Exhibit 13.1
------------
PROFUTURES LONG/SHORT
GROWTH FUND, L.P.
ANNUAL REPORT
December 31, 2004
NATIONAL FUTURES ASSOCIATION
Chicago, Illinois 60606
Commodity Pool:
PROFUTURES LONG/SHORT GROWTH FUND, L.P.
Annual Report Pursuant to Part 4 of Chapter I of
Title 17 of the Code of Federal Regulations
For the year ended December 31, 2004
Commodity Pool Operator:
ProFutures, Inc.
11719 Bee Cave Road, Suite 200
Austin, Texas 78738
(800) 348-3601
PROFUTURES LONG/SHORT GROWTH FUND, L.P.
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TABLE OF CONTENTS
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PAGES
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Affirmation of the Commodity Pool Operator 1
Report of Independent Registered Public Accounting Firm 2
Financial Statements
Statements of Financial Condition 3
Condensed Schedules of Investments 4
Statements of Operations 5
Statements of Changes in Partners' Capital (Net Asset Value) 6
Notes to Financial Statements 7 - 11
PROFUTURES LONG/SHORT GROWTH FUND, L.P.
AFFIRMATION OF THE COMMODITY POOL OPERATOR
---------------
To the best of the knowledge and belief of the undersigned, the information
contained in the Annual Report for the year ended December 31, 2004 is
accurate and complete.
/s/ GARY D. HALBERT
---------------------------------------
Gary D. Halbert, President
ProFutures, Inc.
PROFUTURES LONG/SHORT GROWTH FUND, L.P.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
-------------------------------------------------------
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., including the condensed schedules of
investments, as of December 31, 2004 and 2003, and the related statements of
operations and changes in partners' capital (net asset value) for the years
ended December 31, 2004, 2003 and 2002. 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 the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. The Partnership is not
required to have, nor were we engaged to perform, an audit of its internal
control over financial reporting. Our audit included consideration of internal
control over financial reporting as a basis for designing audit procedures
that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Partnership's internal
control over financial reporting. Accordingly, we express no such opinion. 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, 2004 and 2003, and the results of its operations
and the changes in its net asset values for the years ended December 31, 2004,
2003 and 2002, in conformity with U.S. generally accepted accounting
principles.
/s/ ARTHUR F. BELL, JR. & ASSOCIATES, L.L.C.
Hunt Valley, Maryland
March 26, 2005
PROFUTURES LONG/SHORT GROWTH FUND, L.P.
STATEMENTS OF FINANCIAL CONDITION
December 31, 2004 and 2003
---------------
2004 2003
---- ----
ASSETS
Equity in broker trading accounts
Cash $ 7,486,415 $ 9,431,077
Option premiums (received) (60,712) (96,000)
Unrealized gain on open contracts 295,523 325,895
-------------------- --------------------
Deposits with broker 7,721,226 9,660,972
Cash 3,339 3,490
-------------------- --------------------
Total assets $ 7,724,565 $ 9,664,462
==================== ====================
LIABILITIES
Accounts payable $ 20,134 $ 13,775
Commissions and other trading fees
on open contracts 3,762 4,193
Incentive fees payable 71,102 158,749
Management fees payable 25,575 31,412
Redemptions payable 194,405 507,201
-------------------- --------------------
Total liabilities 314,978 715,330
-------------------- --------------------
PARTNERS' CAPITAL (Net Asset Value)
General Partner - 61 units outstanding
at December 31, 2004 and 2003 71,243 66,976
Limited Partners - 6,329 and 8,149 units
outstanding at December 31, 2004 and 2003 7,338,344 8,882,156
-------------------- --------------------
Total partners' capital
(Net Asset Value) 7,409,587 8,949,132
-------------------- --------------------
$ 7,724,565 $ 9,664,462
==================== ====================
See accompanying notes.
-3-
PROFUTURES LONG/SHORT GROWTH FUND, L.P.
CONDENSED SCHEDULES OF INVESTMENTS
December 31, 2004 and 2003
---------------
2004 2003
----------------------------- -----------------------------
% of Net % of Net
LONG FUTURES CONTRACTS Value Asset Value Value Asset Value
- ---------------------- ----- ----------- ----- -----------
Agricultural $ 76,976 1.04% 27,330 $ 0.30%
Currency (29,489) (0.40)% 201,070 2.25%
Energy 0 0.00% 8,020 0.09%
Interest rate 14,110 0.19% 5,830 0.07%
Metal 139,404 1.88% 73,905 0.82%
Stock index 144,914 1.96% 0 0.00%
------------ ------- ----------- --------
Total long futures contracts $ 345,915 4.67% $ 316,155 3.53%
============ ======= =========== =========
SHORT FUTURES CONTRACTS
- -----------------------
Agricultural $ 335 0.00% $ (1,260) (0.01)%
Energy 61,300 0.83% 0 0.00%
Interest rate 2,430 0.03% 0 0.00%
Metal (137,157) (1.85)% 0 0.00%
------------ ------- ----------- --------
Total short futures contracts $ (73,092) (0.99)% $ (1,260) (0.01)%
------------ ------- ----------- --------
Total futures contracts $ 272,823 3.68% $ 314,895 3.52%
============ ======= =========== ========
WRITTEN OPTIONS ON FUTURES CONTRACTS
Stock index options $ (37,700) (0.51)% $ (85,000) (0.95)%
Currency options (312) (0.00)% 0 0.00%
------------ ------- ----------- --------
Total written options on futures contracts
(premiums received -$60,712 and
$96,000) $ (38,012) (0.51)% $ (85,000) (0.95)%
============ ======= =========== =========
See accompanying notes.
-4-
PROFUTURES LONG/SHORT GROWTH FUND, L.P.
STATEMENTS OF OPERATIONS
For the Years Ended December 31, 2004, 2003 and 2002
---------------
2004 2003 2002
---- ---- ----
TRADING GAINS (LOSSES)
Gain (loss) from trading
Realized $ 1,183,028 $ 1,655,884 $ 2,049,049
Change in unrealized (30,372) (375,278) 327,418
Brokerage commissions (222,228) (250,478) (296,925)
------------------- ------------------- ------------------
Total trading gains 930,428 1,030,128 2,079,542
------------------- ------------------- ------------------
NET INVESTMENT INCOME (LOSS)
Income
Interest income 108,254 99,408 183,974
------------------- ------------------- ------------------
Expenses
Incentive fees 268,067 178,562 467,596
Management fees 211,500 295,742 348,886
Operating expenses 119,525 104,775 110,997
------------------- ------------------- ------------------
Total expenses 599,092 579,079 927,479
------------------- ------------------- ------------------
Net investment (loss) (490,838) (479,671) (743,505)
------------------- ------------------- ------------------
NET INCOME $ 439,590 $ 550,457 $ 1,336,037
=================== =================== ==================
NET INCOME PER GENERAL AND
LIMITED PARTNER UNIT
(based on weighted average number of
units outstanding during the year of
7,418, 9,713 and 11,611, respectively) $ 59.26 $ 56.67 $ 115.07
=================== =================== ==================
INCREASE IN NET ASSET VALUE PER
GENERAL AND LIMITED PARTNER UNIT $ 69.45 $ 58.96 $ 110.94
=================== =================== ==================
See accompanying notes.
-5-
PROFUTURES LONG/SHORT GROWTH FUND, L.P.
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL (NET ASSET VALUE)
For the Years Ended December 31, 2004, 2003 and 2002
---------------
Total Partners' Capital
Number of ------------------------------------------------------------------
Units General Limited Total
------------------- ------------------ ------------------ -------------------
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 income for the year
ended December 31, 2004 4,267 435,323 439,590
Redemptions (1,820) 0 (1,979,135) (1,979,135)
------------------- ------------------ ------------------ -------------------
Balances at 6,390 $ 71,243 $ 7,338,344 $ 7,409,587
December 31, 2004
=================== ================== ================== ===================
Net Asset Value Per Unit
------------------------------------------------------------------
December 31,
2004 2003 2002
------------------- ------------------ ------------------
$ 1,159.53 $ 1,090.08 $ 1,031.12
=================== ================== ==================
See accompanying notes.
-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 contracts and options on futures 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.
-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,
2004 and 2003, the capital accounts of the General Partner and/or
its principals and affiliates totaled $608,685 and $583,537,
respectively.
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.
Effective October 22, 2004, ProFutures, Inc. has a callable stock
subscription agreement with Man Financial Inc. (MFI), the
Partnership's broker, whereby MFI has subscribed to purchase (up to
$7,000,000, subject to conditions set forth in the stock
subscription agreement dated October 22, 2004) the number of shares
of common stock of ProFutures, Inc. necessary to maintain the
General Partner's net worth requirements. Prior to October 22, 2004,
ProFutures, Inc. had a callable stock subscription agreement with
ABN AMRO Incorporated (ABN), the Partnership's prior broker, whereby
ABN had subscribed to purchase (up to $7,000,000, subject to the
conditions set forth in the stock subscription agreement as amended
effective May 20, 2002) the number of shares of common stock of
ProFutures, Inc. necessary to maintain the General Partner's net
worth requirements.
-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, 2004, 2003 and 2002 were $160,027, $205,740 and
$232,242, respectively. Management fees payable to ProFutures, Inc.
as of December 31, 2004 and 2003 were $12,695 and $15,787,
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 trading 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). Total management fees earned by the
trading advisors amounted to $51,473, $90,002 and $116,644 for the
years ended December 31, 2004, 2003 and 2002, respectively.
Note 4. DEPOSITS WITH BROKER
--------------------
The Partnership deposits funds with MFI (ABN prior to October 2004)
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, 2004 and 2003, the initial margin requirement of
$2,049,867 and $1,822,556, respectively, is satisfied by the deposit
of cash with the applicable 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 U.S. and foreign 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.
9
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, 2004, the latest maturity date for open contracts is
September 2005.
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.
Note 7. GUARANTEES
----------
In the normal course of business, the Partnership enters into
contracts and agreements that contain a variety of representations
and warranties and which provide general indemnifications. The
Partnership's maximum exposure under these arrangements is unknown,
as this would involve future claims that may be made against the
Partnership that have not yet occurred. The Partnership expects the
risk of any future obligation under these indemnifications to be
remote.
10
PROFUTURES LONG/SHORT GROWTH FUND, L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
---------------
Note 8. FINANCIAL HIGHLIGHTS
--------------------
The following information presents per unit operating performance data and other supplemental financial
data for the years ended December 31, 2004, 2003 and 2002. This information has been derived from
information presented in the financial statements.
2004 2003 2002
---- ---- ----
Per Unit Performance
(for a unit outstanding throughout the entire year)
---------------------------------------------------
Net asset value per unit at beginning of year $1,090.08 $1,031.12 $ 920.18
--------- --------- ----------
Income (loss) from operations:
Total trading gains (1) 135.62 108.34 174.97
Net investment (loss) (1) (66.17) (49.38) (64.03)
--------- --------- ----------
Total income from operations 69.45 58.96 110.94
--------- --------- ----------
Net asset value per unit at end of year $1,159.53 $1,090.08 $1,031.12
========= ========= =========
Total Return 6.37 % 5.72 % 12.06 %
========= ========= ========
Supplemental Data
Ratios to average net asset value:
Expenses prior to incentive fees 4.23 % 3.98 % 4.03 %
Incentive fees 3.43 % 1.78 % 4.10 %
--------- --------- ---------
Total expenses 7.66 % 5.76 % 8.13 %
========= ========= =========
Net investment (loss) (2) (2.85)% (3.00)% (2.42)%
========= ========= =========
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 period relative to the number of units outstanding.
(2) Excludes incentive fees.
11