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, 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.)
1100 North 4th Street, Suite 143, Fairfield, Iowa 52556
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (641) 472-5500
Not Applicable
(Former name, former address and former fiscal year, if changed
since last report.)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes X No
Part I. Financial Information
Item 1. Financial Statements
Following are Financial Statements for the fiscal quarter ending September 30, 2002
Fiscal Quarter
Year to Date
Fiscal Year
Fiscal Quarter
Year to Date
Ended 9/30/02
to 9/30/02
Ended 12/31/01
Ended 9/30/01
to 9/30/01
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
Sept 30, 2002
Dec 31, 2001
ASSETS
Cash and cash equivalents
10,764,964
20,938,678
Equity in commodity trading accounts:
Cash on deposit with brokers
15,095,990
8,768,736
Net unrealized trading gains on open contracts
4,075,410
2,486,233
Investments, at fair value
16,756,039
9,988,541
Interest receivable
71,029
52,501
Total assets
46,763,433
42,234,689
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Accrued expenses
31,450
34,692
Commissions payable
175,099
157,564
Advisor's management fee payable
86,493
73,208
Advisor's incentive fee payable
1,659,450
0
Redemptions payable
266,384
118,786
Selling and Offering Expenses Payable
7,485
0
Total liabilities
2,226,361
384,250
Partners' Capital:
Limited partners (19,638.04 and 24,907.39 units
outstanding at 9/30/02 and 12/31/01, respectively)
44,487,072
41,519,565
General partners (22.07 and 198.49 units
outstanding at 9/30/02 and 12/31/01, respectively)
50,000
330,874
Total partners' capital
44,537,072
41,850,439
Total liabilities
and partners' capital
$46,763,433
$42,234,689
Net asset value per outstanding unit of Partnership
interest
$2,265.35
$1,666.96
See accompanying notes to financial statements.
EVEREST FUTURES FUND, L.P.
COMBINED STATEMENTS OF OPERATIONS
For the period January 1, 2002 through September 30, 2002
UNAUDITED
July 1, 2002
Jan 1, 2002
July 1, 2001
Jan 1, 2001
through
through
through
through
Sept 30, 2002
Sept 30, 2002
Sept 30, 2001
Sept 30, 2001
REVENUES
Gains on trading of commodity futures
and forwards contracts, physical
commodities and related options:
Realized gain (loss) on closed positions
12,365,227
15,151,643
152,628
6,373,810
Change in unrealized trading gain (loss)
on open contracts
(3,014,021)
1,589,177
2,390,907
(2,388,098)
Net foreign currency translation gain (loss)
17,335
85,139
92,050
135,998
Brokerage Commissions
(615,333)
(1,778,118)
(629,458)
(1,915,921)
Total trading income (loss)
8,753,208
15,047,842
2,006,127
2,205,788
Interest income, net of cash management fees
205,398
572,255
381,527
1,481,059
Total income (loss)
8,958,606
15,620,097
2,387,655
3,686,847
General and administrative expenses
Advisor's management fees
247,819
701,595
208,423
531,318
Advisor's incentive fees
1,659,450
2,645,119
0
29,399
Administrative expenses
19,751
50,836
15,138
45,573
Total general and administrative expenses
1,927,021
3,397,549
223,561
606,291
Net income (loss)
7,031,585
12,222,548
2,164,094
3,080,556
PROFIT (LOSS) PER UNIT OF
PARTNERSHIP INTEREST
$354.40
$598.39
$84.89
$119.14
See accompanying notes to financial statements.
EVEREST FUTURES FUND, LP
COMBINED STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
For the period January 1, 2002 through September 30, 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)
12,377,896
(155,348)
12,222,548
Additional Units Sold
603.80
1,253,257
0
1,253,257
Redemptions
(6,049.57)
(10,663,646)
(125,526)
(10,789,172)
Partners' capital at Sept 30, 2002
19,660.11
$44,487,072
$50,000
$44,537,072
Net asset value per unit
January 1, 2002
1,666.96
1,666.96
Net profit (loss) per unit
598.39
598.39
Net asset value per unit
Sept 30, 2002
$2,265.35
$2,265.35
See accompanying notes to financial statements.
Everest Futures Fund, L.P
Schedule of Investments
Sept 30, 2002
Number of
contracts
Principal
(notional)
Carrying Value/
Value (OTE)
Long positions:
Futures positions (8.36%)
Interest rates
1,435
$
219,280,706
2,831,675
Metals
335
10,834,244
(162,697)
Energy
527
17,121,632
513,793
Agriculture
940
12,756,892
370,136
Currencies
200
38,964,775
170,113
Indices
0
0
298,958,250
3,723,019
Forward positions (0.19%)
Currencies
75,601,370
86,309
Total long positions
$
374,559,620
3,809,328
Short positions:
Futures positions (1.70%)
Interest rates
$
0
0
Metals
389
11,869,416
249,960
Energy
72
1,198,800
25,937
Agriculture
121
2,826,533
(80,570)
Currencies
17
1,068,790
0
Indices
172
8,594,394
562,278
25,557,933
757,606
Forward positions (-1.10%)
Currencies
85,376,760
(491,524)
Total short positions
$
110,934,692
266,082
Total open contracts (9.15%)
$
4,075,410
Securities Held
Maturity Over 60 days (37.62%)
Coupon
Maturity
Cost
FANNIE MAE MED TERM NT
5.00%
2/14/03
728,012
FANNIE MAE MED TERM NT
5.75%
4/15/03
1,542,883
FANNIE MAE MED TERM NT
5.75%
4/15/03
617,033
FED HM LN BK BOND
2.250%
8/14/03
3,400,000
FREDDIE MAC NOTE
2.45%
1/23/04
902,176
FED HM LN BK BOND
2.33%
3/5/04
1,124,473
FANNIE MAE MED TERM NT
3.18%
5/26/04
2,833,637
FREDDIE MAC NOTE
11/14/03
252,763
FED HM LN BK BOND 2.50
2.50%
2/20/04
1,504,430
FANNIE MAE MED TERM NT
3.75%
5/12/04
717,687
FANNIE MAE MED TERM NT
3.15%
7/29/04
709,942
FANNIE MAE MED TERM NT
3.50%
6/24/04
918,042
FED HM LN BK BOND
2.50%
2/20/04
1,504,962
Total securities maturity over 60 days
$
16,756,039
Cash and cash equivalents (23.95%)
10,764,964
Cash on deposit with brokers (33.89%)
15,095,990
Less liabilities in excess of other assets (-4.61%)
(2,155,332)
Net assets (100.0%)
$
44,537,072
EVEREST FUTURES FUND, L.P.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 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 $76,307,856 for 43,339.99 Units sold July 1, 1995
through September 30, 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. MLM's allocation will be increased by
$10 million effective October 1, 2002.
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 September 30, 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 September 30, 2002, the Partnership has approximately $44.5 million of
net assets. JWH's allocation was approximately $44.3 million and MLM's was
approximately $26.3 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 September 30, 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.
Net trading results from derivatives for the periods presented are reflected in
the statement of operations and equal gains (losses) from trading less
brokerage commissions. Such trading results reflect the net gain arising from
the Partnership's speculative trading of futures contracts, options on futures
contracts, and forward contracts.
The Limited Partners bear the risk of loss only to the extent of the net asset
value of their Partnership units.
(6)FINANCIAL HIGHLIGHTS
The following financial highlights show the Partnership's financial performance
for the nine months ended September 30, 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 35.90%
Ratio to average net assets:
Net income 31.11%
General and administrative expenses:
Expenses 1.92%
Incentive fees 6.73%
Total general and
Administrative expenses 8.65%
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 September 30, 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 September 30, 2002
The Partnership recorded a gain of $7,031,585 or $354.40 per Unit for the third
quarter of 2002. This compares to a gain of $2,164,094 or $84.89 per Unit for
the third 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 Index (Unleveraged) (MLM) for an overlay program. In July
the Fund was up 6.97%.
The turbulence in the financial markets created a beneficial trading
environment for JWH SAP. Lower interest rates made fixed income the
strongest performer in July. The second biggest contributor was equity
indices as JWH was short. Energies were also profitable, especially natural
gas. Agriculturals and metals were essentially flat for the month. The
chain of market moves continued from the last two months into July and
produced solid results for JWH.
The MLM Index Program (Unleveraged) was negative for the Fund in July. The
Index had profits in energies, grains, and financials, but slightly larger
losses in currencies, meats, metals, and softs. The Partnership recorded a
gain of $2,677,092 or $133.12 per unit in July.
August was a positive month for the Fund, up 3.79%. August saw a smoothing of
trends and diminished volatility in financial markets, but there was
considerable volatility in the energy and financial markets. For JWH trading
in fixed income markets was profitable and energies were profitable as the
U.S. continued to discuss ways of disposing of Saddam Hussein. Agriculturals
were volatile and difficult for JWH to trade, currencies lost money, and
metals were flat. The MLM Index Program (Unleveraged) posted profits for the
Fund in energies, financials, and grains. The Partnership recorded a gain of
$1,537,949 or $77.48 per unit in August.
September saw a gain of 6.78% for the Fund. JWH had most of that gain with a
positive 6.35% performance, with profits in fixed income, global indices, and
energy markets. JWH has continued to take full advantage of two recurring
themes which have spurred significant trends: the global economic slowdown
and a possible war with Iraq. The MLM Index Program (Unleveraged) had
profits in energies, financials, metals, and softs, with smaller overall
losses in meats, grains, and currencies. The Partnership recorded a gain
of $2,816,544 or $143.80 per Unit in September.
During the quarter, additional Units sold consisted of 352.27 limited
partnership units; there were no general partnership units sold during
the quarter. Additional Units sold during the quarter represented a total of
$744,465. Investors redeemed a total of 747.29 Units during the quarter and
the General Partner redeemed 55.41 Units. At the end of the quarter there
were 19,660.11 Units outstanding (including 22.07 Units owned by the General
Partner).
During the fiscal quarter ended September 30, 2002, the Partnership had no
material credit exposure to a counter-party which is a foreign commodities
exchange or to any counter-party dealing in over the counter contracts which
was material.
Fiscal Quarter ended September 30, 2001
The Partnership recorded a gain of $2,164,094 or $84.89 per Unit for the third
quarter of 2001. This compares to a loss of $1,597,603 or $58.14 per Unit for
the third quarter of 2000.
At September 30, 2001, John W. Henry & Company, Inc. (JWH) was managing
approximately $42 million in allocated assets for the Partnership, and Mount
Lucas Management Corporation's MLM Index (MLM) was managing approximately $10
million in allocated assets. As of September 30, the Partnership had
approximately $44 million in assets.
In July, the Partnership had a loss of 3.92%. The JWH Strategic Allocation
Program replaced the JWH Financial and Metals Program beginning in July. The
month was one of transition, especially for the currency markets, with a key
reversal in the dollar's upward movement and growing talk that the dollar trend
may be reaching an end. The currency sector under performed, while diversified
programs had more modest declines.
In July the MLM Index Program had not yet begun trading. The Partnership had a
loss of 1,651,375 or $64.87 per Unit in July.
In August, the Partnership had a gain of 5.63%. The monthly performance was
dominated by the active behavior of the central banks, with easing by the Fed,
the Bank of Japan, and the European Central Bank (ECB). These actions drove
trends in interest rates and currencies. The most significant gains came in
European interest rates and the dollar/Euro exchange rate.
The MLM Program did not trade in August. The Partnership had a gain of
$2,282,136 or $89.45 per Unit in August.
In September, the Partnership had a gain of 3.59%. The JWH SAP Program had a
gain of 3.69%, making profits in the global bond markets. Bond prices rose as
investors came out of equities and into bonds after the September 11th attacks
on America. Profits were made in precious metals, where prices rose as they
often do in a crisis. Profits were also made in overseas stock indices, which
tended to sell off as a reaction to the economic uncertainties of the month.
The MLM Index Program received its first allocation in the month of
September and posted a gain of 0.67%. The Partnership recorded a gain of
$1,533,334 or $60.16 per Unit in September.
During the quarter, additional Units sold consisted of 78.71 limited
partnership units; and 0 general partnership units. Additional Units sold
during the quarter represented a total of $125,000. Investors redeemed a
total of 268.67 Units during the quarter. At the end of the quarter there
were 25,327.03 Units outstanding (including 198.49 Units owned by the
General Partner).
During the fiscal quarter ended September 30, 2001, the Partnership had no
material credit exposure to a counter-party, which is a foreign commodities
exchange, or to any counter-party dealing in over the counter contracts,
which was material.
Fiscal Quarter ended June 30, 2002
The Partnership recorded a gain of $10,469,355 or $456.94 per Unit for the
second quarter of 2002. This compares to a loss of $3,358,859 or $128.90 per
Unit for the second 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 Index (Unleveraged) (MLM) for an overlay program. In April
the Fund was up 0.69%.
JWH SAP was down in the middle of April but rallied to slightly positive after
disappointing economic data and corporate earnings forced many markets to
reverse. In particular, the eventual weakness in the dollar provided strong
results in currencies. The energy sector, stock indices, and gold were also
positive, with global interest rates negative. The MLM Index Program
(Unleveraged) was essentially flat for April. The markets in the Index were
choppy as the debate on the timing of the recovery continued. The Partnership
recorded a gain of $244,008 or $9.98 per unit in April.
May was a positive month for the Fund, up 8.68%. The JWH SAP was up 9.39%.
The theme for May at JWH was the weakening of the U.S. dollar. The U.S.
'crisis in confidence' brought about by corporate accounting scandals and
constant government warnings of possible further terrorist attacks created a
widespread repatriation of assets out of the U.S. JWH SAP also had profits
in metals, with gold and silver continuing to shine. Stock index results were
mixed and the energy, interest rate and agricultural sectors were slightly
down. The MLM Index (Unleveraged) was down 0.60% for the Fund, suffering
losses in energies, grains, and softs that were larger than the profits in
metals, meats, financials, and currencies. The Partnership recorded a gain
of $2,914,124 or $127.02 per unit in May.
June saw a gain of 20.11% for the Fund. JWH SAP was up 20.37%. Continued
weakness in the U.S. dollar across the board was felt against the major
currencies. Continued accounting irregularities further depressed the stock
market while triggering a flight from the U.S. dollar. JWH SAP had profits in
interest rates and agriculturals. Losses came in metals as gold retreated from
its peak. The energy market was directionless. The MLM Index (Unleveraged)
was slightly negative (down 0.16%) for the Fund in June. Positive results in
currencies, energies, and financials were outweighed by losses in grains,
meats, metals, and softs. The Partnership recorded a gain of $7,311,224 or
$319.94 per Unit in June.
During the quarter, additional Units sold consisted of 247.44 limited
partnership units; there were no general partnership units sold during the
quarter. Additional Units sold during the quarter represented a total of
$472,851. Investors redeemed a total of 4,599.60 Units during the quarter. At
the end of the quarter there were 20,110.54 Units outstanding (including 77.48
Units owned by the General Partner).
During the fiscal quarter ended June 30, 2002, the Partnership had no material
credit exposure to a counter-party which is a foreign commodities exchange or
to any counter-party dealing in over the counter contracts which was material.
Effective June 20, 2002, Teresa M. Prange resigned as Principal and Chief
Financial Officer of Everest Asset Management, Inc.
Effective August 12, 2002, Everest Asset Management, Inc. relocated its offices
to 1100 North 4th Street, Suite 143, Fairfield, IA 52556.
Fiscal Quarter ended June 30, 2001
The Partnership recorded a loss of $3,358,859 or $128.90 per Unit for the
second quarter of 2001. This compares to a loss of $4,221,518 or $151.95
per Unit for the second quarter of 2000.
The Partnership continued to employ two different trading advisors for the
second quarter 2001. The Fund had a loss of 7.31% in April as both advisors
suffered losses. The JWH firm had reversals of trends that had created profits
in the first quarter, mostly in currencies and interest rates. The Barclay
Futures Index Program (BFIP) gave back most of its gains from March with losses
in six out of seven sectors traded. The Partnership recorded a loss of
$3,394,496 or $130.21 per unit in April.
May was a positive month for the Fund (up1.51%), with both JWH and the BFIP
showing profits. On the JWH side, currencies led the way with the dollar
showing strength against the Euro and Swiss franc. Profits were also seen in
the British pound. Interest rate positions were slightly negative for JWH, as
were overseas stock indexes and metals. The BFIP had gains in 5 out of 7
sectors traded. They were, in this order, softs, energies, grains, financials
and currencies. The two losing sectors were metals and meats. The Partnership
recorded a gain of $641,062 or $24.92 per unit in May.
June saw a loss of 1.41% for the Fund. The JWH programs were down4.29% coming
from losses in interest rate and currency sectors. However, the JWH losses
were somewhat offset by the BFIP gain of 1.92% coming in six of their seven
sectors traded. The largest gain for BFIP came in softs, following by metals
and energies. The Partnership recorded a loss of $605,424 or $23.61 per Unit
in June.
During the quarter, no additional Units were sold. Investors redeemed a total
of 553.01 Units during the quarter. At the end of the quarter there were
25,516.98 Units outstanding (including 198.49 Units owned by the General
Partner).
During the fiscal quarter ended June 30, 2001, the Partnership had no material
credit exposure to a counter-party 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, 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 Index (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 Index 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 Index Program (Unleveraged) had a loss of 0.75%. 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 Index 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 Index. 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
Index 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: November 15, 2002 By: Everest Asset Management, Inc.,
its General Partner
By: __/s/ Peter Lamoureux______________________
Peter Lamoureux
President
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350
In connection with the accompanying second quarter report on Form 10-Q of
Everest Futures Fund, L. P. for the quarter ended June 30, 2002, I, Peter
Lamoureux, President and Treasurer of Everest Asset Management, Inc., General
Partner, Everest Futures Fund, L. P., hereby certify pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002, to the best of my knowledge and belief, that:
(1) such quarterly report on Form 10-Q for the quarter ended
September 30, 2002, fully complies with the requirements of
Section 13(a) or 15(d) of the Securities Exchange Act
1934; and
(2) the information contained in such quarterly report on Form
10Q for the quarter ended September 30, 2002, fairly presents
in all material respects, the financial condition and results
of operations of the Everest Futures Fund, L. P.
EVEREST FUTURES FUND, L.P.
Date: November 15, 2002 By: Everest Asset Management, Inc.,
its General Partner
By: /s/ Peter Lamoureux
Peter Lamoureux
President, Treasurer, Secretary