SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
X Quarterly Report Under Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the Quarter Ended March 31, 1999
--------------
Commission File Number 0-25585
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PROFUTURES LONG/SHORT GROWTH FUND, L.P.
- ---------------------------------------
(Exact name of registrant)
Delaware 74-2849862
- ----------------------- -----------------------------------
(State of Organization) (I.R.S.Employer Identification No.)
ProFutures, Inc.
11612 Bee Cave Road
Suite 100
Austin, Texas 78733
- ----------------------------------------
(Address of principal executive offices)
Registrant's telephone number
(800) 348-3601
- --------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes X
No
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
PROFUTURES LONG/SHORT GROWTH FUND, L.P.
STATEMENTS OF FINANCIAL CONDITION
March 31, 1999 (Unaudited) and December 31, 1998 (Audited)
-------------
March 31, December 31,
1999 1998
---- ----
ASSETS
Equity in broker trading account
Cash $18,363,278 $15,444,073
United States government securities 1,716,439 3,406,808
Unrealized gain (loss) on open contracts (541,475) 1,163,250
------------ -----------
Deposits with broker 19,538,242 20,014,131
Cash 8,363,494 10,415
Subscriptions receivable 35,000 0
----------- -----------
Total assets $27,936,736 $20,024,546
=========== ===========
LIABILITIES
Accounts payable $ 88,430 $ 12,215
Commissions and other trading fees
on open contracts 992 771
General Partner management fee 48,998 46,529
Advisor incentive fee 0 1,400,060
Redemption payable 60,582 10,000
----------- -----------
Total liabilities 199,002 1,469,575
----------- -----------
PARTNERS' CAPITAL (Net Asset Value)
General Partner - 61.4461 units
outstanding at March 31, 1999 and
December 31, 1998 116,463 116,671
Limited Partners - 14,573.0283 and
9,710.7200 units outstanding at
March 31, 1999 and December 31, 1998 27,621,271 18,438,300
----------- -----------
Total partners' capital
(Net Asset Value) 27,737,734 18,554,971
----------- -----------
$27,936,736 $20,024,546
=========== ===========
See accompanying notes.
PROFUTURES LONG/SHORT GROWTH FUND, L.P.
STATEMENTS OF OPERATIONS
For the Three Months Ended March 31, 1999 and 1998
(Unaudited)
-------------
Three months ended
March 31,
1999 1998
---- ----
INCOME
Trading gains (losses)
Realized $ 1,578,905 $ 629,463
Change in unrealized (1,704,725) 277,825
----------- -----------
Gain (loss) from trading (125,820) 907,288
Interest income 231,233 46,131
----------- -----------
Total income 105,413 953,419
----------- -----------
EXPENSES
Brokerage commissions 3,108 716
General Partner management fee 144,005 26,107
Advisor incentive fee 0 158,368
Operating expenses 13,743 14,956
----------- -----------
Total expenses 160,856 200,147
----------- -----------
NET INCOME (LOSS) $ (55,443) $ 753,272
=========== ===========
NET INCOME (LOSS) PER GENERAL AND
LIMITED PARTNER UNIT
(based on weighted average number of
units outstanding during the period of
9,948.2099 and 3,186.2386, respectively) $ (5.57) $ 236.41
=========== ===========
INCREASE (DECREASE) IN NET ASSET VALUE
PER GENERAL AND LIMITED PARTNER UNIT $ (3.39) $ 232.98
=========== ===========
See accompanying notes.
<TABLE>
PROFUTURES LONG/SHORT GROWTH FUND, L.P.
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL (NET ASSET VALUE)
For the Three Months Ended March 31, 1999 and 1998
(Unaudited)
-------------
<CAPTION>
Total Partners' Capital
Number of ------------------------------
Units General Limited Total
--------- ------- ------- -----
<S> <C> <C> <C> <C>
Balances at
December 31, 1998 9,772.1661 $116,671 $18,438,300 $18,554,971
Net (loss) for the
three months ended
March 31, 1999 (208) (55,235) (55,443)
Additions 5,088.2753 0 9,674,650 9,674,650
Redemptions (225.9670) 0 (436,444) (436,444)
----------- -------- ----------- -----------
Balances at
March 31, 1999 14,634.4744 $116,463 $27,621,271 $27,737,734
=========== ======== =========== ===========
Balances at
December 31, 1997 3,044.2642 $ 29,313 $ 2,885,423 $ 2,914,736
Net income for the
three months ended
March 31, 1998 7,623 745,648 753,271
Additions 561.9632 6,138 613,562 619,700
Redemptions (25.4083) 0 (25,000) (25,000)
----------- -------- ----------- -----------
Balances at
March 31, 1998 3,580.8191 $ 43,074 $ 4,219,633 $ 4,262,707
=========== ======== =========== ===========
Net asset value
per unit at
December 31, 1997 $ 957.45
===========
March 31, 1998 $ 1,190.43
===========
December 31, 1998 $ 1,898.76
===========
March 31, 1999 $ 1,895.37
===========
</TABLE>
See accompanying notes.
PROFUTURES LONG/SHORT GROWTH FUND, L.P.
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
-------------
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 stock index futures contracts. It is subject to
the regulations of the Commodity Futures Trading Commission, an
agency of the United States (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.
The Partnership was organized on August 21, 1997 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.
B. Interim Financial Statements
In the opinion of management, the unaudited interim financial
statements reflect all adjustments, which were of a normal and
recurring nature, necessary for a fair presentation of financial
position as of March 31, 1999, and the results of operations for
the three months ended March 31, 1999 and 1998.
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. Unrealized gains or
losses on open contracts (the difference between contract purchase
price and market price) are reported 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. United States government securities are stated at
cost plus accrued interest, which approximates market value.
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.
PROFUTURES LONG/SHORT GROWTH FUND, L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
-------------
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 $96,746 for the three
months ended March 31, 1999 and $6,197 for the three months
ended March 31, 1998.
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. Prior to
June 1, 1998, the Limited Partnership Agreement required the General
Partner to maintain a capital account equal to at least 1% of the
total capital of the Partnership. Effective June 1, 1998, the
Limited Partnership Agreement was amended and 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 March 31, 1999 and December 31, 1998, the capital
accounts of the General Partner and/or its principals and affiliates
totaled $707,957 and $506,005, respectively.
The General Partner is paid a monthly management fee equal to 1/4 of
1% (3% annually) of month-end Net Assets (as defined in the Limited
Partnership Agreement).
PROFUTURES LONG/SHORT GROWTH FUND, L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
-------------
Note 3. COMMODITY TRADING ADVISOR
-------------------------
The Partnership has an advisory contract with Hampton Investors,
Inc. (Hampton), pursuant to which the Partnership pays a quarterly
incentive fee equal to 20% of New Trading Profits (as defined in the
advisory contract).
Note 4. DEPOSITS WITH BROKER
--------------------
The Partnership deposits funds with Internationale Nederlanden
(U.S.) Securities, Futures & Options Inc. (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.
At March 31, 1999 and December 31, 1998, the initial margin
requirement of $2,495,625 and $1,586,250, respectively, is
satisfied by the deposit of cash and U.S. government securities
with such broker.
Note 5. SUBSCRIPTIONS, DISTRIBUTIONS AND REDEMPTIONS
--------------------------------------------
Investments in the Partnership are made by subscription agreement,
subject to acceptance by the General Partner. The subscriptions
receivable at March 31, 1999 of $35,000 were received by the
Partnership on or before April 2, 1999.
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 stock index
futures contracts ("derivatives") on U.S. exchanges. 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 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.
PROFUTURES LONG/SHORT GROWTH FUND, L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
-------------
Note 6. TRADING ACTIVITIES AND RELATED RISKS (CONTINUED)
------------------------------------------------
The Partnership has assets on deposit with financial institutions 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. In the normal course of business, the
Partnership does not require collateral from such financial
institutions.
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.
The fair value of derivatives represents unrealized gains and losses
on open futures contracts. The average fair value of derivatives
during the three months ended March 31, 1999 and 1998 was
approximately $33,000 and $263,500, respectively, and the related
fair values at March 31, 1999 and December 31, 1998 are approximately
$(541,500) and $1,163,000, respectively.
Net trading results from derivatives for the three months ended
March 31, 1999 and 1998, are reflected in the statement of operations
and equal gain (loss) from trading less brokerage commissions. Such
trading results reflect the net gain (loss) arising from the
Partnership's speculative trading of futures contracts.
Open contracts generally mature within three months, however, the
Partnership intends to close all contracts prior to maturity. At
March 31, 1999, the maturity date for all open contracts is
June 1999, and at December 31, 1998, the maturity date for all open
contracts is March 1999.
At March 31, 1999 and December 31, 1998, the notional amount of
open contracts to purchase totaled approximately $39,700,000 and
$28,100,000, respectively, and there were no open contracts to sell.
These amounts do not represent the Partnership's risk of loss due to
market and credit risk, but rather represent the Partnership's
extent of involvement in derivatives at the date of the statement
of financial condition.
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 Hampton's trading activity with the actual
market risk controls being applied by Hampton itself. 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. Registration of Additional Limited Partnership Units
----------------------------------------------------
The General Partner registered $60,000,000 of additional Limited
Partnership Units with the Securities and Exchange Commission under
the Securities Act of 1933. The Registration Statement on Form S-1
became effective February 16, 1999.
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.
A. LIQUIDITY: Substantially all of the Partnership's assets are
highly liquid, such as cash or cash equivalents, open futures
contracts and other financial instruments. It is possible that
extreme market conditions or daily price fluctuation limits at
exchanges could adversely affect the liquidity of open futures
contracts.
B. CAPITAL RESOURCES: Since the Partnership's business is purchase
and sale of futures contracts, it will make few, if any, capital
expenditures. The Partnership has filed a Registration Statement
with the Securities and Exchange Commission for the sale of
$60,000,000 Units of Limited Partnership Interest which became
effective February 16, 1999.
As of March 31, 1999, 14,634.4744 Units are outstanding, including
61.4461 General Partner Units, with an aggregate Net Asset Value
of $27,621,271 ($1,895.37 per Unit). This represents an increase
in Net Asset Value of $9,182,763 compared with December 31, 1998.
The increase primarily relates to sales of limited partnership
interests.
C. RESULTS OF OPERATIONS: For the three months ended March 31, 1999,
the Partnership had a net loss of $(55,443), as compared to net
income of $753,272 for the three months ended March 31, 1998. The
Partnership engages in the speculative trading of stock index
futures contracts on U.S. exchanges; therefore, operating results
will fluctuate from period to period.
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 Advisor's trading activity with the
actual market risk controls being applied by the Advisor itself.
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.
D. POSSIBLE CHANGES: The General Partner reserves the right to
terminate certain and/or engage additional trading advisors or
change any of the Partnership's clearing arrangements.
E. The Year 2000 Problem
---------------------
Many existing computer systems use only two digits to refer to a
year. This technique can cause the systems to treat the year 2000
as 1900, an effect commonly known as the "Year 2000 Problem." The
Partnership, like other financial and business organizations,
depends on the smooth functioning of computer systems and could be
adversely affected if the computer systems on which it relies do not
properly process and calculate date-related information concerning
dates on or after January 1, 2000.
The General Partner administers the business of the Partnership
through various systems and processes maintained by the General
Partner. The General Partner's modifications for Year 2000
compliance are proceeding according to plan and are expected to be
completed by June 1999. The expenses incurred to date by the
General Partner in preparing for Year 2000 compliance have not had
a material adverse impact on the General Partner's financial
position, and the expenses to be incurred in becoming fully Year
2000 compliant are not expected to be material. The Partnership
itself has no systems or information technology applications
relevant to its operations and, thus, has no expenses related to
addressing the Year 2000 Problem.
In addition to the General Partner, the Partnership is dependent
on the capability of the Advisor, the commodity exchange, the
broker, and other third parties with whom the Partnership has
material relationships to prepare adequately for the Year 2000
Problem and its impact on their systems and processes. The Advisor
has taken action to identify any of its computer systems that are
Year 2000 vulnerable and has not reported any problems to the
General Partner. The Advisor is expected to notify the General
Partner in a timely manner if it discovers a Year 2000 vulnerable
system and is unable to correct it by January 1, 2000. The exchange
participated in the Futures Industry Association Y2K Beta Test
during September 1998 and will participate in the Futures Industry
Association Y2K industry-wide test for Year 2000 compliance during
the first and second quarters of 1999. The Futures Industry
Association Y2K Tests are to test links with outside entities. The
broker is addressing its Year 2000 issues and has participated
in Year 2000 testing with various exchanges. The broker will
participate in the Futures Industry Association Y2K industry-wide
test for Year 2000 compliance during the first and second quarters
of 1999. The General Partner is monitoring the progress of the
brokers and the exchanges in addressing their Year 2000 issues.
The most likely and most significant risk to the Partnership
associated with the lack of Year 2000 readiness is the failure of
third parties, including the Advisor, the broker, the exchange and
various regulators to resolve their Year 2000 issues in a timely
manner. This risk could involve the temporary inability to transfer
funds electronically or to determine the Net Asset Value of the
Partnership, in which case sales could be suspended and/or
redemption payments delayed until the Partnership's assets could be
valued and/or funds could be transferred. If the General Partner
believes, prior to December 31, 1999, that the Advisor, the broker
or the exchange have failed to resolve a Year 2000 issue likely
to have a material adverse impact on the Partnership, the General
Partner could direct the Advisor to attempt to close any
Partnership positions and to remain out of the market until such
issue is resolved.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
None.
Item 2. Changes in Securities.
The General Partner registered $60,000,000 of additional Limited
Partnership Units with the Securities and Exchange Commission
under the Securities Act of 1933. The Registration Statement
on Form S-1 became effective February 16, 1999. The offering
commenced immediately following the effective date of the
Registration Statement. The proceeds from the sale of 5,088
Limited Partnership Units totaled $9,674,650 through March 31,
1999 and are available to support the Partnership trading
activity. The offering of Limited Partnership Units is
continuing. The General Partner pays all offering costs and
receives 1% of the subscription price of each unit as
reimbursement. Such reimbursement of offering costs totaled
$96,746 through March 31, 1999.
Item 3. Defaults Upon Senior Securities.
Not Applicable.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
Item 5. Other Information.
None.
Item 6. Exhibits and Reports on Form 8-K.
There were no reports filed on Form 8-K.
Exhibits filed herewith:
Exhibit 1.0 Form of Stock Subscription Agreement by and between
ING (U.S.) Securities, Futures & Options Inc. and ProFutures, Inc.
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/SHORTH GROWTH FUND, L.P.
(Partnership)
By /s/ Gary D. Halbert
---------------------------------
Gary D. Halbert, President
ProFutures, Inc., General Partner
STOCK SUBSCRIPTION AGREEMENT
BY AND BETWEEN
ING (U.S.) SECURITIES, FUTURES & OPTIONS INC.
AND
PROFUTURES, INC.
Re: ProFutures Bull & Bear Fund, L.P.
THIS STOCK SUBSCRIPTION AGREEMENT (as it may be amended from time to time,
the "Agreement"), by and between ING Securities, Futures & Options Inc.
("ING") and ProFutures, Inc. (the "General Partner"), is made as of this
1st day of August, 1998.
WHEREAS, the General Partner entered into Stock Subscription Agreements,
dated August 15, 1990, August 15, 1991, and September 1, 1991, respectively,
each substantially in the form hereof, with Virginia Trading Corporation
("VTC"), and the Virginia Trading division of Quantum Financial Services,
Inc. ("Quantum"), respectively;
WHEREAS, the issued and outstanding capital stock of VTC was acquired by
Quantum which operated VTC's business as the Virginia Trading division of
Quantum;
WHEREAS, the issued and outstanding capital stock of Quantum was acquired by
the ING Group on January 7, 1994 and the name of Quantum was ultimately
changed to ING Securities, Futures & Options Inc.;
WHEREAS, the parties desire to enter into this Agreement to reflect (a) that
the respective rights and duties hereunder shall belong to ING, and (b) the
current terms of the stock subscription obligation of ING;
WHEREAS, pursuant to a separate Brokerage Agreement, ING is the futures
commission merchant for the ProFutures Bull & Bear Fund, L.P., a
Delaware limited partnership (the "Fund");
WHEREAS, the General Partner is obligated by the Agreement of Limited
Partnership of ATA Researchy/ProFutures Diversified Fund, L.P., as amended
and restated on December 1, 1993 (the "Agreement of Limited Partnership'),
to maintain a minimum net worth equal to: (i) the lesser of $250,000 or 15%
of the aggregate initial capital contributions of any limited partnerships
for which it acts as general partner capitalized at $2,500,000 or less; or
(ii) 10% of the aggregate capital contributions of the limited partners of
any limited partnerships for which it acts as general partner capitalized
at greater than $2,500,000 (the "Net Worth Requirement");
WHEREAS, the General Partner has the responsibility for determining the
adequacy of its net worth and the application of this Agreement towards the
Net Worth Requirement; and
WHEREAS, ING has agreed to subscribe for stock of the General Partner to
enable the General Partner to continue to meet the Net Worth Requirement.
NOW, THEREFORE, in consideration of the mutual promises made herein and
other good and valuable consideration, the parties hereto agree as follows:
1. Purchase of Shares. On the date hereof and continuing on a regular
basis as agreed upon by the parties, ING and the General Partner shall
determine the aggregate amount of the subscription for shares of the
General Partner's common stock required to enable the General Partner to
continue to meet the Net Worth Requirement. Based upon such
determination (as confirmed in writing in the form attached as Exhibit
A, each executed original of which is incorporated herein by reference),
ING will subscribe for the total subscription required for the General
Partner to meet the Net Worth Requirement; provided, that in no event
shall the total subscription with respect to the Fund exceed $7 million.
The purchase price for the shares of common stock subscribed for by ING
thereupon shall be equal to book value per share as determined by an
independent certified public accountant selected and paid by the General
Partner on the date(s) this obligation is met, but in no event less than
$.01 per share. In the event the Fund both exceeds its Trading Suspension
Level and, in fact, exhausts all its assets to satisfy Fund obligations,
the subscription required for the General Partner to satisfy the Net Worth
Requirement shall be callable by the General Partner on demand; provided,
however, that: (a) the General Partner shall use its own capital first to
meet the Net Worth Requirement; and (b) any such demand shall relate only
to capital deficiencies resulting solely from the ordinary, lawful and
necessary operations and activities of the Fund which cause the General
Partner's net worth to fall below the Net Worth Requirement. The
parties expressly acknowledge that, unless otherwise agreed in writing
by both parties in their sole and absolute discretion as to other
specific projects or activities, ING shall not have to subscribe to
satisfy capital deficiencies resulting from activities and operations
of the General Partner other than those associated with the Fund.
Payment for the subscription called shall be made by wire transfer
within thirty (30) days after the date of call. Upon payment, the
General Partner shall issue to ING that number of shares for which full
consideration has been paid.
2. Share Rights. Upon issuance, all shares of the General Partner's common
stock shall be fully paid and non-assessable and shall entitle the
holder to all rights applicable to such shares.
3. Computations. For purposes of meeting the Net Worth Requirement, all
subscriptions for common stock shall be carried at face amount without
deduction or discount. Any interests in the Fund owned by the General
Partner or any of the General Partner's interests in other limited
partnerships of which the General Partner is the general partner shall
not be included in the computation of its net worth for compliance with
the Net Worth Requirements.
4. Lower Net Worth. In the event that, at any time, the Net Worth
Requirement set forth in the Fund's Agreement of Limited Partnership is
amended pursuant thereto so that the Net Worth Requirement for the
General Partner is lowered, the General Partner shall promptly notify
ING and upon demand by ING effect a reduction in its net worth (but not
below that required by the Agreement of Limited Partnership) by
cancellation of such excess subscription amount in appropriate fashion.
5. General Partner Activities. The General Partner agrees, for so long as
this Agreement is in effect, not to engage in any activities unrelated
to its current activities of being: (a) a commodity trading advisor;
(b) co-General Partner of ATA Research/ProFutures Diversified Fund, L.P.:
(c) General Partner of the Alternative Asset Growth Fund, L.P.;
(d) General Partner of the Fund; and (e) engaged in a similar activity
involving ING or an associated company thereof; and (f) an introducing
broker, without the consent of ING. Such undertaking shall include the
General Partner's best efforts to conserve capital and avoid expenses to
the extent feasible to minimize the need of the General Partner to call
the subscription, especially as it relates to the Net Worth Requirement
attributable to the Fund. The General Partner also agrees to cooperate
in good faith as to ING in the conduct of its affairs including, without
limitation, its full cooperation in responding to any reasonable request
for information by ING.
6. ING's Activities. ING hereby agrees that it shall: (a) not purchase or
otherwise acquire any Units of Limited Partnership Interest of the Fund;
(b) provide all information which in the opinion of counsel for the
General Partner is required for the General Partner to comply with
federal and state securities and tax laws; and (c) cooperate in good
faith with the General Partner in the conduct of its affairs.
7. Amendments; Assignments. No change or modification to this Agreement
shall be effective unless the same shall be in writing and signed by
each of the parties hereto. However, this Agreement may not be assigned
by either party without the prior written consent of the other, and any
attempted assignment without such consent shall be void. No change in
ownership of either party shall in any way affect its obligation
hereunder or in any related agreements.
8. Third Party Beneficiaries. Third party beneficiary rights, if any,
under this Agreement are expressly limited to the limited partners of
the Fund, to the Net Worth Requirement attributable to the Fund and, for
the period commencing on the date of this Agreement, is accepted until
the termination of this Agreement under any circumstance described in
Paragraph 11 below.
9. Term. This Agreement shall continue in effect for a period of one (1)
year from the date of this Agreement and shall be automatically renewed
for additional one (1) year terms. Notwithstanding the foregoing,
either party may terminate this Agreement at anytime after having given
the other party at least sixty (60) days prior written notice of its
intent to terminate. In the event the Fund terminates ING as its
Clearing Broker, this Agreement will terminate on the same date as the
Brokerage Agreement terminates. In the event that ING terminates its
Brokerage Agreement and ceases to serve as the Fund's Clearing Broker,
or the Brokerage Agreement expires, this Agreement will continue for up
to 60 days after the date such Brokerage Agreement terminates or
expires.
10. Information Requirements of the General Partner. During the term of
this Agreement, the General Partner shall promptly furnish to ING the
following:
(a) copies of all regulatory notices, complaints, legal actions or
proceedings, and other claims involving, relating to or against
the General Partner or against the Fund including, without
limitation, claims by any limited partner of the Fund.
(b) copies of all regulatory notices, complaints, legal actions or
proceedings, and other claims involving, relating to or against
the General Partner or against the Fund including, without
limitation, claims by any limited partner of the fund.
(c) copies of the following financial statements for the Fund:
(i) monthly unaudited balance sheets and income statements;
(ii) monthly asset reports for all assets regardless of where
located; (iii) annual audited financial statements and any other
interim audits available; and (iv) copies of statements from the
other holders of Fund assets when they are received.
(d) copies of the following financial statements for the General
Partner: (i) quarterly and annual unaudited balance sheets and
income statements; and (ii) any audited statements available.
(e) copies of marketing materials used in connection with the Fund
concurrent with their use.
The Clearing Broker shall have the right to review the books and
records of the General Partner (excluding any information on its
trading systems), at its office on reasonable notice during normal
business hours, and subject to ING's maintaining strict confidentiality
as to the information so reviewed.
11. Other Conditions. In the event the General Partner shall voluntarily
file (or have involuntarily filed against it) a petition seeking
protection from creditors pursuant to the United States Bankruptcy
Code, as amended (the "Code"), or be subjected to the supervision of a
receiver appointed by a state or federal court of competent
jurisdiction, and any debtor in possession, trustee or receiver shall
subsequently make a call upon ING for any cash contributions under
this Agreement, the parties hereto specifically agree that ING shall be
required to contribute such cash to the General Partner as is required
to satisfy the Net Worth Requirement only upon the General Partner's
transfer (free and clear of all liens and encumbrances) of such assets
as are held in the name of the General Partner having a fair market
value equal to, or greater than, the value of the purchase price
required of ING by such debtor in possession, trustee or receiver.
Such transfer of assets shall be in lieu of the General Partner's
issuance of shares in exchange for cash; and further provided, that the
transfer of such assets to ING shall be first approved by a United
States Bankruptcy Court Judge, or the court officer having jurisdiction
over any appointed receiver, and ING shall be awarded fee simple
ownership and possession of such assets pursuant to 363 of the Code.
In the circumstances of this paragraph, only of the required assets
defined above by the General Partner to ING, shall ING be required to
make the payment for any subscription called under this Agreement or
shall the General Partner be required to issue any shares of its stock
to ING.
12. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware applicable to
contracts made in that state without reference to its conflict of laws
provisions.
13. Notices. Any notices required or desired to be given under this
Agreement shall be given in writing and shall be effective when given
personally on the date delivered or, when given by mail, overnight
courier or telefacsimile (provided receipt of the latter is orally
confirmed), upon the date of receipt, addressed as follows (or to
such other address as the party entitled to notice shall hereafter
designate in accordance with the terms hereof):
If to the General Partner:
ProFutures, Inc.
1310 Highway 620 South, Suite 200
Austin, Texas 78734
Attn: Gary D. Halbert, President
If to ING:
ING (U.S.) Securities, Futures & Options, Inc.
Sears Tower
233 South Wacker Street
Chicago, Illinois 60606
Attn: Brac Carr, Vice President
14. Entire Agreement. This Agreement contains the entire understanding of
the parties with respect to the matters covered hereby. All prior
subscription agreements and concomitant obligations of the parties are
superceded by this Agreement.
IN WITNESS WHEREOF, the parties have duly executed this Agreement under
seal as of the date first above written.
ING (U.S.) SECURITIES, FUTURES & OPTIONS, INC.
By:
-------------------------------------------
Name:
-----------------------------------------
Title:
----------------------------------------
PROFUTURES, INC.
By:
-------------------------------------------
Gary D. Halbert, President
EXHIBIT A
ING (U.S.) SECURITIES, FUTURES & OPTIONS, INC.
Sears Tower
233 South Wacker Street
Chicago, Illinois 60606
(312) 496-7000
August 1, 1998
Gary Halbert, President
ProFutures, Inc.
1310 Highway 620 South, Suite 200
Austin Texas 78734
Dear Mr. Halbert:
This is to confirm to ProFutures, Inc. the obligation of the undersigned
ING (U.S.) Securities, Futures & Options, Inc. ("ING") pursuant to the
August 1, 1998 Stock Subscription Agreement (as amended from time to time,
the "Agreement") between ProFutures, Inc. ("ProFutures") and ING, as
outlined below. As of July 31, 1998, the aggregate relevant capital
contributions by the limited partners of ProFutures Bull & Bear Fund,
L.P. (the "Fund") for Units still outstanding was $7,462,507. Pursuant
to the Agreement, accordingly, ING hereby subscribes to purchase 35,230
shares of ProFutures (at $188.71 per share), being that number of shares
which will enable ProFutures to maintain its Net Worth Requirement as
defined in the Agreement. It is our understanding under the Agreement
that such subscription will be called only if and subject to the conditions
as set forth in the Agreement occur. This subscription commitment supersedes
all prior subscription commitments pursuant to the Agreement.
ING (U.S.) SECURITIES, FUTURES & OPTIONS, INC.
By:
-------------------------------------------
Name:
-----------------------------------------
Title:
----------------------------------------
ACKNOWLEDGED:
PROFUTURES, INC.
By:
-------------------------------------------
Gary D. Halbert, President
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<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-1999
<CASH> 26,726,772
<SECURITIES> 1,174,964
<RECEIVABLES> 35,000
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0
0
<OTHER-SE> 27,737,734
<TOTAL-LIABILITY-AND-EQUITY> 27,936,736
<SALES> 0
<TOTAL-REVENUES> 105,413
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 160,856
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<INCOME-PRETAX> (55,443)
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