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, 1998
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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 78733
-------------------------------
(Address of principal executive offices)
Partnership's telephone number
(512) 263-3800
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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)
This filing is a special financial report pursuant to Rule 15d-2 of
Regulation 15D. The Partnership previously filed a registration statement
on Form S-1, effective February 16, 1999, containing financial statements
as of September 30, 1998. Therefore, in accordance with Rule 15d-2,
this special report is filed under cover of Form 10-K and contains
only certified financial statements as of December 31, 1998.
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.
None
DOCUMENTS INCORPORATED BY REFERENCE
None
PART II
Item 8. Financial Statements
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, 1998 and 1997 F-3
Statements of Operations For the Year Ended
December 31, 1998 and For the Period
August 21, 1997 (inception) to December 31, 1997 F-4
Statements of Changes in Partners' Capital (Net Asset Value)
For the Year Ended December 31, 1998 and
For the Period August 21, 1997 (inception) to December 31, 1997 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, 1998 and
1997, and the related statements of operations and changes in partners'
capital (net asset value) for the year ended December 31, 1998 and for
the period August 21, 1997 (inception) to December 31, 1997. 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, 1998 and 1997, and the results of its
operations and the changes in its net asset values for the year ended
December 31, 1998 and for the period August 21, 1997 (inception) to
December 31, 1997, in conformity with generally accepted accounting
principles.
ARTHUR F. BELL, JR. & ASSOCIATES, L.L.C.
Hunt Valley, Maryland
February 16, 1999
F-2
PROFUTURES LONG/SHORT GROWTH FUND, L.P.
STATEMENTS OF FINANCIAL CONDITION
December 31, 1998 and 1997
-------------
1998 1997
---- ----
ASSETS
Equity in broker trading account
Cash $15,444,073 $ 585,732
United States government securities 3,406,808 0
Unrealized gain on open contracts 1,163,250 2,175
------------ -----------
Deposits with broker 20,014,131 587,907
Cash and cash equivalents 10,415 2,275,163
Subscriptions receivable 0 69,694
----------- -----------
Total assets $20,024,546 $ 2,932,764
=========== ===========
LIABILITIES
Accounts payable $ 12,215 $ 11,744
Commissions and other trading fees
on open contracts 771 189
General Partner management fee 46,529 6,095
Advisor incentive fee 1,400,060 0
Redemption payable 10,000 0
----------- -----------
Total liabilities 1,469,575 18,028
----------- -----------
PARTNERS' CAPITAL (Net Asset Value)
General Partner - 61.4461 and 30.6159
units outstanding at December 31, 1998
and 1997 116,671 29,313
Limited Partners - 9,710.7200 and
3,013.6483 units outstanding at
December 31, 1998 and 1997 18,438,300 2,885,423
----------- -----------
Total partners' capital
(Net Asset Value) 18,554,971 2,914,736
----------- -----------
$20,024,546 $ 2,932,764
=========== ===========
See accompanying notes.
F-3
PROFUTURES LONG/SHORT GROWTH FUND, L.P.
STATEMENTS OF OPERATIONS
For the Year Ended December 31, 1998 and
For the Period August 21, 1997 (inception) to December 31, 1997
-------------
Year Ended Period Ended
December 31, December 31,
1998 1997
---- ----
INCOME
Trading gains (losses)
Realized $6,818,869 $ (116,342)
Change in unrealized 1,161,075 2,175
---------- ----------
Gain (loss) from trading 7,979,944 (114,167)
Interest income 439,168 19,520
---------- ----------
Total income (loss) 8,419,112 (94,647)
---------- ----------
EXPENSES
Brokerage commissions 8,363 564
General Partner management fee 267,508 9,826
Advisor incentive fee 1,571,370 0
Operating expenses 55,126 11,704
---------- ----------
Total expenses 1,902,367 22,094
---------- ----------
NET INCOME (LOSS) $6,516,745 $ (116,741)
========== ==========
NET INCOME (LOSS) PER GENERAL AND
LIMITED PARTNER UNIT
(based on weighted average number
of units outstanding during the
period of 6,179.3557 and 2,421.6801,
respectively) $ 1,054.60 $ (48.21)
========== ==========
INCREASE (DECREASE) IN NET ASSET VALUE
PER GENERAL AND LIMITED PARTNER UNIT $ 941.31 $ (42.55)
========== ==========
See accompanying notes.
F-4
PROFUTURES LONG/SHORT GROWTH FUND, L.P.
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL (NET ASSET VALUE)
For the Year Ended December 31, 1998 and
For the Period August 21, 1997 (inception) to December 31, 1997
-------------
Total Partners' Capital
Number of ------------------------------
Units General Limited Total
--------- ------- ------- -----
Balances at
August 21, 1997 (inception) 0.0000 $ 0 $ 0 $ 0
Additions 3,044.2642 30,198 3,001,279 3,031,477
Net (loss) for the
period August 21, 1997
(inception) to
December 31, 1997 (885) (115,856) (116,741)
---------- -------- ----------- -----------
Balances at
December 31, 1997 3,044.2642 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 6,959.8881 36,931 9,422,159 9,459,090
Redemptions (231.9862) 0 (335,600) (335,600)
---------- -------- ----------- -----------
Balances at
December 31, 1998 9,772.1661 $116,671 $18,438,300 $18,554,971
========== ======== =========== ===========
Net Asset Value Per Unit
------------------------
December 31,
1998 1997
---- ----
$1,898.76 $957.45
========= =======
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. The Partnership's objective is appreciation of
its assets through 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. 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.
C. Cash and Cash Equivalents
Cash and cash equivalents includes cash and short-term investments
in fixed income securities.
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 $94,591 for the year ended
December 31, 1998 and $30,315 for the period August 21, 1997
(inception) to December 31, 1997.
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 now 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, 1998, the capital accounts of the
General Partner and/or its principals and affiliates totaled
$506,005.
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).
F-7
PROFUTURES LONG/SHORT GROWTH FUND, L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
-------------
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
December 31, 1998, the initial margin requirement of $1,586,250 is
satisfied by the deposit of cash and U.S. government securities with
such broker. At December 31, 1997, substantially all of the cash
deposited with the broker was used to satisfy the initial margin
requirement.
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 December 31, 1997 of $69,694 were received by the
Partnership on or before January 7, 1998.
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.
F-8
PROFUTURES LONG/SHORT GROWTH FUND, L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
-------------
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 year ended December 31, 1998 and during the period
November 20, 1997 (commencement of trading) to December 31, 1997,
was approximately $880,000 and $30,000, respectively, and the
related fair values at December 31, 1998 and 1997 are approximately
$1,163,000 and $2,000, respectively.
Net trading results from derivatives for the year ended December 31,
1998 and for the period August 21, 1997 (inception) to December 31,
1997, 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
December 31, 1998, the maturity date for all open contracts is
March 1999, and at December 31, 1997, the maturity date for all open
contracts is March 1998.
At December 31, 1998 and 1997, the notional amount of open contracts
to purchase totaled approximately $28,100,000 and $5,600,000,
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.
F-9
PROFUTURES LONG/SHORT GROWTH FUND, L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
-------------
Note 7. SUBSEQUENT EVENT
----------------
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. In connection with this
registration, the General Partner amended and restated the Limited
Partnership Agreement to comply with state law guidelines regarding
publicly offered commodity pools.
F-10
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
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<CASH> 15,454,488
<SECURITIES> 4,570,058
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 20,024,546
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 20,024,546
<CURRENT-LIABILITIES> 1,469,575
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 18,554,971
<TOTAL-LIABILITY-AND-EQUITY> 20,024,546
<SALES> 0
<TOTAL-REVENUES> 8,419,112
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,902,367
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 6,516,745
<INCOME-TAX> 0
<INCOME-CONTINUING> 6,516,745
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,516,745
<EPS-PRIMARY> 1,054.60
<EPS-DILUTED> 1,054.60
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