10-K 1 dec02-10k.txt March , 2003 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, 2002. 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, 2002 -------------- 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 [ ] 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 incorporation by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2). Yes [ ] No [X] 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 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) 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, 2002. 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, 2002 was: General Partner's Capital 2 Limited Partners' Capital 603 At the commencement of trading on November 20, 1997 there were 38 Partners holding 3,044 Units. At December 31, 2002 there were 603 Limited Partners holding 10,179 Units, and 535 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 2002, 2001, 2000, 1999 and 1998. 2002 ---- Realized Gains (Losses) $ 2,049,049 Change in Unrealized Gains (Losses) on Open Contracts 327,418 Interest Income 183,974 General Partner Management Fee 232,242 Advisor Management Fees 116,644 Advisor Incentive Fees 467,596 Net Income (Loss) 1,336,037 General Partner Capital 63,353 Limited Partner Capital 10,973,670 Partnership Capital 11,037,023 Net Income (Loss) Per Limited and General Partner Unit* 115.07 Net Asset Value Per Unit At End of Year 1,031.12 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 ---------------- * 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, 2002 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 years ended December 31, 2002 and 2001 consisted of the following: 1st Qtr. 2nd Qtr. 3rd Qtr. 4th Qtr. 2002 2002 2002 2002 -------- -------- -------- -------- Gain (loss) from trading $ 675,047 $ 1,172,035 $ 607,205 $ (77,820) Total income (loss) 726,392 1,222,056 654,147 (42,154) Net income (loss) 326,773 955,576 434,101 (380,413) Net income (loss) per Unit 25.78 80.45 39.22 (35.14) Increase (decrease) in Net Asset Value per Unit 25.10 80.76 39.56 (34.48) Net Asset Value per Unit at end of period 945.28 1,026.04 1,065.60 1,031.12 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 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, 2002 ---------------------------- 2002 had net income of $1,336,037 or $115.07 per Unit. At December 31, 2002, partners' capital totaled $11,037,023, a net decrease of $901,649 from December 31, 2001 including capital redemptions of $2,237,686. Net Asset Value per Unit at December 31, 2002 amounted to $1,031.12, as compared to $920.18 at December 31, 2001, an increase of $110.94. Fourth Quarter 2002 ------------------- The futures markets continued to be very volatile in the fourth quarter of 2002. The ongoing threat of war with Iraq, and its impact on the energy markets, caused much of the volatility. Gold prices soared in part due to this uncertainty, as well as uncertainty over economic prospects for the future. The equity markets were up, for the most part, at the end of the quarter. The Long/Short Growth Fund started the quarter with a loss in October of 4.05%. There were gains in stock indexes and certain agricultural commodities. These gains were more than offset by losses in interest rates, metals, foreign currencies and energy. In November, the Fund lost 1.85%. The Fund had some gains in agricultural commodities, stock indexes and base metals. However, the gains were not enough to offset the losses in foreign currencies, energy and interest rates. In December, the Fund posted a gain of 2.75%. The Fund had gains in equities, foreign currencies and interest rates. There were some losses in certain agricultural commodities and base metals. The Fund finished the year with a gain of 12.06%. The volatility in the futures markets allowed some traders to capitalize on trends in various markets. Third Quarter 2002 ------------------ The futures markets continued to be volatile in the third quarter of 2002. The equity markets suffered losses during the quarter, which impacted the commodities markets. The looming threat of war with Iraq also had a big impact on the markets, especially oil and gas futures. The Partnership started the quarter with a loss in July of (2.58)%. There were losses in stock indexes along with losses in metals, foreign currencies and certain of the agricultural commodities. These losses were partially offset by gains in interest rates, and some of the agricultural commodities. In August, the Partnership gained 6.11%. There were gains in stock indexes. There were also gains in grains and other agricultural commodities, as well as interest rates. There were losses in foreign currencies and base metals. In September, the Partnership posted another gain of 0.47%. There were gains in interest rates, energy and base metals. These gains were mostly offset by losses in stock indexes, certain of the agricultural commodities, and foreign currencies. The Partnership had a total return of 3.86% for the quarter and 15.80% for the nine months ended September 30, 2002. For the third quarter 2002, the majority of the Partnership's trading gains were in interest rate futures and the largest loss was in stock index futures. Second Quarter 2002 ------------------- The futures markets continued to be volatile in the second quarter of 2002, though there was a surge at the end of the quarter. The extreme volatility of the equity markets, mainly on the downside, had a major impact on the commodities markets. Many of the US and overseas stock indexes and foreign currencies were very active. Some of this was the result of the corporate scandals that continue to rock the markets. The Partnership had a good second quarter, starting in April with a gain of .56%. There was a gain in S & P 500 options, with gains in lean hogs and corn futures. These were partially offset by losses in the S & P 500 Index, copper futures and coffee futures. In May, the Partnership continued its positive quarter with a gain of 5.66%. There were gains in foreign currencies, stock indexes and precious metals. There were losses in the energy complex and some agricultural commodities. In June, the Partnership posted another gain of 2.16%. There were gains in British Pounds, the S & P 500 Index, Euro futures and EuroDollar futures. These were partially offset by losses in options on the S & P 500, lean hogs and sugar futures. The Partnership had a total return of 8.54% for the quarter and 11.50% for the six months ended June 30, 2002. For the second quarter 2002, the majority of the Partnership's trading gains were in foreign currencies and the largest loss was in the energy markets. First Quarter 2002 ------------------ The futures markets remained choppy in the first quarter of 2002. While the economy was showing some signs of improvement, there were also some negative signs that caused uncertainty. The troubles in the Middle East lead to large increases in oil and gas prices. Gold prices also moved higher early in the quarter, but gave back some of their gains at the end of the quarter. In January 2002, the Partnership gained a modest 0.99%. There were large gains in stock index, along with some smaller gains in energy and foreign currencies. These were mostly offset by losses in interest rates, agricultural commodities and precious metals. In February 2002, there was another gain of 4.34%. This resulted from gains in stock index, once again. There were also gains in interest rates and agricultural commodities. There were some losses incurred in energy and foreign currencies. In March 2002, the Partnership incurred a loss of 2.51%. Again there were profits in the stock indexes. These however were offset by losses in foreign currencies, interest rates and agricultural commodities. Coffee and Eurodollar futures incurred the largest losses. For the first quarter 2002, the majority of the Partnership's gains came from profits in options on S&P 500 Index futures. The largest loss for the quarter was from coffee. 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. (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 1/6 of 1% (2 annually) of month-end Net Assets. Total management fees earned by the General Partner for 2002 aggregated $232,242. 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, 2002, 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. Item 14. Controls and Procedures. ProFutures, Inc. as general partner of ProFutures Long/Short Growth Fund, L.P., with the participation of the general partner's President and Chief Financial Officer, has evaluated the effectiveness of the design and operation of its disclosure controls and procedures with respect to the Partnership within 90 days of the filing date of this annual report, and, based on their evaluation, have concluded that these disclosure controls and procedures are effective. There were no significant changes in the general partner's internal controls with respect to the Partnership or in other factors applicable to the Partnership that could significantly affect these controls subsequent to the date of their evaluation. PART IV Item 15. 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). 10.7 Form of Amended and Restated Stock Subscription Agreement by and between ABN AMRO Incorporated and ProFutures, Inc. dated May 20, 2002 (filed as an exhibit to the June 30, 2002 Form 10-Q). (b) Reports on Form 8-K ------------------- None. (c) Exhibits -------- 99.1 Form of Certification Pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code. 99.2 Form of Certification Pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code. (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 F-3 Condensed Schedule of Investments F-4 Statements of Operations F-5 Statements of Changes in Partners' Capital (Net Asset Value) F-6 Notes to Financial Statements F-7 - F-12 F-1 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, 2002 and 2001, including the December 31, 2002 condensed schedule of investments, and the related statements of operations and changes in partners' capital (net asset value) for the years ended December 31, 2002, 2001 and 2000. 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, 2002 and 2001, and the results of its operations and the changes in its net asset values for the years ended December 31, 2002, 2001 and 2000, 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 27, 2003 F-2 PROFUTURES LONG/SHORT GROWTH FUND, L.P. STATEMENTS OF FINANCIAL CONDITION December 31, 2002 and 2001 ------------- 2002 2001 ---- ---- ASSETS Equity in broker trading accounts Cash $10,788,323 $12,119,461 Net option premiums (received) (199,000) (291,200) Unrealized gain on open contracts 701,173 373,755 ----------- ----------- Deposits with broker 11,290,496 12,202,016 Cash 12,710 11,652 ----------- ----------- Total assets $11,303,206 $12,213,668 =========== =========== LIABILITIES Accounts payable $ 17,609 $ 17,680 Commissions and other trading fees on open contracts 10,743 9,065 Incentive fees payable 153,011 53,703 Management fees payable 46,257 51,559 Redemptions payable 38,563 142,989 ----------- ----------- Total liabilities 266,183 274,996 ----------- ----------- PARTNERS' CAPITAL (Net Asset Value) General Partner - 61 units outstanding at December 31, 2002 and 2001 63,353 56,537 Limited Partners - 10,643 and 12,913 units outstanding at December 31, 2002 and 2001 10,973,670 11,882,135 ----------- ----------- Total partners' capital (Net Asset Value) 11,037,023 11,938,672 ----------- ----------- $11,303,206 $12,213,668 =========== =========== See accompanying notes. F-3 PROFUTURES LONG/SHORT GROWTH FUND, L.P. CONDENSED SCHEDULE OF INVESTMENTS December 31, 2002 ------------ LONG FUTURES CONTRACTS ---------------------- % of Net Description Value Asset Value ----------- ----- ----------- Agricultural $ 72,731 0.66 % Currency 173,887 1.58 % Energy (17,363) (0.16)% Interest rate 246,597 2.23 % Metal 96,722 0.88 % Stock Index (15,081) (0.14)% --------- ------- Total long futures contracts $ 557,493 5.05 % ========= ======= SHORT FUTURES CONTRACTS ----------------------- % of Net Description Value Asset Value ----------- ----- ----------- Agricultural $ 58,680 0.53 % --------- ------- Total short futures contracts $ 58,680 0.53 % ========= ======= WRITTEN OPTIONS ON FUTURES CONTRACTS ------------------------------------ % of Net Description Value Asset Value ----------- ----- ----------- Stock index options $(114,000) (1.03)% --------- ======= Total written options on futures contracts (premiums received - $199,000) $(114,000) (1.03)% ========= ======= See accompanying notes. F-4 PROFUTURES LONG/SHORT GROWTH FUND, L.P. STATEMENTS OF OPERATIONS For the Years Ended December 31, 2002, 2001 and 2000 ------------- 2002 2001 2000 ---- ---- ---- INCOME Trading gains (losses) Realized $ 2,049,049 $ 2,155,466 $(24,145,559) Change in unrealized 327,418 (463,346) 6,842,576 ------------ ------------ ------------ Gain (loss) from trading 2,376,467 1,692,120 (17,302,983) Interest income 183,974 438,669 1,455,997 ------------ ------------ ------------ Total income (loss) 2,560,441 2,130,789 (15,846,986) ------------ ------------ ------------ EXPENSES Brokerage commissions 296,925 254,563 41,871 Incentive fees 467,596 514,558 111,774 Management fees 348,886 377,269 717,706 Operating expenses 110,997 119,328 86,903 ------------ ------------ ------------ Total expenses 1,224,404 1,265,718 958,254 ------------ ------------ ------------ NET INCOME (LOSS) $ 1,336,037 $ 865,071 $(16,805,240) ============ ============ ============ NET INCOME (LOSS) PER GENERAL AND LIMITED PARTNER UNIT (based on weighted average number of units outstanding during the year of 11,611, 13,857 and 20,147, respectively) $ 115.07 $ 62.43 $ (834.14) ============ ============ ============ INCREASE (DECREASE) IN NET ASSET VALUE PER GENERAL AND LIMITED PARTNER UNIT $ 110.94 $ 61.44 $ (794.21) ============ ============ ============ 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, 2002, 2001 and 2000 ------------- Total Partners' Capital Number of ------------------------------------ Units General Limited Total --------- ------- ------- ----- 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 income for the year ended December 31, 2002 6,816 1,329,221 1,336,037 Redemptions (2,270) 0 (2,237,686) (2,237,686) ------ -------- ------------ ------------ Balances at December 31, 2002 10,704 $ 63,353 $ 10,973,670 $ 11,037,023 ====== ======== ============ ============ Net Asset Value Per Unit ------------------------ December 31, 2002 2001 2000 ---- ---- ---- $1,031.12 $ 920.18 $ 858.74 ========= ========= ========= 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, $0 and $13,888 for the years ended December 31, 2002, 2001 and 2000, 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 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, 2002, the capital accounts of the General Partner and/or its principals and affiliates totaled $551,975. 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), the Partnership's broker, whereby ABN has subscribed to purchase (up to $7,000,000 subject to the conditions set forth in the subscription agreement as amended effective May 20, 2002) 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, 2002, 2001 and 2000 were $232,242, $251,199 and $706,890, respectively. Management fees payable to ProFutures, Inc. as of December 31, 2002 and 2001 were $18,490 and $20,170, respectively. 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). F-9 PROFUTURES LONG/SHORT GROWTH FUND, L.P. NOTES TO FINANCIAL STATEMENTS (CONTINUED) ------------- 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, 2002 and 2001, the initial margin requirement of $2,393,246 and $1,706,987, 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. 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, 2002, the latest maturity date for open contracts is March 2004. F-10 PROFUTURES LONG/SHORT GROWTH FUND, L.P. NOTES TO FINANCIAL STATEMENTS (CONTINUED) ------------- Note 6. TRADING ACTIVITIES AND RELATED RISKS (CONTINUED) ------------------------------------------------ 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 years ended December 31, 2002 and 2001. This information has been derived from information presented in the financial statements. 2002 2001 ---- ---- Per Unit Performance (for a unit outstanding throughout the entire year) ---------------------------------- Net asset value per unit at beginning of year $ 920.18 $ 858.74 --------- --------- Income (loss) from operations: Net investment (loss) (1), (3) (64.03) (41.31) Net realized and change in unrealized gain from trading (2), (3) 174.97 102.75 --------- --------- Total income from operations 110.94 61.44 --------- --------- Net asset value per unit at end of year $1,031.12 $ 920.18 ========= ========= Total Return 12.06 % 7.15 % ====== ====== Supplemental Data Ratios to average net asset value: Expenses prior to incentive fees (4) 4.03 % 4.00 % Incentive fees 4.10 % 4.14 % ------ ------ Total expenses (1) 8.13 % 8.14 % ====== ====== Net investment (loss) (4) (2.42)% (0.47)% ====== ====== Total returns are calculated based on the change in value of a unit during the year. An individual partner's total returns and ratios may vary from the above total returns and ratios based on the timing of 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 CERTIFICATIONS -------------- I, Gary D. Halbert, certify that: 1. I have reviewed this annual report on Form 10-K of ProFutures Long/Short Growth Fund, L.P.; 2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report; 3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the "Evaluation Date"); and c) presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this annual report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: March , 2003 ---------------------------------- /s/ Gary D. Halbert ----------------------------------------- Gary D. Halbert, President ProFutures, Inc., General Partner I, Debi B. Halbert, certify that: 1. I have reviewed this annual report on Form 10-K of ProFutures Long/Short Growth Fund, L.P.; 2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report; 3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the "Evaluation Date"); and c) presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this annual report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: March , 2003 ---------------------------------- /s/ Debi B. Halbert ----------------------------------------- Debi B. Halbert, Chief Financial Officer ProFutures, Inc., General Partner EXHIBIT 99.1 CERTIFICATION PURSUANT TO SECTION 1350 OF CHAPTER 63 OF TITLE 18 OF THE UNITED STATES CODE ------------------------------------------------ I, Gary D. Halbert, the President of ProFutures, Inc. as general partner of ProFutures Long/Short Growth Fund, L.P., certify that (i) the Form 10-K for the year ended December 31, 2002 of ProFutures Long/Short Growth Fund, L.P. fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and (ii) the information contained in the Form 10-K for the year ended December 31, 2002 fairly presents, in all material respects, the financial condition and results of operations of ProFutures Long/Short Growth Fund, L.P. PROFUTURES LONG/SHORT GROWTH FUND, L.P. By: ProFutures, Inc., general partner By: /s/ Gary D. Halbert ---------------------------------- Gary D. Halbert President March , 2003 EXHIBIT 99.2 CERTIFICATION PURSUANT TO SECTION 1350 OF CHAPTER 63 OF TITLE 18 OF THE UNITED STATES CODE ------------------------------------------------ I, Debi B. Halbert, the Chief Financial Officer of ProFutures, Inc. as general partner of ProFutures Long/Short Growth Fund, L.P., certify that (i) the Form 10-K for the year ended December 31, 2002 of ProFutures Long/Short Growth Fund, L.P. fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and (ii) the information contained in the Form 10-K for the year ended December 31, 2002 fairly presents, in all material respects, the financial condition and results of operations of ProFutures Long/Short Growth Fund, L.P. PROFUTURES LONG/SHORT GROWTH FUND, L.P. By: ProFutures, Inc., general partner By: /s/ Debi B. Halbert ---------------------------------- Debi B. Halbert Chief Financial Officer March , 2003