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 quarter period ended March 31, 1997
COMMISSION FILE NUMBER 0-17555
Everest Futures Fund, L.P.
(Exact name of registrant as specified in its charter)
Iowa 42-1318186
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
508 North Second St., Suite 302, Fairfield, Iowa 52556
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(515) 472-5500
Not Applicable
(Former name, former address and former fiscal year, if changed
since last report.)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
Part I. Financial Information
Item 1. Financial Statements
Following are Financial Statements for the fiscal quarter ending March 31, 1997
Fiscal Quarter Year to Date Fiscal Year
Ended 3/31/97 To 3/31/97 Ended 12/31/96
-------------- -------------- --------------
Statement of
Financial Condition X X
Statement of
Operations X X
Statement of Changes
in Partners' Capital X
Statement of
Cash Flows X
Notes to Financial
Statements X
EVEREST FUTURES FUND, LP
COMBINED STATEMENTS OF FINANCIAL CONDITION
UNAUDITED
Mar 31, 1997 Dec 31, 1996
------------- -------------
ASSETS
Cash and cash equivalents 17,658,000 8,832,835
Equity in commodity trading accounts:
Net unrealized trading gains on open contracts 116,055 172,918
Amount Due from broker 2,619,802 3,414,868
Interest receivable 80,653 57,780
------------- -------------
Total assets 20,474,511 12,478,401
============= =============
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Accrued expenses 7,295 17,922
Commissions payable 74,735 47,977
Advisor's management fee payable 54,343 38,578
Advisor's incentive fee payable 0 325,736
Redemptions payable 63,634 9,966
Deferred Partnership offering proceeds 0 825,703
Selling and Offering Expenses Payable 95,028 0
------------- -------------
Total liabilities 295,035 1,265,882
Minority Interest 226,582 127,625
Partners' Capital:
Limited partners (10,785.98 and 6,018.75 units 19,754,141 10,973,945
outstanding at 3/31/97 and 12/31/96, respectively)
(see Note 1)
General partners (108.52 units and 60.85 units 198,753 110,949
outstanding at 3/31/97 and 12/31/96, respectively)
(see Note 1) ------------- -------------
Total partners' capital 19,952,894 11,084,894
------------- -------------
Total liabilities, minority interest,
and partners' capital $20,474,511 $12,478,401
============= =============
Net asset value per outstanding unit of Partnership
interest $1,831.46 $1,823.29
============= =============
In the opinion of management, these statements reflect all adjustments
necessary to fairly state the financial condition of Everest Futures Fund
EVEREST FUTURES FUND, L.P.
COMBINED STATEMENTS OF OPERATIONS
UNAUDITED
(QTD) (YTD) (QTD) (YTD)
Jan 1, 1997 Jan 1, 1997 Jan 1, 1996 Jan 1, 1996
through through through through
Mar 31, 1997 Mar 31, 1997 Mar 31, 1996 Mar 31, 1996
------------- ------------- ------------- -------------
REVENUES
Gains on trading of commodity futures N/A N/A
and forwards contracts, physical
commodities and related options:
Realized gain (loss) on closed positions 291,376 291,376
Change in unrealized gain (loss)
on open positions (55,681) (55,681)
Net foreign currency translation gain (loss) (74,572) (74,572)
Brokerage Commissions (211,224) (211,224)
------------- -------------
Total trading income (loss) (50,100) (50,100)
Interest income, net of cash management fees 176,515 176,515
------------- -------------
Total income (loss) 126,415 126,415
General and administrative expenses
Advisor's management fees 141,461 141,461
Advisor's incentive fees 146 146
Administrative expenses 15,024 15,024
------------- -------------
Total general and administrative expenses 156,630 156,630
Minority Interest 0 0
------------- -------------
Net income (loss) (30,215) (30,215)
============= =============
PROFIT (LOSS) PER UNIT OF
PARTNERSHIP INTEREST $8.17 $8.17
============= =============
(see Note 1) (see Note 1)
This Statement of Operations, in the opinion of management, reflects all adjustments
EVEREST FUTURES FUND, LP
COMBINED STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
For the period January 1, 1997 through March 31, 1997
Limited General
Units* Partners Partners Total
------------- ------------- ------------- -------------
Partners' capital at Jan 1, 1997 6,018.75 $10,973,945 $110,949 $11,084,894
Net profit (loss) (29,922) (293) (30,215)
Additional Units Sold 4,831.23 8,928,708 88,097 9,016,805
(see Note 1)
Redemptions (see Note 1) (63.99) (118,591) 0 (118,591)
------------- ------------- ------------- -------------
Partners' capital at March 31, 1997 10,785.98 $19,754,141 $198,753 $19,952,894
============= ============= ============= =============
Net asset value per unit
January 1, 1997(see Note 1) 1,823.29 1,823.29
Net profit (loss) per unit (see Note 1) 8.17 8.17
------------- -------------
Net asset value per unit
March 31, 1997 $1,831.46 $1,831.46
* Units of Limited Partnership interest.
EVEREST FUTURES FUND, LP
COMBINED STATEMENTS OF CASH FLOWS
UNAUDITED
Jan 1, 1997
through
Mar 31, 1997
-------------
Net profit (loss) ($30,215)
Adjustments to reconcile net profit
(loss) to net cash provided by
(used in) operating activities:
Change in assets and liabilities:
Unrealized gain (loss) on open
futures contracts 56,863
Interest receivable (22,873)
Decrease in equity in commodity trading accounts 795,066
Accrued liabilities (293,840)
Redemptions payable 53,668
Deferred Offering Proceeds (825,703)
Selling and Offering Expenses Payable 95,028
Increase in minority interest 98,957
-------------
Net cash provided by (used in)
operating activities (73,049)
Cash flows from financing activities:
Units Sold 9,016,805
Partner redemptions (118,591)
-------------
Net cash provided by (used in)
financing activities 8,898,214
-------------
Net increase (decrease) in cash 8,825,165
Cash at beginning of period 8,832,835
-------------
Cash at end of period $17,658,000
=============
EVEREST FUTURES FUND, L.P.
NOTES TO FINANCIAL STATEMENTS
March 31, 1997
(1) GENERAL INFORMATION AND SUMMARY
Everest Futures Fund, L.P. (the "Partnership") is a limited
partnership organized on June 20, 1988 under the Iowa Uniform
Limited Partnership Act. The business of the Partnership is the
speculative trading of commodity futures contracts and other
commodity interests, including forward contracts on foreign
currencies ("Commodity Interests") either directly or through
investing in other, including subsidiary, partnerships, funds or
other limited liability entities. The Partnership commenced its
trading operations on February 1, 1989 and its General Partner is
Everest Asset Management, Inc. (the "General Partner") a Delaware
corporation organized in December, 1987.
The Partnership was initially organized on June 20, 1988 under
the name Everest Energy Futures Fund, L.P. and its initial
business was the speculative trading of Commodity Interests, with
a particular emphasis on the trading of energy-related commodity
interests. However, effective September 12, 1991, the
Partnership changed its name to "Everest Futures Fund, L.P." and
at the same time eliminated its energy concentration trading
policy. The Partnership thereafter has traded futures contracts
and options on futures contracts on a diversified portfolio of
financial instruments and precious metals and trades forward
contracts on currencies.
The public offering of the Partnership's Units of limited
partnership interests ("Units") commenced on or about December 6,
1988. On February 1, 1989, the initial offering period for the
Partnership was terminated, by which time the Net Asset Value of
the Partnership was $2,140,315.74. Beginning February 2, 1989,
an extended offering period commenced which terminated on July
31, 1989, by which time a total of 5,065.681 Units of Limited
Partnership Interest were sold. Effective May, 1995 the
Partnership ceased to report as a public offering. On July 1,
1995 the Partnership recommended the offering of its Units as a
Regulation D, Rule 506 private placement, which continues to the
present with a total of $18,549,301 for 11,289.15 Units sold
July 1, 1995 through March 31, 1997.
On February 29, 1996, the Partnership amended its Agreement of
Limited Partnership permitting the Partnership to conduct its
trading business by investing in other partnerships and funds and
in subsidiary partnerships or other limited liability entities.
Effective close of business on March 29, 1996 the Partnership
invested all of its assets in another limited partnership, the
Everest Futures Fund II L.P. ("Everest II"), a Delaware limited
partnership in which the Partnership is the sole limited partner.
As a result, the Partnership does not currently invest directly
in Commodity Interests. Instead, the Partnership transferred
all of its assets to Everest II in return for its Everest II
limited partnership interest. Everest II invests directly in
Commodity Interests through John W. Henry & Co. Inc. ("JWH"), an
independent commodity trading advisor which had hitherto been the
advisor to the Partnership.
Everest II has two general partners, Everest Asset Management,
Inc. - the current General Partner of the Partnership, and CIS
Investments, Inc. ("CISI"), which is a wholly-owned subsidiary of
Cargill Investor Services, Inc., the former clearing broker of
the Partnership and now the Clearing Broker for Everest II. CIS
Financial Services, Inc., an affiliate of the Commodity Broker,
acts as the Partnership's currency dealer. CISI and the General
Partner are registered with the CFTC as commodity pool operators
and are members of the NFA in such capacity.
On September 13, 1996 the Commission accepted for filing a Form
10 - Registration of Securities for the Partnership, and public
reporting of Units of the Partnership sold as a private placement
commenced at that time and has continued to the present.
Upon ten days written notice, 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. The
Partnership may redeem its sole limited partnership interest in
Everest II effective as of the end of one business day after such
redemption request has been made. Everest II's Limited
Partnership Agreement contains a full description of that
partnership's 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
termination of Everest II shall occur on the first to occur of
the following:(i) December 31, 2025; (ii) withdrawal, insolvency
or dissolution of a General Partner or any other event that
causes a General Partner to cease to be a general partner unless
(a) at the time of such event there is at least one remaining
general partner of Everest II to carry on the business of Everest
II, or (b) within ninety (90) days after such event, all partners
agree in writing to continue the business of Everest II and to
the appointment of one or more managing general partners of
Everest II, or any event which will make it unlawful for the
existence of Everest II to continue.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accounting and reporting policies of the Partnership conform
to generally accepted accounting principles and to general
practices within the commodities industry. The following is a
description of the more significant of those policies which the
Partnership follows in preparing its financial statements. All
references to the "Partnership" herein shall mean Everest Futures
Fund, L.P. or its affiliate, Everest Futures Fund II, L.P. as the
context requires.
Financial Accounting Standards Board ("FASB") Interpretation No.
39 Reporting
Reporting in accordance with FASB Interpretation No. 39 ("FIN
39") is not applicable to the Partnership and the provisions of
FIN 39 do not have any effect on the Partnership's financial
statements.
Revenue Recognition
Commodity futures contracts, forward contracts, physical
commodities and related options are recorded on the trade date.
All such transactions are reported on an identified cost basis.
Realized gains and losses are determined by comparing the
purchase price to the sales price when the trades are offset.
Unrealized gains and losses reflected in the statements of
financial condition represent the difference between original
contract amount and market value (as determined by exchange
settlement prices for futures contracts and related options and
cash dealer prices at a predetermined time for forward contracts,
physical commodities and their related options) as of the last
business day of the quarter end.
The Partnership earns interest on 100 percent of the
Partnership's average monthly cash balance on deposit with the
Clearing Broker equal to between 20% and 50% of the Partnership
assets at a rate equal to the average 90-day Treasury bill rate
for U.S. Treasury bills issued during that month. The balance of
the Partnership's assets are held in an account at Citibank, N.A.
invested in a range of government securities, Eurodollar, CD's,
commercial paper, at the discretion of Horizon Cash Management,
LLC, an investment advisor.
Commissions
The Partnership pays the Clearing Broker brokerage commissions
equal to 0.5% of Partnership Beginning Net Asset Value each
month. This amounts to approximately 6% annually of the
Partnership's average Net Asset Value (NAV). Of this amount, the
General Partner will receive approximately 83% of the fees paid
equal to approximately 5% of the Partnership's average NAV. The
General Partnership pays CISI a monthly co-general partner fee of
1/12 of 0.40% of the month-end NAV of Everest II.
Foreign Currency Transactions
Trading accounts on foreign currency denominations are
susceptible to both movements on underlying contract markets as
well as fluctuation in currency rates. Foreign currencies are
translated into U.S. dollars for closed positions at an average
exchange rate for the quarter while quarter-end balances are
translated at the quarter-end currency rates. The impact of
the translation is reflected in the statement of operations.
Statements of Cash Flows
For purposes of the statements of cash flows, cash represents
cash on deposit in the Partnership's bank accounts and at Horizon
Cash Management LLC.
(3) FEES
Management fees are accrued and paid monthly, incentive fees are
accrued monthly and paid quarterly and General Partners'
administrative fees are paid annually and amortized monthly.
Trading decisions for the period of these financial statements
were made by John W. Henry & Company, Inc. ("JWH"), the
Partnership's Commodity Trading Advisor ("CTA"). Pursuant to an
agreement between the Partnership and JWH, JWH receives 0.33% of
the month-end net asset value of the Partnership under its
management. The Partnership pays JWH a quarterly incentive fee
of 15% of trading profits achieved on the NAV of the Partnership
allocated by the General Partners to such Advisor's management.
The Partnership pays an annual administrative fee of $24,000 to
CISI.
(4) INCOME TAXES
No provision for Federal Income Taxes has been made in the
accompanying financial statements as each partner is responsible
for reporting income (loss) based on the pro rata share of the
profits or losses of the Partnership.
(5) FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK
The Partnership was formed to speculatively trade Commodity
Interests. It has commodity transactions and cash on deposit at
its Clearing Broker. In the event that volatility of trading of
other customers of the Clearing Broker impaired the ability of
the Clearing Broker to satisfy its obligations to the
Partnership, the Partnership would be exposed to off-balance
sheet risk. Such risk is defined in Statement of Financial
Accounting Standards No. 105 ("SFAS 105") as a credit risk. To
mitigate this risk, the Clearing Broker, pursuant to the mandates
of the Commodity Exchange Act, is required to maintain funds
deposited by customers relating to futures contracts in regulated
commodities in separate bank accounts which are designated as
segregated customers' accounts. In addition, the Clearing Broker
has set aside funds deposited by customers relating to foreign
futures and options in separate bank accounts which are
designated as customer secured accounts. Lastly, the Clearing
Broker is subject to the Securities and Exchange Commission's
Uniform Net Capital Rule which requires the maintenance of
minimum net capital of at least 4% of the funds required to be
segregated pursuant to the Commodity Exchange Act. The Clearing
Broker has controls in place to make certain that all customers
maintain adequate margin deposits for the positions which they
maintain at the Clearing Broker. Such procedures should protect
the Partnership from the off-balance sheet risk as mentioned
earlier. The Clearing Broker does not engage in proprietary
trading and thus has no direct market exposure. The counterparty
of the Partnership for futures contracts traded in the United
States and most non-U.S. exchanges on which the Partnership
trades is the Clearing House associated with the exchange. In
general, Clearing Houses are backed by the membership and will
act in the event of non-performance by one of its members or one
of the members' customers and as such should significantly reduce
this credit risk. In the cases where the Partnership trades on
exchanges on which the Clearing House is not backed by the
membership, the sole recourse of the Partnership for
nonperformance will be the Clearing House.
The Partnership holds futures and futures options positions on
the various exchanges throughout the world. The Partnership does
not trade over the counter contracts. As defined by SFAS 105,
futures positions are classified as financial instruments. SFAS
105 requires that the Partnership disclose the market risk of
loss from all of its financial instruments. Market risk is
defined as the possibility that future changes in market
prices may make a financial instrument less valuable or more
onerous. If the markets should move against all of the futures
positions held by the Partnership at the same time, and if the
markets moved such that the CTA was unable to offset the futures
positions of the Partnership, the Partnership could lose all of
its assets and the partners would realize a 100% loss. The
Partnership has a contract with one CTA who makes all of the
trading decisions. The CTA trades a program diversified among
the various futures contracts in the financials and metals group.
The CTA trades on U.S. and non-U.S. exchanges. Cash was on
deposit with the Clearing Broker in each time period of the
financial statements which exceeded the cash requirements of the
Commodity Interests of the Partnership.
The following chart discloses the dollar amount of the unrealized
gain or loss on open contracts related to exchange traded
contracts for the Partnership as of March 31, 1997:
COMMODITY GROUP UNREALIZED GAIN/(LOSS)
FOREIGN CURRENCIES (92,310)
STOCK INDICES 0.00
ENERGIES 0.00
METALS (38,525)
INTEREST RATE INSTRUMENTS 246,890
TOTAL 116,055
The range of maturity dates of these exchange traded open
contracts is April of 1997 to March of 1998. The average open
trade equity for the period of January 1, 1997 to March 31, 1997
was $405,474.
The margin requirement at March 31, 1997 was $887,925. To
meet this requirement, the Partnership had on deposit with the
Clearing Broker $442,523 in segregated funds and $558,902 in
secured funds.
(6) FINANCIAL STATEMENT PREPARATION
The interim financial statements are unaudited but reflect all
adjustments that are, in the opinion of management, necessary to
a fair statement of the results for the interim periods
presented. These adjustments consist primarily of normal
recurring accruals.
The results of operations for interim periods are not necessarily
indicative of the operating results to be expected for the fiscal
year.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operation
Fiscal Quarter ended March 31, 1997
The Partnership recorded a loss of $30,215 but a gain of $8.17
per Unit for the first quarter of 1997.
During the first month of the quarter, the Partnership
experienced gains primarily as a result of profits in foreign
exchange rates, while during the next two months losses were
recorded due in part to the direction of U.S interest rates.
Overall, the first quarter of fiscal 1997 ended negatively for
the Partnership's accounts managed by John W. Henry & Company,
Inc.
In January, the U.S. dollar continued to dominate world
currencies, reflecting both sound economic fundamentals and a
policy, shared by both the U.S. central bank and Treasury
administration officials, in support of a strong dollar. The
Japanese yen suffered from problems in the Japanese banking
sector. Rising unemployment and weak economic numbers in Germany
once again drove the German mark down against the U.S. dollar.
Trading in the British pound grew increasingly volatile as
prospects for an interest rate increase in Britain weakened.
Gold prices reached a three year low at mid-month. The
Partnership recorded a profit of $462,923 or $70.99 per Unit in
January.
In February, the U.S. dollar reached new highs against the German
mark, Japanese yen and Swiss franc. The Federal Reserve chairman
hinted of a possible hike in interest rates which sent the dollar
soaring. Volatility in global interest rate markets continued to
be fueled by speculation on the direction of interest rates.
Early in the month, central banks in Germany, England and the U.S
announced their decisions to keep rates stable. In commodity
markets, gold prices rose as demand was rekindled by the lowest
spot prices since 1993. In agricultural markets, a two-month
bull trend in coffee prices continued as unfavorable weather and
labor strife in South America threatened supply. The Partnership
recorded a loss of $334,934 or $44.81 per Unit in February.
In March, speculation over the direction of U.S. interest rates
unsettled financial markets around the world. Rising U.S.
interest rates, unease over first quarter corporate earnings and
lofty stock evaluations resulted in turmoil in U.S equity
markets. In Europe, renewed speculation about a delay in the
European Union's plans for economic and monetary union pushed the
German mark higher against the U.S. dollar. Agricultural markets
recorded profits resulting from persistent supply concerns. The
Partnership recorded a loss of $158,204 or $18.01 per Unit in
March.
During the quarter, additional units sold consisted of 4,831.23
limited partnership units and 47.67 general partner units.
Additional units sold during the quarter represented a
total of $9,016,805. Investors redeemed a total of 63.99 Units
during the quarter. At the end of the quarter there were
10,894.50 Units outstanding (including 108.52 Units owned by the
General Partners).
During the fiscal quarter ended March 31, 1997, the Partnership
had no material credit exposure to a counterparty which is a
foreign commodities exchange.
The Partnership currently only trades on recognized global
futures exchanges. In the event the Partnership begins trading
over the counter contracts, any credit exposure to a counterparty
which exceeds 10% of the Partnership's total assets will be
disclosed.
See Footnote 5 of the Financial Statements for procedures
established by the General Partners to monitor and minimize
market and credit risks for the Partnership. In addition to the
procedures set out in Footnote 5, the General Partners review on
a daily basis reports of the Partnership's performance, including
monitoring of the daily net asset value of the Partnership. The
General Partners also review the financial situation of the
Partnership's Clearing Broker on a monthly basis. The General
Partners rely on the policies of the Clearing Broker to monitor
specific credit risks. The Clearing Broker does not engage in
proprietary trading and thus has no direct market exposure which
provides the General Partners assurance that the Partnership will
not suffer trading losses through the Clearing Broker.
Part II. OTHER INFORMATION
Item 1 Legal Proceedings
The Partnership and its affiliates are from time to time parties
to various legal actions arising in the normal course of
business. The General Partner believes that there is no
proceeding threatened or pending against the Partnership or any
of its affiliates which, if determined adversely, would have a
material adverse effect on the financial condition or results of
operations of the Partnership.
Item 2. Changes in Securities
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security
Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits
None
b) Reports on Form 8-K
None
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned and thereunto duly authorized.
EVEREST FUTURES FUND, L.P.
Date: May 14, 1997 By: Everest Asset Management,Inc.
its General Partner
By: /s/ Peter Lamoureux
Peter Lamoureux
President