Attached files
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly report pursuant to Section 12(b) or (g) of the
Securities Exchange Act of 1934
For the quarterly period ended June 30, 2011
Commission File Number 0-17555
THE EVEREST FUND, L.P.
(Exact name of registrant as specified in its charter)
Iowa 42-1318186
State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1100 North 4th Street, Suite 143, Fairfield, Iowa 52556
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (641) 472-5500
Not Applicable
(Former name, former address and former fiscal year, if changed
since last report.)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
Indicate by check mark whether the registrant is a large accelerated filer,
an accelerated filer, or a non-accelerated filer. See definition of
accelerated filer and large accelerated filer in Rule 12b-2 of the Exchange
Act. (Check one): Large accelerated filer Accelerated filer
Non-accelerated filer
Small Reporting Company Filer X
Indicate by check mark whether the registrant is a shell company (as defined
in Rule 12b-2 of the Act). Yes No X
Table of Contents
Part I: Financial Information
Item 1. Financial Statements 4
Statements of Financial Condition 5
June 30, 2011 (Unaudited) and December 31, 2010 (Audited)
Condensed Schedule of Investments 7
June 30, 2011 (Unaudited)
Condensed Schedule of Investments 8-9
December 31, 2010 (Audited)
Statements of Operations 10-13
For the three and six Months Ended June 30, 2011 and 2010 (Unaudited)
Statements of Changes in Partners' Capital (Net Asset Value) 14-15
For the six Months Ended June 30, 2011 and 2010 (Unaudited)
Statements of Cash Flows
For the six Months Ended June 30, 2011 and 2010 (Unaudited) 15-17
Notes to Financial Statements June 30, 2011 18
Item 2. Management's Discussion and Analysis of Financial 37
Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures about 44
Market Risk
Item 4. Controls and Procedures 44-45
Part II: Other Information 45
Item 1. Legal Proceedings 45
Item 1A. Risk Factors 45
Item 2. Unregistered Sales of Equity Securities and Use 45
of Proceeds
Item 3. Defaults upon Senior Securities 47
Item 4. Submission of Matters to a Vote of Security Holders 47
Item 5. Other Information 47
Item 6. Exhibits 47-48
2
PART I. FINANCIAL INFORMATION
Item 1 Financial Statements
Following are Financial Statements for the six and three months ended
June 30, 2011
EVEREST FUND, L.P.
(An Iowa Limited Partnership)
STATEMENTS OF FINANCIAL CONDITION
June 30, 2011 (UNAUDITED) AND DECEMBER 31, 2010 (AUDITED)
UNAUDITED AUDITED
June 30, 2011 DECEMBER 31, 2010
----------------- -----------------
ASSETS
Cash and cash equivalents $15,074,953 $14,708,768
Equity in broker trading accounts:
Cash and cash equivalents 1,156,906 1,623,908
Net unrealized trading gains(losses)
on open contracts 71,490 1,035,839
Interest receivable 58 198
----------------- ----------------
TOTAL ASSETS $16,303,407 $17,368,713
=============== ================
LIABILITIES AND PARTNERS' CAPITAL
LIABILITIES:
Redemptions payable $205,589 $ 0
Management fee payable 26,901 28,685
Brokerage commissions and fees payable 78,997 75,486
Incentive fee payable 0 119,237
O&O Payable 248 0
Accounts payable & accrued expenses 59,012 82,135
----------- ------------
TOTAL LIABILITIES 370,746 305,543
----------- ------------
PARTNERS' CAPITAL
Limited partners, A Shares (4,533.49069
and 4,504.57959 units outstanding) 15,932,661 17,063,170
------------- ------------
TOTAL PARTNERS' CAPITAL 15,932,661 17,063,170
------------- ------------
TOTAL LIABILITIES AND PARTNERS'
CAPITAL $16,303,407 $17,368,713
============= ============
The accompanying notes are an integral part of this statement.
3
EVEREST FUND, L.P.
(AN IOWA LIMITED PARTNERSHIP)
CONDENSED SCHEDULE OF INVESTMENTS
June 30, 2011
UNAUDITED
EXPIRATION NUMBER OF MARKET % OF PARTNERS'
DATES CONTRACTS VALUE (OTE) CAPITAL
---------------- --------- ------------ --------------
LONG POSITIONS:
FUTURES POSITIONS
Interest rates Sep 11 - Mar 12 138 $ 68,284 0.43%
Metals Aug 11 9 (17,010) -0.11%
Agriculture Oct 11 - Dec 11 61 18,194 0.11%
Currencies Sep 11 - Jun 12 104 (12,488) -0.08%
Indices Sep 11 2 (497) -0.003%
----------- ---------- ----------
Total long positions 56,484 .35%
SHORT POSITIONS:
FUTURES POSITIONS
Interest rates Sep 11 6 (8,071) -0.05%
Energy Sep 11 - Oct 11 18 (82,204) -0.52%
Agriculture Sep 11 - Dec 11 52 115,520 0.73%
Currencies Sep 111 6 (3,263) -0.02%
Indices Sep 11 4 (6,976) -0.04%
----------- ---------- -----------
Total short positions 15,006 0.09%
----------- -----------
TOTAL OPEN CONTRACTS 71,490 0.45%
=========== ===========
The accompanying notes are an integral part of this statement.
THE EVEREST FUND, L.P.
(an Iowa Limited Partnership)
CONDENSED SCHEDULE OF INVESTMENTS
December 31, 2010
AUDITED
Unrealized
% of(Loss)
Expiration Number Partners' On Open
Date of 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% 12,212
---------- ----------
Total Long Futures Contracts 5.99 % 1,022,836
---------- ----------
Short U.S. Futures Contracts
Interest rates Mar 11 118 0.17% $29,347
Energy Apr 11 1 -0.01% (1,250)
Currencies Mar 11 - Dec 11 22 -0.09% (15,094)
---------- ----------
Total Short Futures Contracts 0.08 % $13,004
---------- ----------
Total Futures Contracts 6.07 % $1,035,840
========== ==========
The accompanying notes are an integral part of these financial statements.
4
EVEREST FUND, L.P.
(AN IOWA LIMITED PARTNERSHIP)
STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED June 30, 2011 AND 2010
UNAUDITED
THREE MONTHS ENDED THREE MONTHS ENDED
June 30, 2011 June 30, 2010
-------------------- -------------------
TRADING INCOME (LOSS)
Net realized trading gain(loss)
on closed contracts $(444,551) $1,095,389
Change in net unrealized trading gain
(loss) on open contracts (1,037,289) 20,505
Net foreign currency translation loss 1,909 (12,741)
Brokerage Commissions (12,066) (11,706)
-------------------- -------------------
NET TRADING INCOME (LOSS) (1,491,997) 1,091,447
Interest income, net of cash management fees 9,583 13,014
---------------- -------------------
TOTAL INCOME (1,482,414) 1,104,461
---------------- -------------------
EXPENSES:
General partner management fees 257,460 180,892
Advisor Management fees 87,480 65,695
Incentive fees 0 0
Professional fees 12,654 25,635
Administrative expenses 1,528 777
---------------- -------------------
TOTAL EXPENSES 359,122 272,999
---------------- -------------------
NET INCOME $(1,841,536) $831,462
================ ===================
NET INCOME (LOSS) PER UNIT OF PARTNERSHIP INTEREST
A SHARES, OUTSTANDING ENTIRE PERIOD $(1,253.40) $185.50
================ ===================
The accompanying notes are an integral part of these statements.
EVEREST FUND, L.P.
(AN IOWA LIMITED PARTNERSHIP)
STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED June 30, 2011 AND 2010
UNAUDITED
SIX MONTHS ENDED SIX MONTHS ENDED
June 30, 2011 June 30, 2010
-------------------- -------------------
TRADING INCOME (LOSS)
Net realized trading gain(loss)
on closed contracts $557,233 $69,249
Change in net unrealized trading gain
(loss) on open contracts (964,349) 477,946
Net foreign currency translation loss (6,516) (10,334)
Brokerage Commissions (23,310) (23,432)
-------------------- -------------------
NET TRADING INCOME (LOSS) (436,942) 513,429
Interest income, net of cash management fees 19,431 31,058
---------------- -------------------
TOTAL INCOME (417,511) 544,487
---------------- -------------------
EXPENSES:
General partner management fees 508,095 369,764
Advisor Management fees 176,533 131,265
Incentive fees 143,073 0
Professional fees 23,447 52,566
Administrative expenses 3,490 2,575
---------------- -------------------
TOTAL EXPENSES 854,638 556,169
---------------- -------------------
NET INCOME $(1,272,149) $(11,682)
================ ===================
NET INCOME (LOSS) PER UNIT OF PARTNERSHIP INTEREST
A SHARES, OUTSTANDING ENTIRE PERIOD $(273.53) $6.69
================ ===================
The accompanying notes are an integral part of these statements.
5
5
EVEREST FUND, L.P.
(An Iowa Limited Partnership)
STATEMENT OF CHANGES IN PARTNERS' CAPITAL
FOR THE SIX MONTHS ENDED June 30, 2011
UNAUDITED
UNITS LIMITED PTRS
A SHARES A SHARES TOTAL
---------- ---------------- ------------
BALANCES, January 1, 2011 4,504.58 17,063,171 17,063,171
Additional Units Sold 103.97 413,010 413,010
Redemptions (75.06) (267,282) (267,282)
Less Offering Costs -- (4,089) (4,089)
Net profit (Loss) -- (1,272,149) (1,272,149)
----------- --------------- -------------
BALANCES, JUNE 30,2011 4,533.4906 $15,932,661 $15,932,661
=========== =============== =============
Net asset value per unit,
January 1, 2011 $3,787.96
Net profit (loss) per unit (273.53)
------------
Net asset value per unit
JUNE 30, 2011 $3,514.44
============
The accompanying notes are an integral part of these statements.
6
EVEREST FUND, L.P.
(An Iowa Limited Partnership)
STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED June 30, 2011 AND 2010
UNAUDITED
7
EVEREST FUND, L.P.
NOTES TO FINANCIAL STATEMENTS
June 30, 2011
(1) GENERAL INFORMATION AND SUMMARY
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 Partner'').
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.
The Partnership clears all of its futures and options on futures trades
through Newedge USA, LLC. (NE), its clearing broker, and all of its
foreign currency trading through Newedge Group an affiliate of NE.
(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
loss, 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 Interbank market.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of 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. The
Partnership maintains deposits with high quality financial institutions
in amounts that are in excess of federally insured limits; however, the
Partnership does not believe it is exposed to any significant credit risk.
Redemptions Payable
Pursuant to the provisions of FASB ASC 480, Distinguishing Liabilities
from Equity, 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
period end balances are translated at the period end currency rates. Realized
and unrealized foreign exchange gains or losses are included in trading
income or loss in the statements of operations.
Income Taxes
No provision for income taxes has been made in the accompanying financial
statements as each partner is responsible for reporting income (loss)
based upon the pro rata share of the profits or losses of the Partnership.
The Partnership files U.S. federal and state tax returns.
(3) FAIR VALUE OF FINANCIAL INSTRUMENTS
Effective January 1, 2008, the Partnership adopted FASB ASC 820
(formerly Statement of Financial Accounting Standard No. 157, Fair
Value Measurement), issued by the FASB. ASC 820 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
ASC 820 as assumptions market participants would use in pricing
an asset or liability. The three levels of the fair value hierarchy under
ASC 820 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 third party quoted dealer values on the Interbank market. These
financial instruments are classified in Level 1 of the fair value hierarchy.
The following table presents the Partnership's fair value hierarchy for those
assets and liabilities measured at fair value on a recurring basis as of
June 30, 2011:
Fair Value Measurements Using
-------------------------------------------------------------
Quoted Prices in Significant Significant
Active Markets for Other Unobservable
Identical Assets Observable Inputs Inputs
Total (Level I) (Level II) (Level III)
----------- ----------------- ----------------- --------------
Assets
Cash and equivalents $16,231,859 $16,231,859 $- $-
------------- --------------- --------------- --------------
Investments Long Futures
Contracts 56,484 56,484 - -
Short Futures
Contracts 15,005 15,005 - -
--------------- --------------- --------------- --------------
71,490 71,490 - -
-------------- --------------- --------------- --------------
Total assets at fair value $16,303,349 $16,303,349 $- $-
============== =============== =============== ==============
The following table presents the Partnership's fair value hierarchy for those
assets and liabilities measured at fair value on a recurring basis as of
June 30, 2010:
Fair Value Measurements Using
-------------------------------------------------------------------
Quoted Prices in Significant Significant
Active Markets for Other Unobservable
Identical Assets Observable Inputs Inputs
Total (Level I) (Level II) (Level III)
------------------ ---------------- --------------- --------------
Assets
Cash and equivalents $13,189,111 $13,189,111 $ - $ -
--------------- ----------------- ----------- -----------
Investments
Long Futures
Contracts 625,411 625,411 - -
Short Futures
Contracts 4,840 4,840 - -
------------- ----------------- --------------- --------------
630,251 630,251 - -
------------- ----------------- --------------- --------------
Total assets at fair
value $13,819,362 $13,819,362 $ - $ -
=============== ================== =============== ==============
(4) LIMITED PARTNERSHIP AGREEMENT
The Limited Partners and General Partner share in the profits and losses
of the Partnership in proportion to the number of units or unit
equivalents held by each. However, no Limited Partner is liable for
obligations of the Partnership in excess of their capital contribution
and profits, if any, and such other amounts as they may be liable for
pursuant to the Act. Distributions of profits are made solely at the
discretion of the General Partner.
Responsibility for managing the Partnership is vested solely in the
General Partner. The General Partner has delegated complete trading
authority to an unrelated party (see Note 5).
Although the Partnership 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. 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.
In addition, 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.
From the monthly management fee the General Partner deducts the round
turn trading costs and related exchange fees (between $5.80 to
$10.70 per round turn trade on domestic exchanges, and higher for foreign
exchanges) and pays the selling agents and certain other parties, if any,
up to 50% of the fee retained by the General Partner. The General Partner
may replace or add trading advisors at any time.
The clearing agreements with the clearing brokers 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 National Futures Association fees for futures contracts and
options on futures 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 clearing brokers at a rate equal to the
average 91-day Treasury Bill rate during that month.
The Partnership has also entered into an investment advisory agreement with
Horizon Cash Management L.L.C. ("HCM''). At June 30, 2011 and 2010
approximately 99.86% and 99.75%, 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) DERIVATIVE INSTRUMENTS
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.
Asset Derivatives
Balance Sheet
Location Fair Value #of contracts
Agricultural
Net unrealized trading gains on open contracts 18,194 61
Currencies
Net unrealized trading gains on open contracts (12,488) 104
Energy
Net unrealized trading gains on open contracts 0 0
Metals
Net unrealized trading gains on open contracts (17,010) 9
Interest rates
Net unrealized trading gains on open contracts 68,284 138
Indices
Net unrealized trading gains on open contracts (497) 2
========= ======
56,484 314
Liability Derivatives
Balance Sheet
Location Fair Value #of contracts Net
Agricultural
Net unrealized trading gains on open contracts 115,520 52 133,713
Currencies
Net unrealized trading gains on open contracts (3,263) 6 (15,751)
Energy
Net unrealized trading gains on open contracts (82,204) 18 (82,204)
Metals
Net unrealized trading gains on open contracts 0 0 (17,010)
Interest rates
Net unrealized trading gains on open contracts (8,071) 6 60,213
Indices
Net unrealized trading gains on open contracts (6,976) 4 (7,473)
============ ===== ==========
15,006 86 71,490
Trading Revenue for the Six Months Ended June 30, 2011
Line Item in Income Statement
Realized 527,407
Change in unrealized (964,349)
===========
(436,942)
Includes net foreign currency translation gain(loss)
Trading Revenue for the Six Months Ended June 30, 2010
Line Item in Income Statement
Realized 35,483
Change in unrealized 47,946
===========
513,429
Includes net foreign currency translation gain (loss)
Total average of futures contracts bought and sold
Six months ended June 30, 2011
Total 527,407
============
6 month average 175,802
Total average of futures contracts bought and sold
Three months ended June 30, 2011
Total (454,708)
============
3 month average (151,569)
For the three months ended June 30, 2011, the monthly average of futures
contracts bought and sold was approximately (151,569).
(7) 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.
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.
(8) FINANCIAL HIGHLIGHTS
The following financial highlights show the Partnership's financial
performance for the six months ended June 30, 2011 and
June 30, 2010.
June 30, 2011 June 30, 2010
-------------------- ---------------
Class A Class A
-------------------- ---------------
Total return before distributions* (7.22)% .22%
==================== ===============
Ratio to average net assets:
Net investment Income (loss)** (9.57)% (7.97)%
==================== ===============
Management fees 5.82% 5.61%
Incentive fees 1.64% 0%
Other expenses 2.33% 2.83%
-------------------- ---------------
Total expenses** 9.79% 8.44%
==================== ===============
*Not annualized
**Annualized
Interim Financial Statements
The statements of financial condition, including the consolidated schedule
of investments, as of June 30, 2011, the statements of operations for
the three and six months ended June 30, 2011 and 2010, the statements
of cash flows and changes in partners' capital (net asset value) for the six
months ended June 30, 2011 and 2010 and the accompanying notes to the
financial statements are unaudited. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with U.S. generally accepted accounting principles may be omitted pursuant
to such rules and regulations. In the opinion of management, such financial
statements and accompanying disclosures reflect all adjustments, which
were of a normal and recurring nature, necessary for a fair presentation
of financial position as of June 30, 2011, results of operations for the
three and six months ended June 30, 2011 and 2010, cash flows and
changes in partners' capital (net asset value) for the six months ended
June 30, 2011 and 2010. The results of operations for the full three
And six months ended June 30, 2011 and 2010 are not necessarily
indicative of the results to be expected for the full year or any other
period. These financial statements should be read in conjunction with the
audited financial statements and the notes thereto included in our form
10-k as filed with the Securities and Exchange Commission.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operation
Each months ended June 30, 2011 compared to each months ended
June 30, 2010
Class A Units were positive 1.40% in January 2011 resulting in
a Net Asset Value per unit of $3,841.11 as of January 31, 2011.
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.
The interest rate sector produced slightly positive results as global
rates moved modestly higher amid signs the economy was improving.
The currency sector was unprofitable in January as directionless
price patterns prevailed. Gains from trading in the British pound
were not enough to offset losses from other markets in the sector.
Trading in the equity sector was slightly profitable as stocks
continued to move higher. Positions in Asian, European and U.S.
stock index futures were all profitable. Oil and petroleum products
moved higher in January, contributing to gains for the month.
Positions in heating oil were buoyed by unseasonably cold
temperatures in many parts of the United States. Trading in the
metals sector was unprofitable for the month. The trend in
precious metals prices may have come to an end in January
as gold failed to participate in an otherwise broad-based
rally in commodity prices. Silver also produced negative
performance in January. Trading in the agricultural sector
continued to be an important source of Fund's returns.
All of the positions in the sector were profitable in January.
Class A Units were positive 3.09% in February 2011 resulting in
a Net Asset Value per unit of $3,959.69 as of February 28, 2011.
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.
Performance in February was strong as the Fund gained 3.09%
for the month. The consistency of the Fund's returns is in part
due to a rotation in performance leadership across the portfolio.
While one sector is undergoing a correction, performance from
another sector has been strong enough to generate gains in the
overall Fund. This was the case in February. As key markets
in the agricultural sector suffered from meaningful pullbacks,
certain energy prices, such as crude oil, surged. On the
surface, it may seem that the good performance in February
was simply an extension of January's positive results; generally,
commodity prices were up on the month and equities continued
their movement higher. The energy sector was the difference
maker for the Fund in February as the price of crude oil,
heating oil and gasoline all surged during the month. Positions in
crude oil and crude oil products were all profitable and more than
sufficient to offset small losses from trading in natural gas. The
agricultural sector, which has been an important influence on the
Fund's positive performance in recent months, was once again
profitable in February. Cotton, for example, was the
best-performing single market in the Fund during the month.
Sugar, which had been rallying along with other agricultural markets,
suffered a sharp pull back and was the worst-performing market in
the Fund. The metals sector produced positive results despite
mixed performance from the normally correlated gold and silver
markets. Significant gains from trading in silver more than offset
losses from trading in gold. Positions in U.S., European and
Japanese equity futures were all profitable for the month. Trading
in the interest rate sector was flat in February. Trading in currencies
was slightly unprofitable as the Fund suffered from intra-month
reversals. The price action observed in the Japanese yen and Swiss
franc was consistent with the price action in the Treasury market
and an indication of the strong safe haven flows that upset trends
in both bonds and currencies.
Class A Units were negative 1.14% in March 2011 resulting in
a Net Asset Value per unit of $3,914.46 as of March 31, 2011.
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.
Performance for the Fund declined one percent in March as a
number of long-standing trends were disrupted by the tragic events
that occurred in Japan during the month. The metals sector was a
bright spot for the Fund as precious metals, and silver in particular,
surged amidst the global turmoil. The energy market was also
profitable in March, helping to offset losses from the Fund's
Japanese exposures. In general, the price pattern of crude oil and
crude oil products was similar to that of other risk assets, including
equities; they moved lower following the news from Japan and
then traded higher in the second half of the month. Price patterns
across the agriculture sector were diverse with some markets
following the direction of overall investor risk sentiment while
other markets were more tethered to idiosyncratic fundamentals.
Performance from the sector was negative as gains from trading
in the coffee and cotton markets were insufficient to offset losses
from trading in grains and sugar. Trading in global interest rates
was unprofitable in March as the sector was hit by sudden
reversals that followed news of the Japanese earthquake. Trading
in currencies was slightly unprofitable, with the largest losses
coming from positions in the U.S. dollar against the Japanese yen.
The Fund's systematic non-predictive approach to trading these
markets allowed it to maintain exposure and profit from the
extension of ongoing trends in many markets, while limiting losses
and adjusting positions to newly formed trends in others.
Class A Units were positive 7.53% in April 2011 resulting in
a Net Asset Value per unit of $4,209.22 as of April 30, 2011.
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 Fund's strong gains came as interest rate markets rallied into
the close of the month as did certain commodities while the dollar
continued to decline. Interest rates posted negative performance
for the month. Also, the agricultural sector has cooled in recent
weeks with performance from the sector being slightly negative in
April despite strong gains from positions in sugar. Sugar fell more
than 10 percent on the month as supplies increased as a result of
higher exports from India. Gains in sugar and coffee were not
sufficient to offset losses in grain prices and cotton.
Positive performance in April came from a continuation of trends in
place in the European currencies, energy and precious metals sectors.
The Fund was able to benefit from the continued weakness of the dollar
and increasing speculation in a number of commodities that have spiked
to historic levels during the month. The markets remain susceptible to
upside and downside overreactions to the continued flood of
fundamental data released across the globe as well as an unfortunate
continuation of natural disasters both domestic and abroad.
Class A Units were negative 13.27% in May 2011 resulting in
a Net Asset Value per unit of $3,650.59 as of May 31, 2011.
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 declined in May as long-standing trends in certain
commodity markets came to a violent end. The Fund was
specifically affected by abrupt reversals in the price of energy and
metals. Silver positions, which had been among the most profitable
positions in the Fund to date, were particularly hard hit as the price
of the metal declined by 30 percent in just four days. The price of
crude oil fell by more than 15 percent in just three days. The
absolute decline in prices witnessed over such a short period of time
was the worst on record for both markets. The models used by the
program were designed to capture long-term trends and will usually
have difficulty during the rare times when markets reverse the way
they did in May.
The interest rate sector was profitable in May. Bond prices benefited
as investor flows moved out of stocks and commodities amid concerns
that rising global interest rates would negatively impact economic
growth.The currency sector was unprofitable with the largest loss
coming from positions in the euro. The EUR/USD exchange rate fell more
than 5 percent during the month as the difficult debate on how to
handle the European debt problem weighs on policy makers. The
agricultural sector was also unprofitable with the largest losses
coming from positions in grains. While the magnitude of the decline
was not as severe, corn and wheat both tracked commodity and
other risk assets lower during the first half of the month, leading to
losses. The coffee market bucked the trend for the month as
expectation for cold weather in Brazil added to the positive
fundamental backdrop for the commodity. However, gains from
positions in coffee were unable to offset losses from other positions
in the sector.
Class A Units were negative 3.73% in June 2011 resulting in
a Net Asset Value per unit of $3,514.44 as of June 30, 2011.
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 declined in June as markets remained choppy throughout
the month following May's sharp corrections. The interest rate
sector was essentially flat for the month as gains in Asian and
European debt markets were offset by a drop in the U.S. market.
Trading in the currency markets provided slightly positive returns
as investors continued to flee from risk assets and into
safe-haven currencies such as the Japanese yen and Swiss
franc. Positive returns in these currencies more than offset
losses in higher-yielding currencies, such as the euro and the British
pound.
The Fund's performance in equity indices was slightly negative in June.
Trading in the metals sector was unprofitable. The energy markets
were the Fund's worst-performing sector for the month. Short-term
volatility and price swings in Brent Crude affected the Fund's
positioning in that market. The agricultural sector was also negative
in June. Grain markets steadily declined throughout the month after
hitting highs during the first week of the month following a strong May.
June performance was the result of the continued risk-on and risk-off
reactions to the global sovereign debt crisis. The global economic
picture remains cloudy in the near-term with mixed signals being
reported on a daily basis making it difficult for trends to gain traction
in many markets.
Item 3. Quantitative and Qualitative Disclosures
About Market Risk
There has been no material change with respect to market risk since the
"Quantitative and Qualitative Disclosures About Market Risk" was made in
the Form 10K of the Partnership dated December 31, 2010.
Item 4. Controls and Procedures
As of June 30, 2011 an evaluation was performed by the company under
the supervision and with the participation of management, including
the President of the Company, of the effectiveness of the design and
operation of the Company's disclosure controls and procedures. Based on
that evaluation, the Company's management, including the President, concluded
that the Company's disclosure controls and procedures are effective in timely
alerting them to material information relating to the Company that is
required to be included in the Company's period filings with the Securities
and Exchange Commission. There have been no significant changes in the
company's internal controls or in other factors that could significantly
affect those internal controls subsequent to the date the company carried out
its evaluation.
Part II. OTHER INFORMATION
Item 1. Legal Proceedings
Neither the Partnership, nor the General Partner, is party to
any pending material legal proceeding.
Item 1A. Risk Factors
There has been no material change with respect to risk factors since the
"Risk Factors" were disclosed in the Form 10K of the Partnership dated
December 31, 2010.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
RECENT SALES OF UNREGISTERED SECURITIES A UNITS
Six months ended June 30, 2011 Six months ended June 30,2010
Units Sold 103.97 252.60
Value of Units Sold $413,010 $745,000
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.
See Part I, Statement of Changes in Partner's Capital
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits
Exhibit Number Description of Document Page
Number
31 Certification by Chief Executive Officer
and Chief Financial Officer Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002 E- 1-2
32 Certification by Chief Executive Officer
and Chief Financial Officer Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002 E - 3
b) Reports on Form 8-K
None
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned and thereunto duly authorized.
EVEREST FUND, L.P.
Date: August 15, 2011 By: Everest Asset Management, Inc.,
its General Partner
By:__/s/ Peter Lamoureux_______________________________
Peter Lamoureux
President
32
