PW ASPEN FUND, L.L.C.
Financial Statements
with Report of Independent Auditors
Period from November 22, 1999
(commencement of operations)
through December 31, 1999
<PAGE>
PW ASPEN FUND, L.L.C.
Financial Statements
with Report of Independent Auditors
Period from November 22, 1999
(commencement of operations)
through December 31, 1999
Contents
Report of Independent Auditors ............................ 1
Statement of Assets, Liabilities and Members' Capital ..... 2
Statement of Operations ................................... 3
Statement of Changes in Members' Capital - Net Assets ..... 4
Schedule of Portfolio Investments ......................... 5
Notes to Financial Statements .............................11
<PAGE>
Report of Independent Auditors
To the Members of PW Aspen Fund, L.L.C.
We have audited the accompanying statement of assets, liabilities and members'
capital of PW Aspen Fund, L.L.C., including the schedule of portfolio
investments, as of December 31, 1999, and the related statements of operations
and changes in members' capital - net assets for the period from November 22,
1999 (commencement of operations) to December 31, 1999. These financial
statements are the responsibility of the Fund'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 securities owned as of December 31, 1999, by
correspondence with the custodian and brokers. 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 Aspen Fund, L.L.C. at
December 31, 1999, and the results of its operations and changes in its members'
capital - net assets for the period from November 22, 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 25, 2000
1
<PAGE>
PW ASPEN FUND, L.L.C.
STATEMENT OF ASSETS, LIABILITIES AND MEMBERS' CAPITAL
- --------------------------------------------------------------------------------
DECEMBER 31, 1999
- --------------------------------------------------------------------------------
ASSETS
Investments in securities, at value (Cost $42,320,031) $53,455,647
Receivables:
Investments sold, not settled 269,274
Dividends 25,552
Interest 9,045
- --------------------------------------------------------------------------------
TOTAL ASSETS 53,759,518
- --------------------------------------------------------------------------------
LIABILITIES
Payables:
Investments purchased, not settled 3,447,960
Margin loan 1,630,624
Management fee 40,242
Professional fees 35,000
Interest 5,599
Miscellaneous 11,229
- --------------------------------------------------------------------------------
Total Liabilities 5,170,654
- --------------------------------------------------------------------------------
Net Assets $48,588,864
- --------------------------------------------------------------------------------
MEMBERS' CAPITAL - NET ASSETS
Represented by:
Capital contributions $37,363,827
Accumulated net investment loss (260,444)
Accumulated net realized gain from investments 349,865
Accumulated net unrealized appreciation from investments 11,135,616
- --------------------------------------------------------------------------------
Members' Capital - Net Assets $48,588,864
- --------------------------------------------------------------------------------
The accompaning motes are an integral part of these financial statements.
2
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PW ASPEN FUND, L.L.C.
STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------
PERIOD FROM NOVEMBER 22, 1999 (COMMENCEMENT OF OPERATIONS) THROUGH
DECEMBER 31, 1999
- --------------------------------------------------------------------------------
INVESTMENT INCOME
Dividend $26,582
Interest 37,566
- --------------------------------------------------------------------------------
TOTAL INVESTMENT INCOME 64,148
- --------------------------------------------------------------------------------
EXPENSES
Management fee 46,849
Professional fees 35,000
Organizational costs 219,432
Administration fee 5,884
Miscellaneous 11,775
- --------------------------------------------------------------------------------
TOTAL OPERATING EXPENSES 318,940
Interest expense 5,652
- --------------------------------------------------------------------------------
TOTAL EXPENSES 324,592
- --------------------------------------------------------------------------------
NET INVESTMENT LOSS (260,444)
- --------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN FROM INVESTMENTS
Net realized gain from investments 349,865
Change in net unrealized appreciation from investments 11,135,616
- --------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN FROM INVESTMENTS 11,485,481
- --------------------------------------------------------------------------------
INCREASE IN MEMBERS' CAPITAL
DERIVED FROM OPERATIONS $11,225,037
- --------------------------------------------------------------------------------
The accompaning motes are an integral part of these financial statements.
3
<PAGE>
PW ASPEN FUND, L.L.C.
STATEMENT OF CHANGES IN MEMBERS' CAPITAL - NET ASSETS
- --------------------------------------------------------------------------------
PERIOD FROM NOVEMBER 22, 1999 (COMMENCEMENT OF OPERATIONS) THROUGH
DECEMBER 31, 1999
- --------------------------------------------------------------------------------
FROM INVESTMENT ACTIVITIES
Net investment loss $(260,444)
Net realized gain from investments 349,865
Change in net unrealized appreciation from investments 11,135,616
- --------------------------------------------------------------------------------
NET INCREASE IN MEMBERS' CAPITAL
DERIVED FROM OPERATIONS 11,225,037
- --------------------------------------------------------------------------------
MEMBERS' CAPITAL TRANSACTIONS
Proceeds from Member subscriptions 36,313,827
Proceeds from Manager subscriptions 1,050,000
- --------------------------------------------------------------------------------
INCREASE IN MEMBERS' CAPITAL DERIVED
FROM CAPITAL TRANSACTIONS 37,363,827
- --------------------------------------------------------------------------------
MEMBERS' CAPITAL AT BEGINNING OF PERIOD -
- --------------------------------------------------------------------------------
MEMBERS' CAPITAL AT END OF PERIOD $48,588,864
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
PW ASPEN FUND, L.L.C.
SCHEDULE OF PORTFOLIO INVESTMENTS
- --------------------------------------------------------------------------------
DECEMBER 31, 1999
SHARES MARKET VALUE
- --------------------------------------------------------------------------------
COMMON STOCKS - 109.39%
AIRLINES - 0.09%
963 Deutsche Lufthansa AG - Unsponsored ADR $ 22,296
282 UAL Corp.* 21,873
-----------
44,169
-----------
ATHLETIC FOOTWEAR - 0.76%
7,443 Nike, Inc., Class B 368,897
-----------
AUDIO/VIDEO PRODUCTS - 0.38%
2,622 Gemstar International Group Ltd.* 186,817
-----------
AUTO-CARS/LIGHT TRUCKS - 0.34%
2,246 General Motors Corp. 163,257
-----------
BROADCASTING SERVICES/PROGRAMMING - 12.62%
67,732 AT&T Corp. - Liberty Media Group, Class A* 3,848,058
33,604 Fox Entertainment Group, Inc., Class A* 838,017
3,270 Grupo Televisa S.A. - Sponsored GDR* 223,178
25,182 TV Guide, Inc., Class A* 1,082,826
3,615 XM Satellite Radio Holdings, Inc., Class A* 137,822
-----------
6,129,901
-----------
BUILDING - RESIDENTIAL/COMMERCIAL - 0.21%
6,309 Lennar Corp. 102,521
-----------
CABLE TV - 14.25%
12,635 Cablevision Systems Corp., Class A* 953,942
12,018 Comcast Corp., Class A* 575,362
49,882 Comcast Corp., Special Class A* 2,522,184
30,519 Cox Communications, Inc., Class A* 1,571,728
23,507 USA Networks, Inc.* 1,298,762
-----------
6,921,978
-----------
CASINO HOTELS - 1.11%
8,051 Mandalay Resort Group* 162,026
30,190 Park Place Entertainment Corp.* 377,375
-----------
539,401
-----------
The accompanying notes are an integral part of these financial statements.
5
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PW ASPEN FUND, L.L.C.
SCHEDULE OF PORTFOLIO INVESTMENTS
- --------------------------------------------------------------------------------
DECEMBER 31, 1999
SHARES MARKET VALUE
- --------------------------------------------------------------------------------
COMMON STOCKS- (CONTINUED)
CELLULAR TELECOMMUNICATIONS - 1.53%
5,931 Sprint Corp. (PCS Group)* $ 607,927
2,781 Vodafone AirTouch PLC - Sponsored ADR 137,660
-----------
745,587
-----------
COMMERCIAL SERVICES - 0.14%
2,491 Cendant Corp.* 66,168
-----------
COMPUTER DATA SECURITY - 5.98%
15,228 VeriSign, Inc.* 2,907,604
-----------
COMPUTER SOFTWARE - 2.04%
8,498 Microsoft Corp.* 992,141
-----------
COMPUTERS - MEMORY DEVICES - 1.42%
6,325 EMC Corp.* 691,006
-----------
COMPUTERS - 1.11%
10,573 Dell Computer Corp.* 539,223
-----------
DIVERSIFIED OPERATIONS - 1.30%
14,077 Seagram Co. Ltd. 629,946
-----------
E-COMMERCE - 3.15%
7,598 Amazon.com, Inc.* 578,398
848 CDnow, Inc.* 8,374
1,557 Drugstore.com, Inc.* 56,345
3,412 eBay, Inc. * 427,141
8,901 Ticketmaster Online - CitySearch, Inc., Class B* 342,137
7,096 Webvan Group, Inc.* 117,084
-----------
1,529,479
-----------
ELECTRONIC COMPONENTS - SEMICONDUCTORS - 0.79%
4,666 Intel Corp 384,072
-----------
ENTERPRISE SOFTWARE/SERVICE - 5.85%
25,349 Oracle Corp.* 2,840,685
-----------
The accompanying notes are an integral part of these financial statements.
6
<PAGE>
PW ASPEN FUND, L.L.C.
SCHEDULE OF PORTFOLIO INVESTMENTS
- --------------------------------------------------------------------------------
DECEMBER 31, 1999
SHARES MARKET VALUE
- --------------------------------------------------------------------------------
COMMON STOCKS - (CONTINUED)
ENTERTAINMENT SOFTWARE - 0.60%
2,590 Electronic Arts, Inc.* $ 217,560
8,292 The 3DO Company* 75,407
-----------
292,967
-----------
FINANCE - INVESTMENT BANKER/BROKER - 1.51%
7,793 Goldman Sachs Group, Inc. 734,007
-----------
GOLD MINING - 0.06%
2,518 Placer Dome, Inc. 27,069
-----------
HOTELS & MOTELS - 0.72%
14,985 Starwood Hotels & Resorts Worldwide, Inc. 352,147
-----------
INTERNET CONTENT - 2.84%
6,247 Go.com* 148,366
4,357 Hollywood.com, Inc.* 82,783
6,109 SportsLine.com, Inc.* 306,214
1,950 Yahoo!, Inc.* 843,742
-----------
1,381,105
-----------
INTERNET SOFTWARE - 2.56%
9,090 At Home Corp., Series A* 389,734
3,833 Exodus Communications, Inc.* 340,420
5,767 Inktomi Corp. * 511,821
-----------
1,241,975
-----------
LEISURE & RECREATION/GAMING - 0.17%
26,531 AMF Bowling, Inc.* 82,909
-----------
MACHINERY - GENERAL INDUSTRY - 0.87%
1,728 Mannesmann AG - Sponsored ADR 421,632
-----------
MONEY CENTER BANKS - 1.29%
474 Bayerische Hypo-Und Ver - Sponsored ADR 32,211
6,394 Deutsche Bank AG - Sponsored ADR 543,490
946 Dresdner Bank AG - Sponsored ADR 52,858
-----------
628,559
-----------
The accompanying notes are an integral part of these financial statements.
7
<PAGE>
PW ASPEN FUND, L.L.C.
SCHEDULE OF PORTFOLIO INVESTMENTS
- --------------------------------------------------------------------------------
DECEMBER 31, 1999
SHARES MARKET VALUE
- --------------------------------------------------------------------------------
COMMON STOCKS - (CONTINUED)
MULTIMEDIA - 6.46%
19,036 CBS Corp.* $ 1,217,124
17,122 The Walt Disney Co. 500,818
8,556 Time Warner, Inc. 618,710
13,235 Viacom Inc., Class B* 799,897
-----------
3,136,549
-----------
MUSIC/CLUBS - 1.02%
13,639 SFX Entertainment, Inc.* 493,568
-----------
NETWORKING PRODUCTS - 0.72%
3,261 Cisco Systems, Inc.* 349,335
-----------
RADIO - 1.72%
3,592 Grupo Radio Centro S.A. - Sponsored ADR* 30,083
17,658 Infinity Broadcasting Corp., Class A * 639,008
1,442 Sirius Satellite Radio Inc.* 64,169
1,354 Westwood One, Inc.* 102,904
-----------
836,164
-----------
REAL ESTATE DEVELOPMENT - 0.43%
11,997 Trizec Hahn Corp. 202,449
1,475 Vornado Operating, Inc. * 8,850
-----------
211,299
-----------
REAL ESTATE INVESTMENT TRUST - HOTEL/RESTAURANT - 0.49%
28,743 Host Marriott Corp. 237,130
-----------
REAL ESTATE INVESTMENT TRUST - OFFICE PROPERTY - 1.13%
17,577 Boston Properties, Inc. 547,084
-----------
REAL ESTATE INVESTMENT TRUST - SHOPPING CENTERS - 1.17%
17,555 Vornado Realty Trust 570,538
-----------
RETAIL - APPAREL/SHOES - 1.08%
11,390 The Gap, Inc. 523,940
-----------
The accompanying notes are an integral part of these financial statements.
8
<PAGE>
PW ASPEN FUND, L.L.C.
SCHEDULE OF PORTFOLIO INVESTMENTS
- --------------------------------------------------------------------------------
DECEMBER 31, 1999
SHARES MARKET VALUE
- --------------------------------------------------------------------------------
COMMON STOCKS - (CONTINUED)
RETAIL - DRUG STORE - 0.10%
4,316 Rite Aid Corp.* $ 48,016
-----------
RETAIL - RESTAURANTS - 1.39%
16,811 McDonald's Corp. 677,702
-----------
SATELLITE TELECOMMUNICATIONS - 3.98%
2,631 EchoStar Communications Corp., Class A* 256,523
19,242 Globalstar Telecommunications Ltd.* 846,648
34,116 Loral Space & Communications Ltd.* 829,462
-----------
1,932,633
-----------
TELECOMMUNICATIONS EQUIPMENT - 17.35%
47,868 QUALCOMM, Inc.*, ** 8,430,752
-----------
TELECOMMUNICATIONS SERVICES - 2.81%
7,890 NTL, Inc.* 984,278
7,658 Time Warner Telecom, Inc., Class A* 382,425
-----------
1,366,703
-----------
TELEPHONE - INTEGRATED - 4.65%
44,442 AT&T Corp. 2,258,231
-----------
TELEVISION - 0.43%
2,156 Pegasus Communications Corp.* 210,749
-----------
TRANSPORT - SERVICES - 0.77%
5,430 United Parcel Service, Inc., Class B 374,670
-----------
TOTAL COMMON STOCKS (COST $42,120,425) 53,150,285
-----------
NUMBER OF
CONTRACTS
CALL OPTIONS - 0.62%
AUDIO/VIDEO PRODUCTS - 0.11%
21 Gemstar International Group Ltd., 01/22/00, $45.00 54,075
-----------
The accompanying notes are an integral part of these financial statements.
9
<PAGE>
PW ASPEN FUND, L.L.C.
SCHEDULE OF PORTFOLIO INVESTMENTS
- --------------------------------------------------------------------------------
NUMBER OF DECEMBER 31, 1999
CONTRACTS MARKET VALUE
- --------------------------------------------------------------------------------
CALL OPTIONS - (CONTINUED)
COMPUTER SOFTWARE - 0.01%
3 Microsoft Corp., 01/22/00, $95.00 $ 6,787
-----------
DIVERSIFIED OPERATIONS - 0.07%
33 Seagram Co. Ltd., 02/19/00, $35.00 33,825
-----------
ENTERPRISE SOFTWARE/SERVICE - 0.43%
48 Oracle Corp., 01/22/00, $70.00 206,400
-----------
TOTAL CALL OPTIONS (COST $186,952) 301,087
-----------
PUT OPTIONS - 0.01%
STOCK INDEX - 0.01%
18 S & P 100, 01/22/00, $710.00 4,275
-----------
TOTAL PUT OPTIONS (COST $12,654) 4,275
-----------
TOTAL INVESTMENTS (Cost $42,320,031) - 110.02% $53,455,647
-----------
LIABILITIES IN EXCESS OF OTHER ASSETS - (10.02%) (4,866,783)
-----------
NET ASSETS - 100.00% $48,588,864
===========
* Non-income producing security.
** Partially held ($6,956,938) in a pledged account by the custodian as
collateral for margin loan payable
The accompanying notes are an integral part of these financial statements.
10
<PAGE>
PW ASPEN FUND, L.L.C.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
DECEMBER 31, 1999
- --------------------------------------------------------------------------------
1. ORGANIZATION
PW Aspen Fund, L.L.C. (the "Fund") was organized as a limited liability
company under the laws of Delaware on August 27, 1999. The Fund is registered
under the Investment Company Act of 1940 (the "1940 Act") as a closed-end,
non-diversified management investment company. The Fund's investment
objective is to seek long-term capital appreciation. The Fund pursues its
investment objective by investing principally in publicly traded common
stocks and other equity securities of U.S companies. The Fund also may invest
in equity securities of foreign issuers and in bonds and other fixed-income
securities of U.S. and foreign issuers. Operations of the Fund commenced on
November 22, 1999.
The Manager of the Fund is PW Aspen Management, L.L.C. (the "Manager"), a
Delaware limited liability company. The Manager's capital account balance at
December 31, 1999 was $1,363,385. The Manager is a joint venture between PW
Fund Advisor, L.L.C. ("PWFA") and Mark Advisors, L.L.C. ("MALLC"). PWFA is
the managing member of the Manager and is an indirect, wholly-owned
subsidiary of Paine Webber Group Inc. and is registered as an investment
advisor under the Investment Advisers Act of 1940, as amended. Investment
professionals employed by MALLC will manage the Fund's investment portfolio
on behalf of the Manager under the supervision of PWFA's personnel. MALLC is
also registered as an investment advisor under the Investment Advisers Act of
1940.
The Fund's Manager, to the fullest extent permitted by applicable law, has
irrevocably delegated to a group of individuals ("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 to, and 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 and will generally be
accepted monthly. 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 Members. 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 December 2000, it will recommend to the Directors
that the Fund offer to repurchase interests from Members twice each year, in
June and December. Member's interests in the Fund can only be transferred or
assigned 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 affect the amounts reported in the
financial statements and accompanying notes. The
11
<PAGE>
PW ASPEN FUND, L.L.C.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
DECEMBER 31, 1999
- --------------------------------------------------------------------------------
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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. Realized gains and
losses from security and foreign currency transactions are calculated on the
identified cost basis.
Cash and cash equivalents are accounted for at cost plus accrued interest.
A. PORTFOLIO VALUATION
Net asset value of the Fund will be determined 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.
Domestic exchange traded securities and NASDAQ listed equity securities will
be valued at their last composite sales 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 sold short, as reported by such exchanges. Securities traded on a
foreign securities exchange will be valued at their last sales 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 sold 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 sold 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 Directors.
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 Directors will
periodically monitor the reasonableness of valuations provided by any such
pricing service. Debt securities with remaining maturities of 60 days or
less, absent unusual circumstances, will be valued at amortized cost, so long
as such valuation is determined by the Directors to represent fair value.
All assets and liabilities initially expressed in foreign currencies will be
converted into U.S.
12
<PAGE>
PW ASPEN FUND, L.L.C.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
DECEMBER 31, 1999
- --------------------------------------------------------------------------------
A. PORTFOLIO VALUATION (CONTINUED)
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 which determination of such values or
exchange rates are made and the time that the net asset value of the Fund is
determined. When such events materially affect the values of securities held
by the Fund 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 Directors.
Foreign-denominated assets may involve more risks than domestic transactions,
including currency risk, political and economic risk, regulatory risk, and
market risk. Risks may arise from the potential inability of a counterparty
to meet the terms of a contract and from unanticipated movements in the value
of foreign currencies relative to the U.S. dollar.
The Fund does not isolate the portion of operations resulting from changes in
foreign exchange rates on investments from the fluctuations arising from
changes in market prices of foreign securities held. Such fluctuations are
included in net realized and unrealized gain or loss from investments. Net
realized exchange gain or loss from foreign currency transactions represent
net foreign exchange gain or loss from forward foreign currency contracts,
disposition of foreign currencies, currency gain or loss realized between the
trade and settlement dates on security transactions, and the difference
between the amount of net investment income recorded on the Fund's accounting
records and the U.S. dollar equivalent amounts actually received or paid. Net
unrealized foreign exchange gain or loss arises from changes in value of
assets and liabilities, other than investments in securities, as a result of
changes in exchange rates.
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 costs and organization costs; and expenses of meetings of
Directors and Members.
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 Member is individually required to
report on its own tax returns its distributive share of the Fund's taxable
income or loss.
13
<PAGE>
PW ASPEN FUND, L.L.C.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
DECEMBER 31, 1999
- --------------------------------------------------------------------------------
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 to the Fund. In consideration for such services, the Fund will pay
PWFA a monthly management fee at an annual rate of 1.25% of the Fund's net
assets for the month, excluding assets attributable to the Manager's capital
account (the "Fee"). The Fee is debited against the Members' capital
accounts, excluding the Manager. A portion of the fee will be paid by PWFA to
an affiliate of Mark Advisors L.L.C.
PaineWebber Incorporated ("PWI", a wholly-owned subsidiary of Paine Webber
Group 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. Placement fees, if any, charged on
contributions are debited against the contribution amounts, to arrive at a
net subscription amount.
The Fund may execute portfolio transactions through PWI. During the period
ended December 31, 1999, PWI did not earn brokerage commissions from
portfolio transactions executed on behalf of the Fund.
The increase (or decrease) in Member's capital derived from operations (net
profit) is initially allocated to the capital accounts of all Members on a
pro-rata basis. At the end of the twelve month period following the admission
of a Member to the Fund, and generally at the end of each fiscal year
thereafter, the Manager is entitled to an incentive allocation (the
"Incentive Allocation") of 20% of the net profits, if any, that would have
been credited to the Member's capital account for such period. The Incentive
Allocation will be made only with respect to net profits that exceed any net
losses previously charged to the account of such Member which have not been
offset by any net profits subsequently credited to the account of the Member.
There was no Incentive Allocation recorded in the financial statements for
the period ended December 31, 1999, because a twelve month period had not
lapsed for any individual Member.
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. In 1999, those expenses were assumed by PWFA on behalf of the
Fund.
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 Trust
Company entered into a service agreement whereby PNC Bank, N.A. provides
securities clearance functions.
14
<PAGE>
PW ASPEN FUND, L.L.C.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
DECEMBER 31, 1999
- --------------------------------------------------------------------------------
3. MANAGEMENT FEE, PROFIT ALLOCATION, RELATED PARTY TRANSACTIONS AND OTHER
(CONTINUED)
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. PFPC Inc.
receives a monthly fee primarily based upon aggregate net assets of the Fund.
4. SECURITIES TRANSACTIONS
Aggregate purchases and sales of common stocks for the period ended December
31, 1999, amounted to $44,294,862 and $2,324,696, respectively.
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
$11,135,616, consisting of $11,668,746 gross unrealized appreciation and
$533,130 gross unrealized depreciation.
5. SHORT-TERM BORROWINGS
The Fund has the ability to trade on margin and, in that connection, borrows
funds from brokers and banks for investment purposes. 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 1940 Act requires the Fund to satisfy an asset coverage
requirement of 300% of its indebtedness, including amounts borrowed, measured
at the time the Fund incurs the indebtedness. The Fund pledges securities as
collateral for the margin borrowings, which are maintained in a segregated
account held by the Custodian. For the period ended December 31, 1999, the
Fund's average interest rate paid on borrowings was 6.7% and the average
borrowings outstanding were $762,392. The Fund had borrowings outstanding of
$1,630,624 at December 31, 1999.
6. FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK OR CONCENTRATIONS OF CREDIT
RISK
In the normal course of business, the Fund may trade various financial
instruments and enter into various investment activities with off-balance
sheet risk. These financial instruments include forward and futures
contracts, options and sales of securities sold, not yet purchased.
Generally, these financial instruments represent future commitments to
purchase or sell other financial instruments at specific terms at specified
future dates.
Each of these financial instruments contains varying degrees of off-balance
sheet risk whereby changes in the market value of the securities underlying
the financial instruments may be in excess of the amounts recognized in the
statement of assets, liabilities and members' capital.
15
<PAGE>
PW ASPEN FUND, L.L.C.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
DECEMBER 31, 1999
- --------------------------------------------------------------------------------
6. FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK OR CONCENTRATIONS OF CREDIT
RISK (CONTINUED)
The risk associated with purchasing an option is that the Fund pays a premium
whether or not the option is exercised. Additionally, the Fund 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.
During the period ended December 31, 1999, the Fund did not trade any forward
or futures contracts, or sell securities not yet purchased, but did have
purchases and sales of options amounting to $414,290 and $236,348,
respectively.
7. FINANCIAL HIGHLIGHTS
The following represents the ratios to average net assets and other
supplemental information for the period indicated:
PERIOD FROM NOVEMBER 22, 1999
(COMMENCEMENT OF OPERATIONS) TO
DECEMBER 31, 1999
-----------------
Ratio of net investment loss to average net assets -6.22%*
Ratio of operating expenses to average net assets 7.75%*
Ratio of interest expense to average net assets .14%*
Portfolio turnover rate 5.13%
Total return 23.90%**
Average debt ratio 2.42%
* Annualized.
** Total return assumes a purchase of an interest in the Fund on the first
day and a sale of the Fund interest on the last day of the period noted,
after incentive allocation to the Manager, and does not reflect the
deduction of placement fees, if any, incurred when subscribing to the
Fund. Total returns for a period of less than a full year are not
annualized.
8. SUBSEQUENT EVENTS
Effective January 1, 2000 the Fund received additional Member capital
contributions of approximately $43,970,775. Effective February 1, 2000, the
Fund received additional Member capital contributions of approximately
$27,306,019.
16
<PAGE>
PW ASPEN FUND, L.L.C.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
DECEMBER 31, 1999
- --------------------------------------------------------------------------------
9. 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.
