10-K 1 dec01-10k.txt March 27, 2002 Securities and Exchange Commission 450 Fifth Street, N.W. Washington, D.C. 20549 Re: ProFutures Long/Short Growth Fund, L.P. Commission File #0-25585 Dear Sirs: This filing contains Form 10-K for the year ended December 31, 2001. Very truly yours, Gary D. Halbert, President ProFutures, Inc., General Partner ProFutures Long/Short Growth Fund, L.P. 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, 2001 -------------- Commission File number: 0-25585 -------------- ProFutures Long/Short Growth Fund, L.P. --------------------------------------- (Exact name of Partnership as specified in charter) Delaware 74-2849862 ------------------------------- ------------------------------------ (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 78738 ------------------------------- (Address of principal executive offices) Partnership's telephone number (800) 348-3601 -------------- 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 Registration Statement on Form S-1 effective August 18, 2000 PART I Item 1. Business. (a) General Development of Business ------------------------------- ProFutures Long/Short Growth Fund, L.P. (the "Partnership") is a commodity investment pool which was organized in August 1997 under the Delaware Revised Uniform Limited Partnership Act under the name ProFutures Bull & Bear Fund, L.P. and commenced trading on November 20, 1997. On December 8, 1998, the Partnership changed its name from ProFutures Bull & Bear Fund, L.P. to ProFutures Long/Short Growth Fund, L.P. 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 78738 and its telephone numbers are (800) 348-3601 and (512) 263-3800. The Partnership filed a registration statement with the U.S. Securities and Exchange Commission under the Securities Act of 1933 for the public offering of $60,000,000 of additional Limited Partnership Units which became effective February 16, 1999. The General Partner later registered $40,000,000 of additional Limited Partnership Units with the Securities and Exchange Commission under the Securities Act of 1933 which was effective November 17, 1999. This registration carried forward $35,218,153 of unsold units from the previous registration. Therefore, unsold Limited Partnership Units totaled $75,218,153 as of the effective date of the registration. A post-effective amendment to the registration was effective August 18, 2000 at which time $71,744,551 unsold units were available. Effective November 2000, the Partnership is closed to new investment; however, the General Partner may reopen the Partnership to new investments in the future. From inception through October 2000, the Partnership engaged in the speculative trading of United States (U.S.) stock index futures contracts pursuant to an advisory contract with Hampton Capital Management, Inc. (Hampton). During October 2000, as a result of extreme stock market volatility and trading losses, the advisory contract with Hampton was terminated and trading was halted. Three new commodity trading advisors were subsequently selected and trading resumed in December 2000. The Partnership remains focused on trading stock index futures and options, but the new advisors also trade a diversified group of commodity, currency, and other futures, forward and option contracts. (b) General Description of the Business ----------------------------------- ProFutures, Inc., a Texas corporation, is the General Partner which administers the business and affairs of the Partnership. It is 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. Trading decisions are made by three independent commodity trading advisors, Ansbacher Investment Management, Inc., Beacon Management Corporation (USA) and Stratford Capital Management, Inc., collectively the "Advisors". The Partnership's Selling Agent is ProFutures Financial Group, Inc. which is an affiliate of ProFutures, Inc. 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. (c) Trading Methods and Advisors ---------------------------- The General Partner, on behalf of the Partnership, has 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 instructions unless the General Partner determines that the Partnership's trading policies have been violated. The General Partner has the authority to allocate or reallocate assets to or from its current Advisors. The Advisors do not own any Units of the Partnership. The Advisors are independent commodity trading advisors and are not affiliated with the General Partner. The Advisors are registered with the CFTC as commodity trading advisors and are members 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. Ansbacher Investment Management, Inc. (Ansbacher) ------------------------------------------------- The objective of Ansbacher's strategy is to achieve substantial capital appreciation through the speculative trading of futures contracts, options on futures contracts (and potentially forward contracts), and other futures-related interests, which objective entails a comparatively high level of risk. Ansbacher currently engages in a program of selling or "writing" options (puts and calls) on stock index futures. However, in the future, Ansbacher may trade a broader portfolio of options, futures and cash markets (and potentially forward markets), including agricultural products, metals, currencies, financial instruments, and stock, financial and economic indices (collectively, "Commodity Interests"). Ansbacher may trade Commodity Interests on any U.S. exchange. Ansbacher uses a systematic approach to trading in that it relies heavily on a program of selling or "writing" options on stock index futures. Ansbacher may also, from time to time, purchase options. The implementation of this program, i.e., selecting how many puts and how many calls, and which prices and maturities of each, in turn depends upon both technical and fundamental considerations. The technical indicators will include the prices of various options, both in absolute terms in relation to their historic price levels, and in relative terms comparing the prices of puts to the prices of similar calls. In this respect, Ansbacher may rely upon the current reading of The Ansbacher Index. The fundamental considerations include the condition of the stock market, its trend and its volatility as well as business, political and economic forces which can influence the stock market. In addition, Ansbacher may take positions in the futures markets, including stock index and bond futures, based upon fundamental considerations such as historical price patterns, or technical considerations such as trend following. Ansbacher generally utilizes up to 30% to 40% of account assets for margin; however such amount could be substantially higher (up to 65%) or lower at times depending on trading conditions. These margin levels are very high even for a speculative trading program. Beacon Management Corporation (USA) (Beacon) -------------------------------------------- Beacon's primary trading system is called the Meka Investment Program ("Meka"). Meka invests in futures markets with an investment approach that may take either long or short positions in the market. Meka aggressively invests in a broad array of globally diversified assets using proprietary trading systems and portfolio allocation software. The program's objective is to use diversification and leverage to earn long-run returns from a variety of markets. Meka is executed in the futures markets, which provide excellent liquidity, facilitate asset allocation shifts, and offer flexible leverage. Meka generally maintains investments in the following markets: - global equity indices, such as U.S. large and small cap, Japanese, Australian, and European markets; - global bonds indices, such as U.S. long and intermediate Treasuries, and European bonds; - currency cross rates, such as the U.S. dollar vs. the Japanese Yen, the Euro, the British Pound, the Canadian Dollar, and the Australian dollar; - energy markets, such as crude oil, gasoline, and natural gas; - metals, such as gold, silver, and copper; and - world commodity markets, such as grains, meats, coffee, and sugar. The implementation of Meka is quantitative and computer-based. Meka allocates exposure to each market based on the relationships among the different markets and among the trading systems. Exposure in many markets can be short or long, depending on various market conditions: the trading systems are predominantly trend-following in nature. Several different analytical approaches are employed in the portfolio, including (but not limited to) approaches based on moving averages, breakouts, option replication, and volatility. They vary from short-term methods that trade almost every day to long-term methods that sometimes hold positions for over a year. Stratford Capital Management, Inc. (Stratford) ---------------------------------------------- The objective of Stratford's program is to achieve appreciation of client assets through speculative trading in futures contracts and options thereon primarily on U.S., but also foreign, commodity exchanges. Stratford focuses on trading futures contracts on financial commodity interests such as U.S. Treasury bonds and U.S. stock indices, particularly the S&P 500 Stock Index. The trading of the program began in November 1995 with Stratford trading several individual accounts. The program is designed to try to take advantage of short-term market fluctuations in some of the most liquid futures markets in the world. Trades usually last between one to five days, with the majority occurring within the same day. Trades are selected using a combination of technical analysis of both the futures market and the underlying market within the framework of the fundamentals of a particular market. For example, futures contracts underlying market within the framework of the fundamentals of a particular market. For example, futures contracts on U.S. Treasury bonds may be sold if there is a breakdown in a trend at a time when these bonds are in oversupply. The program generally limits the amount of assets committed to margin at any one time to approximately 25% of the account assets; however, such amount could be substantially higher or lower at any time depending on trading conditions. Stratford seeks to reduce the influence of one-day returns by combining this limited capital commitment with short-term trading in highly liquid futures markets. From time to time, Stratford may trade futures and options contracts on currencies. Currency values are closely related to interest rates and, therefore, can be followed using the same techniques described above. Since the prices of futures and options contracts on currencies generally have more volatility than interest rate futures, effective trading opportunities often arise. However, given the greater volatility of the prices of these contracts, Stratford expects to trade a relatively small number of them. Stratford is authorized to trade a wide range of commodity interests on U.S. and foreign exchanges, but will particularly focus on interest rate sensitive instruments such as U.S. Treasury bonds and municipal bonds. Stratford will also be authorized to trade futures and options contracts on commodity interests such as the following which affect interest rates: metals (gold, silver and copper) oil, Eurodollars and CRB, as well as other Commodity Interests. Stratford may, but currently is not expected to, trade commodity interests in the "cash," "EFP", and "spot" or "forward" over-the-counter markets. Stratford may trade for the accounts of participating customers any of the commodity interests which are now, or may hereafter be, offered for trading on or off local and international exchanges and markets. In that regard, Stratford from time to time in its sole discretion may add new commodity interests to and delete commodity interests from its portfolio. Hampton Capital Management, Inc. (Hampton) ------------------------------------------ Hampton traded for the Partnership pursuant to its Leverage 3 trading program which focused on leveraged trading of the S&P 500 Stock Index futures contract. Effective October 13, 2000, the advisory contract with Hampton was terminated and trading was halted. (d) Fees, Compensation and Expenses ------------------------------- The General Partner, was paid a monthly management fee equal to 1/4 of 1% (3% annually) of month-end Net Assets through November 2000. Effective December 1, 2000, the General Partner management fee was reduced to 1/6 of 1% (2% annually) of month-end Net Assets. The Partnership had an advisory contract with Hampton Capital Management, Inc. (Hampton), pursuant to which the Partnership paid a quarterly incentive fee equal to 20% of New Trading profits (as defined in the advisory contract). Effective October 13, 2000, the advisory contract with Hampton was terminated and further trading was halted. Effective December 1, 2000, the Partnership resumed trading with three new trading advisors. Each Advisor is paid a monthly management fee of 1/12 of 1% (1% annually) of Allocated Net Asset Value (as defined in each respective advisory contract). In addition, each Advisor receives a quarterly incentive fee of 20% of Trading Profits (as defined). A one-time organizational charge of 1% of the subscription amount is paid to the General Partner (or the Selling Agent, its affiliated broker- dealer) by each subscriber. The General Partner has paid for all actual costs of organizing the Partnership and conducting the public offering of Units. To the extent that the aggregate 1% organizational charge collected is less than these actual costs, the General Partner will pay the costs. To the extent that the aggregate 1% organizational charge collected exceeds these actual costs, the excess amount will be paid to the Selling Agent. Such payment could be deemed to be a selling commission. (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 ABN AMRO Incorporated (ABN), (formerly ING (U.S.) Securities, Futures & Options Inc.) as the Partnership's primary clearing broker. ABN 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 and options on futures contracts. See also "The Stock Index Futures Markets", pages II-3 to II-5 of Part II of the Prospectus dated August 18, 2000 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 the Advisors are registered as commodity trading advisors. 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 Advisors as commodity trading advisors, 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 II-4 to II-5 of Part II of the Prospectus dated August 18, 2000, 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 the 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 Limited Partnership Units ("Units") during the fiscal year ended December 31, 2001. 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 Limited Partnership Units. Effective November 2000, the Partnership is closed to new investment; however, the General Partner may reopen the Partnership to new investments in the future. The Partnership's Limited Partnership Units may be purchased at a price equal to 101% of the Net Asset Value per Unit on the last day of each month. Approximately 99% of the purchase price, an amount equal to 100% of Net Asset Value per Unit, is contributed to the Partnership. The General Partner, ProFutures, Inc. retains 1% to pay organizational and offering expenses. 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 as promptly as practicable after the effective date of redemption, but in no event more than 30 days thereafter, provided that all liabilities, contingent or otherwise, of the Partnership, 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 as of December 31, 2001 was: General Partner's Capital 2 Limited Partners' Capital 695 At the commencement of trading on November 20, 1997 there were 38 Partners holding 3,044 Units. At December 31, 2001 there were 695 Limited Partners holding 12,450 Units, and 525 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 2001, 2000, 1999 and 1998 and for the period August 21, 1997 (inception) to December 31, 1997. 2001 ---- Realized Gains (Losses) $ 2,155,466 Change in Unrealized Gains (Losses) on Open Contracts (463,346) Interest Income 438,669 General Partner Management Fee 251,199 Advisor Management Fees 126,070 Advisor Incentive Fees 514,558 Net Income (Loss) 865,071 General Partner Capital 56,537 Limited Partner Capital 11,882,135 Partnership Capital 11,938,672 Net Income (Loss) Per Limited and General Partner Unit* 62.43 Net Asset Value Per Unit At End of Year 920.18 2000 ---- Realized Gains (Losses) $(24,145,559) Change in Unrealized Gains (Losses) on Open Contracts 6,842,576 Interest Income 1,455,997 General Partner Management Fee 706,890 Advisor Management Fees 10,816 Advisor Incentive Fees 111,774 Net Income (Loss) (16,805,240) General Partner Capital 52,762 Limited Partner Capital 12,633,367 Partnership Capital 12,686,129 Net Income (Loss) Per Limited and General Partner Unit* (834.14) Net Asset Value Per Unit At End of Year 858.74 1999 ---- Realized Gains (Losses) $ 1,522,130 Change in Unrealized Gains (Losses) on Open Contracts (7,168,725) Interest Income 1,625,573 General Partner Management Fee 986,328 Advisor Incentive Fee 293,116 Net Income (Loss) (5,439,311) General Partner Capital 101,567 Limited Partner Capital 38,536,017 Partnership Capital 38,637,584 Net Income (Loss) Per Limited and General Partner Unit* (304.83) Net Asset Value Per Unit At End of Year 1,652.95 1998 ---- Realized Gains (Losses) $ 6,818,869 Change in Unrealized Gains (Losses) on Open Contracts 1,161,075 Interest Income 439,168 General Partner Management Fee 267,508 Advisor Incentive Fee 1,571,370 Net Income (Loss) 6,516,745 General Partner Capital 116,671 Limited Partner Capital 18,438,300 Partnership Capital 18,554,971 Net Income (Loss) Per Limited and General Partner Unit* 1,054.60 Net Asset Value Per Unit At End of Year 1,898.76 1997 ---- Realized Gains (Losses) $ (116,342) Change in Unrealized Gains (Losses) on Open Contracts 2,175 Interest Income 19,520 General Partner Management Fee 9,826 Advisor Incentive Fee 0 Net Income (Loss) (116,741) General Partner Capital 29,313 Limited Partner Capital 2,885,423 Partnership Capital 2,914,736 Net Income (Loss) Per Limited and General Partner Unit* (48.21) Net Asset Value Per Unit At End of Year 957.45 ---------------- * Based on weighted average units outstanding Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations. (a) Liquidity and Capital Resources ------------------------------- Substantially all of the Partnership's assets at December 31, 2001 were in cash. 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. The amount of assets invested in the Partnership generally does not affect its performance, as typically this amount is not a limiting factor on the positions acquired by the Advisors, and the Partnership's expenses are primarily charged as a fixed percentage of its asset base, however large. The Partnership raises additional capital only through the sale of Units and trading profits (if any) and does not engage in borrowing. The Partnership sells no securities other than the Units. The value of the Partnership's cash and financial instruments is not materially affected by inflation. Changes in interest rates, which are often associated with inflation, could cause periods of strong up or down stock market price trends, during which the Partnership's profit potential generally increases. Substantially all of the Partnership's assets are held in cash deposited with its broker. Accordingly, except in very unusual circumstances, the Partnership should be able to close out any or all of its open trading positions and liquidate any cash management investments quickly and at market prices. This permits the Advisors to limit losses as well as reduce market exposure on short notice should their programs direct them to do so in order to reduce market exposure. In addition, because there is a readily available market value for the Partnership's positions and assets, the Partnership's monthly Net Asset Value calculations are precise. (b) Results of Operations --------------------- The Partnership's net income (loss) for each quarter of the year ended December 31, 2001 and 2000 consisted of the following: 1st Qtr. 2nd Qtr. 3rd Qtr. 4th Qtr. 2001 2001 2001 2001 -------- -------- -------- -------- Gain (loss) from trading $ 1,217,239 $ (64,414) $ 716,095 $ (176,800) Total income (loss) 1,377,949 48,512 819,394 (115,066) Net income (loss) 958,206 (227,021) 479,412 (345,526) Net income (loss) per Unit 65.66 (16.07) 35.46 (26.20) Increase (decrease) in Net Asset Value per Unit 65.82 (14.61) 36.58 (26.35) Net Asset Value per Unit at end of period 924.56 909.95 946.53 920.18 1st Qtr. 2nd Qtr. 3rd Qtr. 4th Qtr. 2000 2000 2000 2000 -------- -------- -------- -------- Gain (loss) from trading $ (3,336,268) $(8,239,342) $(1,546,869) $(4,180,504) Total income (loss) (2,836,630) (7,854,352) (1,200,811) (3,955,193) Net income (loss) (3,129,924) (8,068,666) (1,378,282) (4,228,368) Net income (loss) per Unit (135.69) (378.47) (70.09) (255.68) Increase (decrease) in Net Asset Value per Unit (129.62) (376.44) (69.66) (218.49) Net Asset Value per Unit at end of period 1,523.33 1,146.89 1,077.23 858.74 Due to the speculative nature of trading derivatives, 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, 2001 ---------------------------- 2001 had net income of $865,071 or $62.43 per Unit. At December 31, 2001, partners' capital totaled $11,938,672, a net decrease of $747,457 from December 31, 2000 due primarily to capital redemptions of $1,612,528. Net Asset Value per Unit at December 31, 2001 amounted to $920.18, as compared to $858.74 at December 31, 2000, an increase of 7.15%. Fourth Quarter 2001 ------------------- The Fund had a gain of 5.31% in October. The interest rates market was extremely volatile after the events of September 11th, and as a result of the Fed's policy of aggressively cutting interest rates. There were large gains in long-term interest rates, as well as smaller gains in short and medium-term interest rates. The gains included investments in Euro Bonds, Australian Bonds, Canadian Bonds, and U.S. Treasury Bonds. There were also significant gains in equities, primarily from options on the S & P 500 Stock Index. In November, many of the gains from October were offset by losses. There was a loss of 6.87%. There were losses in short, medium and long-term interest rates, as well as losses in agriculture, especially cotton, and currencies. In December, the Fund had a small loss of .87%. There were again losses in long and medium-term interest rates, as well as precious metals. Some of these losses were partially offset by gains in agriculture and currency. Third Quarter 2001 ------------------ The quarter ended September 30, 2001 started out with a loss of 2.87% in July. This loss was offset by a gain in August, primarily in stock index futures and options. There were also some smaller gains in interest rates, energy and certain agricultural markets. The Fed's continuing loose monetary policy kept both short-term and long-term interest rates somewhat volatile. The equity markets also remained somewhat volatile. September 2001 was a very volatile month for the Fund due to the events of September 11th. Although the U.S. markets were closed for the remainder of the week, most overseas markets remained open, and significant gains were made during this period. The Fund had significant profits in short-term interest rate futures (Eurodollar). There were also some significant gains in agriculture, mostly orange juice and coffee. Some of these gains were offset by some losses in corn and soybean oil. The Fund was able to end the quarter with a profit of 4.02% and 10.22% for the nine months ended September 30, 2001. Second Quarter 2001 ------------------- April 2001 brought a large loss for the Fund, almost all of which came from stock indexes. On April 18th, the U.S. Federal Reserve announced a surprise cut in interest rates. This caused the stock market, which had been trending lower, to move up dramatically in a mid-day surge. One of the Trading Advisors had sold call options based on a bearish forecast. The sudden reversal led to these positions being stopped out at a major loss within a few moments of the Federal Reserve announcement. April ended with a net loss for the Fund of 10.73%. May and June 2001 were much more favorable, bringing gains of 3.69% and 6.32% respectively. Much of the gain came from stock indexes and foreign currencies as well as agricultural commodities. The second quarter of 2001 ended with a loss of 1.58% and the first six months of 2001 were a gain of 5.96%. First Quarter 2001 ------------------ The Fund's Trading Advisors were able to profit during the first quarter of 2001, even though many markets were relatively trendless, by using very short-term trading strategies in stock index futures and writing options on the S&P 500. The decision in late 2000 to expand the Fund's focus beyond stock indexes by allocating part of the assets to a more diversified program proved helpful, with additional gains coming in markets such as foreign currencies, agricultural commodities, short-term interest rates and metals. The first quarter ended with a gain of 7.66%. Year Ended December 31, 2000 ---------------------------- 2000 had a net loss of $(16,805,240) or $(794.21) per Unit. At December 31, 2000, partners' capital totaled $12,686,129, a net decrease of $25,951,455 from December 31, 1999 due to net capital redemptions of $9,146,215 and the large losses incurred. Net Asset Value per Unit at December 31, 2000 amounted to $858.74, as compared to $1,652.95 at December 31, 1999, a decrease of 48.05%. Extreme volatility in the S&P 500 Index throughout the year resulted in trading losses of $17,302,983 in 2000. The S&P 500 Index experienced significant one day declines during April and October 2000. This resulted in significant losses on those days when the Partnership was in a long position. As a result of this extreme stock market volatility and trading losses, the advisory contract with Hampton was terminated and trading was halted. Three new commodity trading advisors were subsequently selected and trading resumed in December 2000. Year Ended December 31, 1999 ---------------------------- 1999 had a net loss of $(5,439,311) or $(304.83) per Unit. At December 31, 1999, partners' capital totaled $38,637,584, a net increase of $20,082,613 from December 31, 1998 primarily due to net capital additions of $25,521,924. Net Asset Value per Unit at December 31, 1999 amounted to $1,652.95, as compared to $1,898.76 at December 31, 1998, a decrease of 12.95%. The net losses occurred primarily during the fourth quarter as the Advisor generally maintained a short position but the stock market turned positive. (c) Possible Changes ---------------- The General Partner reserves the right to terminate and/or engage additional Commodity Trading Advisors or change any of the Partnership's clearing arrangements. 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 included in Item 7.(b), Results of Operations. 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 is a limited partnership and therefore does not have any directors or officers. The Partnership's General Partner, ProFutures, Inc., administers and manages the affairs of the Partnership. Item 11. Executive Compensation. As discussed above, the Partnership does not have any officers, directors or employees. The General Partner received, as compensation for its services, a monthly management fee equal to 1/6of 1% (2 annually) of month-end Net Assets. Total management fees earned by the General Partner for 2001 aggregated $251,199 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, 2001, the General Partner owned 61 Units. (c) Changes in Control ------------------ None. Item 13. Certain Relationships and Related Transactions. See prospectus dated August 18,2000, page ii, Organizational Chart, and pages 36 - 37, Conflicts of Interest, for information concerning relationships and transactions between the General Partner, the Advisors, the 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 August 18, 2000 and exhibits thereto. 3.1 Amendment to Second Amended and Restated Limited Partnership Agreement dated November 10, 2000 (filed as an exhibit to the 2000 Form 10-K). (b) Reports on Form 8-K ------------------- None. (c) Exhibits -------- 10.1 Form of Stock Subscription Agreement by and between ABN AMRO Incorporated and ProFutures, Inc. (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. PROFUTURES LONG/SHORT GROWTH FUND, L.P. (Partnership) By /s/ GARY D. HALBERT ---------------------------- ----------------------------------------- Date Gary D. Halbert, President and Director ProFutures, Inc. General Partner By /s/ DEBI B. HALBERT ---------------------------- ----------------------------------------- Date Debi B. Halbert, Chief Financial Officer, Treasurer and Director ProFutures, Inc. General Partner PROFUTURES LONG/SHORT GROWTH FUND, L.P. ----------------------------- INDEX TO FINANCIAL STATEMENTS ----------------------------- PAGES ----- Independent Auditor's Report F-2 Financial Statements Statements of Financial Condition December 31, 2001 and 2000 F-3 Condensed Schedule of Investments December 31, 2001 F-4 Statements of Operations For the Years Ended December 31, 2001, 2000 and 1999 F-5 Statements of Changes in Partners' Capital (Net Asset Value) For the Years Ended December 31, 2001, 2000 and 1999 F-6 Notes to Financial Statements F-7 - F-12 INDEPENDENT AUDITOR'S REPORT To the Partners ProFutures Long/Short Growth Fund, L.P. We have audited the accompanying statements of financial condition of ProFutures Long/Short Growth Fund, L.P. as of December 31, 2001 and 2000, including the December 31, 2001 condensed schedule of investments, and the related statements of operations and changes in partners' capital (net asset value) for the years ended December 31, 2001, 2000 and 1999. 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 auditing standards generally accepted in the United States of America. 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 ProFutures Long/Short Growth Fund, L.P. as of December 31, 2001 and 2000, and the results of its operations and the changes in its net asset values for the years ended December 31, 2001, 2000 and 1999, in conformity with accounting principles generally accepted in the United States of America. /s/ ARTHUR F. BELL, JR. & ASSOCIATES, L.L.C. Hunt Valley, Maryland January 29, 2002 F-2 PROFUTURES LONG/SHORT GROWTH FUND, L.P. STATEMENTS OF FINANCIAL CONDITION December 31, 2001 and 2000 ------------- 2001 2000 ---- ---- ASSETS Equity in broker trading accounts Cash $12,119,461 $12,482,092 Net option premiums (received) (291,200) (266,750) Unrealized gain on open contracts 373,755 837,101 ----------- ----------- Deposits with broker 12,202,016 13,052,443 Cash 11,652 29,180 ----------- ----------- Total assets $12,213,668 $13,081,623 =========== =========== LIABILITIES Accounts payable $ 17,680 $ 28,188 Commissions and other trading fees on open contracts 9,065 14,338 Incentive fees payable 53,703 111,774 Management fees payable 51,559 32,343 Redemptions payable 142,989 208,851 ----------- ----------- Total liabilities 274,996 395,494 ----------- ----------- PARTNERS' CAPITAL (Net Asset Value) General Partner - 61 units outstanding at December 31, 2001 and 2000 56,537 52,762 Limited Partners - 12,913 and 14,712 units outstanding at December 31, 2001 and 2000 11,882,135 12,633,367 ----------- ----------- Total partners' capital (Net Asset Value) 11,938,672 12,686,129 ----------- ----------- $12,213,668 $13,081,623 =========== =========== See accompanying notes. F-3 PROFUTURES LONG/SHORT GROWTH FUND, L.P. CONDENSED SCHEDULE OF INVESTMENTS December 31, 2001 ------------ LONG FUTURES CONTRACTS ---------------------- % of Net Description Value Asset Value ----------- ----- ----------- Agricultural $ 34,480 0.29% Currency 2,065 0.02% Interest rate 2,885 0.02% Metal 4,800 0.04% Stock index 913 0.01% --------- ----- Total long futures contracts $ 45,143 0.38% ========= ===== SHORT FUTURES CONTRACTS ----------------------- % of Net Description Value Asset Value ----------- ----- ----------- Agricultural $ 83,985 0.70% Currency 149,535 1.26% Energy 17,773 0.15% Interest rate 9,808 0.08% Metal (57,440) (0.48)% --------- ----- Total short futures contracts $ 203,661 1.71% ========= ===== WRITTEN OPTIONS ON FUTURES CONTRACTS ------------------------------------ % of Net Description Value Asset Value ----------- ----- ----------- Stock index options $(166,249) (1.39)% --------- ===== Total written options on futures contracts (premiums received - $291,200) $(166,249) (1.39)% ========= ===== See accompanying notes. F-4 PROFUTURES LONG/SHORT GROWTH FUND, L.P. STATEMENTS OF OPERATIONS For the Years Ended December 31, 2001, 2000 and 1999 ------------- 2001 2000 1999 ---- ---- ---- INCOME Trading gains (losses) Realized $ 2,155,466 $(24,145,559) $ 1,522,130 Change in unrealized (463,346) 6,842,576 (7,168,725) ------------ ------------ ------------ Gain (loss) from trading 1,692,120 (17,302,983) (5,646,595) Interest income 438,669 1,455,997 1,625,573 ------------ ------------ ------------ Total income (loss) 2,130,789 (15,846,986) (4,021,022) ------------ ------------ ------------ EXPENSES Brokerage commissions 254,563 41,871 35,908 Incentive fees 514,558 111,774 293,116 Management fees 377,269 717,706 986,328 Operating expenses 119,328 86,903 102,937 ------------ ------------ ------------ Total expenses 1,265,718 958,254 1,418,289 ------------ ------------ ------------ NET INCOME (LOSS) $ 865,071 $(16,805,240) $ (5,439,311) ============ ============ ============ NET INCOME (LOSS) PER GENERAL AND LIMITED PARTNER UNIT (based on weighted average number of units outstanding during the year of 13,857, 20,147 and 17,844, respectively) $ 62.43 $ (834.14) $ (304.83) ============ ============ ============ INCREASE (DECREASE) IN NET ASSET VALUE PER GENERAL AND LIMITED PARTNER UNIT $ 61.44 $ (794.21) $ (245.81) ============ ============ ============ See accompanying notes. F-5 PROFUTURES LONG/SHORT GROWTH FUND, L.P. STATEMENTS OF CHANGES IN PARTNERS' CAPITAL (NET ASSET VALUE) For the Years Ended December 31, 2000, 1999 and 1998 ------------- Total Partners' Capital Number of ------------------------------------ Units General Limited Total --------- ------- ------- ----- Balances at December 31, 1998 9,772 $116,671 $ 18,438,300 $ 18,554,971 Net (loss) for the year ended December 31, 1999 (15,104) (5,424,207) (5,439,311) Additions 14,732 0 27,595,792 27,595,792 Redemptions (1,129) 0 (2,073,868) (2,073,868) ------ -------- ------------ ------------ Balances at December 31, 1999 23,375 101,567 38,536,017 38,637,584 Net (loss) for the year ended December 31, 2000 (48,805) (16,756,435) (16,805,240) Additions 1,008 0 1,388,765 1,388,765 Redemptions (9,610) 0 (10,534,980) (10,534,980) ------ -------- ------------ ------------ Balances at December 31, 2000 14,773 52,762 12,633,367 12,686,129 Net income for the year ended December 31, 2001 3,775 861,296 865,071 Redemptions (1,799) 0 (1,612,528) (1,612,528) ------ -------- ------------ ------------ Balances at December 31, 2001 12,974 $ 56,537 $ 11,882,135 $ 11,938,672 ====== ======== ============ ============ Net Asset Value Per Unit ------------------------ December 31, 2001 2000 1999 ---- ---- ---- $ 920.18 $ 858.74 $1,652.95 ========= ========= ========= See accompanying notes. F-6 PROFUTURES LONG/SHORT GROWTH FUND, L.P. NOTES TO FINANCIAL STATEMENTS ------------- Note 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ----------------------------------------------------------- A. General Description of the Partnership ProFutures Long/Short Growth Fund, L.P. (the Partnership) is a Delaware limited partnership which operates as a commodity investment pool. From inception through October 2000, the Partnership engaged in the speculative trading of United States (U.S.) stock index futures contracts pursuant to an advisory contract with Hampton Capital Management, Inc. (Hampton). During October 2000, as a result of extreme stock market volatility and trading losses, the advisory contract with Hampton was terminated and trading was halted. Three new commodity trading advisors were subsequently selected and trading resumed in December 2000. The Partnership remains focused on trading stock index futures and options, but the new advisors also trade a diversified group of commodity, currency, and other futures and option contracts. B. Regulation As a registrant with the Securities and Exchange Commission, the Partnership is subject to the regulatory requirements under the Securities Act of 1933 and the Securities Exchange Act of 1934. As a commodity investment pool, the Partnership is subject to the regulations of the Commodity Futures Trading Commission, an agency of the 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 accounting principles generally accepted in the United States of America, 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 trade price and quoted market price) are reflected in the statement of financial condition as a net gain or loss, as there exists a right of offset of unrealized gains or losses in accordance with Financial Accounting Standards Board Interpretation No. 39 - "Offsetting of Amounts Related to Certain Contracts." Any change in net unrealized gain or loss from the preceding period is reported in the statement of operations. For purposes of both financial reporting and calculation of redemption value, Net Asset Value Per Unit is calculated by dividing Net Asset Value by the total number of units outstanding. F-7 PROFUTURES LONG/SHORT GROWTH FUND, L.P. NOTES TO FINANCIAL STATEMENTS (CONTINUED) ------------- Note 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) ----------------------------------------------------------- D. Brokerage Commissions Brokerage commissions include other trading fees and are charged to expense when contracts are opened. E. Income Taxes The Partnership prepares calendar year U.S. and applicable state information tax returns and reports to the partners their allocable shares of the Partnership's income, expenses and trading gains or losses. F. Organizational Charge The General Partner pays all organizational and offering costs of the Partnership. As reimbursement for such costs, the General Partner (or the Distributor, ProFutures Financial Group, Inc., a broker/dealer affiliate of the General Partner) receives an organizational charge of 1% of the subscription amount of each subscriber to the Partnership. Additions are reflected in the statement of changes in partners' capital (net asset value) net of such organizational charge totaling $0, $13,888 and $275,958 for the years ended December 31, 2001, 2000 and 1999, respectively. 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. H. Statements of Cash Flows The Partnership has elected not to provide statements of cash flows as permitted by Statement of Financial Accounting Standards No. 102 - "Statement of Cash Flows - Exemption of Certain Enterprises and Classification of Cash Flows from Certain Securities Acquired for Resale." F-8 PROFUTURES LONG/SHORT GROWTH FUND, L.P. NOTES TO FINANCIAL STATEMENTS (CONTINUED) ------------- Note 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) ----------------------------------------------------------- I. Statement of Financial Accounting Standards No. 133 In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative Instruments and Hedging Activities" (the "Statement"), effective for fiscal years beginning after June 15, 2000, as amended by SFAS No. 137 and SFAS No. 138. This Statement supersedes SFAS No. 119, "Disclosure about Derivative Financial Instruments and Fair Value of Financial Instruments," and SFAS No. 105, "Disclosure of Information about Financial Instruments with Off-Balance Sheet Risk and Financial Instruments with Concentrations of Credit Risk," whereby disclosure of average aggregate fair values and contract/notional values, respectively, of derivative financial instruments is no longer required for an entity such as the Partnership which carries its assets at fair value. The application of the provisions of SFAS No. 133, as amended by SFAS No. 137 and SFAS No. 138, did not have a significant effect on the financial statements. Note 2. GENERAL PARTNER --------------- The General Partner of the Partnership is ProFutures, Inc., which conducts and manages the business of the Partnership. The Limited Partnership Agreement requires the General Partner and/or its principals and affiliates to maintain capital accounts equal to at least 1% of the total capital of the Partnership. At December 31, 2001, the capital accounts of the General Partner and/or its principals and affiliates totaled $498,903. The Limited Partnership Agreement was amended effective February 16, 1999 and generally requires that the General Partner maintain a net worth of up to $1,000,000. ProFutures, Inc. has callable subscription agreements with ABN AMRO Incorporated (ABN) (formerly ING (U.S.) Securities, Futures & Options, Inc.), the Partnership's broker, whereby ABN has subscribed to purchase (up to $14,000,000) the number of shares of common stock of ProFutures, Inc. necessary to maintain the General Partner net worth requirements. The Partnership paid the General Partner a monthly management fee equal to 1/4 of 1% (3% annually) of month-end Net Assets (as defined in the Limited Partnership Agreement) through November 2000. Effective December 1, 2000, the General Partner management fee was reduced to 1/6 of 1% (2% annually) of month-end Net Assets. Total management fees earned by ProFutures, Inc. for the years ended December 31, 2001, 2000 and 1999 were $251,199, $706,890 and $986,328, respectively. Management fees payable to ProFutures, Inc. as of December 31, 2001 and 2000 were $20,170 and $21,528, respectively. F-9 PROFUTURES LONG/SHORT GROWTH FUND, L.P. NOTES TO FINANCIAL STATEMENTS (CONTINUED) ------------- Note 3. COMMODITY TRADING ADVISORS -------------------------- The Partnership had an advisory contract with Hampton, pursuant to which the Partnership paid a quarterly incentive fee equal to 20% of New Trading Profits (as defined in the advisory contract). Effective October 13, 2000, the advisory contract with Hampton was terminated and trading was halted. Effective December 1, 2000, the Partnership resumed trading with three new trading advisors. Each advisor is paid a monthly management fee of 1/12 of 1% (1% annually) of Allocated Net Asset Value (as defined in each respective advisory agreement). In addition, each advisor receives a quarterly incentive fee of 20% of Trading Profits (as defined). Note 4. DEPOSITS WITH BROKER -------------------- The Partnership deposits funds with ABN to act as broker, subject to Commodity Futures Trading Commission regulations and various exchange and broker requirements. The Partnership earns interest income on its assets deposited with the broker. At December 31, 2001 and 2000, the initial margin requirement of $1,706,987 and $3,822,228, respectively, is satisfied by the deposit of cash with such broker. Note 5. SUBSCRIPTIONS, DISTRIBUTIONS AND REDEMPTIONS -------------------------------------------- Investments in the Partnership were made by subscription agreement, subject to acceptance by the General Partner. Effective November 2000, the Partnership is closed to new investment; however, the General Partner may reopen the Partnership to new investments in the future. The Partnership is not required to make distributions, but may do so at the sole discretion of the General Partner. A Limited Partner may require the Partnership to redeem any or all of such Limited Partner's units at Net Asset Value as of the close of business on the last day of any month upon advance written notice to the General Partner. The Limited Partnership Agreement contains a complete description of the Partnership's redemption policies and procedures. Note 6. TRADING ACTIVITIES AND RELATED RISKS ------------------------------------ The Partnership engages in the speculative trading of U.S. and foreign futures contracts and options on futures contracts (collectively "derivatives"). The Partnership is exposed to both market risk, the risk arising from changes in the market value of the contracts, and credit risk, the risk of failure by another party to perform according to the terms of a contract. F-10 PROFUTURES LONG/SHORT GROWTH FUND, L.P. NOTES TO FINANCIAL STATEMENTS (CONTINUED) ------------- Note 6. TRADING ACTIVITIES AND RELATED RISKS (CONTINUED) ------------------------------------------------ Purchase and sale of futures and options on futures contracts requires margin deposits with the broker. Additional deposits may be necessary for any loss on contract value. The Commodity Exchange Act requires a broker to segregate all customer transactions and assets from such broker's proprietary activities. A customer's cash and other property (for example, U.S. Treasury bills) deposited with a broker are considered commingled with all other customer funds subject to the broker's segregation requirements. In the event of a broker's insolvency, recovery may be limited to a pro rata share of segregated funds available. It is possible that the recovered amount could be less than total cash and other property deposited. Open contracts generally mature within three months, however, the Partnership intends to close all contracts prior to maturity. At December 31, 2001, the latest maturity date for open contracts is March 2003. 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 notional contract 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 Partnership has assets on deposit with a financial institution in connection with its cash management activities. In the event of a financial institution's insolvency, recovery of Partnership assets on deposit may be limited to account insurance or other protection afforded such deposits. 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-11 PROFUTURES LONG/SHORT GROWTH FUND, L.P. NOTES TO FINANCIAL STATEMENTS (CONTINUED) ------------- Note 7. FINANCIAL HIGHLIGHTS -------------------- The following information presents per unit operating performance data and other supplemental financial data for the year ended December 31, 2001. This information has been derived from information presented in the financial statements. Per Unit Performance (for a unit outstanding throughout the entire year) --------------------------------------------------- Net asset value per unit at December 31, 2000 $858.74 ------- Income (loss) from operations: Net investment (loss) (1), (3) (41.31) Net realized and change in unrealized gain from trading (2), (3) 102.75 ------- Total income from operations 61.44 ------- Net asset value per unit at December 31, 2001 $920.18 ======= Total Return 7.15% ===== Supplemental Data Ratios to average net asset value: Expenses prior to incentive fees (4) (4.00)% Incentive fees (4.14)% ----- Total expenses and incentive fees (1) (8.14)% ===== Net investment (loss) (1) (4.61)% ===== Total return is calculated based on the change in value of a unit during the year. An individual partner's total return and ratios may vary from the above total return and ratios based on the timing of additions and redemptions. --------------- (1) Excludes brokerage commissions and other trading fees. (2) Includes brokerage commissions and other trading fees. (3) The net investment (loss) per unit is calculated by dividing the net investment (loss) by the average number of units outstanding during the year. The net realized and change in unrealized gain from trading is a balancing amount necessary to reconcile the change in net asset value per unit with the other per unit information. (4) Excludes brokerage commissions, other trading fees and incentive fees. F-12 Exhibit 10.1 STOCK SUBSCRIPTION AGREEMENT BY AND BETWEEN ABN AMRO INCORPORATED AND PROFUTURES, INC. THIS STOCK SUBSCRIPTION AGREEMENT (as it may be amended from time to time, the "Agreement"), by and between ABN AMRO Incorporated ("ABN") and ProFutures, Inc. ("ProFutures"), is made as of this 30th day of April, 2001. WHEREAS, ProFutures entered into Stock Subscription Agreements, dated August 15, 1990, August 15, 1991, and September 1, 1991, respectively, each substantially in the form hereof, with Virginia Trading Corporation ("VTC"), and the Virginia Trading division of Quantum Financial Services, Inc. ("Quantum"), respectively; WHEREAS, the issued and outstanding capital stock of VTC was acquired by Quantum which operated VTC's business as the Virginia Trading division of Quantum; WHEREAS, the issued and outstanding capital stock of Quantum was acquired by the ING Group on January 7, 1994 and the name of Quantum was ultimately changed to ING Securities, Futures & Options Inc. ("ING"); WHEREAS, ProFutures entered into revised Stock Subscription Agreements with ING as of August 1, 1998 with respect to each of ProFutures Long/Short Growth Fund, L.P., a Delaware limited partnership ("PLSGF"), ProFutures Diversified Fund, L.P., a Delaware limited partnership ("PDF") and Alternative Asset Growth Fund, L.P., a Delaware limited partnership ("AAGF"); WHEREAS, ProFutures entered into a Stock Subscription Agreement with respect to ProFutures Strategic Allocation Trust, a Delaware business trust ("PSAT"), as of August 31, 2000; WHEREAS, ING sold certain customer accounts and related assets and liabilities to ABN as of April 30, 2001; WHEREAS, the parties desire to enter desire to enter into this Agreement to reflect (a) that the respective rights and duties hereunder shall belong to ABN, and (b) the current terms of the stock subscription obligation of ABN; WHEREAS, pursuant to separate customer agreements (the "Brokerage Agreement"), ABN is the futures commission merchant for each of PLSGF, PDF, AAGF and PSAT (collectively, the "Funds"); WHEREAS, ProFutures is obligated by the Agreement of Limited Partnership of PDF, as amended and restated on December 1, 1993 (the "PDF Agreement of Limited Partnership"), to maintain a minimum net worth equal to: (i) the lesser of $250,000 or 15% of the aggregate initial capital contributions of any limited partnerships for which it acts as general partner capitalized at $2,500,000 or less; or (ii) 10% of the aggregate capital contributions of the limited partners of any limited partnerships for which it acts as general partner capitalized at greater than $2,500,000 (which includes PDF, PLSGF and AAGF) and with respect to PSAT, the greater of $50,000 or at least 5% of the total contributions to PSAT (collectively, the "Net Worth Requirement"); WHEREAS, ProFutures has the responsibility for determining the adequacy of its net worth and the application of this Agreement towards the Net Worth Requirement; and WHEREAS, ABN has agreed to subscribe for stock of ProFutures to enable ProFutures to continue to meet the Net Worth Requirement. 1 NOW, THEREFORE, in consideration of the mutual promises made herein and other good and valuable consideration, the parties hereto agree as follows: 1. Purchase of Shares. On the date hereof and continuing on a regular is as agreed upon by the parties, ABN and ProFutures shall determine the aggregate amount of the subscription for shares of ProFutures' common stock required to enable ProFutures to continue to meet the Net Worth Requirement. Based upon such determination (as confirmed in writing in the form attached as Exhibit A, each executed original of which is incorporated herein by reference), ABN will subscribe for the total subscription required for ProFutures to meet the Net Worth Requirement; provided, that in no event shall the total aggregate subscription with respect to the PSAT and PLSGF exceed $7 million; and provided further that in no event shall the total aggregate subscription with respect to PDF and AAGF exceed $7 million. The purchase price for the shares of common stock subscribed for by ABN thereupon shall be equal to book value per share as determined by an independent certified public accountant selected and paid by ProFutures on the date(s) this obligation is met, but in no event less than $.01 per share. In the event that any one of the Funds both exceeds its Trading Suspension Level and, in fact, exhausts all its assets to satisfy obligations of such Fund, the subscription required for ProFutures to satisfy the Net Worth Requirement shall be callable by ProFutures on demand; provided, however, that: (a) ProFutures shall use its own capital first to meet the Net Worth Requirement; and (b) any such demand shall relate only to capital deficiencies resulting solely from the ordinary, lawful and necessary operations and activities of such Fund which cause ProFutures' net worth to fall below the Net Worth Requirement. The parties expressly acknowledge that, unless otherwise agreed in writing by both parties in their sole and absolute discretion as to other specific projects or activities, ABN shall not have to subscribe to satisfy capital deficiencies resulting from activities and operations of ProFutures other than those associated with one of the Funds. Payment for the subscription called shall be made by wire transfer within thirty (30) days after the date of call. Upon payment, ProFutures shall issue to ABN that number of shares for which full consideration has been paid. ProFutures shall notify ABN promptly if a Fund reaches the Trading Suspension Level (as set forth in such Fund's Agreement of Limited Partnership or Declaration of Trust and Trust Agreement, as the case may be), which notice shall be sent pursuant to Section 14 hereof and addressed to both ABN's General Counsel and Chief Financial Officer. 2. Share Rights. Upon issuance, all shares of ProFutures' common stock shall be fully paid and non-assessable and shall entitle the holder to all rights applicable to such shares. 3. Computations. For purposes of meeting the Net Worth Requirement, all subscriptions for common stock shall be carried at face amount without deduction or discount. Any interests in the Funds owned by ProFutures or any of ProFutures' interests in other entities of which it is the general partner or managing owner shall not be included in the computation of its net worth for compliance with the Net Worth Requirements. 4. Lower Net Worth. In the event that, at any time, the Net Worth Requirement is amended pursuant thereto so that the Net Worth Requirement for ProFutures is lowered, ProFutures shall promptly notify ABN and upon demand by ABN effect a reduction in its net worth (but not below that required by the PDF Agreement of Limited Partnership) by cancellation of such excess subscription amount in appropriate fashion. 5. ProFutures Activities. ProFutures agrees, for so long as this Agreement is in effect, not to engage in any activities unrelated to its current activities of being: (a) a commodity trading advisor; (b) general partner of PLSGF; (c) general partner of AAGF; (d) general partner of PDF; (e) managing owner of PSAT; (f) engaged in a similar activity involving ABN or an associated company thereof; and (g) an introducing broker, without the consent of ABN. Such undertaking shall include ProFutures' best efforts to conserve capital and avoid expenses to the extent feasible to minimize the need of ProFutures to call the subscription, especially as it relates to the Net Worth Requirement attributable to the Funds. ProFutures also agrees to cooperate in good faith with ABN in the conduct of its affairs including, without limitation, its full cooperation in responding to any reasonable request for information by ABN. 6. Bank Holding Company Act. In the event this subscription amount is called by ProFutures with respect to a Fund, ProFutures agrees to operate such Fund in compliance with the Bank Holding Company Act of 1956, as amended (the "Act"), liquidating any positions that, under the Act, may not be held by such Fund. ProFutures and ABN acknowledge and agree that such positions shall be liquidated in a commercially reasonable manner consistent with ProFutures' fiduciary duties to such Funds. 2 7. ABN's Activities. ABN hereby agrees that it shall: (a) not purchase or otherwise acquire any units of limited partnership interest or beneficial interest of a Fund; (b) provide all information which in the opinion of counsel for ProFutures is required for ProFutures to comply with federal and state securities and tax laws; and (c) cooperate in good faith with ProFutures in the conduct of its affairs. 8. Amendments; Assignments. No change or modification to this Agreement shall be effective unless the same shall be in writing and signed by each of the parties hereto. However, this Agreement may not be assigned by either party without the prior written consent of the other, and any attempted assignment without such consent shall be void. No change in ownership of either party shall in any way affect its obligation hereunder or in any related agreements. 9. Third Party Beneficiaries. Third party beneficiary rights, if any, under this Agreement are expressly limited to the limited partners or unitholders, as the case may be, of a Fund, to the Net Worth Requirement for the period commencing on the date of this Agreement until the termination of this Agreement. 10. Term. This Agreement shall continue in effect for a period of one (1) year from the date of this Agreement and shall be automatically renewed for additional one (1) year terms. Notwithstanding the foregoing, either party may terminate this Agreement at anytime after having given the other party at least sixty (60) days prior written notice of its intent to terminate. In the event a Fund terminates ABN as its clearing broker, this Agreement will terminate on the same date as the relevant Brokerage Agreement terminates. In the event that ABN terminates the Brokerage Agreement and ceases to serve as the clearing broker to a Fund, or the Brokerage Agreement expires, this Agreement will continue for up to thirty (30) days after the date such Brokerage Agreement terminates or expires with respect to such Fund; provided, that ProFutures shall provide ABN with copies of the daily statements from such Fund's other clearing broker(s) during the period that ABN is not the clearing broker and this Agreement is still in effect. 11. Information Requirements of ProFutures. During the term of this Agreement, ProFutures shall promptly furnish to ABN the following: (a) copies of all regulatory notices, complaints, legal actions or proceedings, and other claims involving, relating to or against ProFutures or against any Fund including, without limitation, claims by any limited partner a unitholder, as the case may be, of a Fund; (b) upon request by ABN, copies of the following financial statements for any Fund: (i) monthly unaudited balance sheets and income statements; (ii) monthly asset reports for all assets regardless of where located; (iii) annual audited financial statements and any other interim audits available; and (iv) copies of statements from the other holders of such Fund's assets when they are received; (c) upon request by ABN, copies of the following financial statements for ProFutures: (i) quarterly and annual unaudited balance sheets and income statements; and (ii) any audited statements available; and (d) upon request by ABN, copies of marketing materials used in connection with any Fund concurrent with their use. ABN shall have the right to review the books and records of ProFutures (excluding any information on its trading systems), at its office on reasonable notice during normal business hours, and subject to ABN's maintaining strict confidentiality as to the information so reviewed. 12. Other Conditions. In the event ProFutures shall voluntarily file (or have involuntarily filed against it) a petition seeking protection from creditors pursuant to the United States Bankruptcy Code, as amended (the "Code"), or be subjected to the supervision of a receiver appointed by a state or federal court of competent jurisdiction, and any debtor in possession, trustee or receiver shall subsequently make a call upon ABN for any cash contributions under this Agreement, the parties hereto specifically agree that ABN shall be required to contribute such cash to ProFutures as is required to satisfy the Net Worth Requirement only upon ProFutures' transfer (free and clear of all liens and encumbrances) of such assets as are held in the name of 3 ProFutures having a fair market value equal to, or greater than, the value of the purchase price required of ABN by such debtor in possession, trustee or receiver. Such transfer of assets shall be in lieu of ProFutures' issuance of shares in exchange for cash; and further provided, that the transfer of such assets to ABN shall be first approved by a United States Bankruptcy Court Judge, or the court officer having jurisdiction over any appointed receiver, and ABN shall be awarded fee simple ownership and possession of such assets pursuant to Section 363 of the Code. 13. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware applicable to contracts made in that state without reference to its conflict of laws provisions. 14. Notices. Any notices required or desired to be given under this Agreement shall be given in writing and shall be effective when given personally on the date delivered or, when given by mail, overnight courier or telefacsimile (provided receipt of the latter is orally confirmed), upon the date of receipt, addressed as follows (or to such other address as the party entitled to notice shall hereafter designate in accordance with the terms hereof): If to ProFutures: ProFutures, Inc. 11612 Bee Cave Road - Suite 100 Austin, Texas 78738 Attn: Gary D. Halbert, President If to ABN: ABN AMRO Incorporated 208 S. LaSalle Chicago, Illinois 60604 Attn: Ben A. Witt, President 15. Entire Agreement. This Agreement contains the entire understanding of the parties with respect to the matters covered hereby. All prior subscription agreements and concomitant obligations of the parties and ING are superceded by this Agreement. IN WITNESS WHEREOF, the parties have duly executed this Agreement under seal as of the date first above written. ABN AMRO INCORPORATED By: /s/ Allan Zavarro -------------------------------- Name:Allan Zavarro Title: Senior Managing Director PROFUTURES, INC. By: /s/ Gary D. Halbert, President -------------------------------- 4 EXHIBIT A ABN AMRO INCORPORATED 208 S. LaSalle Chicago, Illinois April 30, 2001 Gary Halbert, President ProFutures, Inc. 11612 Bee Cave Road - Suite 100 Austin Texas 78738 Dear Mr. Halbert: This is to confirm to ProFutures, Inc. the obligation of the undersigned ABN AMRO Incorporated ("ABN") pursuant to the April 30, 2001 Stock Subscription Agreement (as amended from time to time, the "Agreement") between ProFutures, Inc. ("ProFutures") and ABN, as outlined below. As of March 31, 2001, the aggregate relevant capital contributions by the limited partners or unitholders, as the case may be, of the following funds is as follows: ProFutures Strategic Allocation Trust $ 1,889,200.77 ProFutures Long/Short Growth Fund, L.P. $23,192,851.05 ProFutures Diversified Fund, L.P. $35,094,366.91 Alternative Asset Growth Fund, L.P. $ 7,595,016.91 Aggregate $67,771,435.64 Pursuant to the Agreement, accordingly, ABN hereby subscribes to purchase 42,680 shares of ProFutures (at $145.16 per share), being that number of shares which will enable ProFutures to maintain its Net Worth Requirement as defined in the Agreement. It is our understanding under the Agreement that such subscription will be called only if and subject to the conditions as set forth in the Agreement occur. This subscription commitment supersedes all prior subscription commitments pursuant to the Agreement. ABN AMRO INCORPORATED By: /s/ Allan Zavarro -------------------------------- Name:Allan Zavarro Title: Senior Managing Director ADKNOWLEDGED: PROFUTURES, INC. By: /s/ Gary D. Halbert, President -------------------------------- 5