Item 1. Business
The Everest Fund, L.P. (the "Partnership" or "Everest") is a limited partnership organized on June 20, 1988 under the Iowa Uniform Limited Partnership Act. The business of the Partnership is the speculative trading of commodity futures contracts and other commodity interests, including forward contracts on foreign currencies (Commodity Interests) either directly or indirectly through other entities, including subsidiaries, partnerships, Partnerships or other limited liability entities, which constitute one industry segment. The Partnership commenced its trading operations on February 1, 1989. Its General Partner is Everest Asset Management, Inc. (the "General Partner") a Delaware corporation organized in December, 1987.
During its operation, the Partnership has had various trading advisors. In December 1990, John W. Henry & Company, Inc. (JWH) began trading for the Partnership as one of the Partnership's trading advisors. In May 1994, JWH became the sole trading advisor to the Partnership.
On September 13, 1996 the U.S. Securities and Exchange Commission accepted a voluntary filing by the Partnership of a Form 10 - General Form for Registration of Securities, and public reporting of Units of the Partnership sold as a private placement commenced at that time and has continued to the present.
In 2009 the Partnership continued previously offered Class A Units (retail shares) and charged an initial 1% Offering and Organization fee as a reduction to capital.
In 2009 the Partnership retained the JWH Global Analytics Program ( JWH GAP )as its sole trading program. As of December 31, 2009 100% of the Partnership's assets are being traded by the JWH GAP.
Upon fifteen days written notice, a Class A Limited Partner may require the Partnership to redeem all or part of his Units effective as of the close of business (as determined by the General Partner) on the last day of any month at the Net Asset Value thereof on such date. Notwithstanding the above, pursuant to the Amended and Restated Agreement of Limited Partnership, the General Partner may, in its sole discretion, and on ten days' notice, require a Limited Partner to redeem all or part of his Units in the Partnership as of the end of any month. There are no additional charges to the Limited Partner at redemption. The Partnership's Amended and Restated Agreement of Limited Partnership contains a full description of redemption and distribution procedures.
Since commencing trading operations, the Partnership has engaged in the speculative trading of Commodity Interests and will continue to do so until its dissolution and liquidation, which will occur on the earlier of December 31, 2020 or the occurrence of any of the events set forth in Paragraph 4(a) of the Agreement of Limited Partnership. Such events are (i) an election to dissolve the Partnership made by over 50% of the Limited Partnership Units at least 90 days prior to dissolution, (ii) withdrawal, insolvency, or dissolution of the General Partner (unless a new general partner is substituted), (iii) decline in the Net Asset Value of the Partnership at the close of any business day to less than $300,000, or (iv) any event which will make it unlawful for the existence of the Partnership to be continued or requiring termination of the Partnership.
The address of the General Partner and the Partnership is 1100 North 4th Street, Suite 143, Fairfield, Iowa 52556, and the telephone number at such location is (641) 472- 5500. The General Partner changed its name as of March 1, 1994 and amended its Certificate of Incorporation, with no other changes, accordingly. In accordance with the provisions of the Commodity Exchange Act and the rules of the National Futures Association (NFA), the General Partner is registered as a commodity pool operator and a commodity trading advisor, JWH is registered as a commodity trading advisor and the Commodity Broker is registered as a futures commission merchant, each subject to regulation by the Commodity Futures Trading Commission (CFTC). Each is also a member of the NFA in such capacity.
The General Partner, to the exclusion of the limited partners of the Partnership (the Limited Partners ), manages and conducts the business of the Partnership. Thus the General Partner (i) selects and monitors the independent commodity trading advisor(s) and the Commodity Broker; (ii) allocates and/or reallocates assets of the Partnership to or from JWH and/or the advisor(s); (iii) determines if an advisor or commodity broker should be removed or replaced; (iv) negotiates management fees, incentive fees and brokerage commissions; (v) determines its own compensation with respect to management and administrative fees; and (vi) performs such other services as the Partnership may from time to time request, except that all trading decisions are made by JWH and not the General Partner. In addition, the General Partner selects the commodity broker(s) that will clear trades for the advisor(s). Newedge Financial Inc., part of the Newedge Group joint venture between Societe Generale and Calyon currently acts as Everest's commodity broker.
The General Partner is responsible for the preparation of monthly and annual reports to the Limited Partners; filing reports required by the CFTC, the NFA, the SEC and any other federal or state agencies having jurisdiction over the Partnership's operations; calculation of the Net Asset Value (meaning the total assets less total liabilities of the Partnership ( for a more precise definition, see the Exhibit Form 10 - General Form for Registration of Securities incorporated by reference hereto ) and directing payment of the management and incentive fees payable to JWH or the advisor(s)under an advisory agreement(s) entered into with the commodity trading advisor(s).
Effective November 2003, the General Partner charges the Partnership a monthly management fee equal to 0.50% of the Partnership's Class A beginning-of-month net asset value. The General Partner pays a portion of its fees for actual commission charges to its Clearing Broker.
In addition, the Partnership reimburses the General Partner for the actual organization and offering expenses advanced by it, not to exceed one percent of the Class A Net Asset Value of Units sold. Organization and offering expenses shall mean all expenses incurred by the Partnership or the General Partner in connection with and in preparation to offer and distribute the Units to investors, including, but not limited to, expenses for traveling, printing, engraving, mailing, salaries of employees while engaged in sales activity, charges of transfer agents, registrars, trustees, escrow holder, depositories, experts, expenses of qualification of the sales of its securities under state law, including taxes and fees and accountants and attorneys fees.
Everest pays John W. Henry & Company, Inc., its current commodity trading advisor, a monthly management fee equal to 0.167% (approximately 2% annually) of Everest s month- end Allocated Assets, as defined, and a quarterly incentive fee equal to 20% of Everest's trading profits allocable to its trading exclusive of interest income on Allocated Assets, as defined. The incentive fee is retained by JWH even though trading losses may occur in subsequent quarters; however, no further incentive fees are payable until any such trading losses (other than losses attributable to redeemed units and losses attributable to assets reallocated to another advisor) are recouped by Everest.
The Commodity Broker has agreed to pay Everest interest on 95% of Everest assets (including open trade equity) deposited with it during a month at the average of 91-day U.S. Treasury Bills purchased by the Commodity Broker during each month. The Commodity Broker will retain all excess interest, if any, earned on the Everest assets, above the amount of interest paid to Everest. The interest rate to be paid by the Commodity Broker to Everest is a negotiated rate which has been negotiated between the Commodity Broker and the General Partner. The actual interest income on Everest s assets earned by the Commodity Broker may be greater than or less than the negotiated rate to be paid by the Commodity Broker to Everest. The Commodity Broker will also be responsible for execution and clearance of futures contracts (and possibly certain other Commodity Interests).
The Partnership pays no selling commission but does pay an ongoing compensation fee equal to 3% of the Net Asset Value of Class A Units sold, unless waived in whole or in part by the General Partner, to the selling agents in connection with the sale of the Units. The General Partner may pay up to 100% of the Partnerships it receives to the selling agents as additional selling commission. The Partnership is obligated to pay its periodic operating expenses and extraordinary expenses. Although those expenses will vary depending on the Partnership's size, it is estimated that the periodic operating expenses will be approximately $80,000 annually. Extraordinary expenses for these purposes include expenses associated with significant non-recurring litigation including, but not limited to, class action suits and suits involving the indemnification provisions of the Agreement of Limited Partnership or any other agreement to which the Partnership is a party. By their nature, the dollar amount of extraordinary expenses cannot be estimated. All expenses shall be billed directly and paid for by the Partnership. The Partnership's operating expenses for the years 2006-2010 can be found in the table in Item 6 below.
As of December 31, 2010, the General Partner had two full-time Employees and two part-time employees. Further, the General Partner, in its capacity as a CFTC-regulated commodity pool operator, contracts certain services of research, administration, client support and management information systems and analysis to Capital Management Partners, Inc. (Capital). Capital is a CFTC-regulated introducing broker, and an NFA member. Capital is also registered with the Financial Industry Regulatory Authority, Inc. ( FINRA ) as a broker dealer. As of December 31, 2010, Capital had 6 employees.
The Partnership's business constitutes only one segment for financial reporting purposes; and the purpose of the Partnership is to trade, buy, sell, spread or otherwise acquire, hold or dispose of Commodity Interests including futures contracts, forward contracts, physical commodities and related options thereon. The objective of the Partnership's business is appreciation of its assets through speculative trading in such Commodity Interests. Financial information about the Partnership's business, as of December 31, 2010 is set forth under Items 6 and 7 herein.
For a description of commodity trading and its regulation, see the Prospectus filed on Form S-18 and the Confidential Private Placement Memorandum filed as part of the Form 10 and included in the exhibits hereto.
The Current Offering
On July 1, 1995 the Partnership reopened for investment as a Regulation D, Rule 506 private placement offering an unlimited amount of limited partnership interests. On September 19, 1996 the Commission accepted a Form 10 - General Form for Registration of Securities submitted by the Partnership thereby making the Partnership a public reporting private placement offering. It also qualified the Partnership as a publicly offered security as defined in the Employee Retirement Income Security Act of 1974 (ERISA) rules permitting it to accept investment of an unlimited amount of plan assets as defined in ERISA. Hitherto, as a private placement the Partnership could accept ERISA plan assets representing no more than 25% of the total investment in the Partnership. The limited partnership interests are offered by the Selling Agent and additional selling agents with a Class A minimum subscription amount of $25,000. (The Class A minimum subscription amount for employee benefit plans and individual retirement accounts is $10,000).
Competition
JWH and any other advisor(s) of the Partnership, its or their respective principals, affiliates and employees are free to trade for their own accounts and to manage other commodity accounts during the term of the Advisory Agreement and to use the same information and trading strategy which JWH obtains, produces or utilizes in the performance of services for the Partnership through its investment in Everest. To the extent that JWH recommends similar or identical trades to the Partnership and other accounts which it manages, the Partnership may compete with those accounts for the execution of the same or similar trades.
Other trading advisors who are not affiliated with the Partnership may utilize trading methods which are similar in some respects to those methods used by JWH, or any other future Partnership's advisor(s). These other trading advisors could also be competing with the Partnership for the same or similar trades as requested by the Partnership's advisor(s).
Item 1A.
Item 1A.	Risk Factors GENERAL
Trading in Commodity Interests Is Speculative. Commodity interest prices are highly volatile. Price movements for futures contracts, for example, which may fluctuate substantially during a short period of time, are influenced by numerous factors that affect the commodities markets, including, but not limited to: changing supply and demand relationships, government programs and policies, national and international political and economic events, and changes in interest rates. See, Risk Factors -- Commodity Interests Trading May Be Illiquid.
Commodity Interests Trading Is Highly Leveraged. The low margin deposits normally required in trading commodity interests permit an extremely high degree of leverage. Accordingly, a relatively small price movement in a commodity interest may result in an immediate and substantial loss to the investor. For example, if at the time of purchase 5% of the price of a futures contract is deposited as margin, a 5% decrease in the price of the futures contract would, if the contract were then closed out, result in a total loss of the margin deposit (brokerage commission expense would also be incurred). Like other leveraged investments, any commodity interest trade may result in losses in excess of the amount invested. Although more than the initial margin can be lost on a trade, the Partnership, and not investors personally, will be subject to margin calls.
The Partnership's Trading Account May Be Leveraged or de-levereged. The general partner may, in its sole discretion, periodically adjust the size of the trading account with JWH by increasing or decreasing the cash, other assets or notional Partnerships allocated to it (and thus the amount by which the Partnership's assets are leveraged). Because the trading account may be leveraged, (i) the Partnership may incur greater risk since the Partnership may experience greater losses, as measured by a percentage of assets actually allocated to JWH, due to the notional Partnership's component; (ii) the Partnership's returns may experience greater volatility compared to the returns which the Partnership would have achieved on a non- leveraged basis; and (iii) the Partnership may receive more frequent and larger margin calls. Because the trading account may be de-leveraged, the partnership may incur smaller gains than it would if the JWH trading program had been fully allocated to.
Commodity Interests Trading May Be Illiquid. Most U.S. commodity futures exchanges impose daily limits regulating the maximum amount above or below the previous day's settlement price which a futures contract price may fluctuate during a single day. During a single trading day no trades may be executed at prices beyond the daily limit. Once the price of a particular futures contract has increased or decreased to the limit point, it may be difficult, costly or impossible to liquidate a position. Futures prices in particular contracts have occasionally moved the daily limit for several consecutive days with little or no trading. If this occurs, the Partnership might be prevented from promptly liquidating unfavorable positions, which could result in substantial losses. Those losses could significantly exceed the margin initially committed to the trades involved. In addition, even if prices have not moved the daily limit or there are no limits for the contracts traded, trades might not be able to be executed at favorable prices if little trading in the contracts is taking place. It is also possible that an exchange or the Commodity Futures Trading Commission (CFTC) may suspend trading in a particular contract, order immediate settlement of a contract, or order the liquidation of open positions only.
Exchange for Physical. JWH may make use of a trading technique referred to as exchange for physical in which a cash or spot market position (which may be a forward contract) is exchanged, often outside of regular trading hours, for a comparable futures position. The CFTC has released a study of the exchange for physical market that recommended that a number of new regulatory restrictions be applied to it. If these recommendations or restrictions are adopted, the ability of JWH to use this market may be curtailed.
Trading Decisions Based on Technical Analysis. JWH uses trading programs that employ technical factors in identifying price moves. The success of technical analysis depends upon the occurrence in the future of price movements. Technical systems will not be profitable, and may in fact produce losses, if there are no market moves of the kind the system seeks to follow. Any factor that would make it more difficult to execute the trades identified, such as a reduction of liquidity, also would reduce profitability. There is no assurance that the trading systems of JWH will generate profits under all or any market conditions.
Possible Effects of Other Similar Systems. Commodity trading systems, which use market data like JWH uses, are not new. If many traders follow similar systems, these systems may generate similar buy and sell orders at the same time. Depending on the liquidity of a market, this could cause difficulty in executing orders. The General Partner believes that, although there has been an increase in the number of trading systems in recent years, there also has been an increase in the overall trading volume and liquidity in the futures markets. Any increase in the proportion of Partnerships traded using trend-following systems could alter trading patterns or affect execution of trades to the detriment of the Partnership.
No Assurance of JWH'S Continued Services. JWH has exclusive responsibility for trading commodity interests allocated to it. JWH is dependent on the services of certain key persons. The loss of the services of such persons would make it difficult or impossible for JWH to continue to provide services to the Partnership. In addition, the advisory contract between the Partnership and JWH may be terminated by either party on sixty (60) days written notice.
Changes in Trading Strategies. The trading strategies of most trading advisors are continually developing. JWH is free to make any changes in trading strategies. Changes in commodity interests traded or leverage used are not considered changes in trading strategy.
Possible Effects of Speculative Position Limits. The CFTC and U.S. exchanges have established speculative position limits. These limits control the number of net long or net short speculative futures or options (on futures) positions any person may hold or control in futures or options contracts traded on U.S. exchanges. JWH controls the commodity trading of other accounts. All positions and accounts owned or controlled by JWH and its principals are combined with the Partnership's positions established by JWH for position limit purposes. In order to avoid exceeding position limits, it is possible that JWH will have to modify its trading instructions, and that positions held by the Partnership will have to be liquidated. That could have a negative effect on the operations of the Partnership and its profitability. See, Risk Factors Increase in Amount of Partnerships Managed. In addition, all commodity accounts of the General Partner and its affiliates may also be combined with the Partnership for position limit purposes.
Increase in Amount of Partnerships Managed. JWH expects to manage additional Partnerships in the future. It is not known if managing additional Partnerships, including Partnerships raised in this offering, will have any effect on its performance or trading strategies. In many cases, the rates of return achieved by an advisor deteriorate as assets under management increase. Increases in Partnerships managed may affect the number of futures or options positions an advisor would otherwise hold for each account it manages because of speculative position limits imposed by U.S. exchanges. There is no assurance that changes in strategies, if any, in response to increased Partnerships will be successful. There can be no guarantee that the investment results of that portion of the assets allocated to JWH will be similar to those achieved by it in the past in its other accounts.
Changes in the Number of Available Futures Contracts and Related Options. U.S. and foreign exchanges have established new futures and options contracts in the past few years. This trend could continue. If JWH trades these contracts in the future, there is no assurance that its trading strategies will produce profits.
Past Performance Is Not Necessarily Indicative of Future Results. Although some of the client accounts of JWH have been profitable in the past, you should take seriously the warning the CFTC and the NFA require. PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS. AN INVESTMENT IN THE PARTNERSHIP IS SPECULATIVE AND INVOLVES A SUBSTANTIAL RISK OF LOSS.
Horizon Cash Management, L.L.C. Horizon is an Investment Advisor (IA) with Power of Attorney (POA), to manage Everest Partnership assets on deposit at Northern Trust through investments in short term interest bearing instruments. A substantial portion of the Partnership's assets is held in an omnibus custody account on behalf of the Partnership at The Northern Trust Company in the name of the Partnership. The Partnership has entered into an advisory contract with Horizon pursuant to which Horizon manages such assets in an attempt to maximize their yield through investment in various short-term interest bearing instruments including U.S. Treasury Securities, U.S. Government Agencies Securities, Bankers Acceptances, Certificates of Deposit, Time Deposits, Commercial Paper, Loan Participation Notes and Repurchase Agreements U.S. Treasury Securities and U.S. Government Agencies Securities. As a result, the Partnership's assets managed by Horizon are subject to potential loss resulting from interest rate fluctuations and default.
JWH PROGRAMS
Effects of Trading Multiple Investment Programs. JWH makes trading decisions for each of its investment programs independently of trading decisions for the other JWH investment programs.
Mandatory Closing Out of Offsetting Positions. CFTC rules require offsetting positions taken by JWH for clients be closed out.
Swap Transactions. JWH may periodically enter into transactions which are characterized as swap transactions and which may involve interest rates, currencies, securities interests, commodities, and other items. Swap contracts are not traded on exchanges and are not regulated by the CFTC. Swap transactions are individually negotiated, non-standardized agreements between two parties to exchange cash flows measured by different interest rates, exchange rates or prices, with payments calculated by reference to a principal amount or quantity. As a result, the Partnership will not receive the protection afforded by the Commodity Exchange Act in connection with this trading activity by JWH. The absence of regulation could expose the Partnership to significant losses in the event of trading abuses or financial failure by participants in the swap markets. JWH has not previously traded swaps and has no experience in that market. Transactions in these markets also present certain risks similar to those in the futures, forward and options markets. Only the accounts of eligible swap participants as defined in Part 35 of CFTC Regulations, may engage in swaps.
Options Transactions. JWH may engage in the trading of options (both puts and calls) on futures on behalf of the Partnership. The value of an option depends largely upon the likelihood of favorable price movements in the underlying futures contract in relationship to the exercise (or strike) price during the life of the option. Therefore many of the risks applicable to trading the underlying futures contract are also applicable to options trading. In addition, there are a number of other risks associated with the trading of options. For example, the purchaser of an option runs the risk of loss of his/her entire investment (the premium he pays). Similarly, the uncovered writer of an option is subject to an adverse price movement in the underlying futures position, any such movement may exceed the premium income from the option transaction. Spread positions using options are subject to the same risks involved in the purchase and writing of options. In addition, in the event the Partnership were to write uncovered options as one part of a spread position and such option were exercised by the purchasing party, the Partnership would be required to purchase and deliver the underlying futures contract in accordance with the terms of the option. Finally, an options trader runs the risk of market illiquidity preventing offsetting positions for any particular option. (See Commodity Trading May Be Illiquid above.)
	Business Interruption Risk. During both 2004 and 2005, the operations of JWH at its Boca Raton, Florida, offices were disrupted by hurricanes which required recovery periods to re-establish communications and other utilities. JWH continued its trading operations during those periods without interruption from back up locations. Any future business interruption events, whether weather- related or otherwise, that affect the south Florida area could similarly disrupt the trading operations of JWH, despite the back up precautions it has established. JWH has a business continuity plan, but it cannot guarantee that business interruption events will not have an impact on its operations.
Electronic Trading and Order Routing Systems. JWH may from time to time trade on electronic trading and order routing systems which differ from traditional open outcry pit trading and manual order routing methods. Transactions using an electronic system are subject to the rules and regulations of the exchanges offering the system or listing the contract. Characteristics of electronic trading and order routing systems vary widely among the different electronic systems with respect to order matching procedures, opening and closing procedures and prices, error trade policies and trading limitations or requirements. There are also differences regarding qualifications for access and grounds for termination and limitations on the types of orders that may be entered into the system. Each of these matters may present different risk factors with respect to the trading on or using a particular system. Each system may also present risks related to system access, varying response times and security. In the case of internet-based systems, there may be additional risks related to service providers and the receipt and monitoring of electronic mail.
	Trading through an electronic trading or order routing system is also subject to risks associated with system or component failure. In the event of system or component failure, it is possible that for a certain time period, it might not be possible to enter new orders, execute existing orders or modify or cancel orders that were previously entered. System or component failure may also result in loss of orders or order priority. Some contracts offered on an electronic trading system may be traded electronically and through open outcry during the same trading hours. Exchanges offering an electronic trading or order routing system and listing the contract may have adopted rules to limit their liability, the liability of futures brokers and software and communication system vendors and the amount that may be collected for system failures and delays. These limitation of liability provisions vary among the exchanges.
	Reliance on Timely and Accurate Market Data. JWH's ability to detect market trends and trade them profitably depends on its access to timely and accurate market price data throughout the trend identification and trading processes. If price data is not available or is delayed, JWH would be unable to trade for client accounts until reliable data sources have been restored. Data reconciliation procedures are applied each day to confirm accurate price quotations, and on the subsequent day prices that were employed in the JWH systems are re-reconciled in an attempt to identify changes from previously posted prices. JWH's traders are required to confirm a price from multiple sources before executing a trade, and, during volatile market conditions, traders request confirmation of high and low prices from the floor before placing a trade. Inaccurate information may be generated by a data vendor, or an exchange may transmit inaccurate prices that a vendor then distributes to JWH, but which are later cancelled or amended by the exchange. In addition, JWH may obtain from third parties, such as clearing firms, information about price or about contract specifications and changes to them. Inaccurate price information may cause JWH to enter or close trades that it would not otherwise have entered or closed, to trade or fail to trade at times that would have been indicated by accurate data, or to be completely unable to place a trade. Communications or technical failure may also cause an electronic trading tool to fail, which could cause JWH to fail to act when a trading stop is reached. As a result of such potential data problems, client accounts may be unable to exit positions or miss the opportunity to establish new positions. JWH receives price data electronically. Data providers typically make no representations or warranties about the accuracy or timeliness of the data they provide, and assume no financial liability for lost profits, trading losses or other consequential damages. Data providers also disclaim any responsibility for events of force majeure, as well as for actions (or inaction) of third party information, hardware and software providers, and for interruption of means of communication. Because all of the data required for JWH s trading is provided from third parties, JWH, cannot, despite its employment of the precautions described above, make any assurances that its efforts will detect erroneous or incomplete data, or prevent client accounts from incurring losses or missing profit opportunities.
PARTNERSHIP ISSUES
Substantial Charges to Partnership. The Partnership pays substantial fees and charges and has substantial operating costs. As a result, it must make substantial profits for your units to increase in value. These include an incentive fee to JWH that is based on, among other things, unrealized appreciation in open commodity interest positions. The incentive fee is paid (and retained by JWH) even if that portion of the Partnership's assets traded by it experience subsequent losses or the appreciation is never realized. It is therefore possible that the Partnership may pay an incentive fee in years in which the Partnership breaks even or experiences losses.
Possible Misallocation of Incentive Fees. The Partnership pays quarterly incentive fees on trading profits, if any, earned by JWH. Trading profits are calculated on the overall profits earned by JWH on its allocated assets and not just on increases in the Net Asset Value of each unit. As a result, the Partnership might pay incentive fees even if Partnership units decline in value. In addition, if, at the time limited partners purchase units, there is an accrued incentive fee expense, that accrued expense will reduce the purchase price of their units. If the accrual is reversed because of later losses, the incentive fee will be misallocated because the reversal of the accrued incentive fee expense will be allocated equally to all outstanding units rather than only to those outstanding during the period when the incentive fee expense accrued. Similarly, if you buy units after an incentive fee has been paid and after a later loss attributable to JWH, your units will not be assessed an incentive fee until there are new trading profits, even if your units have increased in value.
There Is No Intrinsic Value to the Partnership's Investments. The Partnership must be profitable for it to provide beneficial diversification to a limited partner's portfolio. Trading in commodity interests is a zero-sum activity in which for every gain there is an equal and offsetting loss (disregarding transaction costs). This differs from a typical securities investment, in which there is an expectation of consistent yields (in the case of bonds) or participation over time in general economic growth (in the case of stocks). The Partnership could lose money while stock and bond prices rise. Stocks and bonds (except penny stocks) generally have some intrinsic value. Limited partners generally can realize some value for their stocks or bonds even if they sell in a down market. In trading commodity interests, on the other hand, investors risk losing all of their investment if prices move against them. In general, performance statistics do not reflect the different risk profiles or tax treatment of traditional and managed commodity interest investments. See, Risk Factors Limited Partners Will Be Taxed on Profits whether or Not Distributed or Realized.
Partnership Trading Is Not Transparent. JWH makes all of the trading decisions for the portion of the Partnership's assets allocated to it. While the General Partner receives daily trade confirmations from the commodity broker, only the monthly performance of the Partnership is reported to limited partners. Accordingly, an investment in the Partnership does not offer limited partners the same transparency, i.e., an ability to review all investment positions daily that a personal trading account offers.
Non-Correlated, Not Negatively Correlated, Performance Objective. Historically, managed futures have been generally non-correlated to the performance of other asset classes such as stocks and bonds. Non-correlation means that there is no statistically valid relationship between the past performance of futures and forward contracts on the one hand and stocks or bonds on the other hand (as opposed to negative correlation, where the performance would be exactly opposite between two asset classes). Because of this non-correlation, the Partnership cannot be expected to be automatically profitable during unfavorable periods for the stock market, or vice versa. The futures and forward markets are different from the securities markets in that for every gain in futures and forward trading, there is an equal and offsetting loss. If the Partnership's investments do not perform in a manner non-correlated with the general financial markets, or do not perform successfully, limited partners will obtain no diversification benefits by investing in the units and the Partnership may have no gains to offset their losses from other investments.
Limited Partners Will Not Participate in Management. Limited Partners will not participate in the management of the Partnership. Under principles of limited partnership law, limited partners participation in the Partnership's management could result in unlimited liability for them. The limited partnership agreement provides that certain actions may be taken, or approved, by the vote of limited partners owning more than 50% of the units, but their role in the Partnership is passive and the profitability of their investment depends entirely on the efforts of others.
Indemnification of Partnership by Limited Partners. If someone signs the subscription agreement and the General Partner accepts their subscription, they will become a limited partner. Under the agreement, they will be required to indemnify the Partnership for any liability that it incurs as a result of their actions.
LIQUIDITY
Limited Ability to Liquidate Investment in Units. Limited partners cannot immediately liquidate their units. There is no market for the units and none is likely to develop. They may, however, redeem their Class A units, without penalty, on the last day of any month on fifteen (15) days prior written notice to the General Partner or such lesser time as is acceptable to the General Partner Because of the time delay between your Class A notice to the General Partner and the end of the month when their investment is redeemed, the value of their investment on the date of redemption may be substantially less than at the time they notify the General Partner of their request to redeem.
Possible Effect of Redemptions on Unit Values. The Partnership will lose money if it has to sell positions at a loss in order to raise capital so that the Partnership can pay substantial redemptions. If a large number of redemptions occur simultaneously, the need to liquidate positions could continue even after the redemption date. The Partnership would have fewer assets to trade after a high level of redemptions. This might make it more difficult for it to recover losses or generate trading profits. Market illiquidity could make it difficult to liquidate positions on favorable terms, and may also result in losses and thus a decline in the value of Partnership units.
Automatic Trading Suspension. Limited Partners should buy units only if you are looking for a long-term investment. If the net asset value per unit declines as of the close of business on any day to a trading suspension level (50% of the highest prior month-end net asset value per unit, after adjustment for prior distributions), the Partnership will liquidate its open positions and notify limited partners. The Partnership cannot assure limited partners that it can liquidate its investments without incurring substantial additional losses or that limited partner will receive any specific value for the units they own. See, Risk Factors Commodity Interest Trading May Be Illiquid.
Counterparty Creditworthiness -- U.S. Markets. Commodity exchanges provide centralized market facilities for trading in futures contracts relating to specified commodities. Each of the commodity exchanges in the United States has an associated clearinghouse. Once trades made between members of an exchange have been confirmed, the clearing house becomes substituted for the clearing member acting on behalf of each buyer and each seller of contracts traded on the exchange and in effect becomes the other party to the trade. Thereafter, each clearing member firm party to the trade looks only to the clearinghouse for performance. Clearinghouses do not deal with customers, but only with member firms, and the guarantee of performance under open positions provided by the clearinghouse does not run to customers. If a customer's commodity broker becomes bankrupt or insolvent, or otherwise defaults on such broker's obligations to such customer, the customer in question may not receive all amounts owing to such customer in respect of his or her trading, despite the clearing house fully discharging all of its obligations.
A substantial portion of the Partnership's assets are held in a custodial account and managed by Horizon. Failure of this firm might result in losses to the Partnership.
FOREIGN INSTRUMENTS
Counterparty Creditworthiness -- Non-U.S. Markets. JWH may trade commodity interests on foreign exchanges and in the over-the-counter markets. Unlike U.S. exchange traded futures contracts where the exchange clearing corporation acts as the counterparty to each customer transaction, the over-the-counter markets and some foreign markets are principals markets. This means that the performance of the contract is the responsibility only of the individual firm or member on the other side of the trade and not of any exchange or clearing corporation. In those transactions, the Partnership will be subject to the risk of the inability of, or refusal by, the counterparty to perform.
Trading on Foreign Exchanges and Currency Exchange Rate Fluctuations. Neither existing CFTC regulations nor regulations of any other U.S. governmental agency apply to transactions on foreign markets. If a foreign clearinghouse default or bankruptcy occurs, the Partnership's rights and responsibilities are likely to differ from those existing on U.S. exchanges. The Partnership is at risk for fluctuations in the exchange rate between the currencies in which the commodity interest is traded and U.S. dollars. It also is possible that in the future, U.S. or foreign governments could impose exchange controls. There is no restriction on how much of the Partnership's trading can be conducted on foreign markets. The Partnership may pay brokerage commissions in foreign currencies. If the exchange rate of those currencies and the U.S. dollar fluctuates, the commission rate paid for those trades might increase (decrease).
Possibility of Forward and Cash Trading. The Partnership might make spot and forward contracts for certain commodities, primarily currencies with U.S. or foreign banks or dealers. A forward contract is a contractual right to purchase or sell a commodity, such as a currency, at or before a specific date in the future at a specific price. Because forward contracts are not traded on exchanges, there is no regulatory protection provided by any exchange or the CFTC. There is no limit on daily price moves for forward contracts. Banks and dealers are not required to continue to make markets in any commodity. In the past, there have been times when certain banks have refused to quote prices for forward contracts or have quoted prices with an unusually wide spread between the price at which the bank is prepared to buy and that at which it is prepared to sell. There is a risk that the banks or dealers through which the Partnership trades could fail or refuse to perform.
The CFTC is studying questions about the regulation of off-exchange instruments such as forward contracts. A number of the major U.S. commodity exchanges have also expressed concerns about these instruments. The CFTC has indicated that it would regard marketing of forward contracts on a retail basis to the U.S. public at large as a violation of the CEAct. The CFTC might, in the future, prohibit the Partnership from trading in the forward markets.
TAX AND REGULATORY ISSUES
Possibility of Taxation as a Corporation. General Partner believes that under current federal income tax law and regulations the Partnership will be classified as a partnership and not as an association taxable as a corporation. The General Partner will not obtain a ruling from the Internal Revenue Service (IRS) or an opinion of counsel to confirm its belief. If the Partnership is taxed as a corporation for federal income tax purposes in any taxable year, its income or losses will not be passed through to you, and the Partnership will be subject to tax on its income at the corporate tax rate. In addition, any distributions made to you could be taxable to you as dividend or capital gain income, and those distributions will not be deductible in computing taxable income.
Possible Legislative Tax Changes. All of the statements in this Memorandum about taxes are based upon the current Internal Revenue Code (the Code). Congress and the IRS regularly revise the Code and the regulations. Those revisions could materially affect you and the Partnership.
Unrelated Business Taxable Income (UBTI) for Employee Benefit Plans. If the Partnership were a publicly-traded partnership and limited partners are a tax-exempt entity, or if they are a tax-exempt entity and debt finance their investment, their share of gross income less Partnership deductions is treated as UBTI, and subject to tax. The General Partner does not believe that the Partnership is publicly-traded for this purpose. However, if it were decided that the Partnership is publicly-traded, it may not be an appropriate investment for employee benefit plans, including individual retirement accounts (IRAs). In addition, if investing in commodity interests results in UBTI, each partner that is a tax-exempt entity would take into account its share of the Partnership's UBTI and the deductions attributable to that income (including a $1,000 deduction against UBTI which is generally available to all tax-exempt entities) in computing its tax liability. Benefit plan investors should consult with their own legal and financial advisers about the tax consequences of plan investments in the Partnership.
Limited Partners Will Be Taxed on Profits whether or Not Distributed or Realized. The Partnership is not required, and the General Partner does not intend, to distribute profits. If the Partnership has taxable income for a fiscal year, the income will be taxable to them based on their distributive share of Partnership profit even if no profits have been distributed. As a result, limited partners might owe taxes on undistributed profits. It is also possible that those profits could be lost by the Partnership after the end of its fiscal year, so that limited partners might never receive the profits on which they are taxed. However, they may redeem units to pay taxes, but this would result in a reduction in their interest in the Partnership's future profits (if any).
Foreign Limited Partners. If limited partners are not citizens or residents of the U.S. and are not otherwise engaged in a trade or business in the U.S., they will generally not be required to pay U.S. income tax on capital gains from commodity interest trading. Interest income will be taxable to them, if they are a foreign investor, unless there is an exemption from tax in an appropriate tax treaty. If the law requires the General Partner to withhold a portion of the income they earn because they are a foreign limited partner, the General Partner may redeem their units to pay the U.S. Department of Treasury taxes they owe. If a limited partner believes amounts were improperly withheld, they must deal directly with the U.S. Department of Treasury.
Failure of Commodity Brokerage Firms. Futures commission merchants must maintain the Partnership's assets in a segregated account. If the Partnership's futures clearing broker Newedge becomes bankrupt, the Partnership could lose money.In addition, even if Newedge adequately segregates the assets of the Partnership, the Partnership may be able to recover only a pro rata share of the property available for distribution to all of Newedge's customers.
Forex Trading Counterparty Creditworthiness. The Partnership will enter into an agreement with an equity in the Newedge Group which will result in such entity acting as the counter-party to the Partnership s foreign currency transactions. That is, the counterparty will be the seller of all forex instruments purchased by the Partnership and the buyer of all forex instruments sold by the Partnership. The counterparty's financial benefit from entering into these transactions with the Partnership is derived from its ability to participate in the foreign exchange interbank markets, which are only available to large institutional investors. The counterparty's compensation will be derived from a mark-up on the bid/ask spread price quoted to the Partnership on each transaction, and the counterparty's ability to offset these transactions in the foreign exchange interbank market. In the event that the counterparty is unable to successfully participate in this market, the ability of the counterparty to enter into transactions with the Partnership may be interrupted. In addition, the counterparty has entered into similar agreements with other persons, and thus acts as the counter-party in transactions effected by these other persons. Because the counterparty acts as counter-party in these transactions, the Partnership is subject to the additional risk that the counterparty will be unable to fulfill its obligations to the Partnership. Moreover, in the event of a bankruptcy of the counterparty, the Partnership may be unable to recover assets held at the counterparty, even if such assets are directly traceable to the Partnership. In the event of the counterparty's bankruptcy, there is no equivalent of the Securities Investors Protection Corporation insurance as applicable in the case of securities broker dealers bankruptcies.
A substantial portion of the Partnership's assets are held in a custodial account and managed by Horizon. Failure of this firm might result in losses to the Partnership.
Possibility of Tax Audit. The IRS might audit the tax returns of the Partnership, or adjustments to its returns might be made as a result of an audit. Uncertainty regarding the federal income tax treatment of certain management and incentive fees paid by the Partnership, or ongoing fees paid to others, may increase the likelihood of an audit. If an audit results in an adjustment, limited partners may be required to pay additional taxes, interest and penalties and may be subject to audit. The IRS is currently authorized to impose an interest penalty on tax deficiencies based on prevailing private sector interest rates.
Risk that Units Will Not Be Considered Publicly-Offered Securities under the Employee Retirement Income Security Act of 1974 (ERISA). The General Partner believes that it is reasonable to take the position that the units qualify as publicly-offered securities under Title I of ERISA, and that the underlying assets of the Partnership will therefore not be considered for any purposes of ERISA or Section 4975 of the Code to be assets of employee benefit plans and IRAs that purchase units. However, this position is not binding on the Department of Labor (DOL) and, therefore, there is no certainty that the units qualify. If the units are determined not to qualify as such publicly-offered securities, the General Partner intends to redeem units held by certain limited partners that are employee benefit plans or IRAs to the extent necessary to prevent the underlying assets of the Partnership from thereafter being considered for purposes of Title I of ERISA or Section 4975 of the Code to be assets of such employee benefit plans or IRAs. However, for any period that the underlying assets of the Partnership are considered to be assets of employee benefit plans or IRAs, the provisions of Title I of ERISA and Section 4975 of the Code would apply to the operation of the Partnership and could adversely affect the Partnership's investments and activities.
Absence of Regulation Applicable to Investment Companies. The Partnership is not registered as an investment company or mutual Partnership. Therefore, the SEC does not regulate it under the Investment Company Act of 1940 (the 1940 Act). Although the Partnership has the right to invest in securities, limited partners are not protected by the 1940 Act. The General Partner is, however, registered with the CFTC as commodity pool operator (CPO), JWH is registered with the CFTC as a CTA and Newedge Financial Inc. is registered with the CFTC as a futures commission merchant (FCM).
Item 1B.
Item 1B. N/A
Item 2.
Item 2.	Properties
The Partnership does not utilize any physical properties in the conduct of its business. The General Partner uses its offices to perform its administrative functions.
The address of the General Partner and the Partnership is 1100 North 4th Street, Suite 143, Fairfield, Iowa 52556, and the telephone number at such location is (641) 472- 5500.
Item 3.
Item 3.	Legal Proceedings
Neither the Partnership, nor the General Partner, is party to any pending material legal proceeding.
Item 4.
Item 4. None - Removed and reserved by SEC.
PART II
Item 5.
Item 5.	Market for Registrant s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
(a) There is no established public market for the Units and none is expected to develop.
(b) As of December 31, 2010, there were 4,504.579 Class A Units held by Limited Partners. A total of 294.30 Class A units were purchased by Limited Partners during 2010. A total of 520.602 Units were redeemed by Class A Limited Partners during 2010.
RECENT SALES OF UNREGISTERED SECURITIES IN 2010 A UNITS
RECENT SALES OF UNREGISTERED SECURITIES IN 2009 A UNITS
1% of the proceeds from the above sales were used to pay the Partnership's Organization and Offering charge. The remaining 99% was invested in the Partnership.
The Seventh Amended and Restated Agreement of Limited Partnership for the Partnership contains a full description of redemption and distribution procedures.
The Agreement of Limited Partnership does not provide for regular or periodic cash distributions, but gives the General Partner sole discretion in determining what distributions, if any, the Partnership will make to its partners. The General Partner has not declared any such distributions to date, and does not currently intend to declare any such distributions.
Item 6.
Item 6.	Selected Financial Data
Item 6. Management's Discussion and Analysis of Financial Condition and Results of Operations.
Liquidity and Capital Resources
We receive our capital resources from investor's contributions.
Net Asset Value of an interest is defined in the Partnership Agreement to mean the Net Assets allocated to the capital account represented by such interest on the date of calculation and includes that interest's pro-rata share of all assets attributable to that Class of units less all liabilities attributable to that Class of units determined in accordance with the principles specified in the Partnership Agreement or, where no principle is specified, in accordance with U.S. generally accepted accounting principles consistently applied under the accrual basis of accounting
Past performance is not necessarily indicative of future results. An investment in the partnership is speculative and involves a substantial Risk of loss.
Off-Balance Sheet Risk
The term "off-balance sheet risk" refers to an unrecorded potential liability that, even though it does not appear on the balance sheet, may result in future obligation or loss. The Partnership trades in futures and forward contracts and is therefore a party to financial instruments with elements of off-balance sheet market and credit risk. In entering into these contracts there exists a risk to the Partnership, market risk, that such contracts may be significantly influenced by market conditions, such as interest rate volatility, resulting in such contracts being less valuable. If the markets should move against all of the futures interests positions of the Partnership at the same time, and if the commodity trading advisors were unable to offset futures interest positions of the Partnership, the Partnership could lose all of its assets and the Limited Partners would realize a 100% loss. Everest Asset Management, Inc., the General Partner,minimizes market risk through diversification of the portfolio allocations to JWH, which in turn trades a diversified portfolio, and maintenance of a margin-to-equity ratio that rarely exceeds 30%.
In addition to market risk, in entering into futures and forward contracts there is a risk that the counterparty will not be able to meet its obligations to the Partnership. The counterparty for futures contracts traded in the United States and on most foreign exchanges is the clearinghouse associated with such exchange. In general, clearinghouses are backed by the corporate members of the clearinghouse who are required to share any financial burden resulting from the non-performance by one of their members and, as such, should significantly reduce this risk. In cases where the clearinghouse is not backed by the clearing members, like some foreign exchanges, it is normally backed by a consortium of banks or other financial institutions.
In the case of forward contracts, which are traded on the inter-bank market rather than on exchanges, the counterparty is generally a single bank or other financial institution, rather than a group of financial institutions; thus there may be a greater counterparty risk. Everest Asset Management, Inc. utilizes only those counterparties that it believes to be creditworthy for the Partnership. All positions of the Partnership are valued each day on a mark-to-market basis. There can be no assurance that any clearing member, clearinghouse or other counterparty will be able to meet its obligations to the Partnership.
The Partnership will utilize high grade short-term commercial paper, which is an unsecured, short-term debt instrument issued by a corporation with maturities rarely longer than 365 days. Commercial paper is not usually backed by any form of collateral, so only firms with high-quality debt rating will be used. As commercial paper is not backed by the full faith and credit of the U.S. Government, if the issuing corporation defaults on their obligations to the Partnership, the Partnership bears the risk of loss of the amount expected to be received.
The Partnership has no Contractual Obligations.
Most U.S. commodity exchanges limit by regulations the amount of fluctuation in commodity futures contract prices during a single trading day. These regulations specify what are referred to as "daily price fluctuation limits" or "daily limits". The daily limits establish the maximum amount the price of a futures contract may vary either up or down from the previous day's settlement price at the end of a trading session. Once the daily limit has been reached in a particular commodity, no trades may be made at a price beyond the limit. Positions in the commodity could then be taken or liquidated only if traders are willing to effect trades at or within the limit during the period from trading on such day. Because the "daily limit" rule only governs price movement for a particular trading day, it does not limit losses. In the past, futures prices have moved the daily limit for numerous consecutive trading days and thereby prevented prompt liquidation of futures positions on one side of the market, subjecting commodity futures traders holding such positions to substantial losses for those days.
It is also possible for an exchange or the CFTC to suspend trading in a particular contract, order immediate settlement of a particular contract, or direct that trading in a particular contract be for liquidation only.
For the year ended December 31, 2010, Limited Partners redeemed a total of 520.6 Class A Units for $1,516,803. .. During 2010, investors purchased 294.3 Class A Units for $870,000.
The Partnership trades on recognized global futures exchanges. In addition, the Partnership trades over the counter contracts in the form of forward foreign currency transactions.
See Footnote 4 of the 2010 Financial Statements for procedures established by the General Partner to monitor and minimize market and credit risks for the Partnership. The General Partner of the Partnership reviews on a daily basis reports of the performance of the Partnership, including monitoring the daily net asset value of the Partnership. The financial situation of the Commodity Broker is monitored on a monthly basis to monitor specific credit risks. The Commodity Broker does not engage in proprietary trading and thus has no direct market exposure which provides the General Partner with assurance that the Partnership, will not suffer trading losses through the Commodity Broker. Results of Operations
Calendar Year 2010
At December 31, 2010 the Partnership had approximately $17.063 million in Class A assets .The JWH allocation was approximately $17.063 million. The balance was being held in interest-bearing accounts in anticipation of future allocations to JWH or other traders.
The Partnership recorded a gain of $3,634,051 or $806.74 per Class A unit, for the year 2010. That represents a gain of 27.23% for the year.
The Partnership continued to employ John W. Henry & Company, Inc. s (JWH) GlobalAnalyticsR Family of Programs.
Class A Units were negative 3.48% in January 2010 resulting in a Net Asset Value per unit of $2,873.42 as of January 31, 2010. January performance was a continuation of the sharp market reversals and directionless patterns seen in late December. While trading these markets with a long-term trend-following approach has been difficult these past two months, we believe the underlying trading models are performing as expected under the circumstances. We believe the programs style discipline will reward clients as trends ultimately emerge from the currently cloudy and uncertain world markets.
Class A Units were negative 3.62% in February 2010 resulting in a Net Asset Value per unit of $2,769.41 as of February 28, 2010.
February's performance was a continuation of the difficult market conditions we have seen over the past few months.
The interest rate sector contributed positively to performance for February as recently established upward trends in Asian and European debt markets continued throughout February. Trading in the currency markets also provided positive returns as the U.S. dollar showed signs of continued strength against the euro, British pound and Swiss franc due to ongoing fiscal weakness across Europe.
The Fund's performance in equity indices was slightly negative in February as global stock markets gyrated throughout the month. Trading in the metals sector was unprofitable. The Fund incurred losses in both gold and silver as the precious metals continued to struggle to find a new direction. There we some significant rallies and reversals throughout the month and the moves were generally tied to the performance of the U.S. dollar. The energy sector was negatively affected as oil prices continued their up and down ride through the first half of the month. The performance of the agricultural sector was also negative in February after the sugar market, which rallied 10 percent in January hitting a 29-year high, sharply reversed course and fell over 17 percent in February.
Class A Units were positive 1.04% in March 2010 resulting in a Net Asset Value per unit of $2,798.33 as of March 31, 2010.
The Fund's positions in equity index futures were profitable in March. The energy sector was also profitable, benefiting from intra-sector diversification and the divergent paths of natural gas and petroleum-based fuel prices. Crude oil prices rose more than 4 percent during the month as improving economic activity increased demand for fuel, most notably from China. At the same time, the domestic natural gas market continues to decline. Natural gas prices fell close to 20 percent during March, making it the best-performing market in the Fund as milder than normal weather across the country further exacerbated the bearish supply/demand dynamic. Performance from the agricultural sector was positive for the month with a number of markets having a significant positive impact on performance. Corn fell more than 10 percent during the month. The sugar market suffered an abrupt reversal, falling more than 20 percent during the month.
The interest rate sector of the Fund declined in March as bonds continue to move erratically as global sentiment shifts between default and recovery. Profits from positions in European interest rates were not enough to offset losses from U.S. and Japanese positions. The currency sector was slightly unprofitable during the month as a more broad-based rally in the dollar caught the program off sides in a few markets. The metals sector was unprofitable in March amidst directionless trading in the gold and silver markets. Precious metals fell as the dollar rally continued and the allure of these metals as a safe haven diminished.
Class A Units were positive 3.01% in April 2010 resulting in a Net Asset Value per unit of $2,882.66 as of April 30, 2010. The interest rate sector contributed positively to performance in April with positions in European futures contracts leading the way. The turmoil in Greece and the concomitant concerns about credit risk and the impact the crisis will have on the overall European economy prompted investors to seek the safety of German government bonds. While bonds in the U.S. did not enjoy the same rally as those in Europe, benchmark U.S. 10-year yields did decline from 3.82 percent to 3.65 percent during the month. The developments in Europe were also an important factor influencing exchange rates during the month. The trend in interest rate differential also favored the dollar versus the euro. The Japanese yen and Swiss franc also contributed to the positive results for this sector. Global stock markets showed signs of diverging in April. Positions in U.S. equity futures were profitable, but were not enough to offset losses from European positions. Trading in the metals sector was profitable with both gold and silver generating a positive performance. Gold and silver are enjoying status as a safe haven and benefiting from the destabilizing effects of the European monetary turmoil. Trading in the energy sector was also profitable in April, with gains from crude oil and crude oil products outweighing small losses in natural gas. Crude rallied just over $2.00 for the month and made a positive contribution to performance. The agriculture sector turned in mixed performance, as small gains in sugar were not enough to offset losses from other markets in the sector.
Class A Units were positive 1.98% in May 2010 resulting in a Net Asset Value per unit of $2,939.63 as of 31, 2010. The Fund performed well overall, providing a measure of diversification to its investors during the month.
The interest rate sector was the best-performer for the Fund with positions in European bonds leading the way. The currency markets also contributed positively to performance with the euro being one of the top performers in the sector. While global equity markets declined during the month amidst higher volatility, the sector was slightly unprofitable as small gains from positions in European equity futures were not enough to offset the losses from positions in U.S. and Asian futures. The biggest losses in the Fund were registered in the energy sector, where both crude and natural gas suffered from significant trend reversals. Difficult trading conditions were exacerbated by uncertainty about the long-term fallout for the energy industry as a result of the oil spill in the Gulf of Mexico. Trading metals was unprofitable as gains in gold were unable to offset losses from positions in silver. Gold set an all-time high during the middle of May. The rally in gold was impressive, considering the gains were made at a time of strength for the U.S. dollar. The agricultural sector was mixed as gains from wheat and sugar were not enough to offset losses from other markets in the sector.
Class A Units were positive 1.50% in June 2010 resulting in a Net Asset Value per unit of $2,983.83 as of June 30, 2010. The Fund's performance in equity indices was slightly positive in June as the global stock markets fluctuated with broad rallies during the first half of the month. However, equity markets began a steady retreat mid-month. The interest rate sector provided the Fund's best returns during the month as growing fear of a double-dip recession sent investors flocking to the relative safety of government debt, despite the low yields. Trading in the currency markets was unprofitable as the recent dollar strength rally came to a halt. Trading in the metals sector was profitable in June as gold rallied to a record high with investors pouring funds into the market as the double-dip recession fears were revived. Gold profited from its status as a safe haven as central banks, pension funds and individual buyers amassed their holdings to shield wealth from Europe's financial turbulence and uncertainty in the global economy. Gold's performance was able to offset the losses produced in silver for the month. Trading in the energy sector was unprofitable for the month as fluctuations in economic sentiment caused reversals mid-month across the entire complex. The agricultural sector performance was also slightly negative in June as the markets lacked a clear direction. Class A Units were negative 0.53% in July 2010 resulting in a Net Asset Value per unit of $2,967.96 as of July 31, 2010. Results for July were slightly down with the Fund at -0.53 percent. The final performance figure belies an active month in the markets where gains generated from existing trends in interest rates and certain agricultural commodities were offset by losses in various risk-sensitive markets, including U.S. equities, which suffered from sharp and abrupt price reversals. Heightened uncertainty regarding the outlook for the U.S. economy remained a key theme as the data released during the month was mixed and did little in the way of offering clarity to investors. The Fund produced positive performance in the currency sector for the month of July. The Japanese yen, which had been strong heading into the month, appreciated another 2.3 percent against the dollar during July. The EUR/USD exchange rate rallied more than 4 percent during the month as the downtrend in the currency, which had been in place for most of 2010, came to an abrupt end. Positions in British pound and Swiss franc were also positive in July. Positions in equity futures were unprofitable as the Fund was caught offside for much of the month-long price reversal. The S&P 500 rallied more than 6 percent in July as global credit conditions improved and earning season progressed without incident. The Fund was able to profit from positions in interest rates. The recent move higher in bond prices that began in May and continued in June was supported by flight-to-quality flows out of equities and other risky assets as turmoil in the European financial markets peaked. Fortunately for the Fund, there was a break in this relationship between bond and stock prices in July as bond prices held their ground and moved higher even as equities snapped back in July. The sharpest corrections and the most difficult markets in July were found in the metals sector. Price action in the energy sector continued to lack clear direction as the summer driving and cooling season failed to spark movement in either direction. The Fund suffered small losses in crude oil, crude oil products and natural gas. The agricultural sector was profitable in July with the largest gains coming from a spectacular rise in the price of wheat.
Class A Units were positive 5.55% in August 2010 resulting in a Net Asset Value per unit of $3,132.56 as of August 31, 2010. The Fund's strong returns came as investor sentiment reverted to the dour tone that has hung over the market for much of the year. All positions in the interest rate sector were profitable in August, making interest rates the best-performing sector in the Fund for the month. Performance from the currency sector was more mixed but still positive as gains from positions in the Japanese yen led the way. Trends in other currencies were less clear but profits from positions in the yen were more-than-enough to offset the mixed performance from other positions in the sector. Trading in equities futures was slightly profitable as volatility rose and global stock markets fell during the month. The metals sector was s lightly positive with small gains in both silver and gold. The energy markets were unprofitable as wide erratic swings in crude oil and crude oil products led to false signals and trading losses. Gains from natural gas were not enough to offset losses in crude oil but it did help minimize trading losses in the sector. The agricultural market traded independently, unaffected by the factors driving other sectors of the Fund. While the trading results from the sector were slightly negative with most markets in the group finishing the month higher and, in some cases, substantially higher. The performance of the Fund in August continues to show the benefits of an allocation to managed futures and the value of diversification in an overall portfolio.
Class A Units were positive 5.79% in September 2010 resulting in a Net Asset Value per unit of $3,314.02 as of September 30, 2010.
The agricultural sector was the best-performing sector in the Fund for the month. While weather was a benign factor for natural gas prices, this was not the case in the agricultural markets as the cost of a number of crops surged. Currencies made a strong contribution to the Fund's performance in September as the dollar decline accelerated. The strong rally in equity prices during September represented a significant reversal from August when U.S. and global indices were down sharply. Consequently, trading in the sector was slightly unprofitable. The metals sector made a significant positive contribution to the Fund's performance in September. Price action in the energy markets continued to be very choppy.
Class A Units were a positive 9.63% in October 2010 resulting in a Net Asset Value of $3,633.30 as of October 31, 2010. The Fund performed exceptionally well in October, generating just under a 10 percent return for the month. While trends in financial markets have remained largely intact, it was the agricultural markets, which are driven by different factors, that fueled the outsized gains for the month. Cotton rallied 23 percent to close the month at the highest level since the market began trading in New York more than 140 years ago. Sugar also had an explosive rally in October, gaining 24 percent for the month. The grain markets in the U.S. also enjoyed a powerful rally during the month and contributed positively to the month's performance.
Metals prices continued their ascent in October. The price of gold made a new record high of $1,388 per ounce in October and finished the month up 3.66 percent. Silver followed gold higher, posting an impressive 12.5 percent return for the month. Positions in both metals were profitable for the month.
The Fund continues to perform well through these uncertain times filled with strong government rhetoric and opposing views on what actions will lead to a sustained global economic recovery. Profits from trading in European currencies led the way in the first quarter with the second quarter seeing strong trends in interest rates and metals as the recovery slowed and it became apparent to market participants that monetary policy would need to stay accommodative. Performance since the beginning of the third quarter has been led by trading in Asian currencies and the agricultural markets. These continual shifts in market price trends present challenges to trend followers but also opportunities to participate in these unforeseen movements by maintaining a diverse portfolio that utilizes a systematic and disciplined approach to identify and invest without a fundamental or directional bias.
Class A Units were a negative 3.62% in November 2010 resulting in a Net Asset Value of $3,501.86 as of November 30, 2010. Heading into November, the Fund had posted positive performance in seven of the prior eight months. Looking back at the price action throughout the month, across multiple sectors, reveals an interruption in many of the trends that have been responsible for much of this year's strong performance. We are pleased that the Fund was able to preserve much of the year's gains as it systematically controlled risk by reducing, liquidating or reversing positions in some sectors based upon the extreme intra-month price fluctuations experienced in November. Just as important, the Fund held onto many positions that experienced significant price volatility throughout the month as it utilizes its long-term models, controlling risk, but allowing room for price variations that often occur but are temporary in the long-term lifecycle of a market trend. November showed that the markets can still be negatively affected by the vestiges of 2008, including credit concerns and imbalances in the global financial system exposing them to ongoing surges in volatility. Price trends in many individual markets were impacted in November but the Fund's risk controls and model diversification, covering both the short- and long-term time horizons, have allowed the Fund to make adjustments and remain positioned to take advantage of the existing and new opportunities that have exposed themselves throughout this mercurial month.
Class A Units were a positive 8.17% in December 2010 resulting in a Net Asset Value of $3,787.96 as of December 31, 2010. The Fund concluded a very good year with another month of positive performance in December. The Fund benefited from the strong performance of the metals sector as the rally in precious metals continued. Gold and silver both registered new all-time highs during December.
The agriculture sector reclaimed performance leadership in December and made a significant contribution to the month's Gains. Cotton was the best-performing market in the sector. Similar price patterns played out across the sector in grains and soft commodities making it the best-performing market in the Fund. The energy sector registered a second consecutive month of positive performance in December.
While equity markets cheered the tax cuts, the mood in the bond market was decidedly less sanguine. Government bond prices fell on the month. The Fund was able to generate a positive return from the interest rate sector. Price action in the currency markets was relatively muted during the last month of the year. Small gains from positions in the Japanese yen and Swiss franc were sufficient to offset small losses from positions in the British pound and the euro. Trading in equity index futures was slightly profitable in December as global stock markets rallied and volatility fell to multi-year lows.
Results of Operations
Calendar Year 2009
At December 31, 2009 the Partnership had approximately $14.1 million in Class A assets .The JWH allocation was approximately $14.1 million. The balance was being held in interest-bearing accounts in anticipation of future allocations to JWH or other traders.
The Partnership recorded a loss of $3,812,810 or $810.85 per Class A unit, for the year 2009. That represents a loss of 21.40% for the year.
The Partnership continued to employ John W. Henry & Company, Inc. s (JWH) GlobalAnalyticsR Family of Programs.
Class A Units were negative 2.49% in January 2009 resulting in a Net Asset Value per unit of $3,693.33 as of January 31, 2009.
While macro-economic conditions continued to deteriorate in January and pressure global equity prices, extreme short-term volatility in certain markets around year-endand uncertainty regarding the impact of future policy steps upset long-standing trends across multiple market sectors. The stock market began to focus acutely on the shaping of economic policy by the new administration. Uncertainty on this front proved to be a clear negative for the stock market as most major averages posted their worst January performance on record.
January represented a month of change for many of the markets and sectors traded by the Fund. While overall market volatility seems to have declined during the month, January performance was affected by price spikes and reversals that impacted long-term trends carried over from 2008 creating a challenging environment for the Fund. The Fund's two largest sector exposures are in interest rates and currencies which were both hit by major reversals in January.
Class A Units were positive 0.94% in February 2009 resulting in a Net Asset Value per unit of $3,728.18 as of February 28, 2009.
The Fund gained 0.94 percent in February as the focus of the markets and trading conditions were very similar to those that prevailed in January. The S&P 500 followed up its worst January on record with a near 11 percent decline in February.
Class A Units were negative 5.53% in March 2009 resulting in a Net Asset Value per unit of $3,522.05 as of March 31, 2009.
The Fund's performance was negative in March, marking the first meaningful month-on-month correction since the Fund's strong 2008 rally. The Fund's decline in performance coincided with the S&P 500's best monthly return since 1987. While it is never comforting to incur losses during these reversal periods it is a natural component of trend-following. The Fund gained 121% between September 2007 and December 2008 from a broad diversity of markets and market sectors. It is not unusual or unexpected that we will experience a period of give-back in some of these markets as new trends emerge. The advisor's position size is currently light with a margin to equity ratio of approximately 6-9% (JWH can go as high as 24-28%). In addition, at the Fund level, the Partnership remained approximately 80% allocated to JWH with the remaining assets gaining interest income at the cash management firm.
Class A Units were negative 2.76% in April 2009 resulting in a Net Asset Value per unit of $3,424.69 as of April 30, 2009.
The Partnership's performance was negative in April. Gains in the energy, equity and agricultural sectors were not enough to offset losses in currency, metals and interest rates. The currency sector was the worst-performing sector for the Partnership. A portion of the losses in this sector came from trading in the Japanese yen. The Partnership held a mix of long and short positions in interest rates for most of April, which resulted in a small net loss on the month. The energy markets on balance had a positive effect on performance in April with much of the gains coming from the sustained downtrend in natural gas prices. The agricultural sector of the portfolio made a positive contribution to performance in April. The Partnership's trading in the metal sector was quiet as exposures were low for most of the month. Gold continues to trade in a choppy fashion, alternately taking its cues from its status as a store of value in times of strife and as a hedge against inflation and as a de facto currency. The changing winds on all these fronts have made Gold a very difficult market to trade. Similarly, the Partnership suffered small losses in its trading in the Silver market.
Class A Units were positive 5.10% in May 2009 resulting in a Net Asset Value per unit of $3,599.32 as of May 31, 2009.
All but one sector in the Partnership made a positive contribution to the Partnership's gains. Currency trading led the way in May as the U.S. dollar suffered a significant decline during the month. Trading in the interest rate sector was also profitable in May. A number of agricultural markets turned in strong performance in May. Soybeans was the best-performing market in this sector as it benefited from global macro factors, such as the weaker U.S. dollar, but also from positive seasonal supply factors. The coffee market was also quite strong and an important driver of the Partnership's performance in May. While energies were hardly left out of the broad commodity market rally in May, the Partnership's trading suffered small losses making it the lone unprofitable sector for the month.
Class A Units were negative 4.87% in June 2009 resulting in a Net Asset Value per unit of $3,423.92 as of June 30, 2009.
In June, the Partnership gave back most of the gains from the previous month as many of the trends that emerged in May stalled or reversed direction. The interest rate sector was negative for the month, where there was at least a temporary reversal in the trend toward higher global interest rates. Performance in currencies was slightly negative in June as gains from trading in the British pound were not enough to offset losses from trading in European currencies and the Japanese yen. While equity markets worldwide have recovered from the multi-year lows put in during March, the rally lost momentum in June. The Partnership suffered losses in its trading of gold and silver. The energy markets contributed positively to the Partnership's performance in June. The direction of crude oil has loosely followed the path of equities for much of the past year. While crude oil is up substantially from the lows of February and March upside momentum did seem to slow in June. The Partnership's trading models reduced exposure to the market at different points during the month which limited overall losses.
Class A Units were negative 5.09% in July 2009 resulting in a Net Asset Value per unit of $3,249.81 as of July 31, 2009.
The Fund suffered from negative performance in July. The Fund had a substantial allocation to interest rates and currencies where the markets have been devoid of trends. The markets continue to consolidate after the large moves of 2008 and while many continue to forecast "the worst is over" after a substantial move higher in the stock markets, others point out that uncertainty around the levels of massive consumer debt, estimated at 124% of disposable income, unencumbered government spending and slow improvement in the real estate markets are risks for sustained recovery. These conflicting views have left many market sectors in an extended state of "whipsaw".
Class A Units were negative 3.21% in August 2009 resulting in a Net Asset Value per unit of $3,145.60 as of August 31, 2009.
In August, the trading environment that prevailed for most of the month was very similar to what has been in place in prior months. Interest rates, certain commodity prices and the dollar continue to trade in broad ranges, limiting the profit opportunities for the Fund's trend-following approach.
The Fund's positions in U.S., European and Japanese stock index futures were all profitable in August. The energy sector produced the worst performance in August for the Fund as crude oil and crude oil products finished down on the month. Gains from natural gas only partially offset the losses from the other markets in the sector. Trading in the metals sector was dominated by the price action which continues to trade in a directionless manner albeit at higher prices. The price of gold changed little month on month as it entered August trading near $955 per ounce and closed the month trading just $2 lower near $953. The intra-month swings were significant, however, which created false signals for the shorter-term models used by the Fund. Trading in gold was unprofitable in August, while trading in the silver market produced profitable performance. The Fund was able to generate gains from trading in the agricultural sector as it continues to profit from the bull market in sugar. The Fund also benefited from the bear market in certain grain prices. Position in wheat, corn and sugar were profitable for the month.
Class A Units were positive 1.17% in September 2009 resulting in a Net Asset Value per unit of $3,182.47 as of September 30, 2009.
The Fund closed out the quarter on a positive note, returning 1.17 percent in September. While price action was relatively subdued during the month, there was enough movement for the Fund to capture returns in three of the six market sectors in the portfolio. The largest gains during September came from the currency sector. Currency investors are beginning to focus on more traditional drivers of exchange rates such as expectations for interest rate differentials, and are focusing on which currency will benefit from future interest rate increases. Trading in the interest rate sector was slightly positive in September as positioning and model direction was mixed across the portfolio. The net effect for September was a market that ground slowly higher. Positions in Japanese Government Bonds were the best-performing market in the sector. The metals market was profitable as the Fund gained from rallies in the price of both gold and silver. The energy markets had a negative impact on the Fund. Losses from crude oil and the crude oil product markets were modest and due to the absence of any clear trend during the period. Performance from the agricultural sector was also negative for the month. There was no significant theme tying the markets together.
Class A Units were a negative -3.58% in October 2009 resulting in a Net Asset Value of $3,068.57 as of October 31, 2009.
The Fund suffered losses in October as the rally in certain volatile assets, including equities, paused after seven consecutive months of positive returns. The Fund's positions in U.S., European and Japanese equity futures all suffered small losses in October. The currency sector was also down slightly for the month; however, performance within the sector was mixed. Performance from the energy sector was slightly negative as losses from trading in natural gas offset small gains from the petroleum sector. The agricultural sector was also negative in October. Cotton and coffee both contributed positively to performance but these gains were not enough to offset losses from grains and sugar prices.
Class A Units were a positive 8.97% in November 2009 resulting in a Net Asset Value of $3,343.97 as of November 30, 2009
November was a strong month for performance. The metals sector was best-performing sector in the portfolio for the month on the back of a surge in the price of gold. The precious metal rallied 12.7 percent and closed the month at $1181 per ounce, which represents a year-to-date gain of more than 30 percent. The speculative demand for gold is being fueled by concerns about the U.S. budget deficit, the value of the U.S. dollar and the prospects for future inflation. The move in gold is in part linked to the value of the U.S. dollar, which declined in November against both the euro and the yen. Equity prices continued to climb a wall of worry as most indices made yearly highs during November. A notable laggard has been the Japanese Nikkei, which actually declined 7 percent in November. The energy sector continues to benefit from the intra-sector divergence between petroleum-based energy prices and natural gas. Natural gas made new lows during the month as gas in storage is at all-time highs at the same time end demand remains soft. On the other hand, crude oil managed to move higher on the month as industry data showed that inventories were tighter than what was being priced in the market. The agricultural markets in the Fund traded in a subdued pattern, but nonetheless profitable.
Class A Units were a negative 10.97% in December 2009 resulting in a Net Asset Value of $2,977.15 as of December 31, 2009.
The market action in the portfolio during December exemplified the difficult markets encountered during the year. There were gains from long-term trends, but these gains were offset by sharp reversals and an extended period of choppy trendless activity. The currency sector of the Fund was particularly hard hit by a significant rally in the dollar versus the Japanese yen. The dollar was recently in a downtrend versus the yen. In fact, in late November it traded at a fourteen-year low. It opened December trading at 86.41 and surged 7.6 percent to close the month at 93.02. The interest rate sector was also difficult as trading patterns in a number of bond markets mirrored the price action in the currency markets. Unfortunately, trading in precious metals, and gold in particular, followed a similar pattern. Gold had its largest one-month price gain in history in November, only to give most of it back in December. Gold was undermined by the strength of the dollar and position squaring in less liquid year-end trading.Trading in silver was also unprofitable. The portfolio suffered small losses in the energy sector. Crude oil and petroleum-based products continue to swing back and forth, lacking any clear direction. Natural gas was more volatile and also experienced trends similar to the trading patterns that affected much of the Fund. Sugar was one of the best markets in the Fund for the month and for the year.In the grain sector most markets continued trading in a choppy directionless manner. Overall, this sector produced positive performance in December.
Inflation
Inflation does have an effect on commodity prices and the volatility of commodity markets; however, inflation is not expected to have an adverse effect on the Partnership's operations or assets.
Item 7A.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Introduction
Past Results Are Not Necessarily Indicative of Future Performance
The Partnership is a speculative commodity pool. The market sensitive instruments held by it are acquired for speculative trading purposes, and all or substantially all of the Partnership's assets are subject to the risk of trading loss. Unlike an operating company, the risk of market sensitive instruments is integral, not incidental, to the main line of business of the Partnership.
Market movements result in frequent changes in the fair market value of the open positions of the Partnership and, consequently, in its earnings and cash flow. The market risk of the Partnership is influenced by a wide variety of factors, including the level and volatility of interest rates, exchange rates, equity price levels, the market value of financial instruments, the diversification effects among the open positions of the Partnership and the liquidity of the markets in which it trades.
The Partnership can acquire and/or liquidate both long and short positions in a wide range of different financial and metals markets. Consequently, it is not possible to predict how a particular future market scenario will affect performance, and the past performance of the Partnership is not necessarily indicative of its future results.
Value at Risk is a measure of the maximum amount which the Partnership could reasonably be expected to lose in a given market sector. However, the inherent uncertainty of the Partnership's speculative trading and the recurrence in the markets traded by the Partnership of market movements far exceeding expectations could result in actual trading or non-trading losses far beyond the indicated Value at Risk or the experience of the Partnership to date (i.e., "risk of ruin"). In light of the foregoing as well as the risks and uncertainties intrinsic to all future projections, the inclusion of the quantification included in this section should not be considered to constitute any assurance or representation that the losses of the Partnership in any market sector will be limited to Value at Risk or by the attempts of the Partnership to manage its market risk.
Standard of Materiality Materiality as used in this section, "Qualitative and Quantitative Disclosures About Market Risk," is based on an assessment of reasonably possible market movements and the potential losses caused by such movements, taking into account the leverage, optionality and multiplier features of the market sensitive instruments of the Partnership.
Quantifying the Trading Value at Risk of the Partnership
Qualitative Forward-Looking Statements
The following quantitative disclosures regarding the market risk exposures of the Partnership contain "forward-looking statements" within the meaning of the safe harbor from civil liability provided for such statements by the Private Securities Litigation Reform Act of 1995 (set forth in Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934). All quantitative disclosures in this section are deemed to be forward- looking statements for purposes of the safe harbor, except for statements of historical fact.
The risk exposure of the Partnership in the various market sectors traded by the commodity trading advisor is quantified below in terms of Value at Risk. Due to the mark-to-market accounting of the Partnership, any loss in the fair value of the Partnership's open positions is directly reflected in the earnings (realized or unrealized) of the Partnership and cash flow (at least in the case of exchange-traded contracts in which profits and losses on open positions are settled daily through variation margin).
Exchange maintenance margin requirements have been used by the Partnership as the measure of its Value at Risk. Maintenance margin requirements are set by exchanges to equal or exceed the maximum losses reasonably expected to be incurred in the fair value of any given contract in 95%- 99% of any one-day intervals. The maintenance margin levels are established by dealers and exchanges using historical price studies as well as an assessment of current market volatility (including the implied volatility of the options on a given futures contract) and economic fundamentals to provide a probabilistic estimate of the maximum expected near-term one-day price fluctuation. Maintenance margin has been used rather than the more generally available initial margin, because initial margin includes a credit risk component which is not relevant to Value at Risk.
In the case of market sensitive instruments which are not exchange traded (almost exclusively currencies in the case of the Partnership), the margin requirements for the equivalent futures positions have been used as Value at Risk. In those rare cases in which a futures-equivalent margin is not available, margins of the dealers have been used.
In quantifying the Value at Risk of the Partnership, 100% positive correlation in the different positions held in each market risk category has been assumed. Consequently, the margin requirements applicable to the open contracts have simply been aggregated to determine the aggregate Value at Risk for each trading category. The diversification effects resulting from the fact that the positions of the Partnership are rarely, if ever, 100% positively correlated have not been reflected.
The Trading Value at Risk in Different Market Sectors of the Partnership
The following table indicates the trading Value at Risk associated with the open positions of the Partnership by market category as of December 31, 2010. All open position trading risk exposures of the Partnership have been included in calculating the figures set forth below. As of December 31, 2010, the total capitalization of the Partnership was approximately $17,063,171, all in Class A shares. .
Material Limitations on Value at Risk as an Assessment of Market Risk
The face value of the market sector instruments held by the Partnership is typically many times the applicable maintenance margin requirement (maintenance margin requirements generally ranging between approximately 1% and 10% of contract face value) as well as many times the capitalization of the Partnership. The magnitude of the open positions of the Partnership creates a "risk of ruin" not typically found in most other investment vehicles. Because of the size of its positions, certain market conditions that are unusual, but historically recurring from time to time, could cause the Partnership to incur severe losses over a short period of time. The foregoing Value at Risk table, as well as the past performance of the Partnership, give no indication of this "risk of ruin."
Non-Trading Risk
The Partnership has non-trading market risk on its foreign cash balances not needed for margin. However, these balances (as well as any market risk they represent) are immaterial.
The Partnership holds a portion of its assets in cash on deposit with Newedge Financial Inc. ("Newedge") with substantially all of the remainder on deposit with Horizon Cash Management, LLC. (Horizon) in short term, highly liquid investments. The Partnership has cash flow risk on these cash deposits because if interest rates decline, so will the interest paid out by Newedge at the 91-day Treasury bill rate. In addition, should short term interest rates decline, so will the interest earnings for assets on deposit with Horizon. The Partnership assets managed by Horizon are deposited in an account in the custodial department of the Northern Trust Company, and invested in U.S. government securities and other interest- bearing obligations at the direction of Horizon. Horizon is responsible for the investment management of the assets of the Partnership not deposited with Newedge as margin monies or held in Partnership operating accounts. Horizon is registered with the Securities and Exchange Commission (SEC) as an investment adviser. Horizon may invest in U.S. government securities and other instruments as permitted by the agreement with the Partnership. Horizon receives an annual fee of 0.25% payable monthly on the assets it manages. However, Horizon only receives its service fee if the accrued monthly interest income earned on the assets of the Partnership managed by Horizon exceeds the 91-day U.S. Treasury Bill rate. As of December 31, 2010, the Partnership had approximately $16.3 million in cash on deposit with Newedge and Horizon.
Qualitative Disclosures Regarding Primary Trading Risk Exposures
The following qualitative disclosures regarding the market risk exposures of the Partnership, except for (i) those disclosures that are statements of historical fact and (ii) the descriptions of how the Partnership and the Trading Advisor manage the primary market risk exposures of the Partnership, constitute forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act. The primary market risk exposures of the Partnership as well as the strategies used and to be used by the Trading Advisor for managing such exposures are subject to numerous uncertainties, contingencies and risks, any one of which could cause the actual results of the risk controls of the Partnership to differ materially from the objectives of such strategies. Government interventions, defaults and expropriations, illiquid markets, the emergence of dominant fundamental factors, political upheavals, changes in historical price relationships, an influx of new market participants, increased regulation and many other factors could result in material losses as well as in material changes to the risk exposures and the risk management strategies of the Partnership. There can be no assurance that the current market exposure and/or risk management strategies of the Partnership will not change materially or that any such strategies will be effective in either the short- or long-term. Investors must be prepared to lose all or substantially all of their investment in the Partnership.
The following were the primary trading risk exposures of the Partnership as of December 31,2010, by market sector.
Interest Rates. Interest rate risk is a major market exposure of the Partnership. Interest rate movements directly affect the price of the sovereign bond positions held by the Partnership and indirectly the value of its stock index and currency positions. Interest rate movements in one country as well as relative interest rate movements between countries materially impact the profitability of the Partnership. The primary interest rate exposure of the Partnership is to interest rate fluctuations in the United States and the other G-7 countries. However, the Partnership also takes positions in the government debt of smaller nations - e.g., Australia. The General Partner anticipates that G-7 interest rates will remain the primary market exposure of the Partnership for the foreseeable future. The changes in interest rates which have the most effect on the Partnership are changes in long-term, as opposed to short- term, rates. Most of the speculative positions held by the Partnership are in medium to long-term instruments. However, since February 2000, the JWH program added a European short rate, the Euribor, which is closely tied to the actions of the European Central Bank. This was done to add short term interest rate diversification.
Currencies. The currency exposure of the Partnership is to exchange rate fluctuations, primarily fluctuations which disrupt historical pricing relationships between different currencies and currency pairs. These fluctuations are influenced by interest rate changes as well as political and general economic conditions. The Partnership trades in a large number of currencies, including cross-rates - i.e., positions between two currencies other than the U.S. dollar. However, the Partnership's major exposures have typically been in the dollar/yen, dollar/Euro, dollar/Swiss franc, dollar/Australian dollar and dollar/pound positions. The General Partner does not anticipate that the risk profile of the Partnership's currency sector will change significantly in the future. The currency trading Value at Risk figure includes foreign margin amounts converted into U.S. dollars with an incremental adjustment to reflect the exchange rate risk inherent to the dollar-based Partnership in expressing Value at Risk in a functional currency other than dollars.
Stock Indices. The primary equity exposure of the Partnership is to equity price risk in the G-7 countries. The stock index futures traded by the Partnership are by law limited to futures on broadly based indices. Ordinarily the primary exposures are in the FTSE (England), Nikkei (Japan) and All Ordinaries (Australia) stock indices. However, in February 2000, the JWH firm added the German DAX Index Futures. The General Partner anticipates little trading in non-G-7 stock indices. The Partnership is primarily exposed to the risk of adverse price trends or static markets in the major U.S., European and Japanese indices. (Static markets would not cause major market changes but would make it difficult for the Partnership to avoid being "whipsawed" into numerous small losses.)
Metals. The metals market exposure of the Partnership is to fluctuations in the price of gold and silver (precious metals) and the base metals of copper, aluminum, zinc, and nickel at JWH.
Commodities. The exposure to commodities of the Partnership from JWH GAP includes corn, soybeans, soybean meal, soybean oil, wheat, and the softs of coffee, cotton, and sugar, as well as a full complement of other agricultural commodities.
Energy. The exposure of the Partnership to energy contracts in the JWH GAP is heating oil, unleaded gasoline, crude oil natural gas and others.
Qualitative Disclosures Regarding Non-Trading Risk Exposure
The following were the only non-trading risk exposures of the Partnership as of December 31, 2010.
Foreign Currency Balances. The primary foreign currency balances of the Partnership are in Japanese yen, Euros, British pounds and Australian dollars. The Partnership controls the non-trading risk of these balances by regularly converting these balances back into dollars (no less frequently than twice a month).
Cash Position. The Partnership holds a portion of its assets in cash at Newedge Financial Inc and Newedge SNC. 95% of these assets earn interest at the average rate paid on 91-day U.S. Treasury Bills purchased during the month. Substantially all of remainder is held at Horizon in short term liquid investments.
Qualitative Disclosures Regarding Means of Managing Risk Exposure
The General Partner monitors the performance of the Partnership and the concentration of its open positions, and consults with the commodity trading advisor concerning the overall risk profile of the Partnership. If the General Partner felt it necessary to do so, the General Partner could require the commodity trading advisor to close out individual positions as well as entire programs traded on behalf of the Partnership. However, any such intervention would be a highly unusual event. The General Partner primarily relies on the commodity trading advisor's own risk control policies while maintaining a general supervisory overview of the Partnership's market risk exposures.
Risk Management
JWH attempts to control risk in all aspects of the investment Process - from confirmation of a trend to determining the optimal exposure in a given market, and to money management issues such as the startup or upgrade of investor accounts. JWH double checks the accuracy of market data, and will not trade a market without multiple price sources for analytical input. In constructing a portfolio, JWH seeks to control overall risk as well as the risk of any one position, and JWH trades only markets that have been identified as having positive performance characteristics. Trading discipline requires plans for the exit of a market as well as for entry. JWH factors the point of exit into the decision to enter (stop loss). The size of the JWH positions in a particular market is not a matter of how large a return can be generated but of how much risk it is willing to take relative to that expected return.
To attempt to reduce the risk of volatility while maintaining the potential for excellent performance, proprietary research is conducted on an ongoing basis to refine the JWH investment strategies. Research may suggest substitution of alternative investment methodologies with respect to particular contracts; this may occur, for example, when the testing of a new methodology has indicated that its use might have resulted in different historical performance. In addition, risk management research and analysis may suggest modifications regarding the relative weighting among various contracts, the addition or deletion of particular contracts from a program, or a change in position size in relation to account equity. The weighting of capital committed to various markets in the investment programs is dynamic, and JWH may vary the weighting at its discretion as market conditions, liquidity, position limit considerations and other factors warrant.
JWH may determine that risks arise when markets are illiquid or erratic, such as may occur cyclically during holiday seasons, or on the basis of irregularly occurring market events. In such cases, JWH at its sole discretion may override computer-generated signals and may at times use discretion in the application of its quantitative models, which may affect performance positively or negatively.
Adjustments in position size in relation to account equity have been and continue to be an integral part of the JWH investment strategy. At its discretion, JWH may adjust the size of a position in relation to equity in certain markets or entire programs. Such adjustments may be made at certain times for some programs but not for others. Factors which may affect the decision to adjust the size of a position in relation to account equity include ongoing research, program volatility, assessments of current market volatility and risk exposure, subjective judgment, and evaluation of these and other general market conditions.
Item 8.
Item 8.	Financial Statements and Supplementary Data
Reference is made to the financial statements and the notes thereto attached to this report.
THE EVEREST FUND, LIMITED PARTNERSHIP Supplementary Summarized Quarterly Data For the four Quarters for 2010 and 2010
Item 9.
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Item 9A(T).
Item 9A(T).	Controls and Procedures
Evaluation of Disclosure Controls and Procedures
The General Partner carried out an evaluation, under the supervision and with the participation of the General Partner's management, including its principal executive Officer, Peter Lamoureux, of the effectiveness of the design and operation of the Partnership's disclosure controls and procedures as contemplated by Rule 13(a)-15(e) of the Securities Exchange Act of 1934, as amended. Any control system, no matter how well designed and operated, can provide only reasonable (not absolute) assurance that its objectives will be met. Furthermore, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. Based on their evaluation as of December 31, 2010, the General Partner's principal executive officer and principal financial officer concluded that the Partnership's disclosure controls and procedures were effective.
Changes In Internal Control Over Financial Reporting
There was no change in the Partnership's internal control over financial reporting in the 12 months ended December 31, 2010 that has materially affected, or is reasonably likely to materially affect, the Partnership's internal control over financial reporting.
The General Partner's management has conducted the evaluation of the internal control over financial reporting, as required by Exchange Act Rules 13a-15 and 15d-15.
Report on Management's Assessment of Internal Control Over Financial Reporting
The management of the General Partner is responsible for establishing and maintaining adequate internal control over financial reporting by the Partnership.
The General Partner's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States. The Partnership's internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Partnership; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States, and that receipts and expenditures of the Partnership are being made only in accordance with authorizations of management of the Partnership; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Partnership's assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. All internal control systems, no matter how well designed, have inherent limitations, including the possibility of human error and the circumvention of overriding controls. Accordingly, even effective internal control over financial reporting can provide only reasonable assurance with respect to financial statement preparation. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Management assessed the effectiveness of the Partnership's internal control over financial reporting , based on the framework set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework. Based on that assessment, management concluded that, as of December 31, 2010, the Partnership's internal control over financial reporting was effective based on the criteria established in Internal Control-Integrated Framework.
This annual report does not include an attestation report of the Partnership's registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by the company's registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the company to provide only management's report in this annual report.
Item 9B.
Item 9B.	Other Information.
None
Part III
Item 10.
Item 10.	Director and Executive Officer of the Registrant.
The General Partner, Everest Asset Management, Inc., is the sole General Partner and commodity pool operator of the Partnership. It is a Delaware corporation incorporated in 1987, is and has been registered with the CFTC as a commodity pool operator since July 1, 1988 and is and has been a member of the National Futures Association since that date. Its address is 1100 North 4th Street, Suite 143, Fairfield, Iowa 52556 and its telephone number at such location is (641) 472-5500.
The officer and director of the General Partner as of December 31, 2010 is listed below:
Peter Lamoureux. Mr. Lamoureux, (born in 1950), has been President, Treasurer and Secretary of the General Partner since November 1996. He joined the General Partner and Capital Management Partners, Inc., a selling agent and affiliate of the Partnership at that time, in 1991 and has had primary responsibility for Partnership syndication since October 1994. Prior to joining the General Partner, Mr. Lamoureux was Manager of Refined Products with United Fuels International, Inc., an energy brokerage firm in Waltham, Massachusetts. He received his B.S. in Education from Rhode Island College, R.I.
The General Partner does not trade commodities for its own account but its principals may. Because of their confidential nature, records of such trading will not be available to Limited Partners for inspection.
There have been no material criminal, civil or administrative actions during the preceding five years or ever against the General Partner or its principal.
Audit Committee Financial Expert
The Board of Directors of Everest Asset Management, Inc. has determined that Peter Lamoureux, President, Treasurer and Secretary of the General Partner, qualifies as an audit committee financial expert in accordance with the applicable rules and regulations of the U.S. Securities and Exchange Commission. Mr. Lamoureux is not "independent" as that term is defined in Item 7(a)(3)(iv) of Schedule 14A under the Exchange Act.
Code of Ethics
The General Partner has adopted a code of ethics for its chief executive officer and persons performing similar functions. A copy of the General Partner's code of ethics may be obtained at no charge by written request to Everest Asset Management, Inc., 1100 North 4th Street, Suite 143, Fairfield, Iowa 52356 or by calling 641-472-5500.
Item 11.
Item 11. Executive Compensation.
The Partnership has no directors or executive officers. As a limited partnership, the business of the Partnership is managed by its General Partner which is responsible for the administration of the business affairs of the Partnership and receives the compensation described in Item 1 "Business" hereof. The officers and directors of the General Partner receive no compensation from the Partnership for acting in their respective capacities with the General Partner.
The General Partner is the manager of the Partnership. General Partner receives .05% management fees monthly.
Item 12.
Item 12. Security Ownership of Certain Owners and Management and Related Stockholder Matters.
(a) As of December 31, 2010 there were two partners known to the Partnership to own beneficially more than 5% of the outstanding Units: RBRF Limited Partnership 5.75% Alan L Schoolcraft 16.71%
(b) As of December 31, 2010, management ownership was: by Peter Lamoureux with 77.353 class A units. This represents 1.72% of class A units of the Partnership.
(c) As of December 31, 2009, no arrangements were known to the Partnership, including no pledge by any person of Units of the Partnership or shares of the General Partner or the affiliates of the General Partners, such that a change in control of the Partnership may occur at a subsequent date.
Item 13.
Item 13. Certain Relationships and Related Transactions.
(a) None other than the compensation arrangements described herein.
(b) None.
(c) None.
The Partnership filed Registration Statements on Form S-18 and Form 10, therefore this information is not required to be included.
Item 14.
Item 14. Principal Accounting Fees and Services
Audit Fees
For the year ended December 31,2010 the aggregate fee billed by Donahue Associates, LLC, Independent Registered Public Accountant, for professional services rendered for the audit of the financial statements included in this annual report was $13,300.
For the year ended December 31,2009 the aggregate fee billed by Donahue Associates, LLC, Independent Registered Public Accountant, for professional services rendered for the audit of the financial statements included in this annual report was $13,700.
Audit Related Fees
None.
Tax Fees
The audit committee pre-approved all fees for the Everest Partnership, L.P. for fiscal year 2010 and 2009.
For the year ended December 31, 2010, the aggregate fees billed by Donahue Associates, LLC for federal and state tax return preparation totaled $6,000.
For the year ended December 31, 2009, the aggregate fees billed by Donahue Associates, LLC for federal and state tax return preparation totaled $5,000.
All Other Fees
None.
Part IV
Item 15.
Item 15. Exhibits, Financial Statement, Schedules.
(a) The following documents are included herein:
(1) Financial Statements:
	a. Report of Independent Registered Public Accounting Firm: Donahue Associates, LLC for 2010 Donahue Associates, LLC for 2009
b. Statements of Financial Condition, December 31, 2010 and 2009.
c. Statements of Operations, Years Ended December 31, 2010 and 2009.
d. Statements of Changes in Partners' Capital, Years Ended December 31, 2010 and 2009.
e. Statements of Cash Flows, Years Ended December 31, 2010 and 2009.
f. Schedule of Investments, December 31, 2010
g. Schedule of Investments, December 31, 2009
Notes to Financial Statements.
Acknowledgment
(2) All financial statement schedules have been omitted because the information required by the schedules is not applicable, or because the information required is contained in the financial statements included herein or the notes thereto.
(3) Exhibits:
See the Index to Exhibits annexed hereto.
See form 8-K Form 8-K filed on September 29, 2010 Exhibits:
		 See The Index to Exhibits annexed hereto.
	(c)	Financial Statement Schedules
		None.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Partnership has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Date:	 March 31, 2011		The Everest Fund, L.P.
By: Everest Asset Management, Inc. (General Partner) By: /s/ Peter Lamoureux Peter Lamoureux, President Secretary, Treasurer, and Director
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Partnership and in the capacities and on the date indicated.
Date:	March 31, 2011
By: /s/ Peter Lamoureux Peter Lamoureux, President, Secretary, Treasurer, and Director Index to Exhibits:
Exhibit No. Description
3.4 Amended and Restated Agreement of Limited Partnership dated as of May 1, 1995.
Advisory Contract between the Partnership, the General Partner and John W. Henry & Company, Inc. dated December 1, 1990.
10.6	 Amendment to Advisory Contract between the Partnership, the General Partner and John W. Henry & Company, Inc. dated April 1, 1995.
10.9	 Certificate of Limited Partnership for Everest Futures Fund II L.P. dated March 15, 1996.
Limited Partnership Agreement for Everest Futures Fund II L.P. dated as of March 29, 1996.
Confidential Private Placement Memorandum and Disclosure Document dated August 21, 1996.
Notes to the Exhibits:
Exhibits 3.4, 10.5, 10.6, 10.9, 10.10 and 28.1 are incorporated by reference to the Partnership's Form 10 accepted on September 19, 1996.
The Exhibits referenced above bear the exhibit numbers corresponding to those indicated in the Partnership's Registration Statements.
Number of Attached Exhibits
None.
Yours truly, Peter Lamoureux President
EVEREST FUND, L.P. (An Iowa Limited Partnership)
ACKNOWLEDGEMENT
The Everest Fund, L.P. (an Iowa Limited Partnership)
FINANCIAL REPORT
For the Years Ending December 31, 2010 and December 31, 2009
The Everest Fund, L.P. (an Iowa Limited Partnership)
Page(s)
I.	 Report of Independent Registered Public Accounting Firm 1
II.	 Financial Statements
Statements of Financial Condition	 2
Statements of Operations		 3
Statements of Changes in Partners' Capital	 4
Statements of Cash Flows			 5
Condensed Schedules of Investments		 6
III.	 Notes to the Financial Statements	 	 7-17
DONAHUE ASSOCIATES, LLC Certified Public Accountants
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the General Partner The Everest Fund, L.P. We have audited the accompanying statement of financial condition, including the condensed schedules of investments, of The Everest Fund, L.P. as of December 31, 2010 and December 31, 2009, and the related statements of operations, changes in partners' capital and cash flows for the years then ended. These financial statements are the responsibility of management. Our responsibility is to express an opinion on these financial statements based on our audits.We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of The Everest Fund, L.P. as of December 31, 2010 and December 31, 2009, and the results of its operations and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America.
Donahue Associates LLC Monmouth Beach, New Jersey March 15, 2011
The Everest Fund, L.P. (an Iowa Limited Partnership) Statements of Financial Condition As of December 31, 2010 and December 31, 2009
2010 2009 ASSETS
Equity in broker trading accounts:
Cash and cash equivalents $14,708,768 $13,113,057 Net unrealized gain (loss) on open contracts 1,035,839 150,734 ----------- ----------- Total equity at broker trading accounts $15,744,607 $13,263,791 Cash and cash equivalents 1,623,908 1,084,562 Interest receivable 198 47,952 ----------- -----------
Total Assets $17,368,713 $14,396,305 =========== ===========
LIABILITIES
Management fees payable $28,685 $23,342 Incentive fees payable 119,237 0 Brokerage commissions & fees payable 75,486 73,529 Accounts payable & accrued expenses 82,135 70,229 Redemptions payable 0 144,670
Total Liabilities $305,543 $311,770 ----------- -----------
PARTNERS' CAPITAL
Limited partners, Class A shares: 4,504.58 and 4,730.89 units outstanding 17,063,170 14,084,535 ----------- -----------
Total Liabilities & Partners' Capital $17,368,713 $14,396,305 =========== ===========
The accompanying notes are an integral part of these financial statements.
The Everest Fund, L.P. (an Iowa Limited Partnership)
Statements of Operations For the Years Ended December 31, 2010 and 2009
2010 2009 Trading gains (losses):
Net realized trading gains (losses) $4,036,082 ($2,069,031) Change in unrealized gains (losses) 883,535 (507,342) Brokerage commissions & fees (41,580) (42,097) ----------- ------------ Net gain (loss) from trading $4,878,037 ($2,618,470)
Net investment income:
Income: Interest income 54,655 138,455 Dividend income 1 21 Other income (loss) 0 (36) ---------- ------------ Total income $54,656 $138,440
Expenses: Management fees- general partner $794,807 $935,444 Management fees- advisors 285,527 260,245 Advisor incentive fees 119,237 0 Professional fees 94,384 127,908 Administrative expenses 4,687 9,183 ----------- ---------- Total administrative expenses 1,298,642 1,332,780 ----------- ----------
Net investment income (loss) (1,243,986) (1,194,340) ------------ -----------
Net income (loss) $3,634,051 ($3,812,810) ============ ============
Net income (loss)per unit of partner interest $810.83 ($810.50)
The accompanying notes are an integral part of these financial statements.
The Everest Fund, L.P. (an Iowa Limited Partnership)
Statement of Changes in Partners' Capital For the Years Ended December 31, 2010 and December 31, 2009
Partners' Units Net Asset Equity Outstanding Value Per Unit -------- ------------ -------------
Partners' equity at December 31, 2008 $18,713,395 4,940.65 $3,787.64
Additions 864,000 273.41
Redemptions (1,671,496) (483.17)
Offering costs (8,554)
Net loss (3,812,810) ------------ --------
Partners' equity at December 31, 2009 $14,084,535 4,730.89 $2,977.14
Additions 870,000 294.30
Redemptions (1,516,803) (520.61)
Offering costs (8,613)
Net income 3,634,051 ------------ ---------
Partners' equity at December 31, 2010 $17,063,170 4,504.58 $3,787.96 ============ ========== ==========
The accompanying notes are an integral part of these financial statements.
The Everest Fund, L.P. (an Iowa Limited Partnership) Statements of Cash Flows For the Years Ended December 31, 2010 and 2009
2010 2009 Cash flows from (for) operating activities Net income (loss) $3,634,051 ($3,812,810) Net changes to reconcile net income (loss) to net cash provided (used) by operating activities: Unrealized gain (loss) on open contracts (885,105) 508,912 Interest receivable 47,754 (27,967) Incentive fees payable 119,237 (885,100) Brokerage commissions & fees payable 1,957 (14,426) Management fees payable 5,343 (2,936) Accounts payable & accrued expenses 11,906 (29,580) ------------ ------------ Net cash provided (used) by operating activities $2,935,143 ($4,263,907)
Cash flows from (for) financing activities:
Partner additions, net of offering costs $861,387 $855,446 Redemptions paid (1,661,473) (1,659,708) ------------ ------------ Net cash provided (used) by financing activities (800,086) (804,262) ------------ ------------ Net change in cash & cash equivalent position $2,135,057 ($5,068,169)
Cash & cash equivalent balance at January 1st 14,197,619 19,265,788 ------------ ------------
Cash & cash equivalent balance at December 31st $16,332,676 $14,197,619 ============ ============
Supplemental disclosures of cash flow information: Redemptions payable $0 $144,670
Cash & cash equivalents consist of:
Cash in broker trading accounts $14,708,768 $13,113,057 Cash & cash equivalents 1,623,908 1,084,562 ----------- ----------- Total cash & cash equivalents $16,332,676 $14,197,619 =========== ===========
The accompanying notes are an integral part of these financial statements.
The Everest Fund, L.P. (an Iowa Limited Partnership)
Condensed Schedule of Investments As of December 31, 2010
Number Percent of Gain (Loss) Expiration of Partners' on Open Date Contracts Capital Contracts ---------- ---------- ---------- ------------
Long U.S. Futures Contracts
Interest rates Sep-11 9 0.01% $1,053
Metals Feb 11-Mar 11 56 3.02% 515,000 Energy Mar 11-Apr 11 50 0.49% 84,126 Agriculture Mar-11 230 1.54% 262,745 Currencies Mar-11 80 0.87% 147,700 Indices Mar-11 16 0.07% 12,211 -------- ----------- Total Long Futures Contracts 6.00% $1,022,835 -------- ----------- Short U.S. Futures Contracts
Interest Rates Mar-11 118 0.17% $29,348 Energy Apr-11 1 -0.01% (1,250) Currencies Mar 11-Dec 11 22 -0.09% (15,094) --------- -----------
Total Short Futures Contracts 0.07% 13,004 --------- ----------- Total Futures Contracts 6.07% $1,035,839 ========= ===========
The accompanying notes are an integral part of these financial statements.
The Everest Fund, L.P. (an Iowa Limited Partnership)
Condensed Schedule of Investments As of December 31, 2009
Number Percent of Gain (Loss) Expiration of Partners' on Open Date Contracts Capital Contracts ---------- ---------- ---------- ------------
Long U.S. Futures Contracts Interest rates Mar 10- Sept 10 55 -0.16% ($22,705) Energy Apr-10 10 -0.15% (21,390) Agriculture Mar-10 116 1.06% 149,918 Indices Mar-10 14 0.21% 29,410 --------- ---------- Total Long Futures Contracts 0.96% $135,233 --------- ----------
Short U.S. Futures Contracts Metals Mar-10 26 -0.05% (7,078) Agriculture Mar 10- Apr 10 8 -0.21% (29,800) Currencies Mar-10 88 0.16% 23,110 Indices Mar-10 43 0.21% 29,269 --------- ---------- Total Short Futures Contracts 0.11% $15,501 --------- ----------
Total Futures Contracts 1.07% $150,734 ========== ==========
The accompanying notes are an integral part of these financial statements.
The Everest Fund, L.P. (an Iowa Limited Partnership) NOTES TO THE FINANCIAL STATEMENTS For the Years Ended December 31, 2010 and December 31, 2009
1.	Organization and Business
The Everest Fund, L.P., formerly Everest Futures Fund, L.P. (an Iowa Limited Partnership), (the "Partnership") is a limited partnership organized in June 1988, under the Iowa Uniform Limited Partnership Act (the "Act") for the purpose of engaging in the speculative trading of commodity futures and options thereon and forward contracts (collectively referred to as "Commodity Interests").The sole General Partner of the Partnership is Everest Asset Management, Inc. (the "General Partne").
On July 1, 1995, the Partnership recommenced its offering under a Regulation D, Rule 506 private placement. The private placement offering is continuing at a gross subscription price per unit equal to net asset value (NAV) per unit, plus an organization and offering cost reimbursement fee payable to the General Partner, and an ongoing compensation fee equal to 3% of the net asset value of Class A Units sold. The Class A Units (retail shares) continue to be charged an initial 1% offering and organization fee as a reduction to capital.
2.	Summary of Significant Accounting Policies
Revenue Recognition Commodity futures contracts, forward contracts, physical commodities, and related options are recorded on the trade-date basis and realized gains or losses are recognized when contracts are liquidated. All such transactions are recorded on the identified cost basis and marked to market daily. Unrealized gains or losses on open contracts (the difference between contract trade price and market price) are reported in the statement of financial condition as a net unrealized gain or toss, as there exists a right of offset of unrealized gains or losses in accordance with the Financial Accounting Standards Board Interpretation No. 39-"Offsetting of Amounts Related to Certain Contracts." Any change in net unrealized gain or loss from the preceding period is reported in the statement of operations. Fair value of exchange-traded contracts is based upon exchange settlement prices. Fair value of non-exchange-traded contracts is based on third party quoted dealer values on the Inter-bank market.
Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions thataffect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Cash and Cash Equivalents Cash equivalents represent short-term highly liquid investments with maturities of 90 days or less at the date of acquisition.
Summary of Significant Accounting Policies, continued
Redemptions Payable Pursuant to the provisions of Statement of Financial Accounting Standards No. 150, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity ("SFAS 150"), redemptions approved by the General Partner prior to month end with a fixed effective date and fixed amount are recorded as redemptions payable as of month end.
Fair Value of Financial Instruments The financial instruments held by the Company are reported in the statements of financial condition at fair value, or at carrying amounts that approximate fair value, due to their highly liquid nature and short-term maturity.
Foreign Currency Translation The Partnership's functional currency is the U.S. dollar, however, it transacts business in currencies other than the U.S. dollar. Assets and liabilities denominated in foreign currencies are translated at the prevailing exchange rates as of the date of the statement of financial conditions. Gains and losses on investment activity are translated at the prevailing exchange rate on the date of each respective transaction while year-end balances are translated at the year-end currency rates. Realized and unrealized foreign exchange gains or losses are included in trading income in the statements of operations.
Income Taxes No provision for income taxes has been made in the accompanying financial statements as each partner is responsible for reporting income (loss) based upon the pro rata share of the profits or losses of the Partnership. The Partnership files U.S. federal and state tax returns.
Recent Accounting Pronouncements:
In January 2010, the Financial Accounting Standards Board issued Accounting Standard Update 2010-06, Fair Value Measurements and Disclosures (Topic 820), Improving Disclosures About Fair Value Measurements ("ASU 2010-06"). ASU 2010-06 adds new requirements for disclosures about transfers into and out of Level 1 and 2 inputs and separate disclosures about fair value measurements, particularly with respect to purchases, sales, issuances and settlements relating to Level 3 inputs. It also clarifies existing fair value disclosures about the level of disaggregation, will require that entities provide fair value measurement disclosures for each class of assets and liabilities, and adds requirements relating to inputs and valuation techniques used to measure fair value. Generally, ASU 2010-06 is effective for interim and annual reporting periods beginning after December 15, 2009, however, the disclosures about purchases, sales, issuances and settlements in the roll forward of activity in Level 3 inputs is not required until fiscal years beginning after December 15, 2010. The adoption of ASU 2010-06 did not have a significant impact on the Partnership's financial condition and results of operations.
Notes to the Financial Statements, continued
3. Fair Value of Financial Instruments
Effective January 1, 2008, the Partnership adopted Statement of Financial Accounting Standard No. 157, Fair Value Measurement (SFAS 157), issued by the FASB. SFAS No. 157 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date and sets out a fair value hierarchy. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). Inputs are broadly defined under SFAS 157 as assumptions market participants would use in pricing an asset or liability. The three levels of the fair value hierarchy under SFAS 157 are described below:
Level 1. Unadjusted quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date.Level 2. Inputs other than quoted prices within Level 1 that are observable for the asset or liability, either directly or indirectly; and fair value is determined through the use of models or other valuation methodologies. A significant adjustment to a Level 2 input could result in the Level 2 measurement becoming a Level 3 measurement. Level 3. Inputs are unobservable for the asset or liability and include situations where there is little, if any, market activity for the asset or liability. The inputs into the determination of fair value are based upon the best information in the circumstances and may require significant management judgment or estimation.
The following section describes the valuation techniques used by the Partnership to measure different financial instruments at fair value and includes the level within the fair value hierarchy in which the financial instrument is categorized. Fair value of exchange-traded contracts is based upon exchange settlement prices. Fair value of non-exchange-traded contracts is based on 3rd party-quoted dealer values on the Inter-bank market. These financial instruments are classified in Level 1 of the fair value hierarchy. The table below demonstrates the Partnership's fair value hierarchy for those assets and liabilities measured at fair value on a recurring basis as of December 31, 2010 and December 31, 2009:
Fair Value of Financial Instruments continued
Fair Value Measurement of Assets
Total Level 1 Level 2 Level 3
Assets at December 31, 2010:
Cash and cash equivalents $14,708,768 $14,708,768
Positions in futures and option contracts 1,035,839 1,035,839 ------------ ------------ ---------- ---------
Total assets at fair value $15,744,607 $15,744,607 $0 $0 ============ ============ ========== ==========
Total Level 1 Level 2 Level 3
Assets at December 31, 2009:
Cash and cash equivalents $13,113,057 $13,113,057
Positions in futures and option contracts 150,734 150,734 ----------- ------------ ---------- ---------- Total assets at fair value $13,263,791 $13,263,791 $0 $0 =========== ============ ========== ==========
In the normal course of business, the Partnership engages in trading derivatives by purchasing and selling futures contracts and options on future contracts for its own account. All such trading is effectuated as speculative as opposed to hedging. Effective January 1, 2009, the Partnership adopted the provisions of Accounting Standards Codification 815, Derivatives & Hedging, which requires enhanced disclosures about the objectives and strategies for using derivatives and quantitative disclosures about the fair value amounts, and gains and losses on derivatives. See below for such disclosures.
Fair Value of Derivative Instruments
2010 2009 Speculative Instruments Location- Statement of Fair Value Fair Value Financial Condition Futures Contracts Net unrealized gain (loss) on open contracts $1,035,839 $150,734
2010 2009 Speculative Instruments Location- Statement Fair Value Fair Value of Operations Futures Contracts Net realized trading gains(losses) $4,036,082 ($2,069,031) Futures Contracts Change in unrealized gains(losses) $883,535 ($507,342)
Notes to the Financial Statements, continued
4. Limited Partner Agreement
The Limited Partners and General Partner share in the profits and losses of the Partnership in proportion to the number of units or unit equivalents held by each. However, no Limited Partner is liable for obligations of the Partnership in excess of their capital contribution and profits, if any, and such other amounts as they may be liable for pursuant to the Act. Distributions of profits are made solely at the discretion of the General Partner.
Responsibility for managing the Partnership is vested solely in the General Partner. The General Partner has delegated complete trading authority to an unrelated party (see Note 5).
Limited Partners may cause any or all of their Class A units to be redeemed as of the end of any month at the month end net asset value on fifteen days' prior written notice to the Partnership, (for Class I Units, as of the end of any quarter on forty-five days' notice), or such lesser period as is acceptable to the Partnership. Although the Agreement does not permit redemptions for the first six months following a Limited Partner's admission to the Partnership, the Agreement does permit the Partnership to declare additional regular redemption dates. The Partnership will be dissolved on December 31, 2020, or upon the occurrence of certain events, as specified in the Limited Partnership agreement.
5. Agreements and Related Party Transactions
John W. Henry & Company, Inc. (JWH) serves as the Partnership's commodity trading advisor. JWH receives a monthly management fee equal to 0.167% (2% annually) of the Partnership's month-end net asset value, (as defined), and a quarterly incentive fee of 20% of the Partnership's new net trading profits, (as defined). The incentive fee is retained by JWH even though trading losses may occur in subsequent quarters; however, no further incentive fees are payable until any such trading losses (other than losses attributable to redeemed units and losses attributable to assets reallocated to another advisor) are recouped by the Partnership.
Effective November 2003, the General Partner charges the Partnership a monthly management fee equal to 0.50% of the Partnership's Class A beginning-of-month net asset value.
Beginning in mid-October 2005, the Partnership engaged Calyon Financial, Inc. ("CFI") as the Partnership's futures and options on futures broker, and engaged, Calyon Financial, SNC ("CFS") as the Partnership's foreign currency or forwards currency broker, (collectively referred to as the "Clearing Brokers"). On January 2, 2008 Calyon Financial, Inc. and SNC changed their company title to Newedge Financial, Inc. Newedge Financial, Inc. further changed their name to Newedge USA, LLC, as a result of a merger on September 1, 2008 between Newedge Financial, Inc. and Newedge USA, LLC. The agreements provide that the Clearing Brokers charge the Partnership brokerage commissions at the rate of between $5.80 to $10.70 per round-turn trade, plus applicable exchange, give up fees and NFA fees for futures contracts and options on futures Agreements and Related Party Transactions, continued
contracts executed on domestic exchanges and over the counter markets. For trades on certain foreign exchanges, the rates may be higher.
The Partnership also reimburses the Clearing Brokers for all delivery, insurance, storage or other charges incidental to trading and paid to third parties.
The Partnership earns interest on 95% of the Partnership's average monthly cash balance on deposit with its Brokers at a rate equal to the average 91-day Treasury Bill rate for US Treasury Bills issued during that month.
The Partnership has also entered into an investment advisory agreement with Horizon Cash Management L.L.C. ("HCM"). At December 31, 2010 and December 31, 2009 approximately 86% and 93%, respectively, of the partnership's capital were funds deposited with a commercial bank and invested under the direction of HCM. HCM receives a monthly cash management fee equal to 1/12 of .25% (.25% annually) of the average daily assets under management if the accrued monthly interest income earned on the Partnership's assets managed by HCM exceeds the 91-day U.S. Treasury bill rate.
6. Financial Instruments, Off-Balance Sheet Risks and Contingencies
The Partnership engages in the speculative trading of U.S. and foreign futures contracts, options on U.S. and foreign futures contracts, and forward contracts ("collectively derivatives"). These derivatives include both financial and non-financial contracts held as part of a diversified trading strategy. The Partnership is exposed to both market risk, the risk arising from changes in the market value of the contracts; and credit risk, the risk of failure by another party to perform according to the terms of a contract.
The purchase and sale of futures and options on futures contracts requires margin deposits with a futures commission merchant ("FCM"). Additional deposits may be necessary for any loss on contract value. The Commodity Exchange Act requires an FCM to segregate all customer transactions and assets from the FCM's proprietary activities. A customer's cash and other property such as U.S. Treasury Bills, deposited with an FCM are considered commingled with all other customer funds subject to the FCM's segregation requirements. In the event of an FCM's insolvency, recovery may be limited to a pro rata share of segregated funds available. It is possible that the recovered amount could be less than the total of cash and other property deposited.
For derivatives, risks arise from changes in the market value of the contracts. Theoretically, the Partnership is exposed to a market risk equal to the value of futures and forward contracts purchased and unlimited liability on such contracts sold short. As both a buyer and seller of options, the Partnership pays or receives a premium at the outset and then bears the risk of unfavorable changes in the price of the contract underlying the option.
Financial Instruments, Off-Balance Sheet Risks and Contingencies, continued
In the case of forward contracts, over-the-counter options contracts or swap contracts, which are traded on the interbank or other institutional market rather than on exchanges, the counterparty is generally a single bank or other financial institution, rather than a clearinghouse backed by a group of financial institutions; thus, there likely will be greater counterparty credit risk. The Partnership trades only with those counterparties that it believes to be creditworthy. All positions of the Partnership are valued each day on a mark-to-market basis. There can be no assurance that any clearing member, clearinghouse or other counterparty will be able to meet its obligations to the Partnership.
The unrealized gain (loss) on open futures and forward contracts is comprised of the following:
---------------------------------- Futures Forwards Total --------- ---------- ----------
Gross unrealized gains $1,022,836 $29,347 $1,052,183
Gross unrealized losses 0 (16,344) (16,344) ----------- ---------- ----------- Net unrealized gains (losses) $1,022,836 $13,003 $1,035,839 =========== ========== ===========
---------------------------------- Futures Forwards Total --------- ---------- ---------- Gross unrealized gains $179,328 $52,379 $231,707
Gross unrealized losses (44,095) (36,878) (80,973) --------- ---------- ---------- Net unrealized gains (losses) $135,233 $15,501 $150,734 ========= ========== ==========
The Partnership's policy is to continuously monitor its exposure to market and counterparty risk through the use of a variety of financial, position and credit exposure reporting and control procedures. In addition, the Partnership has a policy of reviewing the credit standing of each clearing broker or counter party with which it conducts business.
The limited partners bear the risk of loss only to the extent of the net asset value of their Partnership units.
Notes to the Financial Statements, continued
7. Financial Highlights
The following financial highlights show the Partnership's financial performance for the years ended December 31, 2010 and December 31, 2009.
2010 2009 Class A Class A
Total return before distributions* 27.23% -21.40% ======== ======== Ratio to average net assets:
Management fees 7.62% 5.88% Incentive fees 0.84% 0.00% Other expenses 0.70% 2.50% -------- -------- Total expenses 9.16% 8.38% ======== =========
(*)	Total return is calculated for all shareholders throughout the year. An individual shareholder's return may vary from these returns based on the timing of share transactions.
Financial Highlights, continued
Per Unit Performance: (for units outstanding through the entire period)
Net asset value at December 31, 2008 $3,787.64
Loss for fiscal year 2009 (529.92) Expenses for fiscal year 2009 (280.58) --------------
Net asset value at December 31, 2009 $2,977.14
Income for fiscal year 2010 1,099.12 Expenses for fiscal year 2010 (288.29) --------------
Net asset value at December 31, 2010 $3,787.96 ==============
(**)	Total return is calculated for all shareholders throughout the year. An individual shareholder's return may vary from these returns based on the timing of share transactions.
8. Concentrations of Credit The Partnership has a significant amount of its assets on deposit with the clearing futures FCM, which are not insured, at December 31, 2010 and December 31, 2009. In the event of the insolvency of the clearing FCM, recovery of the Partnership's assets may be limited to a pro rata share of available funds not covered by insurance.
The Partnership may, from time to time, have cash deposits at banks that are in excess of insured amounts.
9. Subsequent Events The Company has made a review of material subsequent events from December 31, 2010 through the date of this report and found no material subsequent events reportable during this period.