-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Q5t23e4ueXp0Q94eTAJ/eKKx+Q8W/4Nt/LFjgGBu/hZ5Ztoc2I1zcrKynHDNz/nV LGQS9lp+y1gAsHrj1rt72Q== 0000945227-00-000012.txt : 20000329 0000945227-00-000012.hdr.sgml : 20000329 ACCESSION NUMBER: 0000945227-00-000012 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19991231 FILED AS OF DATE: 20000328 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ALTERNATIVE ASSET GROWTH FUND L P CENTRAL INDEX KEY: 0000851998 STANDARD INDUSTRIAL CLASSIFICATION: OIL ROYALTY TRADERS [6792] IRS NUMBER: 742546493 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 000-18500 FILM NUMBER: 580456 BUSINESS ADDRESS: STREET 1: 1310 HIGHWAY 620 #200 STREET 2: C/O PROFUTURES, INC CITY: AUSTIN STATE: TX ZIP: 78734 BUSINESS PHONE: 5122641100 MAIL ADDRESS: STREET 1: 1310 HIGHWAY 620 STREET 2: STE 200 CITY: AUSTIN STATE: TX ZIP: 78734 10-K 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended: December 31, 1999 -------------- Commission File number: 0-18500 -------------- Alternative Asset Growth Fund, L.P. ----------------------------------- (Exact name of Partnership as specified in charter) Delaware 74-2546493 - ------------------------------- ------------------------------------ (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) c/o ProFutures, Inc., 11612 Bee Cave Road, Suite 100, Austin, Texas 78733 ------------------------------- (Address of principal executive offices) Partnership's telephone number (512) 263-3800 -------------- Securities registered pursuant to Section 12(b) of the Act: Title of each class. Name of each exchange on which registered. -------------------- ------------------------------------------ Securities registered pursuant to Section 12(g) of the Act: Units of Limited Partnership Interest ------------------------------------- (Title of Class) Indicate by check mark whether the Partnership (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Partnership was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No State the aggregate market value of the voting stock held by non-affiliates of the Partnership. The aggregate market value shall be computed by reference to the price at which the stock was sold, or the average bid and asked prices of such stock, as of a specified date within 60 days prior to the date of filing. Not applicable DOCUMENTS INCORPORATED BY REFERENCE Partnership's Prospectus dated August 31, 1990 and Supplement thereto dated March 1, 1991 are incorporated herein by reference in Part I, Part II, Part III and Part IV PART I Item 1. Business. (a) General Development of Business ------------------------------- Alternative Asset Growth Fund, L.P. (the "Partnership") was organized on April 28, 1989 under the Delaware Revised Uniform Limited Partnership Act. The General Partner and Commodity Pool Operator of the Partnership is ProFutures, Inc., a Texas corporation. The General Partner's address is 11612 Bee Cave Road, Suite 100, Austin, Texas 78733 and its telephone numbers are 1-800-348-3601 and (512) 263-3800. The Partnership filed a registration statement with the U.S. Securities and Exchange commission for the sale of a minimum of $4,000,000 and maximum of $50,000,000 in Units of Limited Partnership Interest at $1,000 each, which registration statement was effective on September 26, 1989. On March 6, 1990 the requisite $4,000,000 level of subscriptions was exceeded and the subscription funds were transferred to the Partnership's account. On March 7, 1990 the Partnership commenced trading activity and continued the offering of Units until the expiration of the offering period. The Unit selling price during the initial offering period was $1,000. After the commencement of trading, Unit purchasers acquired Units at the month-end Net Asset Value per Unit (as defined in the limited partnership agreement) plus a pro rata portion of unamortized organization and offering expenses. The Partnership later continued the offering and sale of Units on August 31, 1990, pursuant to a post-effective amendment dated July 16, 1990 and Prospectus dated August 31, 1990. This offering terminated on May 30, 1991. The Partnership issued an aggregate of 32,516.437 Units of Limited Partnership Interest for total contributions of $36,976,906 exclusive of account opening fees. (b) General Description of the Business ----------------------------------- The General Partner administers the business and affairs of the Partnership exclusive of its trading operations. Trading decisions are made by independent Commodity Trading Advisors chosen by ATA Research, Inc., the Partnership's Trading Manager. As of December 31, 1999 there were six Commodity Trading Advisors: Atlas Capital Management, Inc.; Dennis Trading Group, Inc.; Dominion Capital Management, Inc.; Hampton Investors Inc.; Rainbow Trading Corporation; and Willowbridge Associates, Inc. ProFutures, Inc., a Texas corporation, is a guaranteed Introducing Broker of Internationale Nederlanden (U.S.) Securities, Futures & Options Inc. (ING). It is also registered with the Commodity Futures Trading Commission (CFTC) as a Commodity Trading Advisor and Commodity Pool Operator and is a member of the National Futures Association (NFA). Gary D. Halbert is the Chairman, President and principal stockholder of ProFutures, Inc., which was incorporated and began operation in December 1984 and specializes in speculative managed futures accounts. ATA Research, Inc., the Partnership's Trading Manager, is a Texas corporation whose sole Director, Officer and stockholder is Aladin T. Abguhazaleh. It was organized in 1985 to perform research and consulting services associated with monitoring performance of Commodity Trading Advisors. The Partnership operates as a commodity investment pool, whose objective is to achieve appreciation of its assets through the speculative trading in futures and option contracts and other commodity interests. It ordinarily maintains open positions for a relatively short period of time. The Partnership's ability to make a profit depends largely on the success of the Advisors in identifying market trends and price movements and buying or selling accordingly. The Partnership's Trading Policies are set forth on pages 77-78 of the Prospectus, dated August 31, 1990, which is incorporated herein by reference. Material changes in the Trading Policies as described in the Prospectus must be approved by a vote of a majority of the outstanding Units of Limited Partnership Interest. A change in contracts traded will not be deemed to be a material change in the Trading Policies. (c) Trading Methods and Advisors ---------------------------- Futures traders basically rely on either or both of two types of analysis for their trading decisions, "technical" or "fundamental". Technical analysis uses the theory that a study of the markets will provide a means of anticipating price changes. Technical analysis generally will include a study of actual daily, weekly and monthly price fluctuations, volume variations and changes in open interest, utilizing charts and/or computers for analysis of these items. Fundamental analysis, on the other hand, relies on a study and evaluation of external factors which affect the price of a futures contract in order to predict prices. These include political and economic events, weather, supply and demand and changes in interest rates. The respective Advisors' trading strategies attempt to detect trends in price movements for the commodities monitored by them. They normally seek to establish positions and maintain such positions while the particular market moves in favor of the position and to exit the particular market and/or establish reverse positions when the favorable trend either reverses or does not materialize. These trading strategies are not normally successful if a particular market is moving in an erratic and non-trending manner. Because of the nature of the commodities markets, prices frequently appear to be trending when a particular market is, in fact, without a trend. In addition, the trading strategies may identify a particular market as trending favorably to a position even though actual market performance thereafter is the reverse of the trend identified. The General Partner and Trading Manager, on behalf of the Partnership, have entered into advisory contracts which provide that the portion of the Partnership's assets allocated to each Advisor will be traded in accordance with the Advisor's instruction unless the General Partner or the Trading Manager determine that the Partnership's trading policies have been violated. The Trading Manager, upon mutual consultation and agreement with the General Partner, has the authority to allocate or reallocate assets among its current Advisors or any others it may select in the future. Notional Funding Note: As of December 31, 1999, the Partnership has allocated notional funds to Advisors equal to approximately 30.8% of the Partnership's cash and/or other margin - qualified assets. Of course, this percentage may be higher or lower over any given 12 month period. The management fees paid to an Advisor, if any, are a percentage of the nominal account size of the account if an account had been notionally funded. The nominal account size is equal to a specific amount of funds initially allocated to an Advisor which increases by profits and decreases by losses in the account, but not by additions to or withdrawals of actual funds from the account. Some, but not all, Advisors are expected to be allocated notional funds, and not all of the Advisors allocated notional funds are expected to be paid management fees. Further, the amount of cash and/or other margin-qualified assets in an account managed by an Advisor will vary greatly at various times in the course of the Partnership's business, depending on the General Partner's general allocation strategy and pertinent margin requirements for the trading strategies undertaken by an Advisor. None of the Advisors or their respective principals own any Units of the Partnership. The Partnership's Advisors are independent Commodity Trading Advisors and are not affiliated with the General Partner; however, all are also Advisors to other commodity pools with which the General Partner and Trading Manager, respectively, are currently associated. Each Advisor is registered with the CFTC and is a member in such capacity with the NFA. Because of their confidential nature, proprietary trading records of the Advisors and their respective principals are not available for inspection by the Limited Partners of the Partnership. (d) Fees, Compensation and Expenses ------------------------------- The descriptions and definitions contained in "Fees, Compensation and Expenses" on Pages 36- 38 of the Prospectus dated August 31, 1990 are incorporated herein by reference. The General Partner, for its services, receives a monthly administrative fee equal to 1/6 of 1% of month-end Net Asset Value (approximately 2% annually). The Trading Manager, for its services, receives a monthly management fee equal to 1/12 of 1% of the month-end Net Asset Value (approximately 1% annually). The Consultant, for its administrative services to the Partnership, receives a monthly consulting fee equal to 1/6 of 1% of the month-end Net Asset Value (approximately 2% annually). Certain Trading Advisors receive management fees ranging from 1% to 2% annually of Allocated Net Asset Value (as defined in the trading advisory contracts). In addition, the Advisors receive quarterly incentive fees ranging from 20% to 27.5% of Trading Profits (as defined). The quarterly incentive fees are payable only on cumulative profits achieved by the respective Advisor. For example, if one of the Advisors to the Partnership experiences a loss after an incentive fee payment is made, that Advisor will retain such payments but will receive no further incentive fees until such Advisor has recovered the loss and then generated subsequent Trading Profits (as defined). Consequently, an incentive fee may be paid to one Advisor but the Partnership may experience no change or a decline in its Net Asset Value because of the performance of other Advisors. The Trading Manager, upon mutual consultation and agreement with the General Partner, may allocate or reallocate the Partnership's assets at any time among the current Advisors or any others that may be selected. Upon termination of the present Advisors' contracts or at any other time in the discretion of the Trading Manager or General Partner, the Partnership may employ other advisors whose compensation may be calculated without regard to the losses which may be incurred by the present Advisors. Similarly, the Partnership may renew its relationship with each Advisor on the same or different terms. (e) Brokerage Arrangements ---------------------- The General Partner, among other responsibilities, has the duty to select the brokerage firms through which the Partnership's trading will be executed. The General Partner has selected Internationale Nederlanden (U.S.) Securities, Futures & Options Inc. (ING) as the Partnership's primary clearing broker. ING is registered with the CFTC as a Futures Commission Merchant. It is a member of the NFA and a clearing member of the Chicago Board of Trade and the International Monetary Market of the Chicago Mercantile Exchange. (f) Financial Information About Industry Segments --------------------------------------------- The Partnership operates in only one industry segment, that of the speculative trading of futures, options and forward contracts and other commodity interests. See also "Description of Futures Trading", pages 81 to 84 of the Prospectus dated August 31, 1990, which is incorporated herein by reference. (g) Regulation ---------- The U.S. futures markets are regulated under the Commodity Exchange Act, which is administered by the Commodity Futures Trading Commission (CFTC), a federal agency created in 1974. The CFTC licenses and regulates commodity exchanges, commodity brokerage firms (referred to in the industry as "futures commission merchants"), commodity pool operators, commodity trading advisors and others. The General Partner is registered by the CFTC as a commodity pool operator and each Advisor is registered as a commodity trading advisor. Futures professionals such as the General Partner and the Advisors are also regulated by the National Futures Association, a self-regulatory organization for the futures industry that supervises the dealings between futures professionals and their customers. If the pertinent CFTC registrations or NFA memberships were to lapse, be suspended or be revoked, the General Partner would be unable to act as the Partnership's commodity pool operator, and the respective Advisors as a commodity trading advisor, to the Partnership. The CFTC has adopted disclosure, reporting and recordkeeping requirements for commodity pool operators (such as the General Partner) and disclosure and recordkeeping requirements for commodity trading advisors. The reporting rules require pool operators to furnish to the participants in their pools a monthly statement of account, showing the pool's income or loss and change in Net Asset Value and an annual financial report, audited by an independent certified public accountant. The CFTC and the exchanges have pervasive powers over the futures markets, including the emergency power to suspend trading and order trading for liquidation only (i.e., traders may liquidate existing positions but not establish new positions). The exercise of such powers could adversely affect the Partnership's trading. For additional information refer to "Regulation", Pages 82-83 of the Prospectus dated August 31, 1990, which is incorporated herein by reference. (h) Competition ----------- The Partnership may experience increased competition for the same commodity futures contracts. The Advisors may recommend similar or identical trades to other accounts they manage. Thus the Partnership may be in competition with such accounts for the same or similar positions. Competition may also increase due to widespread utilization of computerized trading methods similar to the methods used by some of the Advisors. The Partnership may also compete with other funds organized by the General Partner. (i) Financial Information About Foreign and Domestic Operations ----------------------------------------------------------- The Partnership does not expect to engage in any operations in foreign countries nor does it expect to earn any portion of the Partnership's revenue from customers in foreign countries. Item 2. Properties. The Partnership does not own and does not expect to own any physical properties. Item 3. Legal Proceedings. The Partnership is not aware of any pending legal proceedings to which the Partnership is a party or to which any of its assets are subject. Item 4. Submission of Matters to a Vote of Security Holders. There were no matters submitted to a vote of holders of Units of Limited Partnership Interest ("Units") during the fiscal year ended December 31, 1999. PART II Item 5. Market for Partnership's Securities and Related Security Holder Matters (a) Market Information ------------------ There is no established public trading market for the Partnership's Units of Limited Partnership Interest. A Limited Partner (or any assignee of units) may withdraw some or all of his capital contribution and undistributed profits, if any, by requiring the Partnership to redeem any or all of his Units at Net Asset Value per Unit. Redemptions shall be effective as of the end of any month after 10 days written notice to the General Partner. Redemptions shall be paid within 15 business days after the month end, provided that all liabilities, contingent or otherwise, of the Partnership, except any liability to partners on account of their capital contributions, have been paid and there remains property of the Partnership sufficient to pay them. (b) Holders ------- The number of holders of record of Units of Partnership Interest as of December 31, 1999 was: General Partner's Capital 2 (including principals of the General Partner) Limited Partners' Capital 722 At the commencement of trading on March 7, 1990 there were 290 Limited Partners holding 4,338.536 Units of Limited Partner Interest and one General Partner holding 46 Units of General Partner Interest. At December 31, 1999 there were 722 Limited Partners holding 8,655.745 Units, and 323.451 Units held by the General Partner and its principals. (c) Distributions ------------- The Partnership does not anticipate making any distributions to investors. Distributions of profits to partners are made at the discretion of the General Partner and will depend, among other factors, on earnings and the financial condition of the Partnership. No such distributions have been made to date. Item 6. Selected Financial Data. Following is a summary of certain financial information for the Partnership for the calendar years 1999, 1998, 1997, 1996 and 1995. 1999 ---- Realized Gains (Losses) $ 270,179 Change in Unrealized Gains (Losses) on Open Contracts 496,473 Interest Income 666,712 Management Fees 934,591 Incentive Fees 348,829 Net Income (Loss) (469,685) General Partner Capital 479,238 Limited Partner Capital 12,824,661 Partnership Capital 13,303,899 Net Income (Loss) Per Limited and General Partner Unit* (47.22) Net Asset Value Per Unit At End of Year 1,481.64 1998 ---- Realized Gains (Losses) $ 4,228,116 Change in Unrealized Gains (Losses) on Open Contracts (559,093) Interest Income 810,610 Management Fees 986,596 Incentive Fees 979,982 Net Income (Loss) 1,756,068 General Partner Capital 495,271 Limited Partner Capital 16,233,207 Partnership Capital 16,728,478 Net Income (Loss) Per Limited and General Partner Unit* 150.78 Net Asset Value Per Unit At End of Year 1,531.21 1997 ---- Realized Gains (Losses) $ 2,996,442 Change in Unrealized Gains (Losses) on Open Contracts 515,373 Interest Income 984,111 Management Fees 1,135,594 Incentive Fees 768,675 Net Income (Loss) 1,716,744 General Partner Capital 442,903 Limited Partner Capital 16,850,663 Partnership Capital 17,293,566 Net Income (Loss) Per Limited and General Partner Unit* 121.38 Net Asset Value Per Unit At End of Year 1,369.31 1996 ---- Realized Gains (Losses) $ 3,478,456 Change in Unrealized Gains (Losses) on Open Contracts (1,019,712) Interest Income 1,020,487 Management Fees 1,257,031 Incentive Fees 542,057 Net Income (Loss) 833,088 General Partner Capital 404,722 Limited Partner Capital 18,465,411 Partnership Capital 18,870,133 Net Income (Loss) Per Limited and General Partner Unit* 49.25 Net Asset Value Per Unit At End of Year 1,251.26 1995 ---- Realized Gains (Losses) $ 1,431,928 Change in Unrealized Gains (Losses) on Open Contracts 120,604 Interest Income 1,292,216 Management Fees 1,475,692 Incentive Fees 720,621 Net Income (Loss) (985,673) General Partner Capital 386,084 Limited Partner Capital 21,640,976 Partnership Capital 22,027,060 Net Income (Loss) Per Limited and General Partner Unit* (49.66) Net Asset Value Per Unit At End of Year 1,193.64 ---------------- * Based on weighted average units outstanding Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations. (a) Liquidity --------- Substantially all of the Partnership's assets are held in cash or cash equivalents. There are no restrictions on the liquidity of these assets except for amounts on deposit with the broker needed to meet margin requirements on open futures contracts. Most United States exchanges (but generally not foreign exchanges, or banks or broker-dealer firms in the case of foreign currency forward contracts) limit by regulations the amount of fluctuation in commodity futures contract prices during a single trading day. The regulations specify what are referred to as "daily price fluctuation limits". The daily limits establish the maximum amount the price of a futures contract may vary either up or down from the previous day's settlement price at the end of the trading session. Once the "daily limit" has been reached in a particular commodity, no trades may be made at a price beyond the limit. Positions in the commodity could then be taken or liquidated only if traders are willing to effect trades at or within the limit during the period for trading. Because the "daily limit" rule only governs price movement for a particular trading day, it does not limit losses and may in fact substantially increase losses because it may prevent the liquidation of unfavorable positions. Commodity futures prices have occasionally moved the daily limit for several consecutive trading days and thereby prevented prompt liquidation of futures positions on one side of the market, subjecting those commodity futures traders to substantial losses. (b) Capital Resources ----------------- The Partnership is currently not offering its Units for sale (See Item 1 above.) Since the Partnership's business is the purchase and sale of various commodity interests, it will make few, if any, capital expenditures. Except as it impacts the commodity markets, inflation is not a significant factor in the Partnership's profitability. (c) Results of Operations --------------------- The General Partner, directly and/or indirectly through the Trading Manager, has established procedures to actively monitor market risk and minimize credit risk, although there can be no assurance that it will, in fact, succeed in doing so. The General Partner's basic market risk control procedures consist of continuously monitoring the trading activity of the various trading advisors, with the actual market risk controls being applied by the advisors themselves. The General Partner seeks to minimize credit risk primarily by depositing and maintaining the Partnership's assets at financial institutions and brokers which the General Partner believes to be creditworthy. The Limited Partners bear the risk of loss only to the extent of the market value of their respective investments and, in certain specific circumstances, distributions and redemptions received. Due to the speculative nature of trading commodity interests, the Partnership's income or loss from operations may vary widely from period to period. Management cannot predict whether the Partnership's future Net Asset Value per Unit will increase or experience a decline. PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS. Year Ended December 31, 1999 ---------------------------- 1999 had a net loss of $(469,685) or $(47.22) per Unit. At December 31, 1999, partners' capital totaled $13,303,899, a net decrease of $3,424,579 from December 31, 1998. Net Asset Value per Unit at December 31, 1999 amounted to $1,481.64, as compared to $1,531.21 at December 31, 1998, a decrease of 3.24%. The net loss for 1999 resulted primarily from losses in the foreign currencies and agricultural commodities markets and were only slightly offset by gains in the energy, equities and metals markets. Partners' capital was further reduced by $2,954,894 of redemptions during 1999. Year Ended December 31, 1998 ---------------------------- Net income for 1998 amounted to $1,756,068 or $150.78 per Unit. At December 31, 1998, partners' capital totaled $16,728,478, a net decrease of $565,088 from December 31, 1997. Net Asset Value per Unit at December 31, 1998 amounted to $1,531.21, as compared to $1,369.31 at December 31, 1997, an increase of 11.82%. Net income for 1998 resulted primarily from gains in the interest rate and equity markets, partially offset by losses in agricultural commodities and metals markets. Net income was offset by redemptions of Units, resulting in a net decrease in partners' capital. Year Ended December 31, 1997 ---------------------------- Net income for the year was $1,716,744, or $121.38 per Unit. At December 31, 1997, partners' capital totaled $17,293,566, a decrease of $1,576,567 from December 31, 1996. The Net Asset Value per Unit at December 31, 1997 amounted to $1,369.31 as compared to $1,251.26 at December 31, 1996, an increase of 9.4%. The Partnership's gains came mostly in the financials, including currencies, stocks, and debt instruments. Strong gains were also achieved in the agricultural commodities, including the food and fiber sector and the grains. (d) Possible Changes ---------------- The General Partner reserves the right to terminate Commodity Trading Advisors (see Prospectus) and/or engage additional Commodity Trading Advisors in the future. Furthermore, the General Partner reserves the right to change any of the Partnership's clearing arrangements to accommodate any new Commodity Trading Advisors. Item 8. Financial Statements and Supplementary Data. Financial statements meeting the requirements of Regulation S-X are listed following this report. The Supplementary Financial Information specified by Item 302 of Regulation S-K is not applicable. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosures. None. PART III Item 10. Directors and Executive Officers of the Partnership. The Partnership has no directors or executive officers. The General Partner of the Partnership is ProFutures, Inc., which administers and manages the Partnership's affairs. Gary D. Halbert, age 47, is the Chairman, President, Director and the principal shareholder of ProFutures, Inc. Debi Halbert, age 44, is the Chief Financial Officer, Director and a minority shareholder of ProFutures, Inc. Patrick W. Watson, born 1964, is Vice President of the General Partner. He is involved in research, investment strategy, business development and investor relations. John M. (Mike) Posey, born 1955, is Vice President of Marketing of the General Partner. Jon P. Meyer, born 1964, is Vice President of Operations of the General Partner. There have been no administrative, civil or criminal proceedings against Gary D. Halbert, Debi Halbert, Patrick Watson, Mike Posey, Jon Meyer or ProFutures, Inc. material to the Partnership. Item 11. Executive Compensation. The General Partner receives, as compensation for its services, monthly Administration Management Fees equal to 1/6 of 1% of month-end Net Asset Value (approximately 2% annually), which aggregated $301,463 for 1999. Item 12. Security Ownership of Certain Beneficial Owners. (a) Security Ownership of Certain Beneficial Owners ----------------------------------------------- The Partnership knows of no one person who beneficially owns more than 5% of the Units of Limited Partnership Interest. (b) Security Ownership of Management -------------------------------- Under the terms of the Limited Partnership Agreement, the General Partner exclusively manages the Partnership's affairs. As of December 31, 1999 the General Partner and its principals owned 323.451 Units of General Partnership Interest. (c) Changes in Control ------------------ None. Item 13. Certain Relationships and Related Transactions. See Prospectus dated August 31, 1990, pages 24-27, which is incorporated herein by reference, for information concerning relationships and transactions between the General Partner, the Trading Manager, the Commodity Broker and the Partnership. PART IV Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K. (a) 1. Financial Statements See Index to Financial Statements on Page F-1. The Financial Statements begin on Page F-3. (a) 2. Financial Statement Schedules. Not applicable, not required, or information included in financial statements. (a) 3. Exhibits. Incorporated by reference - previously filed: Form S-1 and Prospectus dated September 26, 1989 and exhibits thereto. Post-effective amendment No.1 dated July 19, 1990. Prospectus dated August 31, 1990. March 1, 1991 Supplement to Prospectus dated August 31, 1990. *1.1 Form of Selling Agreement between the Registrant and ProFutures Financial Group, Inc. *1.2 Form of Additional Selling Agents Agreement between ProFutures Financial Group, Inc. and certain Additional Selling Agents. *3.1 Agreement of Limited Partnership (attached to the 4.1 Prospectus as Exhibit A). *3.2 Subscription Agreement and Power of Attorney (attached to the Prospectus as Exhibit B). *3.3 Request for Redemption Form (attached to the Prospectus as Exhibit C). *5.1 Opinion of Counsel as to the legality of the Units. *8.1 Tax Opinion of Counsel *10.1 Form of Escrow Agreement among the Registrant, the General Partner and First National Bank of Chicago, the Escrow Agent. *10.2(c) Form of Brokerage Agreement dated August 15, 1990 between the Registrant and Virginia Trading division of Quantum Financial Services, Inc. *10.4(a) Form of Trading Manager Agreement between the Registrant and ATA Research, Inc. *10.4(b) Form of Consulting Agreement between Registrant and Business Marketing Group, Inc. *10.4(c) Form of Stock Subscription Agreement by and between ING (U.S.) Securities, Futures & Options Inc. and ProFutures, Inc. *24.1 Consent of Counsel *24.2 Consent of Certified Public Accountants - ----------------------- * Previously filed in the June 13, 1989 Registration Statement; the September 1, 1989 Pre-effective amendment No.1 thereto; the July 16, 1990 post-effective amendment thereto; and/or Form 10-Q for the quarter ended September 30, 1991; and/or Forms 10-Q for the quarters ended March 31, 1992 and September 30, 1992; and/or Forms 10-Q for the quarters ended March 31, June 30 and September 30, 1993; and/or Form 10-K for the year 1994; and/or Forms 10-Q for the quarters ended March 31, June 30 and September 30, 1994; and/or Form 10-Q for the quarter ended March 31, 1995. Exhibit 10.4(c) was filed with the 1998 Form 10-K. (b) Reports on Form 8-K ------------------- None. (c) Exhibits -------- None. (d) Financial Statement Schedules ----------------------------- Not Applicable, not required, or information included in financial statements. SIGNATURES Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange Act of 1934, the Partnership has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. ALTERNATIVE ASSET GROWTH FUND, L.P. (Partnership) By - ---------------------------- --------------------------------------- Date Gary D. Halbert, President and Director ProFutures, Inc. General Partner By - ---------------------------- --------------------------------------- Date Debi Halbert, Chief Financial Officer, Treasurer and Director ProFutures, Inc. General Partner ALTERNATIVE ASSET GROWTH FUND, L.P. Index to Financial Statements Independent Auditor's Report for the years ended December 31, 1999, 1998 and 1997 F-2 Statements of Financial Condition December 31, 1999 and 1998 F-3 Statements of Operations for the years ended December 31, 1999, 1998 and 1997 F-4 Statements of Changes in Partners' Capital (Net Asset Value) for the years ended December 31, 1999, 1998 and 1997 F-5 Notes to Financial Statements F-6 - F-10 F-1 FINANCIAL STATEMENTS AND REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS ALTERNATIVE ASSET GROWTH FUND, L.P INDEPENDENT AUDITOR'S REPORT ---------------------------- To the Partners Alternative Asset Growth Fund, L.P. We have audited the accompanying statements of financial condition of Alternative Asset Growth Fund, L.P. as of December 31, 1999 and 1998, and the related statements of operations and changes in partners' capital (net asset value) for the years ended December 31, 1999, 1998 and 1997. These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Alternative Asset Growth Fund, L.P. as of December 31, 1999 and 1998, and the results of its operations and the changes in its net asset values for the years ended December 31, 1999, 1998 and 1997, in conformity with generally accepted accounting principles. /s/ ARTHUR F. BELL, JR. & ASSOCIATES, L.L.C. Hunt Valley, Maryland February 5, 2000 F-2 ALTERNATIVE ASSET GROWTH FUND, L.P. STATEMENTS OF FINANCIAL CONDITION December 31, 1999 and 1998 ------------ 1999 1998 ---- ---- ASSETS Equity in broker trading accounts Cash $13,029,093 $ 5,103,550 Net option premiums paid (received) 35,507 (205,586) Unrealized gain on open contracts 696,333 199,860 ----------- ----------- Deposits with brokers 13,760,933 5,097,824 Cash and cash equivalents 338 12,158,374 ----------- ----------- Total assets $13,761,271 $17,256,198 =========== =========== LIABILITIES Accounts payable $ 2,348 $ 6,060 Advisor incentive fees payable 127,961 354,357 Advisor management fees payable 46,767 46,295 Consultant fee payable 22,625 28,061 General Partner fee payable 22,625 28,061 Trading Manager fee payable 11,313 14,031 Commissions and other trading fees on open contracts 8,985 13,059 Redemptions payable 214,748 37,796 ----------- ----------- Total liabilities 457,372 527,720 ----------- ----------- PARTNERS' CAPITAL (Net Asset Value) General Partner - 323.451 units outstanding at December 31, 1999 and 1998 479,238 495,271 Limited Partners - 8,655.745 and 10,601.565 units outstanding at December 31, 1999 and 1998 12,824,661 16,233,207 ----------- ----------- Total partners' capital (Net Asset Value) 13,303,899 16,728,478 ----------- ----------- $13,761,271 $17,256,198 =========== =========== See accompanying notes. F-3 ALTERNATIVE ASSET GROWTH FUND, L.P. STATEMENTS OF OPERATIONS For the Years Ended December 31, 1999, 1998 and 1997 ------------ 1999 1998 1997 ---- ---- ---- INCOME Trading gains (losses) Realized $ 270,179 $ 4,228,116 $ 2,996,442 Change in unrealized 496,473 (559,093) 515,373 ----------- ----------- ----------- Gain from trading 766,652 3,669,023 3,511,815 Interest income 666,712 810,610 984,111 ----------- ----------- ----------- Total income 1,433,364 4,479,633 4,495,926 ----------- ----------- ----------- EXPENSES Brokerage commissions 481,516 584,566 695,621 Advisor incentive fees 348,829 979,982 768,675 Advisor management fees 180,934 174,091 197,557 Consultant fee 301,463 325,002 375,215 General Partner fee 301,463 325,002 375,215 Trading Manager fee 150,731 162,501 187,607 Operating expenses 138,113 172,421 179,292 ----------- ----------- ----------- Total expenses 1,903,049 2,723,565 2,779,182 ----------- ----------- ----------- NET INCOME (LOSS) $ (469,685) $ 1,756,068 $ 1,716,744 =========== =========== =========== Net income (loss) per General and Limited Partner Unit (based on weighted average number of units outstanding during the year) $ (47.22) $ 150.78 $ 121.38 =========== =========== =========== Increase (decrease) in Net Asset Value per General and Limited Partner Unit $ (49.57) $ 161.90 $ 118.05 =========== =========== =========== See accompanying notes. F-4 ALTERNATIVE ASSET GROWTH FUND, L.P. STATEMENTS OF CHANGES IN PARTNERS' CAPITAL (NET ASSET VALUE) For the Years Ended December 31, 1999, 1998 and 1997 ------------ Total Partners' Capital Number of ------------------------------------ Units General Limited Total --------- -------- ----------- ----------- Balances at December 31, 1996 15,080.861 $404,722 $18,465,411 $18,870,133 Net income for the year ended December 31, 1997 38,181 1,678,563 1,716,744 Redemptions (2,451.425) 0 (3,293,311) (3,293,311) ----------- -------- ----------- ----------- Balances at December 31, 1997 12,629.436 442,903 16,850,663 17,293,566 Net income for the year ended December 31, 1998 52,368 1,703,700 1,756,068 Redemptions (1,704.420) 0 (2,321,156) (2,321,156) ----------- -------- ----------- ----------- Balances at December 31, 1998 10,925.016 495,271 16,233,207 16,728,478 Net (loss) for the year ended December 31, 1999 (16,033) (453,652) (469,685) Redemptions (1,945.820) 0 (2,954,894) (2,954,894) ----------- -------- ----------- ----------- Balances at December 31, 1999 8,979.196 $479,238 $12,824,661 $13,303,899 ========== ======== =========== =========== Net Asset Value Per Unit ------------------------------------- December 31, 1999 1998 1997 ---- ---- ---- $1,481.64 $1,531.21 $1,369.31 ========= ========= ========= See accompanying notes. F-5 ALTERNATIVE ASSET GROWTH FUND, L.P. NOTES TO FINANCIAL STATEMENTS ------------ Note 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ----------------------------------------------------------- A. General Description of the Partnership Alternative Asset Growth Fund, L.P. (the Partnership) is a Delaware limited partnership which operates as a commodity investment pool. The Partnership engages in the speculative trading of futures contracts and options on futures contracts. B. Regulation As a registrant with the Securities and Exchange Commission, the Partnership is subject to the regulatory requirements under the Securities Acts of 1933 and 1934. As a commodity investment pool, the Partnership is subject to the regulations of the Commodity Futures Trading Commission, an agency of the United States (U.S.) government which regulates most aspects of the commodity futures industry; rules of the National Futures Association, an industry self-regulatory organization; and the requirements of commodity exchanges and Futures Commission Merchants (brokers) through which the Partnership trades. C. Method of Reporting The Partnership's financial statements are presented in accordance with generally accepted accounting principles, which require the use of certain estimates made by the Partnership's management. Transactions are accounted for on the trade date. Gains or losses are realized when contracts are liquidated. Unrealized gains or losses on open contracts (the difference between contract purchase price and quoted market price) are reflected in the statement of financial condition as a net gain or loss, as there exists a right of offset of unrealized gains or losses in accordance with Financial Accounting Standards Board Interpretation No. 39 - "Offsetting of Amounts Related to Certain Contracts." Any change in net unrealized gain or loss from the preceding period is reported in the statement of operations. For purposes of both financial reporting and calculation of redemption value, Net Asset Value per Unit is calculated by dividing Net Asset Value by the number of outstanding Units. D. Cash and Cash Equivalents Cash and cash equivalents includes cash and short-term investments in fixed income securities. E. Brokerage Commissions Brokerage commissions include other trading fees and are charged to expense when contracts are opened. F-6 ALTERNATIVE ASSET GROWTH FUND, L.P. NOTES TO FINANCIAL STATEMENTS (CONTINUED) ------------ Note 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) ----------------------------------------------------------- F. Income Taxes The Partnership prepares calendar year U.S. and state information tax returns and reports to the partners their allocable shares of the Partnership's income, expenses and trading gains or losses. G. Foreign Currency Transactions The Partnership's functional currency is the U.S. dollar; however, it transacts business in currencies other than the U.S. dollar. Assets and liabilities denominated in currencies other than the U.S. dollar are translated into U.S. dollars at the rates in effect at the date of the statement of financial condition. Income and expense items denominated in currencies other than the U.S. dollar are translated into U.S. dollars at the rates in effect during the period. Gains and losses resulting from the translation to U.S. dollars are reported in income currently. Note 2. GENERAL PARTNER --------------- The General Partner of the Partnership is ProFutures, Inc., which conducts and manages the business of the Partnership. The Agreement of Limited Partnership requires the General Partner to contribute to the Partnership an amount equal to at least the greater of (i) 3% of aggregate capital contributions of all partners or $100,000, whichever is less, or (ii) the lesser of 1% of the aggregate capital contributions of all partners or $500,000. As of December 31, 1999, $365,900 has been contributed to the Partnership by the General Partner and its principals. The Agreement of Limited Partnership also requires that the General Partner maintain a net worth at least equal to the sum of (i) the lesser of $250,000 or 15% of the aggregate capital contributions of any limited partnerships for which it acts as general partner and which are capitalized at less than $2,500,000; and (ii) 10% of the aggregate capital contributions of any limited partnerships for which it acts as general partner and which are capitalized at greater than $2,500,000. ProFutures, Inc. has callable subscription agreements with Internationale Nederlanden (U.S.) Securities, Futures & Options, Inc. (ING), the Partnership's primary broker, whereby ING has subscribed to purchase (up to $14,000,017) the number of shares of common stock of ProFutures, Inc. necessary to maintain the General Partner's net worth requirements. The Partnership pays the General Partner a monthly management fee of 1/6 of 1% (2% annually) of month-end Net Asset Value. F-7 ALTERNATIVE ASSET GROWTH FUND, L.P. NOTES TO FINANCIAL STATEMENTS (CONTINUED) ------------ Note 3. COMMODITY TRADING ADVISORS -------------------------- The Partnership has trading advisory contracts with several unrelated commodity trading advisors to furnish investment management services to the Partnership. Certain advisors receive management fees ranging from 1% to 2% annually of Allocated Net Asset Value (as defined in the trading advisory contracts). In addition, the trading advisors receive quarterly incentive fees ranging from 20% to 27.5% of Trading Profits (as defined). Note 4. DEPOSITS WITH BROKERS --------------------- The Partnership deposits funds with brokers subject to Commodity Futures Trading Commission regulations and various exchange and broker requirements. Margin requirements are satisfied by the deposit of cash with such brokers. The Partnership earns interest income on its assets deposited with the brokers. Note 5. OTHER FEES ---------- The Partnership employs a Consultant who is paid a monthly fee of 1/6 of 1% (2% annually) of month-end Net Asset Value for administrative services rendered to the Partnership. The Partnership's Trading Manager receives a monthly fee of 1/12 of 1% (1% annually) of month-end Net Asset Value for management services rendered to the Partnership. Note 6. DISTRIBUTIONS AND REDEMPTIONS ----------------------------- The Partnership is not required to make distributions, but may do so at the sole discretion of the General Partner. A Limited Partner may request and receive redemption of units owned, subject to restrictions in the Agreement of Limited Partnership. Note 7. TRADING ACTIVITIES AND RELATED RISKS ------------------------------------ The Partnership engages in the speculative trading of U.S. and foreign futures contracts and options on U.S. and foreign futures contracts (collectively, "derivatives"). These derivatives include both financial and non-financial contracts held as part of a diversified trading strategy. The Partnership is exposed to both market risk, the risk arising from changes in the market value of the contracts, and credit risk, the risk of failure by another party to perform according to the terms of a contract. F-8 ALTERNATIVE ASSET GROWTH FUND, L.P. NOTES TO FINANCIAL STATEMENTS (CONTINUED) ------------ Note 7. TRADING ACTIVITIES AND RELATED RISKS (CONTINUED) ------------------------------------------------ Purchase and sale of futures and options on futures contracts requires margin deposits with the brokers. Additional deposits may be necessary for any loss on contract value. The Commodity Exchange Act requires a broker to segregate all customer transactions and assets from such broker's proprietary activities. A customer's cash and other property (for example, U.S. Treasury bills) deposited with a broker are considered commingled with all other customer funds subject to the broker's segregation requirements. In the event of a broker's insolvency, recovery may be limited to a pro rata share of segregated funds available. It is possible that the recovered amount could be less than total cash and other property deposited. The Partnership has a substantial portion of its assets on deposit with financial institutions in connection with its cash management activities. In the event of a financial institution's insolvency, recovery of Partnership assets on deposit may be limited to account insurance or other protection afforded such deposits. In the normal course of business, the Partnership does not require collateral from such financial institutions. For derivatives, risks arise from changes in the market value of the contracts. Theoretically, the Partnership is exposed to a market risk equal to the value of futures contracts purchased and unlimited liability on such contracts sold short. As both a buyer and seller of options, the Partnership pays or receives a premium at the outset and then bears the risk of unfavorable changes in the price of the contract underlying the option. Written options expose the Partnership to potentially unlimited liability, and purchased options expose the Partnership to a risk of loss limited to the premiums paid. The fair value of derivatives represents unrealized gains and losses on open futures contracts and long and short options at market value. The average fair value of derivatives during 1999, 1998 and 1997 was approximately $630,000, $380,000 and $690,000, respectively, and the related fair values as of December 31, 1999 and 1998 are approximately $732,000 and $(6,000), respectively. Net trading results from derivatives for the years ended December 31, 1999, 1998 and 1997 are reflected in the statement of operations and equal gain from trading less brokerage commissions. Such trading results reflect the net gain arising from the Partnership's speculative trading of derivatives. F-9 ALTERNATIVE ASSET GROWTH FUND, L.P. NOTES TO FINANCIAL STATEMENTS (CONTINUED) ------------ Note 7. TRADING ACTIVITIES AND RELATED RISKS (CONTINUED) ------------------------------------------------ Open contracts generally mature within one year, however, the Partnership intends to close all contracts prior to maturity. At December 31, 1999 and 1998, the notional amount of open contracts is as follows: 1999 1998 ---- ---- Contracts to Contracts to Contracts to Contracts to Purchase Sell Purchase Sell ------------ ------------ ------------ ------------ Futures contracts and written options thereon: - Agriculture $ 1,700,000 $ 0 $ 4,000,000 $ 5,300,000 - Currency and currency indices 5,900,000 10,400,000 6,100,000 13,300,000 - Energy 0 0 200,000 400,000 - Equity indices 12,900,000 3,500,000 15,900,000 19,300,000 - Interest rates 0 0 50,400,000 22,200,000 - Metals 10,600,000 4,500,000 700,000 2,200,000 Purchased options on futures contracts: - Agriculture 0 0 600,000 0 - Energy 0 0 100,000 0 - Metals 2,500,000 0 0 0 ----------- ----------- ----------- ----------- $33,600,000 $18,400,000 $78,000,000 $62,700,000 =========== =========== =========== =========== The above amounts do not represent the Partnership's risk of loss due to market and credit risk, but rather represent the Partnership's extent of involvement in derivatives at the date of the statement of financial condition. The General Partner has established procedures to actively monitor market risk and minimize credit risk, although there can be no assurance that it will, in fact, succeed in doing so. The General Partner's basic market risk control procedures consist of continuously monitoring the trading activity of the various trading advisors, with the actual market risk controls being applied by the advisors themselves. The General Partner seeks to minimize credit risk primarily by depositing and maintaining the Partnership's assets at financial institutions and brokers which the General Partner believes to be creditworthy. The Limited Partners bear the risk of loss only to the extent of the market value of their respective investments and, in certain specific circumstances, distributions and redemptions received. F-10 EX-27 2 ARTICLE 5 FDS FOR YEAR ENDED 1999
5 1 12-MOS DEC-31-1999 DEC-31-1999 13,029,431 0 0 0 0 13,761,271 0 0 13,761,271 457,372 0 0 0 0 0 13,761,271 0 1,433,364 0 0 1,903,049 0 0 (469,685) 0 (469,685) 0 0 0 (469,685) (47.22) (47.22)
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