March 26, 2004
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, 2003.
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, 2003
--------------
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 [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporation by reference in Part III of this Form 10-K or any amendment to
this Form 10-K.
[X]
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act).
Yes [ ] No [X]
State the aggregate market value of the voting and non-voting stock held by
non-affiliates computed by reference to the price at which the stock was
last sold, or the average bid and asked prices of such stock, as of the last
business day of the registrant's most recently completed second fiscal
quarter. (See definition of affiliate in Rule 405, 17 CFR 230.405.)
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. Several 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) 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., Clarke Capital
Management, Inc. 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.
Beacon was terminated as of July 31, 2003 and was replaced with Clarke
Capital Management, Inc. effective September 1, 2003.
Clarke Capital Management, Inc. (Clarke)
----------------------------------------
Clarke is a diversified, systematic (trend-following) Advisor trading in
several programs. The Partnership selected Clarke's "Millennium" program.
The Millennium program currently trades approximately 83 domestic and
international commodity interests. 24 of these are either long or short
interest rate contracts reflecting interest rates in Europe, the U.S.,
Canada, Japan and Australia. The balance of the commodity interests
followed are currencies, grains, softs, metals, meats and fuels both
foreign and domestic. The number of models used in this program is 27.
Unlike any of Clarke's other programs, the Millennium Program uses several
very long term models among the 27 in its portfolio. These very long term
models generally produce larger profits per trade, but lower profits per
day than shorter models. When used in a portfolio with shorter time frame
models, as is the case here, they can produce smoother overall equity
curves even though these models generally give much more room to a
position before exiting. Clients of the Millennium Program should be
aware that there will be times when there is significant correlation among
global interest rates; possibly in an adverse direction to positions held
in a client's account. Clients of the Millennium Program should be aware
that this factor alone, although there are others, will lead to periods of
extreme volatility and possibly very large drawdowns in a client's equity.
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.
(d) Fees, Compensation and Expenses
-------------------------------
The Partnership pays the General Partner a monthly management fee equal
to 1/6 of 1% (2% annually) of month-end Net Assets (as defined in the
Limited Partnership Agreement).
The Partnership has advisory contracts with several trading advisors.
Certain Advisors are 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, the Advisors receive quarterly incentive
fees ranging from 20% to 25% 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)
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.
(j) Available Information
---------------------
The Partnership is an electronic filer with the Securities and Exchange
Commission (SEC). The SEC maintains an Internet Site that contains
reports, proxy and information statements, and other information regarding
issuers that file electronically with the SEC (http://www.sec.gov). The
General Partner will voluntarily provide electronic or paper copies of
this filing free of charge upon request.
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 fourth quarter of the fiscal year
ended December 31, 2003 through the solicitation of proxies or otherwise.
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,
2003 was:
General Partner's Capital 3
Limited Partners' Capital 483
At the commencement of trading on November 20, 1997 there were 38 Partners
holding 3,044 Units. At December 31, 2003 there were 483 Limited Partners
holding 7,675 Units, and 535 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 2003, 2002, 2001, 2000 and 1999.
2003
----
Realized Gains (Losses) $ 1,655,884
Change in Unrealized Gains (Losses)
on Open Contracts (375,278)
Interest Income 99,408
General Partner Management Fee 205,740
Advisor Management Fees 90,002
Advisor Incentive Fees 178,562
Net Income (Loss) 550,457
General Partner Capital 66,976
Limited Partner Capital 8,882,156
Partnership Capital 8,949,132
Net Income (Loss) Per Limited and
General Partner Unit* 56.67
Net Asset Value Per Unit At
End of Year 1,090.08
2002
----
Realized Gains (Losses) $ 2,049,049
Change in Unrealized Gains (Losses)
on Open Contracts 327,418
Interest Income 183,974
General Partner Management Fee 232,242
Advisor Management Fees 116,644
Advisor Incentive Fees 467,596
Net Income (Loss) 1,336,037
General Partner Capital 63,353
Limited Partner Capital 10,973,670
Partnership Capital 11,037,023
Net Income (Loss) Per Limited and
General Partner Unit* 115.07
Net Asset Value Per Unit At
End of Year 1,031.12
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
----------------
* Based on weighted average units outstanding during the year.
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations.
Critical Accounting Policies
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to
make estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosures of contingent assets and liabilities at
the date of the financial statements and the reported amounts of income
and expense during the reporting period. Management believes that the
estimates utilized in preparing the financial statements are reasonable
and prudent; however, actual results could differ from those estimates.
The Partnership's significant accounting policies are described in detail
in Note 1 to the Financial Statements.
The Partnership records all investments at fair value in its financial
statements, with changes in fair value reported as a component of realized
and change in unrealized trading gain (loss) in the Statements of
Operations. Generally, fair values are based on market prices; however,
in certain circumstances, estimates are involved in determining fair value
in the absence of an active market closing price (e.g. swap and forward
contracts which are traded in the inter-bank market).
(a) Liquidity and Capital Resources
-------------------------------
Substantially all of the Partnership's assets at December 31, 2003 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 years ended
December 31, 2003 and 2002 consisted of the following:
1st Qtr. 2nd Qtr. 3rd Qtr. 4th Qtr.
2003 2003 2003 2003
-------- -------- -------- --------
Gain (loss) from
trading $ 345,035 $ (6,370) $ (78,014) $ 769,477
Net investment (loss) (80,153) (79,619) (94,481) (225,418)
Net income (loss) 264,882 (85,989) (172,495) 544,059
Net income (loss)
per Unit 25.09 (8.50) (18.38) 61.81
Increase (decrease)
in Net Asset Value
per Unit 23.10 (9.53) (16.51) 61.90
Net Asset Value per
Unit at end of
period 1,054.22 1,044.69 1,028.18 1,090.08
1st Qtr. 2nd Qtr. 3rd Qtr. 4th Qtr.
2002 2002 2002 2002
-------- -------- -------- --------
Gain (loss) from
trading $ 600,284 $ 1,099,644 $ 533,953 $ (154,339)
Net investment (loss) (273,511) (144,068) (99,852) (226,074)
Net income (loss) 326,773 955,576 434,101 (380,413)
Net income (loss)
per Unit 25.78 80.45 39.22 (35.14)
Increase (decrease)
in Net Asset Value
per Unit 25.10 80.76 39.56 (34.48)
Net Asset Value per
Unit at end of
period 945.28 1,026.04 1,065.60 1,031.12
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, 2003
----------------------------
2003 had net income of $550,457 or $56.67 per Unit. At December 31, 2003,
partners' capital totaled $8,949,132, a net decrease of $2,087,891 from
December 31, 2002 including capital redemptions of $2,638,348. Net Asset
Value per Unit at December 31, 2003 amounted to $1,090.08 as compared to
$1,031.12 at December 31, 2002, an increase of $58.96 or 5.72%.
Fourth Quarter 2003
-------------------
The economy continued to grow in the fourth quarter, though at a slower
pace than the third quarter. The futures markets were very volatile, with
many trends underway that the traders were able to capitalize on.
In October 2003, the Partnership had a gain of 2.98%. There were large
gains in stock indexes, agricultural commodities and foreign currencies,
with smaller gains in base metals. There were losses in energy and
interest rates.
In November 2003, the Partnership had a small loss of 0.36%. There were
some gains related to stock indexes, foreign currencies and precious
metals. However, these were offset by losses in most of the other
sectors.
In December 2003, the Partnership had a gain of 3.33%. There were gains
in stock indexes and foreign currencies, with smaller gains in metals.
There were some losses in agricultural commodities and energy.
Overall, the Partnership had a total return of 6.02% for the quarter and
5.72% for the year ended December 31, 2003. The majority of the
Partnership's trading gains for the fourth quarter 2003 were in foreign
currencies and the largest loss was in energy.
Third Quarter 2003
------------------
The economy continued to improve in the third quarter. The equity
markets were mostly up. Most analysts expect the economy to continue
to improve for the remainder of the year.
In July 2003, the Partnership had a loss of 4.03%. There were losses
in bonds and other interest rates, and foreign currencies. There were
gains in agricultural commodities and energy.
In August 2003, the Partnership had a gain of 0.80%. The gain was
related to stock indexes as no other types of contracts were traded
during the month.
In September 2003, the Partnership had a gain of 1.74%. There were
gains in stock indexes, agricultural commodities, foreign currencies
and interest rates. There were losses in energy and metals.
Overall, the Partnership had a total return of (1.58)% for the quarter
and (0.29)% for the nine months ended September 30, 2003. The
majority of the Partnership's trading gains for the third quarter 2003
were in stock indexes and the largest loss occurred in interest rate
futures. In September 2003, a new trader, Clarke Capital Management,
was added to the Partnership.
Second Quarter 2003
-------------------
Futures were somewhat more stable in the second quarter as compared
to the first. The war with Iraq ended, and the stock markets began
a steady climb that lasted through the end of the quarter.
In April 2003, the Partnership had a loss of 0.11%. There were gains
in grains and currencies. However, these were mostly offset by losses
in other sectors, including stock indexes.
In May 2003, the Partnership had a gain of 1.47%. There were gains
in currencies and interest rates, especially bonds and stock indexes.
There were losses in agricultural commodities, metals and energy.
In June 2003, the Partnership had a loss of 2.23%. There were losses
in agricultural commodities, bonds, metals, energy and currencies.
There were gains in stock indexes and short-term interest rates.
Overall, the Partnership's rate of return was (0.90)% for the quarter
and 1.32% for the six months ended June 30, 2003. The majority of the
Partnership's trading gains for the second quarter were in foreign
currencies and equities and the largest loss was in agricultural
commodities.
First Quarter 2003
------------------
The futures markets were volatile in the first quarter of 2003. The
looming war with Iraq caused energy prices to skyrocket. Many other
markets were choppy due to this uncertainty. Consumer confidence
dropped dramatically. The traders were able to capitalize on the
volatility in the markets.
In January 2003, the Partnership had a gain of 7.02%. There were very
large gains in the energy, foreign currencies, stock indexes, precious
and base metals, and certain agricultural commodities. The losses
were primarily limited to grains and short-term interest rates.
In February 2003, the Partnership had a gain of .45%. There were
large gains in energy, with smaller gains in currencies and interest
rates. These gains were primarily offset by losses in stock indexes
and metals.
In March 2003, the Partnership had a loss of 4.90%. There were some
small gains in stock indexes and short-term interest rates. However,
the losses in other sectors, especially energy, were far greater.
Overall, the Partnership had a total return of 2.24% for the quarter.
The majority of the Partnership's trading gains were in energy and
foreign currencies and the largest loss was in metal futures.
Year Ended December 31, 2002
----------------------------
2002 had net income of $1,336,037 or $115.07 per Unit. At December 31,
2002, partners' capital totaled $11,037,023, a net decrease of $901,649
from December 31, 2001 including capital redemptions of $2,237,686. Net
Asset Value per Unit at December 31, 2002 amounted to $1,031.12, as
compared to $920.18 at December 31, 2001, an increase of $110.94.
Fourth Quarter 2002
-------------------
The futures markets continued to be very volatile in the fourth quarter of
2002. The ongoing threat of war with Iraq, and its impact on the energy
markets, caused much of the volatility. Gold prices soared in part due to
this uncertainty, as well as uncertainty over economic prospects for the
future. The equity markets were up, for the most part, at the end of the
quarter.
The Long/Short Growth Fund started the quarter with a loss in October
of 4.05%. There were gains in stock indexes and certain agricultural
commodities. These gains were more than offset by losses in interest
rates, metals, foreign currencies and energy.
In November, the Fund lost 1.85%. The Fund had some gains in agricultural
commodities, stock indexes and base metals. However, the gains were not
enough to offset the losses in foreign currencies, energy and interest
rates.
In December, the Fund posted a gain of 2.75%. The Fund had gains in
equities, foreign currencies and interest rates. There were some
losses in certain agricultural commodities and base metals.
The Fund finished the year with a gain of 12.06%. The volatility in
the futures markets allowed some traders to capitalize on trends in
various markets.
Third Quarter 2002
------------------
The futures markets continued to be volatile in the third quarter of
2002. The equity markets suffered losses during the quarter, which
impacted the commodities markets. The looming threat of war with
Iraq also had a big impact on the markets, especially oil and gas
futures.
The Partnership started the quarter with a loss in July of (2.58)%.
There were losses in stock indexes along with losses in metals,
foreign currencies and certain of the agricultural commodities.
These losses were partially offset by gains in interest rates, and
some of the agricultural commodities.
In August, the Partnership gained 6.11%. There were gains in stock
indexes. There were also gains in grains and other agricultural
commodities, as well as interest rates. There were losses in foreign
currencies and base metals.
In September, the Partnership posted another gain of 0.47%. There
were gains in interest rates, energy and base metals. These gains
were mostly offset by losses in stock indexes, certain of the
agricultural commodities, and foreign currencies.
The Partnership had a total return of 3.86% for the quarter and 15.80%
for the nine months ended September 30, 2002. For the third quarter
2002, the majority of the Partnership's trading gains were in interest
rate futures and the largest loss was in stock index futures.
Second Quarter 2002
-------------------
The futures markets continued to be volatile in the second quarter of
2002, though there was a surge at the end of the quarter. The extreme
volatility of the equity markets, mainly on the downside, had a major
impact on the commodities markets. Many of the US and overseas stock
indexes and foreign currencies were very active. Some of this was the
result of the corporate scandals that continue to rock the markets.
The Partnership had a good second quarter, starting in April with a
gain of .56%. There was a gain in S & P 500 options, with gains in
lean hogs and corn futures. These were partially offset by losses in
the S & P 500 Index, copper futures and coffee futures.
In May, the Partnership continued its positive quarter with a gain of
5.66%. There were gains in foreign currencies, stock indexes and
precious metals. There were losses in the energy complex and some
agricultural commodities.
In June, the Partnership posted another gain of 2.16%. There were
gains in British Pounds, the S & P 500 Index, Euro futures and
EuroDollar futures. These were partially offset by losses in options
on the S & P 500, lean hogs and sugar futures.
The Partnership had a total return of 8.54% for the quarter and 11.50%
for the six months ended June 30, 2002. For the second quarter 2002,
the majority of the Partnership's trading gains were in foreign
currencies and the largest loss was in the energy markets.
First Quarter 2002
------------------
The futures markets remained choppy in the first quarter of 2002.
While the economy was showing some signs of improvement, there were
also some negative signs that caused uncertainty. The troubles in
the Middle East lead to large increases in oil and gas prices. Gold
prices also moved higher early in the quarter, but gave back some of
their gains at the end of the quarter.
In January 2002, the Partnership gained a modest 0.99%. There were
large gains in stock index, along with some smaller gains in energy
and foreign currencies. These were mostly offset by losses in
interest rates, agricultural commodities and precious metals.
In February 2002, there was another gain of 4.34%. This resulted
from gains in stock index, once again. There were also gains in
interest rates and agricultural commodities. There were some
losses incurred in energy and foreign currencies.
In March 2002, the Partnership incurred a loss of 2.51%. Again there
were profits in the stock indexes. These however were offset by
losses in foreign currencies, interest rates and agricultural
commodities. Coffee and Eurodollar futures incurred the largest
losses.
For the first quarter 2002, the majority of the Partnership's gains
came from profits in options on S&P 500 Index futures. The largest
loss for the quarter was from coffee.
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%.
(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.
Item 9A. Controls and Procedures.
ProFutures, Inc., as General Partner of ProFutures Long/Short Growth Fund,
L.P., with the participation of the General Partner's President and Chief
Financial Officer, has evaluated the effectiveness of the design and
operation of its disclosure controls and procedures (as defined in the
Securities Exchange Act of 1934 Rules 13a-15(e) or 15d-15(e)) with respect
to the Partnership as of the end of the period covered by this annual
report. Based on their evaluation, the President and Chief Financial
Officer have concluded that these disclosure controls and procedures are
effective. There were no changes in the General Partner's internal
control over financial reporting applicable to the Partnership identified
in connection with the evaluation required by paragraph (d) of Exchange
Act Rules 13a-15 or 15d-15 that occurred during the last fiscal quarter
that have materially affected, or are reasonably likely to materially
affect, internal control over financial reporting applicable to the
Partnership.
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.
The Board of Directors of ProFutures, Inc., in its capacity as the audit
committee for the Partnership, has determined that Debi B. Halbert
qualifies a an "audit committee financial expert" in accordance with the
applicable rules and regulations of the Securities and Exchange
Commission. She is not independent of management.
The Partnership has adopted a Code of Ethics that applies to the
Partnership and its affiliates as well as the Executive Officers of
ProFutures, Inc. The Partnership's Code of Ethics is attached hereto as
an Exhibit.
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 1/6 of 1% (2 annually) of
month-end Net Assets. Total management fees earned by the General Partner
for 2003 aggregated $205,740.
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, 2003,
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.
Item 14. Principal Accounting Fees and Services.
Arthur F. Bell, Jr. & Associates, L.L.C. billed the Partnership aggregate
fees for services rendered to the Partnership for the last two fiscal
years as follows:
2003 2002
---------- ----------
Audit Fees (1) $ 32,863 $ 30,794
Audit-Related Fees (2) $ 11,462 $ 10,221
Tax Fees (3) $ 4,001 $ 5,905
All Other Fees (4) $ 2,600 $ 2,400
(1) Audit fees relate to the annual audit, quarterly reviews, and
assistance with and review of documents filed with the Securities
and Exchange Commission.
(2) Audit-Related Fees relate to the monthly recalculation of net asset
value and net asset value per unit, from information provided by the
General Partner, and consultation on the preparation of month-end
account statements provided to each partner.
(3) Tax Fees relate to the preparation of the U.S. Partnership and
applicable state information tax returns.
(4) All Other Fees relate to the preparation of performance records and
related footnotes for the Partnership and each Advisor.
The Board of Directors of ProFutures, Inc., in its capacity as the audit
committee for the Partnership, approved all of the services described
above. The audit committee has determined that the payments made to its
independent accountant for non-audit services are compatible with
maintaining such auditor's independence.
The audit committee explicitly pre-approves all audit and non-audit
services and all engagement fees and terms, except as otherwise permitted
by regulation.
PART IV
Item 15. 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).
10.7 Form of Amended and Restated Stock Subscription Agreement by
and between ABN AMRO Incorporated and ProFutures, Inc. dated
May 20, 2002 (filed as an exhibit to the June 30, 2002 Form
10-Q).
(b) Reports on Form 8-K
-------------------
None.
(c) Exhibits
--------
14.1 Code of Ethics.
31.01 Certification of Gary D. Halbert, President, pursuant to Rules
13a-14 and 15d-14 of the Securities Exchange Act of 1934.
31.02 Certification of Debi B. Halbert, Chief Financial Officer, pursuant
to Rules 13a-14 and 15d-14 of the Securities Exchange Act of 1934.
32.01 Certification of Gary D. Halbert, President, pursuant to 18 U.S.C.
Section 1350 as enacted by Section 906 of The Sarbanes-Oxley Act
of 2002.
32.02 Certification of Debi B. Halbert, Chief Financial Officer, pursuant
to 18 U.S.C. Section 1350 as enacted by Section 906 of The
Sarbanes-Oxley Act of 2002.
(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)
March 26, 2004 By /s/ GARY D. HALBERT
- ---------------------------- -----------------------------------------
Date Gary D. Halbert, President and Director
ProFutures, Inc.
General Partner
March 26, 2004 By /s/ DEBI B. HALBERT
- ---------------------------- -----------------------------------------
Date Debi B. Halbert, Chief Financial Officer,
Treasurer and Director
ProFutures, Inc.
General Partner
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant in the capacities and on the dates indicated.
March 26, 2004 By /s/ GARY D. HALBERT
- -------------------------- -----------------------------------------
Date Gary D. Halbert, President and Director
ProFutures, Inc.
General Partner
March 26, 2004 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 F-3
Condensed Schedule of Investments F-4
Statements of Operations F-5
Statements of Changes in Partners' Capital (Net Asset Value) F-6
Notes to Financial Statements F-7 - F-11
F-1
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, 2003 and 2002,
including the December 31, 2002 condensed schedule of investments, and the
related statements of operations and changes in partners' capital (net asset
value) for the years ended December 31, 2003, 2002 and 2001. 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, 2003 and 2002, and the results of its operations
and the changes in its net asset values for the years ended December 31, 2003,
2002 and 2001, 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, 2004
F-2
PROFUTURES LONG/SHORT GROWTH FUND, L.P.
STATEMENTS OF FINANCIAL CONDITION
December 31, 2003 and 2002
-------------
2003 2002
---- ----
ASSETS
Equity in broker trading accounts
Cash $ 9,431,077 $10,788,323
Net option premiums (received) (96,000) (199,000)
Unrealized gain on open contracts 325,895 701,173
----------- -----------
Deposits with broker 9,660,972 11,290,496
Cash 3,490 12,710
----------- -----------
Total assets $ 9,664,462 $11,303,206
=========== ===========
LIABILITIES
Accounts payable $ 13,775 $ 17,609
Commissions and other trading fees
on open contracts 4,193 10,743
Incentive fees payable 158,749 153,011
Management fees payable 31,412 46,257
Redemptions payable 507,201 38,563
----------- -----------
Total liabilities 715,330 266,183
----------- -----------
PARTNERS' CAPITAL (Net Asset Value)
General Partner - 61 units outstanding
at December 31, 2003 and 2002 66,976 63,353
Limited Partners - 8,149 and 10,643 units
outstanding at December 31, 2003 and 2002 8,882,156 10,973,670
----------- -----------
Total partners' capital
(Net Asset Value) 8,949,132 11,037,023
----------- -----------
$ 9,664,462 $11,303,206
=========== ===========
See accompanying notes.
F-3
PROFUTURES LONG/SHORT GROWTH FUND, L.P.
CONDENSED SCHEDULE OF INVESTMENTS
December 31, 2003
------------
LONG FUTURES CONTRACTS
- ----------------------
% of Net
Description Value Asset Value
----------- ----- -----------
Agricultural $ 27,330 0.30 %
Currency 201,070 2.25 %
Energy 8,020 0.09 %
Interest rate 5,830 0.07 %
Metal 73,905 0.82 %
--------- -------
Total long futures contracts $ 316,155 3.53 %
--------- -------
SHORT FUTURES CONTRACTS
- -----------------------
% of Net
Description Value Asset Value
----------- ----- -----------
Agricultural $ (1,260) (0.01)%
--------- -------
Total short futures contracts $ (1,260) (0.01)%
--------- -------
Total futures contracts $ 314,895 3.52 %
========= =======
WRITTEN OPTIONS ON FUTURES CONTRACTS
- ------------------------------------
% of Net
Description Value Asset Value
----------- ----- -----------
Stock index options $ (85,000) (0.95)%
--------- =======
Total written options on futures contracts
(premiums received - $96,000) $ (85,000) (0.95)%
========= =======
See accompanying notes.
F-4
PROFUTURES LONG/SHORT GROWTH FUND, L.P.
STATEMENTS OF OPERATIONS
For the Years Ended December 31, 2003, 2002 and 2001
-------------
2003 2002 2001
---- ---- ----
TRADING GAINS (LOSSES)
Gain (loss) from trading
Realized $ 1,655,884 $ 2,049,049 $ 2,155,466
Change in unrealized (375,278) 327,418 (463,346)
Brokerage commissions (250,478) (296,925) (254,563)
------------ ------------ ------------
Total trading gains 1,030,128 2,079,542 1,437,557
NET INVESTMENT INCOME (LOSS)
Income
Interest income 99,408 183,974 438,669
------------ ------------ ------------
Expenses
Incentive fees 178,562 467,596 514,558
Management fees 295,742 348,886 377,269
Operating expenses 104,775 110,997 119,328
------------ ------------ ------------
Total expenses 579,079 927,479 1,011,155
------------ ------------ ------------
Net investment (loss) (479,671) (743,505) (572,486)
------------ ------------ ------------
NET INCOME $ 550,457 $ 1,336,037 $ 865,071
============ ============ ============
NET INCOME PER GENERAL AND
LIMITED PARTNER UNIT
(based on weighted average
number of units outstanding
during the year of 9,713,
11,611 and 13,857, respectively) $ 56.67 $ 115.07 $ 62.43
============ ============ ============
INCREASE IN NET ASSET VALUE
PER GENERAL AND LIMITED
PARTNER UNIT $ 58.96 $ 110.94 $ 61.44
============ ============ ============
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, 2003, 2002 and 2001
-------------
Total Partners' Capital
Number of ------------------------------------
Units General Limited Total
--------- ------- ------- -----
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 income for the year
ended December 31, 2002 6,816 1,329,221 1,336,037
Redemptions (2,270) 0 (2,237,686) (2,237,686)
------ -------- ------------ ------------
Balances at
December 31, 2002 10,704 63,353 10,973,670 11,037,023
Net income for the year
ended December 31, 2003 3,623 546,834 550,457
Redemptions (2,494) 0 (2,638,348) (2,638,348)
------ -------- ------------ ------------
Balances at
December 31, 2003 8,210 $ 66,976 $ 8,882,156 $ 8,949,132
====== ======== ============ ============
Net Asset Value Per Unit
------------------------
December 31,
2003 2002 2001
---- ---- ----
$1,090.08 $1,031.12 $ 920.18
========= ========= =========
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. The Partnership engages in the speculative
trading of 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.
D. Brokerage Commissions
Brokerage commissions include other trading fees and are charged
to expense when contracts are opened.
F-7
PROFUTURES LONG/SHORT GROWTH FUND, L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
-------------
Note 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
-----------------------------------------------------------
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. 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.
G. 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."
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,
2003, the capital accounts of the General Partner and/or its
principals and affiliates totaled $583,537.
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), the Partnership's broker,
whereby ABN has subscribed to purchase (up to $7,000,000 subject to
the conditions set forth in the subscription agreement as amended
effective May 20, 2002) the number of shares of common stock of
ProFutures, Inc. necessary to maintain the General Partner net worth
requirements.
F-8
PROFUTURES LONG/SHORT GROWTH FUND, L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
-------------
Note 2. GENERAL PARTNER (CONTINUED)
---------------------------
The Partnership pays the General Partner a monthly management fee
equal to 1/6 of 1% (2% annually) of month-end Net Assets (as defined
in the Limited Partnership Agreement).
Total management fees earned by ProFutures, Inc. for the years ended
December 31, 2003, 2002 and 2001 were $205,740, $232,242 and $251,199,
respectively. Management fees payable to ProFutures, Inc. as of
December 31, 2003 and 2002 were $15,787 and $18,490, respectively.
Note 3. COMMODITY TRADING ADVISORS
--------------------------
The Partnership has advisory contracts with several commodity trading
advisors to furnish investment management services to the Partnership.
Certain advisors receive management fees equal to 1% annually of
Allocated Net Asset Value (as defined in each respective trading
advisory contract). In addition, the trading advisors receive
quarterly incentive fees ranging from 20% to 25% 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, 2003 and 2002, the initial margin requirement of
$1,822,556 and $2,393,246, respectively, is satisfied by the deposits
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.
F-9
PROFUTURES LONG/SHORT GROWTH FUND, L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
-------------
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.
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, 2003, the latest maturity date for open contracts is
June 2004.
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-10
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 years ended December 31,
2003 and 2002. This information has been derived from information
presented in the financial statements.
2003 2002 2003
---- ---- ----
Per Unit Performance
(for a unit outstanding throughout
the entire year)
----------------------------------
Net asset value per unit at
beginning of year $1,031.12 $ 920.18 $ 858.74
--------- --------- ---------
Income (loss) from operations:
Total trading gains (1) 108.34 174.97 102.75
Net investment (loss) (1) (49.38) (64.03) (41.31)
--------- --------- ---------
Total income from operations 58.96 110.94 61.44
--------- --------- ---------
Net asset value per unit at
end of year $1,090.08 $1,031.12 $ 920.18
========= ========= =========
Total Return 5.72 % 12.06 % 7.15 %
======= ======= =======
Supplemental Data
Ratios to average net asset value:
Expenses prior to incentive fees 3.98 % 4.03 % 4.00 %
Incentive fees 1.78 % 4.10 % 4.14 %
------- ------- -------
Total expenses 5.76 % 8.13 % 8.14 %
======= ======= =======
Net investment (loss) (2) (3.00)% (2.42)% (0.47)%
======= ======= =======
Total returns are calculated based on the change in value of a unit
during the year. An individual partner's total returns and ratios may
vary from the above total returns and ratios based on the timing of
redemptions.
---------------
(1) The net investment (loss) per unit is calculated by dividing the
net investment (loss) by the average number of units outstanding
during the year. Total trading gains is a balancing amount
necessary to reconcile the change in net asset value per unit
with the other per unit information. Such balancing amount may
differ from the calculation of total trading gains per unit due
to the timing of trading gains and losses during the year
relative to the number of units outstanding.
(2) Excludes incentive fees.
F-11
EXHIBIT 14.1
CODE OF ETHICS
--------------
This Code of Ethics (the "Code") covers the ProFutures companies, including
ProFutures, Inc., ProFutures Financial Group, Inc., ProFutures Capital
Management, Inc., as well as the public funds offered, including ProFutures
Diversified Fund, L.P., Alternative Asset Growth Fund, L.P. and ProFutures
Long/Short Growth Fund, L.P. Collectively they will be referred to as
"ProFutures". It applies to the Executive Officers (the "Covered Officers")
of ProFutures for the purpose of promoting:
Honest and ethical conduct, which includes the ethical handling of
conflicts of interest between personal and professional relationships;
Full, fair, accurate and timely disclosure in reports and documents that
ProFutures files with, or submits to the Securities and Exchange
Commission and in other public communications made by ProFutures;
Compliance with applicable laws and governmental rules and regulations;
Prompt internal reporting of violations of the Code to appropriate
personnel; and
Accountability for adherence to the Code.
Covered Officers should follow a high standard of business ethics and should
be sensitive to situations that may be potential conflicts of interest.
A conflict of interest occurs when a Covered Officer's private interest
interferes with the interests of the Fund. Each Covered Officer must not:
Use his/her personal influence or personal relationships improperly to
influence investment decisions or financial reporting by ProFutures
whereby the Covered Officer would benefit personally (directly or
indirectly) to the detriment of ProFutures;
Cause ProFutures to take action or fail to take action, for the individual
personal benefit of the Covered Officer, rather than the benefit of
ProFutures;
Use material non-public knowledge of portfolio transactions made or
contemplated for any Funds to trade personally or have others trade in
anticipation of the market effect of such transactions.
Each Covered Officer should become familiar with this Code, and any questions
with any of the provisions should be directed to the Board of Directors, the
Compliance Officer, or legal counsel. In addition, each Covered Officer:
Must affirm in writing that he/she has read and understands the Code;
Must annually thereafter affirm to the Board that he/she has complied
with the requirements of the Code;
Must not retaliate against any other Covered Officer, other officer, or
employee of ProFutures for reports of potential violations made in good
faith;
Must notify the Board of Directors, the Compliance Officer, or legal
counsel promptly if he/she knows or suspects of any violation of this
Code.
All reports and records for this Code will be considered confidential. The Code
is intended solely for internal use by ProFutures, and does not constitute an
admission, by or on behalf of ProFutures, as to any fact, circumstance or legal
conclusion.
EXHIBIT 31.01
CERTIFICATION
-------------
I, Gary D. Halbert, certify that:
1. I have reviewed this report on Form 10-K of ProFutures Long/Short
Growth Fund, L.P.;
2. Based on my knowledge, this report does not contain any untrue statement
of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects
the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and we have:
a) designed such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures and presented in this report our conclusions about the effectiveness
of the disclosure controls and procedures, as of the end of the period covered
by this report based on such evaluation; and
c) disclosed in this report any change in the registrant's internal control
over financial reporting that occurred during the registrant's most recent
fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual
report) that has materially affected, or is reasonably likely to materially
affect, the registrant's internal control over financial reporting; and
5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation of internal control over financial reporting, to
the registrant's auditors and the audit committee of the registrant's board of
directors (or persons performing the equivalent functions):
a) all significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrant's ability to record, process,
summarize and report financial information; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal control
over financial reporting.
Date: March 26, 2004
----------------------------------
/s/ Gary D. Halbert
- -----------------------------------------
Gary D. Halbert, President
ProFutures, Inc., General Partner
EXHIBIT 31.02
CERTIFICATION
-------------
I, Debi B. Halbert, certify that:
1. I have reviewed this report on Form 10-K of ProFutures Long/Short
Long/Short Growth Fund, L.P.;
2. Based on my knowledge, this report does not contain any untrue statement
of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects
the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and we have:
a) designed such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures and presented in this report our conclusions about the effectiveness
of the disclosure controls and procedures, as of the end of the period covered
by this report based on such evaluation; and
c) disclosed in this report any change in the registrant's internal control
over financial reporting that occurred during the registrant's most recent
fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual
report) that has materially affected, or is reasonably likely to materially
affect, the registrant's internal control over financial reporting; and
5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation of internal control over financial reporting, to
the registrant's auditors and the audit committee of the registrant's board of
directors (or persons performing the equivalent functions):
a) all significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrant's ability to record, process,
summarize and report financial information; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal control
over financial reporting.
Date: March 26, 2004
----------------------------------
/s/ Debi B. Halbert
- -----------------------------------------
Debi B. Halbert, Chief Financial Officer
ProFutures, Inc., General Partner
EXHIBIT 32.01
CERTIFICATION
-------------
I, Gary D. Halbert, the President of ProFutures, Inc., as general partner of
ProFutures Long/Short Growth Fund, L.P., certify that (i) the Form 10-K for the
year ended December 31, 2003 of ProFutures Long/Short Growth Fund, L.P.
fully complies with the requirements of Section 13(a) or 15(d) of the
Securities Exchange Act of 1934 and (ii) the information contained in the Form
10-K for the year ended December 31, 2003 fairly presents, in all material
respects, the financial condition and results of operations of ProFutures
Long/Short Growth Fund, L.P.
PROFUTURES LONG/SHORT GROWTH FUND, L.P.
By: ProFutures, Inc., general partner
By: /s/ Gary D. Halbert
----------------------------------
Gary D. Halbert
President
March 26, 2004
EXHIBIT 32.02
CERTIFICATION
-------------
I, Debi B. Halbert, the Chief Financial Officer of ProFutures, Inc., as general
partner of ProFutures Long/Short Growth Fund, L.P., certify that (i) the Form
10-K for the year ended December 31, 2003 of ProFutures Long/Short Growth
Fund, L.P. fully complies with the requirements of Section 13(a) or 15(d) of
the Securities Exchange Act of 1934 and (ii) the information contained in the
Form 10-K for the year ended December 31, 2003 fairly presents, in all
material respects, the financial condition and results of operations of
ProFutures Long/Short Growth Fund, L.P.
PROFUTURES LONG/SHORT GROWTH FUND, L.P.
By: ProFutures, Inc., general partner
By: /s/ Debi B. Halbert
----------------------------------
Debi B. Halbert
Chief Financial Officer
March 26, 2004