SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly report pursuant to Section 12(b) or (g) of the
Securities Exchange Act of 1934
For the quarterly period ended June 30, 2008
Commission File Number 0-17555
THE EVEREST FUND, L.P.
(Exact name of registrant as specified in its charter)
Iowa 42-1318186
State or other jurisdiction of (I.R.S.Employer
incorporation or organization) Identification No.)
1100 North 4th Street, Suite 143, Fairfield, Iowa 52556
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (641) 472-5500
Not Applicable
(Former name, former address and former fiscal year, if
changed since last report.)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes X No
Indicate by check mark whether the registrant is a large accelerated
filer, an accelerated filer, or a non-accelerated filer (as defined
in Rule 12b-2 of the Exchange Act). (Check one):
Large accelerated filer Accelerated filer
Non-accelerated filer X
Indicate by check mark whether the registrant is a shell company (as
defined in Rule 12b-2 of the Act). Yes No X
2
PART I. FINANCIAL INFORMATION
Item 1 Financial Statements
Following are financial Statements for the fiscal quarter ending June 30, 2008
Fiscal Quarter Year to Date Fiscal Year Fiscal Quarter Year to Date
Ended 6/30/08 to 6/30/08 Ended 12/31/07 Ended 6/30/07 to 6/30/07
------------- ------------ -------------- -------------- -------------
Statement of
Financial Condition X X
Schedule of Investments X
Statement of Operations X X X X
Statement of Changes
in Partner's Capital X
Statements of Cash Flows X X X X
Notes to Financial X
Statements
see accompanying notes to financial statements
3
EVEREST FUND, L.P.
(An Iowa Limited Partnership)
STATEMENTS OF FINANCIAL CONDITION
---------------------------------
UNAUDITED
JUNE 30, 2008 DECEMBER 31, 2007
----------------- -----------------
ASSETS
Cash and cash equivalents $13,328,753 $10,441,634
Equity in commodity trading accounts:
Cash 1,865,155 1,206,629
Net unrealized trading gains (losses) on open contracts 258,901 282,372
Other receivables 964 0
Interest receivable 26,502 45,406
----------- -----------
TOTAL ASSETS $15,480,275 $11,976,041
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
LIABILITIES:
Redemptions payable $ 162,724 $ 125,273
General partner management fee payable 69,075 50,840
Advisor's management fee payable 8,132 0
Accrued expenses 49,431 93,067
----------- -----------
TOTAL LIABILITIES 311,400 283,034
----------- -----------
PARTNERS' CAPITAL
Limited partners, A Shares (5,172.697 and 4,793.613 units
outstanding) 15,168,875 11,693,007
----------- -----------
TOTAL PARTNERS' CAPITAL 15,168,875 11,693,007
----------- -----------
TOTAL LIABILITIES AND PARTNERS'
CAPITAL $15,480,275 $11,976,041
=========== ===========
The accompanying notes are an integral part of these statements.
4
EVEREST FUND, L.P.
(AN IOWA LIMITED PARTNERSHIP)
CONDENSED SCHEDULE OF INVESTMENTS
JUNE 30, 2008
-------------
UNAUDITED
NUMBER OF MARKET VALUE % OF PARTNERS'
EXPIRATION DATES CONTRACTS (OTE) CAPITAL
---------------- --------- ------------ --------------
LONG POSITIONS:
FUTURES POSITIONS
Energy Oct 08 43 158,126 1.04%
Agriculture Aug 08-Dec 08 122 199,849 1.32%
----------- -----
357,975 2.36%
FORWARD POSITIONS
Currencies Sep 08 151,564 1.00%
----------- -----
Total long positions $ 509,539 3.36%
----------- -----
SHORT POSITIONS:
FUTURES POSITIONS
Interest rates Sep 08-Mar 09 292 51,545 0.34%
Metals Aug 08-Sep 08 20 (91,130) -0.60%
Currencies 64 (78,400) -0.52%
Indices Sep 08 5 4,072 0.03%
----------- -----
(113,913) -0.75%
FORWARD POSITIONS
Currencies Sep 08 (136,725) -0.90%
----------- -----
Total short positions (250,638) -1.65%
----------- -----
TOTAL OPEN CONTRACTS 258,901 1.71%
CASH AND CASH EQUIVALENTS 13,328,753 87.87%
CASH ON DEPOSIT WITH BROKERS 1,865,155 12.30%
LESS LIABILITIES IN EXCESS OF OTHER ASSETS (283,934) -1.87%
----------- -----
NET ASSETS $15,168,875 100%
=========== =====
The accompanying notes are an integral part of this statement.
5
EVEREST FUND, L.P.
(AN IOWA LIMITED PARTNERSHIP)
STATEMENTS OF OPERATIONS-CONTINUED
FOR THE PERIOD APRIL 1, 2008 THROUGH JUNE 30, 2008
--------------------------------------------------
UNAUDITED
APRIL 1, 2008 JANUARY 1, 2008
THROUGH THROUGH
JUNE 30, 2008 JUNE 30, 2008
---------------- ---------------
TRADING INCOME (LOSS)
Net realized trading gain(loss)
on closed contracts $ 221,201 $ 3,195,931
Change in net unrealized trading gain
(loss) on open contracts 13,275 (24,498)
Net foreign currency translation gain (loss) (1,866) (2,211)
Brokerage Commissions (11,190) (22,214)
----------- ------------
NET TRADING INCOME (LOSS) 221,420 3,147,008
Interest income, net of cash management fees 86,012 202,726
----------- ------------
TOTAL INCOME LOSS) 307,432 3,349,734
----------- ------------
EXPENSES:
General partner management fees 193,054 372,357
Advisor Management fees 51,384 100,557
Administrative expenses 22,236 42,296
----------- ----------
TOTAL EXPENSES 274,806 973,286
----------- ----------
NET INCOME (LOSS) $ 32,626 $ 2,376,448
=========== ===========
NET INCOME (LOSS) PER UNIT OF PARTNERSHIP INTEREST
A SHARES, OUTSTANDING ENTIRE PERIOD $ 2.63 $ 493.20
=========== ==========
NET INCOME (LOSS) PER UNIT OF PARTNERSHIP INTEREST
I SHARES, OUTSTANDING ENTIRE PERIOD $ 0.00 $ 0.00
=========== ==========
NET INCOME (LOSS) PER UNIT OF PARTNERSHIP INTEREST
AA SHARES, OUTSTANDING ENTIRE PERIOD $ 0.00 $ 0.00
=========== ==========
NET INCOME (LOSS) PER UNIT OF PARTNERSHIP INTEREST
II SHARES, OUTSTANDING ENTIRE PERIOD $ 0.00 $ 0.00
=========== ==========
The accompanying notes are an integral part of these statements.
6
EVEREST FUND, L.P.
(AN IOWA LIMITED PARTNERSHIP)
STATEMENTS OF OPERATIONS
FOR THE PERIOD APRIL 1, 2007 THROUGH JUNE 30, 2007
--------------------------------------------------
UNAUDITED
APRIL 1, 2008 JANUARY 1, 2007
THROUGH THROUGH
JUNE 30, 2007 JUNE 30, 2007
---------------- ---------------
TRADING INCOME (LOSS)
Net realized trading loss
on closed contracts $ 970,708 $ (780,531)
Change in net unrealized trading gain
(loss) on open contracts 445,698 602,200
Net foreign currency translation loss (6,451) (9,556)
Brokerage Commissions (39,237) (77,676)
----------- ------------
NET TRADING INCOME (LOSS) 1,370,719 (265,563)
Interest income, net of cash management fees 161,574 365,630
----------- ------------
TOTAL INCOME (LOSS) 1,532,293 100,067
----------- ------------
EXPENSES:
General partner management fees 126,703 311,780
Advisor Management fees 66,541 149,636
Administrative expenses 83,420 106,336
----------- ----------
TOTAL EXPENSES 276,665 567,752
----------- ----------
NET INCOME (LOSS) $ 1,255,628 $ (467,686)
=========== ===========
NET INCOME (LOSS) PER UNIT OF PARTNERSHIP INTEREST
A SHARES, OUTSTANDING ENTIRE PERIOD $ 195.26 $ (19.31)
=========== ==========
NET INCOME (LOSS) PER UNIT OF PARTNERSHIP INTEREST
I SHARES, OUTSTANDING ENTIRE PERIOD $ 228.44 $ 11.75
=========== ==========
NET INCOME (LOSS) PER UNIT OF PARTNERSHIP INTEREST
AA SHARES, OUTSTANDING ENTIRE PERIOD $ (8.39) $ (6.96)
=========== ==========
NET INCOME (LOSS) PER UNIT OF PARTNERSHIP INTEREST
II SHARES, OUTSTANDING ENTIRE PERIOD $ (8.72) $ (7.23)
=========== ==========
The accompanying notes are an integral part of these statements.
7
EVEREST FUND, L.P.
(An Iowa Limited Partnership)
STATEMENT OF CHANGES IN PARTNERS' CAPITAL
FOR THE PERIOD JANUARY 1, 2008 THROUGH JUNE 30, 2008
----------------------------------------------------
UNAUDITED
UNITS LIMITED PTRS
A SHARES A SHARES TOTAL
---------- ------------ ----------
BALANCES, January 1, 2008 4,793.61 11,693,007 11,693,007
Additional Units Sold 752.77 2,178,218 2,178,218
Redemptions (373.69) (1,078,798) (1,078,798)
Net Profit (Loss) 2,376,448 2,376,448
---------- ------------ ----------
BALANCES, June 30, 2008 5,172.70 $ 15,168,875 15,168,875
========== ============ ==========
Net asset value per unit,
January 1, 2008 $ 2,439.29
Net profit (loss) per unit 493.20
Net asset value per unit
June 30, 2008 $ 2,932.49
============
The accompanying notes are an integral part of these statements.
8
EVEREST FUND, L.P.
(An Iowa Limited Partnership)
STATEMENTS OF CASH FLOWS-CONTINUED
FOR THE PERIOD JANUARY 1, 2008 THROUGH JUNE 30, 2008
----------------------------------------------------
UNAUDITED
APRIL 1, 2008 JANUARY 1, 2008
THROUGH THROUGH
JUNE 30, 2008 JUNE 30, 2008
----------------- -----------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ 32,626 $ 2,376,448
Adjustments to reconcile net loss to net cash provided by
(used in) operating activities:
Decrease (increase) in commodity futures trading accounts:
Cash (322,395) (658,526)
Unrealized gain or loss on open commodity futures contracts (14,302) 23,471
Decrease (increase) in interest receivable 17,448 17,941
(Decrease) increase in management fees payable 4,925 8,184
(Decrease) increase in other accrued expenses (35,266) (43,636)
------------ ------------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES (755,306) 1,750,249
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Redemption of partnership units (668,363) (1,041,348)
Sale of partnership units, net 2,178,218 2,178,218
------------ ------------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 1,509,855 1,136,870
------------ ------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 754,549 2,887,119
CASH AND CASH EQUIVALENTS, AT BEGINNING OF PERIOD 12,574,204 10,441,634
------------ ------------
CASH AND CASH EQUIVALENTS, AT END OF PERIOD $ 13,328,753 $ 13,328,753
============ ============
The accompanying notes are an integral part of these statements
9
EVEREST FUND, L.P.
(An Iowa Limited Partnership)
STATEMENTS OF CASH FLOWS
FOR THE PERIOD JANUARY 1, 2007 THROUGH JUNE 30, 2007
----------------------------------------------------
UNAUDITED
APRIL 1, 2007 JANUARY 1, 2007
THROUGH THROUGH
JUNE 30, 2007 JUNE 30, 2007
----------------- -----------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (loss) $ 1,255,628 $ (467,686)
Adjustments to reconcile net loss to net cash provided by
(used in) operating activities:
Decrease (increase) in commodity futures trading accounts:
Cash (208,456) 1,652,865
Unrealized gain or loss on open commodity futures contracts (444,937) (602,200)
Decrease (increase) in interest receivable 17,518 13,457
Decrease (increase) in receivable from Refco Capital Markets, Ltd 507,924 1,037,051
(Decrease) increase in General Partner management fees payable (24,018) (39,416)
(Decrease) increase in management fees payable (3,252) (9,763)
(Decrease) increase in other accrued expenses 71,524 81,818
------------ ------------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES 1,171,931 1,666,126
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Redemption of partnership units (3,189,035) (5,486,779)
Sale of partnership units, net (448) 98,569
------------ ------------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES (3,189,483) (5,388,210)
------------ ------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (2,017,552) (3,722,084)
CASH AND CASH EQUIVALENTS, AT BEGINNING OF PERIOD 11,809,188 13,513,720
------------ ------------
CASH AND CASH EQUIVALENTS, AT END OF PERIOD $ 9,791,636 $ 9,791,636
============ ============
The accompanying notes are an integral part of these statements
10
EVEREST FUND, L.P.
NOTES TO FINANCIAL STATEMENTS
June 30, 2008
(1) GENERAL INFORMATION AND SUMMARY
Everest Fund, L.P. (the "Partnership") is a limited partnership organized
on June 20, 1988 under the Iowa Uniform Limited Partnership Act (the
Act). The business of the Partnership is the speculative trading of
commodity futures contracts and other commodity interests, including
forward contracts on foreign currencies ("Commodity Interests") either
directly or through investing in other, including subsidiary, partnerships,
funds or other limited liability entities. The Partnership commenced its
trading operations on February 1, 1989 and its general partner is Everest
Asset Management, Inc. (the "General Partner") a Delaware corporation
organized in December 1987.
The Partnership was initially organized on June 20, 1988 under the name
Everest Energy Futures Fund, L.P. On September 12, 1991, the Partnership
changed its name to "Everest Futures Fund, L.P." The Partnership thereafter
has traded futures contracts and options on futures contracts on a
diversified portfolio of financial instruments and precious metals as
well as forward contracts on currencies. In November 2003 the Partnership
changed its name to its present form.
On July 1, 1995 the Partnership recommenced the offering of its Units as
a Regulation D, Rule 506 private placement. 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 and an on going compensation
fee equal to 1% of the net asset value of Class I Units sold The Class
A Units, (retail shares) continue to be charged an initial 1% Offering
and Organization fee as a reduction to capital.
The Partnership clears all of its futures and options on futures
trades through Newedge Financial, Inc. (NFI), its clearing broker, and
all of its foreign currency trading through Newedge Financial SNC (NFS)an
affiliate of NFI.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Cash and Cash Equivalents
Cash equivalents represent short-term highly liquid investments with
maturities of 90 days or less and include money market accounts,
securities purchased under agreements to resell, commercial paper,
and U.S. Government and agency obligations with variable rate and
demand features that qualify them as cash equivalents. These cash
equivalents, with the exception of securities purchased under agreement
to resell, are stated at amortized cost, which approximates fair value.
Securities purchased under agreements to resell, with overnight maturity,
are collateralized by U.S. Government and agency obligations, and are
carried at the amounts at which the securities will subsequently be
resold plus accrued interest.
Reclassifications
Certain prior year amounts have been reclassified to conform with
the current year classifications.
Revenue Recognition
Commodity futures contracts, forward contracts, physical commodities, and
related options are recorded on the trade date basis. All such
transactions are recorded on the identified cost basis and marked to
market daily. Unrealized gains and losses on open contracts reflected
in the statements of financial condition represent the difference
between original contract amount and market value (as determined by
exchange settlement prices for futures contracts and related options
and cash dealer prices at a predetermined time for forward contracts,
physical commodities, and their related options) as of the last business
day of the year or as of the last date of the financial statements.
Net Income (Loss) Per Unit of Partnership Interest
Net income (loss) per unit of partnership interest is the difference
between the net asset value per unit at the beginning and end of each
period for both.
Fair Value of Financial Instruments
The financial instruments held by the Company are reported in the
statements of financial condition at market or fair value, or at carrying
amounts that approximate fair value, due to their highly liquid nature
and short-term maturity. Commodity futures contracts, forward contracts,
physical commodities, and related options are valued as described above
Foreign Currency Translation
Assets and liabilities denominated in foreign currencies are translated at
the prevailing exchange rates as of the valuation date. Gains and
losses on investment activity are translated at the prevailing exchange
rate on the date of each respective transaction while year-end balances
are translated at the year-end currency rates. Realized and unrealized
foreign exchange gains or losses are included in trading income (loss) in
the statements of operations.
Income Taxes
No provision for income taxes has been made in the accompanying financial
statements as each partner is responsible for reporting income
(loss) based upon the pro rata share of the profits or losses of the
Partnership.
Use of Estimates
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
(3) THE LIMITED PARTNERSHIP AGREEMENT
The Limited Partners and General Partner share in the profits and
losses of the Partnership in proportion to the number of units or unit
equivalents held by each. However, no Limited Partner is liable for
obligations of the Partnership in excess of their capital contribution
and profits, if any, and such other amounts, as they may be liable for
pursuant to the Act. Distributions of profits are made solely at
the discretion of the General Partner.
Responsibility for managing the Partnership is vested solely in the
General Partner. The General Partner has delegated complete trading
authority to an unrelated party (note 4).
Limited Partners may cause any or all of their Class A Units to be
redeemed as of the end of any month at net asset value on fifteen days'
prior written notice to the Partnership. 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 at December 31, 2020, or upon the occurrence of certain
events, as specified in the Limited Partnership Agreement.
(4) CONTRACTS AND AGREEMENTS
John W. Henry & Company, Inc. (JWH) began trading its Strategic
Allocation Program with a trading allocation of $40 million on July 1, 2001.
JWH receives a monthly management fee equal to 0.167% (2% annually) of
the Partnership ' s month-end net asset value, (as defined), and a
quarterly incentive fee of 20% of the Partnership ' s new net trading profits,
(as defined). The incentive fee is retained by JWH even though trading
losses may occur in subsequent quarters; however, no further incentive
fees are payable until any such trading losses (other than losses
attributable to redeemed units and losses attributable to assets reallocated
to another advisor) are recouped by the Partnership.
Effective September 1, 2001, Mount Lucas Management Corporation ( MLM ) was
added as a trading advisor with an initial allocation of $10 million. This
allocation represented notional funding for the Partnership. MLM
receives a monthly management fee of 0.0625% (0.75% annually) of the
Partnership s month-end allocated assets as defined. Effective February
2003, the management fee was reduced to 0.04167% (0.50% annually). As MLM
uses the MLM Index -- Unleveraged, they do not receive an incentive fee.
MLM was terminated effective October 31, 2003.
Beginning in June 2003, John W. Henry & Company, Inc. (" JWH ") began trading
JWH Global Analytics Program (" GAP "); Currency Strategic Allocation Program
(" CSAP ") and Worldwide Bond Program (" WBP ") with a trading allocation of
$27 million. CSAP was eliminated as a trading program on January 1st, 2007,
and WBP was dropped on May 31st 2007, leaving GAP as the sole JWH program.
Net brokerage commissions are recorded in the statements of operations as a
reduction of trading income.
Effective November 2003, the General Partner charges the Partnership
a monthly management fee equal to 0.50% of the Partnership ' s Class A
beginning-of-month net asset value. 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 June 30, 2008 JWH s allocation was approximately $13.02 million.
The General Partner may replace or add trading advisors at any time.
The Partnership, through August 31, 2005, cleared all of its futures
trades through Cargill Investor Services, Inc. ( CIS ) and all of its
foreign currency trading activity through CIS Financial Services, Inc.
( CISFS ), an affiliate of CIS. In September 2005, Refco Group Ltd. acquired
CIS and CISFS and the clearing and related services previously performed by
CIS were performed by REFCO, LLC and the foreign currency trading
previouslyperformed by CISFS was provided by Refco Capital Markets, Ltd.
Beginning in mid-October 2005, the Partnership engaged Calyon
Financial, Inc. ( CFI ) as the Partnership s futures and options
on futures broker, and engaged Calyon Financial, SNC ( CFS ) as the
Partnership s foreign currency or forwards currency broker,
(collectively referred to as the Clearing Brokers ).
Calyon Financial, Inc (CFI) changed it's name to Newedge Financial, Inc (NFI)
and Calyon Financial, SNC (CFS) changed it's name to Newedge
Financial, SNC (NFS).
The agreements provide that the Clearing Brokers charge the Partnership
brokerage commissions at the rate of between $5.80 to 10.70 per round-turn
trade, plus applicable exchange, give up fees and NFA fees for futures
contracts and options on futures contracts executed on domestic exchanges
and over the counter markets. For trades on certain foreign exchanges, the
rates may be higher.
The Partnership also reimburses the Clearing Brokers for all delivery,
insurance, storage or other charges incidental to trading and paid
to third parties.
The Partnership earns interest on 95% of the Partnership's average
monthly cash balance on deposit with its Brokers at a rate equal to the
average 91-day Treasury Bill rate for US Treasury Bills issued during that
month.
Excluding amounts held at Newedge, substantially all of cash and cash
equivalents at June 30, 2008 and 2007 are funds deposited with a commercial
bank and invested under the direction of Horizon Cash Management, Inc.
(Horizon). Horizon receives a monthly cash management fee equal to 1/12 of
..25% (.25% annually) of the average daily assets under management if the
accrued monthly interest income earned on the Partnership ' s assets managed
by Horizon exceeds the 91-day U.S. Treasury bill rate.
(5) TRADING ACTIVITIES AND RELATED RISKS
The Partnership engages in the speculative trading of U.S. and foreign futures
contracts, options on U.S. and foreign futures contracts, and forward contracts
(collectively " derivatives "). These derivatives include both
financial and non-financial contracts held as part of a diversified trading
strategy. The Partnership is exposed to both market risk, the risk arising
from changes in the market value of the contracts; and credit risk, the risk of
failure by another party to perform according to the terms of a
contract.
The purchase and sale of futures and options on futures contracts
requires margin deposits with a Futures Commission Merchant (" FCM ").
Additional deposits may be necessary for any loss on contract value. The
Commodity Exchange Act (" CEAct ") requires an FCM to segregate all customer
transactions and assets from the FCM ' s proprietary activities. A customer ' s
cash and other property such as U. S. Treasury Bills, deposited with an FCM
are considered commingled with all other customer funds subject to the
FCM ' s segregation requirements. In the event of an FCM ' s insolvency,
recovery may be limited to a pro rata share of segregated funds available.
It is possible that the recovered amount could be less than the total of
cash and other property deposited.
The Partnership has cash on deposit in the amount of $223,325 as of June
30, 2008 with an interbank market maker (Newedge Financial SNC) in
connection with its trading of forward contracts. In the event of interbank
market maker s insolvency, recovery of the Partnership assets on deposit
may be limited to forfeiture. In the normal course of business, the
Partnership does not require collateral from such interbank market maker.
Because forward contracts are traded in unregulated markets between
principals, the Partnership also assumes a credit risk, on its entire
amount on deposit from counter party non-performance.
For derivatives, risks arise from changes in the market value of the
contracts. Theoretically, the Partnership is exposed to a market
risk equal to the value of futures and forward contracts purchased
and unlimited liability on such contracts sold short. As both a
buyer and seller of options, the Partnership pays or receives
a premium at the outset and then bears the risk of unfavorable
changes in the price of the contract underlying the option.
The Partnership's policy is to continuously monitor its exposure
to market and counterparty risk through the use of a variety of
financial, position and credit exposure reporting and control
procedures. In addition, the Partnership has a policy of reviewing
the credit standing of each clearing broker or counter party
with which it conducts business.
The limited partners bear the risk of loss only to the extent of
the net asset value of their Partnership units.
Net trading results from derivatives for the periods presented are
reflected in the statement of operations and equal gains (losses)
from trading less brokerage commissions. Such trading results
reflect the net gain arising from the Partnership ' s speculative
trading of futures contracts, options on futures contracts, and
forward contracts.
(6)FINANCIAL HIGHLIGHTS
The following financial highlights show the Partnership ' s financial
performance for the six months ended June 30, 2008. Total return is
calculated as the change in a theoretical limited partner ' s investment over
the entire period. An individual partner ' s total returns and ratios may vary
from the total return based on the timing of contributions and withdrawals.
Selected Financial Statistics and Ratios:
6/30/08 6/30/07
1. Total return: A Shares 20.22% -1.01%
I Shares 0.00% 0.57%
AA Shares 0.00% -0.69%
II Shares 0.00% -0.69%
2. Ratio to average net assets:
Total income A Shares 24.92% 0.23%
I Shares 0.00% 3.12%
AA Shares 0.00% 0.79%
II Shares 0.00% 0.79%
3. Expenses, excluding incentive fees:
A Shares 3.83% 4.23%
I Shares 0.00% 2.50%
AA Shares 0.00% 1.43%
II Shares 0.00% 1.43%
4. Incentive fees 3.41% 0.00%
5. Total expenses
A Shares 7.24%
4.23%
I Shares 0.00% 2.50%
AA Shares 0.00% 1.43
II Shares 0.00% 1.43%
The total income and general and expense ratios are computed based upon the
weighted average net assets for the Partnership for the period ended
June 30, 2008 and 2007.
(7) FINANCIAL STATEMENT PREPARATION
The interim financial statements are unaudited but reflect all adjustments
that are, in the opinion of management, necessary for a fair statement
of the results for the interim periods presented. These adjustments
consist primarily of normal recurring accruals. These interim financial
statements should be read in conjunction with the audited financial
statements of the Partnership for the year ended December 31, 2007,
as filed with the Securities and Exchange Commission on March 31,
2008,as part of its Annual Report on Form 10-K.
..
The results of operations for interim periods are not necessarily
indicative of the operating results to be expected for the fiscal year.
Item 2. Management's Discussion and Analysis of
Financial
Condition and Results of Operation
3 months ended June 30, 2008
The Partnership recorded a gain of $32,626 or $2.63 per
Unit of Class A Units for the fiscal quarter ended June 30, 2008.
This compares to a gain of $ 1,255,628 or $195.26 per Unit of Class A
Units for the fiscal quarter ended June 30, 2007. The quarter
ended June 30, 2008 showed a gain of 0.09% ( total return) for the Class A
Units of the fund.
The Partnership continued to employ John W. Henry & Company, Inc. '
s (JWH) GlobalAnalyticsR Family of Programs, Worldwide Bond Program.
Class A Units were negative -5.45% in April 2008 resulting in a
Net Asset Value per unit of $ 2,770.300 as of April 30, 2008.
The Fund's performance was negative in April as many of the long-
term trendsthat have contributed to the positive year-to-date performance
were interrupted or came to an end. In retrospect, the actions taken
by the Federal Reserve Board(the Fed) in the second half of March to
bail out Bear Stearns and add liquidity to the financial system marked
an intermediate turning point in many markets. As volatility subsided
and sentiment improved into April, long held positions were unwound.
The performance of the Fund during the month was attributable to
widespread trend reversals in most market sectors, including
positions in global equity indices, interest rates, currencies, and
precious metals. Performance in agricultural commodities was mixed
for the month. Price action was relatively tame when compared to the
extreme volatility of the first quarter. The Fund's performance in
the energy sector was positive in April. Crude oil continued its
march higher bolstered by the positive fundament backdrop of strong
demand and tight supplies, which advanced crude oil prices more than 12
percent for the month.
While the performance of the Fund was negative in April, it was not
unusual given the significant moves of the last 7 months. Positive
performance from the energy sector served to partially offset significant
reversals in most of the financial markets during April. At the start of
May, the Fund is less exposed to the markets and factors that contributed
to the recent decline in performance. Looking forward, the markets will
likely focus on the strength of the global economy and the stability
of asset prices. The Fund stands ready to take positions in either
direction as new trends assert themselves.
Class A Units were positive 4.45 % in May 2008 resulting in a Net
Asset Value per unit of $2,893.588 as of May 31, 2008.
The Fund bounced back in May to produce positive performance for the month.
The majority of the markets traded were relatively quiet and directionless
with the exception of the energy sector which was the main driver of monthly
trading profits. In the most notable market activity, crude traded above
$135 per barrel, gasoline topped $4.00 at the pump in the U.S. and natural
gas rallied more than 11 percent during the month. Supply continues to be
tight and demand from large emerging economies continues to be strong.
The increases in energy prices led to calls in the U.S. Congress for increased
regulatory scrutiny of those markets. Critical focus was on the effect of
speculation in the commodity markets and the impact of passive commodity
indexing. Time will tell, but the government furor may coincide with the
market peak. The Fund's trading in energies was profitable and accounted for a
majority of the Fund's gains for the month.
Outside of the energy markets, the interest rate sector also contributed
to the monthly gains, as the prospect for higher inflation globally and
more stable financial markets outweighed concerns over slowing economic
activity in the U.S. and other developed nations. Global equity markets,
on the surface, were stable in May. The ranges were relatively tight
and offered few opportunities for trend-followers. The currency markets
were also quiet in May. While the significant downward pressure on the U.S.
dollar appears to have abated, there is little evidence from price action
that there is strong demand to own dollars. Trading in the metals markets
was also calm in May as price action was directionless. Trading in the
agricultural markets was mixed and largely uneventful in May.
Overall, the Fund is pleased with the positive performance achieved in May.
The portfolio's diversification and balance provided the Fund the ability
to minimize losses in sectors that are not trending while capitalizing on
markets that are trending which is the foundation of the Fund's trend
following philosophy. This month's dormant, trendless sectors may be the
catalysts that will drive the Fund's performance during the second half
of the year.
Return of Trilogy withheld fees
Clients who were in the Fund in October 2000 received checks this month.
In most cases the checks are small amounts representing the client's
net portion of trading fees that were withheld from Trilogy Asset
Management by agreement between Trilogy & Everest for a trading
discrepancy in Trilogy's replication of the Barclay Futures Index.
After that agreement Everest attempted to recover what we believe to
be a trading error and Trilogy counter claimed for the withheld trading
fees. Upon the advise of counsel, it is not prudent to continue the
matter. Trilogy is out of business and the financial condition of the
principal of the firm is such that, even in the event of an arbitration
award or judgment in our favor, it is unlikely we would collect.
A lot of time has elapsed since these fees were withheld. If any
selling agents or clients have any questions please feel free to call
or e-mail Peter Lamoureux at peter@everestasset.com.
Class A Units were positive 1.34 % in June 2008 resulting in a
Net Asset Value per unit of $2,932.489 as of June 30, 2008.
The Fund was positive in June marking the ninth month in the past
ten of positive performance. While many strong macro economic trends,
including weakness in the housing market, the rationing of credit,
and significant stress in the financial system, remain intact and
continue to pressure global equity prices, many financial markets
continue to be choppy and devoid of clear trends. The majority of
the gains for the Fund came from the commodity markets where the
global demand for energy continues to push prices higher at the
same time major flooding in the Midwest was impacting the outlook for
the future supply of grain. The Fund's long-term perspective has
allowed it to continue to benefit from the extended bull market in
commodities even as the currency and bond portions of the Fund
struggle to find clear trends amidst a seemingly ever changing
outlook for both growth and inflation.
June's market headlines were dramatic and spoke to the very real
issues of declining global stock markets, floods, strains in the
financial system and a global energy crisis. The Fund's investment
style, however, is dispassionate and only reacts to trends in
prices. The long running trends in commodity prices once again
generated gains for the Fund while the turmoil in the world
economy had the effect of disrupting price action in the financial
markets which created challenges for other parts of the Fund's
portfolio. The portfolios market diversification and non-correlation
to stock and bond long only investments continues to provide
investors protection during these uncertain times.
Return of Trilogy withheld fees
Clients who were in the Fund in October 2000 were sent checks in June.
In most cases the checks are small amounts representing the client's
net portion of trading fees that were withheld from Trilogy Asset
Management by agreement between Trilogy & Everest for a trading
discrepancy in Trilogy's replication of the Barclay Futures Index.
After that agreement Everest attempted to recover what we believe
to be a trading error and Trilogy counter claimed for the withheld
trading fees. Upon the advise of counsel, it is not prudent to
continue the matter. Trilogy is out of business and the financial
condition of the principal of the firm is such that, even in the
event of an arbitration award or judgment in our favor, it is
unlikely we would collect.A lot of time has elapsed since these
fees were withheld. If any selling agents or clients have questions
please feel free to call or e-mail Peter Lamoureux at peter@everestasset.com.
See Note 5 of the Notes to Financial Statements for procedures
established by the General Partner to monitor and minimize market
and credit risks for the Partnership. In addition to the procedures
set out in Note 5, the General Partner reviews on a daily basis
reports of the Partnership's performance, including monitoring
of the daily net asset value of the Partnership. The General
Partner also reviews the financial situation of the Partnership's
Clearing Broker on a monthly basis. The General Partner relies on
the policies of the Clearing Broker to monitor specific credit risks.
The Clearing Broker does not engage in proprietary trading and
thus has no direct market exposure, which provides the General
Partner assurance that the Partnership will not suffer trading
losses through the Clearing Broker.
3 months ended June 30, 2007
The Partnership recorded a gain of $ 1,255,628 or $195.26 per Unit
of Class A Units This compares to a loss of $420,650 or $77.87 per
Unit of Class A Units The quarter ended June 30, 2008 showed a gain
of 0.09% ( total return) for the Class A Units of the fund.
The Partnership continued to employ John W. Henry & Company, Inc. '
s (JWH) GlobalAnalyticsR Family of Programs, Worldwide Bond Program.
Class A Units were negative -0.06 % in April 2007 resulting in a
Net Asset Value per unit of $ 1,701.514 as of April 30, 2007.
Class I Units were positive 0.21 % resulting in a Net Asset Value
per unit of $1,858.17 as of April 30, 2007.
The Fund s performance was essentially even for the month of April.
The Fund s disciplined systematic trading approach took
advantage of opportunities that emerged as global financial markets
recovered from the explosion in volatility that occurred at the end
of February and continued into March. The temporary dislocation of
the financial markets appears to have laid the foundation for a
major shift in trends. The currency, indices and agriculture
sectors
all achieved gains as various components of each sector developed
and sustained profitable trends. The currency sector was the Fund s
best performer as various previously range-bound currencies set
historic highs and lows. The euro reached an all-time high against
both the U.S. dollar and the Japanese yen, while the British pound
reached a 25-year high against the dollar. The stock indices sector
was positive for April as stronger-than-expected 1st quarter
earnings, an increase in mergers and acquisitions, economic growth
in Europe, and benign inflation in the U.S. drove global equity
prices higher. The agriculture sector was slightly positive for
the month as the majority of the gains achieved in N.Y. cotton and
coffee were partially offset by losses in CBOT wheat. The metals
sector was negative for the month. Gold slightly offset losses as
the precious metal reached an 11 month high when demand for a hedge
against the weakness in the dollar increased. The energy sector
was negative for the month as weather and geopolitical events once
again were the driving force behind price movements. The
interest rate sector was negative for the month as uncertainty grew
over the interest rate policy of the central banks of the world s
two largest economies.
In conclusion, the Fund s performance was essentially even for
the month as new trends materialized in the aftermath of the
dislocation of the markets caused by the overreaction to the drop
in global equity markets towards the end of the first quarter. The
Fund benefited as range-bound markets, which have been detrimental
to the Fund s performance, gave way to potentially strong
directional movements. The Fund will continue to apply its disciplined
systematic trading approach to potentially take advantage of
continuing or new opportunities as they present themselves.
Trading Allocation
At the end of May 2007 we will redeem our allocation to the
World Wide Bond Program and be invested 100% in the Global Analytics
Program
(GAP). The JWH GAP has been JWH s most efficient program as
measured
by various risk/reward parameters and it trades a diverse portfolio
of
bonds, currencies and commodities.
We would like all investors to know that although we are trying
to stay the course with JWH and exercise patience, we are also
exploring the possibility of adding other managers who may
complement
JWH due to their differences in style, holding periods and
markets traded. Before we make a decision (if any) to add other
managers, we will keep you informed.
Class A Units were positive 0.60 % in May 2007 resulting in a Net
Asset Value per unit of $1,711.64 as of May 31, 2007.
Class I Units were positive 0.86% resulting in a Net Asset Value
perunit of $1,874.11 as of May 31, 2007.
The Fund s performance was positive for the month of May. The
interest rate sector drove performance with strong gains as the
Fund s disciplined systematic trend-following approach enabled it to
profit from falling bond markets in the U.S. and Europe. The
stock indices sector also added to positive performance as
better-than-expected earnings and stronger-than-expected economic
growth sent equity indexes across the globe to new highs. The currency
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
remained range-bound. The metals sector was negative for the month
as a reversal in precious metals hurt performance as the Fund exited
positions. The agriculture sector was negative for the month as
supply once again drove price action.
In conclusion, performance was positive for the month as the Fund s
systematic trading approach benefited from continued strong
directional movements in European debt markets, and the apparent
emergence of a weakened trend in U.S. debt markets. While we
cannot say how long this trend will last, this sector s move is
encouraging. The Fund will continue to apply its trading approach
to potentially take advantage of continuing or new opportunities
as they present themselves.
Trading Manager Allocation
We are very pleased to announce that the Fund will be making an
allocation to the Morningstar Long / Short commodity Index. The
Index is a momentum based strategy that holds a basket of 19
physical commodity contracts either long or short.
We will send more information about the allocation and the
Morningstar Commodity Index in the next few weeks. We anticipate an
allocation on or about the 1st of August.
Class A Units were positive 10.87 % in June 2007 resulting in a
Net Asset Value per unit of $1,897.72 as of June 30, 2007.
Class I Units were positive 11.13 % resulting in a Net Asset Value
per unit
of $2,082.77 as of June 30, 2007.
The Fund s performance was positive for the month of June. Despite
potentially market-dislocating events, including terrorism
incidents in the United Kingdom and the subprime mortgage problems
in the United States, the Fund was able to profit as its long-
term trend-following approach excelled, holding profitable positions
through the market turmoil. The Fund s systematic approach has
profited over the past few months since the equity induced
dislocation
of financial markets that occurred towards the end of the 1st
quarter, which we suggested might be a precursor for a major shift
in market trends. While discretionary funds and shorter-term
trend-followers may have been forced out of profitable positions due
to instability in the market, the Fund s clients were rewarded for
its longer-term focus. The fixed income, energy, agriculture and
currency sectors all achieved gains as various components of each
sector sustained previously existing or developed new profitable
trends.
The interest rate sector was one of the Fund s best
performing sectors for the second consecutive month as it continued
to take advantage of the fall in U.S. and European bond markets.
The energy sector was the Fund s best performing sector in June as
increased terrorism fears combined with lower-than-expected
supplies in petroleum-based products and higher-than-expected
supplies in natural gas drove the sector s performance. The currency
sector was positive for the month as the Japanese yen suffered
its biggest quarterly loss against the euro and the dollar since
2001. The agriculture sector was positive for the month as cotton
and CBOT wheat drove performance.
The metals sector was basically flat for the month while the
stock indices sector was negative as range-bound markets
and trend reversals dominated both these sectors.
In conclusion, the Fund s systematic long-term trading approach
profited from strong trends that have developed in various
components of the fixed income, energy, agriculture and currency
sectors, while avoiding the short-term effects of financial market
dislocations that occurred during the month. The Fund s long-term
trend following philosophy has allowed it to post gains as many
trends have extended through the 2nd quarter and we remain
optimistic
that this is only the beginning. The Fund will continue to apply
its disciplined trading philosophy to potentially take advantage
of any new or continuing opportunities as they present themselves.
New Allocation
We are very pleased to announce that the Fund will be making an
allocation to the Morningstar Long / Short Commodity Index. The
Index is a momentum based strategy that holds a basket of 19
physical commodity contracts either long or short.
We will send more information about the allocation and the
Morningstar
Commodity Index in the next few weeks. We anticipate an
allocation within the next few months.
Update on the RCM recovery efforts (For those investors in the
Fund in October 2005)
Refco, Inc. filed a plan under Chapter 11 ( the Plan ) and
a Disclosure Document with the Bankruptcy Court. The Plan was
confirmed by the Bankruptcy Court and became effective December
26, 2006. An initial distribution was made to investors in
December 2006. The Plan Administration Committee, of which Peter
Lamoureux is a member, is actively liquidating other assets.
On March 29, The Everest Fund, L.P. received the second in
a series of anticipated distributions in the Refco matter in the
amount of $368,878.96. Of the approximately $7,500,000 that became
inaccessible in October 2005, we have now received
$1,743,404.47. That represents an amount equal to approximately
23% of the frozen assets. The Fund has increased the Class A units
for each investor in the Fund by their pro rata share of the
distribution. Checks have been mailed for the benefit of any
investors who have redeemed. We expect additional distributions
between now and the end of June 2007
On June 28th, 2007 Everest received a third distribution from
Refco in the amount of $668,172.21. That amount is equal to
approximately 9 cents on the dollar of the original amount that was
frozen in October 2005. This, in addition to the other
distributions,
brings the recovery to approximately 32 cents on the dollar so far.
The Fund has increased the Class A units for each investor in the
Fund by their pro rata share of the distribution. Checks have been
mailed for the benefit of any investors who have redeemed.
The Plan Administration Committee is working with the other
estate professionals to effect additional distributions. We will
continue to keep you informed.
See Note 5 of the Notes to Financial Statements for procedures
established by the General Partner to monitor and minimize market
and credit risks for the Partnership. In addition to the procedures
set out in Note 5, the General Partner reviews on a daily basis
reports of the Partnership's performance, including monitoring
of the daily net asset value of the Partnership. The General
Partner also reviews the financial situation of the
Partnership's Clearing Broker on a monthly basis. The General
Partner relies on the policies of the Clearing Broker to monitor
specific credit risks. The Clearing Broker does not engage in
proprietary trading and thus has no direct market exposure,
which provides the General Partner assurance that the Partnership
will not suffer trading losses through the Clearing Broker.
Fiscal Quarter ended March 31, 2008
The Partnership recorded a gain of $2,343,822 or $ 490.56 per Unit
of Class A Units for the fiscal quarter ended March 31, 2008.
This compares to a loss of $ 1,723,314 or $214.58 per Unit of
Class A Units for the fiscal quarter ended March 31, 2007. The
quarter ended March 31, 2008 showed a gain of 20.11%% (total
return) for the Class A Units of the fund.
The Partnership continued to employ John W. Henry & Company, Inc. s
(JWH) GlobalAnalytics Family of Programs
Class A Units were positive 8.62% in January 2008 resulting in a Net
Asset Value per unit of $ 2,649.47 as of January 31, 2008.
The Fund experienced strong positive performance for the month of
January. Fear returned to the markets as the December holiday
season proved to be just a brief respite from the turbulence of
last quarter. An important shift in the market's focus seemed
to be emerging at the start of 2008. Last year the global economy
was relatively strong. The market consternation was idiosyncratic
and related to specific issues affecting the housing and credit
markets in the U.S. In January, the concern was more generalized,
as the market began to adjust for the possibility of a U.S.
recession and a significant slowdown in global growth. By mid month,
many of world's major stock markets were experiencing double-digit
declines. Concerns about the economy and the performance of U.S.
equities led the U.S. Federal Reserve Board (the Fed) to cut
interest rates 75 basis points on January 22nd. This was the
first inter-meeting rate move by the Fed since 2001. This reduction
was followed by a second cut of 50 basis points on January 30th.
The Fed Funds rate ended the month at 3 percent. The aggressive
stance of the Fed and news that the White House and Congress
were coming to an agreement on an economic stimulus package combined
to stabilize equity prices towards the end of the month.
Overall, the Fund was able to provide clients with a strong positive,
uncorrelated return during a difficult month for traditional
investments. While no one can predict the future behavior of markets,
the recent environment has been better suited to the disciplined,
systematic investment style employed by the Fund.
Class A Units were positive 10.18% in February 2008 resulting in a
Net Asset Value per unit of $2,919.21 as of February 29, 2008.
Trading performance for the Fund in February was exceptional. The
data released during the month continues to point to a weakening
in the U.S. economy. As the severity of the credit crisis and
its ramifications become more apparent, numerous remedies have
been enacted or proposed. Pessimism about the deteriorating
state of the economy was often met with optimism about the prospects
of official forms of economic stimulus, creating an interesting
trading dynamic during the month. Some sectors were confined
to broad ranges, while others experienced explosive moves. The
Fund benefited from historic movement in the price of many
commodities as energies, grains, metals and soft commodities
all contributed positively to the Fund's performance.
As global demand pushed commodity prices to historic levels, the
commodity markets generated the majority of the Fund's February
returns. While all commodity sectors were profitable, the
greatest profits came from the agriculture markets, particularly
from grains and soft commodities. In some cases, the moves,
were explosive. For example, bean oil was up 27 percent during the
month, coffee was up 19 percent, wheat was up 15 percent, and
sugar was up 14 percent. It is uncommon for the disparate markets
that make up this sector to move higher so strongly in the same
month. There is a force at play in these markets that goes
beyond the supply and demand fundamentals of each specific market.
The demand for food related commodities from a flatter, more
prosperous global economy is an important theme driving
agricultural commodities. The weakness of the dollar is another
important factor; however, it is likely that investor
speculation also played a role in February.
The energy sector was also profitable as crude oil surged above $100
per barrel; this indicates the drop in prices at the start of the
year was simply a stall on the way to continued new highs. The
initial stage of the approximate 10 percent rally in the price
of crude during the month may be attributable to the unwinding
of large short positions that were established in January. In
addition to the old themes of strong demand and dollar weakness,
the perception in the market that OPEC would defend levels below
$90 per barrel helped to support prices. Natural gas was a
significant contributor to the sector's profits during the
month as it rallied in response to colder weather across much
of the country.
Performance from the metals sector was positive for the month. Gold
continues its march toward the $1,000 per ounce level as it
closed February on a high of $975 per ounce. The weak dollar,
further Fed rate cuts and macroeconomic concerns, including
the prospects for further inflation, are fundamentals that
can have a positive influence on the price of gold. Specific
supply issues better explain the movements higher in base metals
during the month as production outages were reported in both
China and South Africa. This puts further pressure on inventories
which, in some cases, are at multi-year lows.
Overall, February's return continues the strong performance for the
Fund since September of last year with six consecutive positive
months, four of which returned in excess of 10 percent. The
Fund benefited from powerful moves in the commodity markets and
also benefited from strong performance from many other parts of the
portfolio. We cannot forecast how long this commodity rally will
last; but the Fund's ability to take both long and short
positions in these markets means that there could be new
opportunities if the markets turn lower.
Class A Units were positive 0.36% in March 2008 resulting in a Net
Asset Value per unit of $2,929.85 as of March 31, 2008.
The crisis in the financial markets continued in March possibly
reaching the bottom on March 17th when the market first learned
of the Federal Reserve Board's orchestrated bailout of investment
banking firm Bear Stearns. This date also marked the year-to-date
low in the S&P 500 and coincided with price reversals in a number
of key markets. As financial market conditions continued to
deteriorate into the month, U.S. officials provided a substantial
policy response. In addition to reducing the Federal Funds rate
by 75 bps on March 18th, the Federal Reserve established
new lending facilities aimed at adding more liquidity to the
financial system and providing access to a broader array of
financial institutions.
Currencies were the most profitable sector this month as interest
rate differentials between the U.S. and Europe widened further,
providing a fresh incentive to sell the U.S. dollar. The
interest rate sector was once again at the center of the storm
in March as the U.S Federal Reserve was active in its effort to
restore confidence in the markets. Performance from this sector
was slightly positive as gains from early March eroded as trends
corrected later in the month. Positions in U.S. and Japanese
interest rates outperformed positions in European rates.
In general, price action in the precious metals keyed off of
developments in the financial markets. Gold soared to record
highs above $1,000 per ounce early in the month as it enjoyed
its status as a safe haven and store of value. When the
markets staged their recovery, gold sold off sharply. As is often
the case with less liquid assets, the movement out of a market
can have a greater impact on price action than the movement into
a market. Gold traded down from a monthly high near $1,040/ounce
to close the month at $921. Positions In both precious and
base metals were unprofitable for the month. While crude oil prices
forged new ground above $100 per barrel in March, it was natural
gas that supplied a majority of the profits in the sector. Natural
gas rallied more than 7% during the month as colder-than-expected
temperatures and increased demand are expected to slow the build
in natural gas inventories. Positions in London gas oil were also
profitable. Crude oil prices rallied during the first half of the
month only to give back gains at the end of March as the dollar
recovered and forecasts for global growth were revised lower. The
agricultural sector was a significant drag on performance in March
as trading in all component markets was negative. Trading and price
action in the grain markets was largely independent from the moves
in the financial markets and the dollar. Most grain prices were
enjoying a remarkable bull market heading into March and arguably
due for a correction.
While the month contained significant reversals in some trends that
resulted in performance finishing March below the inter-month peak,
we are pleased with the continued positive results for the month
and the quarter. JWH models performed as expected, given the
volatile price action across multiple market sectors. The anxiety
in the markets continues to be elevated as fears about the health
of the U.S. economy and the financial system appear to be
justified. JWH will continue to monitor the markets closely and
employ its long-term, systematic approach for the Funds clients.
See Note 5 of the Notes to Financial Statements for procedures
established by the General Partner to monitor and minimize market
and credit risks for the Partnership. In addition to the procedures
set out in Note 5, the General Partner reviews on a daily basis
reports of the Partnership's performance, including monitoring
of the daily net asset value of the Partnership. The General
Partner also reviews the financial situation of the
Partnership's Clearing Broker on a monthly basis. The General
Partner relies on the policies of the Clearing Broker to monitor
specific credit risks. The Clearing Broker does not engage in
proprietary trading and thus has no direct market exposure, which
provides the General Partner assurance that the Partnership will
not suffer trading losses through the Clearing
Broker.
3 months ended 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
theCurrency Strategic Allocation Program (CSAP) and increased the
allocation to the Global Analytics Program (GAP) to 75% with the remaining 25%
going to the World Wide Bond Program. We look forward to the possibility
of better risk adjusted returns from the new allocation.
JWH is taking steps to reduce the volatility so long associated
with JWH investment programs. The first step has been to install a
new management team. As of January 2007, Mark Rzepsinski, the former
President and Chief Investment Officer, has been replaced by Ken
Webster as the new President and Matt Driscoll as the new Chief Investment
Officer. Mr. Webster, who has been with the firm 12 years, is the former
Senior Vice President and Chief Operating Officer. Mr. Driscoll, who has
been with the firm 15 years, was the Senior Vice President of trading and
research. We believe these changes will be productive for our Fund s
investment at JWH.
Class A Units were positive 1.24% in January 2007 resulting in a Net
Asset Value per unit of $ 1,940.87 as of January 31, 2007.
Class I Units were positive 1.51% resulting in a Net Asset Value of
$2,102.21 as of January 31, 2007.
The Fund s performance was positive for the month of January. The
interest rate sector led performance with strong gains as the program s
systematic trend following approach enabled it to profit from a weakening
trend in European and U.S. fixed income markets. The Fund s disciplined
systematic investment style was able to profit despite short-term market
moving events that caused spikes in volatility resulting in strong
reversals. This type of activity diminished the Funds returns as the
currency sector experienced losses due to a continuation of the reversal
in the U.S. dollar s weakening trend (which started in December)
against major European currencies.
The equity indices sector was slightly positive for the month
despite losses in the Nasdaq E-mini which partially offset gains of
the other components in the sector. The energy sector was slightly
positive for the month despite changing weather conditions which
caused extreme volatility within the sector. Despite the volatility
within the sector, crude oil and London gas oil were able to offset
the losses caused by natural gas which was the sectors worst performer.
The currency sector was negative for the month as currency markets
continued to oscillate. Towards the end of January, the dollar
had its largest fall against the Japanese yen in more than two months
after U.S. Treasury Secretary Henry Paulson said he would be
watching the Japanese currency very carefully. This decline limited
the Fund s gain in this market. The Japanese yen was the best
performer in the sector, while the euro suffered the largest loss.
The metals sector was negative for the month as precious metal
prices reacted to fluctuations in the U.S. dollar.
The early January reversal in the U.S. dollar s weakening trend
reduced the appeal of gold as an alternative investment. Gold
generally moves in the opposite direction of the dollar. However,
gold rose 3.9 percent for the month of January as the dollar once
again weakened and speculation increased that the precious metal s
decline was excessive. All components of the sector were negative
for the month as a result of the increased volatility.
The agriculture sector was negative for the month as price
instability hurt performance. The sector s negative performance
was limited by New York sugar, which was the sector s best performer,
as prices continued to fall due to a global surplus of the commodity
continued.
In conclusion, performance was positive for the month as the Fund
benefited from the continued sell-off in U.S., European and British
fixed income markets. The indices and energy sectors also added to
performance and helped to offset losses in the currency sector which
suffered sharp reversals as markets continued to speculate about the
health of the world s industrialized economies. The agriculture and
metals sectors also limited gains as short-term marketmoving events
resulted in strong reversals or trend-less markets.
As always, the program stands ready to potentially take advantage of
any continuing or new trends that may emerge.
Class A Units were negative 4.77% in February 2007 resulting in a
Net Asset Value per unit of $1,848.37 as of February 28, 2007.
Class I Units were negative 4.50% resulting in a Net Asset Value of
$2,007.54 as of February 28, 2007.
The Fund s performance was negative for the month of February. This
negative performance was a direct result of the explosion in volatility
accompanying the last week of the month. Trading up to that point
was positive for the month, but the events of the week reverberated
throughout global markets and reversed what few trends had been evident
earlier in the month. The events were primarily portrayed in the U.S.
media as a stock market decline, but the issues were far broader than
that. Whether pundits cared to lay the blame on the Chinese stock
market or the trouble in the sub-prime loan sector, global markets
awoke to a measure of short-term volatility not seen for many months
which was not confined simply to the equities markets. As an example,
the gold market hovered around the high $690s, a level not seen since
May of last year. Similarly, the wheat, corn and soybean markets were
hitting full-year highs as the last week of February opened. All of
these markets suffered sharp declines during the last week, which
translated to losses for the Fund. Another example of this sudden
reversal in price behavior was the Japanese yen which was at its
yearly low, but strengthened over 2 percent against the dollar in
the last three trading sessions. These examples in unconnected
markets give a flavor of how widespread the difficulty was in the
last three days of the month. As long-term trend followers, JWH
will position the Fund in the direction of a lasting move, so the
Fund will be long a market that is reaching new yearly highs or
short a market that is reaching new yearly lows. Part of the Funds
strategy rests in investing in markets that behave differently from
each other. In the unusual circumstances where historical
uncorrelated markets reverse in lockstep, the Funds systematic
approach will be susceptible to setbacks.
The metals sector was the best performing sector despite strong
reversals in precious metals. The agriculture sector was also
positive for the month as corn rose to a 10-year high in Chicago
and soybeans reached $8.0775, their highest level since June 2004.
The stock indices sector was slightly positive for the month despite
the severe volatility in global equity markets.
The currency sector was negative for the month as the yen rallied
against the dollar to its highest level in more than 19 months on
February 27th amid a correction in U.S. stocks. The energy sector
was negative for the month as natural gas reversed its strengthening
trend and had its biggest loss in more than six weeks in New York.
Crude oil s reversal also hurt performance as it rose to $61.79 a
barrel, its highest closing price this year. All components
of this sector exhibited negative performance for the month. The
interest rate sector was also negative for the month as global bond
markets reversed their weakening trend as the sell-off in the global
equity markets at the end of the month fueled demand for government
debt.
In conclusion, the Fund finished negative for the month as the
weakness in global equity markets increased volatility in financial
markets around the world. What does this sudden burst of volatility
across markets mean? No one can be sure. Sometimes it is unexpected
turbulence along the current path. Other times it is a harbinger of
a major shift in direction. In the latter case, while the short-term
performance is uncomfortable, the long-term trends which come from
the change can more than make up for the discomfort.
The Fund looks to the markets for its signals, and continues to
apply its disciplined systematic trading approach. The Fund was not
positioned for this sudden turn of events. However, an element of
turmoil has been injected into the markets, which if it persists,
has the potential to be a positive development for the Fund s style
of trading. The Fund remains poised to potentially take advantage of
new opportunities as they present themselves.
Class A Units were negative 7.89% in March 2007 resulting in a Net
Asset Value per unit of $1,702.45 as of March 31, 2007.
Class I Units were negative 7.63% resulting in a Net Asset Value per
unit of $1,854.33 as of March 31, 2007.
The Fund experienced losses in March as the explosion in volatility
that occurred at the end of February continued into early March. On
February 27th, the largest drop in China s stock market in a decade
and the global sell-off that followed seemed to shift market sentiment
towards fears about the slowdown in the U.S. housing market and the
overall health of the U.S. economy. The sudden reappearance of risk
in the world financial markets caused losses in various sectors as the
Fund s systematic trading approach was not positioned for this sudden
turn of events. The currency, metal and agriculture sectors all
suffered losses at the beginning of the month as sharp reversals, which
carried over from February, led to the exiting of positions. The
markets quickly stabilized and spent the remainder of the month retracing
their overextended moves. Performance suffered even further towards
the end of the month as global fixed-income markets weakened. The
energy sector was positive for the month as weather and geopolitical
events were the driving forces of price movements.
In conclusion, the Fund s performance was negative for the month as
the drop in global equity markets, which increased volatility in financial
markets around the world, carried over into the first few days of March.
The Fund s systematic trend following methodology caused it to exit
positions during this difficult turn of events. Short-term market
dislocations can be a harbinger of a major shift in trends. However,
the dislocation of the markets thus far has been a short-lived
phenomenon, resulting in a temporary spike in volatility. The Fund
will continue to apply our disciplined systematic trading approach to
potentially take advantage of new opportunities as they present themselves.
See Note 5 of the Notes to Financial Statements for procedures
established by the General Partner to monitor and minimize market and
credit risks for the Partnership. In addition to the procedures set out
in Note 5, the General Partner reviews on a daily basis reports of the
Partnership's performance, including monitoring of the daily net asset
value of the Partnership. The General Partner also reviews the financial
situation of the Partnership's Clearing Broker on a monthly basis.
The General Partner relies on the policies of the Clearing Broker to
monitor specific credit risks. The Clearing Broker does not engage in
proprietary trading and thus has no direct market exposure, which
provides the General Partner assurance that the Partnership will not
suffer trading losses through the Clearing Broker.
Item 3. Quantitative and Qualitative Disclosures
About Market Risk
There has been no material change with respect to market risk since
the "Quantitative and Qualitative Disclosures About Market Risk" was
made in the amended Form 10K/A of the Partnership dated May 15, 2006.
Item 4. Controls and Procedures
The Company s management, including the President, based on it s
evaluationof the Company's disclosure controls and procedures as of the
end of this reporting period,June 30, 2007, have concluded that they are
effective in timely alerting them to material information relating to
the Company that is required to be included in the Company's period
filings with the Securities and Exchange Commission. There have been
no significant changes in the company's internal controls or in other
factors that could significantly affect those internal controls subsequent
to the date the company carried out its evaluation.
Part II. OTHER INFORMATION
Item 1. Legal Proceedings
A.The Partnership was a creditor of RCM in the bankruptcy case
filed in the United States Bankruptcy Court, Southern District of New York,
captioned In re Refco Inc., et al., case number 05-60006 (RDD). In December
2007, Everest Asset Management, Inc sold the remaining receivable owed to the
Everest Fund, L.P. in the Refco mater. 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 an additional $1,912,484
bringing the total recovery to $4,657,751.46 or 62.25%.
B. In October 2000, there was a discrepancy between the performance
of the BarclayFutures Index Program (BFIP) as traded for the Partnership and
the Barclay Futures Index (BFI). Certain transactions executed by Trilogy on
behalf of the Partnership resulted in a loss of approximately $520,000 that
was recorded in the statement of operations. The General Partner believes that
these transactions were not executed in accordance with the provisions
of BFIPand has demanded that Trilogy reimburse the Partnership for
the loss. The parties are currently attempting to resolve the issue.
A demand for arbitration was filed with the NFA on October 3, 2002.
Trilogy has responded to the demand for arbitration and has counterclaimed
for the amount of $130,210, together with attorney's fees, interest and costs
of suit. That figure represents the amount of management fees, otherwise
payable to Trilogy under its advisory contract, that both parties agreed
would be held as a credit to the Partnership to offset the losses. The
General Partner has a letter to that effect which was signed by the president
of Trilogy on January 29, 2001.
Clients who were in the Fund in October 2000 were sent checks in
June 2008. In most cases the checks are small amounts representing the client's
net portion of trading fees that were withheld from Trilogy Asset Management by
agreement between Trilogy & Everest for a trading discrepancy in Trilogy's
replication of the Barclay Futures Index. Since that time, Everest attempted
to recover what we believe to be a trading error and Trilogy counter claimed
for the withheld trading fees. Upon the advise of counsel, it is not prudent
to continue the matter. Trilogy is out of business and the financial condition
of the principal of the firm is such that, even in the event of an arbitration
award or judgment in our favor, it is unlikely we would collect.
The Partnership and its affiliates are from time to time parties to
various legal actions arising in the normal course of business. The General
Partner believes that there are no proceedings threatened or pending against
the Partnership or any of its affiliates which, if determined adversely,
would have a material adverse effect on the financial condition or results
of operations of the Partnership.
Item 1A. Risk Factors
There has been no material change with respect to risk factors since
the "Risk Factors" were disclosed in the Form 10K of the Partnership
dated December 31, 2007.
Item 2. Unregistered Sales of Equity Securities and Use of
Proceeds
See Part I, Statement of Changes in Partner's
Capital
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits
Exhibit Number Description of Document Page
Number
31 Certification by Chief Executive Officer
and Chief Financial Officer Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002
E- 1-2
32 Certification by Chief Executive Officer
and Chief Financial Officer Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
E - 3
b) Reports on Form 8-K
None
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the
registrant has duly caused this report to be signed on its behalf by
the
undersigned and thereunto duly authorized.
EVEREST FUND, L.P.
Date: August 14, 2008 By: Everest Asset Management, Inc., its
General Partner
By:/s/ Peter Lamoureux
-------------------------
Peter Lamoureux
President