PENFIELD PARTNERS, L.P.
Index to Financial Statements
December 31, 1996
PAGE(S)
Independent Auditors' Report 1
Statement of Assets and Liabilities 2
Statement of Operations 3
Statements of Changes in Partners' Capital 4-5
Schedule of Investments 6-10
Notes to Financial Statements 11-15
Page 1
Independent Auditors' Report
The Partners of
Penfield Partners, L.P.
We have audited the accompanying Statement of Assets and
Liabilities, including the Schedule of Investments, of Penfield
Partners, L.P. as of December 31, 1996 and the related Statement
of Operations for the year ended and the Statements of Changes in
Partners' Capital for each of the two years in the period ended.
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. Our procedures included confirmation of securities
owned at December 31, 1996 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 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 Penfield Partners, L.P. as of December 31, 1996, the results
of its operations for the year then ended and the changes in its
partners' capital for each of the two years in the period then
ended, in conformity with generally accepted accounting
principles.
Anchin, Block & Anchin LLP
New York, N.Y.
February 7, 1997
Page 2
PENFIELD PARTNERS, L.P.
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1996
ASSETS
Investments in securities, at fair value $18,671,741
Cash equivalents 4,861,954
Receivable from broker 35,750
Accrued income 3,760
Organization costs 85,806
___________
TOTAL ASSETS $23,659,011
___________
LIABILITIES
Securities sold short, at fair value $ 2,689,815
Payable to broker 1,768,680
Accrued expenses 63,796
Payables for capital withdrawals 1,100,037
___________
TOTAL LIABILITIES $ 5,622,328
___________
PARTNERS' CAPITAL
General partners 1,279,874
Limited partners 16,756,809
___________
TOTAL PARTNERS' CAPITAL $18,036,683
___________
TOTAL LIABILITIES AND PARTNERS' CAPITAL $23,659,011
___________
Net asset value per Limited Partner's Unit $ 25,000
___________
See Notes to Financial Statements
Page 3
PENFIELD PARTNERS, L.P.
STATEMENT OF OPERATIONS
For the Year Ended December 31, 1996
INVESTMENT GAINS
Realized gains on investments, net $ 3,722,529
Unrealized loss on investments, net (1,459,748)
___________
Total Realized and Unrealized Investment Gains $2,262,781
LOSS FROM OPERATIONS
Income
Interest 140,556
Dividends 69,809
___________
210,365
Expenses
Administrator's fee 151,463
Independent general partners' fees 20,000
Interest 11,233
Professional fees 75,875
Amortization of organization costs 34,323
Other 12,219
___________
305,113
Loss from Operations (94,748)
__________
NET INCOME $2,168,033
__________
See Notes to Financial Statements
Page 4
PENFIELD PARTNERS, L.P.
<TABLE>
STATEMENT OF CHANGES IN PARTNERS' CAPITAL
For the Year Ended December 31, 1996
Corporate Individual
General General Limited
Total Partner Partners Partners
___________ __________ ________ ___________
<S> <C> <C> <C> <C>
PARTNERS' CAPITAL
Beginning $16,472,679 $ 780,023 $ 8,176 $15,684,480
___________ __________ ________ ___________
CHANGES IN CAPITAL FROM
Investments and Operations
Realized & unrealized
investment gains 2,262,781 1,081,791 902 1,180,088
Loss from operations (94,748) (18,342) (51) (76,355)
___________ __________ ________ ___________
Net Increase 2,168,033 1,063,449 851 1,103,733
___________ __________ ________ ____________
Partners' Transactions
Capital contributions 1,543,633 75,000 - 1,468,633
Capital transfers - (2,528) 2,528 -
Capital withdrawals (2,147,662) (647,625) - (1,500,037)
___________ __________ ________ ___________
Net (Decrease)
Increase (604,029) (575,153) 2,528 (31,404)
___________ __________ ________ ___________
Total Increase in
Partners Capital 1,564,004 488,296 3,379 1,072,329
___________ __________ ________ ___________
PARTNERS' CAPITAL-
Ending $18,036,683 $1,268,319 $11,555 $16,756,809
___________ __________ ________ ___________
Units Outstanding-
Beginning 658.91 31.20 .33 627.38
___________ __________ ________ ___________
CHANGES IN UNITS
OUTSTANDING FROM
Units Sold 61.75 3.00 - 58.75
Units Transferred - (0.10) .10 -
Units Issued for
Net Income 86.72 42.54 .03 44.15
Units Repurchased (85.91) (25.91) - (60.00)
___________ __________ ________ __________
Net Increase 62.56 19.53 .13 42.90
___________ __________ ________ ___________
Units Outstanding-
Ending 721.47 50.73 .46 670.28
___________ __________ ________ ___________
</TABLE>
See Notes to Financial Statements
Page 5
PENFIELD PARTNERS, L.P.
<TABLE>
STATEMENT OF CHANGES IN PARTNERS' CAPITAL
For the Year Ended December 31, 1995
CORPORATE INDIVIDUAL
GENERAL GENERAL LIMITED
TOTAL PARTNER PARTNERS PARTNERS
___________ ___________ ________ ____________
<S> <C> <C> <C> <C>
PARTNERS' CAPITAL-
Beginning $23,397,789 $1,656,877 $85,836 $21,655,076
___________ ___________ ________ ____________
CHANGES IN CAPITAL FROM
Investments & Operations
Realized and unrealized
investment gains 2,389,242 301,510 6,007 2,081,725
Loss from operations (250,314) (24,468) (740) (225,106)
___________ ___________ ________ ____________
Net Increase 2,138,928 277,042 5,267 1,856,619
___________ ___________ ________ ____________
Partners' Transactions
Capital contributions 4,027,500 325,000 2,500 3,700,000
Capital transfers - (1,478,896)(71,473) 1,550,369
Capital withdrawals (13,091,538) - (13,954) (13,077,584)
____________ ___________ ________ ____________
Net Decrease (9,064,038) (1,153,896)(82,927) (7,827,215)
____________ ___________ ________ ____________
Total Decrease in
Partners' Capital (6,925,110) (876,854)(77,660) (5,970,596)
____________ ___________ ________ ____________
PARTNERS' CAPITAL-
Ending $16,472,679 $ 780,023 $ 8,176 $15,684,480
____________ ___________ ________ ____________
Units Outstanding-
Beginning 935.91 66.27 3.44 866.20
____________ ___________ ________ ____________
CHANGES IN UNITS
OUTSTANDING FROM
Units Sold 161.10 13.00 0.10 148.00
Units Transferred - (59.16) (2.86) 62.02
Units Issued for
Net Income 85.56 11.09 .21 74.26
Units Repurchased (523.66) - (0.56) (523.10)
________ _______ ______ ________
Net Decrease (277.00) (35.07) (3.11) (238.82)
________ _______ ______ ________
Units Outstanding-
Ending 658.91 31.20 .33 627.38
________ _______ ______ ________
</TABLE>
See Notes to Financial Statements
Page 6
PENFIELD PARTNERS, L.P.
SCHEDULE OF INVESTMENTS
December 31, 1996
NUMBER FAIR
OF SHARES DESCRIPTION VALUE
COMMON STOCKS 100.89%
AUTOMOTIVE PARTS .03%
73,620 Steel City Products, Inc. restricted 5,175
__________
BUILDING AND HOUSING 1.43%
1,200,000 Contempri Homes, Inc., restricted,
including 400,000 warrants (a) 258,720
__________
CHEMICALS 1.87%
22,500 CPAC, Inc. 337,500
__________
COSMETICS AND FRAGRANCES 1.17%
32,500 Jean Philippe Fragrances, Inc. 211,250
__________
DRUGS AND HEALTHCARE 26.66%
15,000 Advanced Magnetics, Inc. 232,500
178,571 Cardiac Control Systems, Inc. (a) 267,855
8,953 Cardiac Control Systems, Inc.,
restricted (a) 13,429
70,000 Faulding, Inc. 428,750
15,000 Neose Technologies, Inc. 270,000
62,500 PLC Systems, Inc. 1,406,250
32,500 Sciclone Pharmaceuticals, Inc. 260,000
32,500 Sofamor / Danek Group Inc. 991,250
20,000 Viragen Europe Ltd. 285,625
125,000 Viragen, Inc. 652,343
__________
4,808,002
__________
ELECTRONICS .81%
53,000 Measurement Specialties, Inc. 145,750
__________
ENERGY 3.17%
15,000 Energy Research Corp. 221,250
25,000 Giant Industries, Inc. 350,000
__________
571,250
__________
See Notes to Financial Statements
Page 7
PENFIELD PARTNERS, L.P.
SCHEDULE OF INVESTMENTS (CONTINUED)
December 31, 1996
NUMBER FAIR
OF SHARES DESCRIPTION VALUE
COMMONS STOCKS (CONTINUED)
FINANCIAL SERVICES 4.61%
20,000 Dime Bancorp, Inc. $ 295,000
50,000 Poughkeepsie Savings Bank 262,500
11,500 R & G Financial Corp. 273,125
__________
830,625
__________
FOOD 2.07%
65,000 Opta Food Ingredients, Inc. 373,750
__________
HEALTHCARE SERVICES .46%
92,500 Accuhealth, Inc. (a) 69,375
18,684 Accuhealth, Inc. restricted (a) 14,012
__________
83,387
__________
INDUSTRIAL AND MACHINERY 2.90%
25,000 Alpine Group, Inc. 171,875
300,000 Lunn Industries, Inc., restricted 281,250
35,000 Transnational Industries, Inc.,
restricted (a) 70,000
__________
523,125
__________
MANUFACTURING 9.31%
32,250 Blount International, Inc. 1,237,594
20,000 Mercer International, Inc. 205,000
22,500 Sealright Co., Inc. 236,250
__________
1,678,844
__________
MINING .96%
185,000 Campbell Resources, Inc. 173,437
__________
See Notes to Financial Statements
Page 8
PENFIELD PARTNERS, L.P.
SCHEDULE OF INVESTMENTS (CONTINUED)
December 31, 1996
NUMBER FAIR
OF SHARES DESCRIPTION VALUE
COMMON STOCKS (CONTINUED)
RESTAURANT, LODGING AND ENTERTAINMENT 8.63%
15,000 Bally Grand, Inc. 540,000
30,000 Casino Data Systems 206,250
60,000 Grand Casinos, Inc. 810,000
__________
1,556,250
__________
SERVICE 1.67%
11,000 Insurance Auto Auctions, Inc. 104,500
25,000 Intrav, Inc. 196,094
__________
300,594
__________
TECHNOLOGY 19.61%
15,000 ASM Lithography Holding 747,186
70,000 Align-Rite International, Inc. 770,000
40,000 Aseco Corp. 465,000
9,600 Asyst Technologies, Inc. 164,400
45,000 Auspex Systems, Inc. 523,124
2,500 Data Translation, Inc. 10,000
15,000 Helix Technology Corp. 435,000
47,500 Media 100, Inc. 421,561
__________
3,536,271
__________
TELECOMMUNICATIONS 11.17%
30,000 360 Communications Co. 697,500
55,000 Acrodyne Communications, Inc. 326,561
65,000 Atlantic Tele-Network, Inc. 991,250
__________
2,015,311
__________
UTILITIES 4.37%
60,000 Northeast Utilities 787,500
__________
__________
TOTAL COMMON STOCKS (COST $16,985,956) $18,196,981
__________
See Notes to Financial Statements
Page 9
PENFIELD PARTNERS, L.P.
SCHEDULE OF INVESTMENTS (CONTINUED)
December 31, 1996
NUMBER FAIR
OF SHARES DESCRIPTION VALUE
PREFERRED STOCKS 2.63%
HEALTHCARE SERVICES 2.08%
187,500 Accuhealth, Inc., restricted (a) $ 375,000
INDUSTRIAL AND MACHINERY .55%
400 Transnational Industries, Inc.,
Series B, restricted (a) 100,000
__________
TOTAL PREFERRED STOCKS
(COST $475,000) 475,000
__________
TOTAL INVESTMENTS (COST $17,460,956) $18,671,741
___________
(a) Affiliated issuer under the Investment Company Act of 1940,
in as much as the Fund owns more than 5% of the voting
securities of the issuer.
All percentages are relative to Partners' Capital
See Notes to Financial Statements
Page 10
PENFIELD PARTNERS, L.P.
SCHEDULE OF INVESTMENTS (CONTINUED)
December 31, 1996
SECURITIES SOLD SHORT
NUMBER FAIR
OF SHARES DESCRIPTION VALUE
COMMON STOCKS 14.91%
DRUGS AND HEALTHCARE 5.31%
32,500 Biovail Corporation International $ 832,815
5,000 Spine-Tech, Inc. 125,000
__________
957,815
__________
ENERGY .78%
10,000 Solv Ex Corporation 140,000
__________
FOOD 2.18%
6,000 Kellogg Co. 393,750
__________
HEALTHCARE SERVICES 1.10%
3,000 Quintiles Transnational Corp. 198,750
__________
MANUFACTURING 1.59%
20,000 CNS, Inc. 287,500
__________
MISCELLANEOUS 1.06%
16,000 Nutrition for Life International, Inc. 192,000
__________
TECHNOLOGY 2.88%
10,000 Centennial Technologies, Inc. 520,000
__________
TOTAL SECURITIES SOLD SHORT
(PROCEEDS $3,002,451) $2,689,815
__________
__________
All percentages are relative to Partners' Capital
See Notes to Financial Statements
Page 11
PENFIELD PARTNERS, L.P.
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
ORGANIZATION Penfield Partners, L.P. ("the Fund") was organized
in November 1988 in the State of Delaware as a
limited partnership for the purpose of trading in
securities. The Fund will continue until December
31, 2028 unless sooner terminated as provided for
in the Partnership Agreement. The Fund's
investment objective is to seek long-term capital
appreciation by investing and trading primarily in
equity securities and securities with equity
features of publicly listed companies.
Effective July 1, 1994, the Fund registered under
the Investment Company Act of 1940 ("1940 Act") to
operate as a nondiversified management company
and a closed-end interval fund.
REPURCHASE The Fund, as a closed-end interval fund, has
POLICIES adopted certain policies for its repurchase of
units from partners as fundamental policies which,
under Rule 23c-3 promulgated under the 1940 Act,
may not be changed without the vote of the holders
of a majority of the outstanding units (as
determined under the 1940 Act). These repurchase
policies are as follows:
(a) The Fund will offer to repurchase units at
intervals of six months in accordance with the
Fund's Amended and Restated Agreement of Limited
Partnership ("Partnership Agreement").
(b) The Fund will allow its partners to submit
requests for repurchases of units by June 16th and
December 17th of each year.
(c) The Fund will establish a maximum of
fourteen days between each deadline for
repurchase requests and the applicable repurchase
date such that repurchases of units shall occur on
June 30th and December 31st of each year.
Page 12
PENFIELD PARTNERS, L.P.
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
The Individual General Partners are authorized
under the Partnership Agreement to establish
other policies relating to repurchases of units
that are consistent with the 1940 Act. The
repurchase of units by the Fund allows partners to
redeem units semi-annually, subject to the terms
and limitations set forth in the Partnership
Agreement.
On November 15, 1996, the Fund offered to
repurchase up to 25% of the outstanding units of
the Fund. Partners holding 5.7% of the units
outstanding on December 31, 1996 equal to
$1,100,037 elected to tender their units to the
Fund for repurchase.
FINANCIAL The preparation of financial statements in
STATEMENT conformity with generally accepted accounting
ESTIMATES principles may require management to make
estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure
of contingent assets and liabilities at the date
of the financial statements and the reported
amounts of revenues and expenses during the
reporting period. Actual results could differ
from those estimates.
VALUATION OF Purchases and sales of securities are recorded on
SECURITIES a trade date basis.
Investments in securities and securities sold
short which are traded on a national securities
exchange or listed on NASDAQ are valued at the
last reported sales price on the last business day
of the year. Investments in securities and
securities sold short which are traded in the
over-the-counter market are valued at the average
of the bid and asked prices on the last trade
date.
Securities for which market quotations are not
readily available are valued at their fair value
as determined in good faith by the Individual
General Partners.
Page 13
PENFIELD PARTNERS, L.P.
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
ORGANIZATION Organization costs are being amortized on a
COSTS straight-line basis over a period of 60 months.
Accumulated amortization at December 31, 1996 is
$85,806.
INCOME TAXES The Fund is not subject to income taxes. The
partners report their distributive share of
realized income or loss on their own tax returns.
CASH Cash equivalents include:
EQUIVALENTS
AND CUSTODY Balance at broker $4,822,684
CONCENTRATIONS Money market funds at brokers 39,270
__________
$4,861,954
Balance at broker consists of a brokerage account
with Furman Selz LLC. The Securities Investors
Protection Corporation (SIPC) insures cash
balances up to $100,000 and securities up to
$500,000. Securities in excess of these limits
are covered by additional insurance maintained by
the broker in the amount of $25 million. Amounts
in excess of insurance coverages are secured by
the good faith and credit of the broker.
SECURITIES The fund is subject to certain inherent risks
SHORT arising from its activities of selling securities
short. The ultimate cost to the Fund to acquire
these securities may exceed the liability
reflected in the financial statements. In
addition, the Fund is required to maintain
collateral with the broker to secure these short
positions.
Page 14
PENFIELD PARTNERS, L.P.
Notes to Financial Statements
December 31, 1996
ALLOCATIONS The net income of the Partnership is allocated
OF INCOME semiannually on June 30th and December 31st, 20%
(LOSS) to the Corporate General Partner and 80% to all
partners in proportion of the number of units held
by each. A net loss will be allocated among the
partners in proportion to the number of units
owned by each. If there is a loss for an
accounting period, the 20% allocation to the
Corporate General Partner will not apply to future
periods until the loss has been recovered. For the
semiannual period ended December 31, 1996, the
Fund had a net loss of $3,091,489.
The 20% income allocation was suspended from
January 21, 1995 through June 30, 1995 due to the
death of the general partner of the Corporate
General Partner. The allocation was reinstated
effective July 1, 1995 on the approval by the
partners of the current investment advisory
agreement. The allocation for the period from
July 1, to December 31, 1995 amounted to $168,714.
All net income allocated to partners is
reinvested. In order to maintain a $25,000 price
per unit, the number of units held by each partner
at the close of each semiannual period will be
adjusted to equal the partner's capital account
divided by $25,000.
RELATED PARTY The Administration Agreement provides for fees
TRANSACTIONS payable to the Fund's administrator, the general
partner of the Corporate General Partner. The
administrator's fee is calculated at a rate of
.0625% of the net asset value of the Fund at the
beginning of each month. (.75% per annum).
A fee is payable to each of the Independent
Individual General Partners at $10,000 per annum,
plus out-of-pocket expenses incurred by them in
performing their duties under the Partnership
Agreement.
Page 15
PENFIELD PARTNERS, L.P.
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
The accompanying Statement of Assets and
Liabilities includes unpaid fees to the
administrator and the Independent General Partners
of $36,976 and $10,000, respectively.
At December 31, 1996 the Fund has an investment
in Transnational Industries, a private placement
security in which an Individual General Partner is
a director and an investor through another entity.
The investment is valued at $170,000.
PURCHASES AND Purchases and sales of securities aggregated
SALES OF $33,344,918 and $36,695,543, respectively.
SECURITIES
SUBSEQUENT Effective January 1, 1997 partners' capital
CAPITAL of approximately $2,550,000 was contributed
TRANSACTIONS to the Partnership.
<TABLE>
SELECTED Years Ended
FINANCIAL December 31,
INFORMATION _________________________________
1996 1995 1994
<S> <C> <C> <C>
Ratio of Total
Expenses to
Average Net Assets 1.53% 2.18% 1.23%
Ratio of Loss from
Operations to
Average Net Assets (.48)% (1.12)% (0.48)%
Ratio of Net Income to
Average Net Assets 10.89% 9.59% 0.65%
Portfolio Turnover
Rate 1.82 1.19 1.87
Total Return 13.41% 10.14% 0.53%
Average Commission
Rate Paid $.0448 (a) (a)
(a) This disclosure is not required prior to 1996.
</TABLE>
