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 March 31, 2002
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.)
2280 West Tyler Street, Suite 105, Fairfield, Iowa 52556
(Address of principal executive offices) (Zip
Code)
Registrant's telephone number, including area code: (641) 472-5500
Not Applicable
(Former name, former address and former fiscal year, if changed
since last report.)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
Part I. Financial Information
Item 1. Financial Statements
Following are Financial Statements for the fiscal quarter ending March 31, 2002
Fiscal Quarter Year to Date Fiscal Year Fiscal Quarter
Year to Date
Ended 3/31/02 to 3/31/02 Ended 12/31/01 Ended 3/31/01
to 3/31/01
Statement of
Financial Condition X X
Statement of
Operations X X X
X
Statement of Changes
in Partners' Capital X
Schedule of Investments X
Notes to Financial
Statements X
EVEREST FUTURES FUND, LP
COMBINED STATEMENTS OF FINANCIAL CONDITION
UNAUDITED
Mar 31, 2002 Dec 31, 2001
ASSETS
Cash and cash equivalents 10,745,248 20,938,678
Equity in commodity trading accounts:
Cash on deposit with brokers 8,511,897 8,768,736
Net unrealized trading gains on open contract (14,363) 2,486,233
Investments, at fair value 16,867,643 9,988,541
Interest receivable 49,123 52,501
Total assets 36,159,549 42,234,689
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Accrued expenses 22,550 34,692
Commissions payable 151,256 157,564
Advisor's management fee payable 71,825 73,208
Advisor's incentive fee payable 0 0
Redemptions payable 344,810 118,786
Selling and Offering Expenses Payable 59 0
Total liabilities 590,500 384,250
Partners' Capital:
Limited partners (24,385.21 and 24,907.39 units
outstanding at 3/31/02 and 12/31/01, respec 35,456,388 41,519,565
(see Note 1)
General partners (77.48 and 198.49 units
outstanding at 3/31/02 and 12/31/01, respec 112,661 330,874
(see Note 1)
Total partners' capital 35,569,049 41,850,439
Total liabilities
and partners' capital $36,159,549 $42,234,689
Net asset value per outstanding unit of Partnership
interest $1,454.01 $1,666.96
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, 2002 through March 31, 2002
UNAUDITED
Jan 1, 2002 Jan 1, 2002 Jan 1, 2001 Jan 1, 2001
through through through through
Mar 31, 2002 Mar 31, 2002 Mar 31, 2001 Mar 31, 2001
REVENUES
Trading income (loss) (2,051,350) (2,051,350) 5,637,319 5,637,319
Change in unrealized trading gain (loss)
on open contracts (2,500,595) (2,500,595) (1,234,315) (1,234,315)
Change in net unrealized gain (loss) on inves 0 0 2,194 2,194
Net foreign currency translation gain (loss) (51,054) (51,054) 82,557 82,557
Brokerage Commissions (624,229) (624,229) (626,890) (626,890)
Total trading income (loss) (5,227,228) (5,227,228) 3,860,865 3,860,865
Interest income, net of cash management fees 190,354 190,354 616,736 616,736
Total income (loss) (5,036,874) (5,036,874) 4,477,601 4,477,601
General and administrative expenses
Advisor's management fees 226,973 226,973 163,321 163,321
Advisor's incentive fees 0 0 29,399 29,399
Administrative expenses 14,546 14,546 9,559 9,559
Total general and administrative expenses 241,519 241,519 202,280 202,280
Net income (loss) (5,278,393) (5,278,393) 4,275,321 4,275,321
PROFIT (LOSS) PER UNIT OF
PARTNERSHIP INTEREST ($212.95) ($212.95) $163.15 $163.15
(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, 2002 through March 31, 2002
UNAUDITED
Limited General
Units Partners Partners Total
Partners' capital at Jan 1, 2002 25,105.88 41,519,565 $330,874 $41,850,439
Net profit (loss) (5,260,180) (18,213) (5,278,394)
Additional Units Sold 4.09 5,941 0 5,941
(see Note 1)
Redemptions (see Note 1) (647.27) (808,937.58) (200,000) (1,008,938)
Partners' capital at March 31, 2002 24,462.70 $35,456,388 $112,661 $35,569,049
Net asset value per unit
January 1, 2002(see Note 1) 1,666.96 1,666.96
Net profit (loss) per unit (see Note 1) (212.95) (212.95)
Net asset value per unit
March 31, 2002 $1,454.01 $1,454.01
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, L.P
Schedule of Investments
March 31, 2002
Number of contraPrincipal (notiCarrying Value/
Value (OTE)
Long positions:
Futures positions (2.09%)
Interest rates 43 $ 44,700,916 161,404
Metals 350 10,755,047 182,011
Energy 510 13,400,098 404,321
Agriculture 397 6,063,208 125,308
Currencies 32 2,195,635 23,700
Indices 107 7,416,559 (154,791)
84,531,462 741,953
Forward positions (-3.05%)
Currencies 91,285,159 (1,085,416)
Total long positions $ 175,816,622 (343,463)
Short positions:
Futures positions (0.40%)
Interest rates 1,805 $ 225,357,649 526,473
Metals 80 2,909,644 (35,907)
Energy 50 1,526,860 (384,901)
Agriculture 851 9,377,727 (9,897)
Currencies 235 51,920,855 (26,755)
Indices 10 1,225,980 71,680
292,318,715 140,692
Forward positions (0.53%)
Currencies 73,807,864 188,409
Total short positions $ 366,126,579 329,101
Total open contracts (-0.04%) $ (14,363)
Securities Held
Maturity Over 60 days (47.05%) Coupon Maturity Cost
FANNIE MAE MED TERM NT 4.55% 7/23/03 $1,011,545.00
FREDDIE MAC NOTE 4.45% 7/30/03 $303,773.00
FANNIE MAE MED TERM NT 4.75% 4/17/03 $515,796.00
FED HM LN BK BOND 6.375% 11/15/02 $523,299.00
FREDDIE MAC NOTE 2.25% 2/14/03 $1,600,000.00
FED HM LN BK BOND 2.62% 10/11/02 $505,007.00
FANNIE MAE MED TERM NT 4.15% 8/28/03 $252,332.00
FANNIE MAE MED TERM NT 4.25% 8/13/03 $2,629,362.00
FANNIE MAE MED TERM NT 4.20% 8/21/03 $1,514,183.00
FANNIE MAE MED TERM NT 5.00% 2/14/03 $738,087.00
FANNIE MAE MED TERM NT 5.75% 4/15/03 $1,581,974.00
FREDDIE MAC NOTE 6.625% 8/15/02 $409,602.00
FED HM LN BK BOND 5.80% 9/18/02 $407,256.00
FANNIE MAE MED TERM NT 5.75% 4/15/03 $632,707.00
FANNIE MAE MED TERM NT 4.63% 5/15/03 $2,689,331.00
FED HM LN BK BOND 5.53% 1/15/03 $1,291,818.00
FANNIE MAE MED TERM NT 6.25% 11/15/02 $261,571.00
Total securities maturity over 60 days $ 16,867,643
Cash and cash equivalents (30.21%) 10,745,248
Cash on deposit with brokers (23.93%) 8,511,897
Less liabilities in excess of other assets (-1.15%) (541,376)
Net assets (100.0%) $ 35,569,050
EVEREST FUTURES FUND, L.P.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2002
(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 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 initial 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 $75,060,540 for 42,740.28 Units sold July 1, 1995
through March 31, 2002. On March 29, 1996, the Partnership transferred all of
its assets to, and became the sole limited partner of, Everest Futures Fund II,
L.P. (Trading Partnership)), a newly formed limited partnership that invested
directly in commodity interests. The co-general partners of the Trading
Partnership were CIS Investments, Inc. (CISI) and the General Partner
(collectively, the General Partners). In July 2000, the Partnership redeemed
approximately 50% of its assets from the Trading Partnership. Effective as of
the close of business August 31, 2000, the Partnership liquidated its remaining
investment in the Trading Partnership. CISI also liquidated its investment
in the Trading Partnership and the Trading Partnership was dissolved in
September 2000.
The Partnership clears all of its futures and options on futures trades through
Cargill Investor Services, Inc. (CIS), its clearing broker, and all of its cash
trading through CIS Financial Services, Inc. (CISFS), an affiliate of CIS.
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
Prior to the dissolution of the Trading Partnership, the accompanying financial
statements were prepared on a combined basis and included the accounts of the
Partnership and the Trading Partnership. All significant intercompany
transactions and balances have been eliminated in the accompanying financial
statements. Certain prior year amounts have been reclassified to be consistent
with the current year presentation.
Cash and Cash Equivalents
Cash equivalents represent short-term highly liquid investments with remaining
maturities of 60 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.
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, which
approximate fair value, because of their highly liquid nature and short-term
maturity.
Revenue Recognition
Commodity futures contracts, forward contracts, physical commodities, and
related options are recorded on the trade date. 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.
The Partnership earns interest on 100% of the Partnership's average monthly
cash balance on deposit with the Brokers at a rate equal to the average 91-day
Treasury bill rate for U. S. Treasury bills issued during that 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. Realized and unrealized foreign exchange gains or
losses are included in trading income (loss) in the statements of operations.
Income Taxes
No provision for income taxes has been made in the accompanying financial
statements as each partner is responsible for reporting income (loss) based
upon the pro rata share of the profits or losses of the Partnership.
Use of Estimates
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and liabilities
at the date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ from
those estimates.
(3) THE LIMITED PARTNERSHIP AGREEMENT
The Limited Partners and General Partner share in the profits and losses of the
Partnership in proportion to the number of units or unit equivalents held by
each. However, no Limited Partner is liable for obligations of the Partnership
in excess of their capital contribution and profits, if any, and such other
amounts as they may be liable for pursuant to the Act. Distributions of
profits are made solely at the discretion of the General Partner.
Responsibility for managing the Partnership is vested solely in the General
Partner. The General Partner has delegated complete trading authority to an
unrelated party (note 4).
Prior to the dissolution of the Trading Partnership, the Trading Partnership
bore 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. In addition, the Trading Partnership bore all of its administrative
expenses. After the dissolution, the Partnership bears all of these 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 fifteen days' prior written notice to
the Partnership, or such lesser period as is acceptable to the Partnership.
Although the Agreement does not permit redemptions for the first six months
following a Limited Partner's admission to the Partnership, the Agreement does
permit the Partnership to declare additional regular redemption dates. The
Partnership will be dissolved at December 31, 2020, or upon the occurrence of
certain events, as specified in the Limited Partnership Agreement.
(4) FEES
Prior to August 1, 2000, the Partnership's trading advisor was John W. Henry &
Company, Inc. (JWH). Beginning July 1, 2001, JWH began trading its Strategic
Allocation Program with a trading allocation of $40 million. Previously JWH
traded its Financial and Metals program. JWH receives a monthly management fee
equal to 0.167 (2% annually) of the Partnership's or Trading Partnership's
(prior to September 2000) month-end net asset value, as defined, and a
quarterly incentive fee of 20% of the Partnership's or Trading Partnership's
(prior to September 2000) new net trading profits, as defined. The monthly
management fee was reduced as of October 1, 2000 from 0.33% (4% annually). 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 or Trading Partnership (prior to September 2000).
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.
Effective September 1, 2001, Mount Lucas Management Corporation (MLM) was added
as trading advisor with an initial allocation of $10 million. This allocation
represented notional funding for the Partnership. MLM receives a monthly
management fee of 0.0625% (0.75% annually) of the Partnership's month-end
allocated assets as defined. As MLM uses the MLM Index-Unleveraged, they do
not receive an incentive fee.
Effective September 1, 2001, CIS charges the Partnership or Trading Partnership
(prior to September 2000) monthly brokerage commissions equal to 0.5052% of the
Partnership or Trading Partnership's beginning-of-month net asset value, as
defined. Prior to September 1, 2001, the monthly brokerage commission was
0.5%. Monthly brokerage commissions will increase incrementally to 0.5208% as
the trading allocation to MLM increases. As of March 31, 2002, the monthly
brokerage commission is 0.5104%. The General Partner receives a management fee
of approximately 83% of the brokerage commission charged by CIS. Net brokerage
commissions are recorded in the statement of operations as a reduction of
trading income and the amounts paid to the General Partner are recorded as
management fees. Prior to September 2000, CISI received a co-general partner
fee from the General Partner equal to 1/12 of .25% of the month-end net asset
value, as defined. Prior to January 1, 1999, CISI received 1/12 of .40% of the
month-end net asset value. CISI no longer as a co-general partner and no
longer receives a co-general partner fee.
As of March 31, 2002, the Partnership has approximately $35.9 million in
assets. JWH's allocation was approximately $35.6 million and MLM's was
approximately $18.7 million of notional funding. The General Partner may
replace or add trading advisors at any time.
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 0.25% (0.25% annually) of the
average daily assets under management if the accrued monthly interest income
earned on the Partnership's assets managed by Horizon exceeds the 91-day U.S.
Treasury bill rate.
(5) TRADING ACTIVITIES AND RELATED RISKS
The Partnership engages in the speculative trading of U.S. and foreign futures
contracts, options on U.S. and foreign futures contracts, and forward contracts
(collectively derivatives). These derivatives include both financial and non-
financial contracts held as part of a diversified trading strategy. The
Partnership is exposed to both market risk, the risk arising from changes in
the market value of the contracts; and credit risk, the risk of failure by
another party to perform according to the terms of a contract.
The purchase and sale of futures and options on futures contracts requires
margin deposits with a Futures Commission Merchant (FCM). Additional deposits
may be necessary for any loss on contract value. The Commodity Exchange Act
(CEAct) requires an FCM to segregate all customer transactions and assets from
the FCM's proprietary activities. A customer's cash and other property such as
U. S. Treasury Bills, deposited with an FCM are considered commingled with all
other customer funds subject to the FCM's segregation requirements. In the
event of an FCM's insolvency, recovery may be limited to a pro rata share of
segregated funds available. It is possible that the recovered amount could be
less than the total of cash and other property deposited.
The Partnership has cash on deposit with an interbank market maker in
connection with its trading of forward contracts. In the event of interbank
market maker's insolvency, recovery of the Partnership assets on deposit may be
limited to account insurance or other protection afforded such deposits. In
the normal course of business, the Partnership does not require collateral from
such interbank market maker. Because forward contracts are traded in
unregulated markets between principals, the Partnership also assumes a credit
risk, the risk of loss 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 notional amounts of open contracts at March 31, 2002, as disclosed in the
Schedule of Investments, do not represent the Partnership's risk of loss due to
market and credit risk, but rather represent the Partnership's extent of
involvement in derivatives at the date of the statement of financial condition.
The Limited Partners bear the risk of loss only to the extent of the net asset
value of their Partnership units.
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
March 31, 2002:
COMMODITY GROUP UNREALIZED GAIN/(LOSS
FOREIGN CURRENCIES (900,063)
STOCK INDICES (83,111)
METALS 146,103
INTEREST RATE INSTRUMENTS 687,877
ENERGIES 19,420
AGRICULTURAL 115,411
____________
TOTAL (14,363)
The range of maturity dates of these exchange traded open contracts is May 2002
to March of 2003. The average open trade equity for the period of January 1,
2002 to March 31, 2002 was $2,099,750.
The margin requirement at March 31, 2002 was $6,059,919. To meet this
requirement, the Partnership had on deposit with the Clearing Broker $2,612,620
in segregated funds, $1,745,458 in secured funds and $4,153,814 in non-
regulated funds.
(6) FINANCIAL HIGHLIGHTS
The following financial highlights show the Partnership's financial performance
for the three months ended March 31, 2002. Total return is calculated as the
change in a theoretical limited partner's investment over the entire period.
Total return is calculated based on the aggregate return of the Partnership
taken as a whole.
Total return (-12.77%)
Ration to average net assets:
Net income (-13.37%)
General and administrative expenses:
Expenses 0.61%
Incentive fees 0.00
Total general and
Administrative expenses 0.61%
The net investment income and general and administrative expenses ratios are
computed based upon the weighted average net assets for the Partnership for the
period ended March 31, 2002.
(7) FINANCIAL STATEMENT PREPARATION
The interim financial statements are unaudited but reflect all adjustments that
are, in the opinion of management, necessary for a fair statement of the
results for the interim periods presented. These adjustments consist primarily
of normal recurring accruals. These interim financial statements should be
read in conjunction with the audited financial statements of the Partnership
for the year ended December 31, 2001, as filed with the Securities and Exchange
Commission on March 31, 2002, 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 March 31, 2002
The Partnership recorded a loss of $5,278,393 or $212.95 per Unit for the first
quarter of 2002. This compares to a gain of $4,275,321 or $163.15 per Unit for
the first quarter of 2001.
The Partnership continued to employ John W. Henry & Company, Inc.'s Strategic
Allocation Program (JWH SAP) as its core manager, and Mount Lucas Management
Corporation's MLM IndexT (Unleveraged) (MLM) for an overlay program. In
January the fund was down 0.85%. JWH SAP had a loss of 1.05%. Gains from
currency and energy positions were outweighed by losses in interest rates,
agriculture, metals and stock indices. The gains in currencies came from the
Japanese yen, Swiss franc, and the Euro. In energies, profits came from
natural gas and crude oil positions. The biggest losses came from US and
European interest rate positions. The MLM IndexT Program (Unleveraged) had a
gain of 0.33%. Profits were in energies and softs, losses in metals, meats,
grains, currencies and financials. The Partnership posted a loss of $355,767
or $14.17 per Unit in January.
Effective January 1, 2002, Mark S. Rzepczynski was appointed President of John
W. Henry & Company, Inc. Mr. Rzepczynski was most recently Senior Vice
President of Research and Trading. Prior to joining JWH, Mr. Rzepczinski was
Vice President and Director of Taxable Credit and Quantitative Research in the
fixed-income division of Fidelity Management and Research from 1995 to 1998.
Mr. Rzepczynski holds a BA (cum laude) in Economics from Loyola University of
Chicago and an AM and PhD in Economics from Brown University.
In February the Partnership had a loss of 3.79%. The month was particularly
difficult for JWH SAP with conflicting U.S. economic data released creating
concerns as to when the U.S. recovery would start. The result was a weaker
U.S. dollar against major European currencies causing the largest sector loss
for the month. On the flip side, renewed concerns over high levels of U.S.
consumer and corporate debt provided profitable trades in the short end of the
yield curve. Energies provided minimal profits, mostly from crude. Other
commodities markets offered mixed performance. The Partnership posted a loss
of $1,561,599 or $62.68 per Unit in February.
During mid-month, the Japanese government announced the possibility of
implementing a stimulus package to include inflating the economy and larger buy
back programs in Japanese government bonds. In addition, the Japanese
government proposed a possible program to buy stocks while at the same time
introducing new regulations making short selling more difficult. These
announcements adversely moved the Japanese government bond and Nikkei against
us. Interest Rate and Stock Indices sectors were unprofitable for the month.
Conversely, the Japanese government announced that at the end of March they
would no longer guarantee time deposits in excess of 10 million yen. This
caused concerned Japanese citizens to lower their deposit amounts and in turn
purchase physical gold. The ensuing rally in gold pushed the metals sector
into positive territory.
The MLM IndexT Program (Unleveraged) had a loss of .75%. MLM had a reversal of
sector performance from January. All sectors were positive in February except
for energies.
Everest Asset Management has added two new branch offices to assist with our
ongoing effort to provide quality service to selling agents. A branch office
has been opened in Charlotte, NC to represent Everest on the east coast, and a
branch office has also been set up in Minneapolis, MN to assist in states west
of the Mississippi. Ruth Mignerey will be the branch manager of the Charlotte
office. Ruth graduated from Syracuse University and was most recently
Assistant Vice President and Marketing Specialist in Alternative Investments at
IJL/Wachovia Securities. Ruth has five years experience with Wachovia in
structuring, marketing and performing due diligence on futures funds. Randy
Kelsey will be the branch manager of the western office. Randy has been with
Cargill Investor Services (CIS) in Chicago between 1980 and 1997. Between 1997
and 2001, Mr. Kelsey was a Senior Quality Consultant at Cargill, Inc. in
Minneapolis. While at CIS, Mr. Kelsey acted as a wholesaler for the JWH Global
Trust, a publicly offered trust also traded by JWH.
In March the Fund had a loss of 8.56%. Both managers were substantially down
for the month. The Partnership posted a loss of $3,361,027 or $136.10 per Unit
in March.
JWH had a loss of 5.73%. For the JWH SAP, March was a disappointing month
despite positive returns from the energy, interest rate, metals and
agricultural sectors, which were over powered by losses in currencies and
indices. Japan's fiscal year end in March played a key role in producing
negative results from yen-denominated markets. Japanese corporations
repatriating yen for year-end purposes initially put heavy downward pressure on
the USD yen from a level just shy of 134. However, a Japanese government
official drew a line in the sand calling for a floor at a USD yen level of 125
126. Probably more influential was the announcement by Japanese regulators
tightening short selling rules on the Nikkei higher from short covering and
simultaneously moving USD yen and yen crosses lower. The USD yen market
quickly reversed when the Japanese Government Pension and Investment Fund
announced a JPY 7 trillion larger allocation to non-government fund managers
for the new fiscal year. Fifteen percent of these assets would be allocated to
non-Japanese markets, creating a demand for non-yen currencies. This brought
USD yen quickly above the 132 level. Needless to say, this type of volatility
created a very difficult trading environment.
The energy sector turned in a solid performance, with each market in positive
territory by taking advantage of the up trends. Support for higher prices came
from stronger-than-anticipated economic numbers from the U.S. This provided
strength to OPEC's announcement in Vienna on March 15th, when they determined
there would be no changes in production, at least until the next meeting on
June 6th. Additionally, the U.S. Administration's overtures towards Iraq gave
further fuel to higher crude prices and put doubt on the United Nations
renewing the "Oil for Food" programs for Iraq, which ends in May. Drawdowns in
the U.S. stockpiles this month in crude and energy products also provided
strength to the markets.
Currencies were particularly hard hit this month. As mentioned previously,
USD/yen and yen crosses were problematic. The U.S. dollar against the British
pound, Swiss franc and Euro traded in a directionless fashion, resulting in
losses as well. The South African rand was especially volatile after two
relatively quiet weeks, resulting in trading losses. Minor currencies,
including the Australian and New Zealand dollar, provided small bright spots
with marginal profits.
Global indices were demanding because of the conflicting sentiment surrounding
both country specific and worldwide economic recovery. The Nikkei, DAX,
Eurostoxx and NASDAQ all started the month on a positive note, but either
failed to continue or simply faltered and reversed trend, causing losses in
these markets.
Profits in interest rates in Europe, Canada and Australia marginally outweighed
losses in the United States and Japan. The Euro-Bund, Euro-Bobl and Australian
3-year bond futures provided solid profits from the well-defined downtrend.
U.S. interest rates, which had been trending higher on fears of double dip
recession in February, turned sharply lower early in March and experienced
range bound trading for the remainder of the month, which provided little
opportunity for profits.
Metals were all positive with the exception of aluminum. Current over-supply
conditions in aluminum made it difficult to keep pace with other base metals,
copper, nickel and zinc, that trended higher as a result of inventory building
in the U.S. Gold and silver continued to benefit from inflationary fears as
nominal rates of return remain very low.
MLM IndexT Program (Unleveraged) had a loss of 5.88% for the month, but the
effect on the Fund was a loss of approximately 2.96% since the MLM Program is
only one-half allocated for the overlay.
Dramatic market reversals, particularly in the energy markets, spurred by the
notion of a U.S. economic recovery and escalating tension in the Middle East
resulted in a very difficult March for the MLM IndexT. Though certainly within
the range of historical experience, this kind of result is definitely on the
lower end of expectations for monthly returns of the Index. As noted last
month, the Index was positioned for continued weakness in commodity prices and
firmness in the bond market. As a result of the action during the month, the
Index now has a much more balanced exposure to the commodity markets and
currency markets, and is short the U.S. bond markets. The change in positions
after a difficult month demonstrates the self-correcting nature of the MLM
IndexT technology. While there can be no assurance that the new exposures will
be successful, Mount Lucas Management Corporation believes that the Index
discipline limits the single position risk.
During the quarter, additional Units sold consisted of 4.09 limited partnership
units; there were no general partnership units sold during the quarter.
Additional Units sold during the quarter represented a total of $5,941.
Investors redeemed a total of 647.27 Units during the quarter. At the end of
the quarter there were 24,462.69 Units outstanding (including 77.48 Units owned
by the General Partner).
During the fiscal quarter ended March 31, 2002, the Partnership had no credit
exposure to a counterparty, which is a foreign commodities exchange, or to any
counter party dealing in over the counter contracts, which was material.
Fiscal Quarter ended March 31, 2001
The Partnership recorded a gain of $4,275,321 or $163.15 per Unit for the first
quarter of 2001. This compares to a loss of $5,502,945 or $200.52 per Unit for
the first quarter of 2000.
The Partnership continued to employ two different trading strategies for the
first quarter 2001. The Fund was down 1.08% in January. The John W. Henry &
Company Financial and Metals Portfolio (JWH) was profitable for the month due
to interest rate positions. A significant portion of the positive returns
occurred during the last days of the month surrounding the Fed cut in rates on
January 21st. In spite of the unusual action of two 50 basis point rate cuts by
the Fed in a single month, bond prices actually declined by just over 2 points
for January. All the remaining sections traded, currencies, non-US stock
indices and metals, incurred losses. The Barclay Futures Index Program (BFIP)
had an allocation of approximately 50% of the Fund's assets for the first
quarter 2001. In January the Index had a decline for the Fund of 6.03%. The
largest losses came in the energies and grains and overall six of the seven
sub-indexes (or sectors) were negative. The only exception was profits in
softs, especially sugar. All in all, the Partnership posted a loss of $455,012
or $17.43 per Unit in January.
The Fund was up 0.78% in February. The JWH allocation was again positive with
gains in short term interest rates. The short term rates reacted to central
bank easing and the massive rally in the Japanese government Bond as the
Japanese economy showed signs of sputtering, realized gains. After eliminating
their zero interest rate policy last August because of the belief that a
recovery was around the corner, the Bank of Japan is again following a monetary
policy of easing as rates were brought down 15 basis points. The Japanese
stock market reacted and the Nikkei stock index hit a 15 year low during
February. Currencies suffered losses for the month as they were affected by a
weakening in the euro, which offset some of the earlier gains from the
beginning of the year. Late in the month, the euro tumbled to two-month lows
against the dollar in the wake of Turkey's lira currency float. Market
concerns about European bank exposure to Turkish assets helped push the euro,
already trending lower during the month, to fresh troughs. Metals were
slightly unprofitable for the month. The BFIP allocation of the Fund lost
1.35%. The passive index had losses in metals and currencies and profits in
meats, softs, and energies. Overall, the Partnership posted a gain of $318,381
or $12.51 per Unit in February.
The Fund was up 10.42% in March. The JWH program was up 12.88% with all four
sectors being profitable. Currencies led the way due to continued weakness in
the Japanese yen, although the other currencies were also profitable.
Declining interest rates also helped for the month, led by the Euro Bund and
the Japanese government bond. Many attributed the strength in bond prices to
be the result of the 'flight to safety' due to continued weakness in the equity
markets. Stock index trading was mixed and there was a small gain in metals.
The BFIP gained back its losses from January and February with a positive 7.49%
result in March. The gains came in the softs, metals, grains, currencies and
energies. Smaller losses came in meats and financials. Overall, the
Partnership posted a gain of $4,411,952 or $168.07 per Unit in March.
During the quarter, additional Units sold consisted of 1026.49 limited
partnership units; there were no general partnership units sold during the
quarter. Additional Units sold during the quarter represented a total of
$1,656,356. Investors redeemed a total of 1,060.18 Units during the quarter.
At the end of the quarter there were 26,069.99 Units outstanding (including
198.49 Units owned by the General Partner).
During the fiscal quarter ended March 31, 2001, the Partnership had no credit
exposure to a counterparty, which is a foreign commodities exchange, or to any
counter party dealing in over the counter contracts, which was material.
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.
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, 2001.
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
Exhibit-27
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: May 15, 2002 By: Everest Asset Management, Inc.,
its General Partner
By: ____________________________
Peter Lamoureux
President