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, 2000
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Commission File number: 0-25585
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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
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Securities registered pursuant to Section 12(b) of the Act:
Title of each class. Name of each exchange on which registered.
-------------------- ------------------------------------------
Securities registered pursuant to Section 12(g) of the Act:
Units of Limited Partnership Interest
-------------------------------------
(Title of Class)
Indicate by check mark whether the Partnership (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that
the Partnership was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days.
Yes X
No
State the aggregate market value of the voting stock held by non-affiliates
of the Partnership. The aggregate market value shall be computed by
reference to the price at which the stock was sold, or the average bid and
asked prices of such stock, as of a specified date within 60 days prior to
the date of filing.
Not applicable
DOCUMENTS INCORPORATED BY REFERENCE
Partnership's Registration Statement on Form S-1 effective August 18, 2000
PART I
Item 1. Business.
(a) General Development of Business
-------------------------------
ProFutures Long/Short Growth Fund, L.P. (the "Partnership") is a commodity
investment pool which was organized in August 1997 under the Delaware
Revised Uniform Limited Partnership Act under the name ProFutures Bull &
Bear Fund, L.P. and commenced trading on November 20, 1997. On
December 8, 1998, the Partnership changed its name from ProFutures Bull &
Bear Fund, L.P. to ProFutures Long/Short Growth Fund, L.P.
The General Partner and Commodity Pool Operator of the Partnership is
ProFutures, Inc., a Texas corporation. The General Partner's address is
11612 Bee Cave Road, Suite 100, Austin, Texas 78733 and its telephone
numbers are (800) 348-3601 and (512) 263-3800.
The Partnership filed a registration statement with the U.S. Securities
and Exchange Commission under the Securities Act of 1933 for the public
offering of $60,000,000 of additional Limited Partnership Units which
became effective February 16, 1999. The General Partner later registered
$40,000,000 of additional Limited Partnership Units with the Securities
and Exchange Commission under the Securities Act of 1933 which was
effective November 17, 1999. This registration carried forward
$35,218,153 of unsold units from the previous registration. Therefore,
unsold Limited Partnership Units totaled $75,218,153 as of the effective
date of the registration. A post-effective amendment to the registration
was effective August 18, 2000 at which time $71,744,551 unsold units were
available. Effective November 2000, the Partnership is closed to new
investment; however, the General Partner may reopen the Partnership to new
investments in the future.
From inception through October 2000, the Partnership engaged in the
speculative trading of United States (U.S.) stock index futures contracts
pursuant to an advisory contract with Hampton Capital Management, Inc.
(Hampton). During October 2000, as a result of extreme stock market
volatility and trading losses, the advisory contract with Hampton was
terminated and trading was halted. Three new commodity trading advisors
were subsequently selected and trading resumed in December 2000. The
Partnership remains focused on trading stock index futures and options,
but the new advisors also trade a diversified group of commodity,
currency, and other futures, forward and option contracts.
(b) General Description of the Business
-----------------------------------
ProFutures, Inc., a Texas corporation, is the General Partner which
administers the business and affairs of the Partnership.
It is registered with the Commodity Futures Trading Commission (CFTC) as
a commodity trading advisor and commodity pool operator and is a member
of the National Futures Association (NFA). Gary D. Halbert is the
Chairman, President and principal stockholder of ProFutures, Inc., which
was incorporated and began operation in December 1984 and specializes in
speculative managed futures accounts.
Trading decisions are made by three independent commodity trading
advisors, Ansbacher Investment Management, Inc., Beacon Management
Corporation (USA) and Stratford Capital Management, Inc., collectively
the "Advisors".
The Partnership's Selling Agent is ProFutures Financial Group, Inc. which
is an affiliate of ProFutures, Inc.
The Partnership operates as a commodity investment pool, whose objective
is to achieve appreciation of its assets through the speculative trading
in futures and option contracts and other commodity interests. It
ordinarily maintains open positions for a relatively short period of
time. The Partnership's ability to make a profit depends largely on the
success of the Advisors in identifying market trends and price movements
and buying or selling accordingly.
(c) Trading Methods and Advisors
----------------------------
The General Partner, on behalf of the Partnership, has entered into
advisory contracts which provide that the portion of the Partnership's
assets allocated to each Advisor will be traded in accordance with the
Advisor's instructions unless the General Partner determines that the
Partnership's trading policies have been violated. The General Partner
has the authority to allocate or reallocate assets to or from its current
Advisors.
The Advisors do not own any Units of the Partnership. The Advisors are
independent commodity trading advisors and are not affiliated with the
General Partner. The Advisors are registered with the CFTC as commodity
trading advisors and are members in such capacity with the NFA. Because
of their confidential nature, proprietary trading records of the Advisors
and their respective principals are not available for inspection by the
Limited Partners of the Partnership.
Ansbacher Investment Management, Inc. (Ansbacher)
-------------------------------------------------
The objective of Ansbacher's strategy is to achieve substantial capital
appreciation through the speculative trading of futures contracts, options
on futures contracts (and potentially forward contracts), and other
futures-related interests, which objective entails a comparatively high
level of risk. Ansbacher currently engages in a program of selling or
"writing" options (puts and calls) on stock index futures. However, in
the future, Ansbacher may trade a broader portfolio of options, futures
and cash markets (and potentially forward markets), including agricultural
products, metals, currencies, financial instruments, and stock, financial
and economic indices (collectively, "Commodity Interests"). Ansbacher may
trade Commodity Interests on any U.S. exchange.
Ansbacher uses a systematic approach to trading in that it relies heavily
on a program of selling or "writing" options on stock index futures.
Ansbacher may also, from time to time, purchase options. The
implementation of this program, i.e., selecting how many puts and how many
calls, and which prices and maturities of each, in turn depends upon both
technical and fundamental considerations. The technical indicators will
include the prices of various options, both in absolute terms in relation
to their historic price levels, and in relative terms comparing the prices
of puts to the prices of similar calls. In this respect, Ansbacher may
rely upon the current reading of The Ansbacher Index. The fundamental
considerations include the condition of the stock market, its trend and
its volatility as well as business, political and economic forces which
can influence the stock market.
In addition, Ansbacher may take positions in the futures markets,
including stock index and bond futures, based upon fundamental
considerations such as historical price patterns, or technical
considerations such as trend following.
Ansbacher generally utilizes up to 30% to 40% of account assets for
margin; however such amount could be substantially higher (up to 65%) or
lower at times depending on trading conditions. These margin levels are
very high even for a speculative trading program.
Beacon Management Corporation (USA) (Beacon)
--------------------------------------------
Beacon's primary trading system is called the Meka Investment Program
("Meka"). Meka invests in futures markets with an investment approach
that may take either long or short positions in the market. Meka
aggressively invests in a broad array of globally diversified assets
using proprietary trading systems and portfolio allocation software. The
program's objective is to use diversification and leverage to earn
long-run returns from a variety of markets. Meka is executed in the
futures markets, which provide excellent liquidity, facilitate asset
allocation shifts, and offer flexible leverage. Meka generally maintains
investments in the following markets:
- global equity indices, such as U.S. large and small cap, Japanese,
Australian, and European markets;
- global bonds indices, such as U.S. long and intermediate Treasuries,
and European bonds;
- currency cross rates, such as the U.S. dollar vs. the Japanese Yen,
the Euro, the British Pound, the Canadian Dollar, and the Australian
dollar;
- energy markets, such as crude oil, gasoline, and natural gas;
- metals, such as gold, silver, and copper; and
- world commodity markets, such as grains, meats, coffee, and sugar.
The implementation of Meka is quantitative and computer-based. Meka
allocates exposure to each market based on the relationships among the
different markets and among the trading systems. Exposure in many
markets can be short or long, depending on various market conditions:
the trading systems are predominantly trend-following in nature. Several
different analytical approaches are employed in the portfolio, including
(but not limited to) approaches based on moving averages, breakouts,
option replication, and volatility. They vary from short-term methods
that trade almost every day to long-term methods that sometimes hold
positions for over a year.
Stratford Capital Management, Inc. (Stratford)
----------------------------------------------
The objective of Stratford's program is to achieve appreciation of client
assets through speculative trading in futures contracts and options
thereon primarily on U.S., but also foreign, commodity exchanges.
Stratford focuses on trading futures contracts on financial commodity
interests such as U.S. Treasury bonds and U.S. stock indices, particularly
the S&P 500 Stock Index.
The trading of the program began in November 1995 with Stratford trading
several individual accounts. The program is designed to try to take
advantage of short-term market fluctuations in some of the most liquid
futures markets in the world. Trades usually last between one to five
days, with the majority occurring within the same day. Trades are
selected using a combination of technical analysis of both the futures
market and the underlying market within the framework of the fundamentals
of a particular market. For example, futures contracts underlying market
within the framework of the fundamentals of a particular market. For
example, futures contracts on U.S. Treasury bonds may be sold if there is
a breakdown in a trend at a time when these bonds are in oversupply.
The program generally limits the amount of assets committed to margin at
any one time to approximately 25% of the account assets; however, such
amount could be substantially higher or lower at any time depending on
trading conditions. Stratford seeks to reduce the influence of one-day
returns by combining this limited capital commitment with short-term
trading in highly liquid futures markets.
From time to time, Stratford may trade futures and options contracts on
currencies. Currency values are closely related to interest rates and,
therefore, can be followed using the same techniques described above.
Since the prices of futures and options contracts on currencies generally
have more volatility than interest rate futures, effective trading
opportunities often arise. However, given the greater volatility of the
prices of these contracts, Stratford expects to trade a relatively small
number of them.
Stratford is authorized to trade a wide range of commodity interests on
U.S. and foreign exchanges, but will particularly focus on interest rate
sensitive instruments such as U.S. Treasury bonds and municipal bonds.
Stratford will also be authorized to trade futures and options contracts
on commodity interests such as the following which affect interest rates:
metals (gold, silver and copper) oil, Eurodollars and CRB, as well as
other Commodity Interests. Stratford may, but currently is not expected
to, trade commodity interests in the "cash," "EFP", and "spot" or
"forward" over-the-counter markets. Stratford may trade for the accounts
of participating customers any of the commodity interests which are now,
or may hereafter be, offered for trading on or off local and international
exchanges and markets. In that regard, Stratford from time to time in its
sole discretion may add new commodity interests to and delete commodity
interests from its portfolio.
Hampton Capital Management, Inc. (Hampton)
------------------------------------------
Hampton traded for the Partnership pursuant to its Leverage 3 trading
program which focused on leveraged trading of the S&P 500 Stock Index
futures contract. Effective October 13, 2000, the advisory contract with
Hampton was terminated and trading was halted.
(d) Fees, Compensation and Expenses
-------------------------------
The General Partner, was paid a monthly management fee equal to 1/4 of 1%
(3% annually) of month-end Net Assets through November 2000. Effective
December 1, 2000, the General Partner management fee was reduced to 1/6 of
1% (2% annually) of month-end Net Assets.
The Partnership had an advisory contract with Hampton Capital Management,
Inc. (Hampton), pursuant to which the Partnership paid a quarterly
incentive fee equal to 20% of New Trading profits (as defined in the
advisory contract). Effective October 13, 2000, the advisory contract
with Hampton was terminated and further trading was halted.
Effective December 1, 2000, the Partnership resumed trading with three
new trading advisors. Each Advisor is paid a monthly management fee of
1/12 of 1% (1% annually) of Allocated Net Asset Value (as defined in each
respective advisory contract). In addition, each Advisor receives a
quarterly incentive fee of 20% of Trading Profits (as defined).
A one-time organizational charge of 1% of the subscription amount is paid
to the General Partner (or the Selling Agent, its affiliated broker-
dealer) by each subscriber. The General Partner has paid for all actual
costs of organizing the Partnership and conducting the public offering of
Units.
To the extent that the aggregate 1% organizational charge collected is
less than these actual costs, the General Partner will pay the costs. To
the extent that the aggregate 1% organizational charge collected exceeds
these actual costs, the excess amount will be paid to the Selling Agent.
Such payment could be deemed to be a selling commission.
(e) Brokerage Arrangements
----------------------
The General Partner, among other responsibilities, has the duty to select
the brokerage firms through which the Partnership's trading will be
executed. The General Partner has selected ING (U.S.) Securities, Futures
& Options Inc. ("ING") as the Partnership's primary clearing broker. ING
is registered with the CFTC as a Futures Commission Merchant. It is a
member of the NFA and a clearing member of the Chicago Board of Trade and
the International Monetary Market of the Chicago Mercantile Exchange.
(f) Financial Information About Industry Segments
---------------------------------------------
The Partnership operates in only one industry segment, that of the
speculative trading of futures and options on futures contracts. See
also "The Stock Index Futures Markets", pages II-3 to II-5 of Part II
of the Prospectus dated August 18, 2000 which is incorporated herein by
reference.
(g) Regulation
----------
The U.S. futures markets are regulated under the Commodity Exchange Act,
which is administered by the Commodity Futures Trading Commission (CFTC),
a federal agency created in 1974. The CFTC licenses and regulates
commodity exchanges, commodity brokerage firms (referred to in the
industry as "futures commission merchants"), commodity pool operators,
commodity trading advisors and others. The General Partner is
registered by the CFTC as a commodity pool operator and the Advisors are
registered as commodity trading advisors. Futures professionals such as
the General Partner and the Advisors are also regulated by the National
Futures Association, a self-regulatory organization for the futures
industry that supervises the dealings between futures professionals and
their customers. If the pertinent CFTC registrations or NFA memberships
were to lapse, be suspended or be revoked, the General Partner would be
unable to act as the Partnership's commodity pool operator, and the
Advisors as commodity trading advisors, to the Partnership.
The CFTC has adopted disclosure, reporting and recordkeeping requirements
for commodity pool operators (such as the General Partner) and disclosure
and recordkeeping requirements for commodity trading advisors. The
reporting rules require pool operators to furnish to the participants in
their pools a monthly statement of account, showing the pool's income or
loss and change in Net Asset Value and an annual financial report,
audited by an independent certified public accountant.
The CFTC and the exchanges have pervasive powers over the futures
markets, including the emergency power to suspend trading and order
trading for liquidation only (i.e., traders may liquidate existing
positions but not establish new positions). The exercise of such powers
could adversely affect the Partnership's trading.
For additional information refer to "Regulation", Pages II-4 to II-5 of
Part II of the Prospectus dated August 18, 2000, which is incorporated
herein by reference.
(h) Competition
-----------
The Partnership may experience increased competition for the same
commodity futures contracts. The Advisors may recommend similar or
identical trades to other accounts they manage. Thus the Partnership
may be in competition with such accounts for the same or similar
positions. Competition may also increase due to widespread utilization
of computerized trading methods similar to the methods used by the
the Advisors. The Partnership may also compete with other funds
organized by the General Partner.
(i) Financial Information About Foreign and Domestic Operations
-----------------------------------------------------------
The Partnership does not expect to engage in any operations in foreign
countries nor does it expect to earn any portion of the Partnership's
revenue from customers in foreign countries.
Item 2. Properties.
The Partnership does not own and does not expect to own any physical
properties.
Item 3. Legal Proceedings.
The Partnership is not aware of any pending legal proceedings to which the
Partnership is a party or to which any of its assets are subject.
Item 4. Submission of Matters to a Vote of Security Holders.
There were no matters submitted to a vote of holders of Limited
Partnership Units ("Units") during the fiscal year ended December 31,
2000.
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,
2000 was:
General Partner's Capital 3
Limited Partners' Capital 793
At the commencement of trading on November 20, 1997 there were 38 Partners
holding 3,044 Units. At December 31, 2000 there were 793 Limited Partners
holding 14,231 Units, and 542 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 2000, 1999 and 1998 and for the period
August 21, 1997 (inception) to December 31, 1997.
2000
----
Realized Gains (Losses) $(24,145,559)
Change in Unrealized Gains (Losses)
on Open Contracts 6,842,576
Interest Income 1,455,997
General Partner Management Fee 706,890
Advisor Management Fees 10,816
Advisor Incentive Fees 111,774
Net Income (Loss) (16,805,240)
General Partner Capital 52,762
Limited Partner Capital 12,633,367
Partnership Capital 12,686,129
Net Income (Loss) Per Limited and
General Partner Unit* (834.14)
Net Asset Value Per Unit At
End of Year 858.74
1999
----
Realized Gains (Losses) $ 1,522,130
Change in Unrealized Gains (Losses)
on Open Contracts (7,168,725)
Interest Income 1,625,573
General Partner Management Fee 986,328
Advisor Incentive Fee 293,116
Net Income (Loss) (5,439,311)
General Partner Capital 101,567
Limited Partner Capital 38,536,017
Partnership Capital 38,637,584
Net Income (Loss) Per Limited and
General Partner Unit* (304.83)
Net Asset Value Per Unit At
End of Year 1,652.95
1998
----
Realized Gains (Losses) $ 6,818,869
Change in Unrealized Gains (Losses)
on Open Contracts 1,161,075
Interest Income 439,168
General Partner Management Fee 267,508
Advisor Incentive Fee 1,571,370
Net Income (Loss) 6,516,745
General Partner Capital 116,671
Limited Partner Capital 18,438,300
Partnership Capital 18,554,971
Net Income (Loss) Per Limited and
General Partner Unit* 1,054.60
Net Asset Value Per Unit At
End of Year 1,898.76
1997
----
Realized Gains (Losses) $ (116,342)
Change in Unrealized Gains (Losses)
on Open Contracts 2,175
Interest Income 19,520
General Partner Management Fee 9,826
Advisor Incentive Fee 0
Net Income (Loss) (116,741)
General Partner Capital 29,313
Limited Partner Capital 2,885,423
Partnership Capital 2,914,736
Net Income (Loss) Per Limited and
General Partner Unit* (48.21)
Net Asset Value Per Unit At
End of Year 957.45
----------------
* Based on weighted average units outstanding
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations.
(a) Liquidity and Capital Resources
-------------------------------
Substantially all of the Partnership's assets at December 31, 2000 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
---------------------
Due to the speculative nature of trading stock index futures, 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, 2000
----------------------------
2000 had a net loss of $(16,805,240) or $(794.21) per Unit. At
December 31, 2000, partners' capital totaled $12,686,129, a net decrease
of $25,951,455 from December 31, 1999 due to net capital redemptions of
$9,146,215 and the large losses incurred. Net Asset Value per Unit at
December 31, 2000 amounted to $858.74, as compared to $1,652.95 at
December 31, 1999, a decrease of 48.05%. Extreme volatility in the S&P
500 Index throughout the year resulted in trading losses of $17,302,983 in
2000. The S&P 500 Index experienced significant one day declines during
April and October 2000. This resulted in significant losses on those days
when the Partnership was in a long position. As a result of this extreme
stock market volatility and trading losses, the advisory contract with
Hampton was terminated and trading was halted. Three new commodity
trading advisors were subsequently selected and trading resumed in
December 2000.
Year Ended December 31, 1999
----------------------------
1999 had a net loss of $(5,439,311) or $(304.83) per Unit. At
December 31, 1999, partners' capital totaled $38,637,584, a net increase
of $20,082,613 from December 31, 1998 primarily due to net capital
additions of $25,521,924. Net Asset Value per Unit at December 31, 1999
amounted to $1,652.95, as compared to $1,898.76 at December 31, 1998, a
decrease of 12.95%. The net losses occurred primarily during the fourth
quarter as the Advisor generally maintained a short position but the
stock market turned positive.
Year Ended December 31, 1998
----------------------------
Net income for 1998 amounted to $6,516,745 or $1,054.60 per Unit. At
December 31, 1998, partners' capital totaled $18,554,971, a net increase
of $15,640,235 from December 31, 1997 due to the combination of
significant net income and net capital additions of $9,123,490. The net
income occurred primarily during the fourth quarter as the Advisor
maintained a long position while the stock markets trended upward. Net
Asset Value per Unit at December 31, 1998 amounted to $1,898.76, as
compared to $957.45 at December 31, 1997, an increase of 98.31%.
(d) 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 not applicable.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosures.
None.
PART III
Item 10. Directors and Executive Officers of the Partnership.
The Partnership has no directors or executive officers. The General
Partner of the Partnership is ProFutures, Inc., which administers and
manages the Partnership's affairs.
Gary D. Halbert, born 1952, is a Director, President and majority
shareholder of ProFutures, Inc. Debi B. Halbert, born 1955, is a
Director, the Chief Financial Officer, Secretary, Treasurer and minority
shareholder of ProFutures, Inc.
Patrick W. Watson, born 1964, is Vice President of the General Partner.
He is involved in research, investment strategy, business development
and investor relations.
John M. (Mike) Posey, born 1955, is Vice President of Marketing of the
General Partner. He is involved in coordination of national sales efforts
and investor relations.
Jon P. Meyer, born 1964, is Vice President of Operations of the General
Partner. He is involved in administration, customer service, management
information systems and compliance.
There have been no administrative, civil or criminal proceedings against
Gary Halbert, Debi Halbert, Patrick Watson, Mike Posey, Jon Meyer or
ProFutures, Inc. material to the Partnership.
Item 11. Executive Compensation.
The General Partner received, as compensation for its services, a monthly
management fee equal to 1/4 of 1% (3% annually) of month-end Net Assets
through November 2000. Effective December 1, 2000, the General Partner
management fee was reduced to 1/6 of 1% (2% annually) of month-end Net
Assets. Total management fees earned by the General Partner for 2000
aggregated $706,890.
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,
2000 the General Partner and its principals owned 61 Units of General
Partnership Interest.
(c) Changes in Control
------------------
None.
Item 13. Certain Relationships and Related Transactions.
See prospectus dated August 18,2000, page ii, Organizational Chart, and
pages 36 - 37, Conflicts of Interest, for information concerning
relationships and transactions between the General Partner, the Advisors,
the Broker and the Partnership.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
(a) 1. Financial Statements
See Index to Financial Statements on Page F-1.
The Financial Statements begin on Page F-3.
(a) 2. Financial Statement Schedules.
Not applicable, not required, or information included in financial
statements.
(a) 3. Exhibits.
Incorporated by reference - previously filed:
Form S-1 and Prospectus dated August 18, 2000 and exhibits thereto.
(b) Reports on Form 8-K
-------------------
None.
(c) Exhibits
--------
Amendment to Second Amended and Restated Limited Partnership Agreement
dated November 10, 2000.
(d) Financial Statement Schedules
-----------------------------
Not Applicable, not required, or information included in financial
statements.
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities
Exchange Act of 1934, the Partnership has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
PROFUTURES LONG/SHORT GROWTH FUND, L.P.
(Partnership)
By /s/ GARY D. HALBERT
- ---------------------------- -----------------------------------------
Date Gary D. Halbert, President and Director
ProFutures, Inc.
General Partner
By /s/ DEBI B. HALBERT
- ---------------------------- -----------------------------------------
Date Debi B. Halbert, Chief Financial Officer,
Treasurer and Director
ProFutures, Inc.
General Partner
PROFUTURES LONG/SHORT GROWTH FUND, L.P.
-----------------------------
INDEX TO FINANCIAL STATEMENTS
-----------------------------
PAGES
-----
Independent Auditor's Report F-2
Financial Statements
Statements of Financial Condition
December 31, 2000 and 1999 F-3
Statements of Operations For the Years
Ended December 31, 2000, 1999 and 1998 F-4
Statements of Changes in Partners' Capital (Net Asset Value)
For the Years Ended December 31, 2000, 1999 and 1998 F-5
Notes to Financial Statements F-6 - F-10
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, 2000 and
1999, and the related statements of operations and changes in partners'
capital (net asset value) for the years ended December 31, 2000, 1999
and 1998. 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 generally accepted auditing
standards. 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, 2000 and 1999, and the results of its
operations and the changes in its net asset values for the years ended
December 31, 2000, 1999 and 1998, in conformity with generally accepted
accounting principles.
/s/ ARTHUR F. BELL, JR. & ASSOCIATES, L.L.C.
Hunt Valley, Maryland
January 23, 2001
F-2
PROFUTURES LONG/SHORT GROWTH FUND, L.P.
STATEMENTS OF FINANCIAL CONDITION
December 31, 2000 and 1999
-------------
2000 1999
---- ----
ASSETS
Equity in broker trading accounts
Cash $12,482,092 $44,341,201
Net option premiums (received) (266,750) 0
Unrealized gain (loss) on open contracts 837,101 (6,005,475)
----------- -----------
Deposits with broker 13,052,443 38,335,726
Cash 29,180 642,249
----------- -----------
Total assets $13,081,623 $38,977,975
=========== ===========
LIABILITIES
Accounts payable $ 28,188 $ 18,894
Commissions and other trading fees
on open contracts 14,338 3,018
Incentive fees payable 111,774 0
Management fees payable 32,343 95,836
Redemptions payable 208,851 222,643
----------- -----------
Total liabilities 395,494 340,391
----------- -----------
PARTNERS' CAPITAL (Net Asset Value)
General Partner - 61 units outstanding
at December 31, 2000 and 1999 52,762 101,567
Limited Partners - 14,712 and 23,314
units outstanding at December 31, 2000
and 1999 12,633,367 38,536,017
----------- -----------
Total partners' capital
(Net Asset Value) 12,686,129 38,637,584
----------- -----------
$13,081,623 $38,977,975
=========== ===========
See accompanying notes.
F-3
PROFUTURES LONG/SHORT GROWTH FUND, L.P.
STATEMENTS OF OPERATIONS
For the Years Ended December 31, 2000, 1999 and 1998
-------------
2000 1999 1998
---- ---- ----
INCOME
Trading gains (losses)
Realized $(24,145,559) $ 1,522,130 $ 6,818,869
Change in unrealized 6,842,576 (7,168,725) 1,161,075
------------ ------------ ------------
Gain (loss) from trading (17,302,983) (5,646,595) 7,979,944
Interest income 1,455,997 1,625,573 439,168
------------ ------------ ------------
Total income (loss) (15,846,986) (4,021,022) 8,419,112
------------ ------------ ------------
EXPENSES
Brokerage commissions 41,871 35,908 8,363
Incentive fees 111,774 293,116 1,571,370
Management fees 717,706 986,328 267,508
Operating expenses 86,903 102,937 55,126
------------ ------------ ------------
Total expenses 958,254 1,418,289 1,902,367
------------ ------------ ------------
NET INCOME (LOSS) $(16,805,240) $ (5,439,311) $ 6,516,745
============ ============ ============
NET INCOME (LOSS) PER GENERAL AND
LIMITED PARTNER UNIT
(based on weighted average
number of units outstanding
during the period of 20,147,
17,844 and 6,179, respectively) $ (834.14) $ (304.83) $ 1,054.60
============ ============ ============
INCREASE (DECREASE) IN NET ASSET
VALUE PER GENERAL AND LIMITED
PARTNER UNIT $ (794.21) $ (245.81) $ 941.31
============ ============ ============
See accompanying notes.
F-4
PROFUTURES LONG/SHORT GROWTH FUND, L.P.
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL (NET ASSET VALUE)
For the Years Ended December 31, 2000, 1999 and 1998
-------------
Total Partners' Capital
Number of ------------------------------------
Units General Limited Total
--------- ------- ------- -----
Balances at
December 31, 1997 3,044 $ 29,313 $ 2,885,423 $ 2,914,736
Net income for the year
ended December 31, 1998 50,427 6,466,318 6,516,745
Additions 6,960 36,931 9,422,159 9,459,090
Redemptions (232) 0 (335,600) (335,600)
------ -------- ------------ ------------
Balances at
December 31, 1998 9,772 116,671 18,438,300 18,554,971
Net (loss) for the year
ended December 31, 1999 (15,104) (5,424,207) (5,439,311)
Additions 14,732 0 27,595,792 27,595,792
Redemptions (1,129) 0 (2,073,868) (2,073,868)
------ -------- ------------ ------------
Balances at
December 31, 1999 23,375 101,567 38,536,017 38,637,584
Net (loss) for the year
ended December 31, 2000 (48,805) (16,756,435) (16,805,240)
Additions 1,008 0 1,388,765 1,388,765
Redemptions (9,610) 0 (10,534,980) (10,534,980)
------ -------- ------------ ------------
Balances at
December 31, 2000 14,773 $ 52,762 $ 12,633,367 $ 12,686,129
====== ======== ============ ============
Net Asset Value Per Unit
------------------------
December 31,
2000 1999 1998
---- ---- ----
$ 858.74 $1,652.95 $1,898.76
========= ========= =========
See accompanying notes.
F-5
PROFUTURES LONG/SHORT GROWTH FUND, L.P.
NOTES TO FINANCIAL STATEMENTS
-------------
Note 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
-----------------------------------------------------------
A. General Description of the Partnership
ProFutures Long/Short Growth Fund, L.P. (the Partnership) is a
Delaware limited partnership which operates as a commodity
investment pool. From inception through October 2000, the
Partnership engaged in the speculative trading of United States
(U.S.) stock index futures contracts pursuant to an advisory
contract with Hampton Capital Management, Inc. (Hampton). During
October 2000, as a result of extreme stock market volatility and
trading losses, the advisory contract with Hampton was terminated
and trading was halted. Three new commodity trading advisors
were subsequently selected and trading resumed in December 2000.
The Partnership remains focused on trading stock index futures and
options, but the new advisors also trade a diversified group of
commodity, currency, and other futures, forward 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 generally accepted accounting principles, 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. Net unrealized gains
or losses on open contracts (the difference between contract
purchase price and quoted market price) are reflected in the
statement of financial condition as a net gain or loss, as there
exists a right of offset of unrealized gains or losses in
accordance with Financial Accounting Standards Board
Interpretation No. 39 - "Offsetting of Amounts Related to Certain
Contracts." Any change in net unrealized gain or loss from the
preceding period is reported in the statement of operations.
For purposes of both financial reporting and calculation of
redemption value, Net Asset Value Per Unit is calculated by
dividing Net Asset Value by the total number of units outstanding.
F-6
PROFUTURES LONG/SHORT GROWTH FUND, L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
-------------
Note 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
-----------------------------------------------------------
D. Brokerage Commissions
Brokerage commissions include other trading fees and are charged
to expense when contracts are opened.
E. Income Taxes
The Partnership prepares calendar year U.S. and state information
tax returns and reports to the partners their allocable shares of
the Partnership's income, expenses and trading gains or losses.
F. Organizational Charge
The General Partner pays all organizational and offering costs of
the Partnership. As reimbursement for such costs, the General
Partner (or the Distributor, ProFutures Financial Group, Inc., a
broker/dealer affiliate of the General Partner) receives an
organizational charge of 1% of the subscription amount of each
subscriber to the Partnership. Additions are reflected in the
statement of changes in partners' capital (net asset value) net
of such organizational charge totaling $13,888, $275,958 and
$94,591 for the years ended December 31, 2000, 1999 and 1998,
respectively.
G. Foreign Currency Transactions
The Partnership's functional currency is the U.S. dollar; however,
it transacts business in currencies other than the U.S. dollar.
Assets and liabilities denominated in currencies other than the
U.S. dollar are translated into U.S. dollars at the rates in
effect at the date of the statement of financial condition.
Income and expense items denominated in currencies other than the
U.S. dollar are translated into U.S. dollars at the rates in
effect during the period. Gains and losses resulting from the
translation to U.S. dollars are reported in income currently.
H. Statements of Cash Flows
The Partnership has elected not to provide statements of cash
flows as permitted by Statement of Financial Accounting Standards
No. 102 - "Statement of Cash Flows - Exemption of Certain
Enterprises and Classification of Cash Flows from Certain
Securities Acquired for Resale."
F-7
PROFUTURES LONG/SHORT GROWTH FUND, L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
-------------
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,
2000, the capital accounts of the General Partner and/or its
principals and affiliates totaled $465,592.
The Limited Partnership Agreement was amended effective February 16,
1999 and generally requires that the General Partner maintain a net
worth of at least $1,000,000. ProFutures, Inc. has callable
subscription agreements with ING (U.S.) Securities, Futures & Options,
Inc. (ING), the Partnership's broker, whereby ING has subscribed to
purchase (up to $14,000,000) the number of shares of common stock of
ProFutures, Inc. necessary to maintain the General Partner net worth
requirements.
The Partnership paid the General Partner a monthly management fee
equal to 1/4 of 1% (3% annually) of month-end Net Assets (as defined
in the Limited Partnership Agreement) through November 2000.
Effective December 1, 2000, the General Partner management fee was
reduced to 1/6 of 1% (2% annually) of month-end Net Assets.
Total management fees earned by ProFutures, Inc. for the years ended
December 31, 2000, 1999 and 1998 were $706,890, $986,328 and $267,508,
respectively. Management fees payable to ProFutures, Inc. as of
December 31, 2000 and 1999 were $21,528 and $95,836, respectively.
Note 3. COMMODITY TRADING ADVISORS
--------------------------
The Partnership had an advisory contract with Hampton Capital
Management, Inc. (Hampton), pursuant to which the Partnership paid a
quarterly incentive fee equal to 20% of New Trading Profits (as
defined in the advisory contract). Effective October 13, 2000, the
advisory contract with Hampton was terminated and trading was halted.
Effective December 1, 2000, the Partnership resumed trading with three
new trading advisors. Each advisor is paid a monthly management fee
of 1/12 of 1% (1% annually) of Allocated Net Asset Value (as defined
in each respective advisory agreement). In addition, each advisor
receives a quarterly incentive fee of 20% of Trading Profits (as
defined).
Note 4. DEPOSITS WITH BROKER
--------------------
The Partnership deposits funds with ING 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.
F-8
PROFUTURES LONG/SHORT GROWTH FUND, L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
-------------
Note 4. DEPOSITS WITH BROKER (CONTINUED)
--------------------------------
At December 31, 2000 and 1999, the initial margin requirement of
$3,822,228 and $8,648,438, respectively, is satisfied by the deposit
of cash with such broker.
Note 5. SUBSCRIPTIONS, DISTRIBUTIONS AND REDEMPTIONS
--------------------------------------------
Investments in the Partnership were made by subscription agreement,
subject to acceptance by the General Partner. Effective November
2000, the Partnership is closed to new investment; however, the
General Partner may reopen the Partnership to new investments in the
future.
The Partnership is not required to make distributions, but may do so
at the sole discretion of the General Partner. A Limited Partner may
require the Partnership to redeem any or all of such Limited Partner's
units at Net Asset Value as of the close of business on the last day
of any month upon advance written notice to the General Partner. The
Limited Partnership Agreement contains a complete description of the
Partnership's redemption policies and procedures.
Note 6. TRADING ACTIVITIES AND RELATED RISKS
------------------------------------
The Partnership engages in the speculative trading of U.S. and foreign
futures contracts and options on futures contracts (collectively
"derivatives"). The Partnership is exposed to both market risk, the
risk arising from changes in the market value of the contracts, and
credit risk, the risk of failure by another party to perform according
to the terms of a contract.
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, 2000, the latest maturity date for open contracts is
September 2001.
F-9
PROFUTURES LONG/SHORT GROWTH FUND, L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
-------------
Note 6. TRADING ACTIVITIES AND RELATED RISKS (CONTINUED)
------------------------------------------------
For derivatives, risks arise from changes in the market value of the
contracts. Theoretically, the Partnership is exposed to a market risk
equal to the value of futures 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
EXHIBIT
PROFUTURES LONG/SHORT GROWTH FUND, L.P.
AMENDMENT TO SECOND AMENDED AND RESTATED
LIMITED PARTNERSHIP AGREEMENT
This Amendment dated as of November 10, 2000 to the Second Amended
and Restated Limited Partnership Agreement (the "Partnership Agreement") of
ProFutures Long/Short Growth Fund, L.P. (the "Partnership") dated as of
February 16, 1999 is executed by ProFutures, Inc. the general partner of the
Partnership (the "General Partner").
WHEREAS, the General Partner may, pursuant to Section 16(a)(vi) of
the Partnership Agreement, amend the Partnership Agreement with amendments
it deems advisable, provided that such amendments are not adverse to the
limited partners;
WHEREAS, the following amendments are advisable to protect limited
partners and the Partnership in light of changing operations of the
Partnership;
NOW, THEREFORE, the Partnership Agreement shall be amended as
follows:
1. Section 9 of the Partnership Agreement shall be amended to delete
the penultimate paragraph thereunder and replace it with the following:
The General Partner will send written notice to each Limited Partner
within seven days of (i) any decline in the Fund's Nest Asset Value per Unit to
50% or less of such Net Asset Value as of the previous highest month-end Net
Asset Value per Unit occurring on or after November 30, 2000, (ii) any material
change in its agreement with the Advisor or any modification in connection with
the method of calculating the incentive fee due to the Advisor or (iii) any
material change affecting the compensation of any party. Any such notice shall
contain a description of Limited Partners' voting rights.
2. Section 11 of the Partnership Agreement shall be amended to delete the
third paragraph thereunder and replace it with the following:
In the event that the Net Asset Value per Unit of the Fund has, as of
the close of business on any business day, declined to a level equal to less
than fifty percent (50%) of the Net Asset Value per Unit of the Fund as of the
previous highest month-end Net Asset Value per Unit occurring on or after
November 30, 2000, the General Partner shall so notify the Limited Partners
within seven (7) business days thereafter and shall suspend new trading and
liquidate all positions as promptly as practicable. The General Partner, in
its notification, will set a date ten (10) business days after the notice date
as of which Limited Partners may redeem their Units. The General Partner shall
mail notice of such date to each Limited Partner and assignee of Units of whom
it has received written notice, by first class mail, postage prepaid, together
with instructions as to the procedure such Limited Partner or assignee must
follow to have such Limited Partner's or assignee's interest (only entire, not
partial, interests may be so redeemed pursuant to a Special Redemption Date, a
Limited Partner or any other assignee of whom the General Partner's interest,
determined as of the close of business (as determined by the General Partner)
on such Special Redemption Date. No redemption charges shall be assessed on
any such Special Redemption Date. As in the case of a regular redemption, as
assignee shall not be entitled to redemption on any Special Redemption Date
until the General Partner has received written notice of the assignment,
transfer or disposition under which the assignee claims an interest in the
Units to be redeemed. After such Special Redemption Date, the Fund may, in
the discretion of the General Partner, resume trading. If the General
Partner determines not to resume trading, the Fund will be terminated.
All other provisions of the Partnership Agreement are affirmed in the
entirety.
IN WITNESS WHEREOF, the General Partner has executed this Amendment as
of the date noted above.
PROFUTURES LONG/SHORT GROWTH FUND, L.P.
By: PROFUTURES, INC.
Its General Partner
By:
----------------------------------
Gary D. Halbert
President