March 27, 2002
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: ProFutures Long/Short Growth Fund, L.P.
Commission File #0-25585
Dear Sirs:
This filing contains Form 10-K for the year ended December 31, 2001.
Very truly yours,
Gary D. Halbert, President
ProFutures, Inc., General Partner
ProFutures Long/Short Growth Fund, L.P.
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended: December 31, 2001
--------------
Commission File number: 0-25585
--------------
ProFutures Long/Short Growth Fund, L.P.
---------------------------------------
(Exact name of Partnership as specified in charter)
Delaware 74-2849862
- ------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
c/o ProFutures, Inc.,
11612 Bee Cave Road, Suite 100,
Austin, Texas 78738
-------------------------------
(Address of principal executive offices)
Partnership's telephone number
(800) 348-3601
--------------
Securities registered pursuant to Section 12(b) of the Act:
Title of each class. Name of each exchange on which registered.
-------------------- ------------------------------------------
Securities registered pursuant to Section 12(g) of the Act:
Units of Limited Partnership Interest
-------------------------------------
(Title of Class)
Indicate by check mark whether the Partnership (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 Partnership was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days.
Yes X
No
State the aggregate market value of the voting stock held by non-affiliates
of the Partnership. The aggregate market value shall be computed by
reference to the price at which the stock was sold, or the average bid and
asked prices of such stock, as of a specified date within 60 days prior to
the date of filing.
Not applicable
DOCUMENTS INCORPORATED BY REFERENCE
Partnership's Registration Statement on Form S-1 effective August 18, 2000
PART I
Item 1. Business.
(a) General Development of Business
-------------------------------
ProFutures Long/Short Growth Fund, L.P. (the "Partnership") is a commodity
investment pool which was organized in August 1997 under the Delaware
Revised Uniform Limited Partnership Act under the name ProFutures Bull &
Bear Fund, L.P. and commenced trading on November 20, 1997. On
December 8, 1998, the Partnership changed its name from ProFutures Bull &
Bear Fund, L.P. to ProFutures Long/Short Growth Fund, L.P.
The General Partner and Commodity Pool Operator of the Partnership is
ProFutures, Inc., a Texas corporation. The General Partner's address is
11612 Bee Cave Road, Suite 100, Austin, Texas 78738 and its telephone
numbers are (800) 348-3601 and (512) 263-3800.
The Partnership filed a registration statement with the U.S. Securities
and Exchange Commission under the Securities Act of 1933 for the public
offering of $60,000,000 of additional Limited Partnership Units which
became effective February 16, 1999. The General Partner later registered
$40,000,000 of additional Limited Partnership Units with the Securities
and Exchange Commission under the Securities Act of 1933 which was
effective November 17, 1999. This registration carried forward
$35,218,153 of unsold units from the previous registration. Therefore,
unsold Limited Partnership Units totaled $75,218,153 as of the effective
date of the registration. A post-effective amendment to the registration
was effective August 18, 2000 at which time $71,744,551 unsold units were
available. Effective November 2000, the Partnership is closed to new
investment; however, the General Partner may reopen the Partnership to new
investments in the future.
From inception through October 2000, the Partnership engaged in the
speculative trading of United States (U.S.) stock index futures contracts
pursuant to an advisory contract with Hampton Capital Management, Inc.
(Hampton). During October 2000, as a result of extreme stock market
volatility and trading losses, the advisory contract with Hampton was
terminated and trading was halted. Three new commodity trading advisors
were subsequently selected and trading resumed in December 2000. The
Partnership remains focused on trading stock index futures and options,
but the new advisors also trade a diversified group of commodity,
currency, and other futures, forward and option contracts.
(b) General Description of the Business
-----------------------------------
ProFutures, Inc., a Texas corporation, is the General Partner which
administers the business and affairs of the Partnership.
It is registered with the Commodity Futures Trading Commission (CFTC) as
a commodity trading advisor and commodity pool operator and is a member
of the National Futures Association (NFA). Gary D. Halbert is the
Chairman, President and principal stockholder of ProFutures, Inc., which
was incorporated and began operation in December 1984 and specializes in
speculative managed futures accounts.
Trading decisions are made by three independent commodity trading
advisors, Ansbacher Investment Management, Inc., Beacon Management
Corporation (USA) and Stratford Capital Management, Inc., collectively
the "Advisors".
The Partnership's Selling Agent is ProFutures Financial Group, Inc. which
is an affiliate of ProFutures, Inc.
The Partnership operates as a commodity investment pool, whose objective
is to achieve appreciation of its assets through the speculative trading
in futures and option contracts and other commodity interests. It
ordinarily maintains open positions for a relatively short period of
time. The Partnership's ability to make a profit depends largely on the
success of the Advisors in identifying market trends and price movements
and buying or selling accordingly.
(c) Trading Methods and Advisors
----------------------------
The General Partner, on behalf of the Partnership, has entered into
advisory contracts which provide that the portion of the Partnership's
assets allocated to each Advisor will be traded in accordance with the
Advisor's instructions unless the General Partner determines that the
Partnership's trading policies have been violated. The General Partner
has the authority to allocate or reallocate assets to or from its current
Advisors.
The Advisors do not own any Units of the Partnership. The Advisors are
independent commodity trading advisors and are not affiliated with the
General Partner. The Advisors are registered with the CFTC as commodity
trading advisors and are members in such capacity with the NFA. Because
of their confidential nature, proprietary trading records of the Advisors
and their respective principals are not available for inspection by the
Limited Partners of the Partnership.
Ansbacher Investment Management, Inc. (Ansbacher)
-------------------------------------------------
The objective of Ansbacher's strategy is to achieve substantial capital
appreciation through the speculative trading of futures contracts, options
on futures contracts (and potentially forward contracts), and other
futures-related interests, which objective entails a comparatively high
level of risk. Ansbacher currently engages in a program of selling or
"writing" options (puts and calls) on stock index futures. However, in
the future, Ansbacher may trade a broader portfolio of options, futures
and cash markets (and potentially forward markets), including agricultural
products, metals, currencies, financial instruments, and stock, financial
and economic indices (collectively, "Commodity Interests"). Ansbacher may
trade Commodity Interests on any U.S. exchange.
Ansbacher uses a systematic approach to trading in that it relies heavily
on a program of selling or "writing" options on stock index futures.
Ansbacher may also, from time to time, purchase options. The
implementation of this program, i.e., selecting how many puts and how many
calls, and which prices and maturities of each, in turn depends upon both
technical and fundamental considerations. The technical indicators will
include the prices of various options, both in absolute terms in relation
to their historic price levels, and in relative terms comparing the prices
of puts to the prices of similar calls. In this respect, Ansbacher may
rely upon the current reading of The Ansbacher Index. The fundamental
considerations include the condition of the stock market, its trend and
its volatility as well as business, political and economic forces which
can influence the stock market.
In addition, Ansbacher may take positions in the futures markets,
including stock index and bond futures, based upon fundamental
considerations such as historical price patterns, or technical
considerations such as trend following.
Ansbacher generally utilizes up to 30% to 40% of account assets for
margin; however such amount could be substantially higher (up to 65%) or
lower at times depending on trading conditions. These margin levels are
very high even for a speculative trading program.
Beacon Management Corporation (USA) (Beacon)
--------------------------------------------
Beacon's primary trading system is called the Meka Investment Program
("Meka"). Meka invests in futures markets with an investment approach
that may take either long or short positions in the market. Meka
aggressively invests in a broad array of globally diversified assets
using proprietary trading systems and portfolio allocation software. The
program's objective is to use diversification and leverage to earn
long-run returns from a variety of markets. Meka is executed in the
futures markets, which provide excellent liquidity, facilitate asset
allocation shifts, and offer flexible leverage. Meka generally maintains
investments in the following markets:
- global equity indices, such as U.S. large and small cap, Japanese,
Australian, and European markets;
- global bonds indices, such as U.S. long and intermediate Treasuries,
and European bonds;
- currency cross rates, such as the U.S. dollar vs. the Japanese Yen,
the Euro, the British Pound, the Canadian Dollar, and the Australian
dollar;
- energy markets, such as crude oil, gasoline, and natural gas;
- metals, such as gold, silver, and copper; and
- world commodity markets, such as grains, meats, coffee, and sugar.
The implementation of Meka is quantitative and computer-based. Meka
allocates exposure to each market based on the relationships among the
different markets and among the trading systems. Exposure in many
markets can be short or long, depending on various market conditions:
the trading systems are predominantly trend-following in nature. Several
different analytical approaches are employed in the portfolio, including
(but not limited to) approaches based on moving averages, breakouts,
option replication, and volatility. They vary from short-term methods
that trade almost every day to long-term methods that sometimes hold
positions for over a year.
Stratford Capital Management, Inc. (Stratford)
----------------------------------------------
The objective of Stratford's program is to achieve appreciation of client
assets through speculative trading in futures contracts and options
thereon primarily on U.S., but also foreign, commodity exchanges.
Stratford focuses on trading futures contracts on financial commodity
interests such as U.S. Treasury bonds and U.S. stock indices, particularly
the S&P 500 Stock Index.
The trading of the program began in November 1995 with Stratford trading
several individual accounts. The program is designed to try to take
advantage of short-term market fluctuations in some of the most liquid
futures markets in the world. Trades usually last between one to five
days, with the majority occurring within the same day. Trades are
selected using a combination of technical analysis of both the futures
market and the underlying market within the framework of the fundamentals
of a particular market. For example, futures contracts underlying market
within the framework of the fundamentals of a particular market. For
example, futures contracts on U.S. Treasury bonds may be sold if there is
a breakdown in a trend at a time when these bonds are in oversupply.
The program generally limits the amount of assets committed to margin at
any one time to approximately 25% of the account assets; however, such
amount could be substantially higher or lower at any time depending on
trading conditions. Stratford seeks to reduce the influence of one-day
returns by combining this limited capital commitment with short-term
trading in highly liquid futures markets.
From time to time, Stratford may trade futures and options contracts on
currencies. Currency values are closely related to interest rates and,
therefore, can be followed using the same techniques described above.
Since the prices of futures and options contracts on currencies generally
have more volatility than interest rate futures, effective trading
opportunities often arise. However, given the greater volatility of the
prices of these contracts, Stratford expects to trade a relatively small
number of them.
Stratford is authorized to trade a wide range of commodity interests on
U.S. and foreign exchanges, but will particularly focus on interest rate
sensitive instruments such as U.S. Treasury bonds and municipal bonds.
Stratford will also be authorized to trade futures and options contracts
on commodity interests such as the following which affect interest rates:
metals (gold, silver and copper) oil, Eurodollars and CRB, as well as
other Commodity Interests. Stratford may, but currently is not expected
to, trade commodity interests in the "cash," "EFP", and "spot" or
"forward" over-the-counter markets. Stratford may trade for the accounts
of participating customers any of the commodity interests which are now,
or may hereafter be, offered for trading on or off local and international
exchanges and markets. In that regard, Stratford from time to time in its
sole discretion may add new commodity interests to and delete commodity
interests from its portfolio.
Hampton Capital Management, Inc. (Hampton)
------------------------------------------
Hampton traded for the Partnership pursuant to its Leverage 3 trading
program which focused on leveraged trading of the S&P 500 Stock Index
futures contract. Effective October 13, 2000, the advisory contract with
Hampton was terminated and trading was halted.
(d) Fees, Compensation and Expenses
-------------------------------
The General Partner, was paid a monthly management fee equal to 1/4 of 1%
(3% annually) of month-end Net Assets through November 2000. Effective
December 1, 2000, the General Partner management fee was reduced to 1/6 of
1% (2% annually) of month-end Net Assets.
The Partnership had an advisory contract with Hampton Capital Management,
Inc. (Hampton), pursuant to which the Partnership paid a quarterly
incentive fee equal to 20% of New Trading profits (as defined in the
advisory contract). Effective October 13, 2000, the advisory contract
with Hampton was terminated and further trading was halted.
Effective December 1, 2000, the Partnership resumed trading with three
new trading advisors. Each Advisor is paid a monthly management fee of
1/12 of 1% (1% annually) of Allocated Net Asset Value (as defined in each
respective advisory contract). In addition, each Advisor receives a
quarterly incentive fee of 20% of Trading Profits (as defined).
A one-time organizational charge of 1% of the subscription amount is paid
to the General Partner (or the Selling Agent, its affiliated broker-
dealer) by each subscriber. The General Partner has paid for all actual
costs of organizing the Partnership and conducting the public offering of
Units.
To the extent that the aggregate 1% organizational charge collected is
less than these actual costs, the General Partner will pay the costs. To
the extent that the aggregate 1% organizational charge collected exceeds
these actual costs, the excess amount will be paid to the Selling Agent.
Such payment could be deemed to be a selling commission.
(e) Brokerage Arrangements
----------------------
The General Partner, among other responsibilities, has the duty to select
the brokerage firms through which the Partnership's trading will be
executed. The General Partner has selected ABN AMRO Incorporated (ABN),
(formerly ING (U.S.) Securities, Futures & Options Inc.) as the
Partnership's primary clearing broker. ABN is registered with the CFTC as
a Futures Commission Merchant. It is a member of the NFA and a clearing
member of the Chicago Board of Trade and the International Monetary Market
of the Chicago Mercantile Exchange.
(f) Financial Information About Industry Segments
---------------------------------------------
The Partnership operates in only one industry segment, that of the
speculative trading of futures and options on futures contracts. See
also "The Stock Index Futures Markets", pages II-3 to II-5 of Part II
of the Prospectus dated August 18, 2000 which is incorporated herein by
reference.
(g) Regulation
----------
The U.S. futures markets are regulated under the Commodity Exchange Act,
which is administered by the Commodity Futures Trading Commission (CFTC),
a federal agency created in 1974. The CFTC licenses and regulates
commodity exchanges, commodity brokerage firms (referred to in the
industry as "futures commission merchants"), commodity pool operators,
commodity trading advisors and others. The General Partner is
registered by the CFTC as a commodity pool operator and the Advisors are
registered as commodity trading advisors. Futures professionals such as
the General Partner and the Advisors are also regulated by the National
Futures Association, a self-regulatory organization for the futures
industry that supervises the dealings between futures professionals and
their customers. If the pertinent CFTC registrations or NFA memberships
were to lapse, be suspended or be revoked, the General Partner would be
unable to act as the Partnership's commodity pool operator, and the
Advisors as commodity trading advisors, to the Partnership.
The CFTC has adopted disclosure, reporting and recordkeeping requirements
for commodity pool operators (such as the General Partner) and disclosure
and recordkeeping requirements for commodity trading advisors. The
reporting rules require pool operators to furnish to the participants in
their pools a monthly statement of account, showing the pool's income or
loss and change in Net Asset Value and an annual financial report,
audited by an independent certified public accountant.
The CFTC and the exchanges have pervasive powers over the futures
markets, including the emergency power to suspend trading and order
trading for liquidation only (i.e., traders may liquidate existing
positions but not establish new positions). The exercise of such powers
could adversely affect the Partnership's trading.
For additional information refer to "Regulation", Pages II-4 to II-5 of
Part II of the Prospectus dated August 18, 2000, which is incorporated
herein by reference.
(h) Competition
-----------
The Partnership may experience increased competition for the same
commodity futures contracts. The Advisors may recommend similar or
identical trades to other accounts they manage. Thus the Partnership
may be in competition with such accounts for the same or similar
positions. Competition may also increase due to widespread utilization
of computerized trading methods similar to the methods used by the
the Advisors. The Partnership may also compete with other funds
organized by the General Partner.
(i) Financial Information About Foreign and Domestic Operations
-----------------------------------------------------------
The Partnership does not expect to engage in any operations in foreign
countries nor does it expect to earn any portion of the Partnership's
revenue from customers in foreign countries.
Item 2. Properties.
The Partnership does not own and does not expect to own any physical
properties.
Item 3. Legal Proceedings.
The Partnership is not aware of any pending legal proceedings to which the
Partnership is a party or to which any of its assets are subject.
Item 4. Submission of Matters to a Vote of Security Holders.
There were no matters submitted to a vote of holders of Limited
Partnership Units ("Units") during the fiscal year ended December 31,
2001.
PART II
Item 5. Market for Partnership's Securities and Related Security Holder
Matters
(a) Market Information
------------------
There is no established public trading market for the Partnership's
Limited Partnership Units. Effective November 2000, the Partnership is
closed to new investment; however, the General Partner may reopen the
Partnership to new investments in the future.
The Partnership's Limited Partnership Units may be purchased at a price
equal to 101% of the Net Asset Value per Unit on the last day of each
month. Approximately 99% of the purchase price, an amount equal to 100%
of Net Asset Value per Unit, is contributed to the Partnership. The
General Partner, ProFutures, Inc. retains 1% to pay organizational and
offering expenses.
A Limited Partner (or any assignee of units) may withdraw some or all of
his capital contribution and undistributed profits, if any, by requiring
the Partnership to redeem any or all of his Units at Net Asset Value per
Unit. Redemptions shall be effective as of the end of any month after
10 days written notice to the General Partner. Redemptions shall be paid
as promptly as practicable after the effective date of redemption, but in
no event more than 30 days thereafter, provided that all liabilities,
contingent or otherwise, of the Partnership, have been paid and there
remains property of the Partnership sufficient to pay them.
(b) Holders
-------
The number of holders of record of Units of Partnership as of December 31,
2001 was:
General Partner's Capital 2
Limited Partners' Capital 695
At the commencement of trading on November 20, 1997 there were 38 Partners
holding 3,044 Units. At December 31, 2001 there were 695 Limited Partners
holding 12,450 Units, and 525 Units held by the General Partner and its
principals.
(c) Distributions
-------------
The Partnership does not anticipate making any distributions to investors.
Distributions of profits to partners are made at the discretion of the
General Partner and will depend, among other factors, on earnings and
the financial condition of the Partnership. No such distributions have
been made to date.
Item 6. Selected Financial Data.
Following is a summary of certain financial information for the
Partnership for the calendar years 2001, 2000, 1999 and 1998 and for the
period August 21, 1997 (inception) to December 31, 1997.
2001
----
Realized Gains (Losses) $ 2,155,466
Change in Unrealized Gains (Losses)
on Open Contracts (463,346)
Interest Income 438,669
General Partner Management Fee 251,199
Advisor Management Fees 126,070
Advisor Incentive Fees 514,558
Net Income (Loss) 865,071
General Partner Capital 56,537
Limited Partner Capital 11,882,135
Partnership Capital 11,938,672
Net Income (Loss) Per Limited and
General Partner Unit* 62.43
Net Asset Value Per Unit At
End of Year 920.18
2000
----
Realized Gains (Losses) $(24,145,559)
Change in Unrealized Gains (Losses)
on Open Contracts 6,842,576
Interest Income 1,455,997
General Partner Management Fee 706,890
Advisor Management Fees 10,816
Advisor Incentive Fees 111,774
Net Income (Loss) (16,805,240)
General Partner Capital 52,762
Limited Partner Capital 12,633,367
Partnership Capital 12,686,129
Net Income (Loss) Per Limited and
General Partner Unit* (834.14)
Net Asset Value Per Unit At
End of Year 858.74
1999
----
Realized Gains (Losses) $ 1,522,130
Change in Unrealized Gains (Losses)
on Open Contracts (7,168,725)
Interest Income 1,625,573
General Partner Management Fee 986,328
Advisor Incentive Fee 293,116
Net Income (Loss) (5,439,311)
General Partner Capital 101,567
Limited Partner Capital 38,536,017
Partnership Capital 38,637,584
Net Income (Loss) Per Limited and
General Partner Unit* (304.83)
Net Asset Value Per Unit At
End of Year 1,652.95
1998
----
Realized Gains (Losses) $ 6,818,869
Change in Unrealized Gains (Losses)
on Open Contracts 1,161,075
Interest Income 439,168
General Partner Management Fee 267,508
Advisor Incentive Fee 1,571,370
Net Income (Loss) 6,516,745
General Partner Capital 116,671
Limited Partner Capital 18,438,300
Partnership Capital 18,554,971
Net Income (Loss) Per Limited and
General Partner Unit* 1,054.60
Net Asset Value Per Unit At
End of Year 1,898.76
1997
----
Realized Gains (Losses) $ (116,342)
Change in Unrealized Gains (Losses)
on Open Contracts 2,175
Interest Income 19,520
General Partner Management Fee 9,826
Advisor Incentive Fee 0
Net Income (Loss) (116,741)
General Partner Capital 29,313
Limited Partner Capital 2,885,423
Partnership Capital 2,914,736
Net Income (Loss) Per Limited and
General Partner Unit* (48.21)
Net Asset Value Per Unit At
End of Year 957.45
----------------
* Based on weighted average units outstanding
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations.
(a) Liquidity and Capital Resources
-------------------------------
Substantially all of the Partnership's assets at December 31, 2001 were
in cash. There are no restrictions on the liquidity of these assets
except for amounts on deposit with the broker needed to meet margin
requirements on open futures contracts.
The amount of assets invested in the Partnership generally does not
affect its performance, as typically this amount is not a limiting factor
on the positions acquired by the Advisors, and the Partnership's expenses
are primarily charged as a fixed percentage of its asset base, however
large.
The Partnership raises additional capital only through the sale of Units
and trading profits (if any) and does not engage in borrowing. The
Partnership sells no securities other than the Units.
The value of the Partnership's cash and financial instruments is not
materially affected by inflation. Changes in interest rates, which are
often associated with inflation, could cause periods of strong up or down
stock market price trends, during which the Partnership's profit potential
generally increases.
Substantially all of the Partnership's assets are held in cash deposited
with its broker. Accordingly, except in very unusual circumstances, the
Partnership should be able to close out any or all of its open trading
positions and liquidate any cash management investments quickly and at
market prices. This permits the Advisors to limit losses as well as
reduce market exposure on short notice should their programs direct them
to do so in order to reduce market exposure. In addition, because there
is a readily available market value for the Partnership's positions and
assets, the Partnership's monthly Net Asset Value calculations are
precise.
(b) Results of Operations
---------------------
The Partnership's net income (loss) for each quarter of the year ended
December 31, 2001 and 2000 consisted of the following:
1st Qtr. 2nd Qtr. 3rd Qtr. 4th Qtr.
2001 2001 2001 2001
-------- -------- -------- --------
Gain (loss) from
trading $ 1,217,239 $ (64,414) $ 716,095 $ (176,800)
Total income (loss) 1,377,949 48,512 819,394 (115,066)
Net income (loss) 958,206 (227,021) 479,412 (345,526)
Net income (loss)
per Unit 65.66 (16.07) 35.46 (26.20)
Increase (decrease)
in Net Asset Value
per Unit 65.82 (14.61) 36.58 (26.35)
Net Asset Value per
Unit at end of
period 924.56 909.95 946.53 920.18
1st Qtr. 2nd Qtr. 3rd Qtr. 4th Qtr.
2000 2000 2000 2000
-------- -------- -------- --------
Gain (loss) from
trading $ (3,336,268) $(8,239,342) $(1,546,869) $(4,180,504)
Total income (loss) (2,836,630) (7,854,352) (1,200,811) (3,955,193)
Net income (loss) (3,129,924) (8,068,666) (1,378,282) (4,228,368)
Net income (loss)
per Unit (135.69) (378.47) (70.09) (255.68)
Increase (decrease)
in Net Asset Value
per Unit (129.62) (376.44) (69.66) (218.49)
Net Asset Value per
Unit at end of
period 1,523.33 1,146.89 1,077.23 858.74
Due to the speculative nature of trading derivatives, the
Partnership's income or loss from operations may vary widely from
period to period. Management cannot predict whether the Partnership's
future Net Asset Value per Unit will increase or experience a decline.
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
Year Ended December 31, 2001
----------------------------
2001 had net income of $865,071 or $62.43 per Unit. At December 31, 2001,
partners' capital totaled $11,938,672, a net decrease of $747,457 from
December 31, 2000 due primarily to capital redemptions of $1,612,528. Net
Asset Value per Unit at December 31, 2001 amounted to $920.18, as compared
to $858.74 at December 31, 2000, an increase of 7.15%.
Fourth Quarter 2001
-------------------
The Fund had a gain of 5.31% in October. The interest rates market was
extremely volatile after the events of September 11th, and as a result
of the Fed's policy of aggressively cutting interest rates. There were
large gains in long-term interest rates, as well as smaller gains in short
and medium-term interest rates. The gains included investments in Euro
Bonds, Australian Bonds, Canadian Bonds, and U.S. Treasury Bonds. There
were also significant gains in equities, primarily from options on the
S & P 500 Stock Index.
In November, many of the gains from October were offset by losses. There
was a loss of 6.87%. There were losses in short, medium and long-term
interest rates, as well as losses in agriculture, especially cotton, and
currencies.
In December, the Fund had a small loss of .87%. There were again losses
in long and medium-term interest rates, as well as precious metals. Some
of these losses were partially offset by gains in agriculture and
currency.
Third Quarter 2001
------------------
The quarter ended September 30, 2001 started out with a loss of
2.87% in July. This loss was offset by a gain in August, primarily
in stock index futures and options. There were also some smaller
gains in interest rates, energy and certain agricultural markets.
The Fed's continuing loose monetary policy kept both short-term and
long-term interest rates somewhat volatile. The equity markets also
remained somewhat volatile.
September 2001 was a very volatile month for the Fund due to the
events of September 11th. Although the U.S. markets were closed for
the remainder of the week, most overseas markets remained open,
and significant gains were made during this period. The Fund had
significant profits in short-term interest rate futures (Eurodollar).
There were also some significant gains in agriculture, mostly orange
juice and coffee. Some of these gains were offset by some losses in
corn and soybean oil. The Fund was able to end the quarter with a
profit of 4.02% and 10.22% for the nine months ended September 30,
2001.
Second Quarter 2001
-------------------
April 2001 brought a large loss for the Fund, almost all of which came
from stock indexes. On April 18th, the U.S. Federal Reserve announced
a surprise cut in interest rates. This caused the stock market, which
had been trending lower, to move up dramatically in a mid-day surge.
One of the Trading Advisors had sold call options based on a bearish
forecast. The sudden reversal led to these positions being stopped
out at a major loss within a few moments of the Federal Reserve
announcement. April ended with a net loss for the Fund of 10.73%.
May and June 2001 were much more favorable, bringing gains of 3.69%
and 6.32% respectively. Much of the gain came from stock indexes and
foreign currencies as well as agricultural commodities. The second
quarter of 2001 ended with a loss of 1.58% and the first six months of
2001 were a gain of 5.96%.
First Quarter 2001
------------------
The Fund's Trading Advisors were able to profit during the first
quarter of 2001, even though many markets were relatively trendless,
by using very short-term trading strategies in stock index futures
and writing options on the S&P 500. The decision in late 2000 to
expand the Fund's focus beyond stock indexes by allocating part of the
assets to a more diversified program proved helpful, with additional
gains coming in markets such as foreign currencies, agricultural
commodities, short-term interest rates and metals. The first quarter
ended with a gain of 7.66%.
Year Ended December 31, 2000
----------------------------
2000 had a net loss of $(16,805,240) or $(794.21) per Unit. At
December 31, 2000, partners' capital totaled $12,686,129, a net decrease
of $25,951,455 from December 31, 1999 due to net capital redemptions of
$9,146,215 and the large losses incurred. Net Asset Value per Unit at
December 31, 2000 amounted to $858.74, as compared to $1,652.95 at
December 31, 1999, a decrease of 48.05%. Extreme volatility in the S&P
500 Index throughout the year resulted in trading losses of $17,302,983 in
2000. The S&P 500 Index experienced significant one day declines during
April and October 2000. This resulted in significant losses on those days
when the Partnership was in a long position. As a result of this extreme
stock market volatility and trading losses, the advisory contract with
Hampton was terminated and trading was halted. Three new commodity
trading advisors were subsequently selected and trading resumed in
December 2000.
Year Ended December 31, 1999
----------------------------
1999 had a net loss of $(5,439,311) or $(304.83) per Unit. At
December 31, 1999, partners' capital totaled $38,637,584, a net increase
of $20,082,613 from December 31, 1998 primarily due to net capital
additions of $25,521,924. Net Asset Value per Unit at December 31, 1999
amounted to $1,652.95, as compared to $1,898.76 at December 31, 1998, a
decrease of 12.95%. The net losses occurred primarily during the fourth
quarter as the Advisor generally maintained a short position but the
stock market turned positive.
(c) Possible Changes
----------------
The General Partner reserves the right to terminate and/or engage
additional Commodity Trading Advisors or change any of the Partnership's
clearing arrangements.
Item 8. Financial Statements and Supplementary Data.
Financial statements meeting the requirements of Regulation S-X are
listed following this report. The Supplementary Financial Information
specified by Item 302 of Regulation S-K is included in Item 7.(b), Results
of Operations.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosures.
None.
PART III
Item 10. Directors and Executive Officers of the Partnership.
The Partnership is a limited partnership and therefore does not have any
directors or officers. The Partnership's General Partner, ProFutures,
Inc., administers and manages the affairs of the Partnership.
Item 11. Executive Compensation.
As discussed above, the Partnership does not have any officers, directors
or employees. The General Partner received, as compensation for its
services, a monthly management fee equal to 1/6of 1% (2 annually) of
month-end Net Assets. Total management fees earned by the General Partner
for 2001 aggregated $251,199
Item 12. Security Ownership of Certain Beneficial Owners.
(a) Security Ownership of Certain Beneficial Owners
-----------------------------------------------
The Partnership knows of no one person who beneficially owns more than
5% of the Units of Limited Partnership Interest.
(b) Security Ownership of Management
--------------------------------
Under the terms of the Limited Partnership Agreement, the General Partner
exclusively manages the Partnership's affairs. As of December 31, 2001,
the General Partner owned 61 Units.
(c) Changes in Control
------------------
None.
Item 13. Certain Relationships and Related Transactions.
See prospectus dated August 18,2000, page ii, Organizational Chart, and
pages 36 - 37, Conflicts of Interest, for information concerning
relationships and transactions between the General Partner, the Advisors,
the Broker and the Partnership.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
(a) 1. Financial Statements
See Index to Financial Statements on Page F-1.
The Financial Statements begin on Page F-3.
(a) 2. Financial Statement Schedules.
Not applicable, not required, or information included in financial
statements.
(a) 3. Exhibits.
Incorporated by reference - previously filed:
Form S-1 and Prospectus dated August 18, 2000 and exhibits thereto.
3.1 Amendment to Second Amended and Restated Limited Partnership
Agreement dated November 10, 2000 (filed as an exhibit to the
2000 Form 10-K).
(b) Reports on Form 8-K
-------------------
None.
(c) Exhibits
--------
10.1 Form of Stock Subscription Agreement by and between ABN AMRO
Incorporated and ProFutures, Inc.
(d) Financial Statement Schedules
-----------------------------
Not Applicable, not required, or information included in financial
statements.
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities
Exchange Act of 1934, the Partnership has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
PROFUTURES LONG/SHORT GROWTH FUND, L.P.
(Partnership)
By /s/ GARY D. HALBERT
- ---------------------------- -----------------------------------------
Date Gary D. Halbert, President and Director
ProFutures, Inc.
General Partner
By /s/ DEBI B. HALBERT
- ---------------------------- -----------------------------------------
Date Debi B. Halbert, Chief Financial Officer,
Treasurer and Director
ProFutures, Inc.
General Partner
PROFUTURES LONG/SHORT GROWTH FUND, L.P.
-----------------------------
INDEX TO FINANCIAL STATEMENTS
-----------------------------
PAGES
-----
Independent Auditor's Report F-2
Financial Statements
Statements of Financial Condition
December 31, 2001 and 2000 F-3
Condensed Schedule of Investments
December 31, 2001 F-4
Statements of Operations For the Years
Ended December 31, 2001, 2000 and 1999 F-5
Statements of Changes in Partners' Capital (Net Asset Value)
For the Years Ended December 31, 2001, 2000 and 1999 F-6
Notes to Financial Statements F-7 - F-12
INDEPENDENT AUDITOR'S REPORT
To the Partners
ProFutures Long/Short Growth Fund, L.P.
We have audited the accompanying statements of financial condition of
ProFutures Long/Short Growth Fund, L.P. as of December 31, 2001 and 2000,
including the December 31, 2001 condensed schedule of investments, and the
related statements of operations and changes in partners' capital (net asset
value) for the years ended December 31, 2001, 2000 and 1999. These financial
statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of ProFutures Long/Short Growth
Fund, L.P. as of December 31, 2001 and 2000, and the results of its operations
and the changes in its net asset values for the years ended December 31, 2001,
2000 and 1999, in conformity with accounting principles generally accepted in
the United States of America.
/s/ ARTHUR F. BELL, JR. & ASSOCIATES, L.L.C.
Hunt Valley, Maryland
January 29, 2002
F-2
PROFUTURES LONG/SHORT GROWTH FUND, L.P.
STATEMENTS OF FINANCIAL CONDITION
December 31, 2001 and 2000
-------------
2001 2000
---- ----
ASSETS
Equity in broker trading accounts
Cash $12,119,461 $12,482,092
Net option premiums (received) (291,200) (266,750)
Unrealized gain on open contracts 373,755 837,101
----------- -----------
Deposits with broker 12,202,016 13,052,443
Cash 11,652 29,180
----------- -----------
Total assets $12,213,668 $13,081,623
=========== ===========
LIABILITIES
Accounts payable $ 17,680 $ 28,188
Commissions and other trading fees
on open contracts 9,065 14,338
Incentive fees payable 53,703 111,774
Management fees payable 51,559 32,343
Redemptions payable 142,989 208,851
----------- -----------
Total liabilities 274,996 395,494
----------- -----------
PARTNERS' CAPITAL (Net Asset Value)
General Partner - 61 units outstanding
at December 31, 2001 and 2000 56,537 52,762
Limited Partners - 12,913 and 14,712 units
outstanding at December 31, 2001 and 2000 11,882,135 12,633,367
----------- -----------
Total partners' capital
(Net Asset Value) 11,938,672 12,686,129
----------- -----------
$12,213,668 $13,081,623
=========== ===========
See accompanying notes.
F-3
PROFUTURES LONG/SHORT GROWTH FUND, L.P.
CONDENSED SCHEDULE OF INVESTMENTS
December 31, 2001
------------
LONG FUTURES CONTRACTS
- ----------------------
% of Net
Description Value Asset Value
----------- ----- -----------
Agricultural $ 34,480 0.29%
Currency 2,065 0.02%
Interest rate 2,885 0.02%
Metal 4,800 0.04%
Stock index 913 0.01%
--------- -----
Total long futures contracts $ 45,143 0.38%
========= =====
SHORT FUTURES CONTRACTS
- -----------------------
% of Net
Description Value Asset Value
----------- ----- -----------
Agricultural $ 83,985 0.70%
Currency 149,535 1.26%
Energy 17,773 0.15%
Interest rate 9,808 0.08%
Metal (57,440) (0.48)%
--------- -----
Total short futures contracts $ 203,661 1.71%
========= =====
WRITTEN OPTIONS ON FUTURES CONTRACTS
- ------------------------------------
% of Net
Description Value Asset Value
----------- ----- -----------
Stock index options $(166,249) (1.39)%
--------- =====
Total written options on futures contracts
(premiums received - $291,200) $(166,249) (1.39)%
========= =====
See accompanying notes.
F-4
PROFUTURES LONG/SHORT GROWTH FUND, L.P.
STATEMENTS OF OPERATIONS
For the Years Ended December 31, 2001, 2000 and 1999
-------------
2001 2000 1999
---- ---- ----
INCOME
Trading gains (losses)
Realized $ 2,155,466 $(24,145,559) $ 1,522,130
Change in unrealized (463,346) 6,842,576 (7,168,725)
------------ ------------ ------------
Gain (loss) from trading 1,692,120 (17,302,983) (5,646,595)
Interest income 438,669 1,455,997 1,625,573
------------ ------------ ------------
Total income (loss) 2,130,789 (15,846,986) (4,021,022)
------------ ------------ ------------
EXPENSES
Brokerage commissions 254,563 41,871 35,908
Incentive fees 514,558 111,774 293,116
Management fees 377,269 717,706 986,328
Operating expenses 119,328 86,903 102,937
------------ ------------ ------------
Total expenses 1,265,718 958,254 1,418,289
------------ ------------ ------------
NET INCOME (LOSS) $ 865,071 $(16,805,240) $ (5,439,311)
============ ============ ============
NET INCOME (LOSS) PER GENERAL
AND LIMITED PARTNER UNIT
(based on weighted average
number of units outstanding
during the year of 13,857,
20,147 and 17,844, respectively) $ 62.43 $ (834.14) $ (304.83)
============ ============ ============
INCREASE (DECREASE) IN NET ASSET
VALUE PER GENERAL AND LIMITED
PARTNER UNIT $ 61.44 $ (794.21) $ (245.81)
============ ============ ============
See accompanying notes.
F-5
PROFUTURES LONG/SHORT GROWTH FUND, L.P.
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL (NET ASSET VALUE)
For the Years Ended December 31, 2000, 1999 and 1998
-------------
Total Partners' Capital
Number of ------------------------------------
Units General Limited Total
--------- ------- ------- -----
Balances at
December 31, 1998 9,772 $116,671 $ 18,438,300 $ 18,554,971
Net (loss) for the year
ended December 31, 1999 (15,104) (5,424,207) (5,439,311)
Additions 14,732 0 27,595,792 27,595,792
Redemptions (1,129) 0 (2,073,868) (2,073,868)
------ -------- ------------ ------------
Balances at
December 31, 1999 23,375 101,567 38,536,017 38,637,584
Net (loss) for the year
ended December 31, 2000 (48,805) (16,756,435) (16,805,240)
Additions 1,008 0 1,388,765 1,388,765
Redemptions (9,610) 0 (10,534,980) (10,534,980)
------ -------- ------------ ------------
Balances at
December 31, 2000 14,773 52,762 12,633,367 12,686,129
Net income for the year
ended December 31, 2001 3,775 861,296 865,071
Redemptions (1,799) 0 (1,612,528) (1,612,528)
------ -------- ------------ ------------
Balances at
December 31, 2001 12,974 $ 56,537 $ 11,882,135 $ 11,938,672
====== ======== ============ ============
Net Asset Value Per Unit
------------------------
December 31,
2001 2000 1999
---- ---- ----
$ 920.18 $ 858.74 $1,652.95
========= ========= =========
See accompanying notes.
F-6
PROFUTURES LONG/SHORT GROWTH FUND, L.P.
NOTES TO FINANCIAL STATEMENTS
-------------
Note 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
-----------------------------------------------------------
A. General Description of the Partnership
ProFutures Long/Short Growth Fund, L.P. (the Partnership) is a
Delaware limited partnership which operates as a commodity
investment pool. From inception through October 2000, the
Partnership engaged in the speculative trading of United States
(U.S.) stock index futures contracts pursuant to an advisory
contract with Hampton Capital Management, Inc. (Hampton). During
October 2000, as a result of extreme stock market volatility and
trading losses, the advisory contract with Hampton was terminated
and trading was halted. Three new commodity trading advisors were
subsequently selected and trading resumed in December 2000. The
Partnership remains focused on trading stock index futures and
options, but the new advisors also trade a diversified group of
commodity, currency, and other futures and option contracts.
B. Regulation
As a registrant with the Securities and Exchange Commission, the
Partnership is subject to the regulatory requirements under the
Securities Act of 1933 and the Securities Exchange Act of 1934.
As a commodity investment pool, the Partnership is subject to the
regulations of the Commodity Futures Trading Commission, an agency
of the U.S. government which regulates most aspects of the
commodity futures industry; rules of the National Futures
Association, an industry self-regulatory organization; and the
requirements of commodity exchanges and Futures Commission
Merchants (brokers) through which the Partnership trades.
C. Method of Reporting
The Partnership's financial statements are presented in accordance
with accounting principles generally accepted in the United States
of America, which require the use of certain estimates made by the
Partnership's management. Transactions are accounted for on the
trade date. Gains or losses are realized when contracts are
liquidated. Unrealized gains or losses on open contracts (the
difference between contract trade price and quoted market price)
are reflected in the statement of financial condition as a net
gain or loss, as there exists a right of offset of unrealized
gains or losses in accordance with 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.
For purposes of both financial reporting and calculation of
redemption value, Net Asset Value Per Unit is calculated by
dividing Net Asset Value by the total number of units outstanding.
F-7
PROFUTURES LONG/SHORT GROWTH FUND, L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
-------------
Note 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
-----------------------------------------------------------
D. Brokerage Commissions
Brokerage commissions include other trading fees and are charged
to expense when contracts are opened.
E. Income Taxes
The Partnership prepares calendar year U.S. and applicable state
information tax returns and reports to the partners their
allocable shares of the Partnership's income, expenses and trading
gains or losses.
F. Organizational Charge
The General Partner pays all organizational and offering costs of
the Partnership. As reimbursement for such costs, the General
Partner (or the Distributor, ProFutures Financial Group, Inc., a
broker/dealer affiliate of the General Partner) receives an
organizational charge of 1% of the subscription amount of each
subscriber to the Partnership. Additions are reflected in the
statement of changes in partners' capital (net asset value) net of
such organizational charge totaling $0, $13,888 and $275,958 for
the years ended December 31, 2001, 2000 and 1999, respectively.
G. Foreign Currency Transactions
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 currencies other than the
U.S. dollar are translated into U.S. dollars at the rates in
effect at the date of the statement of financial condition.
Income and expense items denominated in currencies other than the
U.S. dollar are translated into U.S. dollars at the rates in
effect during the period. Gains and losses resulting from the
translation to U.S. dollars are reported in income currently.
H. Statements of Cash Flows
The Partnership has elected not to provide statements of cash
flows as permitted by Statement of Financial Accounting Standards
No. 102 - "Statement of Cash Flows - Exemption of Certain
Enterprises and Classification of Cash Flows from Certain
Securities Acquired for Resale."
F-8
PROFUTURES LONG/SHORT GROWTH FUND, L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
-------------
Note 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
-----------------------------------------------------------
I. Statement of Financial Accounting Standards No. 133
In June 1998, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards ("SFAS") No. 133,
"Accounting for Derivative Instruments and Hedging Activities"
(the "Statement"), effective for fiscal years beginning after
June 15, 2000, as amended by SFAS No. 137 and SFAS No. 138. This
Statement supersedes SFAS No. 119, "Disclosure about Derivative
Financial Instruments and Fair Value of Financial Instruments,"
and SFAS No. 105, "Disclosure of Information about Financial
Instruments with Off-Balance Sheet Risk and Financial Instruments
with Concentrations of Credit Risk," whereby disclosure of average
aggregate fair values and contract/notional values, respectively,
of derivative financial instruments is no longer required for an
entity such as the Partnership which carries its assets at fair
value. The application of the provisions of SFAS No. 133, as
amended by SFAS No. 137 and SFAS No. 138, did not have a
significant effect on the financial statements.
Note 2. GENERAL PARTNER
---------------
The General Partner of the Partnership is ProFutures, Inc., which
conducts and manages the business of the Partnership. The Limited
Partnership Agreement requires the General Partner and/or its
principals and affiliates to maintain capital accounts equal to at
least 1% of the total capital of the Partnership. At December 31,
2001, the capital accounts of the General Partner and/or its
principals and affiliates totaled $498,903.
The Limited Partnership Agreement was amended effective February 16,
1999 and generally requires that the General Partner maintain a net
worth of up to $1,000,000. ProFutures, Inc. has callable subscription
agreements with ABN AMRO Incorporated (ABN) (formerly ING (U.S.)
Securities, Futures & Options, Inc.), the Partnership's broker,
whereby ABN has subscribed to purchase (up to $14,000,000) the number
of shares of common stock of ProFutures, Inc. necessary to maintain
the General Partner net worth requirements.
The Partnership paid the General Partner a monthly management fee
equal to 1/4 of 1% (3% annually) of month-end Net Assets (as defined
in the Limited Partnership Agreement) through November 2000.
Effective December 1, 2000, the General Partner management fee was
reduced to 1/6 of 1% (2% annually) of month-end Net Assets.
Total management fees earned by ProFutures, Inc. for the years ended
December 31, 2001, 2000 and 1999 were $251,199, $706,890 and $986,328,
respectively. Management fees payable to ProFutures, Inc. as of
December 31, 2001 and 2000 were $20,170 and $21,528, respectively.
F-9
PROFUTURES LONG/SHORT GROWTH FUND, L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
-------------
Note 3. COMMODITY TRADING ADVISORS
--------------------------
The Partnership had an advisory contract with Hampton, pursuant to
which the Partnership paid a quarterly incentive fee equal to 20% of
New Trading Profits (as defined in the advisory contract). Effective
October 13, 2000, the advisory contract with Hampton was terminated
and trading was halted.
Effective December 1, 2000, the Partnership resumed trading with three
new trading advisors. Each advisor is paid a monthly management fee of
1/12 of 1% (1% annually) of Allocated Net Asset Value (as defined in
each respective advisory agreement). In addition, each advisor
receives a quarterly incentive fee of 20% of Trading Profits (as
defined).
Note 4. DEPOSITS WITH BROKER
--------------------
The Partnership deposits funds with ABN to act as broker, subject to
Commodity Futures Trading Commission regulations and various exchange
and broker requirements. The Partnership earns interest income on its
assets deposited with the broker.
At December 31, 2001 and 2000, the initial margin requirement of
$1,706,987 and $3,822,228, respectively, is satisfied by the deposit
of cash with such broker.
Note 5. SUBSCRIPTIONS, DISTRIBUTIONS AND REDEMPTIONS
--------------------------------------------
Investments in the Partnership were made by subscription agreement,
subject to acceptance by the General Partner. Effective November
2000, the Partnership is closed to new investment; however, the
General Partner may reopen the Partnership to new investments in the
future.
The Partnership is not required to make distributions, but may do so
at the sole discretion of the General Partner. A Limited Partner may
require the Partnership to redeem any or all of such Limited Partner's
units at Net Asset Value as of the close of business on the last day
of any month upon advance written notice to the General Partner. The
Limited Partnership Agreement contains a complete description of the
Partnership's redemption policies and procedures.
Note 6. TRADING ACTIVITIES AND RELATED RISKS
------------------------------------
The Partnership engages in the speculative trading of U.S. and foreign
futures contracts and options on futures contracts (collectively
"derivatives"). 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.
F-10
PROFUTURES LONG/SHORT GROWTH FUND, L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
-------------
Note 6. TRADING ACTIVITIES AND RELATED RISKS (CONTINUED)
------------------------------------------------
Purchase and sale of futures and options on futures contracts requires
margin deposits with the broker. Additional deposits may be necessary
for any loss on contract value. The Commodity Exchange Act requires a
broker to segregate all customer transactions and assets from such
broker's proprietary activities. A customer's cash and other property
(for example, U.S. Treasury bills) deposited with a broker are
considered commingled with all other customer funds subject to the
broker's segregation requirements. In the event of a broker'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 total cash and other property deposited.
Open contracts generally mature within three months, however, the
Partnership intends to close all contracts prior to maturity. At
December 31, 2001, the latest maturity date for open contracts is
March 2003.
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 notional contract value of futures 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. Written options expose the
Partnership to potentially unlimited liability, and purchased options
expose the Partnership to a risk of loss limited to the premiums paid.
The Partnership has assets on deposit with a financial institution in
connection with its cash management activities. In the event of a
financial institution's insolvency, recovery of Partnership assets on
deposit may be limited to account insurance or other protection
afforded such deposits.
The General Partner has established procedures to actively monitor
market risk and minimize credit risk, although there can be no
assurance that it will, in fact, succeed in doing so. The General
Partner's basic market risk control procedures consist of continuously
monitoring the trading activity of the various trading advisors, with
the actual market risk controls being applied by the advisors
themselves. The General Partner seeks to minimize credit risk
primarily by depositing and maintaining the Partnership's assets at
financial institutions and brokers which the General Partner believes
to be creditworthy. The Limited Partners bear the risk of loss only
to the extent of the market value of their respective investments and,
in certain specific circumstances, distributions and redemptions
received.
F-11
PROFUTURES LONG/SHORT GROWTH FUND, L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
-------------
Note 7. FINANCIAL HIGHLIGHTS
--------------------
The following information presents per unit operating performance data
and other supplemental financial data for the year ended December 31,
2001. This information has been derived from information presented in
the financial statements.
Per Unit Performance
(for a unit outstanding throughout the entire year)
---------------------------------------------------
Net asset value per unit at December 31, 2000 $858.74
-------
Income (loss) from operations:
Net investment (loss) (1), (3) (41.31)
Net realized and change in unrealized
gain from trading (2), (3) 102.75
-------
Total income from operations 61.44
-------
Net asset value per unit at December 31, 2001 $920.18
=======
Total Return 7.15%
=====
Supplemental Data
Ratios to average net asset value:
Expenses prior to incentive fees (4) (4.00)%
Incentive fees (4.14)%
-----
Total expenses and incentive fees (1) (8.14)%
=====
Net investment (loss) (1) (4.61)%
=====
Total return is calculated based on the change in value of a unit
during the year. An individual partner's total return and ratios may
vary from the above total return and ratios based on the timing of
additions and redemptions.
---------------
(1) Excludes brokerage commissions and other trading fees.
(2) Includes brokerage commissions and other trading fees.
(3) The net investment (loss) per unit is calculated by dividing the
net investment (loss) by the average number of units outstanding
during the year. The net realized and change in unrealized gain
from trading is a balancing amount necessary to reconcile the
change in net asset value per unit with the other per unit
information.
(4) Excludes brokerage commissions, other trading fees and incentive
fees.
F-12
Exhibit 10.1
STOCK SUBSCRIPTION AGREEMENT
BY AND BETWEEN
ABN AMRO INCORPORATED
AND
PROFUTURES, INC.
THIS STOCK SUBSCRIPTION AGREEMENT (as it may be amended from time to time,
the "Agreement"), by and between ABN AMRO Incorporated ("ABN") and ProFutures,
Inc. ("ProFutures"), is made as of this 30th day of April, 2001.
WHEREAS, ProFutures entered into Stock Subscription Agreements, dated
August 15, 1990, August 15, 1991, and September 1, 1991, respectively, each
substantially in the form hereof, with Virginia Trading Corporation ("VTC"),
and the Virginia Trading division of Quantum Financial Services, Inc.
("Quantum"), respectively;
WHEREAS, the issued and outstanding capital stock of VTC was acquired by
Quantum which operated VTC's business as the Virginia Trading division of
Quantum;
WHEREAS, the issued and outstanding capital stock of Quantum was acquired
by the ING Group on January 7, 1994 and the name of Quantum was ultimately
changed to ING Securities, Futures & Options Inc. ("ING");
WHEREAS, ProFutures entered into revised Stock Subscription Agreements
with ING as of August 1, 1998 with respect to each of ProFutures Long/Short
Growth Fund, L.P., a Delaware limited partnership ("PLSGF"), ProFutures
Diversified Fund, L.P., a Delaware limited partnership ("PDF") and Alternative
Asset Growth Fund, L.P., a Delaware limited partnership ("AAGF");
WHEREAS, ProFutures entered into a Stock Subscription Agreement with
respect to ProFutures Strategic Allocation Trust, a Delaware business trust
("PSAT"), as of August 31, 2000;
WHEREAS, ING sold certain customer accounts and related assets and
liabilities to ABN as of April 30, 2001;
WHEREAS, the parties desire to enter desire to enter into this Agreement
to reflect (a) that the respective rights and duties hereunder shall belong to
ABN, and (b) the current terms of the stock subscription obligation of ABN;
WHEREAS, pursuant to separate customer agreements (the "Brokerage
Agreement"), ABN is the futures commission merchant for each of PLSGF, PDF,
AAGF and PSAT (collectively, the "Funds");
WHEREAS, ProFutures is obligated by the Agreement of Limited Partnership
of PDF, as amended and restated on December 1, 1993 (the "PDF Agreement of
Limited Partnership"), to maintain a minimum net worth equal to: (i) the lesser
of $250,000 or 15% of the aggregate initial capital contributions of any
limited partnerships for which it acts as general partner capitalized at
$2,500,000 or less; or (ii) 10% of the aggregate capital contributions of the
limited partners of any limited partnerships for which it acts as general
partner capitalized at greater than $2,500,000 (which includes PDF, PLSGF and
AAGF) and with respect to PSAT, the greater of $50,000 or at least 5% of the
total contributions to PSAT (collectively, the "Net Worth Requirement");
WHEREAS, ProFutures has the responsibility for determining the adequacy of
its net worth and the application of this Agreement towards the Net Worth
Requirement; and
WHEREAS, ABN has agreed to subscribe for stock of ProFutures to enable
ProFutures to continue to meet the Net Worth Requirement.
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NOW, THEREFORE, in consideration of the mutual promises made herein and
other good and valuable consideration, the parties hereto agree as follows:
1. Purchase of Shares. On the date hereof and continuing on a regular
is as agreed upon by the parties, ABN and ProFutures shall determine the
aggregate amount of the subscription for shares of ProFutures' common stock
required to enable ProFutures to continue to meet the Net Worth Requirement.
Based upon such determination (as confirmed in writing in the form attached as
Exhibit A, each executed original of which is incorporated herein by
reference), ABN will subscribe for the total subscription required for
ProFutures to meet the Net Worth Requirement; provided, that in no event shall
the total aggregate subscription with respect to the PSAT and PLSGF exceed $7
million; and provided further that in no event shall the total aggregate
subscription with respect to PDF and AAGF exceed $7 million. The purchase
price for the shares of common stock subscribed for by ABN thereupon shall be
equal to book value per share as determined by an independent certified public
accountant selected and paid by ProFutures on the date(s) this obligation is
met, but in no event less than $.01 per share. In the event that any one of
the Funds both exceeds its Trading Suspension Level and, in fact, exhausts all
its assets to satisfy obligations of such Fund, the subscription required for
ProFutures to satisfy the Net Worth Requirement shall be callable by ProFutures
on demand; provided, however, that: (a) ProFutures shall use its own capital
first to meet the Net Worth Requirement; and (b) any such demand shall relate
only to capital deficiencies resulting solely from the ordinary, lawful and
necessary operations and activities of such Fund which cause ProFutures' net
worth to fall below the Net Worth Requirement. The parties expressly
acknowledge that, unless otherwise agreed in writing by both parties in their
sole and absolute discretion as to other specific projects or activities, ABN
shall not have to subscribe to satisfy capital deficiencies resulting from
activities and operations of ProFutures other than those associated with one of
the Funds. Payment for the subscription called shall be made by wire transfer
within thirty (30) days after the date of call. Upon payment, ProFutures shall
issue to ABN that number of shares for which full consideration has been paid.
ProFutures shall notify ABN promptly if a Fund reaches the Trading Suspension
Level (as set forth in such Fund's Agreement of Limited Partnership or
Declaration of Trust and Trust Agreement, as the case may be), which notice
shall be sent pursuant to Section 14 hereof and addressed to both ABN's General
Counsel and Chief Financial Officer.
2. Share Rights. Upon issuance, all shares of ProFutures' common stock
shall be fully paid and non-assessable and shall entitle the holder to all
rights applicable to such shares.
3. Computations. For purposes of meeting the Net Worth Requirement, all
subscriptions for common stock shall be carried at face amount without deduction
or discount. Any interests in the Funds owned by ProFutures or any of
ProFutures' interests in other entities of which it is the general partner or
managing owner shall not be included in the computation of its net worth for
compliance with the Net Worth Requirements.
4. Lower Net Worth. In the event that, at any time, the Net Worth
Requirement is amended pursuant thereto so that the Net Worth Requirement for
ProFutures is lowered, ProFutures shall promptly notify ABN and upon demand by
ABN effect a reduction in its net worth (but not below that required by the PDF
Agreement of Limited Partnership) by cancellation of such excess subscription
amount in appropriate fashion.
5. ProFutures Activities. ProFutures agrees, for so long as this
Agreement is in effect, not to engage in any activities unrelated to its
current activities of being: (a) a commodity trading advisor; (b) general
partner of PLSGF; (c) general partner of AAGF; (d) general partner of PDF;
(e) managing owner of PSAT; (f) engaged in a similar activity involving ABN or
an associated company thereof; and (g) an introducing broker, without the
consent of ABN. Such undertaking shall include ProFutures' best efforts to
conserve capital and avoid expenses to the extent feasible to minimize the need
of ProFutures to call the subscription, especially as it relates to the Net
Worth Requirement attributable to the Funds. ProFutures also agrees to
cooperate in good faith with ABN in the conduct of its affairs including,
without limitation, its full cooperation in responding to any reasonable
request for information by ABN.
6. Bank Holding Company Act. In the event this subscription amount is
called by ProFutures with respect to a Fund, ProFutures agrees to operate such
Fund in compliance with the Bank Holding Company Act of 1956, as amended (the
"Act"), liquidating any positions that, under the Act, may not be held by such
Fund. ProFutures and ABN acknowledge and agree that such positions shall be
liquidated in a commercially reasonable manner consistent with ProFutures'
fiduciary duties to such Funds.
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7. ABN's Activities. ABN hereby agrees that it shall: (a) not purchase
or otherwise acquire any units of limited partnership interest or beneficial
interest of a Fund; (b) provide all information which in the opinion of counsel
for ProFutures is required for ProFutures to comply with federal and state
securities and tax laws; and (c) cooperate in good faith with ProFutures in the
conduct of its affairs.
8. Amendments; Assignments. No change or modification to this Agreement
shall be effective unless the same shall be in writing and signed by each of
the parties hereto. However, this Agreement may not be assigned by either
party without the prior written consent of the other, and any attempted
assignment without such consent shall be void. No change in ownership of
either party shall in any way affect its obligation hereunder or in any related
agreements.
9. Third Party Beneficiaries. Third party beneficiary rights, if any,
under this Agreement are expressly limited to the limited partners or
unitholders, as the case may be, of a Fund, to the Net Worth Requirement for
the period commencing on the date of this Agreement until the termination of
this Agreement.
10. Term. This Agreement shall continue in effect for a period of one (1)
year from the date of this Agreement and shall be automatically renewed for
additional one (1) year terms. Notwithstanding the foregoing, either party may
terminate this Agreement at anytime after having given the other party at least
sixty (60) days prior written notice of its intent to terminate. In the event
a Fund terminates ABN as its clearing broker, this Agreement will terminate on
the same date as the relevant Brokerage Agreement terminates. In the event that
ABN terminates the Brokerage Agreement and ceases to serve as the clearing
broker to a Fund, or the Brokerage Agreement expires, this Agreement will
continue for up to thirty (30) days after the date such Brokerage Agreement
terminates or expires with respect to such Fund; provided, that ProFutures
shall provide ABN with copies of the daily statements from such Fund's other
clearing broker(s) during the period that ABN is not the clearing broker and
this Agreement is still in effect.
11. Information Requirements of ProFutures. During the term of this
Agreement, ProFutures shall promptly furnish to ABN the following:
(a) copies of all regulatory notices, complaints, legal actions or
proceedings, and other claims involving, relating to or against ProFutures or
against any Fund including, without limitation, claims by any limited partner
a unitholder, as the case may be, of a Fund;
(b) upon request by ABN, copies of the following financial statements for
any Fund: (i) monthly unaudited balance sheets and income statements; (ii)
monthly asset reports for all assets regardless of where located; (iii) annual
audited financial statements and any other interim audits available; and (iv)
copies of statements from the other holders of such Fund's assets when they are
received;
(c) upon request by ABN, copies of the following financial statements for
ProFutures: (i) quarterly and annual unaudited balance sheets and income
statements; and (ii) any audited statements available; and
(d) upon request by ABN, copies of marketing materials used in connection
with any Fund concurrent with their use.
ABN shall have the right to review the books and records of ProFutures
(excluding any information on its trading systems), at its office on reasonable
notice during normal business hours, and subject to ABN's maintaining strict
confidentiality as to the information so reviewed.
12. Other Conditions. In the event ProFutures shall voluntarily file (or
have involuntarily filed against it) a petition seeking protection from
creditors pursuant to the United States Bankruptcy Code, as amended (the
"Code"), or be subjected to the supervision of a receiver appointed by a state
or federal court of competent jurisdiction, and any debtor in possession,
trustee or receiver shall subsequently make a call upon ABN for any cash
contributions under this Agreement, the parties hereto specifically agree that
ABN shall be required to contribute such cash to ProFutures as is required to
satisfy the Net Worth Requirement only upon ProFutures' transfer (free and clear
of all liens and encumbrances) of such assets as are held in the name of
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ProFutures having a fair market value equal to, or greater than, the value of
the purchase price required of ABN by such debtor in possession, trustee or
receiver. Such transfer of assets shall be in lieu of ProFutures' issuance of
shares in exchange for cash; and further provided, that the transfer of such
assets to ABN shall be first approved by a United States Bankruptcy Court
Judge, or the court officer having jurisdiction over any appointed receiver,
and ABN shall be awarded fee simple ownership and possession of such assets
pursuant to Section 363 of the Code.
13. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware applicable to contracts
made in that state without reference to its conflict of laws provisions.
14. Notices. Any notices required or desired to be given under this
Agreement shall be given in writing and shall be effective when given
personally on the date delivered or, when given by mail, overnight courier or
telefacsimile (provided receipt of the latter is orally confirmed), upon the
date of receipt, addressed as follows (or to such other address as the party
entitled to notice shall hereafter designate in accordance with the terms
hereof):
If to ProFutures:
ProFutures, Inc.
11612 Bee Cave Road - Suite 100
Austin, Texas 78738
Attn: Gary D. Halbert, President
If to ABN:
ABN AMRO Incorporated
208 S. LaSalle
Chicago, Illinois 60604
Attn: Ben A. Witt, President
15. Entire Agreement. This Agreement contains the entire understanding of
the parties with respect to the matters covered hereby. All prior subscription
agreements and concomitant obligations of the parties and ING are superceded by
this Agreement.
IN WITNESS WHEREOF, the parties have duly executed this Agreement under
seal as of the date first above written.
ABN AMRO INCORPORATED
By: /s/ Allan Zavarro
--------------------------------
Name:Allan Zavarro
Title: Senior Managing Director
PROFUTURES, INC.
By: /s/ Gary D. Halbert, President
--------------------------------
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EXHIBIT A
ABN AMRO INCORPORATED
208 S. LaSalle
Chicago, Illinois
April 30, 2001
Gary Halbert, President
ProFutures, Inc.
11612 Bee Cave Road - Suite 100
Austin Texas 78738
Dear Mr. Halbert:
This is to confirm to ProFutures, Inc. the obligation of the undersigned
ABN AMRO Incorporated ("ABN") pursuant to the April 30, 2001 Stock Subscription
Agreement (as amended from time to time, the "Agreement") between ProFutures,
Inc. ("ProFutures") and ABN, as outlined below. As of March 31, 2001, the
aggregate relevant capital contributions by the limited partners or
unitholders, as the case may be, of the following funds is as follows:
ProFutures Strategic Allocation Trust $ 1,889,200.77
ProFutures Long/Short Growth Fund, L.P. $23,192,851.05
ProFutures Diversified Fund, L.P. $35,094,366.91
Alternative Asset Growth Fund, L.P. $ 7,595,016.91
Aggregate $67,771,435.64
Pursuant to the Agreement, accordingly, ABN hereby subscribes to purchase
42,680 shares of ProFutures (at $145.16 per share), being that number of shares
which will enable ProFutures to maintain its Net Worth Requirement as defined
in the Agreement. It is our understanding under the Agreement that such
subscription will be called only if and subject to the conditions as set forth
in the Agreement occur. This subscription commitment supersedes all prior
subscription commitments pursuant to the Agreement.
ABN AMRO INCORPORATED
By: /s/ Allan Zavarro
--------------------------------
Name:Allan Zavarro
Title: Senior Managing Director
ADKNOWLEDGED:
PROFUTURES, INC.
By: /s/ Gary D. Halbert, President
--------------------------------
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