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, 2000
--------------
Commission File Number 0-25585
-------
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 office)
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, 2000 (Unaudited) and December 31, 1999 (Audited)
-------------
March 31, December 31,
2000 1999
---- ----
ASSETS
Equity in broker trading account
Cash $32,902,985 $44,341,201
Unrealized gain (loss) on open contracts 1,154,925 (6,005,475)
------------ -----------
Deposits with broker 34,057,910 38,335,726
Cash 185,087 642,249
----------- -----------
Total assets $34,242,997 $38,977,975
=========== ===========
LIABILITIES
Accounts payable $ 21,550 $ 18,894
Commissions and other trading fees
on open contracts 1,448 3,018
General Partner management fee 85,371 95,836
Redemption payable 1,293,969 222,643
----------- -----------
Total liabilities 1,402,338 340,391
----------- -----------
PARTNERS' CAPITAL (Net Asset Value)
General Partner - 61.4461 units
outstanding at March 31, 2000 and
December 31, 1999 93,595 101,567
Limited Partners - 21,496.9955 and
23,313.5041 units outstanding at
March 31, 2000 and December 31, 1999 32,747,064 38,536,017
----------- -----------
Total partners' capital
(Net Asset Value) 32,840,659 38,637,584
----------- -----------
$34,242,997 $38,977,975
=========== ===========
See accompanying notes.
PROFUTURES LONG/SHORT GROWTH FUND, L.P.
STATEMENTS OF OPERATIONS
For the Three Months Ended March 31, 2000 and 1999
(Unaudited)
-------------
Three months ended
March 31,
2000 1999
---- ----
INCOME
Trading gains (losses)
Realized $(10,496,668) $ 1,578,905
Change in unrealized 7,160,400 (1,704,725)
------------ ------------
Gain (loss) from trading (3,336,268) (125,820)
Interest income 499,638 231,233
------------ ------------
Total income (loss) (2,836,630) 105,413
------------ ------------
EXPENSES
Brokerage commissions 9,286 3,108
General Partner management fee 257,008 144,005
Operating expenses 27,000 13,743
------------ ------------
Total expenses 293,294 160,856
------------ ------------
NET (LOSS) $ (3,129,924) $ (55,443)
============ ============
NET (LOSS) PER GENERAL AND
LIMITED PARTNER UNIT
(based on weighted average number of
units outstanding during the period of
23,066.1407 and 9,948.2099, respectively) $ (135.69) $ (5.57)
============ ============
(DECREASE) IN NET ASSET VALUE PER
GENERAL AND LIMITED PARTNER UNIT $ (129.62) $ (3.39)
============ ============
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, 2000 and 1999
(Unaudited)
-------------
<CAPTION>
Total Partners' Capital
Number of ----------------------------------
Units General Limited Total
----------- -------- ----------- -----------
<S> <C> <C> <C> <C>
Balances at
December 31, 1999 23,374.9502 $101,567 $38,536,017 $38,637,584
Net (loss) for the
three months ended
March 31, 2000 (7,972) (3,121,952) (3,129,924)
Additions 548.1465 0 816,132 816,132
Redemptions (2,364.6551) 0 (3,483,133) (3,483,133)
----------- -------- ----------- -----------
Balances at
March 31, 2000 21,558.4416 $ 93,595 $32,747,064 $32,840,659
=========== ======== =========== ===========
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
=========== ======== =========== ===========
Net asset value
per unit at
December 31, 1998 $ 1,898.76
===========
March 31, 1999 $ 1,895.37
===========
December 31, 1999 $ 1,652.95
===========
March 31, 2000 $ 1,523.33
===========
</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.
B. Regulation
As a registrant with the Securities and Exchange Commission, the
Partnership is subject to the regulatory requirements under the
Securities Acts of 1933 and 1934. As a commodity investment pool,
the Partnership 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.
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 quoted market price) are reflected in the statement of
financial condition as a net gain or loss, as there exists a right of
offset of unrealized gains or losses in accordance with Financial
Accounting Standards Board Interpretation No. 39 - "Offsetting of
Amounts Related to Certain Contracts." Any change in net unrealized
gain or loss from the preceding period is reported in the statement
of operations.
For purposes of both financial reporting and calculation of
redemption value, Net Asset Value Per Unit is calculated by dividing
Net Asset Value by the total number of units outstanding.
D. Brokerage Commissions
Brokerage commissions include other trading fees and are charged to
expense when contracts are opened.
PROFUTURES LONG/SHORT GROWTH FUND, L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
-------------
Note 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
-----------
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 $8,161 for the three
months ended March 31, 2000 and $96,746 for the three months
ended March 31, 1999.
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."
H. 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, 2000, and the results of operations for
the three months ended March 31, 2000 and 1999.
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 March 31, 2000
and December 31, 1999, the capital accounts of the General Partner
and/or its principals and affiliates totaled $574,040 and $617,408,
respectively.
PROFUTURES LONG/SHORT GROWTH FUND, L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
-------------
Note 2. GENERAL PARTNER (CONTINUED)
---------------------------
The Limited Partnership Agreement was amended effective
February 16, 1999 and generally required that the General Partner
maintain a net worth of at least $1,000,000. ProFutures, Inc. has
callable subscription agreements with Internationale Nederlanden
(U.S.) Securities, Futures & Options, Inc. (ING), the Partnership's
broker, whereby ING has subscribed to purchase (up to $14,000,017)
the number of shares of common stock of ProFutures, Inc. necessary
to maintain the General Partner net worth requirements.
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).
Note 3. COMMODITY TRADING ADVISOR
-------------------------
The Partnership has an advisory contract with Hampton Capital
Management, 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 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, 2000 and December 31, 1999, the initial margin
requirement of $4,148,438 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 are made by subscription agreement,
subject to acceptance by the General Partner.
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.
PROFUTURES LONG/SHORT GROWTH FUND, L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
-------------
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.
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. In the normal course of business, the
Partnership does not require collateral from such financial
institution.
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.
Open contracts generally mature within three months, however, the
Partnership intends to close all contracts prior to maturity. At
March 31, 2000, the maturity date for all open contracts is
June 2000, and at December 31, 1999, the maturity date for all open
contracts is March 2000.
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.
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 and open futures contracts. It is
possible that extreme market conditions or daily price
fluctuation limits at exchanges could adversely affect the
liquidity of open futures contracts. 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.
B. CAPITAL RESOURCES: 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.
C. 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.
For the three months ended March 31, 2000, the Partnership had a net
loss of $(3,129,924), as compared to a net loss of $(55,443) for the
three months ended March 31, 1999. 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 first quarter of 2000 was a period of extreme volatility
in the U.S. equity markets. For most of the quarter the Advisor
generally maintained a long market position. The net trading losses
occurred primarily early in the quarter as the S&P 500 index was
declining partially offset by trading gains later in the quarter as
the index was rising.
At March 31, 2000, partners' capital totaled $32,840,659,
a net decrease of $5,796,925 from December 31, 1999
primarily due to net capital redemptions of $2,667,001
as well as a net loss for the quarter.
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.
Item 3. Quantitative and Qualitative Disclosure About Market Risk
There has been no material change during the three months ended
March 31, 2000, in the sources of the Partnership's exposure to
market risk. The relationship of the total Value at Risk as a
percentage of total capitalization declined in the first quarter
from 17.9% at December 31, 1999 to 10.1% at March 31, 2000.
Market movements result in frequent changes in the fair market value of
the Partnership's open positions and, consequently, in its earnings and
cash flow. The Partnership's market risk is influenced by a wide variety
of factors, including general economic conditions, equity price levels,
the market value of financial instruments and contracts and the liquidity
of the markets in which it trades.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
None.
Item 2. Changes in Securities.
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. 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 $8,161 and $96,746 for
the three months ended March 31, 2000 and 1999, respectively.
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:
None.
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
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-END> MAR-31-2000
<CASH> 33,088,072
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 34,242,997
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 34,242,997
<CURRENT-LIABILITIES> 1,402,338
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 32,840,659
<TOTAL-LIABILITY-AND-EQUITY> 34,242,997
<SALES> 0
<TOTAL-REVENUES> (2,836,630)
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 293,294
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (3,129,924)
<INCOME-TAX> 0
<INCOME-CONTINUING> (3,129,924)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,129,924)
<EPS-BASIC> (135.69)
<EPS-DILUTED> (135.69)
</TABLE>
