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, 2012
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 2
Statements of Financial Condition 2
June 30, 2012 (Unaudited) and December 31, 2011 (Audited)
Condensed Schedule of Investments 3
June 30, 2012 (Unaudited)
Condensed Schedule of Investments 4
December 31, 2011 (Audited)
Statements of Operations 5-6
For the Three and Six Months Ended June , 2012 and 2011 (Unaudited)
Statements of Changes in Partners' Capital (Net Asset Value) 6-7
For the Six Months Ended June 30, 2012 and 2011 (Unaudited)
Statements of Cash Flows
For the six Months Ended June 30, 2012 and 2011 (Unaudited) 8-9
Notes to Financial Statements June 30, 2012 9
Item 2. Management's Discussion and Analysis of Financial 17
Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures about 20
Market Risk
Item 4. Controls and Procedures 20
Part II: Other Information 21
Item 1. Legal Proceedings 21
Item 1A. Risk Factors 21
Item 2. Unregistered Sales of Equity Securities and Use 21
of Proceeds
Item 3. Defaults upon Senior Securities 21
Item 4. Submission of Matters to a Vote of Security Holders 21
Item 5. Other Information 21
Item 6. Exhibits 21
2
PART I. FINANCIAL INFORMATION
Item 1 Financial Statements
Following are Financial Statements for the three months ended June 30, 2012
EVEREST FUND, L.P.
(An Iowa Limited Partnership)
STATEMENTS OF FINANCIAL CONDITION
June 30, 2012 (UNAUDITED) AND DECEMBER 31, 2011 (AUDITED)
UNAUDITED AUDITED
June 30, 2012 DECEMBER 31, 2011
----------------- -----------------
ASSETS
Cash and cash equivalents $10,686,801 $12,127,485
Equity in broker trading accounts:
Cash and cash equivalents 2,096,288 2,459,727
Net unrealized trading gains(losses)
on open contracts (202,403) 591,296
Interest receivable 1,012 (100)
----------------- ----------------
TOTAL ASSETS $12,581,697 $15,178,408
=============== ================
LIABILITIES AND PARTNERS' CAPITAL
LIABILITIES:
Redemptions payable $20,822 $ 0
Management fee payable 20,690 24,925
Brokerage commissions and fees payable 61,791 69,868
Incentive fee payable 0 0
O&O Payable 594 0
Accounts payable & accrued expenses 45,716 59,195
----------- ------------
TOTAL LIABILITIES 149,613 153,989
----------- ------------
PARTNERS' CAPITAL
Limited partners, A Shares (4,533.49069
and 4,576.28727 units outstanding) 12,432,085 15,024,419
------------- ------------
TOTAL PARTNERS' CAPITAL 12,432,085 15,024,419
------------- ------------
TOTAL LIABILITIES AND PARTNERS'
CAPITAL $12,581,697 $15,178,408
============= =============
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, 2012
UNAUDITED
EXPIRATION NUMBER OF MARKET % OF PARTNERS'
DATES CONTRACTS VALUE (OTE) CAPITAL
---------------- --------- ------------ --------------
LONG POSITIONS:
FUTURES POSITIONS
Interest rates Sep 12 - Mar 13 236 $ 96,146 0.77%
Agriculture Nov 12 - Dec 12 80 84,788 0.68%
Currencies Jun 13 136 (1,288) -0.01%
Indices Sep 12 24 (2,040) -0.016%
Forward Positions
Currencies 6,340 0.05%
----------- ---------- ----------
Total long positions 183,947 1.48%
SHORT POSITIONS:
FUTURES POSITIONS
Interest rates Sep 12 36 (53,752) -0.43%
Metals Aug 12 - Sep 12 40 39,303 0.32%
Energy Sep 12 - Oct 12 51 (86,835) -0.70%
Agriculture Sep 12 - Dec 12 59 (73,744) -0.59%
Currencies Sep 12 74 (44,738) -0.36%
Indices Sep 12 28 (92,809) -0.75%
Forward Positions
Currencies (73,775) -0.59%
----------- ------------ ----------
Total short positions (386,350) -3.11%
----------- ----------
TOTAL OPEN CONTRACTS (202,043) -1.63%
=========== ===========
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, 2011
AUDITED
Unrealized
% of(Loss)
Expiration Number Partners' On Open
Date of Contracts Capital Contracts
________ ____________ _________ _____________
Long U.S. Futures Contracts
Interest rates Mar 12 - Sep 12 157 1.31% $196,358
Agriculture Mar 12 10 0.00% (250)
---------- ----------
Total Long Futures Contracts 1.31 % 196,108
---------- ----------
Short U.S. Futures Contracts
Interest rates Mar 12 4 -0.01% ($2,070)
Metals Feb 12 - Mar 12 60 2.29% 343,720
Energy Mar 12 - Apr 12 55 0.17% 25,835
Agriculture Mar 12 166 0.30% 45,668
Currencies Mar 12 - Dec 12 126 -0.26% (39,013)
Indices Mar 12 9 0.14% 21,047
---------- ----------
Total Short Futures Contracts 2.63 % $395,188
---------- ----------
Total Futures Contracts 3.94 % $591,296
========== ==========
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, 2012 AND 2011
UNAUDITED
THREE MONTHS ENDED THREE MONTHS ENDED
June 30, 2012 June 30, 2011
-------------------- -------------------
TRADING INCOME (LOSS)
Net realized trading gain(loss)
on closed contracts $554,239 $(444,551)
Change in net unrealized trading gain
(loss) on open contracts (159,956) (1,037,289)
Net foreign currency translation loss 77,562 1,909
Brokerage Commissions (17,102) (12,066)
-------------------- -------------------
NET TRADING INCOME (LOSS) 454,742 (1,491,997)
Interest income, net of cash management fees 9,092 9,583
---------------- -------------------
TOTAL INCOME(LOSS) 463,835 (1,482,414)
---------------- -------------------
EXPENSES:
General partner management fees 173,157 257,460
Advisor Management fees 63,871 87,480
Incentive fees 0 0
Professional fees 16,855 12,654
Administrative expenses 2,931 1,528
---------------- -------------------
TOTAL EXPENSES 256,815 359,122
---------------- -------------------
NET INCOME(LOSS) $207,020 $(1,841,536)
================ ===================
NET INCOME (LOSS) PER UNIT OF PARTNERSHIP INTEREST
A SHARES, OUTSTANDING ENTIRE PERIOD $46.51 $(1,253.40)
================ ===================
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, 2012 AND 2011
UNAUDITED
SIX MONTHS ENDED SIX MONTHS ENDED
June 30, 2012 June 30, 2011
-------------------- ------------------
TRADING INCOME (LOSS)
Net realized trading gain(loss)
on closed contracts $(1,076,362) $557,233
Change in net unrealized trading gain
(loss) on open contracts (793,717) (964,349)
Net foreign currency translation loss 78,112 (6,516)
Brokerage Commissions (30,514) (23,310)
-------------------- ------------------
NET TRADING INCOME (LOSS) (1,822,480) (436,942)
Interest income, net of cash management fees 18,725 19,431
---------------- ------------------
TOTAL INCOME (LOSS) (1,803,755) (417,511)
---------------- ------------------
EXPENSES:
General partner management fees 363,798 508,095
Advisor Management fees 127,759 176,533
Incentive fees 0 143,073
Professional fees 35,870 23,447
Administrative expenses 3,498 3,490
---------------- ------------------
TOTAL EXPENSES 530,925 854,638
---------------- ------------------
NET INCOME (LOSS) $(2,334,680) $(1,272,149)
================ ==================
NET INCOME (LOSS) PER UNIT OF PARTNERSHIP INTEREST
A SHARES, OUTSTANDING ENTIRE PERIOD $(510.48) $(273.53)
================ ==================
The accompanying notes are an integral part of these statements.
5
EVEREST FUND, L.P.
(An Iowa Limited Partnership)
STATEMENT OF CHANGES IN PARTNERS' CAPITAL
FOR THE SIX MONTHS ENDED JUNE 30, 2012
UNAUDITED
UNITS LIMITED PTRS
A SHARES A SHARES TOTAL
---------- ---------------- ------------
BALANCES, January 1, 2012 4,576.29 15,024,419 15,024,419
Additional Units Sold 54.52 155,777 155,777
Redemptions (146.94) (411,888) (411,888)
Less Offering Costs -- (1,542) (1,542)
Net profit (Loss) -- (2,334,681) (2,334,681)
----------- --------------- -------------
BALANCES, JUNE 30,2012 4,483.865 $12,432,085 $12,432,085
=========== =============== =============
Net asset value per unit,
January 1, 2012 $3,283.10
Net profit (loss) per unit (510.48)
--------------
Net asset value per unit
JUNE 30, 2012 $2,772.627
==============
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, 2012 AND 2011
UNAUDITED
<CAPTI
SIX MONTHS ENDED SIX MONTHS ENDED
JUNE 30, 2012 JUNE 30, 2011
--------------------------- -------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $(2,334,680) $(1,272,149)
Adjustments to reconcile net income(loss) to net cash
used in operating activities:
Unrealized gain or loss on open commodity
futures contracts 793,699 964,349
Decrease (increase) in interest receivable (1,112) 140
(Decrease) increase in incentive fees payable 0 (119,237)
(Decrease) increase in management fees payable (4,235) (1,784)
(Decrease)increase in Broker commissions &
fees payable (8,077) 3,511
(Decrease) increase in O&O Expense 594 248
(Decrease) increase in other accrued expenses (13,479) (23,123)
---------------- -------------------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES (1,567,290) (448,045)
---------------- -------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Redemption of partnership units (391,067) (61,692)
Partner addition of units,net of offering costs 154,235 408,921
---------------- -------------------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES (236,832) 347,229
---------------- -------------------
NET INCREASE (DECREASE)IN CASH AND CASH EQUIVALENTS (1,804,122) (100,816)
CASH AND CASH EQUIVALENTS, AT BEGINNING OF PERIOD 14,587,212 16,332,676
---------------- -------------------
CASH AND CASH EQUIVALENTS, AT END OF PERIOD $12,783,089 $16,231,859
================ ===================
END OF THE YEAR CASH AND CASH EQUIVALENTS CONSIST OF:
Cash in broker trading accounts $2,096,288 $1,156,906
Cash and cash equivalents 10,686,801 15,074,953
----------------- --------------------
TOTAL END OF THE YEAR CASH AND CASH EQUIVALENTS $12,783,089 $16,231,859
================= ====================
The accompanying notes are an integral part of these statements
7
EVEREST FUND, L.P.
NOTES TO FINANCIAL STATEMENTS
June 30, 2012
(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.
On June 12, 2012 The Everest Fund, L.P. has dismissed its Futures Clearing
Firm Newede USA, LLC. Newedge USA, LLC served as the Fund's clearing
broker from October 13, 2005 through June 2012. On June12, 2012 they
were replaced with R.J. O'Brein and Associates, LLC (RJO), 222 South
Riverside Plaza, Suite 900, Chicago, Illinois 60606. The decision to
change clearing brokers was recommended and approved by the board
of directors.
Currently, R.J. O'Brien and Associates, LLC ("RJO") serves as the Fund's
clearing broker to execute and clear Fund's futures and equities
transactions and provide other brokerage-related services. RJO
Professional FX is a division of RJO. RJO Professional FX may execute
foreign exchange or other over the counter transaction with the Fund
as principal. RJO is a subsidiary of R.J. O'Brien Holdings Corporation.
RJO is registered with the U.S. Commodity Futures Trading Commission
("CFTC") as a Futures Commission Merchant ("FCM") and is a member of
the National Futures Association ("NFA") in several capacities, including
as a Forex Dealer Member ("FDM") and is a member of certain principal
U.S. contracts markets. RJO is a full clearing member of the CME Group,
the IntercontinentalExchange, NYSE Liffe U.C., and the CBOE Futures
Exchange ("CFE").
There have been no material administrative, civil or criminal action
brought, pending or concluded against RJO in the past five years.
There were no disagreements with the former clearing broker on any
matter of accounting principles or practices, or procedures or compliance
with the applicable rules of the Commission during the most recent
fiscal year and any subsequent interim periods. The move is
necessitated by the desire for more efficient trading and execution,
and better back office support.
(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.
Recently adopted accounting pronouncements
ASU No. 2011-02; A Creditor's Determination of Whether a Restructuring Is a
Troubled Debt Restructuring ("TDR"). In April, 2011, the FASB issued ASU
No. 2011-02, intended to provide additional guidance to assist creditors in
determining whether a restructuring of a receivable meets the criteria to be
considered a troubled debt restructuring. The amendments in this ASU are
effective for the first interim or annual period beginning on or after June
15, 2011, and are to be applied retrospectively to the beginning of the annual
period of adoption. As a result of applying these amendments, an entity may
identify receivables that are newly considered impaired. Early adoption is
permitted. The adoption of ASU No. 2011-02 will not have a material affect
on the Partnership's financial statements.
ASU No. 2011-04; Amendments to Achieve Common Fair Value Measurement and
Disclosure Requirements in U.S. GAAP and International Reporting Financial
Standards (IFRS).The amendments in this ASU generally represent clarifications
of Topic 820, but also include some instances where a particular principle
or requirement for measuring fair value or disclosing information about fair
value measurements has changed. This ASU results in common principles and
requirements for measuring fair value and for disclosing information about
fair value measurements in accordance with U.S. GAAP and IFRS. The
amendments in this ASU are to be applied prospectively. For public entities,
the amendments are effective during interim and annual periods beginning
after December 15, 2011. Early application by public entities is not
permitted.
(3) FAIR VALUE OF FINANCIAL INSTRUMENTS
Fair value is defined 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. The Financial Accounting Standards
Board has defined a hierarchy for fair value measurements. 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). The three levels of the fair value
hierarchy 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 table below demonstrates the Partnership's fair value hierarchy for
those assets and liabilities measured at fair value on a recurring basis
as of June 30 31, 2012 and June 30, 2011:
Level 1 Level 2 Level 3
Assets at June 30,2012:
Open positions in futures and
option contracts $(202,403)
---------- ---------- ---------
Total assets at fair value $(202,403) $0 $0
========== ========== =========
Level 1 Level 2 Level 3
Assets at June 30, 2011:
Open positions in futures and
option contracts $71,490
---------- ---------- ---------
Total assets at fair value $71,490 $0 $0
=========== ========== =========
(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 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.
Effective November 2003, the General Partner charges the Partnership a
monthly management fee equal to 0.50% (6% annually) 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, 2012 and 2011
Approximately 99.80% and 99.86 %, 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.
Fair Value of Derivative Instruments
2012 2011
Speculative Instruments Location- Statement of Financial Fair Value Fair Value
Condition
______________________ ________________________________ __________ __________
Futures Contracts Net unrealized gain (loss)
on open contracts $(202,403) $71,490
2012 2011
Speculative Instruments Location- Statement of Operations Fair Value Fair Value
_______________________ _________________________________ ____________ _________
Futures Contracts Net realized trading gains(losses) ($1,076,362) $557,233
Futures Contracts Change in unrealized gains(losses) ($793,717) $(964,349)
Asset Derivatives
Balance Sheet
Location Fair Value #of contracts
_____________________ ____________ _____________
Agricultural
Net unrealized trading gains on open contracts 84,788 80
Currencies
Net unrealized trading gains on open contracts (1,288) 136
Energy
Net unrealized trading gains on open contracts 0 0
Metals
Net unrealized trading gains on open contracts 0 0
Interest rates
Net unrealized trading gains on open contracts 96,146 236
Indices
Net unrealized trading gains on open contracts (2,040) 24
Currency Forwards
Net unrealized trading gains on open contracts 6,340
============ ===========
183,947 476
Liability Derivatives
Balance Sheet Location
Fair Value #of contracts Net
_____________ ______________ _______
Agricultural
Net unrealized trading gains on open contracts (73,744) 59 11,044
Currencies
Net unrealized trading gains on open contracts (44,738) 74 (46,026)
Energy
Net unrealized trading gains on open contracts (86,835) 51 (86,835)
Metals
Net unrealized trading gains on open contracts 39,303 40 (39,303)
Interest rates
Net unrealized trading gains on open contracts (53,752) 36 (42,394)
Indices
Net unrealized trading gains on open contracts (92,809) 28 (94,849)
Currency Forwards
Net unrealized trading gains on open contracts (73,775) (67,435)
============ ========== =========
(386,350) 288 (202,403)
Trading Revenue for the Six Months Ended June 30, 2012
Line Item in Income Statement
Realized (1,028,763)
Change in unrealized (793,717)
===========
(1,822,480)
Includes net foreign currency translation gain(loss)
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)
Total average of futures contracts bought and sold
Six months ended June 30, 2012
Total (1,015,352)
============
6 month average (169,225)
Total average of futures contracts bought and sold
Six months ended June 30, 2011
Total 527,407
===============
6 month average 175,802
For the six months ended June 30, 2012, the monthly average of futures
contracts bought and sold was approximately (169,225).
(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, 2012 and
June 30, 2011.
June 30, 2012 June 30, 2011
--------------------- -----------------
Class A Class A
-------------------- -----------------
Total return before distributions* (15.55)% (7.22)%
=============== ===============
Ratio to average net assets:
Net investment Income (loss)** (7.85)% (9.57)%
=============== ===============
Management fees 2.79% 2.91%
Incentive fees 0.00% 0.82%
Other expenses 1.28% 1.17%
--------------- ---------------
Total expenses** 8.14% 8.06%
=============== ===============
*Not annualized
**Annualized
Interim Financial Statements
The statements of financial condition, including the consolidated schedule
of investments, as ofJune 30, 2012, the statements of operations for
the three and six months ended June 30, 2012 and 2011, the statements
of cash flows and changes in partners' capital (net asset value) for the six
months ended June 30, 2012 and 2011 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, 2012, results of operations for the
six months ended June 30, 2012 and 2011, cash flows and
changes in partners' capital (net asset value) for the six months ended
June 30, 2012 and 2011. The results of operations for the full six
months ended June 30, 2012 and 2011 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 negative 13.32% in January 2012 resulting in
a Net Asset Value per unit of $2,845.95 as of January 31, 2012.
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.
The New Year started on a decidedly negative note for the Fund
as performance declined in January. All six sectors of the portfolio
posted negative returns with the largest losses coming from the
metals sector. There was no dominant or clear theme running through
the markets in January that easily explains the Fund's returns. The
interest rate sector was the best performing sector in the Fund for
the month. The foreign exchange markets were more difficult to trade
in January as the Fund suffered from significant reversals across the
sector during the month. The stock market was slightly unprofitable as
gains from positions in U.S. equity index futures were insufficient to
offset losses from positions in the Nikkei and European index futures.
The largest losses came from the metals sector and from positions in
gold and silver. Gold and silver ended 2011 in clear down trends with
closing prices near multi-month lows. The energy sector was
unprofitable as gains from positions in natural gas could not
offset losses from petroleum products. Agricultural commodities
were also unprofitable for the month with all markets in the sector
detracting from performance.
The month was filled with radical trend reversals in many markets
that have previously provided excellent returns and portfolio protection
for our investors. Fund's portfolios have been structured to provide
investors with a broad exposure to historically uncorrelated markets
and market sectors that have an opportunity to enhance the risk and
return profiles of their overall investment portfolios.
Class A Units were negative 0.66% in February 2012 resulting in
a Net Asset Value per unit of $2,827.04 as of February 29, 2012.
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.
After a tumultuous start to the year, the Fund's performance
stabilized in February. This period of relative quiet reflected a less
volatile market environment for many of the sectors traded in the
Fund. Global equity prices rose while registering lower levels of
volatility. The energy sector was one area where there continues
to be a high level of uncertainty. The Fund was able to profit
as energy prices rose. Gains from positions in energy, indices
and currencies helped reduce the losses in the other sectors
resulting in a minimal loss for the Fund. The currency
sector was profitable for February as positions in the Japanese
yen paced gains. Gains from positions in the yen more than
offset small net losses from trading in European currencies. The
rally in global stock prices propelled performance in the equity
sector in the latest period. Positions in the Japanese Nikkei 225
were the most profitable in the sector. Positions in the metal
sector were unprofitable in February as the listless trading
conditions that prevailed for most of the month were upset in a one
day shock on the last trading day of the month. Gold trended
higher on low volatility for most of February, while it generally
followed the path of stocks. The energy sector was profitable
in February as crude oil prices moved higher and traded
over $100 per barrel for most of the month. Positions in all
energy markets were profitable in February. The agricultural
sector was unprofitable as gains from positions in the cotton
market were unable to offset losses in other parts of the sector.
There was an absence of trends across the balance of the
sector with generally lower levels of volatility. After a difficult
start to the year, a period of calm has come across many of the
market sectors in the Fund amid lower levels of volatility.
Class A Units were negative 3.57% in March 2012 resulting in
a Net Asset Value per unit of $2,726.12 as of March 31, 2012.
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.
The Fund declined in March as the markets closed out the first
Quarter in a decidedly quiet tone. The interest rate sector was the
worst-performing sector in the Fund in March as the long run move
in bond prices may have ended. The currency sector was
essentially flat as gains from positions in the Japanese yen
nearly offset losses from trading in European currencies as
exchange rate flows generally tracked the changes in market risk
sentiment.
Trading in equities was predictably profitable given the
underlying state of the markets as positions in the Nikkei 225 led
the way. Trading in metals was unprofitable in March as
meaningful losses in silver more than offset small gains from
trading in gold. While the rally in crude oil prices lost some
momentum in March, the energy sector was nevertheless still
profitable as sector leadership rotated to the natural gas market.
In the petroleum complex, small gains in crude oil and London
gas oil offset small losses from positions in heating oil. The
agricultural sector was slightly unprofitable in March as gains
from positions in soybeans and coffee were unable to offset
losses in other parts of the sector. Unfortunately, soybeans
were the only strong trend in the sector as most other markets
lacked direction.
Class A Units were negative 1.80% in April 2012 resulting in
a Net Asset Value per unit of $2,677.00 as of April 30, 2012.
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.
In a relatively quiet month the Fund declined in April as the
rally in equity prices appeared to lose some momentum.
In general, commodity prices fell in April as the uptrend in
crude oil prices appears to be threatened. Amidst this relatively
benign market backdrop, the Fund's trading advisor added a
few new markets to the portfolio with the objective of increasing
the diversification of the Fund. The South African rand and the
Russian ruble were added to the currency sector, while London
copper and aluminum were added to the metals sector.
The interest rate sector was the best-performing sector in the
Fund during April as positions in European and Japanese bond
futures lead the way and offset small losses from positions in
U.S., interest rates.
The currency sector was unprofitable in April. Trading in
European and emerging currencies was largely mixed and not
sufficient enough to offset losses from trading in the Japanese
yen. In their inaugural month of trading in the Fund's portfolio,
emerging currencies were flat, with the Russian ruble contributing
small gains and the South African rand contributing small losses.
The equity sector experienced small losses during the month. The
energy sector was the worst-performing sector in the Fund during
April, as positions in crude oil, crude oil products and natural
gas were all unprofitable. The high levels of supply combined with
weaker economic data weighed on the oil patch in April. The
small month-on-month rally in natural gas led to small losses for
the Fund, which ended a streak of nine consecutive months of
profitable trading in this commodity. The metals market was
profitable as gains from precious metals, especially silver, more
than offset small losses from trading in industrial metals. The
newly added London copper and London aluminum traded largely
flat with just small losses for the month. The agricultural sector
was also profitable in April due to strong gains from trading in
the soybean market.
Class A Units were positive 15.78% in May 2012 resulting in
a Net Asset Value per unit of $3,099.31 as of May 31, 2012.
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.
Performance in May was exceptional as the Fund gained almost
16 percent for the month. Profits came from almost every sector
traded: metals; interest rates; currencies; energies; and
agriculturals.In our opinion, this is a very good time to have the
diversification of Everest and the traditional equity and bond
markets. The interest rate sector was the best-performing sector
in the Fund as government bond prices surged to historic levels,
pushing yields on government bonds to historic levels. Performance
from the currency sector was also strong as investor flight from
the euro gathered momentum. The Russian ruble and the South
African rand were both profitable in their first full month of
trading after being added to the Fund in April. The euro and ruble
were the sector's best-performing markets. Despite the fact that
most global equity markets were down significantly during May, the
Fund's exposure to that sector generated only modest profits, as
not all markets entered the month in clear down trends.
The metals sector, revamped in April, contributed positively to
performance in May as all positions in the sector were profitable.
The copper and aluminum markets - also newly added to the Fund - were
both profitable in their first full month of trading. Trading in
the energy sector was profitable as positions in crude oil products
were more than sufficient to offset losses from trading in natural
gas. All positions in crude oil and crude oil products were
significantly positive in May. The Fund also benefited from
strong gains in the agricultural sector, especially in cotton
and sugar.
Class A Units were negative 10.54% in June 2012 resulting in
a Net Asset Value per unit of $2,772.63 as of June 30, 2012.
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.
The Fund's performance in June was disappointing with the reversal
of a large portion of the profits generated in May.
The interest rate sector was unprofitable in June but, on a
relative basis, performance was more encouraging as long-term
trends remained largely intact and there was only a modest
retracement of the strong moves of May. The currency sector
was hard hit as all positions were unprofitable on the month.
Trends in the equity sector were similarly upset. The S&P 500,
which was down 6.26 percent in May, rebounded in June to
gain almost four percent, continuing the non-correlation of
the stock markets and our Everest Fund.
Trading in metals was unprofitable as gains from positions
in aluminum were insufficient to offset losses from
trading in gold and copper. In certain respects, trading in
the energy sector was similar to the metals sector. Crude
oil and crude oil products were in powerful downtrends for
much of the month and were making'significant
positive contributions to the Fund's performance until very
late in the month. The agricultural sector was unprofitable
in June as trading in sugar and corn weighed heavily in the
group's performance. Both markets entered the month in
long protracted down trends. Sugar prices gained more than
six percent in June, ending trends for certain models used
in the Fund.
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, 2011.
Item 4. Controls and Procedures
As of June 30, 2012 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, 2011.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
RECENT SALES OF UNREGISTERED SECURITIES A UNITS
Six months Six months
ended June 30, 2012 ended June 30,2011
Units Sold 54.52 103.97
Value of Units Sold $155,777 $413,010
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 14, 2012 By: Everest Asset Management, Inc.,
its General Partner
By:__/s/ Peter Lamoureux__________________________
Peter Lamoureux
President
32