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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, 2005
Commission File Number 0-17555
THE EVEREST FUND, L.P.
(Exact name of registrant as specified in its charter)
Iowa 42-1318186
State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1100 North 4th Street, Suite 143, Fairfield, Iowa 52556
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (641) 472-5500
Not Applicable
(Former name, former address and former fiscal year, if changed since
last report.)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [ ]
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Following are Financial Statements for the fiscal quarter ending March 31, 2005
Fiscal Quarter Year to Date Fiscal Year Fiscal Quarter Year to Date
Ended 3/31/05 to 3/31/05 Ended 12/31/04 Ended 3/31/04 to 3/31/04
-------------- ------------ -------------- -------------- ------------
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
See accompanying notes to financial statements
2
THE EVEREST FUND, L.P.
(AN IOWA LIMITED PARTNERSHIP)
STATEMENT OF FINANCIAL CONDITION
UNAUDITED
MARCH 31, 2005 DEC 31, 2004
-------------- ------------
ASSETS
Cash and cash equivalents $ 25,655,347 $ 24,898,966
Equity in Cargill Investor Services, Inc. trading accounts:
Cash 8,355,795 9,890,324
Net unrealized trading gains on open contracts 892,732 2,213,429
Interest receivable 128,370 122,859
-------------- ------------
TOTAL ASSETS $ 35,032,243 $ 37,125,578
============== ============
LIABILITIES AND PARTNERS' CAPITAL
LIABILITIES:
Redemptions payable $ 301,055 $ 483,500
Commissions payable 127,549 141,451
Advisor's management fee payable 56,849 59,145
Advisor's incentive fee payable 0 85,111
Accrued expenses 33,276 47,319
-------------- ------------
TOTAL LIABILITIES 518,729 816,526
-------------- ------------
PARTNERS' CAPITAL:
General partners, I shares ( 0 and 12.32 units outstanding) 30,360
Limited partners, A Shares (14,405.55 and 13,715.42 units
outstanding) 31,891,320 33,356,576
Limited partners, I Shares (1,159.68 and 1,185.94 units
outstanding) 2,622,194 2,922,116
-------------- ------------
TOTAL PARTNERS' CAPITAL 34,513,514 36,309,052
-------------- ------------
TOTAL LIABILITIES AND PARTNERS' CAPITAL $ 35,032,243 $ 37,125,578
============== ============
See accompanying notes to financial statements.
3
THE EVEREST FUND, L.P.
(AN IOWA LIMITED PARTNERSHIP)
STATEMENTS OF OPERATIONS
FOR THE PERIOD JANUARY 1, 2005 THROUGH MARCH 31, 2005
JAN 1, 2005 JAN 1, 2004
THROUGH THROUGH
MARCH 31, 2005 MARCH 31, 2004
-------------- --------------
TRADING INCOME:
Net realized trading gain (loss)
on closed contracts $ (1,392,146) $ 2,332,948
Change in net unrealized trading gain
(loss) on open contracts (1,267,306) 461,480
Net foreign currency translation gain (loss) (114,075) 34,765
Brokerage Commissions (499,992) (498,791)
-------------- --------------
NET TRADING INCOME (3,273,519) 2,330,401
Interest income, net of cash management fees 213,287 99,486
-------------- --------------
TOTAL INCOME (LOSS) (3,060,233) 2,429,888
-------------- --------------
EXPENSES:
Management fees 169,021 173,951
Incentive fees 0 155,050
Administrative expenses 20,166 13,417
-------------- --------------
TOTAL EXPENSES 189,187 342,418
-------------- --------------
NET INCOME (LOSS) (3,249,420) 2,087,470
============== ==============
NET INCOME (LOSS) PER UNIT OF PARTNERSHIP INTEREST
A SHARES, OUTSTANDING ENTIRE PERIOD ($ 218.23) $ 143.50
============== ==============
NET INCOME (LOSS) PER UNIT OF PARTNERSHIP INTEREST
I SHARES, OUTSTANDING ENTIRE PERIOD ($ 202.84)
==============
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
4
THE EVEREST FUND, L.P.
(AN IOWA LIMITED PARTNERSHIP)
STATEMENT OF CHANGES IN PARTNERS' CAPITAL
FOR THE PERIOD JANUARY 1, 2005 THROUGH MARCH 31, 2005
UNAUDITED
UNITS LIMITED PTRS UNITS LIMITED PTRS GENERAL PTR
A SHARES A SHARES I SHARES I SHARES I SHARES TOTAL
---------- ------------ ---------- ------------ ----------- -----------
Partners' capital at Jan 1, 2005 13,715.42 $ 33,356,576 1,198.26 $ 2,922,116 $ 30,360 $36,309,052
Additional Units Sold 906.45 2,017,381 2,017,381
Redemptions (216.33) (477,243) (38.58) (58,236) (27,328) (562,807)
Less Organizational and Offering Costs (692) (692)
Net profit (loss) (3,005,394) (240,994) (3,032) (3,249,420)
---------- ------------ ---------- ------------ ----------- -----------
Partners' capital at March 31, 2005 14,405.55 $ 31,891,320 1,159.68 $ 2,622,194 $ 0 $34,513,514
========== ============ ========== ============ =========== ===========
Net asset value per unit
Jan 1, 2005 $ 2,432.05 $ 2,463.97 $ 2,463.97
Net profit (loss) per unit (218.23) (202.84) (246.07)
------------ ------------ -----------
Net asset value per unit
March 31, 2005 or at redemption for GP $ 2,213.82 $ 2,261.13 $ 2,217.90
See accompanying notes to financial statements
5
THE EVEREST FUND, L.P
(AN IOWA LIMITED PARTNERSHIP)
SCHEDULE OF INVESTMENTS
MARCH 31, 2005
% OF
EXPIRATION MARKET PARTNERS'
DATES NUMBER OF CONTRACTS VALUE (OTE) CAPITAL
------------- ------------------- -------------------- ---------
LONG POSITIONS:
FUTURES POSITIONS
Interest rates Jun - Dec 05 114 $ 78,598 0.23%
Energy May - Jul 05 260 882,589 2.56%
Agriculture May 05 442 562,577 1.63%
Indices Jun 05 59 (101,889) -0.30%
-------------------- ---------
1,421,875 4.12%
FORWARD POSITIONS
Currencies Jun 05 (1,728,415) -5.01%
-------------------- ---------
Total long positions $ (306,541) -0.89%
-------------------- ---------
SHORT POSITIONS:
FUTURES POSITIONS
Interest rates Jun - Dec 05 818 $ 153,889 0.45%
Agriculture May 05 160 3,488 0.01%
Currencies Mar 06 140 22,613 0.07%
Indices Jun 05 20 2,050 0.01%
-------------------- ---------
182,039 0.53%
FORWARD POSITIONS
Currencies Jun 05 1,017,234 2.95%
--------------------
Total short positions $ 1,199,273 3.47%
-------------------- ---------
TOTAL OPEN CONTRACTS 892,732 2.59%
CASH AND CASH EQUIVALENTS 25,655,347 74.33%
CASH ON DEPOSIT WITH BROKERS 8,355,795 24.21%
LESS LIABILITIES IN EXCESS OF OTHER ASSETS (390,360) -1.13%
-------------------- ---------
NET ASSETS $ 34,513,514 100.00%
==================== =========
See accompanying notes to financial statements
6
EVEREST FUND, L.P.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2005
(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. In November 2003 the Partnership changed its
name to its present form.
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 $109,636,287 for 57,717.42 Units of Class A Units sold July 1, 1995
through March 31, 2005 and a total of $2,946,627 for 1,198.26 Units of Class I
Units sold March 31, 2005 net of offering costs. 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. (Everest II). In July 2000, the
Partnership redeemed approximately 50% of its assets from Everest II. Effective
as of the close of business August 31, 2000, the Partnership liquidated its
remaining investment in Everest II. Effective June 4, 2004, the Partnership
introduced a new share category, Class I Units,
7
or Institutional Units which have an ongoing Offering and Organization fee of
1/12 of 0.10% of the NAV per unit per month. The Class A Units, (retail shares)
continue to be charged an initial 1% Offering and Organization fee as a
reduction to capital.
The Partnership clears all of its futures and options on futures trades through
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
Cash and Cash Equivalents
Cash equivalents represent short-term highly liquid investments with maturities
of 90 days or less and include money market accounts, securities purchased under
agreements to resell, commercial paper, and U.S. Government and agency
obligations with variable rate and demand features that qualify them as cash
equivalents. These cash equivalents, with the exception of securities purchased
under agreement to resell, are stated at amortized cost, which approximates fair
value. Securities purchased under agreements to resell, with overnight maturity,
are collateralized by U.S. Government and agency obligations, and are carried at
the amounts at which the securities will subsequently be resold plus accrued
interest.
Reclassifications
Certain prior year amounts have been reclassified for conform to the current
year classifications.
Revenue Recognition
Commodity futures contracts, forward contracts, physical commodities, and
related options are recorded on the trade date basis. All such transactions are
recorded on the identified cost basis and marked to market daily. Unrealized
gains and losses on open contracts reflected in the statements of financial
condition represent the difference between original contract amount and market
value (as determined by exchange settlement prices for futures contracts and
related options and cash dealer prices at a predetermined time for forward
contracts, physical commodities, and their related options) as of the last
business day of the year or as of the last date of the financial statements.
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.
Net Income (Loss) Per Unit of Partnership Interest
8
Net income (loss) per unit of partnership interest is the difference between the
net asset value per unit at the beginning and end of each period for both Class
A and Class I Units.
Fair Value of Financial Instruments
The financial instruments held by the Company are reported in the statements of
financial condition at market or fair value, or at carrying amounts that
approximate fair value, because of their highly liquid nature and short-term
maturity.
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).
Class A 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'
9
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. Class I Limited Partners may cause any or all of their Units to be
redeemed as of the end of any quarter on 45 days' prior written notice to the
Partnership or such lesser period as is acceptable to the Partnership. The
Partnership will be dissolved at December 31, 2020, or upon the occurrence of
certain events, as specified in the Limited Partnership Agreement.
(4) CONTRACTS AND AGREEMENTS
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 month-end net asset value, as
defined, and a quarterly incentive fee of 20% of the Partnership's new net
trading profits, as defined. The incentive fee is retained by JWH even though
trading losses may occur in subsequent quarters; however, no further incentive
fees are payable until any such trading losses (other than losses attributable
to redeemed units and losses attributable to assets reallocated to another
advisor) are recouped by the Partnership.
Effective September 1, 2001, Mount Lucas Management Corporation ("MLM") was
added as a trading advisor with an initial allocation of $10 million. This
allocation represented notional funding for the Partnership. MLM receives a
monthly management fee of 0.0625% (0.75% annually) of the Partnership's
month-end allocated assets as defined. Effective February 2003, the management
fee was reduced to 0.04167% (0.50% annually). As MLM uses the MLM Index -
Unleveraged, they do not receive an incentive fee. MLM was terminated effective
October 31, 2003.
Beginning in June 2003, John W. Henry & Company, Inc. ("JWH") began trading JWH
Global Analytics Program ("GAP"); Currency Strategic Allocation Program ("CSAP")
and Worldwide Bond Program ("WBP") with a trading allocation of $27 million.
Effective November 2003, CIS charges the Partnership monthly brokerage
commissions equal to 0.50% of the Partnership's Class A beginning-of-month net
asset value. From May 2002 through October 2003, CIS charged the Partnership
monthly brokerage commissions of either 0.5104% or 0.5156%, depending on the
total amount which the Partnership had allocated to trading, including notional
funding. Prior to May 2002, CIS charged the Partnership monthly brokerage
commissions equal to 0.5052% of the Partnership beginning-of-month net asset
value, as defined. Prior to September 1, 2001, the monthly brokerage commission
was 0.5%. The General Partner receives a management fee of approximately 83% of
the brokerage commission charged by CIS. Effective June 2004, CIS charges the
Partnership monthly brokerage commissions equal to 0.229% of the Partnership's
Class I beginning-of-month net asset value. Net brokerage commissions are
recorded in the statements
10
of operations as a reduction of trading income and the amounts paid to the
General Partner are recorded as management fees.
As of March 31, 2005, the Partnership had approximately $34.5 million in net
assets. As of March 31, 2005, JWH's allocation was approximately $34.5 million.
The General Partner may replace or add trading advisors at any time.
A substantial portion of assets are deposited with a commercial bank and
invested under the direction of Horizon Cash Management, Inc. (Horizon). Horizon
will receive a monthly cash management fee equal to 1/12 of .25% (.25% annually)
of the average daily assets under management if the accrued monthly interest
income earned on the Partnership's assets managed by Horizon exceeds the 91-day
U.S. Treasury bill rate.
(5) 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.
11
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 three months ended March 31, 2005. Total return is calculated as the
change in a theoretical limited partner's investment over the entire period. An
individual partner's total returns and ratios may vary from the total return
based on the timing of contributions and withdrawals.
3/31/05 3/31/04
Total return: A Shares 8.97% 6.36%
I Shares 8.23%
Ratio to average net assets:
Total income A Shares -8.84% 6.12%
I Shares -8.39%
Expenses, excluding incentive fees:
A Shares 0.54% 0.55%
I Shares 0.58%
Incentive fees 0.00% 0.45%
Total expenses
A Shares 0.54% 0.99%
I Shares 0.58%
The total income and general and expense ratios are computed based upon the
weighted average net assets for the Partnership for the period ended March 31,
2005.
(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, 2004, as filed with the Securities and Exchange
Commission on March 31, 2005, as part of its Annual Report on Form 10-K.
12
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, 2005
The Partnership recorded a loss of $3,249,420 or $218.23 per Unit of Class A
Units ($202.84 for Class I Units) for the first quarter of 2005. This compares
to a gain of $2,087,470 or $143.50 per Class A Unit for the first quarter of
2004. The first quarter 2005 showed a loss of 8.97% for the Class A Units of the
fund (a loss of 8.23% for the Class I Units).
The Partnership continued to employ John W. Henry & Company, Inc.'s (JWH)
GlobalAnalyticsR Family of Programs, Worldwide Bond Program and Currency
Strategic Allocation Program.
Class A Units were negative 6.29% for January 2005 resulting in a net asset
value per unit of $2,279.03 as of January 31, 2005. The Fund's performance was
negative in January. While both the fixed-income and agricultural sectors had
gains for the month, they weren't enough to offset the losses in other sectors.
The Fund's underperformance was driven by the strength of the US dollar, which
rebounded from last year's weakening trend. The dollar's sudden turnaround was
the dominant factor that drove most market sectors during the month, and
therefore resulted in the overall loss for the program.
A significant portion of January's loss was directly related to the strength of
the US dollar against most major currencies. The weak US dollar trend, which had
dominated the markets during the second half of last year, began to reverse
itself as market expectations of a Yuan revaluation by the Chinese central bank
began to diminish. The largest gain was achieved in the Brazilian real, while
the largest loss occurred in the euro.
Trading in both metals and stock indices were also negative during the month.
The loss in metals was due to the weakness in both gold and silver. Gold, which
recently has had a strong inverse relationship with the US dollar, came under
pressure as the US dollar strengthened throughout the month. The Fund's returns
in the indices sector further hindered performance. The loss in indices resulted
from a sell off in world equity markets as stocks weakened because energy prices
rose during the month. The largest gain in the indices sector was achieved in
the Eurostoxx 50, while the largest loss occurred in the Nasdaq e-mini.
Higher prices in energies led to negative performance in this sector. In
addition to the events in the Middle East, weather dominated the sector's price
action. Oil prices surged as colder-than-expected
13
weather, as well as a blizzard, moved into the eastern U.S., which accounts for
80 percent of residential heating oil usage.
Both the agricultural and fixed income sectors provided positive returns. Wheat
helped returns as prices fell to a 20-month low after a report showed that U.S.
exports slowed when the European Union indicated it would subsidize exports of
the grain for the first time since June 2003. Corn slightly boosted returns as
prices fell to the lowest level since June 2001 on slumping demand for record
supplies in the U.S., which is the world's largest producer and exporter of the
grain. In addition, in the fixed income sector the Japanese Government bonds
(JGBs) rose during the month after Japanese government reports showed household
spending and industrial production fell. However, the positive returns in both
sectors were not enough to offset losses in the rest of the fund. The largest
gain in the agricultural sector was achieved in wheat, while the largest loss
occurred in cotton. In the fixed income sector the largest gain was achieved in
the JGBs, while the largest loss occurred in the Australian 10-year bond.
Class I Units for January 2005 were also negative with a loss of 6.03% resulting
in a net asset value per unit of $2,315.40. While both the fixed-income and
agricultural sectors had gains for the month, they weren't enough to offset the
losses in other sectors. The Fund's underperformance was driven by the strength
of the US dollar, which rebounded from last year's weakening trend. The dollar's
sudden turnaround was the dominant factor that drove most market sectors during
the month, and therefore resulted in the overall loss for the program. A
significant portion of January's loss was directly related to the strength of
the US dollar against most major currencies.
The Class I Units are traded with the same program as the Class A Units above.
Class A Units showed a loss of 4.47% resulting in a net asset value per unit of
$2,177.09 as of February 28, 2005. The Fund's performance was negative in
February. While both stock indices and the energy sectors had gains for the
month, it wasn't enough to offset the combined losses in the other sectors
traded. The Fund's underperformance was driven by the apparent end to some
long-term trends in the global fixed-income market and the unfavorable
performance in the currency sector.
A significant portion of February's losses was directly related to the
fixed-income sector as the European, Japanese and U.S. bond markets sold off.
The catalyst for the dramatic move higher in world interest rates was the
cumulative effect of various events and economic data released during the month.
Currencies were the other main contributor to the Fund's losses as the weakness
of the Japanese yen against the U.S. dollar during the first half of February
hurt performance. On February 10th, the U.S. dollar rose to a three-month high
against the yen after a Commerce Department report showed the U.S. trade deficit
narrowed in January from a previous record high. The recent dollar strength
began six days earlier when Chairman Alan Greenspan predicted that the deficit
in the U.S. current account, the broadest measure of trade, may shrink. The
energy sector had positive returns and was the Fund's best performing sector.
Energies rallied as commodity prices surged to a 24-year high
14
due to signs of growing global demand for everything energy-related. The
International Energy Agency raised its prediction for global consumption, and
forecasts of colder temperatures across Europe and the U.S. which also helped to
drive energy prices even higher. All components of this sector were positive
with the largest gain achieved in London gas oil.
The Fund's three other sectors, indices, metals, and agriculture all had
relatively little effect on overall performance during the month. Indices posted
gains as the Nikkei rallied throughout the month on hopes that quicker U.S.
growth would help Japan start an export-led economic recovery. The metals sector
posted negative returns, as inflation fears in the U.S. pushed gold prices
higher. All components of this sector were negative with the largest loss coming
from silver. Lastly, agriculture was slightly negative, as profits from the
rally in NY coffee caused by forecasts of a dry season in Brazil, was offset by
losses in various other agricultural markets.
For Class I the fund showed a loss of 4.21% in February. The net asset value per
unit was $2,217.90 as of February 28, 2005. While both stock indices and the
energy sectors had gains for the month, it wasn't enough to offset the combined
losses in the other sectors traded. The Fund's underperformance was driven by
the apparent end to some long-term trends in the global fixed-income market and
the unfavorable performance in the currency sector.A significant portion of
February's losses was directly related to the fixed-income sector as the
European, Japanese and U.S. bond markets sold off. The catalyst for the dramatic
move higher in world interest rates was the cumulative effect of various events
and economic data released during the month. Currencies were the other main
contributor to the Fund's losses as the weakness of the Japanese yen against the
U.S. dollar during the first half of February hurt performance.
Class A Units showed a gain of 1.69% resulting in a net asset value per unit of
$2,213.82 as of March 31, 2005. The Fund's performance was positive for the
month of March. The energy sector exhibited strong returns and the agricultural
sector also contributed to the Fund's positive performance. The combined
positive performance in these two sectors was able to offset the losses suffered
in the other sectors. Continuing worries over supply drove profits in energies,
while a strengthening U.S. dollar, as well as increasing inflation fears
dominated performance in most other sectors.
The energy sector was the Fund's best performing sector as crude oil and
gasoline surged to near all-time highs on speculation that rising domestic
demand may outpace U.S. refinery production during peak summer demand resulting
in strained global oil supplies.
The Fund's performance in the agriculture sector was profitable for the month.
The Fund was able to benefit from rising New York coffee prices as production
declined and stocks held by roasters and producers fell to their lowest level in
15 years. These profits combined with profits from cotton and London coffee were
enough to offset the negative returns in other markets within the sector.
Currencies were the most unprofitable sector during the month. The single most
influential factor driving performance in this sector was
15
the U.S. dollar. At the start of the month, the dollar weakened against other
major currencies as the U.S. trade deficit widened to $58.3 billion, the
second-highest level ever. However, the weakening trend reversed itself as the
price of oil soared and the yield on the benchmark 10-year Treasury note rose to
its highest level in seven months. Furthermore, demand for the greenback
increased when the Federal Reserve raised borrowing costs by a quarter
percentage point for a seventh time since last June and indicated that inflation
pressures were picking up. The largest gain in this sector was achieved in the
Japanese yen, while the largest loss occurred in the Swiss franc.
The Fund was unprofitable in the fixed income sector for the month as European
and Domestic markets sold off and the Japanese bond markets rallied. Increases
in both energy prices and inflation expectations were the catalyst for the
dramatic move higher in most of the world interest rates. The largest gain in
this sector was achieved in the U.S. ten-year note, while the largest loss
occurred in the bund.
Metals had losses for the Fund during March, as gold and silver were driven by
the volatility in the U.S. dollar during the month. Precious metals tend to have
an inverse relationship with the U.S. dollar. Thus, as the dollar weakened at
the beginning of the month gold and silver strengthened; and as the dollar
rallied, gold sold off when the dollar became a more attractive asset to hold.
All components of this sector were negative, with the largest loss coming from
silver.
Performance in stock indices was slightly down for the month as equity markets
weakened around the world. Higher bond yields and oil prices made equities less
attractive to investors as inflationary pressures started to weigh on the global
economy.
Class I Units showed a gain of 1.95% resulting in a net asset value per unit of
$2,261.13 as of March 31, 2005. The energy sector exhibited strong returns and
the agricultural sector also contributed to the Fund's positive performance. The
combined positive performance in these two sectors was able to offset the losses
suffered in the other sectors. Continuing worries over supply drove profits in
energies, while a strengthening U.S. dollar, as well as increasing inflation
fears dominated performance in most other sectors. The energy sector was the
Fund's best performing sector as crude oil and gasoline surged to near all-time
highs on speculation that rising domestic demand may outpace U.S. refinery
production during peak summer demand resulting in strained global oil supplies.
The Everest Fund, L.P. Class A experienced a net loss of 8.97% for the first
quarter of 2005. The Class I Units experienced a net loss of 8.23% for the same
period.
During the first quarter, additional Units sold consisted of 906.45 limited
partnership Units; there were zero general partnership Units sold during the
quarter. Additional Units sold during the quarter represented a total of
$2,017,381. Investors redeemed a total of 242.589 Units during the quarter and
the General Partner redeemed 12.32 Units. At the end of the quarter there were
14,405.55 Units outstanding (including 0 Units owned by the general partner).
16
During the fiscal quarter ended March 31, 2005, 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 Note 5 of the Notes to Financial Statements for procedures established by
the General Partner to monitor and minimize market and credit risks for the
Partnership. In addition to the procedures set out in Note 5, the General
Partner reviews on a daily basis reports of the Partnership's performance,
including monitoring of the daily net asset value of the Partnership. The
General Partner also reviews the financial situation of the Partnership's
Clearing Broker on a monthly basis. The General Partner relies on the policies
of the Clearing Broker to monitor specific credit risks. The Clearing Broker
does not engage in proprietary trading and thus has no direct market exposure,
which provides the General Partner assurance that the Partnership will not
suffer trading losses through the Clearing Broker.
FISCAL QUARTER ENDED MARCH 31, 2004
The Partnership recorded a gain of $2,087,470 or $143.50 per Unit for the first
quarter of 2004. This compares to a gain of $6,420,752 or $311.51 per Unit for
the first quarter of 2003. The first quarter 2004 showed a gain of 6.36% for the
fund.
The Partnership continued to employ John W. Henry & Company, Inc.'s (JWH)
GlobalAnalyticsR Family of Programs, Worldwide Bond Program and Currency
Strategic Allocation Program. The Everest Fund, L.P experienced a gain of 0.54%
during January, resulting in a Net Asset Value per Unit of $2,268.719 as of
January 31, 2004.
In January the JWH programs had gains in the fixed income sector, as the world-
wide trend of interest rates continued to move lower. The currency sector was
positive, with the US dollar trend continuing downward against most major
currencies in the first half of the month, then swiftly strengthening against
most currencies later in the month. The agricultural sector was also positive
primarily on the performance of corn, soybeans and New York coffee. Stock
indices were unprofitable as Europe, the US and Japan maintained their upward
trend for most of the month on positive economic growth and a favorable interest
rate environment. The energy sector was also down for the month, especially from
the position in London gas oil. Finally, the metals sector was also down, from
losses in gold.
The Everest Fund, L.P experienced a gain of 6.32% during February, resulting in
a Net Asset Value per Unit of $2,412.208 as of February 29, 2004.
In February JWH had a gain of +6.32%. Interest rates continued to move lower in
G7 nations due to benign inflationary pressures. Energies, with the exception of
natural gas, remained on an upward trend because of supply concerns. The US
dollar, which had been weakening against most major currencies, found strength
mid-month and reversed its five-month downtrend. Base metals continued the
strong move upward due to
17
low inventory levels, while precious metals followed currencies and reversed
course during the month. Despite exhibiting a degree of volatility on an
intra-month basis, most equity indices ended the month close to unchanged.
Profits came from the fixed income sector, agriculturals, energies, and metals
in that order. Currencies were unprofitable.
The Everest Fund, L.P. experienced a loss of 0.51% during March, resulting in a
Net Asset Value per Unit of $2,399.95 as of March 31, 2004.
JWH had a loss of 0.51% in March for the fund. The month was dominated by
increased geopolitical risks, which led to a reduction in the market positions.
In March, the most influential market factors for the fund were the effects of
Japan's fiscal year end. The Bank of Japan, through intervention in foreign
exchange markets, bolstered the US dollar against the Japanese yen, which in
turn propelled Japanese equities and interest rates.
The largest gains came from the agricultural sector with gains in the fall of
cotton prices and gains from the rising prices of grains. The metals sector was
the second most profitable sector with silver and gold moving higher despite the
US dollar strengthening. Energies were also profitable in March with
geopolitical risks and OPEC's policies helping crude oil and related products
maintain lofty price levels. Global stock indices were also positive as most
global indices went down in the first half of the month but recovered in the
later half in reaction to favorable economic data. Profits were posted in the
fixed income sector as well, as employment data sent bond prices higher (and
rates lower), with the exception of Japan. The currency sector was unprofitable
with action dominated by the action in the Japanese yen, orchestrated by the
Bank of Japan. March is the Japanese fiscal year end and the Bank of Japan
intervened in the foreign exchange market by buying over $40 billion US dollars
and selling Japanese yen in an effort to allow Japanese exporters to hedge their
US dollar profits at favorable rates for year end considerations. Most other
major currencies traded in a sideways fashion. The largest losses came in the
Japanese yen, the British Pound and the euro.
During the quarter, additional Units sold consisted of 924.18 limited
partnership units; there were no general partnership units sold during the
quarter. Additional Units sold during the quarter represented a total of
$2,201,716. Investors redeemed a total of 826.69 Units during the quarter and
the General Partner redeemed zero Units. At the end of the quarter there were
14,926.48 Units outstanding (including 0.42 Units owned by the General Partner).
During the fiscal quarter ended March 31, 2004, 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.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES
18
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, 2004.
ITEM 4. CONTROLS AND PROCEDURES
Within 90 days of the date of this report an evaluation was performed by the
company under the supervision and with the participation of management,
including the President of the Company, of the effectiveness of the design and
operation of the Company's disclosure controls and procedures. Based on that
evaluation, the Company's management, including the President, concluded that
the Company's disclosure controls and procedures are effective in timely
alerting them to material information relating to the Company that is required
to be included in the Company's period filings with the Securities and Exchange
Commission. There have been no significant changes in the company's internal
controls or in other factors that could significantly affect those internal
controls subsequent to the date the company carried out its evaluation.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
The Partnership and its affiliates are from time to time parties to various
legal actions arising in the normal course of business. The General Partner
believes that there are no proceedings threatened or pending against the
Partnership or any of its affiliates which, if determined adversely, would have
a material adverse effect on the financial condition or results of operations of
the Partnership.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
See Part I, Statement of Changes in Partner's Capital
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits
19
b) Reports on Form 8-K
None
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned and thereunto duly authorized.
EVEREST FUND, L.P.
Date: May 10, 2005 By: Everest Asset Management, Inc.,
its General Partner
By: /s/ Peter Lamoureux
-----------------------------------
Peter Lamoureux
President
20
EXHIBIT INDEX
Exhibit Number Description of Document Page Number
- ------------- ---------------------------------------------- -----------
31 Certification by Chief Executive Officer
and Chief Financial Officer Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002 E- 1-2
32 Certification by Chief Executive Officer
and Chief Financial Officer Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002 E - 3
21