Troon Partners, L.P.
Financial Statements
Period from February 27, 1997 (commencement of operations)
to June 30, 1997
(Unaudited)
Contents
Statement of Assets, Liabilities and Partners' Capital 2
Statement of Operations 3
Statement of Changes in Partners' Capital - Net Assets 4
Notes to Financial Statements 5
Schedule of Portfolio Investments 11
Troon Partners, L.P.
Statement of Assets, Liabilities and Partners' Capital (in thousands)
June 30, 1997
(Unaudited)
Assets
Cash $ 1,538
Investments in securities, at market
(identified cost - $69,441) 76,763
Due from broker 652
Due from affiliate 5
Dividends receivable 8
Interest receivable 1
Organizational costs (net of accumulated amortization of $18) 219
Other assets 11
Total assets 79,197
Liabilities
Due to broker 370
Management fee payable 62
Accrued expenses 146
Total liabilities 578
Net Assets $ 78,619
Partners' Capital
Represented by:
Capital contributions, (net of syndication costs of $50) $ 71,920
Accumulated net investment income 3
Accumulated net realized loss on investments (626)
Net unrealized appreciation on investments 7,322
Partners' Capital - Net Assets $ 78,619
The accompanying notes are an integral part of these financial statements.
-2-
Troon Partners, L.P.
Statement of Operations ( in thousands)
Period from February 27, 1997
(commencement of operations)
to June 30, 1997
(Unaudited)
Investment Income
Dividends $ 389
Interest 55
444
Operating expenses
Management fee 233
Professional fees 88
Administration fees 41
Custodian fees 28
Amortization of organizational costs 18
Individual General Partners' fees and expenses 9
Miscellaneous 24
441
Net investment income 3
Realized and unrealized gain on investments
Realized loss on investments
Investment securities (341)
Purchased options (285)
Net realized loss on investments (626)
Unrealized appreciation on investments
Beginning of period 0
End of period 7,322
Net realized appreciation on investments 7,322
Net realized and unrealized gain on investments 6,696
Increase in partners' capital derived
from investment activities $ 6,699
The accompanying notes are an integral part of these financial statements.
-3-
Troon Partners, L.P.
Statement of Changes in Partners' Capital - Net Assets (in thousands)
Period from February 27, 1997
(commencement of operations)
to June 30, 1997
(Unaudited)
Investment activities
Net investment income $ 3
Net realized loss on investments (626)
Change in unrealized appreciation on investments 7,322
Increase in partners' capital derived
from investment activities 6,699
Partners' capital transactions
Capital contributions 71,970
Syndication costs (50)
Increase in partners' capital derived
from capital transactions 71,920
Partners' capital at beginning of period 0
Partners' capital at end of period $ 78,619
The accompanying notes are an integral part of these financial statements.
-4-
Troon Partners, L.P.
Notes to Financial Statements - June 30, 1997 (Unaudited)
1. Organization
Troon Partners, L.P. (the "Partnership") was organized under the Delaware
Revised Uniform Limited Partnership Act on December 12, 1996. The
Partnership is registered under the Investment Company Act of 1940 (the
"Act") as a closed-end, non-diversified management investment company. The
Partnership will operate until December 31, 2021 unless further extended or
sooner terminated as provided for in the Limited Partnership Agreement (the
"Agreement"), dated December 19, 1996. The Partnership's investment
objective is to achieve long-term capital appreciation. The Partnership
pursues this objective by investing principally in equity securities of
publicly-traded U.S. companies. The Partnership may also invest in equity
securities of foreign issuers and in bonds and other fixed-income securities
of U.S. issuers.
There are five "Individual General Partners" and a "Manager." The Manager
is Troon Management, L.L.C. which is a joint venture between Oppenheimer &
Co., Inc. ("Opco") and Mark Asset Management Corporation ("MAMC").
Investment professionals at MAMC manage the Partnership's investment
portfolio on behalf of the Manager under Opco's supervision.
The acceptance of initial and additional contributions, as well as the
repurchase or withdrawal of Partnership interests, are subject to approval
by the Manager. The Partnership may from time to time offer to repurchase
interests pursuant to written tenders by Partners. Such repurchases will
be made at such times and on such terms as may be determined by the
Individual General Partners, in their complete and exclusive discretion.
Beginning in 1998, the Manager expects that generally it will recommend to
the Individual General Partners that the Partnership repurchase interests
from Partners once in each year effective as of the end of each such year.
2. Significant Accounting Policies
The preparation of financial statements in conformity with generally
accepted accounting principles requires the Manager to make estimates and
assumptions that affect the amounts reported in the financial statements
and accompanying notes. The Manager believes that the estimates utilized
in preparing the Partnership's financial statements are reasonable and
prudent; however, actual results could differ from these estimates.
a. Portfolio Valuation
Securities transactions, including related revenue and expenses, are
recorded on a trade-date basis and dividends are recorded on an ex-dividend
date basis. Interest income is recorded on the accrual basis.
Domestic exchange traded or NASDAQ listed equity securities will be valued
at their last composite sale prices as reported on the exchanges where such
securities are traded. If no sales of such securities are reported on a
particular day, the securities will be valued based upon their composite
bid prices for securities held long, or their composite ask prices for
securities held short, as reported by such exchanges. Securities traded on
a foreign securities exchange will be valued at their last sale prices on
the exchange where such securities are primarily traded, or in the absence
of a reported sale on a particular day, at their bid prices (in the case of
securities held long) or ask prices (in the case of securities held short)
as reported by such exchange. Listed options will be valued using last
sales prices as reported by the exchange with the highest reported daily
volume for such options or, in the absence of any sales on a particular day,
at their bid prices as reported by the exchange with the highest volume on
the last day a trade was reported. Other securities for which market
quotations are readily available will be valued at their bid prices (or ask
prices in the case of securities held short) as obtained from one or more
dealers making markets for such securities. If market quotations are not
readily available, securities and other assets will be valued at fair value
as determined in good faith by, or under the supervision of, the Individual
General Partners.
Debt securities will be valued in accordance with the procedures described
above, which with respect to such securities may include the use of
valuations furnished by a pricing service which employs a matrix to
determine valuation for normal institutional size trading units. The
Individual General Partners will periodically monitor the reasonableness of
valuations provided by any such pricing service. Debt securities with
remaining maturities of 60 days or less will, absent unusual circumstances,
be valued at amortized cost, so long as such valuation is determined by the
Individual General Partners to represent fair value.
All assets and liabilities initially expressed in foreign currencies will be
converted into U.S. dollars using foreign exchange rates provided by a
pricing service compiled as of 4:00 p.m. London time. Trading in foreign
securities generally is completed, and the values of such securities are
determined, prior to the close of securities markets in the U.S. Foreign
exchange rates are also determined prior to such close. On occasion, the
values of such securities and exchange rates may be affected by events
occurring between the time as of which determination of such values or
exchange rates are made and the time as of which the net asset value of the
Partnership is determined. When such events materially affect the values
of securities held by the Partnership or its liabilities, such securities
and liabilities will be valued at fair value as determined in good faith by,
or under the supervision of, the Individual General Partners.
b. Partnership Expenses
The expenses incurred by the Partnership in connection with its organization
are being amortized over a 60 month period beginning with the commencement
of operations, February 27, 1997.
Syndication costs totaling $50,000 related to the Partnership's initial
offering have been charged directly to the capital accounts of the limited
partners of record as of April 30, 1997.
c. Income Taxes
No federal, state or local income taxes will be provided on the profits of
the Partnership since the partners are individually liable for their share
of the Partnership's income.
3. Management Fee, Related Party Transactions and Other
Opco provides certain management and administrative services to the
Partnership including, among other things, providing office space and other
support services to the Partnership. In exchange for such services, the
Partnership pays Opco a monthly management fee of .08333% (1% on an
annualized basis) of the Partnership's net assets determined as of the
beginning of the month, excluding assets attributable to the Manager's
capital account.
During the period ended June 30, 1997, Opco earned $5,897 in brokerage
commissions from portfolio transactions executed on behalf of the
Partnership.
At the end of the twelve month period following the admission of a limited
partner to the Partnership, and generally at the end of each fiscal year
thereafter, the Manager is entitled to an incentive allocation of 20% of net
profits, if any, that have been credited to the capital account of such
limited partner during such period. The incentive allocation will be
charged to a limited partner only to the extent that cumulative net profits
with respect to such limited partner through the close of any period exceeds
the highest level of cumulative net profits with respect to such limited
partner through the close of any prior period. As of June 30, 1997, there
was no incentive allocation.
Due from affiliate represents the amount due from Opco for the over-payment
of syndication costs, which totaled $4,969.
Each Independent Individual General Partner, who is not an "interested
person" of the Partnership as defined by the Act, receives an annual
retainer of $5,000 plus a fee for each meeting attended. The other
Individual General Partners do not receive any annual or other fees. All
Individual General Partners are reimbursed by the Partnership for all
reasonable out-of-pocket expenses incurred by them in performing their
duties. For the period from February 27, 1997 to June 30, 1997, these fees
(including meeting fees and a pro-rata portion of the annual retainer) and
expenses totaled $9,179. One Individual General Partner, who is an
"interested person" of the Partnership, as defined by the Act, holds a
limited partnership interest in the Partnership.
Morgan Stanley Trust Company serves as Custodian of the Partnership's assets.
PFPC Inc. serves as Administrator and Accounting Agent to the Partnership,
and in that capacity provides certain accounting, recordkeeping, tax and
investor services.
4. Securities Transactions
Aggregate purchases and sales of investment securities, excluding short-term
securities, for the period from February 27, 1997 to June 30, 1997, amounted
to $88,960,111 and $20,268,751, respectively.
At June 30, 1997, the cost of investments for federal income tax purposes
was substantially the same as the cost for financial reporting purposes.
At June 30, 1997, accumulated net unrealized appreciation on investments was
$7,322,132, consisting of $8,446,580 gross unrealized appreciation and
$1,124,448 gross unrealized depreciation.
Due from broker primarily represents proceeds from unsettled trades and
short sales. Due to broker primarily represents liabilities from unsettled
security purchases.
5. Financial Instruments with Off-Balance Sheet Risk or
Concentrations of Credit Risk
The risk associated with purchasing an option is that the Partnership pays
a premium whether or not the option is exercised. Additionally, the
Partnership bears the risk of loss of premium and change in market value
should the counterparty not perform under the contract. Put and call
options purchased are accounted for in the same manner as investment
securities.
A summary of the notional amounts of open purchased option contracts as of
June 30, 1997, is as follows:
Notional Amounts
Equity options $ 4,590,500
Equity index options 10,004,000
6. Financial Instruments Held or Issued for Trading Purposes
The Partnership maintains positions in a variety of financial instruments.
The following table summarizes the components of net realized and unrealized
gains from investment transactions:
Net Gains / (Losses)
February 27, 1997
(commencement of operations)
to June 30, 1997
Equity securities $ 7,015,331
Equity options (176,814)
Equity index options (142,787)
Net Gain from investment transactions $ 6,695,730
The following table presents the fair values of derivative financial
instruments and the average fair values of those instruments:
Average Fair Value
Fair Value at from Inception through
June 30, 1997 June 30, 1997
Assets:
Equity options $770,237 $563,013
Equity index options 56,425 85,513
Average fair values presented above are based upon each type's month-end
fair value during the period ended June 30, 1997.
7. Short-Term Borrowings
The Partnership has the ability to trade on margin and, in that connection,
borrow funds from brokers and banks for the purchase of equity and fixed
income securities. Trading in equity securities on margin involves an
initial cash requirement representing at least 50% of the underlying
security's value with respect to transactions in U.S. markets and varying
percentages with respect to transactions in foreign markets. The Act
requires the Partnership to satisfy an asset coverage requirement of 300%
of its indebtedness, including amounts borrowed, measured at the time the
Partnership incurs the indebtedness. As of June 30, 1997, the Partnership
had no outstanding margin borrowings. During the period ended June 30,
1997, the average daily amount of short term debt was not material to the
Partnership's total net assets.
8. Selected Financial Ratios and Other Supplemental Information
The following represents the ratios to average net assets and other
supplemental information for the period:
February 27, 1997
(commencement of
operations) to
June 30, 1997
Investment income 0.01%*
Operating expenses 1.85%*
Portfolio turnover 32.07%
Average commission rate $0.0596**
Total return 8.97%***
* Annualized.
** Average commission rate per share on purchases and sales of investment
securities.
*** Total return assumes a purchase of a Limited Partnership interest in the
Partnership on the first day and a sale of the Partnership interest on
the last day of the period noted, before incentive allocation to the
General Partner, if any. Total returns for a period of less than a full
year are not annualized.
Troon Partners, L.P.
Schedule of Portfolio Investments (Unaudited)
June 30, 1997
Market Value
Shares
Common Stocks - 92.70%
Banking - Regional - 2.54%
7,403 Wells Fargo & Co. $ 1,995,109
Beverages - 3.32%
32,499 Coca-Cola Co. 2,209,932
7,805 Coca-Cola Femsa S.A. - Sponsored ADR 402,933
2,612,865
Broadcasting - 4.04%
29,343 Grupo Televisia S.A. - Sponsored GDR* 891,294
56,528 HSN, Inc.* 1,766,500
65,774 TCI Satellite Entertainment, Inc.* 517,970
3,175,764
Cable TV - 13.73%
8,559 Adelphia Communications Corp., Class A* 60,983
13,449 Cablevision Systems Corp., Class A* 721,203
57,713 Comcast Corp., Special Class A 1,233,615
77,506 Cox Communications, Inc., Class A* 1,860,144
6,392 Rogers Communications, Inc., Class B* 39,554
158,140 Tele-Communications, Inc.* 2,352,332
147,294 Tele-Communications, Inc., Series A* 3,498,232
50,572 U.S. West Media Group* 1,024,083
10,790,146
Communications Software - .05%
18,201 General Magic, Inc.* 36,402
Computer Services & Software - 10.27%
3,734 Infinity Financial Technology, Inc.* 60,913
24,345 Intuit, Inc. 558,426
59,000 Microsoft Corp. 7,456,125
8,075,464
Computers - Micro - 4.86%
32,530 Dell Computer Corp.* 3,820,258
Computers - Software - 2.05%
20,157 McAfee Associates, Inc.* 1,272,411
4,886 SAP AG-Sponsored ADR 338,009
1,610,420
* Non-income Producing Security
The accompanying notes are an integral part of these financial statements.
Troon Partners, L.P.
Schedule of Portfolio Investments (Unaudited) (continued)
June 30, 1997
Market Value
Shares
Common Stocks - 92.70% (continued)
Diversified Operations - 1.90%
64,605 Westinghouse Electric Corp. $ 1,493,991
Electronic Components - Semiconductors - 0.07%
415 Intel Corp. 58,852
Entertainment Software - .03%
5,860 Acclaim Entertainment, Inc.* 24,173
Finance - Credit Cards - 2.59%
27,303 American Express Co. 2,034,074
Financial Guarantee Insurance - 2.85%
46,757 MGIC Investment Corp. 2,241,437
Hotels & Motels - 7.56%
24,044 HFS, Inc.* 1,394,552
158,816 Host Marriott Corp.* 2,828,989
68,273 Mirage Resorts, Inc.* 1,723,893
5,947,434
Internet Software - 1.64%
23,157 America Online, Inc.* 1,288,108
Multimedia - 7.17%
10,725 Comcast Corp., Class A 224,560
86,576 News Corp. Ltd. - Sponsored ADR 1,666,588
21,312 The Walt Disney Co. 1,710,288
42,267 Time Warner, Inc. 2,039,383
5,640,819
Music/Clubs - 0.04%
2,093 Ticketmaster Group, Inc.* 34,796
Oil - Exploration & Production - 2.50%
33,949 Gulf Canada Resources, Ltd.* 282,218
175,652 Mesa, Inc.* 1,009,999
18,990 Parker & Parsley Petroleum Co.* 671,771
1,963,988
* Non-income Producing Security
The accompanying notes are an integral part of these financial statements.
Troon Partners, L.P.
Schedule of Portfolio Investments (Unaudited) (continued)
June 30, 1997
Market Value
Shares
Common Stocks - 92.70% (continued)
Oil/Gas Drilling - 1.19%
6,512 Diamond Offshore Drilling, Inc.* $ 507,122
8,152 ENSCO International, Inc.* 430,018
937,140
Real Estate - 1.80%
44,277 Lennar Corp. 1,414,119
Real Estate Investment Trust - 15.81%
77,580 Boston Properties, Inc.* 2,114,055
21,866 Crescent Operating, Inc. - When Issued* 262,392
135,228 Crescent Real Estate Equities Company 4,293,489
54,343 Starwood Lodging Trust 2,319,794
47,651 Vornado Realty Trust 3,436,828
12,426,558
Retail - Discount - 1.08%
25,132 Wal-Mart Stores, Inc. 849,788
Retail - Restaurants - 2.56%
42,008 Host Marriott Services Corp.* 493,594
31,387 McDonald's Corp. 1,516,400
2,009,994
Satellite Telecommunications - .10%
2,740 PanAmSat Corp.* 79,460
Telecommunications Equip. & Long Distance Service - 2.95%
30,440 Globalstar Telecommunications Ltd.* 932,225
54,386 Loral Space and Communications* 815,790
11,191 Qualcomm, Inc.* 569,342
2,317,357
Total Common Stocks (Cost $65,169,373) 72,878,516
* Non-income Producing Security
The accompanying notes are an integral part of these financial statements.
Troon Partners, L.P.
Schedule of Portfolio Investments (Unaudited) (continued)
June 30, 1997
Market Value
Shares
Preferred Stocks - 3.65%
Multimedia - 2.05%
103,294 News Corp. Ltd - Sponsored ADR PRF $ 1,613,969
Oil - Exploration & Production - 1.60%
188,434 Mesa, Inc. PRF, Conv. Series A, 6/30/08, 8% 1,260,245
Total Preferred Stocks (Cost $3,225,028) 2,874,214
Warrants - .23%
Electronic Components - Semiconductors
1,805 Intel Corp. Warrants 3/14/98, $41.75 183,208
Total Warrants (Cost $184,561) 183,208
Number of
Contracts
Call Options - .92%
Banking - Regional - .20%
56 Wells Fargo & Co., 10/18/97, $250.00 155,400
Computers - Micro - .04%
60 Gateway 2000, Inc., 7/19/97, $27.50 30,000
Finance - Credit Cards - .08%
120 American Express Co., 7/19/97, $70.00 63,000
Hotels & Motels - .07%
60 HFS Inc., 7/19/97, $50.00 56,250
Medical - Drugs - .24%
60 Pfizer, Inc., 9/20/97, $90.00 192,000
Multimedia - .11%
88 Viacom, Inc., 7/19/97, $25.00 42,900
32 The Walt Disney Co., 7/19/97, $65.00 43,200
86,100
* Non-income Producing Security
The accompanying notes are an integral part of these financial statements.
Troon Partners, L.P.
Schedule of Portfolio Investments (Unaudited) (continued)
June 30, 1997
Market Value
Number of
Contracts
Call Options - .92% (continued)
Retail - Office Supplies - .18%
165 Office Depot, Inc., 7/19/97, $15.00 $ 86,625
165 Staples, Inc., 7/19/97, $20.00 51,562
138,187
Total Call Options (Cost $761,377) 720,937
Put Options - .13%
Retail - Restaurants - .06%
60 Boston Chicken, Inc., 7/19/97, $20.00 40,500
44 McDonald's Corp., 7/19/97, $50.00 8,800
49,300
Stock Index - .07%
122 S&P 100 Index, 7/19/97, $820.00 56,425
Total Put Options (Cost $100,129) 105,725
Total Investments (Cost $69,440,468)- 97.63% $76,762,600
Other Assets, Less Liabilities - 2.37% 1,856,347
Net Assets - 100.00% $78,618,947
The accompanying notes are an integral part of these financial statements.
