SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10K AMENDED
Annual report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the fiscal year ended Commission File Number
December 31, 2007 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
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" or "Everest") 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, which constitute one industry
segment. 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.
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.
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.
Effective January 1, 2007 the Partnership 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 Partnership 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 Partnership.
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
$1,365,525.51. 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 Partnership since
October 12, 2005. For investors who were in the Partnership 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 Partnership after
October 2005.
During the year ended December 31, 2007, the Partnership
received an additional anticipated distribution in the Refco
matter in the amount of $1,379,747, representing approximately
18% and 46% of the original and reduced frozen asset balances,
respectively, 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, and recognized
a realized gain of $1,664,824 on the sale. This brings the
total recovery from 36.69% to 62.25% of the original frozen
asset balance, and ends the Refco recovery effort. Upon the
final sale of the Refco receivable, Class AA and II Units
were 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 Clearing 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.
Newedge Financial Inc., part of the Newedge
Group joint venture between Societe Generale and Calyon
currently acts as Everest's clearing broker.
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).
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.
The General Partner pays a portion of its fees for actual
commission charges to its Clearing Broker.
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
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.
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 A 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 December 31,2007. 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).
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 May Be Leveraged or
de-levereged.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 Partnerships allocated to it
(and thus the amount by which the Partnership's assets are
leveraged). Because the trading account may be leveraged,
(i) the Partnership may 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 Partnerships 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. Because
the trading account may be de-leveraged, the partnership
may incur smaller gains than it would if the JWH trading
program had been fully allocated.
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. Horizon is an Investment
Advisor (IA) with Power of Attorney (POA), to manage Everest
Partnership assets on deposit at Northern Trust through
investments in short term interest bearing instruments. 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.
Mandatory Closing Out of Offsetting Positions. CFTC rules
require offsetting positions taken by JWH for clients be
closed out.
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.
Partnership 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 the Partnership's futures clearing
broker Newedge becomes bankrupt, the Partnership could lose
money. In addition, even if Newedge 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 Newedge'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 1B. N/A
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.
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.
Item 3. Legal Proceedings
Neither the Partnership, nor the General Partner, is party
to any pending material legal proceeding.
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). The General Partner believes that certain transactions
executed by Trilogy Capital Management, LLC, (a Delaware
corporation, CFTC registered CTA and NFA member) were
not executed in accordance with the provisions of BFIP and
demanded that Trilogy reimburse the Partnership for losses.
The general Partner does not believe at this time that any of
the losses will be recovered. The general Partner has negotiated
a settlement with Mr. Alan R.Kaufman, President and principle
of Trilogy, that would free the General Partner to
distribute the withheld fees to the Limited Partners who
were in the Partnership in October 2000. This matter was brought
to a conclusion in the 1st quarter of 2008, and checks were
sent to all investors who were in the Partnership in October 2000
representing their pro rata share of the withheld fees that
remained in the account.
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, 1,066.54 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.
RECENT SALES OF UNREGISTERED SECURITIES IN 2007 A UNITS
2007 1st quarter 2nd quarter 3rd quarter 4th quarter
Units Sold 25.51 0 0 0
Value of Units Sold $50,000 0 0 0
RECENT SALES OF UNREGISTERED SECURITIES IN 2007 I UNITS
2007 1st quarter 2nd quarter 3rd quarter 4th quarter
Units Sold 23.78 0 0 0
Value of Units Sold $50,000 0 0 0
1% of the proceeds from the above sales were used to pay the
Partnership's Organization and Offering charge. The remaining 99%
was invested in the Partnership.
The Seventh Amended and Restated Agreement of Limited
Partnership for the Partnership contains a full description
of redemption and distribution procedures.
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. Net trading Gain* $8,249 $5,098 $165 $-1,117 $2,438
2. Interest and other income $441 $461 $988 $940 $2,323
3. Expenses $3,403 $2,632 $2,466 $6,089 $995
4. Net Income 4,846 2,466 -2,302 -7,206 3,766
5. Income (Loss)
Per Unit: A Shares 184.01 175.60 -193.95 -321.57 522.26
I Shares 0.00 365.10 -122.38 -270.57 630.86
AA Shares 0.00 0.00 -7.77 -1,342.5 2,703.69
II Shares 0.00 0.00 -8.08 -1,396.40 2,812.13
6. Total Assets 34,590 37,126 33,192 19,769 11,976
7. Long Term Obligations 0 0 0 0 0
8. Cash Dividend per Unit 0 0 0 0 0
9. Total partners capital 33,461 36,309 32,539 18,711 11,693
10. Increase/decrease in NAV 9,260 2,848 -3,770 -13,828 -7,018
* 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
We receive our capital resources from investor's contributions.
Net Asset Value of an interest is defined in the Partnership
Agreement to mean the Net Assets allocated to the capital
account represented by such interest on the date of calculation
and includes that interest's pro-rata share of all assets attributable
to that Class of units less all liabilities attributable to that Class
of units determined in accordance with the principles specified
in the Partnership Agreement or, where no principle is specified,
in accordance with U.S. generally accepted accounting principles
consistently applied under the accrual basis of accounting.
Past performance is not necessarily indicative of future results.
An investment in the partnership is speculative and involves a
substantial Risk of loss.
Off-Balance Sheet Risk
The term "off-balance sheet risk" refers to an unrecorded
potential liability that, even though it does not appear on the
balance sheet, may result in future obligation or loss. The
Partnership trades in futures and forward contracts and is therefore
a party to financial instruments with elements of off-balance sheet
market and credit risk. In entering into these contracts there
exists a risk to the Partnership, market risk, that such contracts
may be significantly influenced by market conditions, such as interest
rate volatility, resulting in such contracts being less valuable.
If the markets should move against all of the futures interests
positions of the Partnership at the same time, and if the commodity
trading advisors were unable to offset futures interest positions
of the Partnership, the Partnership could lose all of its assets and
the Limited Partners would realize a 100% loss. Everest Asset
Management, Inc., the General Partner, minimizes market risk through
diversification of the portfolio allocations to JWH, which in turn
trades a diversified portfolio, and maintenance of a margin-to-equity
ratio that rarely exceeds 30%.
In addition to market risk, in entering into futures and forward
contracts there is a risk that the counterparty will not be able to
meet its obligations to the Partnership.The counterparty for futures
contracts traded in the United States and on most foreign
exchanges is the clearinghouse associated with such exchange.
In general, clearinghouses are backed by the corporate members
of the clearinghouse who are required to share any financial
burden resulting from the non-performance by one of their
members and, as such, should significantly reduce this risk.In
cases where the clearinghouse is not backed by the clearing
members, like some foreign exchanges, it is normally backed
by a consortium of banks or other financial institutions.
In the case of forward contracts, which are traded on the
inter-bank market rather than on exchanges, the counterparty
is generally a single bank or other financial institution, rather
than a group of financial institutions; thus there may be a
greater counterparty risk. Everest Asset Management, Inc.
utilizes only those counterparties that it believes to be
creditworthy for the Partnership. All positions of the Partnership
are valued each day on a mark-to-market basis. There can be
no assurance that any clearing member, clearinghouse or
other counterparty will be able to meet its obligations to
the Partnership.
The Partnership will utilize high grade short-term commercial
paper, which is an unsecured, short-term debt instrument
issued by a corporation with maturities rarely longer than
365 days. Commercial paper is not usually backed by any
form of collateral, so only firms with high-quality debt
rating will be used. As commercial paper is not backed by
the full faith and credit of the U.S. Government, if the
issuing corporation defaults on their obligations to the
Partnership, the Partnership bears the risk of loss of the
amount expected to be received.
The Partnership has no Contractual Obligations.
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 1,066.54 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.
During 2007, investors purchased 25.51 Class A Units for
$50,000. Limited Partners purchased 23.78 Class I Units
for $50,000.
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.
See Footnote 7 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 Clearing 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 $1,997,816 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, and the share class was closed out.
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 Partnership ( 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.
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 Partnership'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 incomemarkets. The Partnership'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 Partnerships 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.
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 Partnership'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 Partnership.
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 Partnership 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.
Update on the RCM recovery effort
Second Refco Distribution (Not applicable to investors who
came into the Partnership after October 2005).
On March 29 2007, The Everest Partnership, 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, the Partnership has now
received $1,743,404.47. That represented an amount equal to
approximately 23% of the frozen assets. The Partnership
increased the Class A units for each investor in the Partnership by
their pro rata share of the distribution. Checks were mailed
for the benefit of any investors who had redeemed.
3 months ended June 30, 2007
The Partnership recorded a gain of $ 1,255,628 or $195.27
per Unit of Class A Units ($ 228.44 for Class I Units, a loss
of $8.39 for Class AA Units and a loss of $8.72 for Class II Units)
for the fiscal quarter ended June 30, 2007. This compares to a
loss of $420,650 or $77.87 per Unit of Class A Units ($64.19 for
Class I Units, .80 for Class AA Units and .84 for Class II Units)
for the fiscal quarter ended June 30, 2006. The quarter ended
June 30, 2007 showed a gain of 11.47%( total return) for the
Class A Units of the Partnership (12.32% for the Class I Units,
- -0.83% for Class AA Units and -0.83% for Class II Units).
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 Partnership's performance was essentially even for the month
of April.The Partnership'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 Partnership's best performer as various previously
range-bound currencies set historic highs and lows.
Trading Allocation
At the end of May 2007 the Partnership redeemed it's allocation
to the World Wide Bond Program and is invested 100% in the
Global Analytics Program (JWH GAP).
Class A Units were positive 0.60 % in May 2007 resulting in
a Net Asset Value per unit of $1,711.64 as of May 31, 2007.
Class I Units were positive 0.86% resulting in a Net Asset
Value per unit of $1,874.11 as of May 31, 2007.
The Partnership's performance was positive for the month of May.
The interest rate sector drove performance with strong gains as the
Partnership's disciplined systematic trend-following approach
enabled it to profit from falling bond markets in the U.S. and
Europe. The stock indices sector also added to positive
performance as better-than-expected earnings and
stronger-than-expected economic growth sent equity indexes
across the globe to new highs. The currency sector
was slightly positive for the month also as the dollar
strengthened against the Japanese yen.
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 Partnership'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 Partnership was able to
profit as its long-term trend-following approach excelled, holding
profitable positions through the market turmoil. The Partnership'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.
Update on the RCM recovery efforts (For those investors in
the Partnership in October 2005)
On June 28th, 2007 Partnership received a third distribution
From Refco in the amount of $668,172.21. That amount was
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, brought the recovery to approximately
32 cents on the dollar as of the end of June 2007.
The Partnership increased the Class A units for each investor
in the Partnership by their pro rata share of the distribution.
Checks were mailed for the benefit of any investors who have
redeemed.
3 months ended September 30, 2007
The Partnership recorded a gain of $453,710 or $ 82.25
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 $ 4,750,979 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.
The quarter ended September 30, 2007 showed a gain
of 4.33%( total return) for the Class A Units of the
Partnership (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).
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 Partnership
declined in July as many of the financial market trends
that contributed to the Partnership's second quarter gains
were significantly disrupted or ended during the month.
Although the Partnership 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
Partnerships with multiple advisors had similar declines.
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.
Partnership'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 Partnership's long-term diversified trend-
following methodology suffered losses as the market
dislocations forced the exiting of positions.
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 Partnership 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 Partnership
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 Partnership'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.
Refco Distribution (For those investors in the Partnership in
October 2005)
On September 20, 2007 Everest received another
Distribution from Refco in the amount of $342,699.06.
That amount was 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 Partnership increased the Class A units
for each investor in the Partnership by their pro rata share of
the distribution. Checks were mailed for the benefit
of any investors who had redeemed. These changes did not
apply those who have come into the Partnership after October 2005.
During the reporting period, fiscal quarter ended September
30, 2007, additional Units sold consisted of zero limited
partnership Units; there were zero general partnership
Units sold during the period. Additional Units sold during
the period represented a total of $ zero. Investors redeemed
a total of 1630.38 Units during the period and the General
Partner redeemed zero Units. At the end of the period
there were 5,298.499 Units outstanding (including zero
Units owned by the General Partner). As of September 30, 2007
the estimated Class AA NAV per unit was $989.27 and
Class II NAV per unit was $1,028.94.
During the fiscal quarter ended September 30, 2007, the
Partnership was exposed to credit risk in connection with
the bankruptcy filing by RCM, the Partnership's former
foreign currency broker.
3 months ended December 31, 2007
The Partnership recorded a gain of $3,779,436 or $459.32
per Unit of Class A Units ($ $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 Partnership'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
Partnership'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 Partnership'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.
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 Partnership'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.
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.
Refco
On December 14, 2007 Partnership received
$1,912,484 upon the sale of the remaining Refco receivable.
This brought the recovery from 36.69 cents on the dollar to
62.25 cents on the dollar and ended the Refco recovery
effort. The Partnership increased the class A units for each
investor in the Partnership by their pro-rate share, and mailed
checks for the benefit of those who have redeemed. These
changes did not apply those who have come into the Partnership
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 7 of the Financial Statements for 2007 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 7, 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 Partnershiping.
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 Partnership
(-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.
Update on the RCM recovery efforts
The Official Committee of Creditors in the Refco case
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.
Everest Asset Management, Inc. remained
available to answer any questions specific to the Everest
Partnership. The Partnership's offering documents were updated and
the Partnership received new investments in 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.
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.
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 Partnership
(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.
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.
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.
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.
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.
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.
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 Partnership (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.
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.
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).
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
Partnership; 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.
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.
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.
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.
Refco Summary for Investors in the Partnership 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, the Partnership received
$1,365,525.51. That represented an amount equal to
approximately 18% of the frozen assets. The Partnership increased
the Class A units for each investor in the Partnership by their
pro rata share of the distribution, and lowered the Class
'AA' units. This was reflected 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 2007
for the benefit of any investors who had redeemed.
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%
December 31, 2006
of Total
Market Sector Value at Risk %
Capitalization
Commodities 0.06 0.33%
Energies 0.00 0.00%
Financial Stock Indices 0.04 0.19%
Interest Rates 0.08 0.43%
Metals 0.00 0.00%
Currencies 2.38 12.71%
Total 2.56 million 13.66%
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.
THE EVEREST FUND, LIMITED PARTNERSHIP
Supplementary Summarized Quarterly Data
For the four Quarters for 2007 and 2006
March 31,2007 June 30,2007 September 30,2007 December 31,2007
Class A Class A Class A Class A
-------------- ----------- ----------------- --------------
Net Income $-1,723,615 $1,254,082 $354,753 $2,112,595
Increase in Net Asset Value
Per Unit $-214.58 $195.27 $82.25 $459.32
Net Asset Value
Per Unit $1,702.45 $1,897.72 $1,979.97 $2,439.29
Ending Net Asset
Value $11,243,513 $9,591,967 $9,203,910 $11,693,007
March 31,2006 June 30,2006 September 30,2006 December 31,2006
Class A Class A Class A Class A
-------------- ----------- ----------------- --------------
Net Income $-715,255 $-350,079 $-252,914 $-1,133,548
Increase in Net Asset Value
Per Unit $-70.29 $-77.87 $-26.08 $-146.83
Net Asset Value
Per Unit $2,167.80 $2,089.94 $2,063.85 $1,917.03
Ending Net Asset
Value $20,798,455 $17,387,895 $16,560,909 $14,785,461
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure
On September 18, 2007, Spicer Jeffries LLP resigned as The
Everest Fund, LP's principal independent accountant.
Spicer Jeffries LLP resigned due to the rules under
the Sarbanes-Oxley Act of 2002 regarding partner rotation.
Spicer Jeffries LLP will not be considered independent with
respect to the Everest Fund, LP. for the December 31, 2007
audit. The report on the financial statements prepared
by Spicer Jeffries LLP for the years ended December
31, 2006, 2005 and 2004 did not contain an adverse
opinion or a disclaimer of opinion, nor was it qualified
or modified as to audit scope or accounting
principles. During the two most recent fiscal years 2005
and 2006,and subsequent interim period through the date of
resignation - September 17,2007, we did not have any
disagreements with Spicer Jeffries LLP on any accounting
principles or practices, financial statement disclosure,
or auditing scope or procedure.
During fiscal year 2007, Everest selected the firm of Ryan
& Juraska, Cerified Public Accountants, to conduct the
2007 audit. The 2007 audited financial statements and
Form 10K were issued on March 31, 2008, which included a
report on the financial statements by Ryan & Juraska,
which did not contain an adverse opinion or a disclaimer
of opinion, nor was it qualified or modified as to audit
scope or accounting principles. Subsequent to the filing
of the 2007 Form 10K with the SEC, Everest received a
comment letter from the SEC stating that Ryan & Juraska
is not a firm registered with the PCAOB and therefore
Everest would need to file an amended 2007 Form 10K with
an audit report of a firm registered with the PCAOB.
Subsequently Everest selected the firm of McGladrey & Pullen,LLP
Independent Registered Public Accountant, to conduct the
2007 audit work related to the 2007 financial statements to
be included in the 2007 amended Form 10-K filing with the SEC.
Item 9A(T) Controls and Procedures
Explanation note
The 10K filing was incomplete due to a miscommunication between
Everest's attorneys and Everest. Management performed the
evaluation of internal control over financial reporting but failed to
complete it's report. Disclosure controls and procedures were
ineffective as the end of 2007. We are herein revising our disclosures.
valuation of Disclosure Controls and
Procedures
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 13(a)-15(e) of the Securities
Exchange Act of 1934, as amended. Any control system, no
matter how well designed and operated, can provide only
reasonable (not absolute) assurance that its objectives will be met.
Furthermore, no evaluation of controls can provide absolute
assurance that all control issues and instances of fraud, if any,
have been detected. Based on their evaluation as of December 31, 2007,
the General Partner's principal executive officer and principal
financial officer concluded that the Partnership's disclosure controls
and procedures were not effective.
Changes In Internal Control Over Financial Reporting
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.
The General Partner's management has conducted the evaluation
of the internal control over financial reporting, as required
by Exchange Act Rules 13a-15 and 15d-15.
Report on Management's Assessment of Internal Control
Over Financial Reporting
The management of the General Partner is responsible for
establishing and maintaining adequate internal control over
financial reporting by the Partnership.
The General Partner's internal control over financial reporting
is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with accounting
principles generally accepted in the United States. The Partnership's
internal control over financial reporting includes those policies and
procedures that (i) pertain to the maintenance of records that, in
reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of the Partnership; (ii) provide reasonable
assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with accounting
principles generally accepted in the United States, and that receipts
and expenditures of the Partnership are being made only in accordance
with authorizations of management of the Partnership; and (iii) provide
reasonable assurance regarding prevention or timely detection
of unauthorized acquisition, use, or disposition of the Partnership's
assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over
financial reporting may not prevent or detect misstatements. All
internal control systems, no matter how well designed, have inherent
limitations, including the possibility of human error and the
circumvention of overriding controls. Accordingly, even effective
internal control over financial reporting can provide only reasonable
assurance with respect to financial statement preparation. Also,
projections of any evaluation of effectiveness to future periods are
subject to the risk that controls may become inadequate because of
changes in conditions, or that the degree of compliance with the
policies or procedures may deteriorate.
Management assessed the effectiveness of the Partnership's internal
control over financial reporting, based on the framework set forth by
the Committee of Sponsoring Organizations of the Treadway
Commission (COSO) in Internal Control-Integrated Framework.
Based on that assessment, management concluded that, as of
December 31, 2007, the Partnership's internal control over financial
reporting was effective based on the criteria established in
Internal Control-Integrated Framework.
This annual report does not include an attestation report of
the Partnership's registered public accounting firm regarding
internal control over financial reporting. Management's report
was not subject to attestation by the company's registered public
accounting firm pursuant to temporary rules of the Securities and
Exchange Commission that permit the company to provide only
management's report in this annual report
Item 9B. Other Information.
None
Item 10. Director and Executive Officer 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 officer and director of the General Partner as of
December 31, 2007 is 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.
Financial Officer of the Registrant. Peter Ecob is the financial
officer of the General Partner.
Peter Ecob. Mr. Ecob (born in 1949) has been Financial Officer
of the General Partner since May 2002. Prior to joining the
General Partner, Mr. Ecob was Controller of Sea Mar Community
Health Centers, a non-profit health care provider in Washington State.
He received his B.A. and M.B.A. from the University of Washington
in Seattle, Washington.
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.
The General Partner is the manager of the Partnership. General Partner
receives .05% management fees monthly.
Item 12. Security Ownership of Certain Owners and
Management and Related Stockholder Matters.
(a) As of December 31, 2007 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
(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 McGladrey and Pullen, LLP, for professional
services rendered for the audit of the financial
statements included in this annual report was $20,000.
.
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) from:
McGladrey and Pullen, LLP
Spicer Jeffries, LLP
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: October 26, 2009 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: October 26, 2009
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
(Commission (State or other jurisdiction of incorporation)(IRS Employer
file number)
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
TABLE OF CONTENTS
Year Ended December 31, 2007
______________________________
Page(s)
Report of Independent Registered Public Accounting Firm
2
Financial Statements
Statement of Financial Condition
3
Condensed Schedule of Investments
4-5
Statement of Operations
6
Statement of Changes in Partners' Capital
7-8
Statement of Cash Flows
9
Notes to Financial Statements
10-21
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the General Partner of
The Everest Fund, L.P.
We have audited the accompanying statement of financial condition,
including the condensed schedule of investments, of The Everest
Fund, L.P. (the "Partnership") as of December 31, 2007, and the
related statements of operations, changes in partners' capital
(net asset value) 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 audits.
We conducted our audit in accordance with the standards of the Public
Company Accounting Oversight Board (United States).Those standards
require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audit
provides 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,
its cash flows and changes in its partners' capital (net asset value)
for the year ended December 31, 2007, in conformity with U.S. generally
accepted accounting principles.
We were not engaged to examine management's assessment of the
effectiveness of The Everest Fund, L.P. internal control over financial
reporting as of December 31, 2007, included in the accompanying
Management's Annual Report on Internal Control over Financial Reporting
and, accordingly, we do not express an opinion thereon.
/S/ McGladrey & Pullen, LLP
Chicago, Illinois
March 30, 2009
THE EVEREST FUND, L.P.
(an Iowa Limited Partnership)
STATEMENT OF FINANCIAL CONDITION
December 31, 2007
______________________________
ASSETS
2007
Equity in broker trading accounts
Cash and cash equivalents $10,886,787
Net unrealized gain on open contracts 282,372
-----------
11,169,159
Cash and cash equivalents 761,476
Interest receivable 45,406
-----------
Total assets $11,976,041
===========
LIABILITIES AND PARTNERS' CAPITAL (NET ASSETS)
Liabilities
Management fees payable 13,855
Brokerage commissions and fees payable 50,840
Accounts payable and accrued expenses 93,067
Redemptions payable 125,272
----------
283,034
----------
Partners' Capital (Net Assets)
Limited partners, A shares,
4,793.61 units outstanding 11,693,007
-----------
Total liabilities and partners'
capital (net assets) $11,976,041
===========
The accompanying notes are an integral part of these financial statements.
THE EVEREST FUND, L.P.
(an Iowa Limited Partnership)
CONDENSED SCHEDULE OF INVESTMENTS
December 31, 2007
__________________________
Unrealized
Percent of Gain (Loss)
Expiration Number Partners' On Open
Date of Contracts Capital Contracts
___________ ____________ ___________ ___________
Long U.S. Futures Contracts
Currency Dec 08 30 0.22 % $26,250
Agriculture Mar 08 189 1.65 % 192,168
Interest Rates Mar 08 59 (0.46)% (53,980)
Metals Feb08-Mar08 22 0.03 % 4,000
Energy Mar08-Apr08 50 1.58 % 184,569
-------- ---------
Total Long Futures Contracts 3.02 % 353,007
--------- ---------
Short U.S. Futures Contracts
Interest Rates Mar08-Sep08 (0.19)% (22,448)
Petroleum Mar 08 .08 % 9,250
--------- ---------
Total Short Futures Contracts (0.11)% (13,198)
--------- ---------
Total Futures Contracts 2.91 % 339,809
--------- ---------
Long U.S. Forward Contracts
Currency Mar 08 0.46 % 53,396
--------- ---------
Total Long Forward Contracts 0.46 % 53,396
--------- ---------
Short U.S. Forward Contracts
Currency Mar 08 (0.95)% (110,833)
--------- ---------
Total Short Forward Contracts (0.95)% (110,833)
--------- ---------
Total Forward Contracts (0.49)% (57,437)
--------- ---------
Total Futures and Forward Contracts 2.42 % $282,372
========== ===========
The accompanying notes are an integral part of these financial statements.
THE EVEREST FUND, L.P.
(an Iowa Limited Partnership)
STATEMENT OF OPERATIONS
Year Ended December 31, 2007
________________________
2007
-----------
Trading gains (losses)
Net gain (loss) from trading
Realized $2,590,992
Change in unrealized (46,282)
Foreign currency translation 18,975
-----------
2,563,685
Less:brokerage commissions and fees (126,081)
-----------
Net trading gain 2,437,604
-----------
Net Investment Income (loss)
Income
Interest income 628,662
Dividend income 29,098
Gain on sale of Refco receivable 1,664,824
---------
2,322,584
---------
Expenses
General Partner management fees 548,389
Advisor management fees 255,844
Professional fees 156,857
Administrative expenses 33,620
----------
Total expenses 994,710
----------
Net investment income 1,327,874
----------
Net Income $3,765,478
==========
Net income per unit of partnership interest
outstanding for the entire year:
Class A Units $522.26
Class I Units $630.86
Class AA Units $2,703.69
Class II Units $2,812.13
-----------
The accompanying notes are an integral part of these financial statements.
THE EVEREST FUND, L.P.
(an Iowa Limited Partnership)
STATEMENT OF CHANGES IN PARTNERS' CAPITAL (NET ASSETS)
Year ended December 31, 2007
________________________
Number of Net Asset
Units Amount Value Per
Class A Units Unit
---------------
Partners' Capital,December 31,2006 7,712.69 $14,785,460
Additions 25.51 50,000
Redemptions (3,520.97) (6,375,499)
Transfers between classes 576.38 1,235,725
Offering costs - (495)
Net income - 1,997,816
----------- ------------
Partners' Capital,December 31,2007 4,793.61 $11,693,007 $2,439.29
----------- ------------ ---------
Class I Units
---------------
Partners' Capital,December 31,2006 932.14 $1,930,473
Additions 23.78 50,000
Redemptions (993.87) (2,197,979)
Transfers between classes 37.95 75,760
Offering costs - (1,448)
Net income - 143,194
----------- ------------
Partners' Capital,December 31,2007 - $- $-
----------- ------------ --------
Class AA Units
---------------
Partners' Capital,December 31,2006 1,786.21 $1,792,866
Redemptions (1,066.54) (2,016,751)
Transfers between classes (719.67) (1,235,725)
Net income - 1,459,610
------------ -------------
Partners' Capital,December 31,2007 - $- $-
------------ ------------- --------
Class II Units
---------------
Partners' Capital,December 31,2006 193.97 $202,499
Redemptions (121.11) (291,597)
Transfers between classes (72.86) (75,760)
Net income 164,858
------------ -------------
Partners' Capital,December 31,2007 - $- $-
------------ ------------- --------
Total - All Units
------------------
Partners' Capital,December 31,2006 10,625.01 $18,711,298
Additions 49.29 100,000
Redemptions (5,702.49) (10,881,826)
Transfers between classes (178.20) -
Offering costs (1,943)
Net income - 3,765,478
----------- -------------
Partners' Capital, December 31, 2007 4,793.61 $11,693,007 $2,439.29
----------- ------------- ----------
The accompanying notes are an integral part of these financial statements.
THE EVEREST FUND, L.P.
(an Iowa Limited Partnership)
STATEMENT OF CASH FLOWS
Year ended December 31, 2007
________________________________
2007
----------
Operating activities
Net income $3,765,478
Adjustments to reconcile net income
to net cash provided by operating
activities:
Net change in unrealized gain (loss)
on open contracts 46,282
Decrease in receivable from Refco
Capital Markets, Ltd. 1,627,407
Decrease in interest receivable 48,680
Increase in brokerage commissions
and fees payable 50,840
Increase (Decrease) in management
fees payable (17,431)
(Decrease) in payable to the General
Partner (72,484)
Increase in accounts payable and
accrued expenses 37,305
----------
Net cash provided by operating
activities 5,486,077
-----------
Financing activities
Partner additions of units, net
offering cost 98,057
Redemptions (11,654,482)
------------
Net cash provided by (used in) financing
activities (11,556,425)
------------
Net increase (decrease) in cash and
cash equivalents (6,070,348)
------------
Cash and cash equivalents
Beginning of year 17,718,611
------------
End of year 11,648,263
============
End of year cash and cash equivalents consist of:
Cash in broker trading accounts 10,886,787
Cash and cash equivalents 761,476
------------
Cash and cash equivalents, end of year $11,648,263
=============
Supplemental schedule of noncash investing
and financing activities
Redemptions payable $125,610
=============
The accompanying notes are an integral part of these financial statements.
THE EVEREST FUND, L.P.
(an Iowa Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
Year Ended December 31, 2007
_____________________________________
1. Organization and Business
The 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 ongoing compensation fee equal
to 3% of the net asset value of Class A Units sold. The Class A Units
(retail shares) continue to be charged an initial 1% Offering and
Organization fee as a reduction to capital.
Effective June 4, 2004, the Partnership introduced a new share category,
Class I Units or Institutional Units which have an ongoing Offering and
Organization fee of 1/12 of 0.10% of the NAV per unit (as defined) per
month. The private placement 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. Effective December 31, 2007, Class I Units were
terminated.
Pursuant to the discussion in Note 4, the Partnership had Class AA and
II Units which are fully redeemed and terminated as of December 31, 2007.
2. Summary of Significant Accounting Policies
Revenue Recognition
Commodity futures contracts, forward contracts, physical commodities,
and related options are recorded on the trade-date basis and realized
gains or losses are recognized when contracts are liquidated. All
such transactions are recorded on the identified cost basis and marked
to market daily. Unrealized gains or losses on open contracts (the
difference between contract trade price and market price) are reported
in the statement of financial condition as a net unrealized gain or
toss, as there exists a right of offset of unrealized gains or losses
in accordance with the Financial Accounting Standards Board
Interpretation No. 39 - "Offsetting of Amounts Related to Certain
Contracts." Any change in net unrealized gain or loss from the preceding
period is reported in the statement of operations. Fair value of
exchange-traded contracts is based upon exchange settlement prices.
Fair value of non-exchange-traded contracts is based on third party
quoted dealer values on the Interbank market.
THE EVEREST FUND, L.P.
(an Iowa Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
Year Ended December 31, 2007
_______________________
2. Summary of Significant Accounting Policies, continued
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles 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.
Cash and Cash Equivalents
Cash equivalents represent short-term highly liquid investments with
maturities of 90 days or less at the date of acquisition. The
Partnership maintains deposits with high quality financial institutions
in amounts that are in excess of federally insured limits; however, the
Partnership does not believe it is exposed to any significant credit risk.
Redemptions Payable
Pursuant to the provisions of Statement of Financial Accounting Standards
No. 150, Accounting for Certain Financial Instruments with Characteristics
of both Liabilities and Equity ("SFAS 150"), redemptions approved by the
General Partner prior to month end with a fixed effective date and fixed
amount are recorded as redemptions payable as of month end.
Fair Value of Financial Instruments
The financial instruments held by the Company are reported in the statements
of financial condition at fair value, or at carrying amounts that approximate
fair value, due to their highly liquid nature and short-term maturity.
Foreign Currency Translation
The Partnership's functional currency is the U.S. dollar, however, it
transacts business in currencies other than the U.S. dollar. Assets and
liabilities denominated in foreign currencies are translated at the
prevailing exchange rates as of the date of the statement of financial
conditions. 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.
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.
The Partnership files U.S. federal and state tax returns. The 2004 through
2007 tax years generally remain subject to examination by U.S. federal
and most state tax authorities.
THE EVEREST FUND, L.P.
(an Iowa Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
Year Ended December 31, 2007
________________________________
2. Summary of Significant Accounting Policies, continued
Recently adopted accounting pronouncements
In April 2007 the FASB issued Interpretation No. 39-1, Amendment of FASB
Interpretation No. 39 ("FIN 39-1"). FIN 39-1 defines "right of setoff"
and specifies what conditions must be met for a derivative contract to
qualify for this right of setoff. It also addresses the applicability of
a right of setoff to derivative instruments and clarifies the circumstances
in which it is appropriate to offset amounts recognized for multiple
derivative instruments executed with the same counterparty under a master
netting arrangement and fair value amounts recognized for the right to
reclaim cash collateral (a receivable) or the obligation to return cash
collateral (a payable) arising from the same master netting arrangement
as the derivative instruments. This interpretation is effective for fiscal
years beginning after November 15, 2007. The adoption of FIN 39-1 did not
have a material impact on the Partnership's financial statements.
In January 2007, the Partnership adopted the Financial Accounting Standards
Board Interpretation No No. 48, Accounting for Uncertainty in Income Taxes
(FIN 48). FIN 48 clarifies the accounting for uncertainty in income taxes
recognized in an enterprise's financial statements in accordance with
Statement No. 109, Accounting for Income Taxes. FIN 48 prescribes a
recognition threshold and measurement attribute for the financial statement
recognition and measurement of a tax position taken or expected to be taken
in a tax return. FIN 48 also provides guidance on derecognition of tax
benefits, classification on the balance sheet, interest and penalties,
accounting in interim periods, disclosure, and transition. Adoption of FIN
48 did not have a material effect on the Partnership's financial position
or results of operations.
Recent accounting pronouncements
In March 2008, the FASB issued SFAS No. 161, Disclosure about Derivative
Instruments and Hedging Activities, an Amendment of FASB Statement No. 133
("SFAS No. 161"). SFAS No. 161 is intended to improve transparency in
financial reporting by requiring enhanced disclosures of an entity's
derivative instruments and hedging activities and their effects on the
entity's financial position, financial performance, and cash flows. SFAS No.
161 applies to all derivative instruments within the scope of SFAS No. 133.
It also applies to non-derivative hedging instruments and all hedged items
designated and qualifying as hedges under SFAS No. 133. SFAS No. 161 amends
the current qualitative and quantitative disclosure requirements for
derivative instruments and hedging activities set forth in SFAS No. 133
and generally increases the level of disaggregation that will be required in
an entity's financial statements. SFAS No. 161 requires qualitative
disclosures about objectives and strategies for using derivatives,
quantitative disclosures about fair value amounts of gains and losses on
derivative instruments, and disclosures about credit-risk related contingent
features in derivative agreements. SFAS No. 161 is effective prospectively
for financial statements issued for fiscal years and interim periods beginning
after November 15, 2008.
THE EVEREST FUND, L.P.
(an Iowa Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
Year Ended December 31, 2007
____________________________________
3. Fair Value of Financial Instruments
Effective January 1, 2008, the Partnership adopted Statement of Financial
Accounting Standard No. 157, Fair Value Measurement (SFAS 157), issued by
the FASB. SFAS No. 157 defines fair value as the price that would be
received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date and sets
out a fair value hierarchy. The fair value hierarchy gives the highest
priority to quoted prices in active markets for identical assets or
liabilities (Level 1) and the lowest priority to unobservable inputs
(Level 3). Inputs are broadly defined under SFAS 157 as assumptions
market participants would use in pricing an asset or liability.
4. 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 at 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 had
cash and open trade equity in neutral currency positions of approximately
$7,500,000 remaining at RCM at October 31, 2005.
THE EVEREST FUND, L.P.
(an Iowa Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
Year Ended December 31, 2007
__________________________
4. Receivable from Refco Capital Markets, Ltd., continued
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 at 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 were
calculated and paid on the net asset value of Class A and Class I units
only, thus segregating the assets held by RCM and the reserve established
in connection with the RCM legal proceedings.
On September 30, 2006 the Partnership reduced the value of the Class AA
and Class III assets to 40% of the amounts of assets held at RCM,
resulting in a remaining balance of $2,992,933. On December 28, 2006,
the Partnership received the first in a series of anticipated distributions
in the RCM bankruptcy of $1,365,526, representing approximately 18% and
46% of the original and reduced frozen asset balances, respectively.
Checks were mailed for the benefit of any investors who had redeemed
prior to the distribution receipt.
During the year ended December 31, 2007, the Partnership received an
additional anticipated distribution in the Refco matter in the amount
of $1,379,747, representing approximately 18% and 46% of the original
and reduced frozen asset balances, respectively, 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, and
recognized a realized gain of $1,664,824 on the sale. This brings the
total recovery from 36.69% to 62.25% of the original frozen asset
balance, and ends the Refco recovery effort. Upon the final sale of
the Refco receivable, Class AA and II Units were terminated.
5. 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 6).
THE EVEREST FUND, L.P.
(an Iowa Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
Year Ended December 31, 2007
_________________________________
5. Limited Partnership Agreement, continued
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 December 31, 2020, or upon the
occurrence of certain events, as specified in the Limited Partnership agreement.
6. Agreements and Related Party Transactions
John W. Henry & Company, Inc. (JWH) serves as the Partnership's commodity
trading advisor. 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 November 2003, the General Partner charges the Partnership a
monthly management fee equal to 0.50% of the Partnership's Class A
beginning-of-month net asset value.
Effective June 2004, the General Partner charges the Partnership a monthly
management fee equal to 0.229% of the Partnership's Class I beginning-of-month
net asset value. From the monthly management fee the General Partner deducts
the round turn trading costs and related exchange fees (between $5.80 to
$10.70 per round turn trade on domestic exchanges, and higher for foreign
exchanges) and pays the selling agents and certain other parties, if any,
up to 50% of the fee retained by the General Partner. The General Partner
may replace or add trading advisors at any time.
THE EVEREST FUND, L.P.
(an Iowa Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
Year Ended December 31, 2007
_____________________________
6. Agreements and Related Party Transactions, continued
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''). On January 2, 2008 Calyon Financial, Inc. and SNC changed
their company title to Newedge Financial, Inc. Newedge Financial, Inc. further
changed their name to Newedge USA, LLC, as a result of a merger on September
1, 2008 between Newedge Financial, Inc. and Newedge USA, LLC. 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.
The Partnership has also entered into an investment advisory agreement with
Horizon Cash Management L.L.C. ("HCM''). At December 31, 2007
approximately 89% of the partnership's capital funds was 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.
THE EVEREST FUND, L.P.
(an Iowa Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
Year Ended December 31, 2007
__________________________________
7. 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 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.
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.
In the case of forward contracts, over-the-counter options contracts or
swap contracts, which are traded on the interbank or other institutional
market rather than on exchanges, the counterparty is generally a single
bank or other financial institution, rather than a clearinghouse backed
by a group of financial institutions; thus, there likely will be greater
counterparty credit risk. The Partnership trades only with those
counterparties that it believes to be creditworthy. All positions of
the Partnership are valued each day on a mark-to-market basis. There
can be no assurance that any clearing member, clearinghouse or other
counterparty will be able to meet its obligations to the Partnership.
THE EVEREST FUND, L.P.
(an Iowa Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
Year Ended December 31, 2007
________________________________
7. Financial Instruments, Off-Balance Sheet Risks and Contingencies,
continued
The unrealized gain (loss) on open futures and forward contracts
is comprised of the following:
2007
---------------------------------------
Futures Forwards Total
--------------- ------------- --------
Gross unrealized gains $416,237 $53,396 $469,633
Gross unrealized losses (76,428) (110,833) (187,261)
--------------- ------------- ---------
Net unrealized gains (losses) $339,809 $(57,437) $282,372
=============== ============= =========
The Partnership's policy is to continuously monitor its exposure to market
and counterparty risk through the use of a variety of financial, position
and credit exposure reporting and control procedures. In addition, the
Partnership has a policy of reviewing the credit standing of each clearing
broker or counter party with which it conducts business.
The limited partners bear the risk of loss only to the extent of the net
asset value of their Partnership units.
THE EVEREST FUND, L.P.
(an Iowa Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
__________________________
8. Financial Highlights
The following financial highlights show the Partnership's financial
performance for the year ended December 31, 2007.
2007
-------------------------------------------
Class A Class I Class AA Class II
----------- ---------- --------- ---------
Total return before distributions* 27.24 % 30.46% 269.37% 269.37%
=========== =========== ========== =========
Ratio to average net assets:
Net investment income 4.76 % 5.50% 142.18% 137.56%
=========== =========== ========== =========
Management fees 7.24 % 2.32% 0.00% 0.00%
Other expenses 1.94 % 1.13% 5.83% 5.64%
----------- ----------- ---------- ---------
Total expenses 9.18 % 5.21% 5.83% 5.64%
=========== =========== ========== =========
(*) Total return is calculated for all shareholders throughout the year.
An individual shareholder's return may vary from these returns based on the
timing of share transactions.
THE EVEREST FUND, L.P.
(an Iowa Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
________________________
8. Financial Highlights, continued
Per Unit Performance:
(for unites outstanding through the entire period)
Class A Class I Class AA Class II
----------- ----------- ---------- ---------
Net asset value - December 31,2006 $1,917.03 $2,071.02 $1,003.73 $1,043.98
----------- ----------- ---------- ---------
Total income 669.70 719.70 2,784.72 2,896.41
Total expenses (147.44) (88.84) (81.03) (84.28)
----------- ----------- ---------- ---------
Increase in net assets 522.26 630.86 2,703.69 2,812.13
----------- ----------- ---------- ---------
Net asset value - December 31,2007
(before final redemptions)** $2,439.29 $2,701.88 $3,707.42 $3,856.11
=========== ========== ========== ==========
(**) Total return is calculated for all shareholders throughout the year.
An individual shareholder's return may vary from these returns based on the
timing of share transactions.
21
EVEREST FUND, L.P.
(An Iowa Limited Partnership)
FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2006,
2005 AND 2004
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, 2006 and 2005 3
Condensed Schedule of Investments, December 31, 2006 4
Condensed Schedule of Investments, December 31, 2005 5
Statements of Operations, Years Ended December 31, 2006, 2005 and 2004 6
Statements of Changes in Partners' Capital, Years Ended December
31, 2006, 2005 and 2004 7
Statements of Cash flows, Years Ended December 31, 2006, 2005 and 2004 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, including
the condensed schedules of investments, of Everest Fund, L.P.
(An Iowa Limited Partnership), ( the Partnership ) as of December
31 2006 and 2005 and the related statements of
operations, changes in partners capital and cash
flows for the years ended December 31, 2006, 2005 and 2004. 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 audits.
We conducted our audits in accordance with standards of the Public Company
Accounting Oversight Board (United States). 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 examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit
also includes 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. (An Iowa Limited Partnership) as of December
31 2006 and 2005 and the results of its operations and its
cash flows for the years ended December 31, 2006, 2005 and 2004,
in conformity with accounting principles generally accepted in
the United States of America.
/s/ SPICER JEFFRIES LLP
Greenwood Village, Colorado
March 15, 2007
EVEREST FUND, L.P.
(An Iowa Limited Partnership)
STATEMENTS OF FINANCIAL CONDITION
DECEMBER 31, 2006 DECEMBER 31, 2005
----------------- -----------------
ASSETS
Cash and cash equivalents $13,513,720 $21,483,743
Equity in commodity trading accounts:
Cash 4,204,891 4,102,121
Net unrealized trading gains on open contracts 328,654 31,920
Receivable from Refco Capital Markets, Ltd. (Note 1) 1,627,407 7,482,332
Interest receivable 94,086 92,364
----------- -----------
TOTAL ASSETS $19,768,758 $33,192,480
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
LIABILITIES:
Redemptions payable $ 898,266 $ 426,556
General partner management fee payable 72,484 120,693
Advisor's management fee payable 31,286 48,461
Accrued expenses 55,424 57,519
----------- -----------
TOTAL LIABILITIES 1,057,460 653,229
----------- -----------
PARTNERS' CAPITAL
Limited partners, A Shares (7,712.69 and 9,879.80 units
outstanding) 14,785,460 22,111,952
Limited partners, I Shares (932.14 and 1,097.97 units
outstanding) 1,930,473 2,570,984
Limited partners, AA Shares (1,786.21 and 3,008.60 units
outstanding) 1,792,866 7,059,021
Limited partners, II Shares (193.97 and 326.71 units
outstanding) 202,499 797,294
----------- -----------
TOTAL PARTNERS' CAPITAL 18,711,298 32,539,251
----------- -----------
TOTAL LIABILITIES AND PARTNERS'
CAPITAL $19,768,758 $33,192,480
=========== ===========
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, 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%
OTHER ASSETS IN EXCESS OF LIABILITIES 664,033 3.55%
----------- -----
NET ASSETS $18,711,298 100%
=========== =====
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, 2005
NUMBER OF MARKET VALUE % OF PARTNERS'
EXPIRATION DATES CONTRACTS (OTE) CAPITAL
---------------- --------- ------------ --------------
LONG POSITIONS:
FUTURES POSITIONS
Interest rates Mar 06 40 $ 113,116 0.35%
Metals Feb 06 - Jun 06 136 377,690 1.16%
Energy Mar 06 30 (768,992) -2.36%
Agriculture Mar 06 150 300,388 0.92%
Indices Mar 06 30 25,020 0.08%
----------- -----
47,222 0.15%
FORWARD POSITIONS
Currencies Mar 06 (230,040) -0.71%
----------- -----
Total long positions (182,818) -0.56%
----------- -----
SHORT POSITIONS:
FUTURES POSITIONS
Interest rates Mar 06 - Sep 06 315 25,628 0.08%
Energy Mar 06 18 29,700 0.09%
Agriculture Mar 06 284 (174,678) -0.54%
Currencies Dec 06 27 2,700 0.01%
Indices Mar 06 - Sep 06 203 (102,822) -0.32%
----------- -----
(219,472) -0.67%
FORWARD POSITIONS
Currencies Mar 06 434,210 1.33%
----------- -----
Total short positions 214,738 0.66%
----------- -----
TOTAL OPEN CONTRACTS 31,920 0.10%
CASH AND CASH EQUIVALENTS 21,483,743 66.02%
CASH ON DEPOSIT WITH BROKERS 4,102,121 12.61%
OTHER ASSETS IN EXCESS OF LIABILITIES 6,921,467 21.27%
----------- -----
NET ASSETS $32,539,251 100%
=========== =====
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, 2006, 2005 AND 2004
2006 2005 2004
----------- ---------- -----------
TRADING INCOME (LOSS)
Net realized trading gain (loss)
on closed contracts $(2,229,567) $ 1,646,959 $4,432,830
Change in net unrealized trading gain
(loss) on open contracts 296,734 (2,154,977) 492,388
Net foreign currency translation gain (loss) 18,636 (73,598) (24,707)
Brokerage Commissions (142,742) (241,988) (263,488)
----------- ---------- -----------
NET TRADING INCOME (LOSS) (2,056,939) (823,604) 4,637,023
Interest income, net of cash management fees 939,630 988,314 461,372
----------- ---------- -----------
TOTAL INCOME (1,117,309) 164,710 5,098,395
----------- ---------- -----------
EXPENSES:
General partner management fees 1,026,037 1,686,472 1,664,314
Advisor Management fees 468,353 684,696 655,104
Advisor Incentive fees -- -- 240,161
Administrative expenses 105,253 95,167 72,775
Bad debt expense 4,489,400 -- --
------------ ---------- -----------
TOTAL EXPENSES $ 6,089,043 $2,466,335 $ 2,632,354
----------- ---------- -----------
NET INCOME $(7,206,352) $(2,301,625) $2,466,041
=========== ========== ===========
NET INCOME (LOSS) PER UNIT OF PARTNERSHIP INTEREST
A SHARES, OUTSTANDING ENTIRE PERIOD $(321,07) $(193.95) $175.60
=========== ========== ===========
NET INCOME (LOSS) PER UNIT OF PARTNERSHIP INTEREST Since Inception (June 4, 2004)
I SHARES, OUTSTANDING ENTIRE PERIOD $ (270.57) $ (122.38 ) $365.10
=========== ========== ===========
NET LOSS PER UNIT OF PARTNERSHIP INTEREST
AA SHARES, OUTSTANDING SINCE OCTOBER 31, 2005 $(1,342.55) $(7.77)
=========== =========
NET LOSS PER UNIT OF PARTNERSHIP INTEREST
II SHARES, OUTSTANDING SINCE OCTOBER 31, 2005 $(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, 2006, 2005, 2004
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, 2003 14,828.99 33,459,902 938 -- -- --
Additional Units Sold 3,252.34 7,327,540 -- 35.73 50,000 25,000
Redemptions (3,190.62) (7,020,090) -- -- -- --
Transfers Between Classes (1,175.29) (2,870,615) (1,012) 1,162.53 2,870,615 1,012
Less Offering Costs -- -- -- -- (266) (13)
Net Income -- 2,459,839 74 -- 1,767 4,361
---------- ------------ -------- -------- ---------- --------
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 --
========== ============ ======== ======== ========== ========
Net asset value per unit,
January 1, 2006 $ 2,238.10 $ 2,341.59
Net profit (loss) per unit (321.07) (270.57)
------------ ----------
Net asset value per unit
December 31, 2006 $ 1,917.03 $ 2,071.02
============= ==========
UNITS LIMITED UNITS LIMITED
AA PTRS AA II PTRS II
SHARES SHARES SHARES SHARES TOTAL
-------- ---------- ------ --------- ------------
BALANCES, December 31, 2003 -- -- -- -- 33,460,840
-- -- -- -- 7,402,540
Additional Units Sold -- -- -- -- (7,020,090)
Redemptions -- -- -- -- --
Transfers Between Classes -- -- -- -- (279)
Less Offering Costs -- -- -- -- 2,466,041
Net Income -------- ---------- ------ --------- ------------
-- -- -- -- 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
======== ========== ====== ========= ============
Net asset value per unit,
January 1, 2006 $ 2,346.28 $2,440.38
Net profit (loss) per unit (1,342.55) (1,396.40)
---------- ---------
Net asset value per unit
December 31, 2006 $ 1,003.73 $1,043.98
========== =========
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, 2006, 2005, AND 2004
JANUARY 1, 2006 JANUARY 1, 2005 JANUARY 1, 2004
THROUGH THROUGH THROUGH
DECEMBER 31, 2006 DECEMBER 31, 2005 DECEMBER 31,2004
----------------- ----------------- ----------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (7,206,352) $ (2,301,625) $ 2,466,041
Adjustments to reconcile net income (loss) to net cash
(used in) operating activities:
Bad debt expense 4,489,400 -- --
Cash (102,770) 5,788,203 (5,409, 641)
Unrealized gain or loss on open commodity futures contracts (296,734) 2,181,509 (543,274)
Decrease (increase) in interest receivable (1,722) 30,495 (78,392)
Increase in receivable from Refco Capital Markets, Ltd. 1,365,526 (7,482,332) --
(Decrease) increase in incentive fees payable -- (85,111) 85,111
(Decrease) increase in management fees payable (17,175) (10,684) 2,962
Decrease in General partner management fees payable (48,209) (20,758) (1,868)
(Decrease) increase in other accrued expenses (2,097) 10,200 16,615
------------ ------------ ------------
NET CASH USED IN OPERATING ACTIVITIES (1,820,133) (1,890,103) (3,462,446)
------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Redemption of partnership units (7,449,420) (6,584,843) (7,435,360)
Sale of partnership units, net 1,299,530 5,059,723 7,402,260
NET CASH USED IN FINANCING ACTIVITIES (6,149,890) (1,525,120) (33,100)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (7,970,023) (3,415,223) (3,495,546)
CASH AND CASH EQUIVALENTS, AT BEGINNING OF YEAR 21,483,743 24,898,966 28,394,512
CASH AND CASH EQUIVALENTS, AT END OF YEAR $13,513,720 $ 21,483,743 $24,898,966
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.
Based on the estimated recovery amounts 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
being held at Refco were valued as of October 17, 2005.
This write down of $4,489,400 is a preliminary adjustment.
The estimate could also be adjusted depending upon the
outcome of the processing of valid claims in the bankruptcy
litigation. Beyond the initial recovery estimate, there are
expected to be efforts at further recoveries through litigation
against certain parties who have been identified by the
Litigation Trust Committee. No assurance can be made that
the claims processing will not result in a decrease or that
the litigation efforts will result in an increase in the
Class AA and Class II asset values.
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.
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, 2006 and 2005, JWH s
allocation was approximately $18 and $28.2 million
(including approximately $1.3 million of
notional funding), 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 Partnership also reimburses the Clearing
Brokers for all delivery, insurance,
storage or other charges incidental to trading
and paid to third parties.
The Partnership earns interest on 95% of the
Partnership ' s average monthly cash balance
on deposit with its Brokers at a rate equal to
the average 91-day Treasury Bill rate for US
Treasury Bills issued during that month.
Excluding amounts held at RCM, approximately 87%
and 98%, respectively of cash and cash
equivalents at December 31, 2006 and 2005 are
funds deposited with a commercial bank and
invested under the direction of Horizon Cash
Management, Inc. (Horizon). Horizon receives
a monthly cash management fee equal
to 1/12 of .25% (.25% annually) of the average
daily assets under management if the
accrued monthly interest income earned on the
Partnership s assets managed by Horizon
exceeds the 91-day U.S. Treasury bill rate.
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.
The Partnership has cash and open positions on
deposit in the amount of $2,402,303 as of December
31, 2006 with an interbank market maker
in connection with its trading of forward
contracts. In the event of the interbank
market maker's insolvency, recovery of the
Partnership assets on deposit may be subject
to forfeiture. In the normal course of business,
the Partnership does not require collateral
from such interbank market maker. Because
forward contracts are traded in
unregulated markets between principals, the
Partnership assumes credit risk on its entire
amount on deposit from counter party non-performance.
For derivatives, risks arise from changes in the
market value of the contracts. Theoretically,
the Partnership is exposed to a
market risk equal to the value of futures and
forward contracts purchased and unlimited
liability on such contracts sold short. As
both a buyer and seller of options, the Partnership
pays or receives a premium at the outset and
then bears the risk of unfavorable
changes in the price of the contract underlying
the option.
The Partnership s policy is to continuously monitor
its exposure to market and counterparty risk
through the use of a variety of
financial, position and credit exposure reporting
and control procedures. In
addition, the Partnership has a policy of
reviewing the credit standing of each clearing
broker or counter party with which it conducts business.
The limited partners bear the risk of loss only
to the extent of the net asset value of their
Partnership units.
The Partnership receivable from RCM of $1,627,407
represents the Partnership s receivable from RCM,
who is currently in bankruptcy.
These funds are unavailable to the Partnership
until the bankruptcy proceedings are finalized.
NOTE 5- TRADING DISCREPANCY
Effective August 1, 2000 Trilogy Capital Management,
LLC ( Trilogy ) was added as a trading advisor.
Trilogy was terminated effective June
30, 2001. Trilogy received a monthly management
fee of 0.075% (0.9% annually) of
the Partnership s month-end allocated assets as
defined and did not receive an
incentive fee.
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.
13
NOTE 5- TRADING DISCREPANCY
(concluded)
A demand for arbitration was filed with the NFA
on October 3, 2002. Trilogy has responded to the
demand for arbitration and has
counterclaimed for the amount of $130,210, together
with attorney s fees, interest
and costs of suit. That figure represents the
amount of management fees, otherwise
payable to Trilogy under its advisory contract,
that both parties agreed would
be held as a credit to the Partnership to offset
the losses. The General Partner has a
letter to that effect which was signed by the
president of Trilogy on January 29, 2001.
The General Partner anticipates a hearing in front
of an NFA arbitration panel, but no date has been
set for the hearing. At the present
time, the General Partner is unable to determine
whether any of the losses will be recovered.
NOTE 6- FINANCIAL HIGHLIGHTS
The following financial highlights show the
Partnership s financial performance for
the years ended December 31, 2006, 2005, and 2004.
This information has been derived from information
presented in the financial statements.
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%)
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I SHARES A SHARES II SHARES AA SHARES I SHARES A SHARES SHARES
2005 2005 2005 2005 2004 2004
--------- --------- --------- --------- --------- ---------
PER UNIT OPERATING PERFORMANCE (1)
Total income $ (66.82) $ (142.31) $ -- $ -- $ 407.73 $ 240.93
Total expenses (55.56) (51.64) (8.08) (7.77) (42.63) (65.33)
--------- --------- --------- --------- --------- ---------
Net increase in net asset value (122.38) (193.95) (8.08) (7.77) 365.10 175.60
Net asset value, beginning of year
(inception for I shares) 2,463.97 2,432.05 2,448.46 2,354.05 2,098.87 2,265.45
--------- --------- --------- --------- --------- ---------
Net asset value, end of year $2,341.59 $2,238.10 $2,440.38 $2,346.28 $2,463.97 $2,432.05
========= ========= ========= ========= ========= =========
SELECTED FINANCIAL STATISTICS AND RATIOS:
Total return (2) (4) (4.97%) (7.97%) (0.33%) (0.33%) 10.05% 7.78%
========= ========= ========= ========= ========= =========
Ratio to average net assets:
Trading Income (2.15%) (4.84%) 0.00% 0.00% 2.16% 10.64%
Expenses, not including incentive fees (2.37%) (2.28%) (0.33%) (0.33%) (1.40%) (2.24%)
Incentive fees (3) 0.00% 0.00% 0.00% 0.00% 0.44% (0.75%)
Total expenses (2.37%) (2.28%) (0.33%) (0.33%) (0.96%) (2.99%)
Net income (4.52%) (7.13%) (0.33%) (0.33%) 1.20% 7.64%
(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