss of approximately
$520,000 that was recorded in the statement of operations.
The General Partner believes that these transactions were
not executed in accordance with the provisions of BFIP and
has demanded that Trilogy reimburse the Partnership for the
loss. The parties are currently attempting to resolve the
issue.
Until a final resolution is reached, the parties have
agreed that the management fees otherwise payable to
Trilogy under its advisory contract would be applied as a
credit to offset the losses. The offset is not in
settlement, partial settlement, or indemnification of any
kind and is without prejudice to any rights or claims by
either side. Beginning in November 2000, and until
approximately July 1, 2001, at which time Trilogy was
terminated, all of the management fees that would otherwise
be paid to Trilogy were deposited into a separate account
for the benefit of those limited partners that were limited
partners on November 1, 2000 and to cover the expenses
associated with the collection of the losses. The separate
account is not included in the financial statements of the
Partnership. After its termination, Trilogy demanded that
such fees be returned to it. The General Partner rejected
Trilogy's demand and is assessing its options for
collection.
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 does not believe at this time that any
of the losses will be recovered. Trilogy has closed their
operations and an analysis of the principal's assets ( Mr.
Alan Kaufman) reveals insufficient resources to make any
material reimbursement. A judgment, if obtained, would
likely put Mr. Kaufman into bankruptcy. As an alternative,
the general Partner is attempting to negotiate a settlement
with Mr. Kaufman that would free the General Partner to
distribute the withheld fees to the Limited Partners who
were in the Fund in October 2000. We anticipate bringing
this matter to a conclusion in the 1st quarter of 2008.
Item 4. Submission of Matters to a Vote of Security
Holders
None
PART II
Item 5. Market for Registrant s Common Equity, Related
Stockholder Matters and Issuer Purchases of Equity
Securities.
(a) There is no established public market for the
Units and none is expected to develop.
(b) As of December 31, 2007, there were 4,793.613
Class A Units held by Limited Partners. A total of 3,520.97
Units were redeemed by Class A Limited Partners during
2007. During this same period, there were 993.87 Units
redeemed by Class I Limited Partners, 1,066.53 units
redeemed by Class AA Limited Partners and 121.11 units
redeemed by Class II Limited Partners. Additionally, there
were 719.67 Units transferred from Class AA to A and 72.86
Units transferred from Class II to I. The Seventh Amended
and Restated Agreement of Limited Partnership for the
Partnership contains a full description of redemption and
distribution procedures.
(c) To date no distributions have been made from the Class
A or Class I units to Limited Partners.
The Agreement of Limited Partnership does not provide for
regular or periodic cash distributions, but gives the
General Partner sole discretion in determining what
distributions, if any, the Partnership will make to its
partners. The General Partner has not declared any such
distributions to date, and does not currently intend to
declare any such distributions.
Item 6. Selected Financial Data
2003 2004 2005 2006 2007
------- ------- ------- ------- --------
(In thousands, except amounts per Unit)
1. Operating Revenues * $ 8,24 $ 5,098 $ 165 $ -1,117 $4,748
2. Income (Loss) from
Continuing Operations 4,846 2,466 -2,302 -7,206 3,765
3. Income (Loss)
Per Unit: A Shares 184.01 175.60 -193.95 -321.57 522.26
I Shares 365.10 -122.38 -270.57 630.86
AA Shares -7.77 -1,342.55 2,703.69
II Shares -8.08 -1,396.40 2,812.13
4. Total Assets 34,590 37,126 33,192 19,769 11,976
5. Long Term Obligations 0 0 0 0 0
6. Cash Dividend per Unit 0 0 0 0 0
* Certain prior year amounts have been reclassified to conform to the
current year presentation.
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
Liquidity and Capital Resources
Most U.S. commodity exchanges limit by regulations the
amount of fluctuation in commodity futures contract prices
during a single trading day. These regulations specify
what are referred to as "daily price fluctuation limits" or
"daily limits". The daily limits establish the maximum
amount the price of a futures contract may vary either up
or down from the previous day's settlement price at the end
of a trading session. Once the daily limit has been
reached in a particular commodity, no trades may be made at
a price beyond the limit. Positions in the commodity could
then be taken or liquidated only if traders are willing to
effect trades at or within the limit during the period from
trading on such day. Because the "daily limit" rule only
governs price movement for a particular trading day, it
does not limit losses. In the past, futures prices have
moved the daily limit for numerous consecutive trading days
and thereby prevented prompt liquidation of futures
positions on one side of the market, subjecting commodity
futures traders holding such positions to substantial
losses for those days.
It is also possible for an exchange or the CFTC to suspend
trading in a particular contract, order immediate
settlement of a particular contract, or direct that trading
in a particular contract be for liquidation only.
For the year ended December 31, 2007, Limited Partners
redeemed a total of 3520.97 Class A Units for
6,375,499. Limited Partners redeemed a total of 993.87
Class I Units for 2,197,979. Limited Partners redeemed a
total of 1,066.53 Class AA Units for 2,016,751 and
Limited Partners redeemed a total of 121.11 II units for
291,597. Additionally, there were 719.67 Units representing
$1,235,725 transferred from Class AA to Class A and 72.86
Units representing $75,760 transferred from Class II to
Class I.
For the year ended December 31, 2006, Limited Partners
redeemed a total of 3139.34 Class A Units for $6,866,488.
Limited Partners redeemed a total of 246.40 Class I Units
for $554,414. Limited Partners redeemed a total of 460.17
Class AA Units for $461,886 and Limited Partners redeemed a
total of 36.73 units for $38,343. Additionally, there were
762.22 Units representing $765,050 transferred from Class
AA to Class A and 96.01 Units representing $100,236
transferred from Class II to Class I.
During 2007, investors purchased 25.51 Class A Units for
$50,000. No Class I Units were purchased by Limited
Partners.
The Partnership trades on recognized global futures
exchanges. In addition, the Partnership trades over the
counter contracts in the form of forward foreign currency
transactions. As of December 31, 2007, the Partnership had
$100,047 on deposit at Newedge Financial Inc.
See Footnote 4 of the Financial Statements for procedures
established by the General Partner to monitor and minimize
market and credit risks for the Partnership. The General
Partner of the Partnership reviews on a daily basis reports
of the performance of the Partnership, including monitoring
the daily net asset value of the Partnership. The financial
situation of the Commodity Broker is monitored on a monthly
basis to monitor specific credit risks. The Commodity
Broker does not engage in proprietary trading and thus has
no direct market exposure which provides the General
Partner with assurance that the Partnership, will not
suffer trading losses through the Commodity Broker.
Results of Operations
Calendar Year 2007
At December 31, 2007 the Partnership had approximately
$11.7 million in Class A assets and no Class I assets. The
JWH allocation was approximately $7.7 million. The balance
was being held in interest-bearing accounts in anticipation
of future allocations to JWH or other traders.
The Partnership recorded a gain of 1,997,815 or 522.26 per
Class A unit, for the year 2007. That represents a gain of
27.24% for the year. The Partnership recorded a gain
of 630.86 per Class I Unit, which represents a gain of
30.46% through November 30, 2007 when all Class I shares
were redeemed.
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.
Update on the RCM recovery efforts
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, please refer to last month' s
letter for details. The Plan Administration Committee,
of which Peter Lamoureux is a member, is actively liquidating
other assets. We anticipate another distribution within the
next two months.
Class A Units were negative 4.77% in February 2007
resulting in a Net AssetValue 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 eviden
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.
Update on the RCM recovery efforts
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. We anticipate another distribution within the
next two months.
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 tur
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.
Update on the RCM recovery effort
Second Refco Distribution (Not applicable to investors who
came into theFund after 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.
3 months 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 quarterended 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 ofthe 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 perunit of $1,874.11 as of May 31, 2007.
The Fund s performance was positive for the month of May.
The interestrate 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 sectorwas 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 remainedrange-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 sub
prime mortgage problems in the United States, the Fund
was able to profit as its long-term trend-following
approach excelled, holding profitable position through
the market turmoil. The Fund s systematic approach
has profited over the past few months since the equity induced
dislocationof 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 dueto 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 beenmailed for the benefit of
any investors who have redeemed.
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 Julyas 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
resultingin 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 andswap 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 opportunitiesas they
arise.
Clearing Broker News
The Funds 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.
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 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
The Partnership anticipates making an allocation to the
Morningstar Long / Short Commodity Index sometime in 2008.
The Index is a momentum based strategy that holds a
basket of 19 physical commodity contracts either long
or short.
Offering Memorandum
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
commoditiesto 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.
During the reporting period, fiscal quarter ended September
30, 2007, additional Units sold consisted of zero
limited partnershi 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.
3 months ended December 31, 2007
The Partnership recorded a gain of $3,779,436 or $459.31
per Unit of Class A Units ($ $511.84 for Class I Units),
$2,718.15 for Class AA Units and $2,827.17 for Class II
Units) for the fiscal quarter ended December 31, 2007. This
compares to a loss of $1,267,541 or $146.82 per Unit of
Class A Units ($140.68 for Class I Units), $3.03 for Class
AA Units and $3.15 for Class II Units) for the fiscal
quarter ended December 31, 2006.
Class A Units were a positive 8.19% in October 2007
resulting in a Net Asset Value of $2,142.08.
Class I Units were a positive 8.45% resulting in a Net
Asset Value of $2,375.10 as of October 31, 2007.
The Fund's performance was positive for the month of
October. Apprehension returned to the financial markets
resulting from speculation that credit market losses could
potentially further hurt the broader U.S. economy. The
resulting increase in market volatility benefited the
Fund's disciplined, long-term systematic trading approach
as energy and metals markets surged as the dollar continued
its plunge and as the Federal Reserve Board (the Fed)
lowered its benchmark rate by 25 basis points to 4.5
percent in the hopes of keeping the U.S. economy from
stalling.
The energy sector was the Fund's strongest performer for
the month as crude oil led petroleum products higher.
The metals and stock indices sectors were both positive for
the month after the economy expanded more-than-forecasted
and the Fed cut its benchmark rate. U.S. stocks rose for
the third straight month and gold reached its highest price
in 27 years.
The currency sector was slightly negative in October as the
dollars plunge against both the euro and British pound was
not enough to offset the losses caused by trend reversals
in the Japanese yen. The interest rate sector was negative
for the month as the Fund exited positions in European and
U.S. fixed income markets. The agriculture sector was
negative for October as the Fund systematically exited
positions as markets retreated from a seven-year high in NY
coffee and an all-time high of $9.6175 a bushel in CBOT
wheat on September 28th.
In conclusion, the Fund's performance was positive for
the month of October. Its' long-term, trend-following
approach capitalized on increasing concerns about the
health of the global credit-markets which drove bullish
trends in both the energy and metals sectors. As always,
the Fund stands ready to potentially take advantage of any
continuing or new trends that may emerge.
Class A Units showed a gain of 13.50% in November 2007
resulting in a Net Asset Value of $2,431.19. The year-to-
date return for 2007 was +26.82% for the Class A Units.
The interest rate sector was the Fund's best performer in
November as global interest rates continued their move
lower. The decline in interest rates in November had an
impact on currency exchange rates. The dollar dropped
precipitously against a number of the world's major
currencies. The sharp decline in the value of the dollar
against some of the world's major currencies impacted other
markets and contributed to profits in other sectors of the
portfolio. This was most evident in the energy sector,
where the majority of the actively traded products are
priced in U.S. dollars. Performance for the agricultural
sector was slightly positive in November.
Precious metals prices were also impacted by movements in
the dollar. In times of crisis, gold is often seen as a
safe harbor and can function as if it is a de facto
currency. Overall, performance for the metals sector was
slightly negative for the month. Performance for the equity
sector was negative for the month. The tendency for
November to be a good month for equity returns did not
prove to be the case this year as the S&P 500 declined
approximately 4.50 percent during the month, but global
equity prices rallied sharply at the end of the month.
November performance resulted in the third consecutive
positive month for the Fund. The ongoing concern about the
health of the U.S. economy and the Fed's ability to
proactively react to signs of impending problems continue
to drive performance across the market sectors. As always,
the Fund stands ready to potentially take advantage of any
continuing or new trends that may emerge.
Auditors
The Fund has selected the Chicago firm of Ryan & Juraska,
Certified Public Accountants (R&J), to conduct the 2007
audit and tax work. R&J specialize in Broker-Dealers,
Commodity Pool Operators, Commodity Trading Advisors and
Hedge Funds.
Class A Units showed a gain of 0.33% in December 2007,
resulting in a Net Asset Value of $2,439.29. The year-to-
date return for 2007 was +27.24% for the Class A Units.
Everest held on to its investment with JWH while two of the
nation's top 5 broker-dealers either pulled out of all JWH
investments (Merrill Lynch) or issued a sell signal for JWH
managed funds with a white paper to back up their
conclusions (a firm who has a selling agreement with
Everest). Although I understand their frustration, the fact
is that each of these firms acted at almost the exact
bottom of JWH's performance cycle for our fund,
recommending a pull out at almost the exact wrong time.
Long term trend following requires a lot of patience. We
appreciate the discipline of every investor and broker who
has remained with the fund, and we are making efforts to
create a better investor experience.
Now that JWH has delivered a +27.24% year, we are taking
steps to improve the experience of long term trend
following by allocating approximately 40% of the Fund to
vehicles that are designed to replicate the Morningstar
Long/Short Commodity Index. We anticipate the allocation
will occur either in late January or February, depending on
the regulatory process.
Refco
On December 14, 2007 Everest received
$1,912,484 upon the sale of the remaining Refco receivable.
This brings the recovery from 36.69 cents on the dollar to
62.25 cents on the dollar and ends the Refco recovery
effort. The Fund increased the class A units for each
investor in the Fund by their pro-rate share, and mailed
checks for the benefit of those who have redeemed. These
changes do not apply those who have come into the Fund
after October 2005.
During the reporting period, fiscal quarter ended December
31, 2007, no additional Units were sold by the limited
partnership; there were no general partnership Units sold
during the period. Additional Units sold during the period
represented a total of $0.00 . Investors redeemed a total
of 145.20299 Class A Units, 351.88382 Class AA Units,
48.14901 Class I Units and 58.95415 Class II Units during
the period. Additionally, there were 191.014 Units
transferred from Class AA to Class A 0.00 Units transferred
from Class II to Class I. At the end of the period there
were 4793.61 Units outstanding (including no Units owned by
the General Partner).
See Footnote 4 of the Financial Statements for procedures
established by the General Partner to monitor and minimize
market and credit risks for the Partnership. In addition
to the procedures set out in Footnote 4, 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.
During the fiscal quarter ended December 31, 2007, the
Partnership was exposed to credit risk in connection with
the bankruptcy filing by RCM, the Partnership's former
foreign currency broker. See Items 1 and 3 above for
additional information.
Inflation
Inflation does have an effect on commodity prices and the
volatility of commodity markets; however, inflation is not
expected to have an adverse effect on the Partnership's
operations or assets.
Calendar Year 2006
At December 31, 2006 the Partnership had approximately
$14.8 million in Class A assets and approximately $1.9
million in Class I assets. The JWH allocation was
approximately $18.0 million which includes $ 1.3 million of
notional funding.
The Partnership recorded a loss of $7,206,352 or $321.07
per Class A unit, for the year 2006. That represents a loss
of 14.35% for the year. The Partnership recorded a loss of
$270.57 per Class I Unit, which represents a loss of 11.56%
for the year.
First Quarter 2006
The Partnership recorded a loss of $767,181 or $70.29 per
Unit of Class A Units ($55.42 for Class I Units, $2.03 for
Class AA Units and $2.11 for Class II Units) for the fiscal
quarter ended March 31, 2006. This compares to a loss of
$3,249,420 or $218.23 per Unit of Class A Units ($202.84
for Class I Units) for the fiscal quarter ended March 31,
2005. The quarter ended March 31, 2006 showed a loss of
3.14% (total return) for the Class A Units of the fund (-
2.37% for the Class I Units, 0.09% for Class AA Units and
0.09% for Class II Units).
The Partnership continued to employ John W. Henry &
Company, Inc.'s (JWH) GlobalAnalyticsR Family of Programs,
Worldwide Bond Program and Currency Strategic Allocation
Program.
Class A Units were negative 2.71% in January 2006 resulting
in a Net Asset Value per unit of $2,177.48 as of January
31, 2006.
Class I Units were negative 2.45% resulting in a Net Asset
Value of $2,284.32 as of January 31, 2006.
The Fund ' s overall return was negative for the month of
January as losses in the interest rate, currency and energy
sectors outweighed the gains achieved in the other sectors.
The interest rate sector led the Fund ' s losses on
increased speculation of rising global interest rates. The
metals sector led the positive performing sectors along
with more moderate gains achieved in both indices and
agriculture. Metals benefited from gold rising to a 25-year
high as investors sought a " safe haven " in the precious
metal. This was due to increased fears about Iran's nuclear
program and a Hamas led-Palestinian government.
The fixed income sector was the Fund ' s worst performing
sector as the fixed income markets in the U.S., Europe and
Japan sold-off over fears of their respective central banks
raising interest rates. The currency sector also suffered
losses as the U.S. dollar posted its biggest monthly
decline against the euro since November 2004. The dollar
also suffered losses against the Swiss franc, Japanese yen
and the euro as investors no longer expected interest rate
differentials to benefit the dollar as the spread narrowed
between the U.S. and both European and Japanese interest
rates. The Fund ' s energy sector underperformed as
volatility within the sector increased as oil and natural
gas are now being used as " geopolitical weapons " by Iran,
Russia, Venezuela and militants in Bolivia. Crude oil,
which is up 41 percent from a year ago and 11 percent for
the month, helped to limit losses in this sector despite
the increased volatility. However, the gains were not
enough to offset the losses incurred in natural gas, which
for the first time in almost 6 months dropped below $8 in
New York. Natural gas fell 17 percent for the month as mild
weather in the largest U.S. consuming regions cut demand
which limited the need for utilities to pull from reserves
stored in underground aquifers and caverns.
The metals sector was the best performing sector for the
month. Gold extended its surge to a 25-year high, and
silver climbed to its highest level since March 1984.
Gold's increase occurred on concerns that the dollar may
weaken because of higher oil prices, increasing the metal's
appeal as a hedge against further declines in the U.S.
currency. Global Stock Indices were positive for the month
as European stock indices had their best January rally in
eight years as energy stocks along with miners and
steelmakers gained on expectations earnings would benefit
from higher commodity prices. The agriculture sector was
also positive on the month as sugar reached a 16-year high
in London and a 25-year high in New York. The record highs
were a result of the surging cost of crude oil which
increased the demand for ethanol, a sugar cane by-product.
Brazil, the biggest producer and exporter of sugar, is
converting more of its cane crop to ethanol to cope with
record
gasoline prices.
In conclusion, the Fund finished negative for the month as
the fixed income, currency and energy sectors suffered
losses. Although the Fund underperformed, we remain
confident that our trend following approach will withstand
the recent market volatility and remain poised to take
advantage of new opportunities as they present themselves.
Update on the RCM recovery efforts
The Official Committee of Creditors in the Refco case has
posted a website for information and updates. It has a
summary of events in October, November and December 05; a
calendar of events for January and February of 06; a
bankruptcy basics primer; FAQs; and a section to ask
questions. The site is at: www.refcocommittee.com. This
may be too much information in too legal a format, and it
is not specific to the recovery efforts of any one
investment fund, but at least something has been organized.
The questions and the FAQ section may be more common sense
based and have less legal terminology.
The next issue to be determined by the court is a decision
on whether Refco Capital Markets (RCM) was acting as a
stockbroker. If so, RCM would go into a Chapter 7
liquidation. The Everest Fund has filed a motion objecting
to the conversion, as we do not believe that RCM was acting
as a stockbroker. The arguments are scheduled to be heard
on February 14th. Everest Asset Management, Inc. remains
available to answer any questions specific to the Everest
Fund. The Fund's offering documents have been updated and
we have taken in investor money for January and February.
Class A Units were negative 5.91% in February 2006
resulting in a Net Asset Value per unit of $2,048.72 as of
February 28, 2006.
Class I Units were negative 5.65% resulting in a Net Asset
Value of $2,155.24 as of February 28, 2006.
The Fund's performance was negative for the month as
listless markets continued to hamper the Fund's long-term
trend following approach. The majority of the losses were
realized in the currency sector. Currency markets gyrated
over speculation surrounding potential global interest rate
moves. The energy sector incurred losses on concerns over
geopolitical events. While the market continued to be
apprehensive over the situation in Iran and Iraq, attacks
in Nigeria and Saudi Arabia added to the market's
trepidation. Limiting losses in this sector was natural
gas, as prices fell to their lowest level in almost nine
months. The metals sector was also negative for the month
as volatility hurt performance. Global Stock indices did
not perform well for the month as Asian stocks posted their
first monthly decline since October 2005 and the Nasdaq
dropped 1.1 percent. Market instability was also a factor
in the indices sector as U.S. stocks suffered their biggest
loss in five weeks on the last day of trading in February.
The interest rate sector was slightly positive for the
month as performance in various markets counterbalanced
each other. Performance in the agriculture sector was
slightly negative for the month as trading in N.Y coffee
and N.Y. sugar hindered returns, while trading in CBOT
wheat limited losses.
Update on the RCM recovery efforts
The Official Committee of Creditors in the Refco case has
posted a website for information and updates. It has a
summary of events in October 05 through February 06; a
calendar of events for March 06; a bankruptcy basics
primer; FAQs; and a section to ask questions. The site is
at: www.refcocommittee.com. This may be too much
information in too legal a format, and it is not specific
to the recovery efforts of any one investment fund, but at
least something has been organized. The questions and the
FAQ section may be more common sense based and have less
legal terminology.
The issue on whether the Refco Capital Markets (RCM) case
should be converted to Chapter 7 liquidation was heard by
the courts during February and early March. Closing
arguments will be heard on Tuesday, March 14th. Everest
Asset Management, Inc., the Official Committee of Unsecured
Creditors, and the debtors (Refco) object to the
conversion. We may know the Judge ' s ruling on Tuesday
the 14th, or shortly thereafter. Everest Asset Management,
Inc. remains available to answer any questions specific to
the Everest Fund. The Fund's offering documents have been
updated and we have had new investments for January,
February and March.
Class A Units were positive 5.81% in March 2006 resulting
in a Net Asset Value per unit of $2,167.80 as of March 31,
2006.
Class I Units were positive 6.08% resulting in a Net Asset
Value per unit of $2,286.17 as of March 31, 2006.
The fixed income sector led performance with robust gains
as the Fund s systematic trend-following approach enabled
it to profit from rising global interest rates. The indices
and metal sectors also added to the positive performance as
silver continued to trend higher, and the indices sector
benefited from stronger economic data in Europe. The
indices sector also profited from the continued strength of
commodity stocks on the back of global growth in China.
Limiting the Fund s gains for the month was the currency
sector, which continued to suffer from range-bound trading,
along with underperformance in both the energy and
agriculture sectors.
The fixed income sector was the Fund s strongest performer
for month as Japanese, German and U.S. government debt
endured stronger than expected consumer confidence and
rising inflationary fears. The indices sector was also
positive for the month as Asian stocks approached a 16-year
high on surging demand for metals and oil, and the Nikkei
225 climbed above 17,000 for the first time in more than
five years. The metals sector was also profitable for the
month as silver reached $11.66 on March 30th, the highest
intraday price since September 1983.
The energy sector was the Fund s worst performer as
geopolitical induced volatility limited gains within the
sector. Performance in the currency sector was also
negative for the month as range-bound trading continued to
negatively affect the Fund s long term trend following
approach. Although some currencies had directional moves
during the month, they were then accompanied by strong
reversals. The agriculture sector also underperformed for
the month as gains made in London sugar were not enough to
offset the underperformance caused by the weakness in CBOT
wheat and corn.
Update on the RCM recovery effort
The Official Committee of Creditors in the Refco case has
posted a website for information and updates. It has a
summary of events in October 05 through February 06; a
calendar of events for March 06; a bankruptcy basics
primer; FAQs; and a section to ask questions. The site is
at: www.refcocommittee.com. This may be too much
information in too legal a format, and it is not specific
to the recovery efforts of any one investment fund, but at
least something has been organized. The questions and the
FAQ section may be more common sense based and have less
legal terminology. On March 14th the Judge tentatively
ruled that Refco Capital Markets (RCM) should be converted
to a Chapter 7, but he agreed to give the parties 45 days
in order to try to work out a consensual plan for
reorganizing RCM and distributing the assets on hand.
Everest Asset Management, Inc. remains available to answer
any questions specific to the Everest Fund. The Fund s
offering documents have been updated and we have had new
investments for January, February and March.
During the reporting period, fiscal quarter ended March 31,
2006, additional Units sold consisted of 264.9 limited
partnership Units; there were zero general partnership
Units sold during the period. Additional Units sold during
the period represented a total of $575,000. Investors
redeemed a total of 637.11 Units during the period and the
General Partner redeemed zero Units. At the end of the
period there were 13,940.87 Units outstanding (including
zero Units owned by the General Partner).
As of March 31, 2006 the estimated Class AA NAV per unit
was $2,348.31 and Class II NAV per unit was $2,442.49.
During the fiscal quarter ended March 31, 2006, the
Partnership was exposed to credit risk in connection with
the bankruptcy filing by RCM, the Partnership s former
foreign currency broker. See Note 1 of the Notes to
Financial Statements above for additional information.
Second Quarter 2006
The Partnership recorded a loss of $420,650 or $77.87 per
Unit of Class A Units ($64.19 for Class I Units, $0.80 for
Class AA Units and $0.84 for Class II Units) for the fiscal
quarter ended June 30, 2006. This compares to a gain of
$1,781,153 or $113.12 per Unit of Class A Units ($134.00
for Class I Units) for the fiscal quarter ended June 30,
2005. The quarter ended June 30, 2006 showed a loss of
3.59%( total return) for the Class A Units of the fund
(2.81% for the Class I Units, 0.03% for Class AA Units and
0.03% for Class II Units).
The Partnership continued to employ John W. Henry &
Company, Inc.'s (JWH) GlobalAnalyticsR Family of Programs,
Worldwide Bond Program and Currency Strategic Allocation
Program.
Class A Units were positive 13.63% in April 2006 resulting
in a Net Asset Value per unit of $2,463.35 as of April 30,
2006.
Class I Units were positive 13.50% resulting in a Net Asset
Value of $2,594.70 as of April 30, 2006.
The interest rate sector led performance with strong gains
as the Fund s systematic trend-following approach enabled
it to profit from higher global interest rates. The metal
and currency sectors also added to performance as both gold
and silver continued to trend higher on inflationary fears
and increased demand, while currencies benefited from a
weakening U.S. dollar. The energy sector had gains due to
increased concerns over Iran's nuclear program. The indices
sectors had more modest gains, while the agriculture sector
incurred losses as performance within these sectors was
hampered by volatility.
The fixed-income sector was the Fund's strongest performing
sector as European, Japanese and U.S. fixed income markets
sold off. The metals sector was also profitable as all
components were positive for the month. Gold climbed above
$650/oz for the first time in 25-years after Iran failed to
meet an April 28th deadline to cooperate with United
Nations inspectors who are trying to determine if the
country is enriching uranium for military purposes. Also
adding to performance was silver which rallied on
speculation investor demand will grow as Barclays Bank PLC
began offering an exchange-traded fund backed by the metal.
Silver has rallied 51 percent this year, and rose 17% this
month alone. The currency sector was also positive on the
month as the U.S. dollar fell on expectations of narrowing
interest rate differentials. The dollar fell 4.1 percent
against the euro, the biggest monthly decline since
December 2003 and the British pound gained against the
dollar for a fourth week, its longest winning streak in a
year. The largest gain in this sector was the euro, while
the largest loss was in the Japanese yen. Keeping with the
prevailing theme performance in the energy sector was also
positive during the month. Concerns that the UN Security
Council will impose sanctions that could lead Iran, the
fourth-largest oil producer, to cut shipments drove crude
oil for June delivery to a new high of $75.35 a barrel on
April 21st and 24th. Crude oil for June delivery ended up
7.8% this month. The global stock indices sector was
slightly positive for the month as the Fund's performance
was hindered by increased geopolitical instability in the
global stock markets, as well as a volatile interest rate
environment.
The agriculture sector was the Fund's worst performing
sector for the month as volatility hurt performance.
Cotton limited the sectors losses, with the largest loss
occurring in N.Y. coffee as growers in Latin America and
Africa took advantage of a recent rally to sell beans.
Update on the RCM recovery efforts
The Committee has been successful in bringing money into
the various Refco estates during the last month, with two
legal actions settled or pending settlement. In addition,
on May 2nd, the Judge in the case granted the two RCM
groups two more weeks to work out a consensual plan which
would allow the case to remain in a Chapter 11. The
general partner remains available to answer any questions
specific to the Everest Fund.
Class A Units were negative 3.85% in May 2006 resulting in
a Net Asset Value per unit of $2,368.52 as of May 31, 2006.
Class I Units were negative 3.24% resulting in a Net Asset
Value of $2,510.69 as of May 31, 2006.
The Fund's performance was negative in May as the interest
rate, metal, agriculture and stock indices sectors suffered
from large market corrections during the second half of the
month. Increased inflationary fears and concerns over the
global economy led investors to take profits and reduce
risk exposure. A major catalyst for the reversal was the
news that the Federal Reserve on May 10th signaled that
"further policy firming may yet be needed" instead of
signaling a possible "pause" at it's next meeting at the
end of June. This caught the market by surprise causing
equity markets, which had been near or at record highs, to
fall in response. This news also eventually caused a
"contagion effect" in the metal and currency sectors.
The currency sector was positive for the month despite the
extreme volatility that dominated the sector. The fixed
income sector was the Fund's worst performing sector as
uncertainty surrounding inflation prospects and global
growth led to increased volatility. Performance in the
energy sector was also negative for the month as petroleum
products retreated from record or near record highs during
the month. The metal sector was also negative for the
month as precious metals fell from record highs set towards
the beginning of the month. Gold fell 12% after reaching a
26-year high of $732 an ounce on May 12th. The largest
loss in this sector occurred in silver. Global Stock
Indices also underperformed for the month. Attributing to
the underperformance of the sector was the Federal
Reserve's uncertainty about inflation, which took the
markets by surprise, and the lackluster U.S. consumer
confidence report. The agriculture sector was also
negative for the month as London and New York sugar
hindered performance. Sugar, whose demand has increased on
its ability to be made into ethanol, fell as energy prices
dropped during the month.
Update on the RCM recovery efforts
* The ongoing dispute at the Refco Capital Markets (RCM)
between the securities customers and the FX customers
(Everest) has been resolved after much negotiation. This
should greatly facilitate the distribution of assets at
hand and the distribution of future recoveries. This
agreement should avoid much costly litigation and time
delays.
* The 'bar date' for the filing of all claims against RCM
has been set for July 17th. Everest has already filed it's
claim. It may take six to eight weeks to process and
verify all claims. Although there could be further delays,
it is possible that we will see a distribution of the
assets on hand at RCM by the fourth quarter of this year,
maybe as early as October.
* The Bankruptcy court approved a settlement whereby the
Sphinx entities have agreed to pay back $262 million to the
Refco estates.
* The Austrian Bank BAWAG settled with the creditors
committee and the Department of Justice (DOJ) and agreed to
pay up to $675 million. Please keep in mind that a portion
of the BAWAG settlement goes to the DOJ and some to the
Refco estate, not directly to the Refco Capital Markets.
However, most of the other bankrupt Refco entities owe RCM
money so there should be benefits coming down to the RCM
level, which is where Everest money is frozen.
The agreement between parties at RCM and the two
substantial recoveries of assets are some of the most
significant steps of progress in the recovery of our assets
since the events of October 2005. The Committee (and Peter
Lamoureux, president of the Fund's general partner, as a
member of the Committee) is continuing to work hard to
recover assets in a timely manner.
Class A Units were negative 11.76% in June 2006 resulting
in a Net Asset Value per unit of $2,089.94 as of June 30,
2006.
Class I Units were negative 11.50% resulting in a Net Asset
Value of $2,221.98 as of June 30, 2006.
The Fund's performance was negative for the month of June.
All six sectors were negative with the currency sector, and
to a lesser extent the interest rate sector, responsible
for the majority of the Fund's losses. These sectors were
affected by trend-reversing markets caused by anticipated,
but unrealized, fears that the Federal Reserve would not
only raise rates at its June 29th meeting, but also
reinforce expectations for further rate increases to curb
inflation.
Currencies were the Fund's worst performing sector as the
U.S. dollar spent the majority of the month strengthening
against most major currencies. The interest rate sector
was also unprofitable for the month as U.S. 10-year and 30-
year treasury bonds led the sector's
decline. The interest rate speculation that dominated the
currency markets also affected the U.S. treasury markets.
The metals sector was also negative for the month as
precious metals continued to retreat from highs set in May.
Gold fell to a three month low of $542.45 an ounce on June
14th after reaching a 26-year high of $732 an ounce on May
12th. The dramatic sell-off was caused by the combination
of a stronger dollar, as investors bought dollars as an
alternative to gold, and increased speculation that the
Federal Reserve could hike interest rates as much as 50
basis points. Despite the recent weakness in the precious
metal, gold is up 18 percent for the year. All components
of this sector were negative with the largest loss coming
from gold. The agriculture sector also underperformed
during the month as weather conditions had severe affects
on various crops in the U.S. and around the world. Global
Stock Indices were slightly negative for the month as
speculation over the outcome of the June 29th Federal
Reserve meeting caused severe market fluctuations. The
energy sector was also slightly negative for the month as
choppy market conditions hindered performance. All of the
petroleum based products were negative for the month.
The combined losses in the currency and interest rate
sectors drove the Fund's negative performance. Comments
from the Federal Reserve combined with stronger than
expected economic data caused speculation that the Federal
Reserve might raise interest rates 50 basis points instead
of previously expected 25 at the June 29th meeting. The
possibility of a larger than expected interest rate move
sent the U.S. dollar and U.S. treasury yields higher.
However, the markets reversed themselves upon the
announcement that the Federal Reserve had raised rates by
25 basis points, and signaled to the markets that they have
possibly reached the end of the rate hiking cycle. The
resulting increase in uncertainty
and speculation led to volatility in the markets and caused
several reversals making it difficult for our disciplined
systematic investment style to capitalize on longer-term
trends. As always, then Fund stands ready to potentially
take advantage from any continuing or new trends that may
emerge.
Update on the RCM recovery efforts
An agreement among securities customers and general
unsecured creditors of RCM was filed with the courts on
June 30. A motion was filed seeking bankruptcy court
approval of the agreement. The terms of the agreement are
complex, to say the least. It is a settlement between
certain parties claiming to be 'securities' customers of
RCM and certain parties purporting to be foreign exchange
customers/general unsecured creditors of RCM. Everest
would fall into the latter camp. The agreement defers
attempts to convert the current RCM Chapter 11 case to a
case in Chapter 7, but if a global consensus settlement in
Chapter 11 fails, a conversion to Chapter 7 would be on a
more efficient pre-planned basis. The agreement defines a
process for allocating the assets on hand at RCM, provides
a mechanism for determining who is a securities customer
and who is an FX/unsecured customer, and sets a schedule
for distributions of other expected RCM assets such as
intercompany claims and third party (litigation)
recoveries.
Although this agreement is a major step toward recovering
Everest's assets, keep in mind that it is contingent upon a
number of things such as Bankruptcy Court approval and the
Rogers Raw Material Fund becoming a party to the agreement.
We will know more about the contingencies being met by the
next court date of August 10th.
The Official Committee of Creditors in the Refco case has
posted a website for information and updates. It has a
summary of events in October 05 through June 06; a calendar
of events for July 06; a bankruptcy basics primer; FAQs;
and a section to ask questions. The site is at:
www.refcocommittee.com
During the reporting period, fiscal quarter ended June 30,
2006, additional Units sold consisted of 156.72 limited
partnership Units; there were zero general
partnership Units sold during the period. Additional Units
sold during the period represented a total of $350,495.
Investors redeemed a total of 1,550.34 Units during the
period and the General Partner redeemed zero Units. At the
end of the period there were 12,547.25 Units outstanding
(including zero Units owned by the General Partner).
As of June 30, 2006 the estimated Class AA NAV per unit was
$2,347.50 and Class II NAV per unit was $2,441.65.
During the fiscal quarter ended June 30, 2006, the
Partnership was exposed to credit risk in connection with
the bankruptcy filing by RCM, the Partnership ' s former
foreign currency broker. See Note 1 of the Notes to
Financial Statements above for additional information.
Third Quarter 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.
The Fund s performance was negative for the month of
July. All six sectors traded were negative, with the
interest rate, agriculture and currency sectors responsible
for the majority of the Fund s losses. While some markets
had strong directional moves, the overall trading
environment was unfavorable for the Fund s long-term
trend following approach. Geopolitical events, extreme
weather conditions, and speculation over U.S. interest rate
policy caused harmful spikes in volatility within the
sectors traded by the Fund.
The interest rate sector was the Fund s worst performing
sector as speculation of a slowing U.S. economy and the
crisis in the Middle East attracted investors to the
perceived safety in fixed-income markets. The agriculture
sector was also negative for the month. The currency
sector also underperformed for the month as fighting
between Israel and Hezbollah caused a sharp reversal in the
weakening U.S. dollar trend. Performance in the energy
sector was negative for the month as geopolitical events
and a record-breaking heat wave in the Midwest and
Northeastern U.S. caused volatility throughout the entire
energy sector. The metals sector was also negative for the
month as increased volatility in gold hurt the sector s
performance. Gold was up 5
percent in July after dropping 5.1 percent in June. The
indices sector was only slightly negative for the month as
the Nasdaq slumped about 3.7 percent.
In conclusion, performance was negative for the month as
volatility affected trends throughout markets traded by the
Fund. Concern surrounding the U.S. economy continued to
keep the markets speculating about the Federal Reserve s
next move, causing uncertainty within the interest rate,
currency and indices sectors. Meanwhile, the eruption of
violence in the Middle East added to the Fund s losses as
investors fled from equities into safe haven investments
such as gold and treasuries. Finally, the Fund also
suffered as a heat wave swept across the nation driving
energy and agricultural prices suddenly higher. As a
result, short-term market moving events increased
volatility and induced strong reversals making it difficult
for JWH s disciplined systematic investment style to
capitalize on longer-term trends.
Update on the RCM recovery efforts
* On June 30th the two groups of creditors at Refco
Capital Markets (RCM) entered into a Settlement Agreement.
This concluded months of negotiating between the Securities
Customers and the FX/General Unsecured Creditors of RCM,
Everest being in the second group.
* On July 24th the Rogers funds agreed to become parties
to the Settlement Agreement.
* Immediately thereafter the Official Committee of
Unsecured Creditors began to attempt to reach a global
consensual settlement agreement with the other Refco
bankrupt entities. Everest's claims at Refco are at the RCM
level, however there are 23 other bankrupt entities. Most
of the parties to the case are attempting to reach a global
consensus involving all the Refco estates.
* The RCM Settlement Agreement, if approved by the
Judge, provides for a schedule of payments to be made from
the assets on hand at RCM, and it provides a formula for
sharing the anticipated intercompany receivables and
finally the third party recoveries. Everest is still
hopeful for an initial distribution of the assets on hand
by the end of the 4th quarter of this year, but many things
may impact that time frame.
The Official Committee of Creditors in the Refco case has
posted a website for information and updates. It has a
summary of events in October 05 through July 06; a calendar
of events for August 06; a bankruptcy basics primer; FAQs;
and a section to ask questions. The site is at:
www.refcocommittee.com
Class A Units were positive 7.63% in August 2006 resulting
in a Net Asset Value per unit of $2,000.56 as of August 31,
2006.
Class I Units were positive 7.89% resulting in a Net Asset
Value of $2,138.44 as of August 31, 2006.
The Fund's performance was positive in August as four out
of the six sectors traded were profitable for the month.
The fixed-income sector led performance with robust gains
as U.S., Japanese, and European bond markets trended higher
on signs that inflationary pressures in the world s
largest economies are receding. The currency sector also
added to the Fund s positive performance as the Japanese
yen weakened against the U.S. dollar and euro on
speculation that Japan s central bank wouldn t raise
interest rates again this year. The Fund s performance
was further enhanced by more modest gains in the metals and
agriculture sectors, while the Fund suffered small loses in
the indices and energy sectors.
The fixed-income sector was the Fund s strongest
performer as Japanese government bonds (JGBs), German
bunds, and the U.S. benchmark 10-year bond all rallied for
the month. The currency sector was the Fund s other
solid performer for the month, as the Japanese yen fell
against the U.S. dollar and euro on increased speculation
that the BOJ would keep interest rates at their current
level. The metals sector was also profitable for the month
as silver futures for December delivery reached $13 an
ounce, the highest price since May 30th. The precious
metal has gained 90 percent in the past year. Silver s
rally is due to increased demand throughout the world, and
expectations of continued economic expansion in developing
nations. The largest gain in this sector was achieved in
silver, while the only loss occurred in gold as
geopolitical tension in the Middle East, due to Iran s
continued pursuit of uranium enrichment, kept the metal
vulnerable to price fluctuations. The agriculture sector
was also positive for the month as losses in CBOT wheat
were offset by gains made in London and New York sugar.
Sugar prices in London have dropped almost 25 percent in
the past three months after rising to a record $497 a
metric ton on May 12th. The global stock indices sector
was slightly negative for the month as global equity
markets reversed the recent losing trend and rallied on
decreased fears of inflation. The energy sector was the
Fund s worst performing sector as higher price trends at
the beginning of the month experienced strong reversals.
Natural gas soared on August 2nd in New York on concern s
that Tropical Storm Chris could strengthen into the season
s first hurricane and track towards the Gulf of Mexico
where about a quarter of the United States gas supply is
produced. However by August 31st, natural gas closed at a
six-week low in New York as Tropical Storm Chris was a non-
event and mild weather across the central and eastern U.S.
reduced demand for the fuel to be sent to power stations.
In conclusion, the Fund was positive for the month, with
the fixed income sector leading performance as Japanese,
German and U.S. fixed income markets trended higher on
contained inflation fears. The currency sector also helped
profitability as the Japanese yen weakened on speculation
that interest rates in Japan will remain at their current
level. As always, the Fund stands ready to potentially take
advantage from any continuing or new trends that may
emerge.
Update on the RCM recovery efforts
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 Everest's belief that the Court will approve the Plan
or a plan that is close to the current draft. We 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.
Fourth Quarter 2006
The Partnership recorded a loss of $1,267,541 or $ 146.82
per Unit of Class A Units ($140.68 for Class I Units),
$3.03 for Class AA Units and $ 3.15 for Class II Units) for
the fiscal quarter ended December 31, 2006. This compares
to a loss of $1,634,747 or $138.06 per Class A Unit for the
fiscal quarter ending December 31, 2005, ($123.35 for Class
I Units). The quarter ended December 31, 2006 showed a
loss of 7.11% (total return) for the Class A Units of the
fund; a loss of 6.36% (total return) for the Class I Units,
and 0.01% for Class AA and II Units.
Class A Units were a negative 5.53% in October 2006
resulting in a Net Asset Value of $1,949.77.
Class I Units were a negative 5.27% resulting in a Net
Asset Value of $2095.25 as of October 31, 2006.
The Fund's performance was negative for the month of
October. Three of the six sectors traded had positive
performance. However, the gains made in the energy, indices
and agriculture sectors were not able to offset the
combined losses of the remaining sectors. The
underperforming sectors were affected by trend-reversing
markets caused by shifting expectations about global
inflationary fears, as well as the health of the U.S.
economy.
The fixed income sector was the Fund's worst
performing sector for the month as U.S., European, and
Japanese debt markets suffered similar reversals over
speculation surrounding potential global interest rate
moves. The currency sector was negative for the month.
The economic data and speculation about future interest
rates which led to the losses in the fixed-income sector
also caused underperformance within this sector, as the
U.S. dollar suffered a strong reversal at the end of the
month. The largest sector loss occurred in the euro.
Performance in the metals sector was also negative for the
month.
The energy sector was the Fund's strongest performer
for the month of October. Crude oil plunged 25 percent
since reaching a record $78.40 a barrel on July 14th, amid
concern that fighting in Lebanon would spread through the
Middle East. Since July 14th, three factors have caused
prices to drop; a cease fire between Israel and Lebanon has
been achieved, crude oil inventories have risen, and there
has been a calm Atlantic hurricane season. The stock
indices sector was also positive for the month. Asian
stocks climbed, for their best month since April. Also
advancing were the U.S. benchmark indices, as earlier
optimism that U.S. households would sustain economic growth
pushed the Dow industrials to a record high during the
month and sent the S&P 500 to its highest level since
November 2000. Performance in the agriculture sector was
also positive during the month as corn and CBOT wheat were
the sectors best performers.
In conclusion, the Fund was negative for the month as an
unexpected shift in the global interest rate environment
shocked the markets and resulted in sharp reversals in the
fixed-income and currency markets. While gains in energy,
indices and agriculture sectors helped to limit losses,
they were not enough to offset the combined losses from the
fixed-income and currency markets. As always, the Fund
stands ready to potentially profit from any new trends that
may emerge.
Update on the RCM Recovery Efforts / Write Down of RCM
Receivable
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 which the
Bankruptcy Court is being asked to approve in the Refco
case, the General Partner as of October 31, 2006 (but
effective September 30, 2006) 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. 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 is a preliminary
adjustment and could be negatively impacted if the Plan is
not confirmed by the Bankruptcy Court on December 15, 2006.
The estimate could also be adjusted depending upon the
outcome of the processing of valid claims in the bankruptcy
litigation and certain other factors.
Looking beyond the recovery estimates described above,
there is the potential for further recoveries through
litigation efforts. A Litigation Trust is being
established and funded. A Litigation Trust Committee has
been formed and a Litigation Trustee is being appointed to
pursue claims against a targeted list of parties who may
have acted fraudulently or with negligence in the conduct
of Refco business. We have not included litigation
recoveries, if any, in the write down, because the success
of such actions cannot be estimated at this time. No
assurances can be made that there will be any further
recoveries for Everest from these efforts.
In accordance with Generally Accepted Accounting Principles
the write down was reflected in the statement of operations
at September 30, 2006. The estimate was determined after
the issuance of our 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.
Class A Units showed a gain of 6.38% in November 2006
resulting in a Net Asset Value of $ 2074.23.
Class I Units showed a gain of 6.65% resulting in a Net
Asset Value of $ 2234.50.
The Fund was +6.38% for November. The currency sector led
performance with strong gains as the Fund's systematic
trend following approach enabled it to profit from a
weakening U.S. dollar. The agricultural and interest rate
sectors also added to the positive performance as corn
continued to trend higher on increased export demand and
U.S. treasuries rallied as signs of slowing economic growth
bolstered speculation that the Federal Reserve (Fed) will
cut interest rates. The metal sector was also positive on
the strength of silver while the energy and indices sectors
incurred losses as performance within these sectors was
hampered by trend reversals towards the end of the month.
December's results cannot be predicted, and we are hopeful
for a positive year. Under market conditions that favor
JWH's systematic trading system, this manager has shown the
ability to recover quickly in the past. However, the Fund
is down for the year at the end of November and we have had
a number of questions regarding potential tax advantages
from a negative year that could be used to offset gains in
other investments. Although your clients should consult
with their own tax advisors, we would like to remind
everyone that it is not necessary to redeem the investment
in order to trigger the tax advantage, if there is one.
The Fund's results are recognized for tax purposes in each
year of trading and will be reported on the K-1.
We appreciate your patience during what has been a
disappointing period of performance in the managed futures
industry and by our manager, John W. Henry & Company, Inc.
(JWH). By their very nature, uncorrelated asset classes
can produce different results, which may lead to better
combined returns over time. A 10% Everest 90% S&P 500
allocation had higher total returns with lower standard
deviation than a 100% S&P 500 investment for the last 5
year, 7 year and 10 year periods ending with the 3rd quarter
of 2006 (rebalancing quarterly). In the last three years
that has not been the case. At Everest, we have always
tried to look at the long term results, and we encourage
investors to do the same. We have seen no fundamental
change in management or style of investing at JWH which
have caused under performance, and we look forward to the
potential return of markets that are more favorable to
JWH's systematic trading system. We continue to review the
allocation to three programs at JWH.
For investors who have been in the Fund since October
2005, we anticipate getting a number of distributions from
the frozen assets at Refco over the next few months which
should equate to most of the assets on hand at RCM being
paid out by June of 2007. In addition, the Litigation
Trust will be pursuing actions against a targeted list of
individuals and firms with the hope of further recoveries.
Obviously, the success of that litigation cannot be
determined at this time, nor can we predetermine a time
frame for results.
In summary, we are reviewing our allocation to the JWH
programs and winding down the Refco issues. We wish
everyone a Joyous Holiday Season and a Healthy and
Prosperous New Year.
Class A Units showed a loss of 7.58% in December 2006,
resulting in a Net Asset Value of $ 1,917.03.
Class I Units showed a loss of 7.32% resulting in a Net
Asset Value of $ 2071.02.
The Fund's performance was negative for the month of
December. Four out of six sectors traded were negative,
with the interest rate sector responsible for the majority
of the Fund's losses. Speculation over the future of the
U.S. Federal Reserve's (FED), European Central Bank's
(ECB), and the Bank of Japan's (BOJ) interest rate policies
caused harmful and sharp reversals in global fixed income
markets. The same uncertainty surrounding the future
direction of world interest rates also hurt performance in
the Fund's currency sector, as fluctuating interest rate
expectations caused excessive volatility in global currency
markets. The health of U.S., European, and Japanese
economies continued to keep markets speculating about the
direction of global interest rates, causing uncertainty
within the fixed income, currency, and metal sectors. As a
consequence, short-term market moving events resulted in
strong reversals or trend-less markets making it difficult
for JWH's disciplined systematic investment style to
capitalize on longer-term trends.
The poor performance in December ensured a losing year
for the Fund. We have decided to make a change in
allocation to the JWH programs. Since June of 2003 the
Fund has been allocated to three JWH programs in
approximately the following amounts: 50% to the JWH Global
Analytics Program (GA), 25% Worldwide Bond Program (WWB),
and 25% Currency Strategic Allocation Program (CSAP).
Effective January 3rd, 2007 we have dropped the CSAP and
increased GA to 75% while keeping WWB at 25%. We still
have exposure to currency trading within the Global
Analytics Program. For the past three years CSAP has
underperformed both GA and WWB Programs, and we believe
this change will help improve the results of our trading
with JWH.
Refco Summary for Investors in the Fund October 2005
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, we have now received
$1,365,525.51. That represents an amount equal to
approximately 18% of the frozen assets. We have increased
the Class A units for each investor in the Fund by their
pro rata share of the distribution, and lowered the Class
'AA' units. This will be seen as an increase in the Class
'A' (or Class 'I') units on the December 2006 client
statements and a decrease in the Class 'AA' (or Class II
units). Checks were mailed in the middle of January 2006
for the benefit of any investors who have redeemed.
There is approximately 26.5 cents on the dollar on
hand at Refco for FX clients like Everest. Subject to the
claims processing, we anticipate receiving additional
distributions that may bring us to that level of recovery
within the first half of 2007. The Disclosure Document
filed with the Court in October 2006 estimates on page 8
that the Everest Fund's category of recovery (FX unsecured
creditors) could come to 37.5 cents on the dollar subject
to a number of contingencies. In order to approach the
37.5 % recovery, a number of entities involved in Refco
need to be liquidated, further transfers need to be
effected between Refco entities, and some appeals need to
be heard by the courts. It is difficult to estimate the
length of time to complete this process or the degree of
success in approaching the 37.5 % recovery level. Peter
Lamoureux is a member of the Plan Administration Committee
and will endeavor to communicate any results in a timely
fashion.
As mentioned before, there is the possibility of
further recoveries through litigation against certain
parties who are being targeted by the Litigation Trust
Committee. At this time no assurance can be made that the
litigation efforts will result in further recoveries for
the Fund.
During the reporting period, fiscal quarter ended December
31, 2006, additional Units sold consisted of 113.61 limited
partnership Units; there were no general partnership
Units sold during the period. Additional Units sold during
the period represented a total of $ 238,000. Investors
redeemed a total of 824.27 Class A Units, 460.17 Class
AA Units and 36.73 Class II Units during the period.
Additionally, there were 762.22 Units transferred from
Class AA to Class A 96.01 Units transferred from Class II
to Class I. At the end of the period there were 10,625.001
Units outstanding (including no Units owned by the General
Partner).
As of December 31, 2006 the estimated Class AA NAV was
$1,003.73 and the estimated Class II NAV was $1,043.98.
See Footnote 4 of the Financial Statements for procedures
established by the General Partner to monitor and minimize
market and credit risks for the Partnership. In addition
to the procedures set out in Footnote 4, 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.
During the fiscal quarter ended December 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 Items 1 and 3 above for
additional information.
Inflation
Inflation does have an effect on commodity prices and the
volatility of commodity markets; however, inflation is not
expected to have an adverse effect on the Partnership's
operations or assets.
Item 7A. Quantitative and Qualitative Disclosures About
Market Risk
Introduction
Past Results Are Not Necessarily Indicative of Future
Performance
The Partnership is a speculative commodity pool. The
market sensitive instruments held by it are acquired for
speculative trading purposes, and all or substantially all
of the Partnership's assets are subject to the risk of
trading loss. Unlike an operating company, the risk of
market sensitive instruments is integral, not incidental,
to the main line of business of the Partnership.
Market movements result in frequent changes in the fair
market value of the open positions of the Partnership and,
consequently, in its earnings and cash flow. The market
risk of the Partnership is influenced by a wide variety of
factors, including the level and volatility of interest
rates, exchange rates, equity price levels, the market
value of financial instruments, the diversification effects
among the open positions of the Partnership and the
liquidity of the markets in which it trades.
The Partnership can acquire and/or liquidate both long and
short positions in a wide range of different financial and
metals markets. Consequently, it is not possible to
predict how a particular future market scenario will affect
performance, and the past performance of the Partnership is
not necessarily indicative of its future results.
Value at Risk is a measure of the maximum amount which the
Partnership could reasonably be expected to lose in a given
market sector. However, the inherent uncertainty of the
Partnership's speculative trading and the recurrence in the
markets traded by the Partnership of market movements far
exceeding expectations could result in actual trading or
non-trading losses far beyond the indicated Value at Risk
or the experience of the Partnership to date (i.e., "risk
of ruin"). In light of the foregoing as well as the risks
and uncertainties intrinsic to all future projections, the
inclusion of the quantification included in this section
should not be considered to constitute any assurance or
representation that the losses of the Partnership in any
market sector will be limited to Value at Risk or by the
attempts of the Partnership to manage its market risk.
Standard of Materiality
Materiality as used in this section, "Qualitative and
Quantitative Disclosures About Market Risk," is based on an
assessment of reasonably possible market movements and the
potential losses caused by such movements, taking into
account the leverage, optionality and multiplier features
of the market sensitive instruments of the Partnership.
Quantifying the Trading Value at Risk of the Partnership
Qualitative Forward-Looking Statements
The following quantitative disclosures regarding the market
risk exposures of the Partnership contain "forward-looking
statements" within the meaning of the safe harbor from
civil liability provided for such statements by the Private
Securities Litigation Reform Act of 1995 (set forth in
Section 27A of the Securities Act and Section 21E of the
Securities Exchange Act of 1934). All quantitative
disclosures in this section are deemed to be forward-
looking statements for purposes of the safe harbor, except
for statements of historical fact.
The risk exposure of the Partnership in the various market
sectors traded by the commodity trading advisor is
quantified below in terms of Value at Risk. Due to the
mark-to-market accounting of the Partnership, any loss in
the fair value of the Partnership's open positions is
directly reflected in the earnings (realized or unrealized)
of the Partnership and cash flow (at least in the case of
exchange-traded contracts in which profits and losses on
open positions are settled daily through variation margin).
Exchange maintenance margin requirements have been used by
the Partnership as the measure of its Value at Risk.
Maintenance margin requirements are set by exchanges to
equal or exceed the maximum losses reasonably expected to
be incurred in the fair value of any given contract in 95%-
99% of any one-day intervals. The maintenance margin levels
are established by dealers and exchanges using historical
price studies as well as an assessment of current market
volatility (including the implied volatility of the options
on a given futures contract) and economic fundamentals to
provide a probabilistic estimate of the maximum expected
near-term one-day price fluctuation. Maintenance margin
has been used rather than the more generally available
initial margin, because initial margin includes a credit
risk component which is not relevant to Value at Risk.
In the case of market sensitive instruments which are not
exchange traded (almost exclusively currencies in the case
of the Partnership), the margin requirements for the
equivalent futures positions have been used as Value at
Risk. In those rare cases in which a futures-equivalent
margin is not available, margins of the dealers have been
used.
In quantifying the Value at Risk of the Partnership, 100%
positive correlation in the different positions held in
each market risk category has been assumed. Consequently,
the margin requirements applicable to the open contracts
have simply been aggregated to determine the aggregate
Value at Risk for each trading category. The
diversification effects resulting from the fact that the
positions of the Partnership are rarely, if ever, 100%
positively correlated have not been reflected.
The Trading Value at Risk in Different Market Sectors of
the Partnership
The following table indicates the trading Value at Risk
associated with the open positions of the Partnership by
market category as of December 31, 2007. All open position
trading risk exposures of the Partnership have been
included in calculating the figures set forth below. As of
December 31, 2007, the total capitalization of the
Partnership was approximately $11,693,007, all in Class A
shares. .
December 31, 2007
of Total
Market Sector Value at Risk %
Capitalization
Commodities 0.16 1.39%
Energies 0.32 2.73%
Financial Stock Indices 0.03
0.28%
Interest Rates 0.17 1.45%
Metals 0.04 0.37%
Currencies 0.14 1.23%
Total 0.87 million 7.43%
Material Limitations on Value at Risk as an Assessment of
Market
Risk
The face value of the market sector instruments held by the
Partnership is typically many times the applicable
maintenance margin requirement (maintenance margin
requirements generally ranging between approximately 1% and
10% of contract face value) as well as many times the
capitalization of the Partnership. The magnitude of the
open positions of the Partnership creates a "risk of ruin"
not typically found in most other investment vehicles.
Because of the size of its positions, certain market
conditions that are unusual, but historically recurring
from time to time, could cause the Partnership to incur
severe losses over a short period of time. The foregoing
Value at Risk table, as well as the past performance of the
Partnership, give no indication of this "risk of ruin."
Non-Trading Risk
The Partnership has non-trading market risk on its foreign
cash balances not needed for margin. However, these
balances (as well as any market risk they represent) are
immaterial.
The Partnership holds a portion of its assets in cash on
deposit with Newedge Financial Inc. ("Newedge") with
substantially all of the remainder on deposit with Horizon
Cash Management, LLC. (Horizon) in short term, highly
liquid investments. The Partnership has cash flow risk on
these cash deposits because if interest
rates decline, so will the interest paid out by Newedge at
the 91-day
Treasury bill rate. In addition, should short term
interest rates decline, so will the interest earnings for
assets on deposit with Horizon. The Partnership assets
managed by Horizon are deposited in an account in the
custodial department of the Northern Trust Company, and
invested in U.S. government securities and other interest-
bearing obligations at the direction of Horizon. Horizon
is responsible for the investment management of the assets
of the Partnership not deposited with Newedge as margin
monies or held in Partnership operating accounts. Horizon
is registered with the Securities and Exchange Commission
(SEC) as an investment adviser. Horizon may invest in U.S.
government securities and other instruments as permitted by
the agreement with the Partnership. Horizon receives an
annual fee of 0.25% payable monthly on the assets it
manages. However, Horizon only receives its service fee if
the accrued monthly interest income earned on the assets of
the Partnership managed by Horizon exceeds the 91-day U.S.
Treasury Bill rate. As of December 31, 2007, the
Partnership had approximately $11.6 million in cash
on deposit with Newedge and Horizon.
Qualitative Disclosures Regarding Primary Trading Risk
Exposures
The following qualitative disclosures regarding the market
risk exposures of the Partnership, except for (i) those
disclosures that are statements of historical fact and (ii)
the descriptions of how the Partnership and the Trading
Advisor manage the primary market risk exposures of the
Partnership, constitute forward-looking statements within
the meaning of Section 27A of the Securities Act and
Section 21E of the Securities Exchange Act. The primary
market risk exposures of the Partnership as well as the
strategies used and to be used by the Trading Advisor for
managing such exposures are subject to numerous
uncertainties, contingencies and risks, any one of which
could cause the actual results of the risk controls of the
Partnership to differ materially from the objectives of
such strategies. Government interventions, defaults and
expropriations, illiquid markets, the emergence of dominant
fundamental factors, political upheavals, changes in
historical price relationships, an influx of new market
participants, increased regulation and many other factors
could result in material losses as well as in material
changes to the risk exposures and the risk management
strategies of the Partnership. There can be no assurance
that the current market exposure and/or risk management
strategies of the Partnership will not change materially or
that any such strategies will be effective in either the
short- or long-term. Investors must be prepared to lose
all or substantially all of their investment in the
Partnership.
The following were the primary trading risk exposures of
the Partnership as of December 31,2007, by market sector.
Interest Rates. Interest rate risk is a major market
exposure of the Partnership. Interest rate movements
directly affect the price of the sovereign bond positions
held by the Partnership and indirectly the value of its
stock index and currency positions. Interest rate
movements in one country as well as relative interest rate
movements between countries materially impact the
profitability of the Partnership. The primary interest
rate exposure of the Partnership is to interest rate
fluctuations in the United States and the other G-7
countries. However, the Partnership also takes positions
in the government debt of smaller nations - e.g.,
Australia. The General Partner anticipates that G-7
interest rates will remain the primary market exposure of
the Partnership for the foreseeable future. The changes in
interest rates which have the most effect on the
Partnership are changes in long-term, as opposed to short-
term, rates. Most of the speculative positions held by the
Partnership are in medium to long-term instruments.
However, since February 2000, the JWH program added a
European short rate, the Euribor, which is closely tied to
the actions of the European Central Bank. This was done to
add short term interest rate diversification.
Currencies. The currency exposure of the Partnership is to
exchange rate fluctuations, primarily fluctuations which
disrupt historical pricing relationships between different
currencies and currency pairs. These fluctuations are
influenced by interest rate changes as well as political
and general economic conditions. The Partnership trades in
a large number of currencies, including cross-rates - i.e.,
positions between two currencies other than the U.S.
dollar. However, the Partnership's major exposures have
typically been in the dollar/yen, dollar/Euro, dollar/Swiss
franc, dollar/Australian dollar and dollar/pound positions.
The General Partner does not anticipate that the risk
profile of the Partnership's currency sector will change
significantly in the future. The currency trading Value at
Risk figure includes foreign margin amounts converted into
U.S. dollars with an incremental adjustment to reflect the
exchange rate risk inherent to the dollar-based Partnership
in expressing Value at Risk in a functional currency other
than dollars.
Stock Indices. The primary equity exposure of the
Partnership is to equity price risk in the G-7 countries.
The stock index futures traded by the Partnership are by
law limited to futures on broadly based indices. Ordinarily
the primary exposures are in the FTSE (England), Nikkei
(Japan) and All Ordinaries (Australia) stock indices.
However, in February 2000, the JWH firm added the German
DAX Index Futures. The General Partner anticipates little
trading in non-G-7 stock indices. The Partnership is
primarily exposed to the risk of adverse price trends or
static markets in the major U.S., European and Japanese
indices. (Static markets would not cause major market
changes but would make it difficult for the Partnership to
avoid being "whipsawed" into numerous small losses.)
Metals. The metals market exposure of the Partnership is
to fluctuations in the price of gold and silver (precious
metals) and the base metals of copper, aluminum, zinc, and
nickel at JWH.
Commodities. The exposure to commodities of the
Partnership from JWH GAP includes corn, soybeans, soybean
meal, soybean oil, wheat, and the softs of coffee, cotton,
and sugar, as well as a full complement of other
agricultural commodities.
Energy. The exposure of the Partnership to energy
contracts in the JWH GAP is heating oil, unleaded gasoline,
crude oil natural gas and others.
Qualitative Disclosures Regarding Non-Trading Risk Exposure
The following were the only non-trading risk exposures of
the Partnership as of December 31, 2007.
Foreign Currency Balances. The primary foreign currency
balances of the Partnership are in Japanese yen, Euros,
British pounds and Australian dollars. The Partnership
controls the non-trading risk of these balances by
regularly converting these balances back into dollars (no
less frequently than twice a month).
Cash Position. The Partnership holds a portion of its
assets in cash at CFI and CFS. 95% of these assets earn
interest at the average rate paid on 91-day U.S. Treasury
Bills purchased during the month. Substantially all of
remainder is held at Horizon in short term liquid
investments.
Qualitative Disclosures Regarding Means of Managing Risk
Exposure
The General Partner monitors the performance of the
Partnership and the concentration of its open positions,
and consults with the commodity trading advisor concerning
the overall risk profile of the Partnership. If the
General Partner felt it necessary to do so, the General
Partner could require the commodity trading advisor to
close out individual positions as well as entire programs
traded on behalf of the Partnership. However, any such
intervention would be a highly unusual event. The General
Partner primarily relies on the commodity trading advisor's
own risk control policies while maintaining a general
supervisory overview of the Partnership's market risk
exposures.
Risk Management
JWH attempts to control risk in all aspects of the
investment Process - from confirmation of a trend to
determining the optimal exposure in a given market, and to
money management issues such as the startup or upgrade of
investor accounts. JWH double checks the accuracy of
market data, and will not trade a market without multiple
price sources for analytical input. In constructing a
portfolio, JWH seeks to control overall risk as well as the
risk of any one position, and JWH trades only markets that
have been identified as having positive performance
characteristics. Trading discipline requires plans for the
exit of a market as well as for entry. JWH factors the
point of exit into the decision to enter (stop loss). The
size of the JWH positions in a particular market is not a
matter of how large a return can be generated but of how
much risk it is willing to take relative to that expected
return.
To attempt to reduce the risk of volatility while
maintaining the potential for excellent performance,
proprietary research is conducted on an ongoing basis to
refine the JWH investment strategies. Research may suggest
substitution of alternative investment methodologies with
respect to particular contracts; this may occur, for
example, when the testing of a new methodology has
indicated that its use might have resulted in different
historical performance. In addition, risk management
research and analysis may suggest modifications regarding
the relative weighting among various contracts, the
addition or deletion of particular contracts from a
program, or a change in position size in relation to
account equity. The weighting of capital committed to
various markets in the investment programs is dynamic, and
JWH may vary the weighting at its discretion as market
conditions, liquidity, position limit considerations and
other factors warrant.
JWH may determine that risks arise when markets are
illiquid or erratic, such as may occur cyclically during
holiday seasons, or on the basis of irregularly occurring
market events. In such cases, JWH at its sole discretion
may override computer-generated signals and may at times
use discretion in the application of its quantitative
models, which may affect performance positively or
negatively.
Adjustments in position size in relation to account equity
have been and continue to be an integral part of the JWH
investment strategy. At its discretion, JWH may adjust the
size of a position in relation to equity in certain markets
or entire programs. Such adjustments may be made at
certain times for some programs but not for others.
Factors which may affect the decision to adjust the size of
a position in relation to account equity include ongoing
research, program volatility, assessments of current market
volatility and risk exposure, subjective judgment, and
evaluation of these and other general market conditions.
Item 8. Financial Statements and Supplementary Data
Reference is made to the financial statements and the notes
thereto attached to this report.
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure
None.
Item 9A. Controls and Procedures
As of December 31, 2007, the General Partner carried out an
evaluation, under the supervision and with the
participation of the General Partner's management,
including its principal executive officer and principal
financial officer, of the effectiveness of the design and
operation of the Partnership's disclosure controls and
procedures as contemplated by Rule 13a-15 of the Securities
Exchange Act of 1934, as amended. Based on and as of the
date of that evaluation, the General Partner's principal
executive officer and principal financial officer concluded
that the Partnership's disclosure controls and procedures
are effective, in all material respects, in timely alerting
him to material information relating to the Partnership
required to be included in the reports required to be filed
or submitted by the Partnership with the SEC under the
Exchange Act.
There was no change in the Partnership's internal control
over financial reporting in the 12 months ended December
31, 2007 that has materially affected, or is reasonably
likely to materially affect, the Partnership's internal
control over financial reporting.
Item 9B. Other Information.
None
Part III
Item 10. Directors and Executive Officers of the
Registrant.
The General Partner, Everest Asset Management, Inc., is the
sole General Partner and commodity pool operator of the
Partnership. It is a Delaware corporation incorporated in
1987, is and has been registered with the CFTC as a
commodity pool operator since July 1, 1988 and is and has
been a member of the National Futures Association since
that date. Its address is 1100 North 4th Street, Suite 143,
Fairfield, Iowa 52556 and its telephone number at such
location is (641) 472-5500.
The officers and directors of the General Partner as of
December 31, 2007 are listed below:
Peter Lamoureux. Mr. Lamoureux, (born in 1950), has
been President, Treasurer and Secretary of the General
Partner since November 1996. He joined the General Partner
and Capital Management Partners, Inc., a selling agent and
affiliate of the Partnership at that time, in 1991 and has
had primary responsibility for Partnership syndication
since October 1994. Prior to joining the General Partner,
Mr. Lamoureux was Manager of Refined Products with United
Fuels International, Inc., an energy brokerage firm in
Waltham, Massachusetts. He received his B.S. in Education
from Rhode Island College, R.I.
The General Partner does not trade commodities for its own
account but its principals may. Because of their
confidential nature, records of such trading will not be
available to Limited Partners for inspection.
There have been no material criminal, civil or
administrative actions during the preceding five years or
ever against the General Partner or its principal.
Audit Committee Financial Expert
The Board of Directors of Everest Asset Management, Inc.
has determined that Peter Lamoureux, President, Treasurer
and Secretary of the General Partner, qualifies as an audit
committee financial expert in accordance with the
applicable rules and regulations of the U.S. Securities and
Exchange Commission. Mr. Lamoureux is not "independent" as
that term is defined in Item 7(a)(3)(iv) of Schedule 14A
under the Exchange Act.
Code of Ethics
The General Partner has adopted a code of ethics for its
chief executive officer and persons performing similar
functions. A copy of the General Partner's code of ethics
may be obtained at no charge by written request to Everest
Asset Management, Inc., 1100 North 4th Street, Suite 143,
Fairfield, Iowa 52356 or by calling 641-472-5500.
Item 11. Executive Compensation.
The Partnership has no directors or executive officers. As
a limited partnership, the business of the Partnership is
managed by its General Partner which is responsible for the
administration of the business affairs of the Partnership
and receives the compensation described in Item 1
"Business" hereof. The officers and directors of the
General Partner receive no compensation from the
Partnership for acting in their respective capacities with
the General Partner.
Item 12. Security Ownership of Certain Owners and
Management and Related Stockholder Matters.
(a) As of December 31, 2007 the no partners were
known to the Partnership to own beneficially more than 5%
of the outstanding Units:
(b)As of December 31, 2007, management ownership
was: none
(b)As of December 31, 2007, management ownership
was: none.
(c) As of December 31, 2007, no arrangements were
known to the Partnership, including no pledge by any person
of Units of the Partnership or shares of the General
Partner or the affiliates of the General Partners, such
that a change in control of the Partnership may occur at a
subsequent date.
Item 13. Certain Relationships and Related Transactions.
(a) None other than the compensation
arrangements described herein.
(b) None.
(c) None.
The Partnership filed Registration Statements on Form S-18
and Form 10, therefore this information is not required to
be included.
Item 14. Principal Accounting Fees and Services
Audit Fees
For the year ended December 31,2007 the aggregate fee
billed by Ryan and Juraska, Certified Public accountants,
for professional services rendered for the audit of the
financial statements included in this annual report was
$17,500 .
For the year ended December 31,2006 the aggregate fee
billed by Spicer Jeffries LLP for professional services
rendered for the audit of the financial statements included
in this annual report and review of the quarterly 10Q's for
the year ended were $37,000.
Audit Related Fees
None.
Tax Fees
For the year ended December 31, 2007 the aggregate fees
billed by Ryan and Juraska, Certified Public accountants,
for federal and state tax return preparation totaled
$20,000.
For the year ended December 31, 2006 the aggregate fees
billed by Spicer Jeffries LLP for federal and state tax
return preparation totaled $28,000.
All Other Fees
None.
Part IV
Item 15. Exhibits, Financial Statement, Schedules.
(a) The following documents are included herein:
(1) Financial Statements:
a. Report of Independent Registered
Public Accounting Firm. (Independent
Auditor's Report)
b. Statements of Financial Condition, December 31, 2007,
2006 and 2005.
c. Schedule of Investments, December 31, 2007
d. Schedule of Investments, December 31, 2006
e. Statements of Operations, Years Ended December 31, 2007
2006 and 2005 .
f. Statements of Changes in Partners' Capital, Years Ended
December 31, 2007, 2006 and 2005 .
g. Statements of Cash Flows, Years Ended December 31, 2007,
2006 and 2005.
Notes to Financial Statements.
Acknowledgment
(2) All financial statement schedules have been omitted
because the information required by the schedules is not
applicable, or because the information required is
contained in the financial statements included herein or
the notes thereto.
(3) Exhibits:
See the Index to Exhibits annexed hereto.
See form 8-K filed 10.20.2005
See form 8-K filed 11.06.2006
See form 8-K filed 8.14.2007
See form 8-Ka filed 9.25.2007
Exhibits:
See The Index to Exhibits annexed hereto.
(c) Financial Statement Schedules
None.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Partnership has duly
caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Date: March 29, 2008 The Everest Fund, L.P.
By: Everest Asset
Management, Inc.
(General Partner)
By: /s/ Peter Lamoureux
Peter Lamoureux, President
Secretary, Treasurer, and
Director
Pursuant to the requirements of the Securities Exchange Act
of 1934, this report has been signed below by the following
persons on behalf of the Partnership and in the capacities
and on the date indicated.
Date: March 29, 2008
By: /s/ Peter Lamoureux
Peter Lamoureux, President,
Secretary, Treasurer, and
Director
Index to Exhibits:
Exhibit
No. Description
3.4 Amended and Restated Agreement of Limited
Partnership
dated as of May 1, 1995.
Advisory Contract between the Partnership, the General
Partner and John W. Henry & Company, Inc. dated
December 1, 1990.
10.6 Amendment to Advisory Contract between the
Partnership,
the General Partner and John W. Henry & Company,
Inc.
dated April 1, 1995.
10.9 Certificate of Limited Partnership for Everest
Futures
Fund II L.P. dated March 15, 1996.
Limited Partnership Agreement for Everest Futures Fund
II L.P. dated as of March 29, 1996.
Confidential Private Placement Memorandum and Disclosure
Document dated August 21, 1996.
Notes to the Exhibits:
Exhibits 3.4, 10.5, 10.6, 10.9, 10.10 and 28.1 are
incorporated by reference to the Partnership's Form 10
accepted on September 19, 1996.
The Exhibits referenced above bear the exhibit numbers
corresponding to those indicated in the Partnership's
Registration Statements.
Number of Attached Exhibits
None.
Form 8-K Date: October 20, 2005
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
THE EVEREST FUND, L.P.
Iowa 0-17555 42-1318186
1100 North 4th Street
Suite 143
Fairfield, Iowa 52556 (641) 472-5500
Item 8.01 Other Events.
On October 13, 2005, Refco Inc. ( Refco ), the parent
company of Refco LLC and Refco Capital Markets, Ltd.
( RCM ) the futures commission merchant and foreign
currency broker, respectively, for The Everest Fund, L.P.
(the Fund ), announced that liquidity within RCM was no
longer sufficient to continue operations and that it had
imposed a 15 day moratorium on all of its activities to
protect the value of that business. Subsequently, Refco and
certain of its subsidiaries, including RCM, filed for
bankruptcy protection. Attached as Exhibit 99.1 to this
Form 8-K, and incorporated herein by reference, is a Letter
to Limited Partners dated October 20, 2005 discussing these
events that was
distributed by the Fund on October 20, 2005.
99.1 Letter to Limited Partners dated October 20,
2005
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 hereunto duly
authorized.
Date: October 20, 2005
THE EVEREST FUND, L.P.
By: Everest Asset Management, Inc.,
General Partner
By: /s/ Peter Lamoureux
Peter Lamoureux
President, Secretary, Treasurer and Director
FORM 8-K Date: November 6, 2006
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
Date of Report (Date of earliest event reported): October
31, 2006
THE EVEREST FUND, L.P.
Iowa 0-17555 42-1318186
1100 North 4th Street
Suite 143
Fairfield, Iowa 52556) (641) 472-5500
Item 8.01 Other Events.
On September 14, 2006, Refco, Inc. and all of its
subsidiaries and affiliates who are the Debtors in the
Bankruptcy Court proceeding filed a plan under 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' super majority' of creditors at the RCM level. The
Disclosure Statement was the subject of a hearing before
the Bankruptcy Court on October 16, 2006, at which time
objections were heard. The Plan is slated to be confirmed
by the Bankruptcy Court on
or before December 15, 2006, and it would then become
effective on or before December 31, 2006 (the "Effective
Date"). Although Everest is hopeful that distributions
will be made on an expedited basis, a timetable for
distributions has yet to be released. The processing of
claims and the objections to claims, which as of the date
hereof have not been completed, could impact the timeliness
of distributions. 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 filed with the Bankruptcy Court indicate
recoveries at
RCM for creditors like Everest who had margin money for the
purposes of foreign exchange trading at RCM will be in the
range of 37.5 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.
Based on the estimated recovery amounts contained in the
schedules of the Plan and Disclosure Document which the
Bankruptcy Court is being asked to approve, the General
Partner as of October 31, 2006 has reduced the value of the
Class AA and Class II assets to 40% of the amounts at which
such assets were valued as of October 17, 2005. As of
October 17,2005 the assets were valued at $7,482,331.68,
resulting in a write down of $4,489,399.01 and a remaining
asset balance of
$2,992,932.67. This write down is only an estimate at this
time and could be adjusted upward or downward in the
future. The write down estimate could be negatively
impacted by a number of things such as, but not limited to,
the Plan not being confirmed by the Court by December 15,
2006 or the allowed claims exceeding the amounts listed on
the schedules currently.
Looking beyond the initial recovery estimates described
above, there is the potential for further recoveries
through litigation efforts. A Litigation Trust is being
established and funded. A Litigation Trust Committee has
been formed and a Litigation Trustee is being appointed to
pursue claims against a targeted list of parties who may
have acted fraudulently or with negligence in the conduct
of Refco business. We have not included litigation
recoveries, if any, in the write down, because the success
of such actions cannot be estimated at this time. No
assurances can be made that there will be any further
recoveries for Everest from these efforts.
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 hereunto duly
authorized.
Date: November 6, 2006
THE EVEREST FUND, L.P.
By: Everest Asset Management, Inc.,
General Partner
By: /s/ Peter Lamoureux
Peter Lamoureux
President, Secretary, Treasurer and Director
Form 8-K Date: August 14, 2007
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
Date of Report (Date of earliest event reported): August
14, 2007
THE EVEREST FUND, L.P.
(Exact name of registrant as specified in its
charter)
Iowa 0-17555 42-
1318186
(State or other jurisdiction of incorporation)(Commission
file number) (IRS Employer
Identification No.)
1100 North 4th Street
Suite 143
Fairfield, Iowa 52556
(Address of principal executive offices)
Registrant's telephone number, including area code: (641)
472-5500
Check the appropriate box below if the Form 8-K filing
is
intended to
simultaneously satisfy the filing obligation of the
registrant under
any of the
following provisions:
Written communications pursuant to Rule 425 under the
Securities
Act (17 CFR 230.425)
Soliciting material pursuant to Rule 14a-12 under the
Securities
Act (17 CFR 240.14a-12)
Pre-commencement communications pursuant to Rule 14d-
2(b) under
the Exchange Act (17 CFR 240.14d-2(b))
Pre-commencement communications pursuant to Rule 13e-
4(c) under
the Exchange Act (17 CFR 240.13e-4(c))
The Everest Fund, L.P. will be late filing the 2nd quarter
2007 10Q.
1. Due to last minute computer issues, the Fund will not be
able to
file 10Q by August 14 , 2007.
2. We expect to be able to file the 2nd quarter 2007 10Q on
or
before August 17, 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 hereunto duly authorized.
Date: August 14, 2007.
THE EVEREST FUND, L.P.
By: Everest Asset Management, Inc.,
General Partner
By: /s/ Peter Lamoureux
Peter Lamoureux
President, Secretary, Treasurer and Director
Form 8-Ka Date: September 25, 2007
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K AMENDMENT
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
Date of Report (Date of earliest event reported): September
25, 2007
THE EVEREST FUND, L.P.
(Exact name of registrant as specified in its
charter)
Iowa 0-17555
42-1318186
(State or other jurisdiction of incorporation)(Commission
file number) (IRS Employer
Identification No.)
1100 North 4th Street
Suite 143
Fairfield, Iowa 52556
(Address of principal executive offices)
Registrant's telephone number, including area code: (641)
472-5500
Check the appropriate box below if the Form 8-K filing
is intended to simultaneously satisfy the filing obligation of the
registrant under any of the following provisions:
Written communications pursuant to Rule 425 under the
Securities Act (17 CFR 230.425)
Soliciting material pursuant to Rule 14a-12 under the
Securities Act (17 CFR 240.14a-12)
Pre-commencement communications pursuant to Rule 14d-
2(b) under the Exchange Act (17 CFR 240.14d-2(b))
Pre-commencement communications pursuant to Rule 13e-
4(c) under the Exchange Act (17 CFR 240.13e-4(c))
On September 18, 2007, Spicer Jeffries LLP resigned as The
EverestFund, 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 tothe 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
ExchangeCommission 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 hereunto duly authorized.
Date: September 25, 2007.
THE EVEREST FUND, L.P.
By: Everest Asset Management, Inc.,
General Partner
By: /s/ Peter Lamoureux
Peter Lamoureux
President, Secretary, Treasurer and Director
Settlement of Refco receivebles
On December 14, 2007, Everest Asset Management, Inc.
received $1,912,484.00 from the sale of our Refco
receivable and in settlement of our claims at Refco. The
fund has increased the Class A units for each investor in
the fund by their pro rata share of the distribution.
Prior to the sale we had received distributions totaling
$2,761,336.98 out of our total claim of $7,482,331.66 or
approximately 36.69%. The claim has been sold for the
additional $1,912,484 bringing the total recovery to
$4,657,751.46 or 62.25%. The enclosed check is for the
benefit of investors who have redeemed.
I have worked toward recapturing this money for just over
two years. I have logged hundreds of hours of conference
calls, thousands of emails with spreadsheets and service of
court document attachments and made a number of trips to NY
city as a member of the Official Committee of Unsecured
Creditors of Refco, Inc. I believe that I have made a
difference in recoveries, while at the same time being able
to keep investors well informed and keep the Fund's legal
costs at a minimum.
I believe, at this time, this is the best settlement result
we could achieve for the following reasons:
To my knowledge, this is the highest percent recovery yet
entered into for an FX unsecured claim such as ours, which
is solely at Refco Capital Markets, Ltd. (RCM).
The previous 36.69% recovery has one or two more
distributions yet to be made for approximately3-5 more
cents, (which are known to me and I have factored into our
settlement number) but that will essentially 'tap out' the
cash & securities that are available for FX unsecured
claims at RCM.
The future distributions will be based upon the success of
the litigation actions, and those could take between 1 and
5 years to resolve (although some quick settlements may
take place).
Settling now gives the money to you, the investors, so that
you may maximize the time value of your own money.
Settling now stops the clock on the legal and accounting
expenses. If we can distribute all the money in December
2007, we avoid audit and tax return costs for 2008 for the
AA and II units of the Fund. We are making our best efforts
to get the money to you this month.
The disadvantage of settling at this time is that we have
no way of knowing whether or not the long term litigation
results, if any, will yield substantially higher than the
time value of money and cost savings we get from settling
now.
As most of you know, white collar crimes have been alleged
against former Refco principals, which at the time were not
detected by Refco's auditors or the underwriters of Refco's
IPO. These situations are difficult to avoid and not
easily resolved. In the end, I hope that all investors will
appreciate the effort that has been made to recover these
assets.
Yours truly,
Peter Lamoureux
President
EVEREST FUND, L.P.
(An Iowa Limited Partnership)
ACKNOWLEDGEMENT
EVEREST FUND, L.P.
(An Iowa Limited Partnership)
FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2007,
2006 AND 2005
EVEREST FUND, L.P.
(An Iowa Limited Partnership)
TABLE OF CONTENTS
Page
----
Report of Independent Registered Public Accounting Firm 2
Financial Statements and Schedules:
Statements of Financial Condition, December 31, 2007 and 2006 3
Condensed Schedule of Investments, December 31, 2007 4
Condensed Schedule of Investments, December 31, 2006 5
Statements of Operations, Years Ended December 31, 2007, 2006 and 2005 6
Statements of Changes in Partners' Capital, Years Ended December
31, 2007, 2006 and 2005 7
Statements of Cash flows, Years Ended December 31, 2007, 2006 and 2005 8
Notes to Financial Statements 9-15
Acknowledgement 16
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Partners of Everest Fund, L.P.
We have audited the accompanying statements of financial condition
of The Everest Fund, L.P.(an Iowa limited Partnership), including
the condensed schedule of investments, as of December 31, 2007, and
the related statements of operations, changes in partners capital
and cash flows for the year ended December 31, 2007. These financial
statements are the responsibility of the Partnership s management.
Our responsibility is to express an opinion on these financial statements
based on our audit. The financial statements for the year ended December
31, 2006 were audited by another auditor whose report dated March 15, 2007
expressed an unqualified opinion on those financial statements.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we
plan and perform the audits to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An audit
includes consideration of internal control over financial reporting as a
basis for designing audit procedures that are appropriate in the circumstances,
but not for the purpose of expressing an opinion on the effectiveness of the
Partnership's internal control over financial reporting. Accordingly, we
express no such opinion. An audit also includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of The Everest Fund, L.P.
as of December 31, 2007, and the results of its operations for the year ended,
in conformity with accounting principles generally accepted in the United
States of America.
Ryan & Juraska
Chicago, Illinois
March 24, 2008
EVEREST FUND, L.P.
(An Iowa Limited Partnership)
STATEMENTS OF FINANCIAL CONDITION
DECEMBER 31, 2007 DECEMBER 31, 2006
----------------- -----------------
ASSETS
Cash and cash equivalents $10,441,634 $13,513,720
Equity in commodity trading accounts:
Cash 1,206,629 4,204,891
Net unrealized trading gains on open contracts 282,372 328,654
Receivable from Refco Capital Markets, Ltd. (Note 1) 1,627,407
Interest receivable 45,406 94,086
----------- -----------
TOTAL ASSETS $11,976,041 $19,768,758
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
LIABILITIES:
Redemptions payable $ 125,610 $ 898,266
General partner management fee payable 50,840 72,484
Advisor's management fee payable 13,855 31,286
Accrued expenses 92,729 55,424
----------- -----------
TOTAL LIABILITIES 283,034 1,057,460
----------- -----------
PARTNERS' CAPITAL
Limited partners, A Shares (4,793.613 and 7,712.69 units
outstanding) 11,693,007 14,785,460
Limited partners, I Shares (0 and 932.01 units
outstanding) 0 1,930,473
Limited partners, AA Shares (0 and 1,786.21 units
outstanding) 0 1,572,866
Limited partners, II Shares (0 and 193.97 units
outstanding) 0 202,499
----------- -----------
TOTAL PARTNERS' CAPITAL 11,693,007 18,711,298
----------- -----------
TOTAL LIABILITIES AND PARTNERS'
CAPITAL $11,976,041 $19,768,758
=========== ===========
The accompanying notes are an integral part of these statements.
3
EVEREST FUND, L.P.
(AN IOWA LIMITED PARTNERSHIP)
CONDENSED SCHEDULE OF INVESTMENTS
DECEMBER 31, 2007
NUMBER OF MARKET VALUE % OF PARTNERS'
EXPIRATION DATES CONTRACTS (OTE) CAPITAL
---------------- --------- ------------ --------------
LONG POSITIONS:
FUTURES POSITIONS
Interest rates Mar 08 59 $ (53,980) -0.46%
Metals Feb 08 -Mar 08 22 4,000 0.03%
Energy Mar 08 -Apr 08 50 184,569 1.58%
Agriculture Mar 08 189 192,168 1.64%
Currencies Dec 08 30 26,250 -0.22%
----------- -----
353,006 -3.02%
FORWARD POSITIONS
Currencies Mar 08 53,396 0.46%
----------- -----
Total long positions 406,403 3.48%
----------- -----
SHORT POSITIONS:
FUTURES POSITIONS
Indecies Mar 08 49 (20,980) -0.18%
Interest rates Mar 08 - Sep 08 9 (1,468) -0.01%
Energy Mar 08 10 9,250 0.08%
----------- -----
(13,198) -0.11%
FORWARD POSITIONS
Currencies Mar 08 (110,833) -0.95%
----------- -----
Total short positions (124,030) -1.06%
----------- -----
TOTAL OPEN CONTRACTS 282,372 2.42%
CASH AND CASH EQUIVALENTS 10,441,634 89.30%
CASH ON DEPOSIT WITH BROKERS 1,206,629 10.32%
LESS LIABILITIES IN EXCESS OF OTHER ASSETS (237,628) -2.03%
----------- -----
NET ASSETS $11,693,007 100%
=========== =====
The accompanying notes are an integral part of this statement.
4
EVEREST FUND, L.P.
(AN IOWA LIMITED PARTNERSHIP)
CONDENSED SCHEDULE OF INVESTMENTS
DECEMBER 31, 2006
NUMBER OF MARKET VALUE % OF PARTNERS'
EXPIRATION DATES CONTRACTS (OTE) CAPITAL
---------------- --------- ------------ --------------
LONG POSITIONS:
FUTURES POSITIONS
Interest rates Mar 07 307 $ (446,882) -2.39%
Agriculture Mar 07 123 148,138 0.79%
Currencies Dec 07 66 (24,750) -0.13%
Indices Mar 07 56 108,409 0.58%
----------- -----
(215,085) -1.15%
FORWARD POSITIONS
Currencies Mar 07 54,606 0.29%
----------- -----
Total long positions (160,479) -0.86%
----------- -----
SHORT POSITIONS:
FUTURES POSITIONS
Interest rates Mar 07 332 111,773 0.60%
Metals Feb 07 -Mar 07 67 (84,040) -0.45%
Energy Mar 07 - Apr 07 79 349,382 1.87%
Agriculture Mar 07 65 11,887 0.06%
----------- -----
389,002 2.08%
FORWARD POSITIONS
Currencies Mar 07 100,131 0.54%
----------- -----
Total short positions 489,133 2.62%
----------- -----
TOTAL OPEN CONTRACTS 328,654 1.56%
CASH AND CASH EQUIVALENTS 13,513,720 72.22%
CASH ON DEPOSIT WITH BROKERS 4,204,891 22.47%
LESS LIABILITIES IN EXCESS OF OTHER ASSETS 664,033 3.55%
----------- -----
NET ASSETS $18,711,298 100%
=========== =====
The accompanying notes are an integral part of this statement.
5
EVEREST FUND, L.P.
(AN IOWA LIMITED PARTNERSHIP)
STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 2007, 2006 AND 2005
2007 2006 2005
----------- ---------- -----------
TRADING INCOME (LOSS)
Net realized trading gain (loss)
on closed contracts $2,590,992 $(2,229,567) $1,646,959
Change in net unrealized trading gain
(loss) on open contracts (46,282) 296,734 (2,154,977)
Net foreign currency translation gain (loss) 18,975 18,636 (73,598)
Brokerage Commissions (126,081) (142,742) (241,988)
----------- ---------- -----------
NET TRADING INCOME (LOSS) 2,437,604 (2,056,939) (823,604)
Gain on Sale of Refco Receivable 1,664,819
Interest income, net of cash management fees 645,478 939,630 988,314
----------- ---------- -----------
TOTAL INCOME 4,747,901 (1,117,309) 164,710
----------- ---------- -----------
EXPENSES:
General partner management fees 562,446 1,026,037 1,686,472
Advisor Management fees 255,844 468,353 684,696
Advisor Incentive fees -- -- --
Administrative expenses 164,133 105,253 95,167
Bad debt expense 0 4,489,400 --
------------ ---------- -----------
TOTAL EXPENSES $ 982,425 $6,089,043 $ 2,466,335
----------- ---------- -----------
NET INCOME $ 3,765,477 $(7,206,352) $(2,301,625)
=========== ========== ===========
NET INCOME (LOSS) PER UNIT OF PARTNERSHIP INTEREST
A SHARES, OUTSTANDING ENTIRE PERIOD $ 522.26 $ (321.07) $(193.95)
=========== ========== ===========
NET INCOME (LOSS) PER UNIT OF PARTNERSHIP INTEREST
I SHARES, OUTSTANDING ENTIRE PERIOD $ 630.86 $ (270.57) $(122.38)
=========== ========== ===========
NET LOSS PER UNIT OF PARTNERSHIP INTEREST
AA SHARES, OUTSTANDING SINCE OCTOBER 31, 2005 $2,703.69 $(1,342.55) $(7.77)
=========== ========== ===========
NET LOSS PER UNIT OF PARTNERSHIP INTEREST
II SHARES, OUTSTANDING SINCE OCTOBER 31, 2005 $2,812.13 $(1,396.40) $(8.08)
=========== ========== ===========
The accompanying notes are an integral part of these statements.
6
EVEREST FUND, L.P.
(An Iowa Limited Partnership)
STATEMENT OF CHANGES IN PARTNERS' CAPITAL
YEARS ENDED DECEMBER 31, 2007, 2006, 2005
GENERAL LIMITED GENERAL
UNITS LIMITED PTRS PTR UNITS PTRS PTR
A SHARES A SHARES A SHARES I SHARES I SHARES I SHARES
---------- ------------ -------- -------- ---------- --------
BALANCES, December 31, 2004 13,715.42 33,356,576 -- 1,198.26 2,922,116 30,360
Additional Units Sold 2,232.26 5,071,517 -- 18.31 41,315 --
Redemptions (2,722.22) (6,248,050) -- (117.93) (252,522) (27,328)
Transfers Between Classes (3,345.66) (7,869,117) -- (0.67) (13,214) --
Less Offering Costs -- (50,213) -- -- (2,891) (5)
Net Loss -- (2,148,761) -- -- (123,820) (3,027)
---------- ------------ -------- -------- ---------- --------
BALANCES, December 31, 2005 9,879.80 $ 22,111,952 -- 1,097.97 $2,570,984 --
========== ============ ======== ======== ========== ========
Additional Units Sold 573.14 1,239,000 -- 32.17 75,000 --
Redemptions (3,139.34) (6,866,488) -- (246.40) (554,414) --
Transfers Between Classes 399.09 765,060 -- 48.40 100,236 --
Less Offering Costs -- (12,268) -- -- (2,202) --
Net profit (loss) -- (2,451,796) -- -- (259,131) --
---------- ------------ -------- -------- ---------- --------
BALANCES, December 31, 2006 7,712.69 $ 14,785,460 -- 932.14 $1,930,473 --
========== ============ ======== ======== ========== ========
Additional Units Sold 25.51 50,000 -- 23.78 50,000 --
Redemptions (3,520.97) (6,375,499) -- (993.87) (2,197,979) --
Transfers Between Classes 576.38 1,235,725 -- 37.95 75,760 --
Less Offering Costs -- (495) -- -- (1,448) --
Net profit (loss) -- 1,997,816 -- -- 143,194) --
---------- ------------ -------- -------- ---------- --------
BALANCES, December 31, 2007 4,793.61 $ 11,693,007 -- 0.00 $0 --
========== ============ ======== ======== ========== ========
Net asset value per unit,
January 1, 2007 $ 1,917.03 $ 2,341.59
Net profit (loss) per unit 522.26 (270.57)
------------ ----------
Net asset value per unit
December 31, 2007 $ 2,439.29 $ 2,071.02
============= ==========
UNITS LIMITED UNITS LIMITED
AA PTRS AA II PTRS II
SHARES SHARES SHARES SHARES TOTAL
-------- ---------- ------ --------- ------------
-- -- -- -- 36,309,052
BALANCES, December 31, 2004 -- -- -- -- 5,112,832
Additional Units Sold -- -- -- -- (6,527,899)
Redemptions 3,008.60 7,082,398 326.71 799,934 --
Transfers Between Classes -- -- -- -- (53,109)
Less Offering Costs -- (23,377) -- (2,640) (2,301,625)
Net Loss -------- ---------- ------ --------- ------------
BALANCES, December 31, 2005 3,008.60 $7,059,021 326.71 $ 797,294 $ 32,539,251
Additional Units Sold -- -- -- -- 1,314,000
Redemptions (460.01) (461,886) (36.73) (38,343) (7,921,131)
Transfers Between Classes (762.22) (765,060) (96.01) (100,236) --
Less Offering Costs -- -- -- -- (14,470)
Net Loss -- (4,039,209) -- (456,216) (7,206,352)
-------- ---------- ------ --------- ------------
BALANCES, December 31, 2006 1,786.21 $1,792,866 193.97 $ 202,499 $ 18,711,298
Additional Units Sold -- -- -- -- 100,000
Redemptions (1,066.54) (2,016,751) (121.11) (291,597) (10,881,826)
Transfers Between Classes (719.67) (1,235,725) (72.86) (75,760) --
Less Offering Costs -- -- -- -- (1,943)
Net Loss -- 1,459,610 -- 164,858 3,765,478
-------- ---------- ------ --------- ------------
BALANCES, December 31, 2007 0.00 $0 0.00 $0 $ 11,693,007
======== ========== ====== ========= ============
Net asset value per unit,
January 1, 2007 $ 1,003.73 $1,043.98
Net profit (loss) per unit 2,703.69 2,812.13
---------- ---------
Net asset value per unit
December 31, 2007 $ 3,707.42 $3,856.11
========== =========
The accompanying notes are an integral part of these statements.
7
EVEREST FUND, L.P.
(An Iowa Limited Partnership)
STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 2007, 2006, AND 2005
JANUARY 1, 2007 JANUARY 1, 2006 JANUARY 1, 2005
THROUGH THROUGH THROUGH
DECEMBER 31, 2007 DECEMBER 31, 2006 DECEMBER 31,2005
----------------- ----------------- ----------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 3,765,478 $ (7,206,352) $ (2,301,625)
Adjustments to reconcile net income (loss) to net cash
Provided by(used in) operating activities:
Bad debt expense -- 4,489,400 --
Cash 2,998,261 (102,770) 5,788,203
Unrealized gain or loss on open commodity futures contracts 46,282 (296,734) 2,181,509
Decrease (increase) in interest receivable 48,680 (1,722) 30,495
Increase in receivable from Refco Capital Markets, Ltd. 1,627,407 1,365,526 (7,482,332)
(Decrease) increase in incentive fees payable -- -- (85,111)
(Decrease) increase in management fees payable (17,431) (17,175) (10,684)
Decrease in General partner management fees payable (21,644) (48,209) (20,758)
(Decrease) increase in other accrued expenses 37,306 (2,097) 10,200
------------ ------------ ------------
NET CASH USED IN OPERATING ACTIVITIES 8,484,340 (1,820,133) (1,890,103)
------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Redemption of partnership units (11,654,483) (7,449,420) (6,584,843)
Sale of partnership units, net 98,057 1,299,530 5,059,723
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES (11,556,762) (6,149,890) (1,525,120)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (3,072,086) (7,970,023) (3,415,223)
CASH AND CASH EQUIVALENTS, AT BEGINNING OF YEAR 13,513,720 21,483,743 24,898,966
CASH AND CASH EQUIVALENTS, AT END OF YEAR $10,441,634 $ 13,513,720 $21,483,743
The accompanying notes are an integral part of these statements
8
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
Everest Fund, L.P., formerly Everest Futures Fund, L.P. (an
Iowa Limited Partnership ), ( the Partnership ) is a limited
partnership organized in June 1988, under the Iowa Uniform
Limited Partnership Act (the Act ) for the purpose of engaging
in the speculative trading of commodity futures and options
thereon and forward contracts (collectively referred to as
Commodity Interests ). The sole General Partner of the
Partnership is Everest Asset Management, Inc. ( the General
Partner ).
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 net asset value (NAV) per unit, plus
an organization and offering cost reimbursement fee payable
to the General Partner, and an on going compensation fee equal
to 3% of the net asset value of Class A Units sold. The Class
A Units (retail shares) continue to be charged an initial 1%
Offering and Organization fee as a reduction to capital.
Effective June 4, 2004, the Partnership introduced a new share
category, Class I Units or Institutional Units which have an
ongoing Offering and Organization fee of 1/12 of 0.10% of the
NAV per unit (as defined) per month. The private placement
offering is continuing at a gross subscription price per unit
equal to net asset value per unit, plus an organization and
offering cost reimbursement to the General Partner, and an
on going compensation fee equal to 1% of the net asset value
of Class I Units sold.
Receivable from Refco Capital Markets, Ltd.
On October 13, 2005, Refco, Inc. ( Refco ) announced that
liquidity within one of its operating subsidiaries, Refco
Capital Markets, Ltd. ( RCM ), was no longer sufficient to
continue operations and that RCM was imposing a fifteen
day moratorium on all of its activities in an attempt to
protect the value of that business. RCM acted as the
Partnership s foreign currency broker at that time
and as of such date, approximately 20% of the
Partnership s assets were held on deposit in accounts
at RCM.
On October 17, 2005, Refco and certain subsidiaries filed
a bankruptcy petition in New York seeking protection from
creditors under Chapter 11 of the United States Bankruptcy
Code. RCM was included in this filing and as a result,
all of the dealings with RCM are subject to control by
the Bankruptcy Court. In connection with the bankruptcy,
the president of the General Partner was appointed to the
Official Creditors Committee on October 28, 2005. Based
on information provided to the Partnership by RCM, the
Partnership has cash and open trade equity in neutral
currency positions of approximately $7,500,000 remaining at RCM.
Due to the above, effective October 31, 2005, the Partnership
has created Classes AA and II of shares and transferred to
such classes the value of Partnership assets held in RCM as
of October 17, 2005, together with a reserve for the estimated
expenses of collection and related matters. The amount of such
assets which will become available to the Partnership, if any,
is dependent on several matters associated with the bankruptcy
of RCM. Depending on the disposition of these matters, the
final net asset value may differ materially from the preliminary
amounts which the Partnership has published since October
31, 2005. Redemptions of Classes AA and II are restricted
until the final net asset value can be determined. Subsequent
to October 31, 2005, redemptions and certain fees will only
be calculated and paid on the net asset value of Class A and
Class I units, thus segregating the assets held by RCM and
the reserve established in connection with the RCM legal proceedings.
NOTE 1- ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(continued)
Receivable from Refco Capital Markets, Ltd. (concluded)
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 Partnership has
received $1,365,526. That represents an amount equal to
approximately 18% 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. Based on the estimated recovery amounts that
have been put in front of the Bankruptcy Court, the
partnership s management believes that we will receive
additional distributions in 2007.
During the year ended December 31, 2007, the Partnership received
additional anticipated distributions in the Refco matter in the
amount of $1,379,747. This amount is equal to approximately 18%
of the original amount that was frozen in October 2005. On
December 14, 2007, the Partnership sold its claim of the
remaining Refco receivable and received an additional sum of
$1,912,484. This brings the total recovery from approximately
36.69% to 62.25% and ends the Refco recovery effort.
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 to 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 Per Unit of Partnership Interest
Net income per unit of partnership interest is the
difference between the net asset value per unit at
the beginning and end of each period.
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 in the statements
of operations.
10
NOTE 1- ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(concluded)
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.
NOTE 2- 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.
See note 3.
Subject to restrictions on the redemption of Series AA
and 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 the month end 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. The Partnership
will be dissolved on Decemeber 31, 2020 or upon the
occurrence of certain events, as specified in
the Limited Partnership agreement.
NOTE 3- 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, JWH began trading JWH Global
Analytics Program ( GAP ); Currency Strategic
Allocation Program ( CSAP ) and Worldwide
Bond Program ( WBP ) with a trading allocatio
n of $27 million.
Net brokerage commissions are recorded in the
statements of operations as a reduction of trading income.
11
NOTE 3- CONTRACTS AND AGREEMENTS
(concluded)
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. From May 2002 through October 2003, the
General Partner charged the Partnership a monthly
management fee of either 0.5104% or
0.5156%, depending on the total amount which the
Partnership had allocated to trading,
including notional funding. Prior to May 2002,
the General Partner charged the Partnership
a monthly management fee equal to 0.5052% of the
Partnership beginning-of-month net
asset value, as defined. Effective June 2004,
the General Partner charges the Partnership
a monthly management fee equal to 0.229% of the
Partnership s Class I beginning-of-month net asset
value. From the monthly management fee the General
Partner deducts the round turn trading costs and related
exchange fees(between $5.80 to $10.70 per round
turn trade on domestic exchanges, and higher
for foreign exchanges) and pays the selling
agents and certain other parties, if any, up
to 50% of the fee retained by the General Partner.
As of December 31, 2007 and 2006, JWH s allocation
was approximately $7 and $88 million , respectively.
The General Partner may replace or add trading
advisors at any time.
Brokerage Agreement
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. a
cquired 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 and 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 Fund s clearing broker,
Calyon Financial, Inc. merged with the clearing
broker Fimat, a subsidiary of Societe Generale.
The Merger created a new firm known as Newedge
and became effective January 2nd 2008.
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.
The Partnership has also entered into an investment
advisory agreement with Horizon Cash Management L.L.C. ( HCM ).
At December 31, 2007 and 2006 approximately 89% and 87%,
respectively of the partnership s capital were funds deposited
with a commercial bank and invested under the direction of HCM.
HCM 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 HCM exceeds the 91-day U.S. Treasury bill rate.
NOTE 4- FINANCIAL INSTRUMENTS, OFF-BALANCE SHEET RISKS AND CONTINGENCIES
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 ( The CEAct ) requires
an FCM to segregate all customer
transactions and assets from the FCM s
proprietary activities.
12
NOTE 4- FINANCIAL INSTRUMENTS, OFF-BALANCE SHEET RISKS AND CONTINGENCIES
(concluded)
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.
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.
13
NOTE 5- FINANCIAL HIGHLIGHTS
The following financial highlights show the
Partnership s financial performance for
the years ended December 31, 2007, 2006, and 2005.
This information has been derived from information
presented in the financial statements.
I SHARES A SHARES II SHARES AA SHARES
2007 2007 2007 2007
--------- --------- --------- ---------
PER UNIT OPERATING PERFORMANCE (1)
Total income $ 719.70 $ 669.70 $ 2,896.41 $ 2,784.72
Total expenses (88.84) (147.44) (84.28) (81.03)
--------- --------- --------- ---------
Net increase in net asset value 630.86 522.26 2,812.13 2,703.69
Net asset value, beginning of year 2,071.02 1,917.03 1,043.98 1,003.73
--------- --------- --------- ---------
Net asset value, end of year
or before final redemption $2,701.88 $2,439.29 $3,856.11 $3,707.42
========= ========= ========= =========
SELECTED FINANCIAL STATISTICS AND RATIOS:
Total return (2) (4) 30.46% 27.24% 269.37% 269.37%
========= ========= ========= =========
Ratio to average net assets:
Trading Income 15.81% 26.13% 137.56% 142.18%
Expenses, not including incentive fees (5.21%) (7.77%) (5.64%) (5.83%)
Incentive fees (3) 0.00% 0.00% 0.00% 0.00%
Total expenses (5.21%) (7.77%) (5.64%) (5.83%)
Net income 10.61% 18.36% 131.92% 136.35%
I SHARES A SHARES II SHARES AA SHARES
2006 2006 2006 2006
--------- --------- --------- ---------
PER UNIT OPERATING PERFORMANCE (1)
Total income $ (162.05) $ (151.93) $ 5.97 $ 5.75
Total expenses (108.52) (169.14) (1,402.37) (1,348.30)
--------- --------- --------- ---------
Net increase in net asset value (270.57) (321.07) (1,396.40) (1,342.55)
Net asset value, beginning of year
(inception for AA,I,II shares) 2,341.59 2,238.10 2,440.38 2,346.28
--------- --------- --------- ---------
Net asset value, end of year $2,071.02 $1,917.03 $1,043.98 $1,003.73
========= ========= ========= =========
SELECTED FINANCIAL STATISTICS AND RATIOS:
Total return (2) (4) (11.55%) (14.35%) (57.22%) (57.22%)
========= ========= ========= =========
Ratio to average net assets:
Trading Income (7.12%) (5.39%) 0.30% 0.30%
Expenses, not including incentive fees (4.85%) (8.09%) (70.85%) (4.85%)
Incentive fees (3) 0.00% 0.00% 0.00% 0.00%
Total expenses (4.85%) (8.09%) (70.85%) (4.85%)
Net income (11.97%) (13.48%) (70.55%) (4.55%)
14
I SHARES A SHARES II SHARES AA SHARES
2005 2005 2005 2005
--------- --------- --------- ---------
PER UNIT OPERATING PERFORMANCE (1)
Total income $ (66.82) $ (142.31) $ -- $ --
Total expenses (55.56) (51.64) (8.08) (7.77)
--------- --------- --------- ---------
Net increase in net asset value (122.38) (193.95) (8.08) (7.77)
Net asset value, beginning of year
(inception for I shares) 2,463.97 2,432.05 2,448.46 2,354.05
--------- --------- --------- ---------
Net asset value, end of year $2,341.59 $2,238.10 $2,440.38 $2,346.28
========= ========= ========= =========
SELECTED FINANCIAL STATISTICS AND RATIOS:
Total return (2) (4) (4.97%) (7.97%) (0.33%) (0.33%)
========= ========= ========= =========
Ratio to average net assets:
Trading Income (2.15%) (4.84%) 0.00% 0.00%
Expenses, not including incentive fees (2.37%) (2.28%) (0.33%) (0.33%)
Incentive fees (3) 0.00% 0.00% 0.00% 0.00%
Total expenses (2.37%) (2.28%) (0.33%) (0.33%)
Net income (4.52%) (7.13%) (0.33%) (0.33%)
(3)Selected data for a unit of beneficial interest
outstanding throughout the year, or since inception
for I shares.
(2) An individual partner s total returns and ratios
may vary from the above returns based on the timing
of contributions and withdrawals.
(3) Incentive fees accrued on units held as A shares
were reversed due to losses after those units were
transferred to I shares, resulting
in a negative incentive fee for I shares.
(4) I Shares have been annualized for the period
ending December 31, 2004.
15
Acknowledgement
To the best of my knowledge and belief, the information
contained here is accurate and complete.
/s/Peter Lamoureux
President
Everest Asset Management, Inc.
General Partner of Everest Fund, L.P.
16