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 March 31, 2010
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 4
March 31, 2010 (Unaudited) and December 31, 2009 (Audited)
Condensed Schedule of Investments 5
March 31, 2010 (Unaudited)
Condensed Schedule of Investments 6
December 31, 2009 (Audited)
Statements of Operations 7-8
For the Three Months Ended March 31, 2010 and 2009 (Unaudited)
Statements of Changes in Partners' Capital (Net Asset Value) 9-10
For the Three Months Ended March 31, 2010 and 2009 (Unaudited)
Statements of Cash Flows
For the Three Months Ended March 31, 2010 and 2009 (Unaudited) 11-12
Notes to Financial Statements for the Three Months Ended 13
March 31, 2010 and 2009 (Unaudited)
Item 2. Management's Discussion and Analysis of Financial 27
Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures about 31
Market Risk
Item 4. Controls and Procedures 31
Part II: Other Information 31
Item 1. Legal Proceedings 31
Item 1A. Risk Factors 31
Item 2. Unregistered Sales of Equity Securities and Use 32
of Proceeds
Item 3. Defaults upon Senior Securities 32
Item 4. Submission of Matters to a Vote of Security Holders 32
Item 5. Other Information 33
Item 6. Exhibits 33-39
2
PART I. FINANCIAL INFORMATION
Item 1 Financial Statements
Following are financial Statements for the fiscal quarter ending March 31, 2010
see accompanying notes to financial statements
EVEREST FUND, L.P.
(An Iowa Limited Partnership)
STATEMENTS OF FINANCIAL CONDITION
MARCH 31, 2010 (UNAUDITED) AND DECEMBER 31, 2009 (AUDITED)
UNAUDITED AUDITED
MARCH 31, 2010 DECEMBER 31, 2009
----------------- -----------------
ASSETS
Cash and cash equivalents $11,454,898 $13,926,125
Equity in broker trading accounts:
Cash and cash equivalents 1,105,051 271,494
Net unrealized trading gains(losses) on open contracts 609,746 150,735
Interest receivable 11,760 47,952
----------- -----------
TOTAL ASSETS $13,181,456 $14,396,306
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
LIABILITIES:
Redemptions payable $ 333,593 $ 144,670
General partner management fee payable 58,942 73,529
Advisor's management fee payable 21,337 23,342
Advisor's incentive fee payable 0 0
O&O Payable 2,426 0
Accrued expenses 75,059 70,229
----------- -----------
TOTAL LIABILITIES 491,357 311,770
----------- -----------
PARTNERS' CAPITAL
Limited partners, A Shares (4,534.8759 and 4,730.8865 units
outstanding) 12,690,099 14,084,536
----------- -----------
TOTAL PARTNERS' CAPITAL 12,690,099 14,084,536
----------- -----------
TOTAL LIABILITIES AND PARTNERS'
CAPITAL $13,181,456 $14,396,306
=========== ===========
The accompanying notes are an integral part of this statement.
3
EVEREST FUND, L.P.
(AN IOWA LIMITED PARTNERSHIP)
CONDENSED SCHEDULE OF INVESTMENTS
MARCH 31, 2010
UNAUDITED
NUMBER OF MARKET VALUE % OF PARTNERS'
EXPIRATION DATES CONTRACTS (OTE) CAPITAL
---------------- --------- ------------ --------------
LONG POSITIONS:
FUTURES POSITIONS
Interest rates Jun 10 - Dec 10 98 $ (7,400) -0.06%
Metals May 10 5 (1,100) -0.01%
Energy Jun 10 - Jul 10 37 69,921 0.55%
Agriculture May 10 24 36,415 0.29%
Currencies Mar 11 44 3,300 0.03%
Indices Jun 10 16 42,225 0.33%
----------- -----
Total long positions 143,361 1.13%
SHORT POSITIONS:
FUTURES POSITIONS
Interest rates Jun 10 12 (3,750) -0.03%
Energy Jul 10 10 13,200 0.10%
Agriculture May 10 156 401,597 3.16%
Currencies Jun 10 88 55,338 0.44%
----------- -----
Total short positions 466,386 3.67%
----------- -----
TOTAL OPEN CONTRACTS 609,746 4.80%
============= =========
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, 2009
_____________________________
Unrealized
Percent of Gain (Loss)
Expiration Number Partners' On Open
Date of Contracts Capital Contracts
___________ ____________ ____________ __________
Long U.S. Futures Contracts
Interest rates Mar10 - Sept10 55 -0.16% ($22,705)
Energy Apr 10 10 -0.15% (21,390)
Agriculture Mar 10 116 1.06% 149,919
Currencies Dec 09 - Sep 10 14 0.21 % 29,410
---------- ----------
Total Long Futures Contracts 0.96 % 135,234
---------- ----------
Short U.S. Futures Contracts
Interest rates Mar 10 26 -0.05% (7,078)
Energy Mar 10-Apr 10 8 -0.21% (29,800)
Agriculture Mar 10 88 0.16 % 23,110
Currencies Mar 10 43 0.21 % 29,269
--------- -----------
Total Short Futures Contracts 0.11 % 15,501
--------- -----------
Total Futures Contracts 1.07 % $150,735
========== ============
The accompanying notes are an integral part of these financial statements.
5
EVEREST FUND, L.P.
(AN IOWA LIMITED PARTNERSHIP)
STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2010 AND 2009
UNAUDITED
THREE MONTHS ENDED THREE MONTHS ENDED
MARCH 31, 2010 MARCH 31, 2009
---------------- ---------------
TRADING INCOME (LOSS)
Net realized trading gain(loss)
on closed contracts $(1,026,140) $ (212,700)
Change in net unrealized trading gain
(loss) on open contracts 457,442 (747,272)
Net foreign currency translation loss 2,407 (3,901)
Brokerage Commissions (11,726) (8,780)
----------- ------------
NET TRADING INCOME (LOSS) (578,018) (972,653)
Interest income, net of cash management fees 18,044 42,973
----------- ------------
TOTAL INCOME (LOSS) (559,974) (929,680)
----------- ------------
EXPENSES:
General partner management fees 188,872 266,212
Advisor Management fees 65,570 69,708
Incentive fees 0 0
Administrative expenses 28,728 35,769
----------- ----------
TOTAL EXPENSES 283,170 371,689
----------- ----------
NET INCOME (LOSS) $ (843,144) $(1,301,369)
=========== ===========
NET INCOME (LOSS) PER UNIT OF PARTNERSHIP INTEREST
A SHARES, OUTSTANDING ENTIRE PERIOD $ (178.81) $ (265.59)
=========== ==========
The accompanying notes are an integral part of these statements.
6
EVEREST FUND, L.P.
(An Iowa Limited Partnership)
STATEMENT OF CHANGES IN PARTNERS' CAPITAL
FOR THE THREE MONTHS ENDED MARCH 31, 2010
UNAUDITED
UNITS LIMITED PTRS
A SHARES A SHARES TOTAL
---------- ------------ ------------
BALANCES, January 1, 2010 4,730.89 14,084,536 14,084,536
Additional Units Sold 86.69 245,000 245,000
Redemptions (282.70) (793,867) (793,867)
Less Offering Costs -- (2,426) (2,426)
Net Loss -- (843,144) (843,144)
---------- ------------ ------------
BALANCES, March 31, 2010 4,534.88 $12,690,099 $12,690,099
========== ============ =============
Net asset value per unit,
January 1, 2010 $2,977.15
Net profit (loss) per unit (178.81)
------------
Net asset value per unit
March 31, 2010 $2,798.33
============
The accompanying notes are an integral part of these statements.
EVEREST FUND, L.P.
(An Iowa Limited Partnership)
STATEMENT OF CHANGES IN PARTNERS' CAPITAL
FOR THE THREE MONTHS ENDED MARCH 31, 2009
UNAUDITED
UNITS LIMITED PTRS
A SHARES A SHARES TOTAL
---------- ------------ ------------
BALANCES, January 1, 2009 4,940.65 18,713,395 18,713,395
Additional Units Sold 13.34 50,000 50,000
Redemptions (93.61) (343,038) (343,038)
Less Offering Costs -- (495) (495)
Net Loss -- (1,301,369) (1,301,369)
---------- ------------ -------------
BALANCES, March 31, 2009 4,860.38 $ 17,118,493 $ 17,118,493
========== ============ =============
Net asset value per unit,
January 1, 2009 $3,787.64
Net profit (loss) per unit (265.59)
------------
Net asset value per unit
March 31, 2009 $3,522.05
============
The accompanying notes are an integral part of these statements.
7
EVEREST FUND, L.P.
(An Iowa Limited Partnership)
STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2010 AND 2009
UNAUDITED
THREE MONTHS ENDED THREE MONTHS ENDED
MARCH 31, 2010 MARCH 31, 2009
----------------- -----------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income(loss) $ (843,144) $ (1,301,369)
Adjustments to reconcile net income(loss) to net cash
used in operating activities:
Decrease (increase) in commodity futures trading accounts:
Unrealized gain or loss on open commodity
futures contracts (459,012) 747,182
Decrease (increase) in interest receivable 36,192 (10,087)
(Decrease) increase in incentive fees payable 0 (885,100)
(Decrease) increase in management fees payable (2,004) (4,224)
(Decrease)increase in General Partner management fees payable (14,587) (918)
(Decrease) increase in O&O Expense 2,426 (99)
(Decrease) increase in other accrued expenses 4,830 20,794
------------ ------------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES (1,275,299) (1,433,821)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Redemption of partnership units (604,945) (403,511)
Partner addition of units,net of offering costs 242,574 49,505
------------ ------------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES (362,371) (354,006)
------------ ------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (1,637,670) (1,787,827)
CASH AND CASH EQUIVALENTS, AT BEGINNING OF PERIOD 14,197,619 19,265,788
------------ ------------
CASH AND CASH EQUIVALENTS, AT END OF PERIOD $ 12,559,949 $17,477,961
============ ============
END OF THE YEAR CASH AND CASH EQUIVALENTS CONSIST OF:
Cash in broker trading accounts $ 1,105,051 $ 1,096,849
Cash and cash equivalents 11,454,898 16,381,112
------------ ------------
TOTAL END OF THE YEAR CASH AND CASH EQUIVALENTS $ 12,559,949 $ 17,477,961
============ ============
The accompanying notes are an integral part of these statements
EVEREST FUND, L.P.
NOTES TO FINANCIAL STATEMENTS
March 31, 2010
(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
toss, as there exists a right of offset of unrealized gains or losses
in accordance with the Financial Accounting Standards Board
Interpretation No. 39 - "Offsetting of Amounts Related to Certain
Contracts." Any change in net unrealized gain or loss from the preceding
period is reported in the statement of operations. Fair value of
exchange-traded contracts is based upon exchange settlement prices.
Fair value of non-exchange-traded contracts is based on third party
quoted dealer values on the 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
year-end balances are translated at the year-end currency rates. Realized
and unrealized foreign exchange gains or losses are included in trading
income in the statements of operations.
Income Taxes
No provision for income taxes has been made in the accompanying financial
statements as each partner is responsible for reporting income (loss)
based upon the pro rata share of the profits or losses of the Partnership.
The Partnership files U.S. federal and state tax returns.
Recently adopted accounting pronouncements
Financial Accounting Standards Board ("FASB") Accounting Standard
Codification ("ASC") 820, Fair Value Measurements and Disclosures
("ASC 820" and formerly referred to as FAS-157), establishes a framework
for measuring fair value in GAAP, clarifies the definition of fair value
within that framework, and expands disclosures about the use of fair
value measurements. ASC 820 is effective for fiscal years beginning after
November 15, 2007. ASC 820-10-65, Transition and Open Effective Date
Information, deferred the effective date of ASC 820, for non-financial
assets and liabilities that are not on a recurring basis recognized or
disclosed at fair value in the financial statements, to fiscal years,
and interim periods, beginning after November 15, 2008. The Partnership
has adopted the guidance within ASC 820 for non-financial assets and
liabilities measured at fair value on a nonrecurring basis at
January 1, 2009 and will continue to apply its provisions prospectively
from January 1, 2009. The application of ASC 820 for non-financial assets
and liabilities did not have a significant impact on earnings nor the
financial position of the Partnership.
FASB ASC 815, Derivatives and Hedging ("ASC 815"), ASC 815-10-65,
Transition and Open Effective Date Information ("ASC 815-10-65"and
formerly referred to as FAS-161) includes a requirement for enhanced
disclosures about an entity's derivative and hedging activities and
thereby improves the transparency of financial reporting. ASC 815 is
effective prospectively for fiscal years beginning after
November 15, 2008. The application of ASC 815 did not have a significant
impact on earnings nor the financial position of the Partnership.
FASB ASC 855, Subsequent Events ("ASC 855" and formerly referred to
as FAS-165), modified the subsequent event guidance. The three
modifications to the subsequent events guidance are: 1) To name
the two types of subsequent events either as recognized or
non-recognized subsequent events, 2) To modify the definition
of subsequent events to refer to events or transactions that occur
after the balance sheet date, but before the financial statement are
issued or available to be issued and 3) To require entities to
disclose the date through which an entity has evaluated subsequent
events and the basis for that date, i.e. whether that date represents
the date the financial statements were issued or were available to be
issued. The adoption of FASB ASC 855, did not have a material affect
on the Partnership's financial position.
Effective January 1,2009 the Partnership adopted SFAS No. 161,
Disclosure about Derivative Instruments and Hedging Activities.(See note 6)
(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
March 31, 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 $ 12,559,949 $ 12,559,949 $ - $ -
------------- --------------- --------------- --------------
Investments
Long Futures
Contracts 143,361 143,361 - -
Short Futures
Contracts 466,385 466,385 - -
--------------- -------------- --------------- --------------
609,746 609,746 - -
--------------- -------------- --------------- --------------
Total assets at fair
value $ 13,169,695 $13,169,695 $ - $ -
=============== ============== =============== ==============
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
March 31, 2009:
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 $ 17,477,960 $ 17,477,960 $ - $ -
------------- --------------- --------------- --------------
Investments
Long Futures
Contracts -101,594 -101,594 - -
Short Futures
Contracts 14,059 14,059 - -
--------------- -------------- --------------- --------------
-87,535 -87,535 - -
--------------- -------------- --------------- --------------
Total assets at fair
value $ 17,390,425 $17,390,425 $ - $ -
=============== ============== =============== ==============
(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, (as defined). The incentive fee is retained by JWH even though
trading losses may occur in subsequent quarters; however, no further
incentive fees are payable until any such trading losses (other than
losses attributable to redeemed units and losses attributable to assets
reallocated to another advisor) are recouped by the Partnership.
Effective November 2003, the General Partner charges the Partnership a
monthly management fee equal to 0.50% of the Partnership's Class A
beginning-of-month net asset value.
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.
Beginning in mid-October 2005, the Partnership engaged Calyon Financial, Inc.
("CFI'') as the Partnership's futures and options on futures broker, and
engaged, Calyon Financial, SNC ("CFS'') as the Partnership's foreign currency
or forwards currency broker, (collectively referred to as the "Clearing
Brokers''). On January 2, 2008 Calyon Financial, Inc. and SNC changed
their company title to Newedge Financial, Inc. Newedge Financial, Inc. further
changed their name to Newedge USA, LLC, as a result of a merger on September
1, 2008 between Newedge Financial, Inc. and Newedge USA, LLC. The agreements
provide that the Clearing Brokers charge the Partnership brokerage commissions
at the rate of between $5.80 to $10.70 per round-turn trade, plus applicable
exchange, give up fees and NFA fees for futures contracts and options on
futures contracts executed on domestic exchanges and over the counter markets.
For trades on certain foreign exchanges, the rates may be higher.
The Partnership also reimburses the Clearing Brokers for all delivery,
insurance, storage or other charges incidental to trading and paid to third
parties.
The Partnership earns interest on 95% of the Partnership's average monthly
cash balance on deposit with its Brokers at a rate equal to the average
91-day Treasury Bill rate for US Treasury Bills issued during that month.
The Partnership has also entered into an investment advisory agreement with
Horizon Cash Management L.L.C. ("HCM''). At March 31, 2010 and 2009
approximately 99.65% and 99.89%, 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 36,415 24
Currencies
Net unrealized trading gains on open contracts 3,300 44
Energy
Net unrealized trading gains on open contracts 69,921 37
Metals
Net unrealized trading gains on open contracts (1,100) 5
Interest rates
Net unrealized trading gains on open contracts (7,400) 98
Indices
Net unrealized trading gains on open contracts 42,225 16
======== ==========
143,361 224
Liability Derivatives
Balance Sheet
Location Fair Value #of contracts Net
Agricultural
Net unrealized trading gains on open contracts 401,597 156 438,012
Currencies
Net unrealized trading gains on open contracts 55,338 88 58,638
Energy
Net unrealized trading gains on open contracts 13,200 10 83,121
Metals
Net unrealized trading gains on open contracts - - (1,100)
Interest rates
Net unrealized trading gains on open contracts (3,750) 12 (11,150)
Indice
Net unrealized trading gains on open contracts - - 42,225
======== ======== ==========
466,385 266 609,746
Trading Revenue for the
Three Months Ended March 31, 2010
Line Item in Income Statement
Realized (1,035,459)
Change in unrealized 457,442
=============
(578,018)
Includes net foreign currency translation gain(loss)
Three months average of futures contracts bought and sold
January 2010 (903,972)
February 2010 (215,571)
March 2010 84,083
============
Total (1,035,459)
============
3 month average (345,153)
For the three months ended March 31, 2010, the monthly average of futures
contracts bought and sold was approximately (345,153), respectively.
(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.
March 31, 2010 unaudited
---------------------------------------------
Futures Forwards Total
-------------------- ----------- -----------
Gross unrealized gains 151,861 470,135 $621,996
Gross unrealized losses (8,500) (3,750) (12,250)
-------------------- ----------- -----------
Net unrealized gains (losses) 143,361 466,385 609,746
==================== =========== ===========
March 31, 2009 unaudited
---------------------------------------------
Futures Forwards Total
-------------------- ----------- ----------
Gross unrealized gains $0.00 $31,083 $31,083
Gross unrealized losses (101,594) (17,024) (118,618)
-------------------- ----------- -----------
Net unrealized gains (losses) ($101,594) $14,059 ($87,535)
==================== =========== ===========
(8) FINANCIAL HIGHLIGHTS
The following financial highlights show the Partnership's financial
performance for the quarter ended March 31, 2010 and March 31, 2009.
March 31, 2010 March 31, 2009
------------------- ---------------------
Class A Class A
------------------- ---------------------
Total return before distributions* (6.01)% (7.01%)
=================== =====================
Ratio to average net assets:
Net investment Income (loss)** (2.01) (7.39)%
=================== =====================
Management fees 1.93% 5.98%
Incentive fees 0% 0%
Other expenses 0.22% 2.37%
------------------- ----------------------
Total expenses** 2.14% 8.35%
=================== ======================
*Not annualized
**Annualized
Interim Financial Statements
The statements of financial condition, including the consolidated schedule
of investments, as of March 31, 2010, the statements of operations for
the three month ended March 31, 2010 and 2009, the statements of cash
flows and changes in partners' capital (net asset value) for the three
months ended March 31, 2010 and 2009 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 March 31, 2010, results of operations for the
three months ended March 31, 2010 and 2009, cash flows and changes in
partners' capital (net asset value) for the three month ended March 31, 2010
and 2009. The results of operations for the full three months ended March
31, 2010 and 2009 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
Fiscal Quarter ended March 31, 2010
The Partnership recorded a loss of $843,144 or $ 178.81 per Unit of Class
A Units for the fiscal quarter ended March 31,2010. This compares to a
loss of $1,301,369 or $265.59 per Unit of Class A Units for the fiscal
quarter ended March 31, 2009. The quarter ended March 31, 2010 showed
a loss of 6.01% (total return) for the Class A Units of the fund.
The Partnership continued to employ John W. Henry &
Company, Inc.'s (JWH) GlobalAnalyticsR Family of Programs.
Class A Units were negative 3.48% in January 2010 resulting in
a Net Asset Value per unit of $2,873.42 as of January 31, 2010.
January performance was a continuation of the sharp market reversals and
directionless patterns seen in late December. While trading these markets
with a long-term trend-following approach has been difficult these past two
months, we believe the underlying trading models are performing as
expected under the circumstances. We believe the programs style discipline
will reward clients as trends ultimately emerge from the currently cloudy
and uncertain world markets.
Class A Units were negative 3.62% in February 2010 resulting in
a Net Asset Value per unit of $2,769.41 as of February 28, 2010.
February's performance was a continuation of the difficult market conditions
we have seen over the past few months.
The interest rate sector contributed positively to performance for February
as recently established upward trends in Asian and European debt markets
continued throughout February. Trading in the currency markets also provided
positive returns as the U.S. dollar showed signs of continued strength against
the euro, British pound and Swiss franc due to ongoing fiscal weakness across
Europe.
The Fund's performance in equity indices was slightly negative in February
as global stock markets gyrated throughout the month. Trading in the metals
sector was unprofitable. The Fund incurred losses in both gold and silver as
the precious metals continued to struggle to find a new direction. There we
some significant rallies and reversals throughout the month and the moves
were generally tied to the performance of the U.S. dollar. The energy sector
was negatively affected as oil prices continued their up and down ride
through the first half of the month. The performance of the agricultural sector
was also negative in February after the sugar market, which rallied 10 percent
in January hitting a 29-year high, sharply reversed course and fell over 17
percent in February.
Class A Units were positive 1.04% in March 2010 resulting in
a Net Asset Value per unit of $2,798.33 as of March 31, 2010.
The Fund's positions in equity index futures were profitable in March. The
energy sector was also profitable, benefiting from intra-sector diversification
and the divergent paths of natural gas and petroleum-based fuel prices.
Crude oil prices rose more than 4 percent during the month as improving
economic activity increased demand for fuel, most notably from China. At the
same time, the domestic natural gas market continues to decline. Natural gas
prices fell close to 20 percent during March, making it the best-performing
market in the Fund as milder than normal weather across the country further
exacerbated the bearish supply/demand dynamic. Performance from the
agricultural sector was positive for the month with a number of markets having
a significant positive impact on performance. Corn fell more than 10 percent
during the month. The sugar market suffered an abrupt reversal, falling more
than 20 percent during the month.
The interest rate sector of the Fund declined in March as bonds continue to
move erratically as global sentiment shifts between default and recovery.
Profits from positions in European interest rates were not enough to offset
losses from U.S. and Japanese positions. The currency sector was slightly
unprofitable during the month as a more broad-based rally in the dollar caught
the program off sides in a few markets. The metals sector was unprofitable in
March amidst directionless trading in the gold and silver markets. Precious
metals fell as the dollar rally continued and the allure of these metals as
a safe haven diminished.
Fiscal Quarter ended March 31, 2009
The Partnership recorded a loss of $1,301,369 or $265.59 per Unit of Class
A Units for the fiscal quarter ended March 31, 2009. This compares to a
gain of $2,343,822 or $490.57 per Unit of Class A Units for the fiscal
quarter ended March 31, 2008. The quarter ended March 31, 2009 showed
a loss of 7.01% (total return) for the Class A Units of the fund.
The Partnership continued to employ John W. Henry &
Company, Inc.'s (JWH) GlobalAnalyticsR Family of Programs.
Class A Units were negative 2.49% in January 2009 resulting in
a Net Asset Value per unit of $3,693.33 as of January 31, 2009.
While macro-economic conditions continued to deteriorate in January and
pressure global equity prices, extreme short-term volatility in certain
markets around year-endand uncertainty regarding the impact of future
policy steps upset long-standing trends across multiple market sectors.
The stock market began to focus acutely on the shaping of economic policy
by the new administration. Uncertainty on this front proved to be a clear
negative for the stock market as most major averages posted their worst
January performance on record.
January represented a month of change for many of the markets and sectors
traded by the Fund. While overall market volatility seems to have declined
during the month, January performance was affected by price spikes and
reversals that impacted long-term trends carried over from 2008 creating
a challenging environment for the Fund. The Fund's two largest sector
exposures are in interest rates and currencies which were both hit by
major reversals in January.
Class A Units were positive 0.94% in February 2009 resulting in
a Net Asset Value per unit of $3,728.18 as of February 28, 2009.
The Fund gained 0.94 percent in February as the focus of the markets and
trading conditions were very similar to those that prevailed in January.
The S&P 500 followed up its worst January on record with a near 11 percent
decline in February.
Beyond the continued decline in the equity sector, movement in many
sectors remains constrained as opposing forces keep those markets from
moving too far in any one direction. The resulting decline in volatility
throughout these sectors has brought down the overall volatility of the
Fund and has allowed for certain risk management parameters to further
protect the Fund from sudden trend reversals.
Class A Units were negative 5.53% in March 2009 resulting in
a Net Asset Value per unit of $3,522.05 as of March 31, 2009.
The Fund's performance was negative in March, marking the first meaningful
month-on-month correction since the Fund's strong 2008 rally. The Fund's
decline in performance coincided with the S&P 500's best monthly return
since 1987.
See Note 5 of the Notes to Financial Statements for procedures established by
the General Partner to monitor and minimize market and credit risks for the
Partnership. In addition to the procedures set out in Note 5, the General
Partner reviews on a daily basis reports of the Partnership's performance,
including monitoring of the daily net asset value of the Partnership. The
General Partner also reviews the financial situation of the Partnership's
Clearing Broker on a monthly basis. The General Partner relies on the
policies of the Clearing Broker to monitor specific credit risks. The
Clearing Broker does not engage in proprietary trading and thus has no direct
market exposure, which provides the General Partner assurance that the
Partnership will not suffer trading losses through the Clearing Broker.
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, 2009.
Item 4. Controls and Procedures
Within 90 days of the date of this report an evaluation was performed by the
company under the supervision and with the participation of management,
including the President of the Company, of the effectiveness of the design
and operation of the Company's disclosure controls and procedures. Based on
that evaluation, the Company's management, including the President, concluded
that the Company's disclosure controls and procedures are effective in timely
alerting them to material information relating to the Company that is
required to be included in the Company's period filings with the Securities
and Exchange Commission. There have been no significant changes in the
company's internal controls or in other factors that could significantly
affect those internal controls subsequent to the date the company carried out
its evaluation.
Part II. OTHER INFORMATION
Item 1. Legal Proceedings
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, 2009.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
RECENT SALES OF UNREGISTERED SECURITIES A UNITS
1st quarter 2010 1st quarter 2009
Units Sold 86.69 13.34
Value of Units Sold 245,000 $50,000
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: May 17, 2010 By: Everest Asset Management, Inc.,
its General Partner
By:__/s/ Peter Lamoureux_____
Peter Lamoureux
President
1
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