<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 1998
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _______________________ to ______________________
Commission file number: 0-26002
PRUDENTIAL SECURITIES AGGRESSIVE GROWTH FUND L.P.
- --------------------------------------------------------------------------------
(Exact name of Registrant as specified in its charter)
Delaware 13-3702808
- --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
One New York Plaza, 13th Floor, New York, NY 10292
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (212) 778-7866
Securities registered pursuant to Section 12(b) of the Act:
None
- --------------------------------------------------------------------------------
Securities registered pursuant to Section 12(g) of the Act:
Units of Limited Partnership Interest
- --------------------------------------------------------------------------------
(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) 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 CK 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. [ ]
DOCUMENTS INCORPORATED BY REFERENCE
Agreement of Limited Partnership of the Registrant, dated March 19, 1993,
included as part of Registration Statement on Form S-1 (File No. 33-59828) filed
with the Securities and Exchange Commission March 19, 1993 pursuant to Rule
424(b) of the Securities Act of 1933, and amended and restated as of May 6,
1993, is incorporated by reference into Part IV of this Annual Report on Form
10-K
Annual Report to Limited Partners for the year ended December 31, 1998 is
incorporated by reference into Parts II and IV of this Annual Report on Form
10-K
Index to exhibits can be found on pages 7 and 8.
<PAGE>
PRUDENTIAL SECURITIES AGGRESSIVE GROWTH FUND L.P.
(a limited partnership)
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PART I PAGE
<S> <C> <C>
Item 1 Business......................................................................... 3
Item 2 Properties....................................................................... 3
Item 3 Legal Proceedings................................................................ 3
Item 4 Submission of Matters to a Vote of Limited Partners.............................. 4
PART II
Item 5 Market for the Registrant's Units and Related Limited Partner Matters............ 4
Item 6 Selected Financial Data.......................................................... 4
Item 7 Management's Discussion and Analysis of Financial Condition and Results of
Operations..................................................................... 4
Item 7A Quantitative and Qualitative Disclosures About Market Risk....................... 4
Item 8 Financial Statements and Supplementary Data...................................... 4
Item 9 Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure..................................................................... 4
PART III
Item 10 Directors and Executive Officers of the Registrant............................... 4
Item 11 Executive Compensation........................................................... 6
Item 12 Security Ownership of Certain Beneficial Owners and Management................... 6
Item 13 Certain Relationships and Related Transactions................................... 6
PART IV
Item 14 Exhibits, Financial Statement Schedules and Reports on Form 8-K.................. 7
Financial Statements and Financial Statement Schedules........................... 7
Exhibits......................................................................... 7
Reports on Form 8-K.............................................................. 8
SIGNATURES.................................................................................. 9
</TABLE>
2
<PAGE>
PART I
Item 1. Business
General
Prudential Securities Aggressive Growth Fund L.P. (the 'Registrant'), a
Delaware limited partnership, was formed on February 17, 1993 and will terminate
on December 31, 2013 unless terminated sooner under the provisions of the
Amended and Restated Agreement of Limited Partnership (the 'Partnership
Agreement'). The Registrant was formed to engage in the speculative trading of a
portfolio consisting primarily of commodity futures, forward and options
contracts. On August 2, 1993, the Registrant completed its initial offering with
sales of 102,383 units of limited partnership interest and 1,500 units of
general partnership interest (collectively, 'Units') which resulted in net
proceeds to the Registrant of $10,180,534. The Registrant continued to offer
Units on a monthly basis until the continuous offering was terminated on January
31, 1995. Additional contributions raised through the continuous offering
resulted in additional net proceeds to the Registrant of $9,988,243. The
Registrant's fiscal year for book and tax purposes ends on December 31.
Since October 1, 1997, trading decisions for the Registrant are made by Eagle
Trading Systems, Inc. ('Eagle') and Welton Investment Corporation, independent
commodity trading managers. Eagle replaced Sjo, Inc. ('Sjo') as a trading
manager effective October 1, 1997. Eagle receives management fees at the same
rate as did Sjo (a monthly fee on traded assets equal to a 2% annual rate). In
addition, Eagle earns a quarterly incentive fee equal to 23% of New High Net
Trading Profits (as defined in the Advisory Agreement among the Registrant, the
General Partner and Eagle) as compared to a monthly incentive fee of 15% paid to
Sjo. The General Partner retains the authority to override trading instructions
that violate the Registrant's trading policies.
The Registrant is engaged solely in the business of commodity futures,
forward and options trading; therefore, presentation of industry segment
information is not applicable.
General Partner
The general partner of the Registrant is Prudential Securities Futures
Management Inc. (the 'General Partner') which is a wholly owned subsidiary of
Prudential Securities Incorporated ('PSI'), which in turn is a wholly owned
subsidiary of Prudential Securities Group Inc. ('PSGI'). PSI was the principal
underwriter of the limited partnership units and is the commodity broker of the
Registrant. The General Partner is required to maintain at least a 1% interest
in the Registrant as long as it is acting as the Registrant's general partner.
Competition
The General Partner and its affiliates have formed and may continue to form
various entities to engage in the speculative trading of futures, forward and
options contracts which, in part, have certain of the same investment policies
as the Registrant.
The Registrant is a closed-ended fund which solicited the sale of additional
Units on a monthly basis until the continuous offering was terminated and does
not intend to solicit the sale of additional Units in the future. As such, the
Registrant does not compete with other entities to attract new fund
participants. However, to the extent that the trading managers recommend similar
or identical trades to the Registrant and other accounts which they manage, the
Registrant may compete with those accounts for the execution of the same or
similar trades.
Employees
The Registrant has no employees. Management and administrative services for
the Registrant are performed by the General Partner and its affiliates pursuant
to the Partnership Agreement as further discussed in Notes A, C and D to the
Registrant's annual report to limited partners for the year ended December 31,
1998 ('Registrant's 1998 Annual Report') which is filed as an exhibit hereto.
Item 2. Properties
The Registrant does not own or lease any property.
Item 3. Legal Proceedings
There are no material legal proceedings pending by or against the Registrant
or the General Partner.
3
<PAGE>
Item 4. Submission of Matters to a Vote of Limited Partners
None
PART II
Item 5. Market for the Registrant's Units and Related Limited Partner Matters
A significant secondary market for the Units has not developed, and it is not
expected that one will develop in the future. There are also certain
restrictions set forth in the Partnership Agreement limiting the ability of a
partner to transfer Units. However, the Partnership Agreement provides that a
partner may redeem Units as of the last business day of any full calendar
quarter at the then current net asset value per Unit. Consequently, holders of
Units may not be able to liquidate their investment in the event of an emergency
or for any other reason.
There are no material restrictions upon the Registrant's present or future
ability to make distributions in accordance with the provisions of the
Partnership Agreement. No distributions have been made since inception and no
distributions are anticipated in the future.
As of April 27, 1999, there were 419 holders of record owning 49,744.806
Units which include 499 units of general partnership interest.
Item 6. Selected Financial Data
The following table presents selected financial data of the Registrant. This
data should be read in conjunction with the financial statements of the
Registrant and the notes thereto on pages 2 through 10 of the Registrant's 1998
Annual Report which is filed as an exhibit hereto.
<TABLE>
<CAPTION>
Year ended December 31,
--------------------------------------------------------------------
1998 1997 1996 1995 1994
---------- ---------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Total revenue (including interest)........ $1,585,452 $ 805,913 $1,652,534 $ 5,188,212 $ 113,883
---------- ---------- ---------- ----------- -----------
---------- ---------- ---------- ----------- -----------
Net income (loss)......................... $ 749,207 $ (201,966) $ 399,782 $ 3,349,952 $(2,055,849)
---------- ---------- ---------- ----------- -----------
---------- ---------- ---------- ----------- -----------
Net income (loss) per weighted average
Unit.................................... $ 12.46 $ (2.44) $ 3.40 $ 20.98 $ (10.38)
---------- ---------- ---------- ----------- -----------
---------- ---------- ---------- ----------- -----------
Total assets.............................. $5,956,724 $6,978,978 $9,754,335 $13,023,589 $13,757,176
---------- ---------- ---------- ----------- -----------
---------- ---------- ---------- ----------- -----------
Net asset value per Unit.................. $ 107.26 $ 94.83 $ 97.07 $ 89.97 $ 69.47
---------- ---------- ---------- ----------- -----------
---------- ---------- ---------- ----------- -----------
</TABLE>
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
This information is incorporated by reference to pages 11 through 13 of the
Registrant's 1998 Annual Report which is filed as an exhibit hereto.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Information regarding quantitative and qualitative disclosures about market
risk is not required pursuant to Item 305(e) of Regulation S-K.
Item 8. Financial Statements and Supplementary Data
The financial statements are incorporated by reference to pages 2 through 10
of the Registrant's 1998 Annual Report which is filed as an exhibit hereto.
Supplementary data specified by Item 302 of Regulation S-K (selected
quarterly financial data) is not applicable.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
PART III
Item 10. Directors and Executive Officers of the Registrant
There are no directors or executive officers of the Registrant. The
Registrant is managed by the General Partner.
4
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<PAGE>
The General Partner's directors and executive officers, and any persons
holding more than 10% of the Registrant's Units ('Ten Percent Owners') are
required to report their initial ownership of such Units and any subsequent
changes in that ownership to the Securities and Exchange Commission on Forms 3,
4, or 5. Such executive officers, directors and Ten Percent Owners are required
by Securities and Exchange Commission regulations to furnish the Registrant with
copies of all Forms 3, 4 and 5 they file. All of these filing requirements were
satisfied on a timely basis (except Tamara B. Wright, who did not file Form 3 in
a timely manner upon becoming a director, but has subsequently filed and is now
current in all filings). In making these disclosures, the Registrant has relied
solely on written representations of the General Partner's directors and
executive officers or copies of the reports that they have filed with the
Securities and Exchange Commission during and with respect to its most recent
fiscal year.
The directors and executive officers of Prudential Securities Futures
Management Inc. and their positions with respect to the Registrant are as
follows:
Name Position
Joseph A. Filicetti President and Director
Eleanor L. Thomas Executive Vice President and Director
Barbara J. Brooks Chief Financial Officer
Steven Carlino Vice President, Chief Accounting Officer and
Treasurer
A. Laurence Norton, Jr. Director
Guy S. Scarpaci Director
Tamara B. Wright Senior Vice President and Director
JOSEPH A. FILICETTI, age 36, is the President and a Director of Prudential
Securities Futures Management Inc. He had been a Vice President of Prudential
Securities Futures Management Inc. and Seaport Futures Management, Inc. from
October 1998 to March 1999. In April 1999, Mr. Filicetti was named to his
current positions at Prudential Securities Futures Management Inc. and became an
Executive Vice President and Director of Seaport Futures Management, Inc. Prior
to joining PSI, Mr. Filicetti was with Rotella Capital Management as Director of
Sales and Marketing from 1996 through October 1998, and was with Merrill Lynch
as a market maker trading bonds from 1992 to 1996.
ELEANOR L. THOMAS, age 44, is an Executive Vice President and Director of
Prudential Securities Futures Management Inc. She had been a Vice President of
Prudential Securities Futures Management Inc. and Seaport Futures Management,
Inc. since April 1993 and a First Vice President from October 1998 to March
1999. In April 1999, Ms. Thomas was named President and Director of Seaport
Futures Management, Inc. She is primarily responsible for origination, asset
allocation, and due dilligence for the managed futures group within PSI. She is
also a First Vice President of PSI. Prior to joining PSI in March 1993, she was
with MC Baldwin Financial Company from June 1990 through February 1993 and
Arthur Anderson & Co. from 1986 through May 1990. Ms. Thomas is a certified
public accountant.
BARBARA J. BROOKS, age 50, is the Chief Financial Officer of Prudential
Securities Futures Management Inc. She is a Senior Vice President of PSI. She is
also the Chief Financial Officer of Seaport Futures Management, Inc. and serves
in various capacities for other affiliated companies. She has held several
positions within PSI since April 1983. Ms. Brooks is a certified public
accountant.
STEVEN CARLINO, age 35, is a Vice President and Treasurer of Prudential
Securities Futures Management Inc. He is a First Vice President of PSI. He is
also a Vice President and Treasurer of Seaport Futures Management, Inc. and
serves in various capacities for other affiliated companies. Prior to joining
PSI in October 1992, he was with Ernst & Young for six years. Mr. Carlino is a
certified public accountant.
A. LAURENCE NORTON, JR., age 60, is a Director of Prudential Securities Futures
Management Inc. He is an Executive Vice President of PSI and, since March 1994,
has been the head of the International and Futures Divisions of PSI. He is also
a Director of Seaport Futures Management, Inc. From October 1991 to March 1994,
he held the position of Executive Director of Retail Development and Retail
Strategies at PSI. Prior to joining PSI in 1991, Mr. Norton was a Senior Vice
President and Branch Manager of Shearson Lehman Brothers.
5
<PAGE>
GUY S. SCARPACI, age 52, is a Director of Prudential Securities Futures
Management Inc. He is a First Vice President of the Futures Division of PSI. He
is also a Director of Seaport Futures Management, Inc. Mr. Scarpaci has been
employed by PSI in positions of increasing responsibility since August 1974.
TAMARA B. WRIGHT, age 40, is a Director and a Senior Vice President of
Prudential Securities Futures Management Inc. She is a Senior Vice President and
Chief Administrative Officer for the International and Futures Divisions of PSI.
She is also a Director and a Senior Vice President of Seaport Futures
Management, Inc. and serves in various capacities for other affiliated
companies. Prior to joining PSI in July 1988, she was a manager with Price
Waterhouse.
During the fourth quarter of 1998, Steven Carlino replaced Barbara J. Brooks
as Treasurer of Prudential Securities Futures Management Inc. Additionally,
during December 1998, Tamara B. Wright was elected as a Senior Vice President
and Director of Prudential Securities Futures Management Inc. On March 26, 1999,
Thomas M. Lane, Jr. resigned as President and Director of Prudential Securities
Futures Management Inc. During April 1999, Joseph A. Filicetti was named
President and Director and Eleanor L. Thomas became an Executive Vice President
and Director of Prudential Securities Futures Management Inc.
There are no family relationships among any of the foregoing directors or
executive officers. All of the foregoing directors and/or executive officers
have indefinite terms.
Item 11. Executive Compensation
The Registrant does not pay or accrue any fees, salaries or any other form of
compensation to directors and officers of the General Partner for their
services. Certain officers and directors of the General Partner receive
compensation from affiliates of the General Partner, not from the Registrant,
for services performed for various affiliated entities, which may include
services performed for the Registrant; however, the General Partner believes
that any compensation attributable to services performed for the Registrant is
immaterial. (See also Item 13, 'Certain Relationships and Related Transactions,'
for information regarding compensation to the General Partner.)
Item 12. Security Ownership of Certain Beneficial Owners and Management
As of April 27, 1999, no director or officer of the General Partner owns
directly or beneficially any interest in the voting securities of the General
Partner.
As of April 27, 1999, no director or officer of the General Partner owns
directly or beneficially any of the Units issued by the Registrant.
As of April 27, 1999, the following limited partner beneficially owns at
least five percent of the outstanding limited partnership units of the
Registrant:
<TABLE>
<CAPTION>
Title Name and Address of Amount and Nature of Percent of
of Class Beneficial Owner Beneficial Ownership Class
- --------------------- ------------------------------ ------------------------ ----------
<S> <C> <C> <C>
Units of limited Thomas H. Baize and 2,550 units of limited 5%
partnership interest Barbara S. Baize Living Trust partnership interest
3219 West Autumn Circle
Sugarland, TX 77479-2627
</TABLE>
Item 13. Certain Relationships and Related Transactions
The Registrant has and will continue to have certain relationships with the
General Partner and its affiliates. However, there have been no direct financial
transactions between the Registrant and the directors or officers of the General
Partner.
Reference is made to Notes A, C and D to the financial statements of the
Registrant's 1998 Annual Report which is filed as an exhibit hereto, which
identify the related parties and discuss the services provided by these parties
and the amounts paid or payable for their services.
6
<PAGE>
PART IV
<TABLE>
<CAPTION>
Page in
Annual Report
<S> <C> <C> <C> <C>
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) 1. Financial Statements and Report of Independent Accountants (incorporated by
reference to the Registrant's 1998 Annual Report which is filed as an
exhibit hereto)
Report of Independent Accountants 2
Financial Statements:
Statements of Financial Condition--December 31, 1998 and 1997 3
Statements of Operations--Three years ended December 31, 1998 4
Statements of Changes in Partners' Capital--Three years ended December 31,
1998 4
Notes to Financial Statements 5
2. Financial Statement Schedules
All schedules have been omitted because they are not applicable or the
required information is included in the financial statements or notes
thereto
3. Exhibits
Description:
3.1-- Agreement of Limited Partnership of the Registrant, dated March 19,
1993, as amended and restated as of May 6, 1993 (incorporated by
reference to Exhibit A to Amendment No. 1 to Registrant's
Registration Statement on Form S-1, File No. 33-59828, dated May 7,
1993)
10.1-- Escrow Agreement, dated May 13, 1993, among the Registrant,
Prudential Securities Futures Management Inc., Prudential Securities
Incorporated and Bankers Trust Company (incorporated by reference to
Exhibit 10.1 of the Registrant's Quarterly Report on Form 10-Q for
the period ended June 30, 1993)
10.2-- Brokerage Agreement, dated as of August 2, 1993, between the
Registrant and Prudential Securities Incorporated (incorporated by
reference to Exhibit 10.2 of the Registrant's Quarterly Report on
Form 10-Q for the period ended June 30, 1993)
10.3-- Advisory Agreement dated May 13, 1993 among the Registrant,
Prudential Securities Futures Management Inc., Sjo, Inc. and Colorado
Commodities Management Corporation (incorporated by reference to
Exhibit 10.3 of the Registrant's Quarterly Report on Form 10-Q for
the period ended June 30, 1993)
10.4-- Representation Agreement concerning the Registration Statement and
the Prospectus dated May 13, 1993 among the Registrant, Prudential
Securities Futures Management Inc., Prudential Securities
Incorporated, Sjo, Inc. and Colorado Commodities Management
Corporation (incorporated by reference to Exhibit 10.4 of the
Registrant's Quarterly Report on Form 10-Q for the period ended June
30, 1993)
</TABLE>
7
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
10.5-- Net Worth Agreement, dated as of May 13, 1993, between Prudential
Securities Futures Management Inc. and Prudential Securities Group
Inc. (incorporated by reference to Exhibit 10.5 of the Registrant's
Quarterly Report on Form 10-Q for the period ended June 30, 1993)
10.6-- Promissory Note, dated August 2, 1993, issued by Prudential
Securities Group Inc. (incorporated by reference to Exhibit 10.6 of
the Registrant's Quarterly Report on Form 10-Q for the period ended
June 30, 1993)
10.7-- Form of Secured Demand Note Collateral Agreement, dated August 2,
1993, between Prudential Securities Futures Management Inc. and
Prudential Securities Group Inc. (incorporated by reference to
Exhibit 10.7 of the Registrant's Quarterly Report on Form 10-Q for
the period ended June 30, 1993)
10.8-- Advisory Agreement, dated April 5, 1994, among the Registrant,
Prudential Securities Futures Management Inc. and Welton Investment
Corporation (formerly known as Welton Investment Systems Corporation)
(incorporated by reference to Exhibit 10.8 of the Registrant's
Quarterly Report on Form 10-Q for the period ended March 31, 1994)
10.9-- Form of Foreign Currency Addendum to Brokerage Agreement between the
Registrant and Prudential Securities Incorporated (incorporated by
reference to Exhibit 10.9 to the Registrant's Quarterly Report on
Form 10-Q for the period ended March 31, 1996)
10.10-- Advisory Agreement, dated October 1, 1997, among the Registrant,
Prudential Securities Futures Management Inc. and Eagle Trading
Systems, Inc. (incorporated by reference to Exhibit 10.10 of the
Registrant's Quarterly Report on Form 10-Q for the period ended
September 30, 1997)
13.1-- Registrant's 1998 Annual Report (With the exception of the
information and data incorporated by reference in Items 7 and 8 of
this Annual Report on Form 10-K, no other information or data
appearing in the Registrant's 1998 Annual Report is to be deemed
filed as part of this report) (filed herewith)
27.1-- Financial Data Schedule (filed herewith)
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the last quarter of the period
covered by this report
</TABLE>
8
<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.
Prudential Securities Aggressive Growth Fund L.P.
By: Prudential Securities Futures Management Inc.
A Delaware Corporation, General Partner
By: /s/ Steven Carlino Date: May 3, 1999
--------------------------------------------
Steven Carlino
Vice President, Chief Accounting Officer and Treasurer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities (with respect to the General Partner) and on
the dates indicated.
By: Prudential Securities Futures Management Inc.
A Delaware Corporation, General Partner
By: /s/ Joseph A. Filicetti Date: May 3, 1999
----------------------------------------------
Joseph A. Filicetti
President and Director
By: /s/ Eleanor L. Thomas Date: May 3, 1999
---------------------------------------------
Eleanor L. Thomas
Executive Vice President and Director
By: /s/ Barbara J. Brooks Date: May 3, 1999
---------------------------------------------
Barbara J. Brooks
Chief Financial Officer
By: /s/ Steven Carlino Date: May 3, 1999
---------------------------------------------
Steven Carlino
Vice President and Treasurer
By: Date:
---------------------------------------------
A. Laurence Norton, Jr.
Director
By: /s/ Guy S. Scarpaci Date: May 3, 1999
---------------------------------------------
Guy S. Scarpaci
Director
By: Date:
---------------------------------------------
Tamara B. Wright
Senior Vice President and Director
9
<PAGE>
1998
- --------------------------------------------------------------------------------
Prudential Securities Annual
Aggressive Growth Fund L.P. Report
<PAGE>
PRUDENTIAL SECURITIES AGGRESSIVE GROWTH FUND L.P.
LETTER TO LIMITED PARTNERS FOR THE YEAR ENDED DECEMBER 31, 1998
1
<PAGE>
<PAGE>
PricewaterhouseCoopers (LOGO)
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, NY 10036
Telephone (212) 596 8000
Facsimile (212) 596 8910
Report of Independent Accountants
January 26, 1999
To the General Partner and
Limited Partners of
Prudential Securities Aggressive Growth Fund L.P.
In our opinion, the accompanying statements of financial condition and the
related statements of operations and changes in partners' capital present
fairly, in all material respects, the financial position of Prudential
Securities Aggressive Growth Fund L.P. at December 31, 1998 and 1997, and the
results of its operations for each of the three years in the period ended
December 31, 1998 in conformity with generally accepted accounting principles.
These financial statements are the responsibility of the general partner; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which 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,
assessing the accounting principles used and significant estimates made by the
general partner, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.
/s/ PricewaterhouseCoopers LLP
2
<PAGE>
PRUDENTIAL SECURITIES AGGRESSIVE GROWTH FUND L.P.
(a limited partnership)
STATEMENTS OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
December 31,
---------------------------
1998 1997
<S> <C> <C>
- ---------------------------------------------------------------------------------------------------
ASSETS
Equity in commodity trading accounts:
Cash $1,440,981 $1,811,247
U.S. Treasury bills, at amortized cost 4,312,089 5,035,022
Net unrealized gain on open commodity positions 203,654 131,368
------------ ----------
Net equity 5,956,724 6,977,637
Organizational costs, net -- 1,341
------------ ----------
Total assets $5,956,724 $6,978,978
------------ ----------
------------ ----------
LIABILITIES AND PARTNERS' CAPITAL
Liabilities
Redemptions payable $ 280,222 $ 597,404
Accrued expenses 69,230 73,381
Management fees payable 9,806 11,503
Options, at market 2,856 3,725
------------ ----------
Total liabilities 362,114 686,013
------------ ----------
Commitments
Partners' capital
Limited partners (51,636.285 and 65,699.974 units outstanding) 5,538,514 6,230,001
General partner (523 and 664 units outstanding) 56,096 62,964
------------ ----------
Total partners' capital 5,594,610 6,292,965
------------ ----------
Total liabilities and partners' capital $5,956,724 $6,978,978
------------ ----------
------------ ----------
Net asset value per limited and general partnership unit ('Units') $ 107.26 $ 94.83
------------ ----------
------------ ----------
- ---------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these statements.
</TABLE>
3
<PAGE>
PRUDENTIAL SECURITIES AGGRESSIVE GROWTH FUND L.P.
(a limited partnership)
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Year ended December 31,
----------------------------------------
1998 1997 1996
<S> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------
REVENUES
Net realized gain on commodity transactions $1,192,535 $ 393,201 $1,575,922
Change in net unrealized gain on open commodity
positions 79,210 (40,219) (415,076)
Interest income 313,707 452,931 491,688
---------- ---------- ----------
1,585,452 805,913 1,652,534
---------- ---------- ----------
EXPENSES
Commissions 482,849 622,043 801,140
Other transaction fees 12,473 48,740 61,589
Management fees 122,340 155,528 201,323
Incentive fees 76,578 19,952 21,247
General and administrative expenses 140,849 158,710 163,232
Amortization of organizational costs 1,156 2,906 4,221
---------- ---------- ----------
836,245 1,007,879 1,252,752
---------- ---------- ----------
Net income (loss) $ 749,207 $ (201,966) $ 399,782
---------- ---------- ----------
---------- ---------- ----------
ALLOCATION OF NET INCOME (LOSS)
Limited partners $ 741,707 $ (199,983) $ 401,458
---------- ---------- ----------
---------- ---------- ----------
General partner $ 7,500 $ (1,983) $ (1,676)
---------- ---------- ----------
---------- ---------- ----------
NET INCOME (LOSS) PER WEIGHTED
AVERAGE UNIT
Net income (loss) per weighted average Unit $ 12.46 $ (2.44) $ 3.40
---------- ---------- ----------
---------- ---------- ----------
Weighted average number of Units outstanding 60,116 82,842 $ 117,670
---------- ---------- ----------
---------- ---------- ----------
- ----------------------------------------------------------------------------------------------------
</TABLE>
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
<TABLE>
<CAPTION>
LIMITED GENERAL
UNITS PARTNERS PARTNER TOTAL
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------
Partners' capital--December 31, 1995 132,262.992 $11,704,062 $195,066 $11,899,128
Net income (loss) -- 401,458 (1,676) 399,782
Redemptions (39,727.491) (3,213,246) (103,503) (3,316,749)
----------- ----------- -------- -----------
Partners' capital--December 31, 1996 92,535.501 8,892,274 89,887 8,982,161
Net loss -- (199,983) (1,983) (201,966)
Redemptions (26,171.527) (2,462,290) (24,940) (2,487,230)
----------- ----------- -------- -----------
Partners' capital--December 31, 1997 66,363.974 6,230,001 62,964 6,292,965
Net income -- 741,707 7,500 749,207
Redemptions (14,204.689) (1,433,194) (14,368) (1,447,562)
----------- ----------- -------- -----------
Partners' capital--December 31, 1998 52,159.285 $ 5,538,514 $ 56,096 $ 5,594,610
----------- ----------- -------- -----------
----------- ----------- -------- -----------
- ----------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these statements.
</TABLE>
4
<PAGE>
PRUDENTIAL SECURITIES AGGRESSIVE GROWTH FUND L.P.
(a limited partnership)
NOTES TO FINANCIAL STATEMENTS
A. General
Prudential Securities Aggressive Growth Fund L.P. (the 'Partnership') is a
Delaware limited partnership which was formed on February 17, 1993 and will
terminate on December 31, 2013 unless ended sooner under the provisions of the
Amended and Restated Agreement of Limited Partnership (the 'Partnership
Agreement'). On August 2, 1993, the Partnership completed its initial offering
having raised $10,388,300 from the sale of 102,383 limited partnership units and
1,500 general partnership units (collectively, 'Units') and commenced
operations. The Partnership continued to offer Units on a monthly basis until
the continuous offering was terminated on January 31, 1995. Additional
contributions raised through the continuous offering resulted in additional net
proceeds to the Partnership of $9,988,243. The Partnership was formed to engage
in the speculative trading of a portfolio consisting primarily of commodity
futures, forward and options contracts. The general partner is Prudential
Securities Futures Management Inc. (the 'General Partner'), a wholly owned
subsidiary of Prudential Securities Incorporated ('PSI'), which, in turn, is a
wholly owned subsidiary of Prudential Securities Group Inc. ('PSGI'). PSI was
the principal underwriter of the limited partnership units and is the commodity
broker ('Commodity Broker') of the Partnership. The General Partner is required
to maintain at least a 1% interest in the Partnership as long as it is acting as
the Partnership's general partner.
The General Partner generally maintains not less than 75% of the net asset
value in interest-bearing U.S. Government obligations (primarily U.S. Treasury
bills), a significant portion of which is utilized for margin purposes for the
Partnership's commodity trading activities. The remaining 25% is held in cash in
the Partnership's commodity trading accounts.
All trading decisions for the Partnership since October 1, 1997 are made by
Eagle Trading Systems, Inc. ('Eagle') and Welton Investment Corporation ('WIC'),
independent commodity trading managers. Eagle replaced Sjo, Inc. ('Sjo') as a
trading manager effective October 1, 1997. Eagle receives management fees at the
same rate as did Sjo (a monthly fee on traded assets equal to a 2% annual rate).
In addition, Eagle earns a quarterly incentive fee equal to 23% of New High Net
Trading Profits (as defined in the Advisory Agreement among the Partnership, the
General Partner and Eagle) as compared to a monthly incentive fee of 15% paid to
Sjo. Eagle, WIC and Sjo are collectively referred to as the 'Trading Managers.'
The General Partner retains the authority to override trading instructions that
violate the Partnership's trading policies.
B. Summary of Significant Accounting Policies
Basis of accounting
The books and records of the Partnership are maintained on the accrual basis
of accounting in accordance with generally accepted accounting principles.
The preparation of financial statements in conformity with generally accepted
accounting principles requires the General Partner to make estimates and
assumptions that affect the reported amounts of liabilities at the date of the
financial statements and the reported amounts of expenses during the reporting
period. Actual results could differ from those estimates.
Commodity futures and forward transactions are reflected in the accompanying
statements of financial condition on trade date. The difference between the
original contract amount and market value is reflected as net unrealized gain or
loss. Option transactions are reflected in the statements of financial condition
at market value which is inclusive of the net unrealized gain or loss. The
market value of each contract is based upon the closing quotation on the
exchange, clearing firm or bank on, or through, which the contract is traded.
To the extent practicable, the Partnership invests a significant portion of
its net asset value in U.S. Treasury bills which are often used to fulfill
margin requirements. U.S. Treasury bills are carried at amortized cost, which
approximates market value. Interest earned on these obligations accrues for the
benefit of the Partnership. See Note D for additional discussion on interest
income.
5
<PAGE>
The weighted average number of Units outstanding was computed for purposes of
disclosing net income (loss) per weighted average Unit. The weighted average
Units are equal to the number of Units outstanding at year end, adjusted
proportionately for Units redeemed based on their respective time outstanding
during the year.
The Partnership has elected not to provide a Statement of Cash Flows as
permitted by Statement of Financial Accounting Standards No. 102, 'Statement of
Cash Flows--Exemption of Certain Enterprises and Classification of Cash Flows
from Certain Securities Acquired for Resale.'
Income taxes
The Partnership is not required to provide for, or pay, any Federal or state
income taxes. Income tax attributes that arise from the Partnership's operations
are passed directly to the individual partners. The Partnership may be subject
to other state and local taxes in jurisdictions in which it operates.
Profit and loss allocations, distributions, and redemptions
Net realized profits or losses for tax purposes are allocated first to
partners who redeem Units to the extent the amounts received on redemption are
greater than or are less than the amounts paid for the redeemed Units by the
partners. Net realized profits or losses remaining after these allocations are
allocated to each partner in proportion to such partner's capital account at
year-end. Net income or loss for financial reporting purposes is allocated
monthly to all partners on a pro rata basis based on each partner's number of
Units outstanding during the month.
Distributions (other than on redemptions of Units) are made at the sole
discretion of the General Partner on a pro rata basis in accordance with the
respective capital accounts of the partners. No distributions have been made
since inception.
The Partnership Agreement provides that a partner may redeem Units as of the
last business day of any full calendar quarter at the then current net asset
value per Unit reduced by each Unit's pro rata portion of unamortized
organizational costs.
New Accounting Guidance
In June 1998, the Financial Accounting Standards Board issued Statement No.
133, Accounting for Derivative Instruments and Hedging Activities ('SFAS 133'),
which the Partnership is required to adopt effective January 1, 2000. SFAS 133
establishes accounting and reporting standards for derivative instruments and
for hedging activities and requires that an entity recognize all derivatives as
assets or liabilities measured at fair value. The Partnership does not believe
the effect of adoption will be material.
C. Costs, Fees and Expenses
Organizational and offering costs
The Partnership was responsible for all of its organizational and offering
expenses, subject to a limitation of 2% of the gross proceeds to the
Partnership. Costs in excess of the 2% limitation were the responsibility of the
General Partner and/or its affiliates. Offering costs were charged directly to
partners' capital. Costs incurred to organize the Partnership were considered
deferred organizational costs and were capitalized and amortized over a 60-month
period which concluded during 1998. As of December 31, 1997, the accumulated
amortization of such costs was $25,648. During the years ended December 31, 1998
and 1997, organizational costs were reduced by each redeeming Unit's pro rata
portion of the unamortized balance in the amount of $185 and $910, respectively.
Commissions
The General Partner, on behalf of the Partnership, entered into an agreement
with PSI to act as Commodity Broker whereby the Partnership pays a fixed monthly
fee for brokerage services rendered. The monthly fee equals 2/3 of 1% (8% per
annum) of the Partnership's net asset value as of the first day of each month.
In addition, the Partnership is obligated to pay the National Futures
Association, exchange and clearing fees incurred in connection with the
Partnership's commodity trading activities.
6
<PAGE>
Management and incentive fees
The Partnership pays each Trading Manager a monthly management fee of 1/6 of
1% (2% per annum) of the portion of the Partnership's net asset value allocated
to that Trading Manager as of the last day of each month. In addition, the
Partnership pays WIC a monthly incentive fee equal to 15% and Eagle a quarterly
incentive fee equal to 23% of the 'New High Net Trading Profits' (as defined in
the Advisory Agreement among the Partnership, the General Partner and each
Trading Manager).
See Note A for further information concerning a change in Trading Managers
which resulted in a change to incentive fees during 1997.
General and administrative fees
In addition to the costs, fees and expenses previously discussed, the
Partnership reimburses the General Partner and its affiliates for actual
Partnership operating expenses payable by, or allocable to, the Partnership. The
amount of reimbursement from the Partnership is limited by the provisions of the
Partnership Agreement. The Partnership also pays amounts directly to unrelated
parties for certain operating expenses.
D. Related Parties
The General Partner and its affiliates perform services for the Partnership,
which include but are not limited to: brokerage services; accounting and
financial management; registrar; transfer and assignment functions; investor
communications; printing services and other administrative services. The costs
incurred for these services for the three years ended December 31, 1998 were:
<TABLE>
<CAPTION>
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Commissions $482,849 $622,043 $801,140
General and administrative 69,627 92,905 96,039
-------- -------- --------
$552,476 $714,948 $897,179
-------- -------- --------
-------- -------- --------
</TABLE>
Expenses payable to the General Partner and its affiliates (which are
included in accrued expenses) as of December 31, 1998 and 1997 were $16,583 and
$19,078, respectively.
The Partnership's assets are maintained either in trading or cash accounts
with PSI or, for margin purposes, with the various exchanges on which the
Partnership is permitted to trade.
The Partnership, acting through its Trading Managers, executes
over-the-counter, spot, forward and/or option foreign exchange transactions with
PSI. PSI then engages in back-to-back trading with an affiliate,
Prudential-Bache Global Markets Inc. ('PBGM'). PBGM attempts to earn a profit on
such transactions. PBGM keeps its prices on foreign currency competitive with
other interbank currency trading desks. All over-the-counter currency
transactions are conducted between PSI and the Partnership pursuant to a line of
credit. PSI may require that collateral be posted against the marked-to-market
position of the Partnership.
In addition to interest earned on approximately 75% of Partnership assets
invested in U.S. Treasury bills, PSI credits the Partnership monthly with 100%
of the interest it earns on the average remaining equity balances in the
Partnership's accounts (approximately 25% of Partnership assets).
As of December 31, 1998, a non-U.S. affiliate of the General Partner owns
299.772 limited partnership units of the Partnership.
E. Income Taxes
There have been no differences between the tax basis and book basis of
partners' capital from the commencement of operations through December 31, 1998.
F. Credit and Market Risk
Since the Partnership's business is to trade futures, forward and options
contracts, its capital is at risk due to changes in the value of these contracts
(market risk) or the inability of counterparties to perform under the terms of
the contracts (credit risk).
Futures, forward and options contracts involve varying degrees of off-balance
sheet risk; and changes in the level or volatility of interest rates, foreign
currency exchange rates or the market values of the contracts
7
<PAGE>
(or commodities underlying the contracts) frequently result in changes in the
Partnership's unrealized gain (loss) on open commodity positions reflected in
the statements of financial condition. The Partnership's exposure to market risk
is influenced by a number of factors including the relationships among the
contracts held by the Partnership as well as the liquidity of the markets in
which the contracts are traded.
Futures and options contracts are traded on organized exchanges and are thus
distinguished from forward contracts which are entered into privately by the
parties. The credit risks associated with futures and options contracts are
typically perceived to be less than those associated with forward contracts,
because exchanges typically provide clearinghouse arrangements in which the
collective credit (subject to certain limitations) of the members of the
exchanges is pledged to support the financial integrity of the exchange. On the
other hand, the Partnership must rely solely on the credit of its broker (PSI)
with respect to forward transactions. The Partnership presents unrealized gains
and losses on open forward positions as a net amount in the statements of
financial condition because it has a master netting agreement with PSI.
The General Partner attempts to minimize both credit and market risks by
requiring the Partnership's Trading Managers to abide by various trading
limitations and policies. The General Partner monitors compliance with these
trading limitations and policies which include, but are not limited to,
executing and clearing all trades with creditworthy counterparties (currently,
PSI is the sole counterparty or broker); limiting the amount of margin or
premium required for any one commodity or all commodities combined; and
generally limiting transactions to contracts which are traded in sufficient
volume to permit the taking and liquidating of positions. The General Partner
may impose additional restrictions (through modifications of such trading
limitations and policies) upon the trading activities of the Trading Managers as
it, in good faith, deems to be in the best interests of the Partnership.
PSI, when acting as the Partnership's futures commission merchant in
accepting orders for the purchase or sale of domestic futures and options
contracts, is required by Commodity Futures Trading Commission ('CFTC')
regulations to separately account for and segregate as belonging to the
Partnership all assets of the Partnership relating to domestic futures and
options trading and is not to commingle such assets with other assets of PSI. At
December 31, 1998, such segregated assets totalled $3,858,606. Part 30.7 of the
CFTC regulations also requires PSI to secure assets of the Partnership related
to foreign futures and options trading which totalled $2,207,274 at December 31,
1998. There are no segregation requirements for assets related to forward
trading.
As of December 31, 1998, the Partnership's open futures, forward and options
contracts mature within six months.
At December 31, 1998 and 1997, gross contract amounts of open futures,
forward and options contracts are:
<TABLE>
<CAPTION>
1998 1997
------------ ------------
<S> <C> <C>
Financial Futures and Options Contracts:
Commitments to purchase $24,959,772 $31,963,286
Commitments to sell 13,403,515 3,430,271
Currency Futures and Options Contracts:
Commitments to purchase 913,406 1,371,557
Commitments to sell 413,435 7,726,254
Currency Forward Contracts:
Commitments to purchase 112,012 173,921
Commitments to sell -- 8,190,630
Other Futures Contracts:
Commitments to purchase -- 48,400
Commitments to sell 2,069,906 3,413,653
</TABLE>
The gross contract amounts represent the Partnership's potential involvement
in a particular class of financial instrument (if it were to take or make
delivery on an underlying futures, forward or options contract). The gross
contract amounts significantly exceed the future cash requirements as the
Partnership intends to close out open positions prior to settlement and thus is
generally subject only to the risk of loss arising from the change in the value
of the contracts. As such, the Partnership considers the 'fair value' of its
futures, forward and options contracts to be the net unrealized gain or loss on
the contracts (plus premiums on options). Thus, the amount at risk associated
with counterparty nonperformance of all contracts is the net
8
<PAGE>
unrealized gain included in the statements of financial condition. The market
risk associated with the Partnership's commitments to purchase commodities is
limited to the gross contract amounts involved, while the market risk associated
with its commitments to sell is unlimited since the Partnership's potential
involvement is to make delivery of an underlying commodity at the contract
price; therefore, it must repurchase the contract at prevailing market prices.
At December 31, 1998 and 1997, the fair value of open futures, forward and
options contracts was:
<TABLE>
<CAPTION>
1998 1997
----------------------- -----------------------
<S> <C> <C> <C> <C>
Assets Liabilities Assets Liabilities
-------- ----------- -------- -----------
Futures Contracts:
Domestic exchanges
Financial $ 43,125 $ -- $ 4,438 $ --
Currencies 13,010 14,225 77,423 20,787
Other 21,750 6,870 107,158 --
Foreign exchanges
Financial 241,300 1,536 33,537 2,970
Other 19,112 -- 6,400 48,400
Forwards Contracts:
Currencies -- 112,012 170,173 195,604
Options Contracts:
Domestic exchanges
Financial -- 656 -- 3,725
Currencies -- 2,200 -- --
-------- ----------- -------- -----------
$338,297 $ 137,499 $399,129 $ 271,486
-------- ----------- -------- -----------
-------- ----------- -------- -----------
</TABLE>
The following table presents the average fair value of futures, forward and
options contracts during the years ended December 31, 1998 and 1997,
respectively.
<TABLE>
<CAPTION>
1998 1997
----------------------- -----------------------
<S> <C> <C> <C> <C>
Assets Liabilities Assets Liabilities
-------- ----------- -------- -----------
Futures Contracts:
Domestic exchanges
Financial $ 36,225 $ 1,646 $ 16,325 $ 851
Currencies 85,720 10,733 103,491 8,945
Other 44,956 6,368 8,243 2,066
Foreign exchanges
Financial 186,161 12,847 168,893 33,150
Other 9,158 35,223 492 18,981
Forwards Contracts:
Currencies 109,098 185,611 53,084 67,321
Options Contracts:
Domestic exchanges
Financial -- 15,042 -- 24,578
Currencies -- 2,672 2,215 6,673
Foreign exchanges
Financial -- 20 3,787 2,501
-------- ----------- -------- -----------
$471,318 $ 270,162 $356,530 $ 165,066
-------- ----------- -------- -----------
-------- ----------- -------- -----------
</TABLE>
9
<PAGE>
The following table presents the trading revenues from futures, forward and
options contracts during the three years ended December 31, 1998:
<TABLE>
<CAPTION>
1998 1997 1996
---------- -------- ----------
<S> <C> <C> <C>
Futures Contracts:
Domestic exchanges
Financial $ 250,541 $138,719 $ 500
Currencies (161,730) (64,498) 212,798
Other 165,562 37,086 1,840
Foreign exchanges
Financial 1,496,944 267,972 893,976
Currencies -- -- 3,036
Other (41,749) (92,775) --
Forwards Contracts:
Currencies (459,553) (25,431) --
Options Contracts:
Domestic exchanges
Financial 74,225 89,241 64,312
Currencies (52,495) 34,794 --
Foreign exchanges
Financial -- (32,126) (15,616)
---------- -------- ----------
$1,271,745 $352,982 $1,160,846
---------- -------- ----------
---------- -------- ----------
</TABLE>
10
<PAGE>
PRUDENTIAL SECURITIES AGGRESSIVE GROWTH FUND L.P.
(a limited partnership)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
The Partnership commenced trading operations on August 2, 1993 with net
proceeds of $10,180,534. The Partnership continued to offer Units on a monthly
basis until the continuous offering was terminated on January 31, 1995.
Additional contributions raised through the continuous offering resulted in
additional net proceeds to the Partnership of $9,988,243.
At December 31, 1998, 100% of the Partnership's net assets were allocated to
commodities trading. A significant portion of the net asset value was held in
U.S. Treasury bills (which represented approximately 73% of the net asset value
prior to redemptions payable) and cash, which are used as margin for the
Partnership's trading in commodities. Inasmuch as the sole business of the
Partnership is to trade in commodities, the Partnership continues to own such
liquid assets to be used as margin.
The commodity contracts are subject to periods of illiquidity because of
market conditions, regulatory considerations and other reasons. For example,
commodity exchanges limit fluctuations in certain commodity futures contract
prices during a single day by regulations referred to as 'daily limits.' During
a single day no trades may be executed at prices beyond the daily limit. Once
the price of a futures contract for a particular commodity has increased or
decreased by an amount equal to the daily limit, positions in the commodity can
neither be taken nor liquidated unless traders are willing to effect trades at
or within the daily limit. Commodity futures prices have occasionally moved the
daily limit for several consecutive days with little or no trading. Such market
conditions could prevent the Partnership from promptly liquidating its commodity
futures positions.
Since the Partnership's business is to trade futures, forward and options
contracts, its capital is at risk due to changes in the value of these contracts
(market risk) or the inability of counterparties to perform under the terms of
the contracts (credit risk). The Partnership's exposure to market risk is
influenced by a number of factors including the volatility of interest rates and
foreign currency exchange rates, the liquidity of the markets in which the
contracts are traded and the relationship among the contracts held. The inherent
uncertainty of the Partnership's speculative trading as well as the development
of drastic market occurrences could result in monthly losses considerably beyond
the Partnership's experience to date and could ultimately lead to a loss of all
or substantially all of investors' capital. The General Partner attempts to
minimize these risks by requiring the Partnership's Trading Managers to abide by
various trading limitations and policies. See Note F to the financial statements
for a further discussion on the credit and market risks associated with the
Partnership's futures, forward and options contracts.
Redemptions by limited partners and the General Partner for the year ended
December 31, 1998 were $1,433,194 and $14,368, respectively. Redemptions
recorded from the commencement of operations in August 1993 through December 31,
1998 were $14,124,220 for the limited partners and $142,811 for the General
Partner. Future redemptions will impact the amount of funds available for
investments in commodity contracts in subsequent periods.
The Partnership does not have, nor does it expect to have, any capital
assets.
Results of Operations
The net asset value per Unit as of December 31, 1998 was $107.26, an increase
of 13.11% from the December 31, 1997 net asset value per Unit of $94.83, which
was a decrease of 2.31% from the December 31, 1996 net asset value per Unit of
$97.07. The MAR (Managed Account Reports) Fund/Pool Index, which tracked the
performance of 281 and 315 futures funds in 1998 and 1997, returned 6.57% and
9.34%, respectively. Past performance is not necessarily indicative of future
results.
During 1998, the Partnership accumulated profits in the energy, financial,
grain, and index sectors which were partially offset by losses in the currency
and metal sectors.
The Partnership profited significantly from positions in the financial
sector, which provided various opportunities throughout the year. Events in the
Far East drove sector performance as investors moved from stocks to bonds in
search of higher quality investments. Japanese government bond positions (JGBs)
11
<PAGE>
particularly profited the Partnership as investors reacted throughout the year
to news concerning the Japanese government's economic stimulus package. Rising
concerns in the third quarter regarding the soundness of Japanese banks and the
devaluation of the Russian ruble drove investors out of stocks and back into
bonds. In the fourth quarter, market volatility forced the Partnership to close
many financial sector positions and limit exposure.
Global stock market activity across the board added profits to the
Partnership. For example, in the first quarter, gains were achieved from
positions in the NASDAQ (U.S.), CAC 40 (France), DAX (Germany), and IBEX (Spain)
indices.
Volatility throughout the year made for an unprofitable currency sector.
Although Canadian dollar positions provided gains, the Partnership experienced
currency sector losses as trends in European and Japanese currencies failed to
materialize.
Interest income is earned on the Partnership's investment in U.S. Treasury
bills (approximately 75% of its net asset value) and on the remaining 25% of its
net asset value which receives an interest credit from PSI. Interest income
varies monthly according to interest rates, trading performance and redemptions.
Interest income decreased by approximately $139,000 for the year ended December
31, 1998 as compared to 1997. Approximately $54,000 of the decline in interest
income relates to an interest income adjustment recorded during the three months
ended September 30, 1997. Additionally, decreases in interest income also
resulted from a decline in interest rates during 1998 and from redemptions
during 1997 and 1998 which reduced the Partnership's net assets, including its
investments in U.S. Treasury bills. Interest income decreased by approximately
$39,000 for the year ended December 31, 1997 as compared to 1996 primarily as a
result of redemptions during 1996 and 1997 which reduced the Partnership's net
assets.
Commissions are calculated on the Partnership's net asset value as of the
first day of each month and, therefore, vary according to trading performance
and redemptions. Commissions decreased by approximately $139,000 for the year
ended December 31, 1998 as compared to 1997 and approximately $179,000 for the
year ended December 31, 1997 as compared to 1996 primarily due to the effect of
redemptions on the monthly net asset values.
Other transaction fees consist of National Futures Association, exchange and
clearing fees which are based on the number of trades the Trading Managers
execute. Other transaction fees decreased by approximately $36,000 for the year
ended December 31, 1998 as compared to 1997 and decreased approximately $13,000
for the year ended December 31, 1997 as compared to 1996. These declines were
due to a decline in trading volume resulting from lower average net asset values
caused by redemptions. In addition, the October 1997 replacement of Sjo, Inc.
with Eagle Trading Systems, Inc. as a trading manager to the Partnership led to
lower transaction fees as a result of the different trading strategies executed
by the respective trading managers.
All trading decisions are currently being made by Eagle and WIC. Management
fees are calculated on the portion of the Partnership's net asset value
allocated to each Trading Manager at the end of each month and, therefore, are
affected by trading performance and redemptions. Management fees decreased by
approximately $33,000 for the year ended December 31, 1998 as compared to 1997
and approximately $46,000 for the year ended December 31, 1997 as compared to
1996 for the same reasons commissions decreased as described above.
Incentive fees are based on the New High Net Trading Profits generated by
each Trading Manager, as defined in the Advisory Agreement between the
Partnership, the General Partner and each Trading Manager. During the years
ended December 31, 1998, 1997 and 1996 the Partnership paid incentive fees of
approximately $77,000, $20,000 and $21,000 as a result of trading profits
generated by one of the Partnership's Trading Managers during each year; Eagle
in 1998, WIC in 1997 and Sjo in 1996.
General and administrative expenses decreased by approximately $18,000 for
the year ended December 31, 1998 as compared to 1997 and approximately $5,000
for the year ended December 31, 1997 as compared to 1996. These expenses include
reimbursements of costs incurred by the General Partner on behalf of the
Partnership in addition to accounting, audit, tax and legal fees as well as
printing and postage costs related to reports sent to limited partners.
12
<PAGE>
New Accounting Guidance
In June 1998, the Financial Accounting Standards Board issued Statement No.
133, Accounting for Derivative Instruments and Hedging Activities ('SFAS 133'),
which the Partnership is required to adopt effective January 1, 2000. SFAS 133
establishes accounting and reporting standards for derivative instruments and
for hedging activities and requires that an entity recognize all derivatives as
assets or liabilities measured at fair value. The Partnership does not believe
the effect of adoption will be material.
Year 2000 Risk
Investment funds, like financial and business organizations and individuals
around the world, depend on the smooth functioning of computer systems. The year
2000, however, holds the potential for a significant disruption in the operation
of these systems. Many computer systems in use today cannot distinguish the year
2000 from the year 1900 because of the way in which dates are encoded. This is
commonly known as the 'Year 2000 Problem.' The Partnership could be adversely
affected if computer systems used by it or any third party with whom it has a
material relationship do not properly perform date comparisons and calculations
concerning dates on or after January 1, 2000, which in turn could have a
negative impact on the handling or determination of trades and prices and the
services provided to the Partnership.
The Partnership has engaged third parties to perform primarily all of the
services it needs. Accordingly, the Partnership's Year 2000 problems, if any,
are not its own but those that center around the ability of the General Partner,
Prudential Securities Incorporated, its trading managers and any other third
party with whom the Partnership has a material relationship (individually, as
'Service Provider,' and collectively, the 'Service Providers') to address and
correct problems that may cause their systems not to function as intended as a
result of the Year 2000 Problem.
The Partnership has received assurances from its General Partner and
Prudential Securities Incorporated that they anticipate being able to continue
their operations without any material adverse impact from the Year 2000 Problem.
Although other Service Providers, such as the Partnership's trading managers,
have not made similar representations to the Partnership, the Partnership has no
reason to believe that these Service Providers will not take steps necessary to
avoid any material adverse impact on the Partnership, though there can be no
assurance that this will be the case. The costs or consequences of incomplete or
untimely resolution of the Year 2000 Problem by the Service Providers, or by
governments, exchanges, clearing houses, regulators, banks and other third
parties, are unknown to the Partnership at this time, but could have a material
adverse impact on the operations of the Partnership. The General Partner will
promptly notify the Partnership's limited owners in the event it determines that
the Year 2000 Problem will have a material adverse impact on the Partnership's
operations.
The Partnership has considered various alternatives as a contingency plan. If
the Year 2000 Problems are systemic, for example, the federal government, the
banking system, exchanges or utilities are affected materially, there may be no
adequate contingency plan for the Partnership to follow other than to suspend
operations. If the Year 2000 Problems are related to one or more of the other
Service Providers selected by the Partnership, the Partnership believes that
each such Service Provider is prepared to address any Year 2000 Problems which
arise that could have a material adverse impact on the Partnership's operations.
Inflation
Inflation has had no material impact on operations or on the financial
condition of the Partnership from inception through December 31, 1998.
13
<PAGE>
- --------------------------------------------------------------------------------
I hereby affirm that, to the best of my knowledge and belief, the information
contained herein relating to Prudential Securities Aggressive Growth Fund L.P.
is accurate and complete.
PRUDENTIAL SECURITIES FUTURES
MANAGEMENT INC.
(General Partner)
By: Barbara J. Brooks
Chief Financial Officer
- --------------------------------------------------------------------------------
14
<PAGE>
OTHER INFORMATION
The actual round-turn equivalent of brokerage commissions paid per contract
for the year ended December 31, 1998 was $68.
The Partnership's Annual Report on Form 10-K as filed with the Securities and
Exchange Commission is available to limited partners without charge upon written
request to:
Prudential Securities Aggressive Growth Fund L.P.
P.O. Box 2016
Peck Slip Station
New York, New York 10272-2016
15
<PAGE>
Peck Slip Station BULK RATE
P.O. Box 2016 U.S. POSTAGE
New York, NY 10272 PAID
Automatic Mail
AGGGROWTH/17217-4
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
The Schedule contains summary financial
information extracted from the financial
statements for Prudential Securities Aggressive
Growth Fund LP and is qualified in its entirety
by reference to such financial statements
</LEGEND>
<RESTATED>
<CIK> 0000899174
<NAME> Prudential Securities Aggressive Growth Fund LP
<MULTIPLIER> 1
<FISCAL-YEAR-END> Dec-31-1998
<PERIOD-START> Jan-1-1998
<PERIOD-END> Dec-31-1998
<PERIOD-TYPE> 12-Mos
<CASH> 1,440,981
<SECURITIES> 4,515,743
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 5,956,724
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 5,956,724
<CURRENT-LIABILITIES> 362,114
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 5,594,610
<TOTAL-LIABILITY-AND-EQUITY> 5,956,724
<SALES> 0
<TOTAL-REVENUES> 1,585,452
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 836,245
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 749,207
<EPS-PRIMARY> 12.46
<EPS-DILUTED> 0
</TABLE>
