<PAGE>
UNITED STATES
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, 1996
or
( ) Transition Report Pursuant to Section 13
or 15(d) of the Securities Exchange Act of 1934
Commission file number: 0-23240
THE GROWTH AND GUARANTEE FUND L.P.
----------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 13-3407269
----------------------------- -------------------
(State of jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
C/O MERRILL LYNCH INVESTMENT PARTNERS INC.
MERRILL LYNCH WORLD HEADQUARTERS
WORLD FINANCIAL CENTER
SOUTH TOWER, 6TH FLOOR, NEW YORK, NY 10080-6106
------------------------------------------------
(Address of principal executive offices)
Registrant's telephone number, including area code: (212) 236-4167
--------------
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: None
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: Limited Partnership
-------------------
Units
-----
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) 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
----- _____
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
Aggregate market value of the voting stock held by non-affiliates: the
registrant is a limited partnership and, accordingly, has no voting stock held
by non-affiliates or otherwise.
DOCUMENTS INCORPORATED BY REFERENCE
The registrant's "1996 Annual Report and Independent Auditors' Report," the
annual report to security holders for the fiscal year ended December 31, 1996,
is incorporated by reference into Part II, Item 8, hereof and filed as an
Exhibit herewith.
<PAGE>
THE GROWTH AND GUARANTEE FUND L.P.
ANNUAL REPORT FOR 1996 ON FORM 10-K
Table of Contents
-----------------
<TABLE>
<CAPTION>
PART I PAGE
------ ----
<C> <S> <C>
Item 1. Business........................................... 1
Item 2. Properties......................................... 5
Item 3. Legal Proceedings.................................. 5
Item 4. Submission of Matters to a Vote of Security Holders 5
PART II
-------
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters................................ 5
Item 6. Selected Financial Data............................ 6
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations................ 8
Item 8. Financial Statements and Supplementary Data........ 9
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure................ 9
PART III
--------
Item 10. Directors and Executive Officers of the Registrant.10
Item 11. Executive Compensation............................ 11
Item 12. Security Ownership of Certain Beneficial Owners and
Management........................................ 12
Item 13. Certain Relationships and Related Transactions.... 12
PART IV
-------
Item 14. Exhibits, Financial Statement Schedules and Reports
on Form 8-K....................................... 13
</TABLE>
-i-
<PAGE>
PART I
ITEM 1: BUSINESS
--------
(a) General Development of Business:
-------------------------------
The Growth and Guarantee Fund L.P. (the "Partnership" or the
"Fund") was organized under the Delaware Revised Uniform Limited Partnership Act
on January 21, 1987. The Partnership commenced its public offering of Series A
and Series B Units of Limited Partnership Interest ("Units") on June 12, 1987
and commenced operations on August 5, 1987 with respect to the Series A Units
and on September 21, 1987 with respect to the Series B Units. Both Series of
Units were traded in an identical manner, except for the different time periods
over which their strategies operated.
The Partnership invests in stock index futures and options
contracts pursuant to asset allocation strategies developed by Leland O'Brien
Rubinstein Associates Inc. ("LOR" or the "Trading Advisor"), the objective of
which is to limit losses in down S&P Stock Index markets while optimizing the
extent to which the Net Asset Value per Unit may participate, over time and on
an unleveraged basis, in significant upward movements in stock index levels.
The Partnership does not trade directly but rather through a
subsidiary limited partnership ("the Trading Partnership"). This structure is
used so as to isolate the assets used to provided the Fund's "Principal
Protection" feature from the risk of trading losses.
From the commencement of operations through June 29, 1990 (with
respect to Series B Units) and September 28, 1990 (with respect of Series A
Units), Aetna Capital Management ("ACM") served as the Partnership's Trading
Advisor, directing the trading activities of the Partnership, using principles
associated with the asset allocation strategies of LOR, which initially served
as Trading Consultant. On June 29, 1990 (with respect to Series B Units) and
September 28, 1990 (with respect to Series A Units), LOR assumed the additional
function of Trading Advisor, replacing ACM in that capacity.
Merrill Lynch Investment Partners Inc. (the "General Partner" or
"MLIP") acts as the general partner of the Partnership. Merrill Lynch Futures
Inc. (the "Commodity Broker" or "MLF") is the Partnership's commodity broker.
The General Partner is a wholly-owned subsidiary of Merrill Lynch Group Inc.,
which in turn is a wholly-owned subsidiary of Merrill Lynch & Co., Inc. The
Commodity Broker is an indirect wholly-owned subsidiary of Merrill Lynch & Co.,
Inc. (ML&Co. and its affiliates are herein sometimes referred to as "Merrill
Lynch").
When the Fund began trading in respect of the Series A and Series B
Units, such Series had an initial capitalization of $148,349,950 and
$84,283,207, respectively. No Units of either Series were sold after the initial
closing. The Series B Units ceased trading December 31, 1991. Series A Units
with an aggregate Net Asset Value of $139,049,676 had been redeemed (including
December 31, 1996 redemptions which were not actually paid out until January
1997) as of December 31, 1996, and the capitalization of the Fund (all
attributable to Series A Units) was $9,421,523. The Net Asset Value per Series A
Unit, originally $100 as of August 5, 1987, had risen to $218.46. As of
December 31, 1996, the Fund had 42,447 Limited Partners.
Through December 31, 1996, the net gain in the Net Asset Value per
Series A Unit was 118.46%. The highest month-end Net Asset Value per Series A
Unit through December 31, 1996 was $223.74 (November, 1996) and the lowest
$87.31 (October, 1987).
(b) Financial Information about Industry Segments:
---------------------------------------------
The Partnership's business constitutes only one segment for
financial reporting purposes, i.e., a speculative "commodity pool."
(c) Narrative Description of Business:
---------------------------------
GENERAL
On June 12, 1987, the Partnership entered into an Advisory
Agreement with ACM pursuant to which ACM implemented certain asset allocation
strategies and directed the purchase and sale of other "Eligible Assets," as
defined in the Limited Partnership Agreement. The Partnership also entered into
a Consulting Agreement with LOR pursuant to which LOR, as the Partnership's
Trading Consultant, made available to ACM certain licenses relating to ACM's use
of LOR's trading programs.
-1-
<PAGE>
The Partnership's trading strategy is to apply the asset allocation
techniques in an attempt to maximize the Partnership's upside participation in
upward movements in stock index levels while preserving its ability to liquidate
positions prior to incurring losses in excess of the Downside Protection
parameters. The trading strategy is primarily reactive, i.e., it responds to
market movements without attempting to forecast trends or future prices (as
would, for example, a trend-following system). This strategy is applied
directly to the futures markets, attempting to assure the Downside Protection
through liquidating long stock index futures positions.
A principal feature of the Partnership is the protection against
certain losses. The Limited Partnership Agreement limits the decrease of the
Net Asset Value per Series A Unit at the end of a specified time period
applicable to no more than 10% of the Net Asset Value per Series A Unit at the
beginning of such time period (the Series B Units are no longer outstanding).
LOR, which initially served as the Trading Consultant for the
Partnership, replaced ACM as the Trading Advisor effective June 29, 1990 for
Series B Units and September 28, 1990 for Series A Units. LOR utilizes the same
Dynamic Asset Allocation Risk Management Strategies program used previously by
ACM. As of June 29, 1990 and September 28, 1990, the Partnership and LOR
entered into Advisory Agreements relating to the management of the assets for
the Series B Units and Series A Units, respectively. The Advisory Agreement
with respect to the Series B Units terminated effective December 31, 1991 upon
the cessation of the trading activities with respect to the Series B Units. the
Advisory Agreement, with respect to Series A Units, may be terminated by the
General Partner upon sixty days' advance written notice to LOR.
The Partnership is structured so as to provide investors with
protection against certain losses. The maximum permissible decrease in the Net
Asset Value per Unit, as of the end of successive Time Horizons (term defined in
the Limited Partnership Agreement, generally 18 months in duration) is 10% of
the Net Asset Value per Unit as of the beginning of each such Time Horizon (the
"Protected Minimum NAV"). At the start of its operations, the Partnership
provided the assurance of investors receiving at least the protected minimum NAV
through the use of the Aetna Surety Bond. However, the Surety Bond was replaced
on October 2, 1990 in respect of the Series A Units by the Fund entering into an
Agreement with Chase Manhattan Bank, N.A. ("Chase") whereby a letter of credit
issued by Chase served to ensure the Protected Minimum NAV. The letter of
credit varied from time to time as a result of Units redeemed, or the occurrence
of a New Profit Lock-In, as defined in the Letter of Credit and Reimbursement
Agreement. With respect to Series A, the October 2, 1990 Letter of Credit
issued by Chase was amended as of December 18, 1992, a new Letter of Credit was
issued, a new Protected Minimum Net Asset Value of $123.79 was established
through May 31, 1994, and a new Time Horizon end date of June 30, 1994. The
Letter of Credit expired in June 1994 and was not renewed.
Series A Units began 1996 with a Protected Minimum Net Asset Value of
$127.80. In order to assure this minimum value, the Fund purchases Treasury
STRIPS maturing at the end of the current Time Horizon in a face amount equal to
the Protected Minimum NAV. The current Time Horizon will end on April 30, 1998.
These STRIPS are not subject to the risk of market losses.
The Fund is structured to provide a "New Profits Lock-In" in the event
that the NAV per series A Unit increases by 10% or more. The latest "New
Profits Lock-In" was established at an NAV per Series A Unit of $210.98 on
October 18, 1996.
USE OF PROCEEDS AND INTEREST INCOME
General. The Fund's assets are not used to purchase or acquire any
-------
asset but rather held as a means of providing the Fund's "principal protection"
feature and as security for and to pay the Partnership's trading losses as well
as any expenses and redemptions. The Partnership's assets are generally
available to earn interest, as more fully described below under "- Available
Assets."
Market Sectors. The Partnership trades in one market sector, the S&P
--------------
stock index futures markets. As the Fund's objective is to replicate the
positive return on the S&P 500 Index while also providing Downside Protection,
it is a non-diversified investment focused exclusively on the S&P 500 futures
contract.
-2-
<PAGE>
Market Types. The Fund trades exclusively on the Chicago Mercantile
------------
Exchange, on which the S&P 500 futures contract is traded.
Custody of Assets. All of the Fund's assets are currently held in
-----------------
customer accounts at Merrill Lynch or in bank accounts opened in the name
of the Fund.
STRIPS. In order to provide its "principal protection" feature of
------
assuring investors will not lose more than 10% of the value of their respective
investments over the course of any 18 month Time Horizon, the Fund invests
approximately 80% of its assets in Treasury STRIPS (effectively zero coupon
bonds) maturing at the end of the Time Horizon in a principal amount sufficient
to assure the Protected Minimum Net Asset Value per Series A Unit.
Available Assets. In addition to the STRIPS held by it to provide its
----------------
"principal protection" feature, the Fund earns interest, as described below, on
its "Available Assets," which can be generally described as the cash actually
held by the Fund or invested in short-term Treasury bills. Available Assets are
held in U.S. dollars and are comprised of the following: (a) the Fund's cash
balance in the offset accounts (as described below) - which includes "open trade
equity" (unrealized gains and losses on open positions) on the Fund's S&P 500
Stock Index futures contracts, which is paid into or out of the Fund's account
on a daily basis; and (b) short-term Treasury bills purchased by the Fund.
Interest income, once accrued by the Fund, is subject to the risk of
trading losses.
Interest Earned on the Fund's Available Assets. The Fund's Available
----------------------------------------------
Assets (which for purposes of this description do not include the STRIPS held by
the Fund so as to assure the Protected Minimum Net Asset Value per Series A Unit
as of the end of each Time Horizon) are held in cash in offset accounts and in
short-term Treasury bills purchased from dealers unaffiliated with Merrill
Lynch. Offset accounts are non-interest bearing demand deposit accounts
maintained with banks unaffiliated with Merrill Lynch. An integral feature of
the offset arrangements is that the participating banks specifically acknowledge
that the offset accounts are MLF customer accounts, not subject to any Merrill
Lynch liability.
MLF credits the Partnership, as of the end of each month, with
interest at the effective daily 91-day Treasury bill rate on the average daily
Available Assets held in the offset accounts during such month. The Fund
receives all the interest paid on the short-term Treasury bills in which it
invests.
The use of the offset account arrangements for the Partnership's
Available Assets may be discontinued by Merrill Lynch whether or not Merrill
Lynch otherwise continues to maintain its offset arrangements. The offset
arrangements are dependent on the banks' continued willingness to make overnight
credits available to Merrill Lynch, which, in turn, is dependent on the credit
standing of ML&Co. If Merrill Lynch were to determine that the offset
arrangements had ceased to be practicable (either because ML&Co. credit lines at
participating banks were exhausted or for any other reason), Merrill Lynch would
thereafter attempt to invest all of the Fund's Available Assets to the maximum
practicable extent in short-term Treasury bills. All interest earned on the
Available Assets so invested would be paid to the Fund, but MLIP would expect
the amount of such interest to be less than that available to the Fund under the
offset account arrangements. The remaining Available Assets of the Fund would
be kept in cash to meet variation margin payments and pay expenses, but would
not earn interest for the Fund.
The banks at which the offset accounts are maintained make available
to Merrill Lynch interest-free overnight credits, loans or overdrafts in the
amount of the Fund's Available Assets held in the offset accounts, charging
Merrill Lynch a small fee for this service. The economic benefits derived by
Merrill Lynch - net of the interest credits paid to the Fund and the fee paid to
the offset banks - from the offset accounts have not exceeded 3/4 of 1% per
annum of the Fund's average daily Available Assets held in the offset accounts.
These revenues to Merrill Lynch are in addition to the Brokerage Commissions
paid by the Fund to MLF.
Having the Fund (and the other MLF clients using the F/X Desk) trade
through the F/X Desk on the basis of MLF's credit lines permits the F/X Desk to
access a wide range of counterparties without the need of such counterparties
evaluating the individual credit of the Fund (or any other MLF client).
-3-
<PAGE>
CHARGES
The following table summarizes the charges incurred by the Fund during
1994, 1995 and 1996.
<TABLE>
<CAPTION>
1994 1995 1996
---- ----
--------------------- --------------------- ---------------------
% OF AVERAGE % OF AVERAGE % OF AVERAGE
DOLLAR MONTH-END DOLLAR MONTH-END DOLLAR MONTH-END
COST AMOUNT NET ASSETS AMOUNT NET ASSETS AMOUNT NET ASSETS
---- ------- ------------ ------- ------------ ------- ------------
<S> <C> <C> <C> <C> <C> <C>
Brokerage Commissions $ 8,247 0.11% $ 4,225 0.05% $ 2,938 0.03%
-------- ---- -------- ----
Administrative Fees 142,881 1.84 144,696 1.78 158,330 1.77
-------- ---- ------- ---- -------- ----
Total $151,128 1.95% 148,921 1.83% $161,268 1.80%
======== ==== ======= ==== ======== ====
</TABLE>
----------------------------
The foregoing table does not reflect the benefits which may be derived
by Merrill Lynch from the deposit of certain of the Fund's available assets
(other than STRIPS which provides the Fund's "Principal Protection feature") in
offset accounts. See Item 1(c), "Narative Description of Business, --Use of
Proceeds and Interest Income."
The Fund's average month-end Net Assets during 1994, 1995 and 1996
equaled $7,755,028, $8,107,763 and $8,948,805, respectively.
During 1994, 1995 and 1996, the Fund earned $355,496, $407,304 and
$453,093 in interest income, or approximately 4.58%, 5.02% and 5.06% of the
Fund's average month-end Net Assets.
-----------------------------
<TABLE>
<CAPTION>
RECIPIENT NATURE OF PAYMENT AMOUNT OF PAYMENT
- --------- ----------------- -----------------
<C> <C> <S>
MLF Brokerage Commissions A round turn rate of $25, which includes
exchange, clearing and NFA fees
MLF Use of Fund assets Merrill Lynch may derive an economic
benefit from the deposit of certain of
the Fund's Available Assets in offset
accounts; such benefit to date has not
exceeded 3/4 of 1% of such average daily
Available Assets.
Third Parties Administrative Expenses As incurred.
MLF; Others Extraordinary expenses Actual costs incurred; none paid to
date, and expected to be negligible.
</TABLE>
----------------------
REGULATION
-4-
<PAGE>
The General Partner, LOR and the Commodity Broker are each subject to
regulation by the Commodity Futures Trading Commission and the National Futures
Association. The Partnership itself is generally not subject to regulation by
the Securities and Exchange Commission. However, MLIP itself is registered as
an "investment adviser" under the Investment Advisers Act of 1940.
(i) through (xii) - not applicable.
(xiii) The Partnership has no employees.
(d) Financial Information about Foreign and Domestic Operations and Export
----------------------------------------------------------------------
Sales:
- -----
The Partnership does not engage in material operations in foreign
countries, nor is a material portion of the Partnership's revenues derived from
customers in foreign countries.
ITEM 2: PROPERTIES
----------
The Partnership does not use any physical properties in the conduct of
its business.
The Partnership's only place of business is the place of business of
the General Partner (see Item 10 herein). The General Partner performs all
administrative services for the Partnership from the General Partner's offices.
ITEM 3: LEGAL PROCEEDINGS
-----------------
There are no pending legal proceedings to which the Partnership or the
General Partner is a party.
ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
---------------------------------------------------
The Partnership has never submitted any matters to a vote of its
Limited Partners.
PART II
ITEM 5: MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
---------------------------------------------------------------------
(a) Market Information:
------------------
There is no established public trading market for the Units, nor
will one develop. Rather, Limited Partners may redeem Units as of the end of
each month at Net Asset Value, Units redeemed prior to the end of the current
Time Horizon are not assured of any minimum Net Asset Value per Unit by the
Partnership's "principal protection" feature.
(b) Holders:
-------
As of December 31, 1996, there were 486 holders of Units,
including the General Partner and the Trading Advisors.
(c) Dividends:
---------
The Partnership has made no distributions since trading
commenced, nor does the General Partner presently intend to make any
distributions in the future.
-5-
<PAGE>
ITEM 6: SELECTED FINANCIAL DATA
-----------------------
The following selected financial data has been derived from the
audited financial statements of the Partnership.
<TABLE>
<CAPTION>
INCOME STATEMENT DATA 1996 1995 1994 1993 1992
- --------------------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Revenues:
Realized:
Trading Profits (Loss)
Options and futures 1,204,850 2,323,415 (327,699) 376,880 547,215
U.S. Government obligations 21,267 51,234 3,471 5,627 59,239
---------- ---------- ---------- ---------- ----------
Change in Unrealized:
Options and futures (30,625) (510,976) 49,200 (122,200) (436,750)
U.S. Government obligations (34,071) 143,640 (122,603) 34,726 (195,643)
---------- ---------- ---------- ---------- ----------
Total Trading Results 1,161,421 2,007,313 (397,631) 295,033 (25,939)
Interest Income 453,093 407,304 355,496 353,974 545,896
---------- ---------- ---------- ---------- ----------
Total Revenues 1,614,514 2,414,617 (42,135) 649,007 519,957
---------- ---------- ---------- ---------- ----------
Expenses:
Brokerage Commissions 2,938 4,225 8,247 9,891 12,382
Administrative Fees 158,330 144,696 142,881 164,052 177,764
---------- ---------- ---------- ---------- ----------
Total Expenses 161,268 148,921 151,128 173,943 190,146
---------- ---------- ---------- ---------- ----------
Income before Minority Interest 1,453,246 2,265,696 (193,263) 475,064 329,811
Minority Interest in Income (28,850) (12,942) --- --- ---
---------- ---------- ---------- ---------- ----------
Net Income (Loss) $1,424,396 2,252,754 (193,263) 475,064 329,811
========== ========== ========== ========== ==========
BALANCE SHEET DATA 1996 1995 1994 1993 1992
---------- ---------- ---------- ---------- ----------
Fund Net Asset Value $9,421,523 $8,623,082 $7,566,511 $8,748,614 $9,733,691
Net Asset Value per Series A Unit $218.46 $186.57 $141.33 $144.72 $137.57
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
MONTH-END NET ASSET VALUE PER SERIES A UNIT
- -----------------------------------------------------------------------------------------------------
Jan. Feb. Mar. Apr. May June July Aug. Sept. Oct. Nov. Dec.
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1992 $130.05 $131.23 $128.41 $131.52 $131.34 $129.61 $133.37 $130.67 $131.81 $131.61 $135.24 $137.57
1993 $138.74 $140.38 $141.95 $138.85 $141.07 $140.99 $140.50 $144.51 $142.22 $144.75 $143.30 $144.72
1994 $148.74 $144.86 $140.67 $140.72 $142.00 $138.44 $142.06 $146.14 $142.90 $145.19 $140.21 $141.33
1995 $144.95 $149.87 $152.99 $157.25 $163.05 $166.23 $171.58 $172.09 $178.01 $177.64 $184.56 $186.57
1996 $192.60 $192.04 $193.82 $194.68 $198.40 $199.74 $191.34 $193.92 $203.75 $210.32 $223.74 $218.46
</TABLE>
-6-
Pursuant to CFTC policy, monthly performance is presented from January 1, 1992,
even though the Units were outstanding prior to such date.
<PAGE>
THE GROWTH AND GUARANTEE FUND L.P.
December 31, 1996
Type of Pool: Single-Advisor/Publicly-Offered/"Principal Protected"/(1)/
Inception of Trading: August 5, 1987
Aggregate Subscriptions: $148,349,450
Current Capitalization: $9,421,523
Worst Monthly Drawdown/(2)/: (4.21)% (7/96)
Worst Peak-to-Valley Drawdown/(3)/: (6.93)% (2/94 - 6/94)
_____________
Net Asset Value per Series A Unit, December 31, 1996: $218.46
<TABLE>
<CAPTION>
- -------------------------------------------------------------
Monthly Rates of Returns/(4)/
- -------------------------------------------------------------
Month 1996 1995 1994 1993 1992
- -------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
January 3.23% 2.56% 2.77% 0.85% (1.92)%
February (0.29) 3.40 (2.61) 1.19 0.91
March 0.93 2.08 (2.89) 1.12 (2.15)
April 0.45 2.78 0.03 (2.19) 2.42
May 1.91 3.69 0.91 1.60 (0.14)
June 0.67 1.95 (2.51) (0.06) (1.32)
July (4.21) 3.22 2.61 (0.67) 2.90
August 1.35 0.30 2.88 3.19 (2.02)
September 5.07 3.44 (2.22) (1.59) 0.87
October 3.22 (0.20) 1.61 1.78 (0.14)
November 6.38 3.89 (3.43) (1.00) 2.76
December (2.36) 1.09 0.80 0.99 1.72
Compound Annual
Rate of Return 17.09% 32.01% (2.34)% 5.20% 3.75%
- -------------------------------------------------------------
</TABLE>
(1) Certain funds, including other funds sponsored by MLIP, are
structured so as to guarantee to investors that their investment will be worth
no less than a specified amount as of a date certain in the future. The CFTC
refers to such funds as "principal protected." The Partnership provides its
"principal protection" feature through the purchase of STRIPS which matures as
of the end of each Time Horizon in an amount equal to 90% of the Partnership's
capitalization as of the beginning of such Time Horizon.
(2) Worst Monthly Drawdown represents the largest negative Monthly
Rate of Return experienced since January 1, 1992 by the Fund; a drawdown is
measured on the basis of month-end Net Asset Value only, and does not reflect
intra-month figures.
(3) Worst Peak-to-Valley Drawdown represents the greatest percentage
decline since January 1, 1992 from a month-end cumulative Monthly Rate of Return
without such cumulative Monthly Rate of Return being equalled or exceeded as of
a subsequent month-end. For example, if the Monthly Rate of Return was (1)% in
each of January and February, 1% in March and (2)% in April, the Peak-to-Valley
Drawdown would still be continuing at the end of April in the amount of
approximately (3)%, whereas if the Monthly Rate of Return had been approximately
3% in March, the Peak-to-Valley Drawdown would have ended as of the end of
February at approximately the (2)% level.
(4) Monthly Rate of Return is the net performance of the Fund during
the month of determination (including interest income and after all expenses
have been accrued or paid) divided by the total equity of the Fund as of the
beginning of such month.
-7-
<PAGE>
ITEM 7: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
---------------------------------------------------------------
RESULTS OF OPERATION
- --------------------
RESULTS OF OPERATIONS -
GENERAL
The Fund is materially different from most other futures funds in that
it does not attempt to achieve speculative profits from taking long or short
positions in a variety of markets. Rather, the Fund's objective is to capture a
substantial portion of significant upside movements in the S&P 500 Stock Index
(dividends not reinvested) while providing the protection of a maximum loss
which can be incurred during any 18 month Time Horizon. The Fund's ability to
capture upside S&P 500 Stock Index movements is based on a call options
strategy, and is path dependent - i.e., the extent to which the Fund is able to
capture upside movements in the S&P 500 depends on the patterns in which such
movements occur. For example, if the S&P 500 increased during a Time Horizon by
a total of 25% but did so after incurring a 15% drop, it is likely the Fund
would recognize little or none of the upward movement, because it would have
lost all that it had available to lose during the Time Horizon in question
during the course of the 15% drop.
During the past 36 months of trading ending December 31, 1996, the S&P
500 Stock Index (dividends not reinvested) increased a total of 41.36%, whereas
the Net Asset Value per Series A unit increased 35.62%.
PERFORMANCE SUMMARY
The Fund's performance is dependent upon upward movements in the S&P
Stock Index, which the Fund attempts to capture through taking long position in
the S&P Stock Index Futures Contract. During 1994, the Fund's average month-end
Net Assets equalled $7,755,028, and the Fund recognized gross trading losses of
$397,632 or 5.13% of such average month-end Net Assets. Brokerage commissions of
$8,247 or 0.11% and Administrative expenses of $142,881 or 1.84% of average
month-end Net Assets were paid. Interest income of $355,496 or 4.58% of average
month-end Net Assets resulted in a net loss of $193,263 or 2.49% of average
month-end Net Assets, which resulted in a 2.34% decrease in the Net Asset Value
per Unit.
During 1995, the Fund's average month-end Net Assets equalled
$8,107,763, and the Fund recognized gross trading gains of $2,007,313 or 24.76%
of such average month-end Net Assets. Brokerage commissions of $4,225 or 0.05%
and Administrative expenses of $144,696 or 1.78% of average month-end Net Assets
were paid. Interest income of $407,304 or 5.02% of average month-end Net Assets
resulted in net income of $2,252,754 (after deduction of MLIP's Minority
Interest in the Trading Partnership) or 27.79% of average month-end Net Assets
which resulted in a 32.01% increase in the overall Net Asset Value of the Fund.
During 1996, the Fund's average month-end Net Assets equalled
$8,948,805, and the Fund recognized gross trading gains of $1,161,421 or 12.98%
of such average month-end Net Assets. Brokerage commissions of $2,938 or 0.03%
and Administrative expenses of $158,330 or 1.77% of average month-end Net Assets
were paid. Interest income of $453,093 or 5.06% of average month-end Net Assets
resulted in net income of $1,424,396 (after deduction of MLIP's Minority
Interest in the Trading Partnership) or 15.92% of average month-end Net Assets,
which resulted in a 17.09% increase in the Net Asset Value per Unit.
IMPORTANCE OF MARKET FACTORS
The performance of the Fund is dependent on the performance of the S&P
500 Stock Index Futures Contract. The Fund's trading strategy involves taking
"long only" positions in this Contract, attempting to capture substantially all
of any upward movement in the S&P 500 Stock Index, while providing the "downside
protection" of assuring investors that they cannot lose more than 10% of the
capital during any 18-month Time Horizon. The Fund's ability to achieve this
objective is, however, "path dependent." Given different patterns of S&P 500
Stock Index movements during a Time Horizon, the Fund could capture all, most,
or very little of the cumulative gain in the Index over a Time Horizon. Volatile
S&P 500 markets are likely to minimize or reduce the percentage of any
cumulative gain reflected in the performance of the Fund, as the Fund would be
continually acquiring and liquidating S&P positions in response to fluctuating
S&P 500 Index levels. On the other hand, in the case of a strongly upward
trending S&P Index, the Fund would be likely to capture substantantly all of the
cumulate gain in the Index over a Time Horizon. Comparisons between the Fund's
performance in any given fiscal year to that in the prior fiscal year are no
more, or less, meaningful than a comparison between S&P 500 Stock Index
movements which took into account both the overall increase or decrease in the
Index over the period and the pattern of price movements which resulted in such
increase or decrease.
LIQUIDITY
A significant portion of the Partnership's asset assets were held in
U.S. Treasury STRIPS which, in turn, generate the protected minimum Net Asset
Value. The U.S. STRIPS are highly liquid but are acquired by the Fund on a buy-
and-hold basis for the course of a Time Horizon, except to the extent liquidated
to fund a portion of redemptions. A portion of the Partnership's assets are
also held as cash which, in turn, is used to margin its stock index futures
positions and is withdrawn, as necessary, to pay a portion of redemptions and
fees.
The S&P 500 stock index futures contracts in which the Partnership
trades may become illiquid under certain market conditions. Stock index futures
contracts in the U.S. are subject to "circuit breakers" which require the
-8-
<PAGE>
suspension of trading after certain market movements. However, these "circuit
breakers" have rarely been "triggered," and because the Fund buys rather than
sells options, it is generally not exposed to risk of not being able to close
out positions against which the market is moving as a result of illiquidity.
The Partnership does not have, nor does it expect to have, any capital
assets and has no material commitments for capital expenditures. The
Partnership uses its assets to (i) assure the investors the protected minimum
Net Asset Values as of the end of the Time Horizons and (ii) supply the
necessary margin or premiums for, and to pay any losses incurred in connection
with, its trading activity and to pay redemptions and fees. Inflation is not a
significant factor in the Fund's profitability although inflationary cycles can
give rise to the stock index futures markets in which the Funds trades
exclusively. The Fund cannot be profitable during a Time Horizon unless the S&P
500 Stock Index market rises.
ITEM 8: FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
-------------------------------------------
The financial statements required by this Item are included in Exhibit
13.01.
The supplementary financial information ("selected quarterly financial
data" and "information about oil and gas producing activities") specified by
Item 302 of Regulation S-K is not applicable.
ITEM 9: CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
---------------------------------------------------------------
FINANCIAL DISCLOSURE
- --------------------
There were no changes in or disagreements with accountants on
accounting and financial disclosure.
PART III
ITEM 10: DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
--------------------------------------------------
(a,b) Identification of Directors and Executive Officers:
--------------------------------------------------
As a limited partnership, the Partnership itself has no
officers or directors and is managed by the General Partner. Trading decisions
are made by the Trading Advisors on behalf of the Partnership.
The principal officers of MLIP and their business backgrounds
are as follows.
<TABLE>
<CAPTION>
<C> <S>
John R. Frawley, Jr. Chief Executive Officer, President
and Director
James M. Bernard Chief Financial Officer,
Senior Vice President and Treasurer
Jeffrey F. Chandor Senior Vice President, Director of
Sales, Marketing and Research and Director
Allen N. Jones Chairman and Director
Steven B. Olgin Vice President, Secretary and Director
of Administration
</TABLE>
John R. Frawley, Jr. was born in 1943. Mr. Frawley is Chief Executive
Officer, President and a Director of MLIP as well as Co-Chairman of MLF. He
joined Merrill Lynch, Pierce, Fenner & Smith ("MLPF&S") in 1966 and has served
in various positions, including Retail and Institutional Sales, Manager of New
York Institutional Sales, Director of Institutional Marketing, Senior Vice
President of Merrill Lynch Capital Markets, and Director of International
Institutional Sales. Mr. Frawley holds a Bachelor of Science degree from
Canisius College. Mr. Frawley served on the CFTC's
-9-
<PAGE>
Regulatory Coordination Advisory Committee from its inception in 1990 through
its dissolution in 1994. Mr. Frawley is currently a member of the CFTC's
Financial Products Advisory Committee. In January 1996, he was re-elected to a
one-year term as Chairman of the Managed Futures Association, the national trade
association of the United States managed futures industry. Mr. Frawley is also a
Director of that organization, and a Director of the Futures Industry Institute.
Mr. Frawley also currently serves on a panel created by the Chicago Mercantile
Exchange and The Board of Trade of the City of Chicago to study cooperative
efforts related to electronic trading, common clearing and the issues regarding
a potential merger.
James M. Bernard was born in 1950. Mr. Bernard is Chief Financial Officer,
Senior Vice President and Treasurer of MLIP. He joined MLF in 1983. Before
that he was the Commodity Controller for Nabisco Brands Inc. from November 1976
to 1982 and a Supervisor at Ernst & Whinney from 1972 to November 1976. Mr.
Bernard is a member of the American Institute of Certified Public Accountants
and holds a Bachelor of Science degree from St. John's University and a Master
of Business Administration degree from Fordham University.
Jeffrey F. Chandor was born in 1942. Mr. Chandor is Senior Vice President,
the Director of Sales, Marketing and Research and a Director of MLIP. He joined
MLPF&S in 1971 and has served as the Product Manager of Equity, Derivative
Products and Mortgage-Backed Securities as well as Managing Director of
International Sales in the United States, and Managing Director of Sales in
Europe. Mr. Chandor holds a Bachelor of Arts degree from Trinity College,
Hartford, Connecticut.
Allen N. Jones was born in 1942. Mr. Jones is Chairman and a Director of
MLIP. Mr. Jones graduated from the University of Arkansas with a Bachelor of
Science, Business Administration degree in 1964. Since June 1992, Mr. Jones has
held the position of Senior Vice President of MLPF&S. From June 1992 through
February 1994, Mr. Jones was the President and Chief Executive Officer of
Merrill Lynch Insurance Group, Inc. ("MLIG") and remains on the Board of
Directors of MLIG and its subsidiary companies. In February 1994, Mr. Jones
became the Director of Individual Financial Services of the Merrill Lynch
Private Client Group. From January 1992 to June 1992, he held the position of
First Vice President of MLPF&S. From January 1990 to June 1992, he held the
position of District Director of MLPF&S. Before January 1990, he held the
position of Senior Regional Vice President of MLPF&S.
Steven B. Olgin was born in 1960. Mr. Olgin is Vice President, Secretary
and the Director of Administration of MLIP. He joined MLIP in July 1994 and
became a Vice President in July 1995. From 1986 until July 1994, Mr. Olgin was
an associate of the law firm of Sidley & Austin. In 1982, Mr. Olgin graduated
from The American University with a Bachelor of Science degree in Business
Administration and a Bachelor of Arts degree in Economics. In 1986, he received
his Juris Doctor degree from The John Marshall Law School. Mr. Olgin is a
member of the Managed Futures Association's Government Relations Committee and
has served as an arbitrator for the NFA.
At its December 1996 Board of Directors meeting, MLIP formed a Finance
Committee composed of representatives of several different operating and
administrative units at Merrill Lynch to oversee the financial controls and
accounting procedures implemented by MLIP. The Finance Committee will meet
periodically to review MLIP's financial reporting, monitoring and record
keeping, as well as all proposed changes - other than the selection of Advisors
- - affecting the operations of the Fund.
As of December 31, 1996, the principals of MLIP had no investment in the
Fund, and MLIP's general partner interest in the Fund was valued at $148,552.
MLIP acts as general partner to thirteen public futures funds whose units
of limited partnership interest are registered under the Securities Exchange Act
of 1934: The Futures Expansion Fund Limited Partnership, ML Futures Investments
L.P., ML Futures Investments II L.P., John W. Henry & Co./Millburn L.P., The
S.E.C.T.O.R. Strategy Fund(SM) L.P., The SECTOR Strategy Fund(SM) II L.P., The
SECTOR Strategy Fund(SM) IV L.P., The SECTOR Strategy Fund(SM) V L.P., The
SECTOR Strategy Fund(SM) VI L.P., ML Global Horizons L.P., ML Principal
Protection L.P. (formerly, ML Principal Protection Plus L.P.), ML JWH Strategic
Allocation Fund L.P. and the Fund. Because MLIP serves as the sole general
partner of each of these funds, the officers and directors of MLIP effectively
manage them as officers and directors of such funds.
-10-
<PAGE>
(c) Identification of Certain Significant Employees:
-----------------------------------------------
None.
(d) Family Relationships:
--------------------
None.
(e) Business Experience:
-------------------
See Item 10(a)(b) above.
(f) Involvement in Certain Legal Proceedings:
----------------------------------------
None.
(g) Promoters and Control Persons:
-----------------------------
The General Partner is the sole promoter and controlling person of the
Partnership.
ITEM 11: EXECUTIVE COMPENSATION
----------------------
The officers of the General Partner are remunerated in their
respective positions. The Partnership does not itself have any officers,
directors or employees. The Partnership pays Brokerage Commissions to an
affiliate of the General Partner. The General Partner or its affiliates may also
receive certain economic benefits from holding certain of the Fund's dollar
Available Assets in offset accounts, as described in Item 1(c) above. The
directors and officers receive no "other compensation" from the Partnership, and
the directors receive no compensation for serving as directors of the General
Partner. There are no compensation plans or arrangements relating to a change in
control of either the Partnership or the General Partner.
ITEM 12: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
--------------------------------------------------------------
(a) Security Ownership of Certain Beneficial Owners:
-----------------------------------------------
As of December 31, 1996, no person or "group" is known to be or
have been the beneficial owner of more than five percent of the Units. All of
the Partnership's units of general partnership interest are owned by the General
Partner.
(b) Security Ownership of Management:
--------------------------------
As of December 31, 1996, the General Partner owned 680 Units
(unit-equivalent general partnership interests), which was less than 2% of the
total Units outstanding.
(c) Changes in Control:
------------------
None.
ITEM 13: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
----------------------------------------------
(a) Transactions with Management and Others:
---------------------------------------
The General Partner acts as administrative and trading manager of
the Fund. The General Partner provides all normal ongoing administrative
functions of the Partnership, such as accounting, legal and printing services.
The General Partner, which receives the Administrative Fees, pays all expenses
relating to such services.
-11-
<PAGE>
(b) Certain Business Relationships:
------------------------------
MLF, an affiliate of the General Partner, acts as the principal
commodity broker for the Partnership.
In 1996 the Partnership paid: (i) Brokerage Commissions of $2,938 to
the Commodity Broker, and (ii) Administrative Fees of $158,330 to the General
Partner, which included $28,380 in consulting and advisory fees paid by the
Commodity Broker to the Trading Advisors. In addition, MLIP and its affiliates
may have derived certain economic benefits from maintaining a portion of the
Fund's assets in "offset accounts," as described under Item 1(c), "Narrative
Description of Business - Use of Proceeds and Interest Income - Interest Earned
on the Fund's U.S. Dollar Available Assets" and "Executive Compensation" herein.
See Item 1(c), "Narrative Description of Business - Charges" and " -
Description of Current Charges" for a discussion of other business dealings
between MLIP affiliates and the Partnership.
(c) Indebtedness of Management:
--------------------------
The Partnership is prohibited from making any loans, to management
or otherwise.
(d) Transactions with Promoters:
---------------------------
Not applicable.
PART IV
ITEM 14: EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
---------------------------------------------------------------
<TABLE>
<CAPTION>
(a)1. Financial Statements (found in Exhibit 13.01): Page
--------------------------------------------- ----
<S> <C>
Independent Auditors' Report 1
Consolidated Statements of Financial Condition as of
December 31, 1996 and 1995 2
For the years ended December 31, 1996 (consolidated),
1995 (consolidated) and 1994
Statements of Operations 3
Statements of Changes in Partners' Capital 4
Notes to Financial Statements 5-10
</TABLE>
(a)2. Financial Statement Schedules:
-----------------------------
Financial statement schedules not included in this Form 10-K
have been omitted for the reason that they are not required or are not
applicable or that equivalent information has been included in the financial
statements or notes thereto.
-12-
<PAGE>
(a)3. Exhibits:
--------
The following exhibits are incorporated by reference or are filed
herewith to this Annual Report on Form 10-K:
<TABLE>
<CAPTION>
Designation Description
- ----------- -----------
<C> <S>
3.02 Amended and Restated Limited Partnership Agreement of the
Partnership.
Exhibit 3.02: Is incorporated herein by reference from Exhibit 3.01
- ------------
contained in Amendment No. 2 (as Exhibit A) to the
Registration Statement (File No. 33-13175) filed on June
10, 1987, on Form S-1 under the Securities Act of 1933 (the
"Registrant's Registration Statement").
3.04 Amended and Restated Certificate of Limited Partnership of
the Partnership, dated July 27, 1995.
Exhibit 3.04 Is incorporated by reference from Exhibit 3.04
- ------------
contained in the Registrant's report on Form 10-Q for the
Quarter Ended June 30, 1995.
3.05 Certificate of Limited Partnership of the Trading
Partnership dated June 24, 1994.
Exhibit 3.05 Is filed herewith.
- ------------
10.01(c) Form of Advisory Agreement between the Partnership, Merrill
Lynch Investment Partners Inc., Merrill Lynch Futures Inc.
and each Trading Advisor.
Exhibit 10.01(c): Is incorporated by reference from Exhibit
- ----------------
10.01(c) contained in the Registrant's report on Form 10-Q
for the Quarter Ended June 30, 1995.
10.02 Form of Consulting Agreement between each the Partnership
and Merrill Lynch Futures Inc.
Exhibit 10.02: Is incorporated herein by reference from Exhibit
- -------------
10.02 contained in the Registrant's Registration Statement.
10.04 Form of Customer Agreement between the Partnership and
Merrill Lynch Futures Inc.
Exhibit 10.04: Is incorporated herein by reference from Exhibit
- -------------
10.04 contained in the Registrant's Registration Statement.
13.01 1996 Annual Report and Independent Auditors' Report.
Exhibit 13.01: Is filed herewith.
- -------------
28.01 Prospectus of the Partnership dated June 12, 1987.
Exhibit 28.01: Is incorporated by reference as filed with the
- -------------
Securities and Exchange Commission pursuant to Rule 424
under the Securities Act of 1933, on June 12, 1987.
</TABLE>
(b) Report on Form 8-K:
------------------
No reports on Form 8-K were filed during the fourth quarter of 1996.
-13-
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
THE GROWTH AND GUARANTEE FUND L.P.
By: MERRILL LYNCH INVESTMENT PARTNERS INC.
General Partner
By: /s/ John R. Frawley, Jr.
------------------------
John R. Frawley, Jr.
President, Chief Executive Officer and
Director (Principal Executive Officer)
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, this report has been signed on March 14, 1997 by the
following persons on behalf of the Registrant and in the capacities indicated.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ John R. Frawley, Jr. President and Chief Executive Officer and Director March 14, 1997
- --------------------------
John R. Frawley, Jr.
/s/ James M. Bernard Chief Financial Officer, Treasurer (Principal Financial March 14, 1997
- -------------------------- and Accounting Officer) and Senior Vice President
James M. Bernard
/s/ Jeffrey F. Chandor Senior Vice President and Director of Sales, March 14, 1997
- -------------------------- Marketing and Research, and Director
Jeffrey F. Chandor
/s/ Allen N. Jones Director March 14, 1997
- --------------------------
Allen N. Jones
</TABLE>
(Being the principal executive officer, the principal financial and accounting
officer and a majority of the directors of Merrill Lynch Investment Partners
Inc.)
<TABLE>
<S> <C> <C>
MERRILL LYNCH INVESTMENT General Partner of Registrant March 14, 1997
PARTNERS INC.
By: /s/ John R. Frawley, Jr.
----------------------------
John R. Frawley, Jr.
</TABLE>
-14-
<PAGE>
THE GROWTH AND GUARANTEE FUND L.P.
1996 FORM 10-K
INDEX TO EXHIBITS
-----------------
<TABLE>
<CAPTION>
Exhibit
-------
<C> <S>
Exhibit 3.05 Certificate of Limited Partnership of the Trading
- ------------ Partnership dated June 24, 1994.
Exhibit 13.01 1996 Annual Report and Independent Auditors' Report
</TABLE>
-15-
<PAGE>
To the best of the knowledge and belief of the
undersigned, the information contained in
this report is accurate and complete.
James M. Bernard
Chief Financial Officer
Merrill Lynch Investment Partners Inc.
General Partner of
THE GROWTH AND GUARANTEE FUND L.P.
-16-
<PAGE>
EXHIBIT 3.05
CERTIFICATE OF LIMITED PARTNERSHIP
OF
THE GROWTH AND GUARANTEE FUND TRADING COMPANY L.P.
This Certificate of Limited Partnership of The Growth and Guarantee
Fund Trading Company L.P. (the "Partnership"), dated as of the 24 day of
June, 1994, is being duly executed and filed by the undersigned in accordance
with the provisions of 6 Del.C. (S)17-201 to form a limited partnership under
------
the Delaware Revised Uniform Limited Partnership Act (6 Del.C. (S)17-101, et
------ --
seq.).
- ---
1. Name. The name of the limited partnership formed hereby is "The
----
Growth and Guarantee Fund Trading Company L.P."
2. Registered Office. The address of the registered office of the
-----------------
Partnership in the State of Delaware is c/o The Corporation Trust Company,
Corporation Trust Center, 1209 Orange Street, Wilmington, New Castle
County, Delaware 19801.
3. Registered Agent. The name and address of the registered agent
----------------
for service of process on the Partnership in the State of Delaware is The
Corporation Trust Company, Corporation Trust Center, 1209 Orange Street,
Wilmington, New Castle County, Delaware 19801.
4. General Partner. The name and the business address of the sole
---------------
general partner of the Partnership is:
ML Futures Investment Partners Inc.
Merrill Lynch World Headquarters
Sixth Floor, South Tower
World Financial Center
New York, New York 10080-6106
IN WITNESS WHEREOF, the undersigned general partner has duly executed
this Certificate of Limited Partnership as of the date first-above written.
ML Futures Investment Partners Inc.
General Partner
/s/ James M. Bernard
-----------------------------------
James M. Bernard, Chief Financial
Officer, Vice President and
Treasurer
<PAGE>
THE GROWTH AND GUARANTEE FUND L.P.
(A Delaware Limited Partnership)
Consolidated Financial Statements for the years
ended December 31, 1996 and 1995 and Financial
Statements for the year ended December 31, 1994
and Independent Auditors' Report
<PAGE>
To: The Limited Partners of The Growth and Guarantee Fund L.P. - Series A
The Growth and Guarantee Fund L.P. - Series A (the "Fund" or the "Partnership")
ended its tenth fiscal year of trading on December 31, 1996 with a Net Asset
Value ("NAV") per Unit of $218.46, representing an increase of 17.09% from the
December 31, 1995 NAV per Unit of $186.57. In 1996, the stock market, as
measured by the Standard & Poor's 500 Stock Index (the "S&P 500"), increased
22.94%.
The design of the Fund allows investors the opportunity to participate in stock
market advances (as measured by the S&P 500) while protecting investors against
large losses through the "Downside Protection" feature of the Fund, providing a
Protected Minimum NAV per Unit as of the end of the current Time Horizon
determined for the Fund. The Fund purchases Treasury STRIPS maturing at the end
of each Time Horizon in a face amount equal to the Protected Minimum NAV and is
structured to provide a "New Profits Lock-In" in the event that the NAV per Unit
increases by 10% or more. The Time Horizons are 18 months in duration. On
October 18, 1996, the NAV of the Fund increased to $210.98, a level triggering a
"New Profits Lock-In".
Based upon the $210.98 per Unit NAV as of the beginning of the current Time
Horizon, which ends at the close of business on April 30, 1998, the New
Protected Minimum NAV is $189.88 per Unit. The Fund will experience a "New
Profits Lock-In" if the NAV reaches $232.08 per Unit.
1996 proved to be a outstanding year for the Fund. As General Partner and
Trading Manager of the Fund, we continue to remain confident that the Fund is
well positioned to benefit from trading opportunities in 1997. We look forward
to the new fiscal year and the trading opportunities it may bring.
Sincerely,
John R. Frawley, Jr.
President & Chief Executive Officer
Merrill Lynch Investment Partners Inc.
(General Partner)
FUTURES TRADING IS SPECULATIVE AND INVOLVES A HIGH DEGREE OF RISK. PAST
PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
<PAGE>
THE GROWTH AND GUARANTEE FUND L.P.
(A Delaware Limited Partnership)
- --------------------------------
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
Page
----
<S> <C>
INDEPENDENT AUDITORS' REPORT 1
FINANCIAL STATEMENTS FOR THE YEARS ENDED
DECEMBER 31, 1996, 1995 (CONSOLIDATED) AND 1994:
Consolidated Statements of Financial Condition 2
Statements of Operations 3
Statements of Changes in Partners' Capital 4
Notes to Consolidated Financial Statements 5-10
</TABLE>
<PAGE>
INDEPENDENT AUDITORS' REPORT
- ----------------------------
To the Partners of
The Growth and Guarantee Fund L.P.:
We have audited the accompanying consolidated statements of financial condition
of The Growth and Guarantee Fund L.P. (a Delaware limited partnership; (the
"Partnership") as of December 31, 1996 and 1995, and the related statements of
operations and changes in partners' capital for each of the three years in the
period ended December 31, 1996 (consolidated with respect to 1996 and 1995).
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, such financial statements present fairly, in all material
respects, the financial position of The Growth and Guarantee Fund L.P. (a
Delaware limited partnership) as of December 31, 1996, and 1995 (consolidated)
and the results of its operations for each of the three years in the period
ended December 31, 1996 (consolidated with respect to 1996 and 1995) in
conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
February 3, 1997
New York, New York
<PAGE>
THE GROWTH AND GUARANTEE FUND L.P.
(A Delaware Limited Partnership)
- --------------------------------
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
DECEMBER 31, 1996 AND 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ASSETS 1996 1995
- ------ ---- ----
<S> <C> <C>
Accrued interest (Note 2) $ 8,352 $ 4,940
U.S. Government obligations 7,628,080 6,820,462
Equity in commodity futures trading accounts:
Cash and options premiums 2,042,087 1,985,376
Net unrealized profit on open contracts (136,425) (105,800)
-------------- --------------
TOTAL $9,542,094 $8,704,978
============== ==============
LIABILITIES AND PARTNERS' CAPITAL
- ---------------------------------
LIABILITIES:
Redemptions payable $ 48,061 $ 39,739
Administrative fees and brokerage
commissions payable 14,718 13,215
-------------- --------------
Total liabilities 62,779 52,954
-------------- --------------
Minority Interest 57,792 28,942
-------------- --------------
PARTNERS' CAPITAL:
General Partner:
(680 and 680 units) 148,552 126,846
Limited Partners:
(42,447 and 45,539 units) 9,272,971 8,496,236
-------------- --------------
Total partners' capital 9,421,523 8,623,082
-------------- --------------
TOTAL $9,542,094 $8,704,978
============== ==============
NET ASSET VALUE PER UNIT $ 218.46 $ 186.57
============== ==============
</TABLE>
See notes to consolidated financial statements.
-2-
<PAGE>
THE GROWTH AND GUARANTEE FUND L.P.
(A Delaware Limited Partnership)
- --------------------------------
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 (CONSOLIDATED), AND 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
REVENUES:
Trading profit (loss):
Realized:
Options and futures $1,204,850 $2,323,415 $(327,699)
U.S. Government obligations 21,267 51,234 3,471
Change in unrealized:
Options and futures (30,625) (510,976) 49,200
U.S. Government obligations (34,071) 143,640 (122,603)
------------- ------------ -----------
Total trading results 1,161,421 2,007,313 (397,631)
Interest income (Note 2) 453,093 407,304 355,496
------------- ------------ -----------
Total revenues 1,614,514 2,414,617 (42,135)
------------- ------------ -----------
EXPENSES:
Brokerage commissions 2,938 4,225 8,247
Administrative fees 158,330 144,696 142,881
------------- ------------ -----------
Total expenses 161,268 148,921 151,128
------------- ------------ -----------
INCOME BEFORE MINORITY
INTEREST 1,453,246 2,265,696 (193,263)
MINORITY INTEREST IN INCOME (28,850) (12,942) -
------------ ------------ -----------
NET INCOME (LOSS) $1,424,396 $2,252,754 $(193,263)
============ ============ ===========
NET INCOME (LOSS) PER UNIT OF
PARTNERSHIP INTEREST:
Weighted average number of units
outstanding (Note 3) $ 44,973 $ 49,591 $ 57,079
============ ============ ===========
Net income (loss) per weighted average
General Partner and Limited
Partner Unit $ 31.67 $ 45.43 $ (3.39)
============ ============ ===========
</TABLE>
See notes to consolidated financial statements.
-3-
<PAGE>
THE GROWTH AND GUARANTEE FUND L.P.
(A Delaware Limited Partnership)
- --------------------------------
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 (CONSOLIDATED), AND 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Limited General
Units Partners Partner Total
--------- ------------ ----------- -----------
<S> <C> <C> <C> <C>
PARTNERS' CAPITAL,
DECEMBER 31, 1993 60,451 $ 8,650,204 $ 98,410 $ 8,748,614
Redemptions (6,914) (988,840) - (988,840)
Net loss - (190,938) (2,325) (193,263)
--------- ------------- ----------- -------------
PARTNERS' CAPITAL,
DECEMBER 31, 1994 53,537 7,470,426 96,085 7,566,511
Redemptions (7,318) (1,196,183) - (1,196,183)
Net income - 2,221,993 30,761 2,252,754
--------- ------------- ----------- -------------
PARTNERS' CAPITAL,
DECEMBER 31, 1995 46,219 8,496,236 126,846 8,623,082
Redemptions (3,092) (625,955) - (625,955)
Net income - 1,402,690 21,706 1,424,396
--------- ------------- ----------- -------------
PARTNERS' CAPITAL,
DECEMBER 31, 1996 43,127 $ 9,272,971 $148,552 $ 9,421,523
========= ============= =========== =============
</TABLE>
See notes to consolidated financial statements.
-4-
<PAGE>
THE GROWTH AND GUARANTEE FUND L.P.
(A Delaware Limited Partnership)
- --------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 (CONSOLIDATED), AND 1994
- --------------------------------------------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
------------------------------------------
Organization
------------
The Growth and Guarantee Fund L.P. (the "Partnership") was organized on
January 21, 1987 under the Delaware Revised Uniform Limited Partnership Act
and commenced trading activities on August 5, 1987. The Growth and Guarantee
Fund Trading L.P. (the "Trading Partnership") was organized on and commenced
trading activities on June 1, 1995. The Partnership engages in the
speculative trading of stock index futures and options, attempting to
replicate the performance of the S&P 500 Stock Index while assuring that the
Units do not decline in value by more than 10% over the course of any one
Time Horizon (a term defined in the Limited Partner Agreement, generally 18
months in duration). On June 1, 1995, the Partnership began trading through
the Trading Partnership rather than directly. The formation of the
"subsidiary" Trading Partnership has been used as a means of assuring, by
isolating the necessary "reserve" assets from the risk of market loss, the
10% ceiling on the maximum loss which the Partnership can experience during a
Time Horizon. Leland O'Brien Rubinstein Associates Incorporated (the
"Advisor") is the trading advisor of the Trading Partnership. Merrill Lynch
Investment Partners Inc. (formerly, ML Futures Investment Partners Inc.)
("MLIP" or the "General Partner"), a wholly-owned subsidiary of Merrill Lynch
Group, Inc. which in turn is a wholly-owned subsidiary of Merrill Lynch &
Co., Inc. ("Merrill Lynch"), is the general partner of the Partnership and
the Trading Partnership, and Merrill Lynch Futures Inc. ("MLF") , also an
affiliate of Merrill Lynch, is the commodity broker of the Trading
Partnership. The General Partner has agreed to maintain a general partner's
interest of at least 1% of the total equity interest of the Partnership and
the Trading Partnership. The Partnership is the sole Limited Partner of the
Trading Partnership. The General Partner and each Limited Partner share in
the profits and losses of the Partnership, and the General Partner and the
Partnership share in the profits and losses of the Trading Partnership, in
proportion to the interest in the Partnership and the Trading Partnership
owned by each.
The consolidated statements include the accounts of the Trading Partnership.
All related transactions and intercompany balances between the Partnership
and the Trading Partnership are eliminated in consolidation.
The ownership by the General Partner in the Trading Partnership represents a
minority interest when the financial results of the Trading Partnership are
consolidated into those of the Partnership. The General Partner's share of
the Trading Partnership profits and losses is deducted from the Consolidated
Statements of Operations, and the General Partner's interest in the Trading
Partnership reduces partners' capital on the Consolidated Statements of
Financial Condition and the Consolidated Statements of Changes in Partner's
Capital.
-5-
<PAGE>
Estimates
---------
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Revenue Recognition
-------------------
Commodity futures, options, forward contract and securities transactions are
recorded on the trade date and open contracts are reflected in net unrealized
gain (loss) on open contracts in the Consolidated Statements of Financial
Condition at the difference between the original contract amount and the fair
value. The change in net unrealized profit (loss) on open contracts from one
period to the next is reflected in change in unrealized in the Consolidated
Statements of Operations. Fair value is based on quoted market prices on the
exchange or market on which the contract is traded.
U.S. Government Obligations
---------------------------
The Partnership invests a portion of its assets in U.S. Government
securities. These investments are carried at fair value.
Fees
----
The Partnership pays a monthly administrative fee to the General Partner
equal to .146 of 1% of the Partnership's month-end Net Assets (a 1.75% annual
rate). The General Partner pays, at no additional cost to the Partnership,
ongoing quarterly fees of $.063 per Unit for offering and organizational
costs. Prior to the change discussed under "Protected Minimum Net Asset
Value," below, the General Partner also paid the following additional fees
which were based on the Partnership's average month-end Net Assets: (i)
monthly advisory fees to Aetna Capital Management, Inc. ("ACM") totaling, on
an annual basis, .275 of 1% of the first $100 million and .125 of 1% on
amounts in excess of $100 million; (ii) monthly consulting fees to the
Advisor totaling, on an annual basis, .044 of 1% of the first $100 million
and .02 of 1% on amounts in excess of $100 million; and (iii) monthly
insurance premiums to The Standard Fire Insurance Company totaling, on an
annual basis, .375 of 1%. The General Partner currently pays the consulting
fees described in (ii).
Operating Expenses
------------------
The General Partner, at no additional expense to the Partnership, pays all
normal ongoing administrative costs of the Partnership, such as legal,
accounting, printing, postage and similar administrative expenses.
Protected Minimum Net Asset Value
---------------------------------
The maximum permissible decrease in the Net Asset Value per Unit, as of the
end of successive Time Horizons (a term defined in the Limited Partnership
Agreement, generally 18 months in duration) is 10% of the Net Asset Value per
Unit as of the beginning of each such Time Horizon
-6-
<PAGE>
(the "Protected Minimum NAV"). The Partnership had entered into an agreement
with Chase Manhattan Bank N.A. ("Chase") whereby a letter of credit issued by
Chase served to ensure the Protected Minimum NAV. The letter of credit was
issued in favor of State Street Bank and Trust Company of Connecticut, N.A.,
which served as the paying agent for the Limited Partners of the Partnership.
The amounts of the letters of credit varied from time to time as a result of
Units redeemed, or the occurrence of a New Profit Lock-In, as defined in the
Letter of Credit and Reimbursement Agreement. The Letter of Credit expired in
June 1994 and was not renewed. The Protected Minimum NAV for the current Time
Horizon ending April 30, 1998 is guaranteed by the U.S. Government
obligations. The Partnership utilized a "downside protection" strategy which
is designed to maximize profits while controlling the risk of major
drawdowns. Avoiding significant losses is of particular importance to the
Partnership's prospects for profitability due to its "downside protection"
feature.
Income Taxes
------------
No provision for income taxes has been made in the accompanying financial
statements as each Limited Partner is individually responsible for reporting
income or loss based on such Partner's respective share of the Partnership's
income and expenses as reported for income tax purposes.
Redemptions
-----------
A Limited Partner may require the Partnership to redeem some or all such
Partner's Units at 100% of Net Asset Value as of the last business day of any
month, and at 100% of actual Net Asset Value plus any amounts due under the
Protected Minimum NAV as of the last business day of any month which is also
the last day of a Time Horizon, upon ten days' written notice to the General
Partner.
Dissolution of the Partnership
------------------------------
The Partnership will terminate on December 31, 2007 or at an earlier date if
certain conditions occur, as well as under certain circumstances as set forth
in the Limited Partnership Agreement.
2. RELATED PARTY TRANSACTIONS
The portion of the Partnership's assets (approximately 10% to 15%) which are
not held by the Partnership in U.S. Government securities is invested in the
Trading Partnership. The Partnership's assets are held in U.S. Government
securities deposited with Merrill Lynch, Pierce, Fenner & Smith Incorporated
("MLPF&S"), an affiliate of Merrill Lynch. The Trading Partnership's U.S.
dollar-denominated assets are held at MLF in cash or short-term Treasury
bills. The Partnership receives all interest paid on such Treasury bills. On
the cash held at MLF, the Partnership receives interest from Merrill Lynch at
rates ranging from .50 of 1% per annum below the prevailing 91-day Treasury
bill rate up to the full prevailing 91-day Treasury bill rate. Merrill Lynch
may derive certain economic benefits, in excess of the interest which Merrill
Lynch pays to the Partnership, from possession of such cash. During the years
ended December 31, 1996, 1995 and 1994, MLF paid the Partnership
approximately $73,663, $49,000 and $42,000 of interest, respectively. Any
additional economic benefit derived from possession of the Partnership's
assets accrues to MLF or its affiliates.
-7-
<PAGE>
The Partnership pays MLF brokerage commissions of $25.00 per each round-turn,
which includes exchange clearing and NFA fees, on U.S. futures transactions
executed by the Partnership.
3. WEIGHTED AVERAGE UNITS
Weighted average number of Units outstanding was computed for purposes of
disclosing net income (loss) per weighted average Unit. The weighted average
Units outstanding at December 31, 1996, 1995 and 1994 equals the Units
outstanding as of such date, adjusted proportionately for Units redeemed
based on the respective length of time each was outstanding during the
preceding period.
4. FAIR VALUE AND OFF-BALANCE SHEET RISK
The Partnership trades futures and options on stock indices. The
Partnership's trading results by reporting category are as follows:
<TABLE>
<CAPTION>
Trading Results
---------------------------------
1996 1995
---------------- ---------------
<S> <C> <C>
Interest Rates or Cash Instruments $ (10,191) $ 199,460
Stock Indices 1,171,612 1,807,853
---------------- ---------------
$1,161,421 $2,007,313
================ ===============
</TABLE>
Market Risk
-----------
Derivative instruments involve varying degrees of off-balance sheet market
risk and changes in the level or volatility of interest rates or the S&P 500
Stock Index will result in changes in the Partnership's unrealized profit
(loss) on such derivative instruments as reflected in the Consolidated
Statements of Financial Condition as of the end of the period. The
Partnership's exposure to market risk is influenced by a number of factors
which affect stock index levels.
One important aspect of the General Partner's risk controls is its
adjustments to the leverage at which the Partnership trades. By controlling
the percentage of the Partnership's assets allocated to trading, the General
Partner can directly affect the market exposure of the Partnership. Leverage
control is the principal means by which the General Partner hopes to be able
to ensure that Merrill Lynch is never required to make any payments under its
guarantee that the Net Asset Value per Unit will equal no less than $100 as
of the Principal Assurance Date. Deleveraged trading involves significant
opportunity costs, but is effective in controlling the risk of loss.
Fair Value
----------
The derivative instruments traded by the Trading Partnership are marked to
market daily with the resulting unrealized profit (loss) recorded in the
Consolidated Statements of Financial Condition
-8-
<PAGE>
and the related income or loss reflected in trading revenues in the
Statements of Operations. The contract/notional values of open contracts as
of December 31, 1996 and 1995 were as follows:
<TABLE>
<CAPTION>
1996 1995
---------------------------------------------------- --------------------------------------------------
Commitment to Commitment to Commitment to Commitment to
Purchase Sell Purchase Sell
(Futures & Options) (Futures & Options) (Futures & Options) (Futures & Options)
----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Stock
Indices $8,976,550 $ - $6,052,025 $ -
================== =================== ================== ==================
</TABLE>
The majority of the Partnership's derivative financial instruments
outstanding at December 31, 1996, mature within one year.
The contract/notional value of exchange traded and open contracts as of
December 31, 1996 and 1995 were as follows:
<TABLE>
<CAPTION>
1996 1995
---------------------------------------------------- ------------------------------------------------
Commitment to Commitment to Commitment to Commitment to
Purchase (Futures, Sell (Futures, Purchase (Futures, Sell (Futures,
Options & Forwards) Options & Forwards) Options & Forwards) Options & Forwards)
------------------- ------------------- ------------------- -------------------
<S> <C> <C> <C> <C>
Exchange
Traded $8,976,550 $ - $6,052,025 $ -
================== =================== ================== ==================
</TABLE>
The average fair value of derivative financial instruments held or issued as
of the end of each calendar month during the years ended December 31, 1996
and 1995 were as follows:
<TABLE>
<CAPTION>
1996 1995
---------------------------------------------------- ------------------------------------------------
Commitment to Commitment to Commitment to Commitment to
Purchase (Futures, Sell (Futures, Purchase (Futures, Sell (Futures,
Options & Forwards) Options & Forwards) Options & Forwards) Options & Forwards)
------------------- ------------------- ------------------- -------------------
<S> <C> <C> <C> <C>
Stock
Indices $7,367,783 $ - $5,341,896 $156,385
================== ==================== ================== ================
</TABLE>
Credit Risk
-----------
The risks associated with exchange-traded contracts are typically perceived
to be less than those associated with over-the-counter transactions (non-
exchange-traded), because exchanges typically (but not universally) provide
clearinghouse arrangements in which the collective credit (in some cases
limited in amount, in some cases not) of the members of the exchange is
pledged to support the financial integrity of the exchange, whereas in over-
the-counter transactions, on the other hand, traders must rely solely on the
credit of their respective individual counterparties. Margins, which may be
subject to loss in the event of a default, are generally required in exchange
trading, and
-9-
<PAGE>
counterparties may require margin in the over-the-counter markets. The
Partnership does not trade off-exchange instruments.
The contract amounts in the above tables represent the extent of the Trading
Partnership's market exposure in the relevant class of derivative
instruments. Because the Partnership trades only exchange-traded instruments,
it has no counterparty risk.
The Partnership also has credit risk because the sole broker with respect to
the Partnership is MLF. At December 31, 1996 and 1995, $9,525,064 and
$8,967,334 of these assets, respectively were held in segregated accounts at
MLF in accordance with Commodity Futures Trading Commission regulations.
The gross unrealized profit and net unrealized profit (loss) on open
contracts as of December 31, 1996 and 1995 were as follows:
<TABLE>
<CAPTION>
1996 1995
--------------------------------------------------- --------------------------------------------------
Gross Unrealized Net Unrealized Gross Unrealized Net Unrealized
Profit Profit (Loss) Profit Profit (Loss)
------------------------ ------------------------ ------------------------- -------------------------
<S> <C> <C> <C> <C>
Exchange-Traded $ - $(136,425) $ - $(105,800)
======================== ========================= ========================= =========================
</TABLE>
The Partnership controls credit risk by dealing almost exclusively with
Merrill Lynch entities as brokers and counterparties.
The Partnership, through its normal course of business, enters into various
contracts with MLF acting as its commodity broker. Pursuant to the brokerage
arrangement with MLF, to the extent that such trading results in receivables
from and payables to MLF, these receivables and payables are offset and
reported as a net receivable or payable.
To the best of the knowledge and belief of the
undersigned, the information contained in this
report is accurate and complete.
James M. Bernard
Chief Financial Officer
Merrill Lynch Investment Partners Inc.
General Partner of
The Growth and Guarantee Fund L.P.
-10-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> BD
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CONSOLIDATED
STATEMENTS OF FINANCIAL CONDITION, CONSOLIDATED STATEMENTS OF OPERATIONS,
CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' CAPITAL AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000812188
<NAME> THE GROWTH AND GUARANTEE FUND
<S> <C> <C>
<PERIOD-TYPE> 12-MOS 12-MOS
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1995
<PERIOD-START> JAN-01-1996 JAN-01-1995
<PERIOD-END> DEC-31-1996 DEC-31-1995
<CASH> 0 0
<RECEIVABLES> 1,914,014 1,884,516
<SECURITIES-RESALE> 0 0
<SECURITIES-BORROWED> 0 0
<INSTRUMENTS-OWNED> 7,628,080 6,820,462
<PP&E> 0 0
<TOTAL-ASSETS> 9,542,094 8,704,978
<SHORT-TERM> 0 0
<PAYABLES> 62,779 52,954
<REPOS-SOLD> 0 0
<SECURITIES-LOANED> 0 0
<INSTRUMENTS-SOLD> 0 0
<LONG-TERM> 0 0
0 0
0 0
<COMMON> 0 0
<OTHER-SE> 9,479,315 8,652,024
<TOTAL-LIABILITY-AND-EQUITY> 9,542,094 8,704,978
<TRADING-REVENUE> 1,161,421 2,007,313
<INTEREST-DIVIDENDS> 453,093 407,304
<COMMISSIONS> 2,938 4,225
<INVESTMENT-BANKING-REVENUES> 0 0
<FEE-REVENUE> 0 0
<INTEREST-EXPENSE> 0 0
<COMPENSATION> 0 0
<INCOME-PRETAX> 1,424,396 2,252,754
<INCOME-PRE-EXTRAORDINARY> 1,424,396 2,252,754
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 1,424,396 2,252,754
<EPS-PRIMARY> 31.67 45.43
<EPS-DILUTED> 31.67 45.43
</TABLE>
