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, 1999
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Commission File number: 0-18500
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Alternative Asset Growth Fund, L.P.
-----------------------------------
(Exact name of Partnership as specified in charter)
Delaware 74-2546493
- ------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
c/o ProFutures, Inc.,
11612 Bee Cave Road, Suite 100,
Austin, Texas 78733
-------------------------------
(Address of principal executive offices)
Partnership's telephone number
(512) 263-3800
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Securities registered pursuant to Section 12(b) of the Act:
Title of each class. Name of each exchange on which registered.
-------------------- ------------------------------------------
Securities registered pursuant to Section 12(g) of the Act:
Units of Limited Partnership Interest
-------------------------------------
(Title of Class)
Indicate by check mark whether the Partnership (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 Partnership was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days.
Yes X
No
State the aggregate market value of the voting stock held by non-affiliates
of the Partnership. The aggregate market value shall be computed by reference
to the price at which the stock was sold, or the average bid and asked prices
of such stock, as of a specified date within 60 days prior to the date of
filing.
Not applicable
DOCUMENTS INCORPORATED BY REFERENCE
Partnership's Prospectus dated August 31, 1990 and Supplement
thereto dated March 1, 1991 are incorporated herein by
reference in Part I, Part II, Part III and Part IV
PART I
Item 1. Business.
(a) General Development of Business
-------------------------------
Alternative Asset Growth Fund, L.P. (the "Partnership") was organized on
April 28, 1989 under the Delaware Revised Uniform Limited Partnership
Act. The General Partner and Commodity Pool Operator of the
Partnership is ProFutures, Inc., a Texas corporation. The General
Partner's address is 11612 Bee Cave Road, Suite 100, Austin, Texas 78733
and its telephone numbers are 1-800-348-3601 and (512) 263-3800.
The Partnership filed a registration statement with the U.S. Securities
and Exchange commission for the sale of a minimum of $4,000,000 and
maximum of $50,000,000 in Units of Limited Partnership Interest at
$1,000 each, which registration statement was effective on
September 26, 1989. On March 6, 1990 the requisite $4,000,000 level
of subscriptions was exceeded and the subscription funds were transferred
to the Partnership's account. On March 7, 1990 the Partnership commenced
trading activity and continued the offering of Units until the expiration
of the offering period.
The Unit selling price during the initial offering period was $1,000.
After the commencement of trading, Unit purchasers acquired Units at
the month-end Net Asset Value per Unit (as defined in the limited
partnership agreement) plus a pro rata portion of unamortized
organization and offering expenses.
The Partnership later continued the offering and sale of Units on
August 31, 1990, pursuant to a post-effective amendment dated July 16,
1990 and Prospectus dated August 31, 1990. This offering terminated on
May 30, 1991. The Partnership issued an aggregate of 32,516.437 Units
of Limited Partnership Interest for total contributions of $36,976,906
exclusive of account opening fees.
(b) General Description of the Business
-----------------------------------
The General Partner administers the business and affairs of the
Partnership exclusive of its trading operations. Trading decisions are
made by independent Commodity Trading Advisors chosen by ATA Research,
Inc., the Partnership's Trading Manager. As of December 31, 1999 there
were six Commodity Trading Advisors: Atlas Capital Management, Inc.;
Dennis Trading Group, Inc.; Dominion Capital Management, Inc.; Hampton
Investors Inc.; Rainbow Trading Corporation; and Willowbridge Associates,
Inc.
ProFutures, Inc., a Texas corporation, is a guaranteed Introducing
Broker of Internationale Nederlanden (U.S.) Securities, Futures & Options
Inc. (ING). It is also registered with the Commodity Futures Trading
Commission (CFTC) as a Commodity Trading Advisor and Commodity Pool
Operator and is a member of the National Futures Association (NFA).
Gary D. Halbert is the Chairman, President and principal stockholder of
ProFutures, Inc., which was incorporated and began operation in
December 1984 and specializes in speculative managed futures accounts.
ATA Research, Inc., the Partnership's Trading Manager, is a Texas
corporation whose sole Director, Officer and stockholder is Aladin T.
Abguhazaleh. It was organized in 1985 to perform research and consulting
services associated with monitoring performance of Commodity Trading
Advisors.
The Partnership operates as a commodity investment pool, whose objective
is to achieve appreciation of its assets through the speculative trading
in futures and option contracts and other commodity interests. It
ordinarily maintains open positions for a relatively short period of
time. The Partnership's ability to make a profit depends largely on the
success of the Advisors in identifying market trends and price movements
and buying or selling accordingly.
The Partnership's Trading Policies are set forth on pages 77-78 of the
Prospectus, dated August 31, 1990, which is incorporated herein by
reference. Material changes in the Trading Policies as described in
the Prospectus must be approved by a vote of a majority of the
outstanding Units of Limited Partnership Interest. A change in
contracts traded will not be deemed to be a material change in the
Trading Policies.
(c) Trading Methods and Advisors
----------------------------
Futures traders basically rely on either or both of two types of
analysis for their trading decisions, "technical" or "fundamental".
Technical analysis uses the theory that a study of the markets will
provide a means of anticipating price changes. Technical analysis
generally will include a study of actual daily, weekly and monthly price
fluctuations, volume variations and changes in open interest, utilizing
charts and/or computers for analysis of these items. Fundamental
analysis, on the other hand, relies on a study and evaluation of
external factors which affect the price of a futures contract in order
to predict prices. These include political and economic events,
weather, supply and demand and changes in interest rates.
The respective Advisors' trading strategies attempt to detect trends in
price movements for the commodities monitored by them. They normally
seek to establish positions and maintain such positions while the
particular market moves in favor of the position and to exit the
particular market and/or establish reverse positions when the favorable
trend either reverses or does not materialize. These trading strategies
are not normally successful if a particular market is moving in an
erratic and non-trending manner.
Because of the nature of the commodities markets, prices frequently
appear to be trending when a particular market is, in fact, without a
trend. In addition, the trading strategies may identify a particular
market as trending favorably to a position even though actual market
performance thereafter is the reverse of the trend identified.
The General Partner and Trading Manager, on behalf of the Partnership,
have entered into advisory contracts which provide that the portion of
the Partnership's assets allocated to each Advisor will be traded in
accordance with the Advisor's instruction unless the General Partner
or the Trading Manager determine that the Partnership's trading
policies have been violated. The Trading Manager, upon mutual
consultation and agreement with the General Partner, has the authority
to allocate or reallocate assets among its current Advisors or any
others it may select in the future.
Notional Funding Note: As of December 31, 1999, the Partnership has
allocated notional funds to Advisors equal to approximately 30.8% of the
Partnership's cash and/or other margin - qualified assets. Of course,
this percentage may be higher or lower over any given 12 month period.
The management fees paid to an Advisor, if any, are a percentage of the
nominal account size of the account if an account had been notionally
funded. The nominal account size is equal to a specific amount of funds
initially allocated to an Advisor which increases by profits and
decreases by losses in the account, but not by additions to or
withdrawals of actual funds from the account. Some, but not all,
Advisors are expected to be allocated notional funds, and not all of the
Advisors allocated notional funds are expected to be paid management
fees. Further, the amount of cash and/or other margin-qualified assets
in an account managed by an Advisor will vary greatly at various times
in the course of the Partnership's business, depending on the General
Partner's general allocation strategy and pertinent margin requirements
for the trading strategies undertaken by an Advisor.
None of the Advisors or their respective principals own any Units of the
Partnership. The Partnership's Advisors are independent Commodity Trading
Advisors and are not affiliated with the General Partner; however, all
are also Advisors to other commodity pools with which the General
Partner and Trading Manager, respectively, are currently associated.
Each Advisor is registered with the CFTC and is a member in such
capacity with the NFA. Because of their confidential nature,
proprietary trading records of the Advisors and their respective
principals are not available for inspection by the Limited Partners
of the Partnership.
(d) Fees, Compensation and Expenses
-------------------------------
The descriptions and definitions contained in "Fees, Compensation and
Expenses" on Pages 36- 38 of the Prospectus dated August 31, 1990 are
incorporated herein by reference.
The General Partner, for its services, receives a monthly administrative
fee equal to 1/6 of 1% of month-end Net Asset Value (approximately 2%
annually).
The Trading Manager, for its services, receives a monthly management fee
equal to 1/12 of 1% of the month-end Net Asset Value (approximately 1%
annually).
The Consultant, for its administrative services to the Partnership,
receives a monthly consulting fee equal to 1/6 of 1% of the month-end
Net Asset Value (approximately 2% annually).
Certain Trading 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 Advisors receive quarterly
incentive fees ranging from 20% to 27.5% of Trading Profits (as
defined). The quarterly incentive fees are payable only on cumulative
profits achieved by the respective Advisor. For example, if one of the
Advisors to the Partnership experiences a loss after an incentive fee
payment is made, that Advisor will retain such payments but will receive
no further incentive fees until such Advisor has recovered the loss and
then generated subsequent Trading Profits (as defined). Consequently, an
incentive fee may be paid to one Advisor but the Partnership may
experience no change or a decline in its Net Asset Value because of the
performance of other Advisors. The Trading Manager, upon mutual
consultation and agreement with the General Partner, may allocate or
reallocate the Partnership's assets at any time among the current
Advisors or any others that may be selected. Upon termination of the
present Advisors' contracts or at any other time in the discretion of
the Trading Manager or General Partner, the Partnership may employ
other advisors whose compensation may be calculated without
regard to the losses which may be incurred by the present Advisors.
Similarly, the Partnership may renew its relationship with each Advisor
on the same or different terms.
(e) Brokerage Arrangements
----------------------
The General Partner, among other responsibilities, has the duty to select
the brokerage firms through which the Partnership's trading will be
executed. The General Partner has selected Internationale Nederlanden
(U.S.) Securities, Futures & Options Inc. (ING) as the Partnership's
primary clearing broker. ING is registered with the CFTC as a Futures
Commission Merchant. It is a member of the NFA and a clearing member of
the Chicago Board of Trade and the International Monetary Market of the
Chicago Mercantile Exchange.
(f) Financial Information About Industry Segments
---------------------------------------------
The Partnership operates in only one industry segment, that of the
speculative trading of futures, options and forward contracts and other
commodity interests. See also "Description of Futures Trading", pages 81
to 84 of the Prospectus dated August 31, 1990, which is incorporated
herein by reference.
(g) Regulation
----------
The U.S. futures markets are regulated under the Commodity Exchange Act,
which is administered by the Commodity Futures Trading Commission (CFTC),
a federal agency created in 1974. The CFTC licenses and regulates
commodity exchanges, commodity brokerage firms (referred to in the
industry as "futures commission merchants"), commodity pool operators,
commodity trading advisors and others. The General Partner is
registered by the CFTC as a commodity pool operator and each Advisor is
registered as a commodity trading advisor. Futures professionals such as
the General Partner and the Advisors are also regulated by the National
Futures Association, a self-regulatory organization for the futures
industry that supervises the dealings between futures professionals and
their customers. If the pertinent CFTC registrations or NFA memberships
were to lapse, be suspended or be revoked, the General Partner would be
unable to act as the Partnership's commodity pool operator, and the
respective Advisors as a commodity trading advisor, to the Partnership.
The CFTC has adopted disclosure, reporting and recordkeeping requirements
for commodity pool operators (such as the General Partner) and disclosure
and recordkeeping requirements for commodity trading advisors. The
reporting rules require pool operators to furnish to the participants in
their pools a monthly statement of account, showing the pool's income or
loss and change in Net Asset Value and an annual financial report,
audited by an independent certified public accountant.
The CFTC and the exchanges have pervasive powers over the futures
markets, including the emergency power to suspend trading and order
trading for liquidation only (i.e., traders may liquidate existing
positions but not establish new positions). The exercise of such powers
could adversely affect the Partnership's trading.
For additional information refer to "Regulation", Pages 82-83 of the
Prospectus dated August 31, 1990, which is incorporated herein by
reference.
(h) Competition
-----------
The Partnership may experience increased competition for the same
commodity futures contracts. The Advisors may recommend similar or
identical trades to other accounts they manage. Thus the Partnership
may be in competition with such accounts for the same or similar
positions. Competition may also increase due to widespread utilization
of computerized trading methods similar to the methods used by some of
the Advisors. The Partnership may also compete with other funds
organized by the General Partner.
(i) Financial Information About Foreign and Domestic Operations
-----------------------------------------------------------
The Partnership does not expect to engage in any operations in foreign
countries nor does it expect to earn any portion of the Partnership's
revenue from customers in foreign countries.
Item 2. Properties.
The Partnership does not own and does not expect to own any physical
properties.
Item 3. Legal Proceedings.
The Partnership is not aware of any pending legal proceedings to which the
Partnership is a party or to which any of its assets are subject.
Item 4. Submission of Matters to a Vote of Security Holders.
There were no matters submitted to a vote of holders of Units of Limited
Partnership Interest ("Units") during the fiscal year ended December 31,
1999.
PART II
Item 5. Market for Partnership's Securities and Related Security Holder
Matters
(a) Market Information
------------------
There is no established public trading market for the Partnership's Units
of Limited Partnership Interest.
A Limited Partner (or any assignee of units) may withdraw some or all of
his capital contribution and undistributed profits, if any, by requiring
the Partnership to redeem any or all of his Units at Net Asset Value per
Unit. Redemptions shall be effective as of the end of any month after
10 days written notice to the General Partner. Redemptions shall be
paid within 15 business days after the month end, provided that all
liabilities, contingent or otherwise, of the Partnership, except any
liability to partners on account of their capital contributions, have
been paid and there remains property of the Partnership sufficient to
pay them.
(b) Holders
-------
The number of holders of record of Units of Partnership Interest as of
December 31, 1999 was:
General Partner's Capital 2 (including principals of
the General Partner)
Limited Partners' Capital 722
At the commencement of trading on March 7, 1990 there were 290 Limited
Partners holding 4,338.536 Units of Limited Partner Interest and one
General Partner holding 46 Units of General Partner Interest. At
December 31, 1999 there were 722 Limited Partners holding 8,655.745
Units, and 323.451 Units held by the General Partner and its principals.
(c) Distributions
-------------
The Partnership does not anticipate making any distributions to
investors.
Distributions of profits to partners are made at the discretion of the
General Partner and will depend, among other factors, on earnings and
the financial condition of the Partnership. No such distributions have
been made to date.
Item 6. Selected Financial Data.
Following is a summary of certain financial information for the
Partnership for the calendar years 1999, 1998, 1997, 1996 and 1995.
1999
----
Realized Gains (Losses) $ 270,179
Change in Unrealized Gains (Losses)
on Open Contracts 496,473
Interest Income 666,712
Management Fees 934,591
Incentive Fees 348,829
Net Income (Loss) (469,685)
General Partner Capital 479,238
Limited Partner Capital 12,824,661
Partnership Capital 13,303,899
Net Income (Loss) Per Limited and
General Partner Unit* (47.22)
Net Asset Value Per Unit At
End of Year 1,481.64
1998
----
Realized Gains (Losses) $ 4,228,116
Change in Unrealized Gains (Losses)
on Open Contracts (559,093)
Interest Income 810,610
Management Fees 986,596
Incentive Fees 979,982
Net Income (Loss) 1,756,068
General Partner Capital 495,271
Limited Partner Capital 16,233,207
Partnership Capital 16,728,478
Net Income (Loss) Per Limited and
General Partner Unit* 150.78
Net Asset Value Per Unit At
End of Year 1,531.21
1997
----
Realized Gains (Losses) $ 2,996,442
Change in Unrealized Gains (Losses)
on Open Contracts 515,373
Interest Income 984,111
Management Fees 1,135,594
Incentive Fees 768,675
Net Income (Loss) 1,716,744
General Partner Capital 442,903
Limited Partner Capital 16,850,663
Partnership Capital 17,293,566
Net Income (Loss) Per Limited and
General Partner Unit* 121.38
Net Asset Value Per Unit At
End of Year 1,369.31
1996
----
Realized Gains (Losses) $ 3,478,456
Change in Unrealized Gains (Losses)
on Open Contracts (1,019,712)
Interest Income 1,020,487
Management Fees 1,257,031
Incentive Fees 542,057
Net Income (Loss) 833,088
General Partner Capital 404,722
Limited Partner Capital 18,465,411
Partnership Capital 18,870,133
Net Income (Loss) Per Limited and
General Partner Unit* 49.25
Net Asset Value Per Unit At
End of Year 1,251.26
1995
----
Realized Gains (Losses) $ 1,431,928
Change in Unrealized Gains (Losses)
on Open Contracts 120,604
Interest Income 1,292,216
Management Fees 1,475,692
Incentive Fees 720,621
Net Income (Loss) (985,673)
General Partner Capital 386,084
Limited Partner Capital 21,640,976
Partnership Capital 22,027,060
Net Income (Loss) Per Limited and
General Partner Unit* (49.66)
Net Asset Value Per Unit At
End of Year 1,193.64
----------------
* Based on weighted average units outstanding
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations.
(a) Liquidity
---------
Substantially all of the Partnership's assets are held in cash or cash
equivalents. There are no restrictions on the liquidity of these assets
except for amounts on deposit with the broker needed to meet margin
requirements on open futures contracts.
Most United States exchanges (but generally not foreign exchanges,
or banks or broker-dealer firms in the case of foreign currency
forward contracts) limit by regulations the amount of fluctuation
in commodity futures contract prices during a single trading day.
The regulations specify what are referred to as "daily price
fluctuation limits". The daily limits establish the maximum amount
the price of a futures contract may vary either up or down from the
previous day's settlement price at the end of the trading session.
Once the "daily limit" has been reached in a particular commodity, no
trades may be made at a price beyond the limit. Positions in the
commodity could then be taken or liquidated only if traders are willing
to effect trades at or within the limit during the period for trading.
Because the "daily limit" rule only governs price movement for a
particular trading day, it does not limit losses and may in fact
substantially increase losses because it may prevent the liquidation
of unfavorable positions. Commodity futures prices have occasionally
moved the daily limit for several consecutive trading days and thereby
prevented prompt liquidation of futures positions on one side of the
market, subjecting those commodity futures traders to substantial
losses.
(b) Capital Resources
-----------------
The Partnership is currently not offering its Units for sale (See Item 1
above.) Since the Partnership's business is the purchase and sale of
various commodity interests, it will make few, if any, capital
expenditures. Except as it impacts the commodity markets, inflation is
not a significant factor in the Partnership's profitability.
(c) Results of Operations
---------------------
The General Partner, directly and/or indirectly through the 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.
Year Ended December 31, 1999
----------------------------
1999 had a net loss of $(469,685) or $(47.22) per Unit. At December 31,
1999, partners' capital totaled $13,303,899, a net decrease of
$3,424,579 from December 31, 1998. Net Asset Value per Unit at
December 31, 1999 amounted to $1,481.64, as compared to $1,531.21 at
December 31, 1998, a decrease of 3.24%.
The net loss for 1999 resulted primarily from losses in the foreign
currencies and agricultural commodities markets and were only slightly
offset by gains in the energy, equities and metals markets. Partners'
capital was further reduced by $2,954,894 of redemptions during 1999.
Year Ended December 31, 1998
----------------------------
Net income for 1998 amounted to $1,756,068 or $150.78 per Unit. At
December 31, 1998, partners' capital totaled $16,728,478, a net decrease
of $565,088 from December 31, 1997. Net Asset Value per Unit at
December 31, 1998 amounted to $1,531.21, as compared to $1,369.31 at
December 31, 1997, an increase of 11.82%.
Net income for 1998 resulted primarily from gains in the interest rate
and equity markets, partially offset by losses in agricultural
commodities and metals markets. Net income was offset by redemptions
of Units, resulting in a net decrease in partners' capital.
Year Ended December 31, 1997
----------------------------
Net income for the year was $1,716,744, or $121.38 per Unit. At
December 31, 1997, partners' capital totaled $17,293,566, a decrease
of $1,576,567 from December 31, 1996. The Net Asset Value per Unit
at December 31, 1997 amounted to $1,369.31 as compared to $1,251.26
at December 31, 1996, an increase of 9.4%.
The Partnership's gains came mostly in the financials, including
currencies, stocks, and debt instruments. Strong gains were also
achieved in the agricultural commodities, including the food and
fiber sector and the grains.
(d) Possible Changes
----------------
The General Partner reserves the right to terminate Commodity Trading
Advisors (see Prospectus) and/or engage additional Commodity Trading
Advisors in the future. Furthermore, the General Partner reserves the
right to change any of the Partnership's clearing arrangements to
accommodate any new Commodity Trading Advisors.
Item 8. Financial Statements and Supplementary Data.
Financial statements meeting the requirements of Regulation S-X are
listed following this report. The Supplementary Financial Information
specified by Item 302 of Regulation S-K is not applicable.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosures.
None.
PART III
Item 10. Directors and Executive Officers of the Partnership.
The Partnership has no directors or executive officers. The General
Partner of the Partnership is ProFutures, Inc., which administers and
manages the Partnership's affairs.
Gary D. Halbert, age 47, is the Chairman, President, Director and the
principal shareholder of ProFutures, Inc. Debi Halbert, age 44, is
the Chief Financial Officer, Director and a minority shareholder of
ProFutures, Inc.
Patrick W. Watson, born 1964, is Vice President of the General Partner.
He is involved in research, investment strategy, business development
and investor relations.
John M. (Mike) Posey, born 1955, is Vice President of Marketing of the
General Partner.
Jon P. Meyer, born 1964, is Vice President of Operations of the General
Partner.
There have been no administrative, civil or criminal proceedings
against Gary D. Halbert, Debi Halbert, Patrick Watson, Mike Posey,
Jon Meyer or ProFutures, Inc. material to the Partnership.
Item 11. Executive Compensation.
The General Partner receives, as compensation for its services, monthly
Administration Management Fees equal to 1/6 of 1% of month-end Net Asset
Value (approximately 2% annually), which aggregated $301,463 for 1999.
Item 12. Security Ownership of Certain Beneficial Owners.
(a) Security Ownership of Certain Beneficial Owners
-----------------------------------------------
The Partnership knows of no one person who beneficially owns more than
5% of the Units of Limited Partnership Interest.
(b) Security Ownership of Management
--------------------------------
Under the terms of the Limited Partnership Agreement, the General
Partner exclusively manages the Partnership's affairs. As of December 31,
1999 the General Partner and its principals owned 323.451 Units of
General Partnership Interest.
(c) Changes in Control
------------------
None.
Item 13. Certain Relationships and Related Transactions.
See Prospectus dated August 31, 1990, pages 24-27, which is
incorporated herein by reference, for information concerning
relationships and transactions between the General Partner, the
Trading Manager, the Commodity Broker and the Partnership.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
(a) 1. Financial Statements
See Index to Financial Statements on Page F-1.
The Financial Statements begin on Page F-3.
(a) 2. Financial Statement Schedules.
Not applicable, not required, or information included in financial
statements.
(a) 3. Exhibits.
Incorporated by reference - previously filed:
Form S-1 and Prospectus dated September 26, 1989 and exhibits
thereto.
Post-effective amendment No.1 dated July 19, 1990.
Prospectus dated August 31, 1990.
March 1, 1991 Supplement to Prospectus dated August 31, 1990.
*1.1 Form of Selling Agreement between the Registrant and
ProFutures Financial Group, Inc.
*1.2 Form of Additional Selling Agents Agreement between
ProFutures Financial Group, Inc. and certain
Additional Selling Agents.
*3.1 Agreement of Limited Partnership (attached to the 4.1
Prospectus as Exhibit A).
*3.2 Subscription Agreement and Power of Attorney
(attached to the Prospectus as Exhibit B).
*3.3 Request for Redemption Form (attached to the
Prospectus as Exhibit C).
*5.1 Opinion of Counsel as to the legality of the Units.
*8.1 Tax Opinion of Counsel
*10.1 Form of Escrow Agreement among the Registrant, the
General Partner and First National Bank of Chicago,
the Escrow Agent.
*10.2(c) Form of Brokerage Agreement dated August 15, 1990
between the Registrant and Virginia Trading division
of Quantum Financial Services, Inc.
*10.4(a) Form of Trading Manager Agreement between the
Registrant and ATA Research, Inc.
*10.4(b) Form of Consulting Agreement between Registrant and
Business Marketing Group, Inc.
*10.4(c) Form of Stock Subscription Agreement by and between
ING (U.S.) Securities, Futures & Options Inc. and
ProFutures, Inc.
*24.1 Consent of Counsel
*24.2 Consent of Certified Public Accountants
- -----------------------
* Previously filed in the June 13, 1989 Registration Statement; the
September 1, 1989 Pre-effective amendment No.1 thereto; the July 16,
1990 post-effective amendment thereto; and/or Form 10-Q for the quarter
ended September 30, 1991; and/or Forms 10-Q for the quarters ended
March 31, 1992 and September 30, 1992; and/or Forms 10-Q for the
quarters ended March 31, June 30 and September 30, 1993; and/or
Form 10-K for the year 1994; and/or Forms 10-Q for the quarters ended
March 31, June 30 and September 30, 1994; and/or Form 10-Q for the
quarter ended March 31, 1995. Exhibit 10.4(c) was filed with the 1998
Form 10-K.
(b) Reports on Form 8-K
-------------------
None.
(c) Exhibits
--------
None.
(d) Financial Statement Schedules
-----------------------------
Not Applicable, not required, or information included in financial
statements.
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities
Exchange Act of 1934, the Partnership has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
ALTERNATIVE ASSET GROWTH FUND, L.P.
(Partnership)
By
- ---------------------------- ---------------------------------------
Date Gary D. Halbert, President and Director
ProFutures, Inc.
General Partner
By
- ---------------------------- ---------------------------------------
Date Debi Halbert, Chief Financial Officer,
Treasurer and Director
ProFutures, Inc.
General Partner
ALTERNATIVE ASSET GROWTH FUND, L.P.
Index to Financial Statements
Independent Auditor's Report for the years ended
December 31, 1999, 1998 and 1997 F-2
Statements of Financial Condition
December 31, 1999 and 1998 F-3
Statements of Operations for the years ended
December 31, 1999, 1998 and 1997 F-4
Statements of Changes in Partners' Capital
(Net Asset Value) for the years ended
December 31, 1999, 1998 and 1997 F-5
Notes to Financial Statements F-6 - F-10
F-1
FINANCIAL STATEMENTS AND
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
ALTERNATIVE ASSET GROWTH FUND, L.P
INDEPENDENT AUDITOR'S REPORT
----------------------------
To the Partners
Alternative Asset Growth Fund, L.P.
We have audited the accompanying statements of financial condition of
Alternative Asset Growth Fund, L.P. as of December 31, 1999 and 1998, and
the related statements of operations and changes in partners' capital (net
asset value) for the years ended December 31, 1999, 1998 and 1997. These
financial statements are the responsibility of the Partnership's management.
Our responsibility is to express an opinion on these financial statements
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Alternative Asset Growth
Fund, L.P. as of December 31, 1999 and 1998, and the results of its operations
and the changes in its net asset values for the years ended December 31, 1999,
1998 and 1997, in conformity with generally accepted accounting principles.
/s/ ARTHUR F. BELL, JR. & ASSOCIATES, L.L.C.
Hunt Valley, Maryland
February 5, 2000
F-2
ALTERNATIVE ASSET GROWTH FUND, L.P.
STATEMENTS OF FINANCIAL CONDITION
December 31, 1999 and 1998
------------
1999 1998
---- ----
ASSETS
Equity in broker trading accounts
Cash $13,029,093 $ 5,103,550
Net option premiums paid (received) 35,507 (205,586)
Unrealized gain on open contracts 696,333 199,860
----------- -----------
Deposits with brokers 13,760,933 5,097,824
Cash and cash equivalents 338 12,158,374
----------- -----------
Total assets $13,761,271 $17,256,198
=========== ===========
LIABILITIES
Accounts payable $ 2,348 $ 6,060
Advisor incentive fees payable 127,961 354,357
Advisor management fees payable 46,767 46,295
Consultant fee payable 22,625 28,061
General Partner fee payable 22,625 28,061
Trading Manager fee payable 11,313 14,031
Commissions and other trading fees
on open contracts 8,985 13,059
Redemptions payable 214,748 37,796
----------- -----------
Total liabilities 457,372 527,720
----------- -----------
PARTNERS' CAPITAL (Net Asset Value)
General Partner - 323.451 units
outstanding at December 31, 1999
and 1998 479,238 495,271
Limited Partners - 8,655.745 and
10,601.565 units outstanding at
December 31, 1999 and 1998 12,824,661 16,233,207
----------- -----------
Total partners' capital
(Net Asset Value) 13,303,899 16,728,478
----------- -----------
$13,761,271 $17,256,198
=========== ===========
See accompanying notes.
F-3
ALTERNATIVE ASSET GROWTH FUND, L.P.
STATEMENTS OF OPERATIONS
For the Years Ended December 31, 1999, 1998 and 1997
------------
1999 1998 1997
---- ---- ----
INCOME
Trading gains (losses)
Realized $ 270,179 $ 4,228,116 $ 2,996,442
Change in unrealized 496,473 (559,093) 515,373
----------- ----------- -----------
Gain from trading 766,652 3,669,023 3,511,815
Interest income 666,712 810,610 984,111
----------- ----------- -----------
Total income 1,433,364 4,479,633 4,495,926
----------- ----------- -----------
EXPENSES
Brokerage commissions 481,516 584,566 695,621
Advisor incentive fees 348,829 979,982 768,675
Advisor management fees 180,934 174,091 197,557
Consultant fee 301,463 325,002 375,215
General Partner fee 301,463 325,002 375,215
Trading Manager fee 150,731 162,501 187,607
Operating expenses 138,113 172,421 179,292
----------- ----------- -----------
Total expenses 1,903,049 2,723,565 2,779,182
----------- ----------- -----------
NET INCOME (LOSS) $ (469,685) $ 1,756,068 $ 1,716,744
=========== =========== ===========
Net income (loss) per General
and Limited Partner Unit
(based on weighted average
number of units outstanding
during the year) $ (47.22) $ 150.78 $ 121.38
=========== =========== ===========
Increase (decrease) in Net Asset
Value per General and Limited
Partner Unit $ (49.57) $ 161.90 $ 118.05
=========== =========== ===========
See accompanying notes.
F-4
ALTERNATIVE ASSET GROWTH FUND, L.P.
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL (NET ASSET VALUE)
For the Years Ended December 31, 1999, 1998 and 1997
------------
Total Partners' Capital
Number of ------------------------------------
Units General Limited Total
--------- -------- ----------- -----------
Balances at
December 31,
1996 15,080.861 $404,722 $18,465,411 $18,870,133
Net income for
the year ended
December 31,
1997 38,181 1,678,563 1,716,744
Redemptions (2,451.425) 0 (3,293,311) (3,293,311)
----------- -------- ----------- -----------
Balances at
December 31,
1997 12,629.436 442,903 16,850,663 17,293,566
Net income for
the year ended
December 31,
1998 52,368 1,703,700 1,756,068
Redemptions (1,704.420) 0 (2,321,156) (2,321,156)
----------- -------- ----------- -----------
Balances at
December 31,
1998 10,925.016 495,271 16,233,207 16,728,478
Net (loss) for
the year ended
December 31,
1999 (16,033) (453,652) (469,685)
Redemptions (1,945.820) 0 (2,954,894) (2,954,894)
----------- -------- ----------- -----------
Balances at
December 31,
1999 8,979.196 $479,238 $12,824,661 $13,303,899
========== ======== =========== ===========
Net Asset Value Per Unit
-------------------------------------
December 31,
1999 1998 1997
---- ---- ----
$1,481.64 $1,531.21 $1,369.31
========= ========= =========
See accompanying notes.
F-5
ALTERNATIVE ASSET GROWTH FUND, L.P.
NOTES TO FINANCIAL STATEMENTS
------------
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 Acts of 1933 and 1934. As a commodity investment
pool, the Partnership is subject to the regulations of the
Commodity Futures Trading Commission, an agency of the United
States (U.S.) government which regulates most aspects of the
commodity futures industry; rules of the National Futures
Association, an industry self-regulatory organization; and the
requirements of commodity exchanges and Futures Commission
Merchants (brokers) through which the Partnership trades.
C. Method of Reporting
The Partnership's financial statements are presented in
accordance with generally accepted accounting principles, which
require the use of certain estimates made by the Partnership's
management. Transactions are accounted for on the trade date.
Gains or losses are realized when contracts are liquidated.
Unrealized gains or losses on open contracts (the difference
between contract purchase price and quoted market price) are
reflected in the statement of financial condition as a net gain
or loss, as there exists a right of offset of unrealized gains or
losses in accordance with Financial Accounting Standards Board
Interpretation No. 39 - "Offsetting of Amounts Related to Certain
Contracts." Any change in net unrealized gain or loss from the
preceding period is reported in the statement of operations.
For purposes of both financial reporting and calculation of
redemption value, Net Asset Value per Unit is calculated by
dividing Net Asset Value by the number of outstanding Units.
D. Cash and Cash Equivalents
Cash and cash equivalents includes cash and short-term
investments in fixed income securities.
E. Brokerage Commissions
Brokerage commissions include other trading fees and are charged
to expense when contracts are opened.
F-6
ALTERNATIVE ASSET GROWTH FUND, L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
------------
Note 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
-----------------------------------------------------------
F. 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.
G. 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.
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 contribute to
the Partnership an amount 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. As of December 31, 1999,
$365,900 has been contributed to the Partnership by the General Partner
and its principals.
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.
F-7
ALTERNATIVE ASSET GROWTH FUND, L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
------------
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.
The Partnership's Trading Manager receives a monthly fee of 1/12 of
1% (1% annually) of month-end Net Asset Value for management
services rendered to the Partnership.
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"). These derivatives
include both financial and non-financial contracts held as part
of a diversified trading strategy. 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.
F-8
ALTERNATIVE ASSET GROWTH FUND, L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
------------
Note 7. TRADING ACTIVITIES AND RELATED RISKS (CONTINUED)
------------------------------------------------
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.
The Partnership has a substantial portion of its assets on deposit
with financial institutions in connection with its cash
management activities. In the event of a financial institution's
insolvency, recovery of Partnership assets on deposit may be limited
to account insurance or other protection afforded such deposits. In
the normal course of business, the Partnership does not require
collateral from such financial institutions.
For derivatives, risks arise from changes in the market value of the
contracts. Theoretically, the Partnership is exposed to a market
risk equal to the value of futures contracts purchased and
unlimited liability on such contracts sold short. 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 fair value of derivatives represents unrealized gains and losses
on open futures contracts and long and short options at market value.
The average fair value of derivatives during 1999, 1998 and 1997 was
approximately $630,000, $380,000 and $690,000, respectively, and the
related fair values as of December 31, 1999 and 1998 are
approximately $732,000 and $(6,000), respectively.
Net trading results from derivatives for the years ended
December 31, 1999, 1998 and 1997 are reflected in the statement
of operations and equal gain from trading less brokerage
commissions. Such trading results reflect the net gain arising
from the Partnership's speculative trading of derivatives.
F-9
ALTERNATIVE ASSET GROWTH FUND, L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
------------
Note 7. TRADING ACTIVITIES AND RELATED RISKS (CONTINUED)
------------------------------------------------
Open contracts generally mature within one year, however, the
Partnership intends to close all contracts prior to maturity. At
December 31, 1999 and 1998, the notional amount of open contracts
is as follows:
1999 1998
---- ----
Contracts to Contracts to Contracts to Contracts to
Purchase Sell Purchase Sell
------------ ------------ ------------ ------------
Futures
contracts and
written options
thereon:
- Agriculture $ 1,700,000 $ 0 $ 4,000,000 $ 5,300,000
- Currency and
currency
indices 5,900,000 10,400,000 6,100,000 13,300,000
- Energy 0 0 200,000 400,000
- Equity indices 12,900,000 3,500,000 15,900,000 19,300,000
- Interest rates 0 0 50,400,000 22,200,000
- Metals 10,600,000 4,500,000 700,000 2,200,000
Purchased
options on
futures contracts:
- Agriculture 0 0 600,000 0
- Energy 0 0 100,000 0
- Metals 2,500,000 0 0 0
----------- ----------- ----------- -----------
$33,600,000 $18,400,000 $78,000,000 $62,700,000
=========== =========== =========== ===========
The above amounts do not represent the Partnership's risk of loss
due to market and credit risk, but rather represent the
Partnership's extent of involvement in derivatives at the date of
the statement of financial condition.
The General Partner has established procedures to actively monitor
market risk and minimize credit risk, although there can be no
assurance that it will, in fact, succeed in doing so. The General
Partner's basic market risk control procedures consist of continuously
monitoring 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.
F-10
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