SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly report pursuant to Section 12(b) or (g) of the
Securities Exchange Act of 1934
For the quarterly period ended September 30, 1999
Commission File Number 0-17555
EVEREST FUTURES 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.)
508 North Second St., Suite 302, Fairfield, Iowa 52556
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (515) 472-5500
Not Applicable
(Former name, former address and former fiscal year, if changed since
last report.)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Following are Financial Statements for the fiscal quarter ending September 30,
1999
Fiscal Quarter Year to Date Fiscal Year Fiscal Quarter Year to Date
Ended 9/30/99 to 9/30/99 Ended 12/31/98 Ended 9/30/98 to 9/30/98
-------------- ------------ -------------- -------------- ------------
Statement of
Financial Condition X X
Statement of
Operations X X X X
Statement of Changes
in Partners' Capital X
Statement of
Cash Flows X X
Notes to Financial
Statements X
EVEREST FUTURES FUND, LP
COMBINED STATEMENTS OF FINANCIAL CONDITION
UNAUDITED
Sep 30, 1999 Dec 31, 1998
------------ ------------
ASSETS
Cash and cash equivalents 36,455,940 46,220,386
Equity in commodity trading accounts:
Amount Due from broker 13,933,653 4,919,607
Net unrealized trading gains on open contracts (1,354,339) 5,802,585
Interest receivable 406,797 277,999
------------ ------------
TOTAL ASSETS 49,442,051 57,220,577
------------ ------------
------------ ------------
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Accrued expenses 24,750 27,364
Commissions payable 222,366 225,131
Advisor's management fee payable 162,881 188,693
Advisor's incentive fee payable 0 0
Redemptions payable 870,502 1,024,873
Deferred Partnership offering proceeds 0 0
Selling and Offering Expenses Payable 8,302 0
------------ ------------
Total liabilities 1,288,802 1,466,061
Minority Interest 517,186 556,759
Partners' Capital:
Limited partners (23,566.17 and 25,378.05 units 47,238,190 54,769,377
outstanding at 9/30/99 and 12/31/98, respectively)
(see Note 1)
General partners (198.49 units and 198.49 units 397,873 428,380
------------ ------------
outstanding at 9/30/99 and 12/31/98, respectively)
(see Note 1)
Total partners' capital 47,636,063 55,197,757
------------ ------------
TOTAL LIABILITIES, MINORITY INTEREST,
AND PARTNERS' CAPITAL $ 49,442,051 $ 57,220,577
------------ ------------
------------ ------------
Net asset value per outstanding unit of Partnership
interest $ 2,004.49 $ 2,158.14
------------ ------------
------------ ------------
This Statement of Financial Condition, in the opinion of management, reflects
all adjustments necessary to fairly state the financial condition of Everest
Futures Fund. (See Note 6)
EVEREST FUTURES FUND, L.P.
COMBINED STATEMENTS OF OPERATIONS
FOR THE PERIOD JANUARY 1, 1999
THROUGH SEPTEMBER 30, 1999
UNAUDITED
JUL 1, 1999 JAN 1, 1999 JUL 1, 1998 JAN 1, 1998
THROUGH THROUGH THROUGH THROUGH
SEP 30, 1999 SEP 30, 1999 SEP 30, 1998 SEP 30, 1998
-------------- ------------- ------------ ------------
REVENUES
Gains on trading of commodity futures and forwards contracts, physical
commodities and related options:
Realized gain (loss) on closed positions (62,611) 5,440,850 264,024 (3,253,535)
Change in unrealized gain (loss)
on open positions (6,169,002) (7,079,674) 15,053,132 11,538,732
Net foreign currency translation gain (loss) 66,909 (1,768) (15,801) (170,932)
Brokerage Commissions (799,610) (2,344,513) (663,098) (1,870,637)
-------------- ------------- ------------ ------------
Total trading income (loss) (6,964,315) (3,985,104) 14,638,257 6,243,629
Interest income, net of cash management fees 674,916 1,857,680 639,049 1,693,603
-------------- ------------- ------------ ------------
Total income (loss) (6,289,399) (2,127,425) 15,277,306 7,937,232
GENERAL AND ADMINISTRATIVE EXPENSES
Advisor's management fees 512,059 1,555,734 492,948 1,273,395
Advisor's incentive fees 0 0 745,531 745,531
Administrative expenses 13,981 65,857 (129,248) (148,673)
-------------- ------------- ------------ ------------
Total general and administrative expenses 526,040 1,621,590 1,109,230 1,870,252
Minority Interest 0 0 (143,987) (59,739)
-------------- ------------- ------------ ------------
NET INCOME (LOSS) (6,815,439) (3,749,015) 14,024,089 6,007,241
-------------- ------------- ------------ ------------
-------------- ------------- ------------ ------------
PROFIT (LOSS) PER UNIT OF
PARTNERSHIP INTEREST ($ 284.10) ($ 153.65) $ 557.71 $ 181.78
-------------- ------------- ------------ ------------
-------------- ------------- ------------ ------------
(see Note 1) (see Note 1)
This Statement of Operations, in the opinion of management, reflects all
adjustments necessary to fairly state the financial condition of Everest Futures
Fund. (See Note 6)
EVEREST FUTURES FUND, LP
COMBINED STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
FOR THE PERIOD JANUARY 1, 1999 THROUGH SEPTEMBER 30, 1999
UNAUDITED
LIMITED GENERAL
UNITS* PARTNERS PARTNERS TOTAL
----------- ------------ ------------- -------------
Partners' capital at Jan 1, 1999 25,378.05 54,769,377 $ 428,380 $ 55,197,757
Net profit (loss) (3,718,509) (30,507) (3,749,015)
Additional Units Sold 1,563.10 3,283,255 0 3,283,255
(see Note 1)
Redemptions (see Note 1) (3,374.97) (7,095,933) 0 (7,095,933)
----------- ------------ ------------- -------------
Partners' capital at September 30, 1999 23,566.18 $ 47,238,190 $ 397,873 $ 47,636,063
----------- ------------ ------------- -------------
----------- ------------ ------------- -------------
Net asset value per unit
January 1, 1999(see Note 1) 2,158.14 2,158.14
Net profit (loss) per unit (see Note 1) (153.65) (153.65)
------------ -------------
Net asset value per unit
September 30, 1999 $ 2,004.49 $ 2,004.49
* Units of Limited Partnership interest
This Statement of Changes in Partners' Capital, in the opinion of management,
reflects all adjustments necessary to fairly state the financial condition of
Everest Futures Fund (See Note 6)
EVEREST FUTURES FUND, LP
COMBINED STATEMENTS OF CASH FLOWS
UNAUDITED
JAN 1, 1999 JAN 1, 1998
THROUGH THROUGH
SEP 30, 1999 SEP 30, 1998
--------------- ------------
Net profit (loss) (3,749,015) (8,016,849)
Adjustments to reconcile net profit
(loss) to net cash provided by
(used in) operating activities:
Change in assets and liabilities:
Unrealized gain (loss) on open
futures contracts 7,156,924 3,550,344
Interest receivable (128,798) (29,596)
Decrease (Increase) in commodity trading accounts (9,014,046) (4,981,281)
Accrued liabilities (31,190) (387,408)
Redemptions payable (154,371) 254,219
Deferred Offering Proceeds 0 (633,394)
Selling and Offering Expenses Payable 8,302 (2,591)
Increase in minority interest (39,573) 45,752
--------------- ------------
Net cash provided by (used in)
operating activities (5,951,768) (10,200,804)
Cash flows from financing activities:
Units Sold 3,283,255 15,615,013
Partner redemptions (7,095,933) (3,393,475)
--------------- ------------
Net cash provided by (used in)
financing activities (3,812,678) 12,221,538
--------------- ------------
Net increase (decrease) in cash (9,764,446) 2,020,734
Cash at beginning of period $ 46,220,386 31,204,067
--------------- ------------
Cash at end of period $ 36,455,940 $33,224,801
--------------- ------------
--------------- ------------
This Statement of Cash Flows, in the opinion of management, reflects all
adjustments necessary to fairly state the financial condition of Everest Futures
Fund. (See Note 6)
EVEREST FUTURES FUND, L.P.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
(1) GENERAL INFORMATION AND SUMMARY
Everest Futures Fund, L.P. (the "Partnership") is a limited partnership
organized on June 20, 1988 under the Iowa Uniform Limited Partnership Act. The
business of the Partnership is the speculative trading of commodity futures
contracts and other commodity interests, including forward contracts on foreign
currencies ("Commodity Interests") either directly or through investing in
other, including subsidiary, partnerships, funds or other limited liability
entities. The Partnership commenced its trading operations on February 1, 1989
and its general partner is Everest Asset Management, Inc. (the "General
Partner") a Delaware corporation organized in December 1987.
The Partnership was initially organized on June 20, 1988 under the name Everest
Energy Futures Fund, L.P. and its initial business was the speculative trading
of Commodity Interests, with a particular emphasis on the trading of
energy-related commodity interests. However, effective September 12, 1991, the
Partnership changed its name to "Everest Futures Fund, L.P." and at the same
time eliminated its energy concentration trading policy. The Partnership
thereafter has traded futures contracts and options on futures contracts on a
diversified portfolio of financial instruments and precious metals and trades
forward contracts on currencies.
The public offering of the Partnership's units of limited partnership interest
("Units") commenced on or about December 6, 1988. On February 1, 1989, the
initial offering period for the Partnership was terminated, by which time the
Net Asset Value of the Partnership was $2,140,315.74. Beginning February 2,
1989, an extended offering period commenced which terminated on July 31, 1989,
by which time a total of 5,065.681 Units of Limited Partnership Interest were
sold. Effective May, 1995 the Partnership ceased to report as a public offering.
On July 1, 1995 the Partnership recommenced the offering of its Units as a
Regulation D, Rule 506 private placement, which continues to the present with a
total of $56,302,340.30 for 31,293.67 Units sold July 1, 1995 through September
30, 1999.
On February 29, 1996, the Partnership amended its Agreement of Limited
Partnership permitting the Partnership to conduct its trading business by
investing in other partnerships and funds and in subsidiary partnerships or
other limited liability entities. Effective the close of business on March 29,
1996, the Partnership invested all of its assets in another limited partnership,
Everest Futures Fund II L.P. ("Everest II" or the "Trading Partnership"), a
Delaware limited partnership in which the Partnership is the sole limited
partner. As a result, the Partnership does not currently invest directly in
Commodity Interests. Instead, the Partnership transferred all of its assets to
Everest II in return for its Everest II limited partnership interest. Everest II
invests directly in Commodity Interests through John W. Henry & Company, Inc.
("JWH"), an independent commodity trading advisor which had hitherto been the
advisor to the Partnership.
Everest II has two general partners, Everest Asset Management, Inc., the current
General Partner of the Partnership and CIS Investments, Inc. ("CISI"), which is
a wholly-owned subsidiary of Cargill Investor Services, Inc., the former
clearing broker of the Partnership and now the clearing broker for Everest II
(the "Clearing Broker"). CIS Financial Services, Inc. ("CISFS"), an affiliate of
the Clearing Broker, acts as the Partnership's currency dealer. CISI and the
General Partner are both registered with the CFTC as commodity pool operators
and are members of the NFA in such capacity.
On September 13, 1996 the Securities and Exchange Commission accepted for filing
a Form 10 -- Registration of Securities for the Partnership. Public reporting of
Units of the Partnership sold as a private placement commenced at that time and
has continued to the present.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying financial statements are prepared on a combined basis and
include the accounts of Everest Futures Fund, L.P. and Everest Futures Fund II,
L.P. All significant intercompany transactions and balances have been eliminated
in the accompanying combined financial statements
Cash Equivalents
Cash equivalents represent short-term highly liquid investments with maturities
of three months or less at time of purchase 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. 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.
Revenue Recognition
Realized and unrealized trading gains and losses on commodity and forward
contracts, which represent the difference between cost and selling price or
quoted market value, are recognized currently. All trading activities are
accounted for on a trade-date basis.
Deferred Partnership Offering Proceeds
Proceeds received during the month from the continuing offering of the
Partnership's units of limited partnership interest are deferred pending
investment on the first day of the following month.
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.
Income Taxes
Income taxes are not provided for by the Partnership because taxable income of
the Partnership is includable in the income tax returns of the partners.
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 increase and decrease in net assets from operations
during the period. Actual results could differ from those estimates.
Reclassifications
Certain reclassifications of prior year amounts have been made to conform with
the current year presentation.
Minority Interest
Minority interest represents CISI's interest in the Trading Partnership.
(3) THE LIMITED PARTNERSHIP AGREEMENT
The Limited Partners and General Partner share in the profits and losses of the
Partnership in proportion to the number of Units or Unit equivalents held by
each. However, no Limited Partner is liable for obligations of the Partnership
in excess of his or her capital contribution and profits, if any, and such other
amounts as he may be liable for pursuant to the Iowa Uniform Limited Partnership
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; however, the General Partner has delegated complete trading authority
to an unrelated party (note 4).
The Trading Partnership bears all expenses incurred in connection with its
trading activities, including commodity brokerage commissions and fees payable
to the trading advisor, as well as legal, accounting, auditing, printing,
mailing and extraordinary expenses. The Partnership bears all of its
administrative expenses.
Limited Partners may cause any or all of their Units to be redeemed as of the
end of any month at net asset value on ten days' prior written notice. The
Partnership will be dissolved at December 31, 2020, or upon the occurrence of
certain events, as specified in the Limited Partnership Agreement.
(4) OTHER AGREEMENTS
All Commodity Interests trading decisions for the Trading Partnership are made
by JWH. JWH receives from the Trading Partnership a monthly management fee equal
to 0.33% (4% annually) of the Trading Partnership's month-end net asset value,
as defined, and a quarterly incentive fee of 15% (20% prior to April 1, 1995) of
the Trading 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 Trading Partnership.
The Clearing Broker charges the Trading Partnership monthly brokerage
commissions equal to 0.50% (1.0833% prior to April 1, 1995) of the Trading
Partnership's beginning-of-month net asset value, as defined. Effective November
1, 1995, the General Partner receives a management fee from the Clearing Broker
of approximately 83% of the brokerage commission charged by the Clearing Broker.
Prior to November 1, 1995, no management fee was received by the General
Partner. From this management fee, CISI receives a co-general partner fee from
the General Partner equal to 1/12 of .25% of the month-end net asset value, as
defined.
A portion of assets are deposited with a commercial bank and invested under the
direction of Horizon Cash Management, Inc. ("Horizon"). Horizon will receive a
monthly cash management fee equal to 1/12 of .25% (.25% annually) of the average
daily assets under management if the accrued monthly interest income earned on
the Partnership's assets managed by Horizon exceeds the 91-day U.S. Treasury
bill rate.
(5) FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK
The Partnership was formed to speculatively trade commodity interests. The
Partnership's commodity interest transactions and related cash balances are on
deposit with the Clearing Broker or CIS Financial Services, Inc. ("CISFS" or
"Forwards Currency Broker" and collectively, the "Brokers") at all times. In the
event that volatility of trading of other customers of the Brokers impaired the
ability of the Brokers to satisfy the obligations to the Partnership, the
Partnership would be exposed to off-balance sheet risk. Such risk is defined in
Statement of Financial Accounting Standards No. 105 (SFAS 105) as a credit risk.
To mitigate this risk, the Clearing Broker, pursuant to the mandates of the
Commodity Exchange Act, is required to maintain funds deposited by customers,
relating to futures contracts in regulated commodities, in separate bank
accounts which are designated as segregated customers' accounts. In addition,
the Clearing Broker has set aside funds deposited by customers relating to
foreign futures and options in separate bank accounts which are designated as
customer secured accounts. Lastly, the Clearing Broker is subject to the
Securities and Exchange Commission's Uniform Net Capital Rule which requires the
maintenance of minimum net capital at least equal to 4% of the funds required to
be segregated pursuant to the Commodity Exchange Act. The Clearing Broker and
Forwards Currency Broker both have controls in place to make certain that all
customers maintain adequate margin deposits for the positions which they
maintain at each Broker. Such procedures should protect the Partnership from the
off-balance sheet risk as mentioned earlier. Neither the Clearing Broker or
the Forwards Currency Broker engage in proprietary trading and thus have no
direct market exposure.
The counterparty of the Partnership for futures contracts traded in the United
States and most non-U.S. exchanges on which the fund trades is the Clearing
House associated with the exchange. In general, Clearing Houses are backed by
the membership and will act in the event of nonperformance by one of its members
or one of the members' customers and as such should significantly reduce this
credit risk. In the cases where the Partnership trades on exchanges on which the
Clearing House is not backed by the membership, the sole recourse of the
Partnership for nonperformance will be the Clearing House. The Forwards Currency
Broker is the counterparty for the Partnership's forwards transactions. CISFS
policies require that they execute transactions only with top rated financial
institutions with assets in excess of $100,000,000.
The Partnership holds futures and futures options positions on the various
exchanges throughout the world and forwards positions with CISFS which transacts
with various top rated banks throughout the world. As defined by SFAS 105,
futures and foreign currency contracts are classified as financial instruments.
SFAS 105 requires that the Partnership disclose the market risk of loss from all
of its financial instruments. Market risk is defined as the possibility that
future changes in market prices may make a financial instrument less valuable or
more onerous. If the markets should move against all of the futures positions
held by the Partnership at the same time, and if the markets moved such that the
trading advisor was unable to offset the futures positions of the Partnership,
the Partnership could lose all of its assets and the partners would realize a
100% loss. The Partnership has a contract with one trading advisor who makes the
trading decisions on behalf of the Partnership. That trading advisor trades a
program which is diversified among the various futures contracts in the
financials and metals group on exchanges both in the U.S. and outside the U.S.
Such diversification should greatly reduce this market risk. Cash was on deposit
with the Clearing Broker in each time period of the financial statements which
exceeded the cash requirements of the Commodity Interests of the Partnership.
The following chart discloses the dollar amount of the unrealized gain or loss
on open contracts related to Commodity Interests for the Partnership as of
September 30, 1999:
COMMODITY GROUP UNREALIZED GAIN/(LOSS)
- --------------- ----------------------
FOREIGN CURRENCIES 546,400
STOCK INDICES (77,618)
METALS (2,147,350)
INTEREST RATE INSTRUMENTS 324,229
------------
TOTAL (1,354,339)
The range of maturity dates of these exchange traded open contracts is December
of 1999 to September of 2000. The average open trade equity for the period of
January 1, 1999 to September 30, 1999 was $3,409,851.
The margin requirement at September 30, 1999 was $6,039,422. To meet this
requirement, the Partnership had on deposit with the Clearing Broker $4,896,994_
in segregated funds, $2,427,236 in secured funds and $5,255,084 in non-regulated
funds.
(6) FINANCIAL STATEMENT PREPARATION
The interim financial statements are unaudited but reflect all adjustments that
are, in the opinion of management, necessary for a fair statement of the results
for the interim periods presented. These adjustments consist primarily of normal
recurring accruals. These interim financial statements should be read in
conjunction with the audited financial statements of the Partnership for the
year ended December 31, 1998, as filed with the Securities and Exchange
Commission on March 29, 1999, as part of its Annual Report on Form 10-K.
The results of operations for interim periods are not necessarily indicative of
the operating results to be expected for the fiscal year.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATION
FISCAL QUARTER ENDED SEPTEMBER 30, 1999
The Partnership recorded a loss of $6,815,439 or $284.10 per Unit for the third
quarter of 1999. This compares to a gain of $14,024,089 or $557.71 per Unit for
the third quarter of 1998.
In the first month of the quarter the Partnership posted a loss resulting
primarily from excessive volatility in the currency markets. The Partnership
posted a small loss during the second month of the quarter due in part to long
positions held in global interest rates and in the Japanese Nikkei stock index.
During the third month of the quarter, the Partnership surrendered profits due
to rapidly escalating gold prices and the Partnership's short gold positions.
Overall, the third quarter of fiscal 1999 ended negatively for the Partnership
accounts managed by JWH. At September 30, 1999, John W. Henry & Company, Inc.
was managing 100% of the Partnership's assets using its Financial and Metals
Portfolio.
The Partnership posted a loss for July, largely due to excessive volatility in
the currency markets. After gaining value versus the world's currencies for
several weeks, the U.S. dollar ran out of steam by the mid-month. As a result,
the Partnership posted losses from long Dollar positions against the Euro, Swiss
franc and Japanese yen. The decline of the Dollar continued through month end,
which prompted short Dollar positions to be established.
Losses in the currency markets wiped out smaller gains that came from global
interest rates and metals. Short positions in the 10-year and 30-year U.S. bonds
provided profits as the long bond yield rose above 6.1%. The Partnership's
strongest gains in this sector came from Europe where interest rates continued
to rise. Profits were earned from short positions in the Euro Bund, Euro Bobl
and U.K. Gilt. Likewise, the Partnership continued to profit from its short
positions in the gold market as the price of gold fell to its lowest level in 20
years; $253.70 per troy ounce. All in all, the Partnership posted a loss of
$1,303,556 or $54.31 per Unit in July.
In August, the Trust posted another small loss. Gains for the Partnership were
the result of a weaker U.S. dollar, versus the Yen and Euro specifically. Lower
gold prices also provided gains. Unfortunately, these gains were offset by
losses in global interest rates and the Japanese Nikkei stock index. Long
positions in the Japanese stock index (the Nikkei) that have been profitable for
the entire year were closed out and small losses were recorded during August.
Currencies provided some resurrection in the form of a stronger Yen and Euro
versus the U.S. dollar. Since mid-July, the Partnership held profitable long
positions in the Yen and Euro looking for these currencies to strengthen against
the Dollar. Gold prices again plummeted through a 20-year low to $253.00 per
troy ounce. Notwithstanding these gains, the Partnership posted a loss of
$1,839,009 or $77.17 per Unit in August.
The Partnership had a difficult time in the markets during September. Losses
were primarily attributable to our short gold position, as the price rose over
$50 per ounce. The price of gold escalated rapidly after 15 European central
banks announced that they wouldn't sell or lease additional gold for the next
five years.
Unfortunately, gains in the Japanese Yen were offset by losses in gold, as well
as short positions in the U.S. and Japanese bond markets. Currencies provided
small gains as the Japanese yen strengthened against the U.S. dollar for the
second consecutive month. In addition, long yen positions were profitable
relative to the European currencies. Notwithstanding these gains, the
Partnership posted a loss of $3,672,875 or $152.62 per Unit in September.
During the quarter, additional Units sold consisted of 508.75 limited
partnership units; there were no general partnership units sold during the
quarter. Additional Units sold during the quarter represented a total of
$1,078,097.46. Investors redeemed a total of 746.38 Units during the quarter. At
the end of the quarter there were 23,566.17.80 Units outstanding (including
198.49 Units owned by the General Partner).
As of September 30, 1999, the Partnership had a balance of $5,255,084 on deposit
with CISFS. CISFS is an affiliate of the Clearing Broker and is the broker for
the Partnership on forwards contracts in foreign currencies. Forward currency
contracts are defined as over-the-counter and require separate disclosure should
the total exposure to any entity dealing in over-the-counter products exceed
10%. The balance on deposit at CISFS represents 10.63% of the total assets of
the Partnership and requires this separate disclosure as an off balance sheet
credit risk to the Partnership.
See Footnote 5 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 5, the General
Partner reviews on a daily basis reports of the Partnership's performance,
including monitoring of the daily net asset value of the Partnership. The
General Partner also reviews the financial situation of the Partnership's
Clearing Broker on a monthly basis. The General Partner relies on the policies
of the Clearing Broker to monitor specific credit risks. The Clearing Broker
does not engage in proprietary trading and thus has no direct market exposure
which provides the General Partner assurance that the Partnership will not
suffer trading losses through the Clearing Broker.
Year 2000 Issue
CIS surveyed major applications in 1996 to see if they were Year 2000 compliant.
Systems identified with Year 2000 issues were targeted for replacement or
modification. Replacement and modification projects are nearly complete. In
addition, CIS has dedicated resources to assess our work processes and verify
that it will be able to handle the changes in the next millennium. This process
addresses software applications as well as key vendor, bank and customer
relationships.
During 1997, CIS participated in developing the industry-wide test plan with the
Futures Industry Association, with whom it continues to work closely. CIS has
participated in BETA testing, which began in September 1998, and participated
again with the FIA in "street wide" testing during the second quarter of 1999.
In addition, CIS has developed various "contingency plans" in the event that
mission critical systems should fail.
CIS is taking this issue seriously and has a goal of maintaining reasonable
procedures in order to eliminate as much risk as possible to its customers
(including the Partnership), its counterparties and itself. Despite the best
efforts of CIS, CISFS and CISI, there can be no assurance that the above steps
will be sufficient or that all potential problems have been identified in order
to avoid any adverse impact to the Partnership. CIS and its affiliates make no
representations or warrants related to Year 2000 readiness or compliance,
including but not limited to business interruption, whether from failures in
their own computer systems, those of the Advisors, or any other third party.
FISCAL QUARTER ENDED SEPTEMBER 30, 1998
The Partnership recorded a gain of $14,024,089 or $557.71 per Unit for the third
quarter of 1998. This compares to a gain of $3,228,396 or $229.44 per Unit for
the third quarter of 1997.
The Partnership suffered losses during the first month of the quarter largely as
a result of losses in interest rates and stock indices. During the second and
third months of the quarter, the Partnership experienced solid gains in interest
rates and smaller gains in currencies and stock indices. At September 30, 1998,
John W. Henry & Company, Inc. was managing 100% of the Partnership's assets
using its Financial and Metals Portfolio.
In July, the Partnership incurred losses as unprofitable positions in interest
rates and stock indices offset moderate gains in metals. The price of gold
declined at month end along with the Japanese yen's fall in world markets; gold
and the Japanese yen have moved in lockstep since early June, reflecting the
diminishing demand for gold as the region's economies retract. Gains in
long-term European bond markets failed to offset losses in other long-term
interest rates traded. The Partnership recorded a loss of $587,513 or $23.68 per
Unit in July.
In August the Partnership posted solid gains, led by profitable positions in
global interest rates. Leading gains in the bond
market were positions in German and U.S. bonds, which benefited from
investors' flight to quality during the month, and the Japanese Government
bond, where the yield on the benchmark 10-year bond dropped to 1.105%, a
historic low. The U.S. dollar made little progress against the Japanese yen
as Japanese officials renewed their threats of intervention in the currency
markets. The Partnership recorded a gain of $7,082,890 or $286.39 per Unit in
August.
In September, the Partnership recorded gains as profitable positions in interest
rates and smaller gains in currencies and stock indices offset losses in metals.
Except for Australian bonds, which reflected the uncertainty of an upcoming
election in that country, positions in all interest rates traded were
profitable. Gains were strongest in German, U.S. and Japanese government bonds;
in all three markets, yields declined to historic levels. Profitable positions
in the German mark and Swiss franc and smaller gains in the British pound offset
losses in other currencies traded. Positions in gold and silver resulted in
losses as prices of both metals rose. The Partnership recorded a gain of
$7,528,712 or $295.00 per Unit in September.
During the quarter, additional Units sold consisted of 1,195.09 limited
partnership units; and 7.89 general partnership units. Additional Units sold
during the quarter represented a total of $2,362,087. Investors redeemed a total
of 493.11 Units during the quarter. At the end of the quarter there were
25,513.77 Units outstanding (including 260.11 Units owned by the General
Partner).
During the fiscal quarter ended September 30, 1998, the Partnership had no
credit exposure to a counterparty which is a foreign commodities exchange or to
any counterparty dealing in over the counter contracts which was material.
FISCAL QUARTER ENDED JUNE 30, 1999
The Partnership recorded a gain of $6,901,733 or $281.62 per Unit for the second
quarter of 1999. This compares to a loss of $4,450,695 or $193.22 per Unit for
the second quarter of 1998.
In the first month of the quarter the Partnership posted a gain resulting
primarily from a rising Japanese stock market and continued appreciation of the
U.S. Dollar versus the Euro and Swiss Franc. The Partnership posted a gain
during the second month of the quarter resulting primarily from the declining
price of gold and the continued decline of the Euro currency. During the third
month of the quarter, the partnership posted a gain as it continued to benefit
from the freefall in gold prices and the declining Euro currency. Overall, the
second quarter of fiscal 1999 ended positively for the Partnership accounts
managed by JWH. At June 30, 1999, John W. Henry & Company, Inc. was managing
100% of the Partnership's assets using its Financial and Metals Portfolio.
In April, currencies were the most favorable sector for the Partnership. The
continued flight to quality to the U.S. dollar provided opportunities for the
Partnership to profit from long U.S. dollar positions versus the Euro and Swiss
franc. As the conflict in Kosovo persisted, the flow of money into the U.S.
dollar continued. Trading in the Japanese yen and Australian dollar was also
profitable. Confidence in the Japanese stock market restored performance in the
Nikkei 225 as the index was up approximately 20% year to date. A long position
in the Nikkei helped the Partnership generate profits as did long positions in
the S&P 500 Index and Hang Seng Index.
During April, the unprofitable trading sectors were primarily interest rates and
precious metals. As Europe cut interest rates mid-month, the Fund's position
went from short to long. Short U.S. bond positions generated a small profit by
month end. Short gold positions were also unprofitable. In the interim, this
position turned profitable as the United Kingdom decided to sell off over
50% of its gold reserves putting severe pressure on the price of gold. All in
all, the Partnership posted a gain of $789,066 or $32.13 per Unit in April.
In May, gold fell below $270 per ounce, a 20 year low. The Partnership benefited
from this price decline since it held short gold positions during the month. The
interest rate rumors in the US, coupled with the inflation fears caused the
continuation of the decline in the US 10-year and 30-year bonds. The Partnership
held short positions in this sector during May, resulting in profits for the
period. In addition, the Partnership held long positions in the Japanese
government bond that were profitable.
For the third consecutive month, currencies continued to provide gains for the
Partnership. Profit opportunities came from long US dollar positions versus the
Euro and Swiss franc. During May, we saw the Euro fall to its lowest level
versus the US dollar since its inception at the beginning of the year. Pressure
on the Euro surrounded the conflict in Kosovo, as investors saw the dollar as a
safe haven. Small gains also came from the Japanese yen. Overall, the
Partnership posted a gain of $2,713,185 or $110.34 per Unit in May.
In June, the rumor of the Fed raising interest rates in the US became a reality.
The Partnership's short positions in the 10-year and 30-year bonds provided
profits and strong gains were posted as European bond prices continued to erode.
A big reason was the weakening Euro, which declined 13%, depreciating in a
straight line against the U.S. dollar since its inception January 1, 1999. Short
positions in the German Bund, the German Bobl and U.K. Gilt provided the lion's
share of performance. Currencies also provided gains for the Partnership for the
fourth consecutive month. Once again, the profit opportunities came from long US
dollar positions versus the Euro and Swiss franc. Pressure on the Euro which
initially resulted from the conflict in Kosovo, also seemed attributable to
investors losing confidence in the Euro.
During June, the Partnership continued to profit from its short positions in the
gold market. Long positions in the Nikkei stock index have been profitable for
the Partnership for the entire year, as the percentage gain in this index for
1999 is 26.64%. Overall, the Partnership posted a gain of $3,399,483 or $139.15
per Unit in June.
During the quarter, additional Units sold consisted of 1,054.35 limited
partnership units; there were no general partnership units sold during the
quarter. Additional Units sold during the quarter represented a total of
$853,934. Investors redeemed a total of 954.20 Units during the quarter. At the
end of the quarter there were 23,803.80 Units outstanding (including 198.49
Units owned by the General Partner).
During the fiscal quarter ended June 30, 1999, the co-General Partner of the
trading subsidiary, CISI, experienced the following officer changes: Shaun D.
O'Brien replaced former Vice President & Treasurer Richard A. Driver; James
Clemens replaced Henry W. Gjersdal as Assistant Secretary; Lillian Lundeen
replaced Bruce H. Barnett as Assistant Secretary.
As of June 30, 1999, the Partnership had a balance of $5,740,204 on deposit with
CISFS. CISFS is an affiliate of the Clearing Broker and is the broker for the
Partnership on forwards contracts in foreign currencies. Forward currency
contracts are defined as over-the-counter and require separate disclosure should
the total exposure to any entity dealing in over-the-counter products exceed
10%. The balance on deposit at CISFS represents 10.03% of the total assets of
the Partnership and requires this separate disclosure as an off balance sheet
credit risk to the Partnership.
FISCAL QUARTER ENDED JUNE 30, 1998
The Partnership recorded a loss of $4,450,695 or $193.22 per Unit for the second
quarter of 1998. This compares to a loss of $1,677,066 or $145.22 per Unit for
the second quarter of 1997.
During the first and third months of the quarter, the Partnership experienced
losses primarily as a result of unprofitable positions in currencies, interest
rates and metals, while during the second month gains were recorded primarily
due to gains in the currency, interest rate and metals markets. At June 30,
1998, John W. Henry & Company, Inc. was managing 100% of the Partnership's
assets using its Financial and Metals Portfolio.
In April, positions in nearly all markets traded were unprofitable. Positions in
the U.S. 30-year bond and Euro dollar markets resulted in losses for interest
rate futures. Unprofitable positions in the German mark and Swiss franc offset
gains in other currencies traded. Silver prices fell following reports that a
major investment company had sold a third of its holdings. Losses in silver and
copper offset profits in gold. The Partnership recorded a loss of $3,302,362 or
$153.41 per Unit in April.
In May gains were recorded reflecting profitable positions in interest rates,
metals and currencies. The strongest gains overall came from positions in the
Japanese yen, Japanese Government bond and silver. Silver prices slumped as
investors who bought on hopes of rising value lost patience and took profits.
Gains were also recorded in positions in the Australian dollar as a nervous
market dealt with rumors of further currency devaluations in Asia; the
Australian currency fell to a 12-year low against the U.S. dollar. The
Partnership recorded a gain of $979,024 or $44.64 per Unit in May.
In June losses were recorded due largely to unprofitable positions in global
interest rates and metals. Unprofitable positions in the Japanese Government
bond led losses in global interest rates as the yield rose from record lows
following
intervention to support the yen. A marginal gain in the Japanese yen failed
to offset losses in the British pound and Swiss franc. Positions in gold and
silver also resulted in losses as the prices of both metals remained coupled
to movements in the Japanese yen. The Partnership recorded a loss of
$2,127,357 or $84.45 per Unit in June.
During the quarter, additional Units sold consisted of 4,221.68 limited
partnership units; and 36.93 general partnership units. Additional Units sold
during the quarter represented a total of $7,496,559. Investors redeemed a total
of 980.24 Units during the quarter. At the end of the quarter there were
24,803.90 Units outstanding (including 252.22 Units owned by the General
Partner).
During the fiscal quarter ended June 30, 1998, the Partnership had no credit
exposure to a counterparty which is a foreign commodities exchange or to any
counterparty dealing in over the counter contracts which was material.
FISCAL QUARTER ENDED MARCH 31, 1999
The Partnership recorded a loss of $3,835,309 or $151.17 per Unit for the first
quarter of 1999. This compares to a loss of $3,566,153 or $182.71 per Unit for
the first quarter of 1998.
In the first month of the quarter the Partnership posted a loss resulting
primarily from volatility in the currency sector as well as Japanese interest
rates. The Trust posted a gain for the second month of the quarter resulting
primarily from trading in precious metals and currencies. During the third month
of the quarter concerns about the military conflict in Kosovo mounted. As a
result the global markets experienced increased volatility, namely in precious
metals and interest rates, and the Partnership posted a small loss. Overall, the
first quarter of fiscal 1999 ended negatively for the Partnership accounts
managed by JWH. At March 31, 1999, John W. Henry & Company, Inc. was managing
100% of the Partnership's assets using its Financial and Metals Portfolio.
Currencies were the most volatile sector for the month of January; namely short
positions in the British pound and long positions in the Japanese yen. The
anxiously awaited Euro began trading and started out the year on a positive note
as short positions rendered small profits for the Partnership. The only
profitable interest rate market was in Germany where the Partnership maintained
a long German bund position, thereby taking advantage of falling German rates.
Short positions in the Japanese government bond and Australian bond positions
created losses for the Partnership. The Nikkei stock index provided the majority
of the loss in the stock indices, as short positions were unprofitable. All in
all, the Partnership posted a loss of $2,750,493 or $107.54 per Unit in January.
In February, long silver positions in the precious metals sector were profitable
and the Nikkei stock index provided gains amidst a falling and then rising
market. Currency trading rendered gains from short positions in the Euro,
British pound and Swiss franc as each currency declined against the U.S. dollar.
These gains were able to cover losses in the Australian dollar and Japanese yen.
Interest rates were the only unprofitable sector for the Partnership. The
Partnership was able to take advantage of rising interest rates in the U.S.
10-year notes and 30-year bonds. However, long Japanese government bond and
German bund positions recorded more significant losses. Overall, the Partnership
posted a gain of $331,060 or $13.35 per Unit in February.
In March, silver and gold positions were extremely volatile as the Partnership
recorded losses from long silver positions and short gold positions. Short bond
positions in Australia and in the United Kingdom were unprofitable as interest
rates in both began to rise. However, long Japanese government bond positions
were the largest loser in this sector as bond prices plummeted. Currencies were
the most favorable sector for the Partnership. A flight to quality in the U.S.
dollar has provided opportunities for the Partnership to profit from long U.S.
dollar positions versus the Euro and Swiss franc. The conflict in Kosovo has
exacerbated the crisis-related selling of the Euro and the flow of money into
the U.S. dollar. The Nikkei stock index moved sharply higher during March and
the Partnership profited from long positions. Long positions in the Australian
All-Ordinaries index were also profitable. Overall, the Partnership posted a
loss of $1,415,876 or $56.98 per Unit in March.
During the quarter, additional Units sold consisted of 658.43 limited
partnership units; there were no general partnership units sold during the
quarter. Additional Units sold during the quarter represented a total of
$1,351,224. Investors redeemed a total of 1,674.39 Units during the quarter. At
the end of the quarter there were 24,560.57 Units outstanding (including 198.49
Units owned by the General Partner).
During the fiscal quarter ended March 31, 1999, the Partnership had no credit
exposure to a counterparty which is a foreign commodities exchange or to any
counterparty dealing in over the counter contracts which was material.
FISCAL QUARTER ENDED MARCH 31, 1998
The Partnership recorded a loss of $3,566,153 or $182.71 per Unit for the first
quarter of 1998.
During the first two months of the quarter, the Partnership experienced losses
primarily as a result of unprofitable positions in currencies and interest
rates, while during the third month losses were recorded primarily due to losses
in metals positions and in the global interest rate market. At March 31, 1998,
John W. Henry & Company, Inc. was managing 100% of the Partnership's assets
using its Financial and Metals Portfolio.
In January, performance was negatively impacted by sharp reversals in Japanese
financial markets and in gold. Investor optimism over efforts to revive ailing
Asian economies boosted the Japanese yen against the U.S. dollar and gave
support to the Nikkei; positions in both resulted in losses for the Partnership.
Benign inflation news in Europe and the U.S. boosted bond markets in both
regions, resulting in gains for the Partnership. These gains were offset by
losses in stock indices and in gold prices. Overall, the Partnership recorded a
loss of $1,416,522 or $76.35 per Unit in January.
In February, losses were incurred in nearly all currencies traded. Trading was
also unprofitable in U.S. Treasury bonds, interest rates and gold. The purchase
of large quantities of silver by a major investor caused the prices of the
precious metal to soar in world markets, before succumbing to some profit taking
at month end; positions in silver resulted in gains for the Partnership.
Profitable positions in most European bonds failed to offset losses in other
long- and short-term interest rates. The Partnership recorded a loss of
$1,566,571 or $79.17 per Unit in February.
In March, the U.S. dollar rose against most of its major counterparts, gaining
strength from the flight of international capital from a deteriorating Japanese
economy and the purchase of dollars to buy U.S. Treasury bonds as yields in key
European bond markets hit post-war lows. Positions in the Swiss franc and the
German mark resulted in gains for the Partnership. Positions in the U.S. 30-year
bond led losses in the global interest rate market. Inflation concerns, fueled
by rising oil prices, propelled gold prices sharply higher. Positions in gold
were unprofitable, as were positions in silver, which became more volatile
during the month. The Partnership recorded a loss of $583,060 or $27.19 per Unit
in March.
During the quarter, additional Units sold consisted of 4,128.21 limited
partnership units; and 33.34 general partnership units. Additional Units sold
during the quarter represented a total of $8,118,453. Investors redeemed a total
of 882.95 Units during the quarter. At the end of the quarter there were
21,525.53 Units outstanding (including 215.29 Units owned by the General
Partner).
During the fiscal quarter ended March 31, 1998, the Partnership had no credit
exposure to a counterparty which is a foreign commodities exchange or to any
counterparty dealing in over the counter contracts which was material.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK
There has been no material change with respect to market risk since the
"Quantitative and Qualitative Disclosures About Market Risk" was made in the
Form 10K of the Partnership dated December 31, 1998.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
The Partnership and its affiliates are from time to time
parties to various legal actions arising in the normal course of business. The
General Partner believes that there is no proceedings threatened or pending
against the Partnership or any of its affiliates which, if determined adversely,
would have a material adverse effect on the financial condition or results of
operations of the Partnership.
Item 2. Changes in Securities
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits
None
b) Reports on Form 8-K
None
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned and thereunto duly authorized.
EVEREST FUTURES FUND, L.P.
Date: November 11, 1999 By: Everest Asset Management, Inc.,
its General Partner
By: /s/ Peter Lamoureux
-----------------------------
Peter Lamoureux
President