PW TECHNOLOGY PARTNERS, L.P.
Financial Statements
with Report of Independent Auditors
Period from April 1, 1999
(commencement of operations)
through December 31, 1999
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PW TECHNOLOGY PARTNERS, L.P.
Financial Statements
with Report of Independent Auditors
Period from April 1, 1999
(commencement of operations)
through December 31, 1999
Contents
Report of Independent Auditors.............................................1
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
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Report of Independent Auditors
To the Partners of PW Technology Partners, L.P.
We have audited the accompanying statement of assets, liabilities and partners'
capital of PW Technology Partners, L.P. as of December 31, 1999, and the related
statements of operations and changes in partners capital - net assets for the
period from April 1, 1999 (commencement of operations) to December 31, 1999.
These financial statements are the responsibility of the Partnership's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted
in the United States. 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. Our
procedures included confirmation of investments owned as of December 31, 1999,
by correspondence with the general partners of the investment funds. 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 audit provides 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 PW Technology Partners, L.P. at
December 31, 1999, and the results of its operations and changes in its partners
capital - net assets for the period from April 1, 1999 to December 31, 1999, in
conformity with accounting principles generally accepted in the United States.
/S/Ernst & Young LLP
New York, New York
February 17, 2000
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PW TECHNOLOGY PARTNERS, L.P.
STATEMENT OF ASSETS, LIABILITIES AND PARTNERS' CAPITAL
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DECEMBER 31, 1999
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ASSETS
Investments in funds, at value (Cost $273,010,000) $385,577,206
Cash and cash equivalents 434,567
Prepaid assets 32,172
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Total Assets $386,043,945
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LIABILITIES
Payables:
Management fee 272,203
Professional fees 39,000
Administration fee 27,001
Miscellaneous fees 24,267
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Total Liabilities 362,471
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Net Assets $385,681,474
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PARTNERS' CAPITAL - NET ASSETS
Represented by:
Capital contributions $274,965,586
Accumulated net investment loss (1,851,318)
Accumulated net unrealized appreciation on investments 112,567,206
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Partners' Capital - Net Assets $385,681,474
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The accompanying notes are an integral part of these financial statements.
2
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PW TECHNOLOGY PARTNERS, L.P.
STATEMENT OF OPERATIONS
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PERIOD FROM APRIL 1, 1999 (COMMENCEMENT OF OPERATIONS) THROUGH DECEMBER 31, 1999
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INVESTMENT INCOME
Interest $ 30,281
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Total Investment Income 30,281
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OPERATING EXPENSES
Management 1,338,563
Organizational costs 208,449
Administration 206,659
Professional 80,478
Miscellaneous 47,450
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Total Operating Expenses 1,881,599
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Net Investment Loss (1,851,318)
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UNREALIZED GAIN FROM INVESTMENTS
Net change in unrealized appreciation
from investments during the period 112,567,206
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Unrealized Gain from Investments 112,567,206
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INCREASE IN PARTNERS' CAPITAL
DERIVED FROM OPERATIONS $110,715,888
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The accompanying notes are an integral part of these financial statements.
3
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PW TECHNOLOGY PARTNERS, L.P.
STATEMENT OF CHANGES IN PARTNERS' CAPITAL - NET ASSETS
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PERIOD FROM APRIL 1, 1999 (COMMENCEMENT OF OPERATIONS) THROUGH DECEMBER 31, 1999
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FROM INVESTMENT ACTIVITIES
Net investment loss $ (1,851,318)
Change in unrealized appreciation from investments 112,567,206
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Increase in Partners' Capital
Derived from Operations 110,715,888
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PARTNERS' CAPITAL TRANSACTIONS
Proceeds from Limited Partner subscriptions 273,965,586
Proceeds from General Partner subscriptions 1,000,000
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Increase in Partners' Capital Derived
from Capital Transactions 274,965,586
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PARTNERS' CAPITAL AT BEGINNING OF PERIOD --
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PARTNERS' CAPITAL AT END OF PERIOD $385,681,474
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The accompanying notes are an integral part of these financial statements.
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PW TECHNOLOGY PARTNERS, L.P.
NOTES TO FINANCIAL STATEMENTS
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DECEMBER 31, 1999
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1. ORGANIZATION
PW Technology Partners, L.P. (the Fund) was organized as a limited
partnership under the laws of Delaware on December 28, 1998. The Fund is
registered under the Investment Company Act of 1940, as amended (the 1940
Act), as a closed-end, non-diversified, management investment company. The
Fund's investment objective is to maximize capital appreciation over the
long-term. The Fund pursues its investment objective by deploying its
assets primarily among a select group of portfolio managers who invest
primarily in, or who have particular knowledge within, the technology
sector. Generally, such portfolio managers conduct their investment
programs through unregistered investment partnerships (collectively, the
Investment Funds), in which the Fund invests as a limited partner along
with other investors. Operations of the Fund commenced on April 1, 1999.
The General Partner of the Fund is PW Fund Advisor, L.L.C. (the Manager or
PWFA), a Delaware limited liability company. The Manager is an indirect
wholly-owned subsidiary of Paine Webber Group Inc., and is registered as an
investment adviser under the Investment Advisers Act of 1940, as amended.
The Fund's General Partner, to the fullest extent permitted by applicable
law, has irrevocably delegated to a group of individuals (the Directors)
its rights and powers to manage and control the business affairs of the
Fund, including the exclusive authority to oversee and to establish
policies regarding the management, conduct and operation of the Fund's
business. The Directors have engaged the Manager to provide investment
advice regarding the selection of Investment Managers and the
responsibility of the day-to-day management of the Fund.
Initial and additional subscriptions for interests by eligible investors
may be accepted at such times as the Manager may determine. The Fund
reserves the right to reject any subscription for interests in the Fund.
The Fund from time to time may offer to repurchase interests pursuant to
written tenders to Partners. These repurchases will be made at such times
and on such terms as may be determined by the Directors, in their complete
and exclusive discretion. The Manager expects that generally, beginning in
2001, it will recommend to the Directors that the Fund offer to repurchase
interests from Partners twice in each year, in June and December, and
intends to recommend the making of an offer to repurchase interests
effective as of March 31, 2000 and December 2000. Limited Partners can only
transfer or assign their partnership interests with the approval of the
Manager.
2. SIGNIFICANT ACCOUNTING POLICIES
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires the Manager to
make estimates and assumptions that
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PW TECHNOLOGY PARTNERS, L.P.
NOTES TO FINANCIAL STATEMENTS
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DECEMBER 31, 1999
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2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
affect the amounts reported in the financial statements and accompanying
notes. The Manager believes that the estimates utilized in preparing the
Fund's financial statements are reasonable and prudent; however, actual
results could differ from these estimates.
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.
Cash and cash equivalents consist of monies invested in money market funds
and are accounted for at cost plus accrued interest as reported by the
money market funds.
a. PORTFOLIO VALUATION
Net asset value of the Fund will be determined by or at the direction of
the Manager as of the close of business at the end of any fiscal period in
accordance with the valuation principles set forth below or as may be
determined from time to time pursuant to policies established by the
Directors.
The Fund's investments in Investment Funds are carried at fair value as
determined by the Fund's pro-rata interest in the net assets of each
Investment Fund. All valuations utilize financial information supplied by
each Investment Fund and are net of management and performance incentive
fees or allocations payable to the Investment Funds' managers as required
by the Investment Funds' agreements. The underlying investments of each
Investment Fund are accounted for at fair value as described in each
Investment Fund's financial statements.
Distributions received, whether in the form of cash or securities, are
applied as a reduction of the investment's cost when identified by the
Investment Funds' as a return of capital.
b. FUND EXPENSES
The Fund will bear all expenses incurred in the business of the Fund,
including, but not limited to, the following: all costs and expenses
related to portfolio transactions and positions for the Fund's account;
legal fees; accounting and auditing fees; costs of insurance; registration
expenses; certain offering and organization costs; and expenses of meetings
of Directors and Limited Partners.
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PW TECHNOLOGY PARTNERS, L.P.
NOTES TO FINANCIAL STATEMENTS
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DECEMBER 31, 1999
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2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
c. INCOME TAXES
No provision for the payment of Federal, state or local income taxes has
been provided on the profits of the Fund. Each Partner is individually
required to report on its own tax return its distributive share of the
Fund's taxable income or loss.
3. MANAGEMENT FEE, PROFIT ALLOCATION, RELATED PARTY TRANSACTIONS AND OTHER
PWFA provides certain management and administrative services to the Fund,
including, among other things, providing office space and other support
services. In consideration for such services, the Fund will pay PWFA a
monthly management fee at an annual rate of 1% of the Fund's net assets,
excluding assets attributable to the General Partner's capital account (the
Fee). The Fee is debited against the Limited Partners' capital accounts. A
portion of the Fee will be paid by PWFA to its affiliates. PaineWebber Inc.
acts as a placement agent for the Fund, without special compensation from
the Fund, and will bear its own costs associated with its activities as
placement agent.
The increase in partners' capital derived from operations is initially
allocated to the capital accounts of all Partners on a pro-rata basis. In
accordance with the Partnership Agreement, the Manager is then allocated an
amount based on the performance of the Fund (the Performance Bonus) for the
Measurement Period, as defined in the Confidential Memorandum (i.e. the
period commencing on the admission of a Limited Partner to the Fund, and
thereafter each period commencing on the day following the last Measuring
Period and ending generally on the first to occur of (1) a fiscal year-end
or (2) a whole or partial redemption). The Performance Bonus is calculated
separately with respect to each Limited Partner. The Performance Bonus is
equal to 1% of the balance of the Limited Partner's capital account at the
end of the Measurement Period, provided that such appreciation (net of any
Performance Bonus) exceeds the Limited Partner's threshold return. The
threshold return is the amount that a Limited Partner would have earned for
a fiscal year if it had received an annualized rate of return of 20% on its
opening capital account balance, as adjusted. The Performance Bonus for the
period ended December 31, 1999 totaled $3,575,388 and was recorded as an
increase to the General Partner's capital account.
Each Director, who is not an interested person of the Fund, as defined by
the 1940 Act, receives an annual retainer of $5,000 plus a fee for each
meeting attended. Any Director who is an interested person does not receive
any annual or other fee from the Fund. All Directors are reimbursed by the
Fund for all reasonable out-of-pocket expenses incurred by them in
performing their duties.
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PW TECHNOLOGY PARTNERS, L.P.
NOTES TO FINANCIAL STATEMENTS
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DECEMBER 31, 1999
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3. MANAGEMENT FEE, PROFIT ALLOCATION, RELATED PARTY TRANSACTIONS AND OTHER
(CONTINUED)
PFPC Trust Company (an affiliate of PNC Bank, N.A.) serves as custodian of
the Fund's assets and provides custodial services for the Fund. PFPC Inc.
(also an affiliate of PNC Bank, N.A.) serves as Administrator and
Accounting Agent to the Fund and in that capacity provides certain
accounting, record keeping, tax and investor related services. The Fund
pays a monthly fee to the Administrator based primarily upon average net
assets, subject to a minimum monthly fee, and will reimburse certain of the
Administrator's expenses.
4. SECURITIES TRANSACTIONS
Aggregate purchases of Investment Funds for the period ended December 31,
1999, amounted to $273,010,000.
At December 31, 1999, the cost of investments for Federal income tax
purposes was substantially the same as the cost for financial reporting
purposes. At December 31, 1999, accumulated net unrealized appreciation on
investments was $112,567,206, consisting of $112,567,206 gross unrealized
appreciation.
5. INVESTMENTS
As of December 31, 1999, the Fund had investments in Investment Funds, none
of which were related parties. The Fund's investments are summarized below
based on the investment objectives of the specific Investment Funds at
December 31, 1999.
Investment Objective Cost Fair Value
-------------------- ---- ----------
Long/Short Equity $273,010,000 $385,577,206
The following table lists the Fund's investments in Investment Funds as of
December 31, 1999. The agreements related to investments in Investment
Funds provide for compensation to the general partners/managers in the form
of management fees of 1% to 2% (per annum) of net assets and performance
incentive fees or allocations of 20% of net profits earned. The Investment
Funds provide for periodic redemptions, with lock up provisions ranging
from one to two years from initial investment.
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PW TECHNOLOGY PARTNERS, L.P.
NOTES TO FINANCIAL STATEMENTS
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DECEMBER 31, 1999
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5. INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
Investment Fund: Cost Income Fair Value % of Fund's
Capital
<S> <C> <C> <C> <C>
CONFIDENTIAL PORTION - FINANCIALS HAVE BEEN OMITTED AND FILED SEPARATELY WITH THE SEC.
------------ ------------ ------------ -------
Total $273,010,000 $112,567,206 $385,577,206 100.0
Other Assets, Less Liabilities 104,268 0.0
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Partners' Capital - Net Assets $385,681,474 100.0
</TABLE>
6. FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK
In the normal course of business, the Investment Funds in which the Fund
invests trade various financial instruments and enter into various
investment activities with off-balance sheet risk. These include, but are
not limited to, short selling activities, writing option contracts,
contracts for differences, and equity swaps.
7. FINANCIAL HIGHLIGHTS
The following represents the ratios to average net assets and other
supplemental information for the period indicated:
For the Period Ended
December 31,
1999
----
Ratio of net investment loss to average net assets -1.38%*
Ratio of expenses to average net assets 1.41%*
Total return 50.96%**
* Annualized.
** Total return assumes a purchase of a limited partnership interest in the
Fund on the first day and a sale of the Fund interest on the last day of
the period noted, after Performance Bonus to the Manager, if any. Total
return for a period of less than a full year is not annualized.
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PW TECHNOLOGY PARTNERS, L.P.
NOTES TO FINANCIAL STATEMENTS
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DECEMBER 31, 1999
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8. YEAR 2000 (UNAUDITED)
PFPC Inc. experienced no significant disruptions in mission critical
information technology and non-information technology systems and believes
those systems successfully responded to the Year 2000 date change. PFPC
Inc. is not aware of any material problems resulting from Year 2000 issues,
either with its products, its internal systems, or the products and
services of third parties. PFPC Inc. will continue to monitor its mission
critical computer applications and those of its suppliers and vendors
throughout the Year 2000 to ensure that any latent Year 2000 matters that
may arise are addressed promptly.
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