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 September 30, 2000
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Commission File Number 0-18500
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Alternative Asset Growth Fund, L.P.
-----------------------------------
(Exact name of registrant)
Delaware 74-2546493
----------------------- ------------------------------------
(State of Organization) (I.R.S. Employer Identification No.)
ProFutures, Inc.
11612 Bee Cave Road, Suite 100
Austin, Texas 78738
------------------------------
(Address of principal executive office)
Registrant's telephone number
(800) 348-3601
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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.
ALTERNATIVE ASSET GROWTH FUND, L.P.
STATEMENTS OF FINANCIAL CONDITION
September 30, 2000 (Unaudited) and December 31, 1999 (Audited)
-----------
September 30, December 31,
2000 1999
---- ----
ASSETS
Equity in broker trading accounts
Cash $ 8,779,337 $13,029,093
Net option premiums paid 0 35,507
Unrealized gain (loss) on open contracts (190,816) 696,333
----------- -----------
Deposits with brokers 8,588,521 13,760,933
Cash 2,523 338
----------- -----------
Total assets $ 8,591,044 $13,761,271
=========== ===========
LIABILITIES
Accounts payable $ 9,798 $ 2,348
Commissions and other trading fees
on open contracts 3,882 8,985
Incentive fees payable 16,904 127,961
Management fees payable 75,312 103,330
Redemptions payable 41,055 214,748
----------- -----------
Total liabilities 146,951 457,372
----------- -----------
PARTNERS' CAPITAL (Net Asset Value)
General Partner - 91.729 and 323.451
units outstanding at September 30, 2000
and December 31, 1999 103,718 479,238
Limited Partners - 7,376.286 and 8,655.745
units outstanding at September 30, 2000 and
December 31, 1999 8,340,375 12,824,661
----------- -----------
Total partners' capital
(Net Asset Value) 8,444,093 13,303,899
----------- -----------
$ 8,591,044 $13,761,271
=========== ===========
See accompanying notes.
ALTERNATIVE ASSET GROWTH FUND, L.P.
STATEMENTS OF OPERATIONS
For the Nine Months Ended September 30, 2000 and 1999
(Unaudited)
-----------
Nine Months Ended
September 30,
2000 1999
--------- ---------
INCOME
Trading gains (losses)
Realized $(1,438,956) $ (443,157)
Change in unrealized (887,149) 1,136,796
----------- -----------
Gain (loss) from trading (2,326,105) 693,639
Interest income 444,938 498,719
----------- -----------
Total income (loss) (1,881,167) 1,192,358
----------- -----------
EXPENSES
Brokerage commissions 344,871 363,761
Incentive fees 146,478 220,868
Management fees 504,043 714,984
Operating expenses 115,293 108,603
----------- -----------
Total expenses 1,110,685 1,408,216
----------- -----------
NET (LOSS) $(2,991,852) $ (215,858)
=========== ===========
NET (LOSS) PER GENERAL AND LIMITED PARTNER UNIT
(based on weighted average number of units
outstanding during the period of 8,239 and
10,170, respectively) $ (363.13) $ (21.22)
=========== ===========
(DECREASE) IN NET ASSET VALUE PER
GENERAL AND LIMITED PARTNER UNIT $ (350.94) $ (22.14)
=========== ===========
See accompanying notes.
ALTERNATIVE ASSET GROWTH FUND, L.P.
STATEMENTS OF OPERATIONS
For the Three Months Ended September 30, 2000 and 1999
(Unaudited)
-----------
Three Months Ended
September 30,
2000 1999
--------- ---------
INCOME
Trading gains (losses)
Realized $ 52,288 $(1,110,496)
Change in unrealized (232,495) 797,084
----------- -----------
(Loss) from trading (180,207) (313,412)
Interest income 141,475 160,223
----------- -----------
Total (loss) (38,732) (153,189)
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EXPENSES
Brokerage commissions 100,366 108,839
Incentive fees 16,905 39,201
Management fees 150,967 223,198
Operating expenses 28,244 31,218
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Total expenses 296,482 402,456
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NET (LOSS) $ (335,214) $ (555,645)
=========== ===========
NET (LOSS) PER GENERAL AND LIMITED PARTNER UNIT
(based on weighted average number of units
outstanding during the period of 7,670 and
9,628, respectively) $ (43.70) $ (57.71)
=========== ===========
(DECREASE) IN NET ASSET VALUE PER
GENERAL AND LIMITED PARTNER UNIT $ (44.36) $ (56.06)
=========== ===========
See accompanying notes.
<TABLE>
ALTERNATIVE ASSET GROWTH FUND, L.P.
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL (NET ASSET VALUE)
For the Nine Months Ended September 30, 2000 and 1999
(Unaudited)
-----------
<CAPTION>
Total Partners' Capital
Number of -----------------------------------
Units General Limited Total
----------- --------- ----------- -----------
<S> <C> <C> <C> <C>
Balances at
December 31, 1999 8,979.196 $ 479,238 $12,824,661 $13,303,899
Net (loss) for the
nine months ended
September 30, 2000 (94,610) (2,897,242) (2,991,852)
Additions 4.278 5,000 0 5,000
Redemptions (1,515.459) (285,910) (1,587,044) (1,872,954)
---------- --------- ----------- -----------
Balances at
September 30, 2000 7,468.015 $ 103,718 $ 8,340,375 $ 8,444,093
========== ========= =========== ===========
Balances at
December 31, 1998 10,925.016 $ 495,271 $16,233,207 $16,728,478
Net (loss) for the
nine months ended
September 30, 1999 (7,161) (208,697) (215,858)
Redemptions (1,555.703) 0 (2,373,650) (2,373,650)
---------- --------- ----------- -----------
Balances at
September 30, 1999 9,369.313 $ 488,110 $13,650,860 $14,138,970
========== ========= =========== ===========
Net asset value
per unit at
December 31, 1998 $ 1,531.21
===========
September 30, 1999 $ 1,509.07
===========
December 31, 1999 $ 1,481.64
===========
September 30, 2000 $ 1,130.70
===========
</TABLE>
See accompanying notes.
ALTERNATIVE ASSET GROWTH FUND, L.P.
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
-----------
Note 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
-----------------------------------------------------------
A. General Description of the Partnership
Alternative Asset 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 futures
contracts and options on futures contracts.
B. Regulation
As a registrant with the Securities and Exchange Commission, the
Partnership is subject to the regulatory requirements under the
Securities Act of 1933 and Securities Exchange Act of 1934. As a
commodity investment pool, the Partnership is subject to the
regulations of the Commodity Futures Trading Commission, an agency of
the 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. Net unrealized gains or
losses on open contracts (the difference between contract purchase
price and quoted market price) are reflected in the statement of
financial condition as a net gain or loss, as there exists a right of
offset of unrealized gains or losses in accordance with Financial
Accounting Standards Board Interpretation No. 39 - "Offsetting of
Amounts Related to Certain Contracts." Any change in net unrealized
gain or loss from the preceding period is reported in the statement
of operations.
For purposes of both financial reporting and calculation of
redemption value, Net Asset Value per Unit is calculated by dividing
Net Asset Value by the number of outstanding Units.
D. Brokerage Commissions
Brokerage commissions include other trading fees and are charged
to expense when contracts are opened.
ALTERNATIVE ASSET 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. Foreign Currency Transactions
The Partnership's functional currency is the U.S. dollar; however, it
transacts business in currencies other than the U.S. dollar. Assets
and liabilities denominated in currencies other than the U.S. dollar
are translated into U.S. dollars at the rates in effect at the date
of the statement of financial condition. Income and expense items
denominated in currencies other than the U.S. dollar are translated
into U.S. dollars at the rates in effect during the period. Gains
and losses resulting from the translation to U.S. dollars are
reported in income currently.
G. 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 September 30, 2000, and the results of operations
for the nine and three months ended September 30, 2000 and 1999.
H. Reclassification
Certain amounts in the 1999 financial statements were reclassified to
conform with the 2000 presentation.
Note 2. GENERAL PARTNER
---------------
The General Partner of the Partnership is ProFutures, Inc., which
conducts and manages the business of the Partnership. The Agreement
of Limited Partnership requires the General Partner to maintain an
investment in the Partnership equal to at least the greater of (i) 3%
of aggregate capital contributions of all partners or $100,000,
whichever is less, or (ii) the lesser of 1% of the aggregate capital
contributions of all partners or $500,000.
ALTERNATIVE ASSET GROWTH FUND, L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
-----------
Note 2. GENERAL PARTNER (CONTINUED)
---------------------------
The Agreement of Limited Partnership also requires that the General
Partner maintain a net worth at least equal to the sum of (i) the
lesser of $250,000 or 15% of the aggregate capital contributions of
any limited partnerships for which it acts as general partner and
which are capitalized at less than $2,500,000; and (ii) 10% of the
aggregate capital contributions of any limited partnerships for which
it acts as general partner and which are capitalized at greater than
$2,500,000.
ProFutures, Inc. has callable subscription agreements with
Internationale Nederlanden (U.S.) Securities, Futures & Options, Inc.
(ING), the Partnership's primary 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's net
worth requirements.
The Partnership pays the General Partner a monthly management fee of
1/6 of 1% (2% annually) of month-end Net Asset Value.
Total management fees earned by ProFutures, Inc. for the nine months
ended September 30, 2000 and 1999 were $152,978 and $232,328,
respectively, and for the three months ended September 30, 2000 and
1999 were $44,463 and $71,922, respectively.
Note 3. COMMODITY TRADING ADVISORS
--------------------------
The Partnership has trading advisory contracts with several unrelated
commodity trading advisors to furnish investment management services
to the Partnership. Certain advisors receive management fees ranging
from 1% to 2% annually of Allocated Net Asset Value (as defined in
the trading advisory contracts). In addition, the trading advisors
receive quarterly incentive fees ranging from 20% to 27.5% of Trading
Profits (as defined).
Note 4. DEPOSITS WITH BROKERS
---------------------
The Partnership deposits funds with brokers subject to Commodity
Futures Trading Commission regulations and various exchange and
broker requirements. Margin requirements are satisfied by the
deposit of cash with such brokers. The Partnership earns interest
income on its assets deposited with the brokers.
Note 5. OTHER FEES
----------
The Partnership employs a consultant who is paid a monthly fee of 1/6
of 1% (2% annually) of month-end Net Asset Value for administrative
services rendered to the Partnership.
ALTERNATIVE ASSET GROWTH FUND, L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
-----------
Note 5. OTHER FEES (CONTINUED)
----------------------
Total consulting fees earned by this consultant for the nine months
ended September 30, 2000 and 1999 were $152,978 and $232,328,
respectively, and for the three months ended September 30, 2000 and
1999 were $44,463 and $71,922, respectively.
As of June 1, 2000, ATA Research Inc. has resigned as the
Partnership's Trading Manager. Kenmar Global Strategies Inc. (Kenmar)
has been engaged to replace similar functions previously performed by
the Trading Manager. Kenmar receives the same fee as previously paid
to the Trading Manager, 1/12 of 1% (1% annually) of month-end Net
Asset Value for services rendered to the Partnership.
Total management fees earned by ATA Research, Inc. for the nine months
ended September 30, 2000 and 1999 were $46,500 and $116,164,
respectively, and for the three months ended September 30, 2000 and
1999 were $0 and $35,961, respectively. Kenmar earned consulting fees
in the amount of $29,989 for the four month period ended September 30,
2000, and $22,232 for the three months ended September 30, 2000.
Note 6. DISTRIBUTIONS AND REDEMPTIONS
-----------------------------
The Partnership is not required to make distributions, but may do so
at the sole discretion of the General Partner. A Limited Partner may
request and receive redemption of units owned, subject to
restrictions in the Agreement of Limited Partnership.
Note 7. TRADING ACTIVITIES AND RELATED RISKS
------------------------------------
The Partnership engages in the speculative trading of U.S. and
foreign futures contracts and options on U.S. and foreign futures
contracts (collectively, "derivatives"). The Partnership is exposed
to both market risk, the risk arising from changes in the market value
of the contracts, and credit risk, the risk of failure by another
party to perform according to the terms of a contract.
Purchase and sale of futures and options on futures contracts
requires margin deposits with the brokers. 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.
ALTERNATIVE ASSET GROWTH FUND, L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
-----------
Note 7. TRADING ACTIVITIES AND RELATED RISKS (CONTINUED)
------------------------------------------------
The Partnership has a portion of its 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.
For derivatives, risks arise from changes in the market value of the
contracts. Theoretically, the Partnership is exposed to a market
risk equal to the value of futures contracts purchased and unlimited
liability on such contracts sold short. As both a buyer and seller
of options, the Partnership pays or receives a premium at the outset
and then bears the risk of unfavorable changes in the price of the
contract underlying the option. Written options expose the
Partnership to potentially unlimited liability, and purchased options
expose the Partnership to a risk of loss limited to the premiums paid.
The General Partner has established procedures to actively monitor
market risk and minimize credit risk, although there can be no
assurance that it will, in fact, succeed in doing so. The General
Partner's basic market risk control procedures consist of
continuously monitoring the trading activity of the various trading
advisors, with the actual market risk controls being applied by the
advisors themselves. The General Partner seeks to minimize credit
risk primarily by depositing and maintaining the Partnership's assets
at financial institutions and brokers which the General Partner
believes to be creditworthy. The Limited Partners bear the risk of
loss only to the extent of the market value of their respective
investments and, in certain specific circumstances, distributions and
redemptions received.
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 and option contracts.
It is possible that extreme market conditions or daily price
fluctuation limits at certain exchanges could adversely affect the
liquidity of open futures and option contracts. There are no
restrictions on the liquidity of these assets except for amounts
on deposit with the brokers needed to meet margin requirements on
open futures contracts.
B. CAPITAL RESOURCES: Since the Partnership's business is the
purchase and sale of various commodity interests, it will make
few, if any, capital expenditures.
The Partnership's offering of Units of Limited Partnership
Interest terminated in 1991.
C. RESULTS OF OPERATIONS:
The Partnership's net income (loss) for the nine months ended
September 30, 2000 and 1999 consisted of the following:
2000 1999
---- ----
Three months ended March 31 $(2,255,870) $ 103,496
Three months ended June 30 (400,768) 236,291
Three months ended September 30 (335,214) (555,645)
----------- -----------
Nine months ended September 30 $(2,991,852) $ (215,858)
=========== ===========
The Partnership's net trading losses for the three months ended
September 30, 2000 resulted primarily from losses in the interest
rate and equity indices markets and were reduced by gains in the
energy and foreign currency markets.
For the nine months ended September 30, 2000, the Partnership's
trading losses resulted from losses in all market sectors, except
for gains in the energy markets.
The Partnership's trading losses for the three months ended
September 30, 1999 resulted from losses in the agricultural,
equity indices, foreign currency and interest rate markets and
were reduced by gains in the energy and metals markets.
For the nine months ended September 30, 1999, the net trading
gains resulted primarily from gains in the energy, interest rate
and metals markets and were reduced by losses in the agricultural
and foreign currency markets. They were further reduced by fees
and operating expenses which resulted in a net loss for the nine
month period ended September 30, 1999
The General Partner, directly and/or indirectly through a
trading manager, has established procedures to actively monitor
market risk and minimize credit risk, although there can be no
assurance that it will, in fact, succeed in doing so. The
General Partner's basic market risk control procedures consist
of continuously monitoring the trading activity of the various
trading advisors, with the actual market risk controls being
applied by the advisors themselves. The General Partner seeks
to minimize credit risk primarily by depositing and maintaining
the Partnership's assets at financial institutions and brokers
which the General Partner believes to be creditworthy. The
Limited Partners bear the risk of loss only to the extent of the
market value of their respective investments and, in certain
specific circumstances, distributions and redemptions received.
Due to the speculative nature of trading commodity interests, the
Partnership's income or loss from operations may vary widely from
period to period. Management cannot predict whether the
Partnership's future Net Asset Value per Unit will increase or
experience a decline.
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
D. POSSIBLE CHANGES: The General Partner reserves the right to
terminate certain and/or engage additional commodity trading
advisors in the future and reserves the right to change any
of the Partnership's clearing arrangements.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
None.
Item 2. Changes in Securities.
None.
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.
SIGNATURE
Pursuant to the requirements 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.
Alternative Asset Growth Fund, L.P.
(Registrant)
/s/ Gary D. Halbert
Gary D. Halbert, President
ProFutures, Inc., General Partner
Alternative Asset Growth Fund, L.P.
