EFTA00603445.pdf

HONEYCOMB ASSET MANAGEMENT July 19. 2017 Dear Honeycomb Partners: Below please find Honeycomb's O2 2017. Year To Date (YTD), and Inception To Date (ITD) Fund performance since our July 2016 institutional launch. 2017 Performance -Gross and Nee O2 2017 Year To Date Inception To Date (Last Twelve Months) Honeycomb Class A (gross) 3.3% 15.3% 20.0% Honeycomb Class A (net) 2.7% 12.2% 15.9% Honeycomb Class B (gross) 3.3% 15.5% 20.5% Honeycomb Class B (net) 2.7% 12.4% 16.3% Internal capital anchored our June 2016 soft launch which also included select Mends and family capital. The Funds June 2016 net performance was -3.4% and -3.3% for classes A and B. respectively. Inception To Date net performance is e12.7% and 4 13.1% for classes A arid B. respectively. ilcluding the June 2016 soft launch. Past performance is not indicative or a guarantee of future results. O2 2017 Performance and Portfolio Discussion In the second quarter, we took the opportunity to be tactical around our fundamental investing process. In early May, we rotated the portfolio into value and media stocks. We reduced exposure to FANG as near-term price targets were achieved following a dramatic increase in the first four months of the year. However. our long media and broadcasting exposures negatively impacted our performance in May. From a lower gross position, we were able to take advantage of the June 9-12th NASDAQ sell-off and re-initiate these growth-oriented positions at what we believed were attractive risk-rewards at prices 5% to 10% lower. We finished June up slightly for the month and overall we had a good quarter. Gross Long and Short Security Selection Contribution - O2 2017' 10% -10% 7.3% Long -3.6% Shorl 3.7% Total 'The security attrbutian above differs from the 2017 performance table as it does not take into account management fee. ilcentive allocation. forwards or Fund expenses. Past performance is not indicative or a guarantee of future results. 645 Unison Avenue. le^ Flaw. New York. NY 10022 Conlklenbal - NIX for OislrbIXbn EFTA00603445 HONEYCOMB ASSET MANAGEMENT From a sector perspective, a significant portion of the portfolio's exposures for the quarter were in Information Technology and Consumer Discretionary, with positions in Information Technology driving our positive performance. Exposures for Q2 averaged approximately 190% gross and 56% net, which compares to 222% gross and 53% net averages in O1. On the long side, Alibaba was our largest contributor and had been a top 5 position coming into the second quarter. Formula One Group (ticker: FWONK) also led our gains along with investments in Google and Charter Communications. These gains were offset by the losses in Fox, CBS and Sinclair Broadcasting. On the short side we had two significant detractors of performance in the quarter. Shod positions in a TV shopping network and a European internet company were the largest losses to performance. We benefited from our short positions in telecom service providers, advertising companies, and a large cap technology company (serving primarily as a hedge). Thematic Introduction: OLED — Moving Beyond the TV In past quarterly letters and discussions, we have highlighted our interest in artificial intelligence, machine learning, autonomous driving, and new technologies made possible by advances in digital computing. At the same time however, game-changing innovation is also happening in the physical world which we have been exploring more closely. One such advancement already at the phase of commercial adoption is OLED technology. OLEDs are "Organic Light- Emitting Diodes" and their properties enable them to emit crystal clear images without a backlight, which is required by traditional displays, making them more power efficient. This means OLED screens are paper-thin, flexible, foldable and can be applied on any surface from plastic to glass. This goes beyond TVs. Imagine the ability to turn windows, walls, and even car tail lights into a working display. Smartphone and appliance manufacturers, auto OEMs, and industries of all kinds are already planning for a future where they can incorporate this technology into their products due to the improved performance and longer battery life. Goldman Sachs recently estimated that the OLED industry will triple to $46bn from its current size by 2020. The applications for OLED are seemingly endless. Potential OLED applications: Moving Beyond the TV As we are beginning our work on this mega trend, we are exploring not only the OLED manufacturers but also their equipment suppliers. Applied Materials (ticker: AMAT), a current portfolio holding, is a supplier of semiconductor capital equipment and is a leading provider in the OLED space, a fact that is underappreciated by the market because OLED- related sales represent a minority of AMAT's revenues today. Despite its dominant position in a high-growth segment, AMAT trades as a semicap company for a cyclically low multiple of 14x forward PIE despite growing earnings more than 20%. As OLED-related sales become a more substantial part of AMAT's business and help smooth out the cyclicality of its earnings trajectory, we believe the stock will benefit from a multiple re-rating as well. 2 Conlidonbal - No! for Disliaton EFTA00603446 HONEYCOMB ASSET MANAGEMENT We are in the process of researching other ways to play this trend. While OLED has been around for a few years and the stocks involved may reflect the potential, the S-curve of mass adoption is now in sight and will take it to the next level of general awareness. We often find in technology the early bird doesn't get the worm, it eats dirt. The bird that comes after the early bird is the one that enjoys the fruits of that labor! What does OLED mean for advertising? The impact of OLED displays will extend far beyond the devices themselves. At Honeycomb we think about capturing the entire value chain of an idea and ask ourselves how might this trend impact other names in our portfolio. According to industry experts we have spoken to, by 2020 approximately 60% of smartphones will have OLED screens. Some of these screens can unfold and double the size of your display allowing you to browse the internet and watch videos more comfortably while keeping your current phone size unchanged. Illustrative smartphone prototype with OLED display - Closed a AL Opening Completely Open We are thinking about what impact this may have on the consumption of YouTube, which already has 1.5 billion daily active users currently spending 40 minutes per day on the site, streaming a total of 1 billion hours per day. Netflix watchers are currently streaming 1 billion hours per week. Both platforms may see a significant increase in viewing hours in a world with bigger, foldable smartphone screens. Additionally, we are analyzing the potential for mobile video advertising to drive more ad dollars to companies like Google and Facebook. Historically, there was a negative impact on advertising rates and conversion from the desktop to mobile transition when screen sizes got smaller. OLED devices could reverse this trend by allowing more potential surface area to advertise. In this scenario, we believe consensus estimates are dramatically underestimating the potential for advertising revenue growth in the future especially given video advertising rates are much higher than click-through links. Year In Review and Business Update Over our first 12 months in business we reflect on what we did well and where we fell short. We did a good job of taking risk in our portfolio (which is the mantra of our shop) and delivering strong returns. Since launch, our gross exposure has averaged 209% with an average 51% net exposure. When it came to hiring talent, however, we didn't take much risk. We interviewed over 100 candidates and probably should have pulled the trigger on more than one occasion. Our bar remains high as we seek professionals with a combination of raw intelligence, common sense, passion and cultural fit centered on creativity and resilience. Our idea flow remains strong and we look to better monetize this with additional bandwidth of added talent. Expect to hear progress on this front in the future. In terms of asset raising, we are extremely proud of the methodical approach we have taken to build our firm. We have had inflows every month since launch and have diversified the partnership by investor type and geographic representation. We believe that our investor base is a strategic asset that has helped our performance. Your confidence in our investment process allows us to do our best work, especially in volatile times. 3 Conlidontial - Not for Dithibution EFTA00603447 HONEYCOMB ASSET MANAGEMENT Closing Remarks It is an exciting time to be a new hedge fund launch. Starting a business has been an incredibly rewarding experience for our team. It continues to be a learning opportunity that requires skill. strategy, preparation and patience. We will continue to grow our assets, talent, and industry knowledge while staying focused on our goal of generating excellent returns on your capital. Best regards. The Honeycomb Team CONTACT INFORMATION: Dominique Ahumada Head of Capital Partnerships 4 Conti oNial - Not for EFTA00603448 HONEYCOMB ASSET MANAGEMENT f Mono, a Important I egni nisrIMirr 'Honeycomb Master Fund LP (the-Master Fund') includes al or substantially al inveslible assets from its feeder hands. Honeycomb Partners LP ('Domestic Fuld). Honeycomb Intermediate Fund LP and Honeycomb Offshore Fund Lid. (collectively. the 'Funds'). However. investors are expected to invest at the feeder fund not at the Master Fund level. The reflected returns assume a representattve investor invested in the Domestic Fund in each of (1) the Class A interests that are subject to a management fee 01 2% and incentive allocation of 20% and (I1) the Class B interests that are subject to a management fee of 1.5% and an incentive alocation of 20%. 'Net' reflects the performance 01 the Domestic Fund net of management lee. expenses and incenttve Matelot. 'Gross' reflects the performance of the Domestic Fund net ol management fee and expenses. but gross of incentbre alocation. Returns assume the reinvestment of all dividends. interest. income and profits. The management fee and expense agues used for performance calculatbns are ;to-rated for the performance period. and incentive allocation calculations reflect an invesbnent since the Domestic Fund's July 1.2016 institutional launch dale. The reflected reams assume participation by the Class A and B representative investor In -new issue' investments. Individual results will vary (potentially considerabtyi depending on. among other things. investing at the offshore feeder fund rather than the Domestic Fund level. new issue eligblty. the timing of contributionstsubscriplions and withdrawals/redemptions, different lee arrangements and any accumulated loss carry-brands. This performance information is estimated and Honeycomb Asset Management LP (the -investment Manager') makes no representations as to the accuracy or completeness thereof. and such Information shout' not be rowed upon for investment related or other purposes. The performance information is based on unaudited information as of the date hereof and 9 subject to change as actual performance for the relevant period is finalized. Past performance is not indicative of future results. Legal Disclosure: This investor letter is confidential. Is Intended only for the person to whom it has been provided and under no circumstances may a copy be shown. cooed. transmitted. or otherwise given to any person other than the aulhorued recipient without the poor written consent of the Investment Manager. Except as 0th Anse specifically set forth heren. the intonation in this letter is as of the dale hereol. Notwithstanding anything to the colliery herein, each recipient to this document (and each employee. representative. or recipient) may disclose to any and all pencils, without limitation of any kind, the tax treatment and lax structure of the Funds any of their transactions, and all materials of any kind (including opinions or other tax analyses) relating to such tax treatment and tax structure, it bong understood that 'tax treatment' and 'tax structure' do not include the name or identifying information of a Fuld or a transaction. The distribution 01 the inlormation contained herein may be restricted in certain jurisdictions: accordingly. h is the responsibility ol any prospective investor to sail* itself as to compliance with relevant laws and regulatbns. The recipient and its professional advisors, by accepting deavery of this document, agree to keep °credential al matters herein and to return this document promptly upon the request of the Investment Manager. The informality) contained herein is preliminary and is provided for discussion purposes only. This information is only a summary of key inlormabon: d is not compete and does not contain certain material information about the Funds. inducting important conflict of interests disclosures and risk factors associated with an investment in the Funds and a subject to change without notice. This document has been supped for discussion purposes only, and therefore no representation or warranty is made. Mather expressed or implied. by the Fulda or the Investment Manager or any of their partners, employees. members, or agents as to the accuracy or completeness of the intonation provided herein. This document may be amended at any time. There is no express or implied obligation to update you of any changes to the information set forth herein. The information contained herein should not be relied upon as the basis of any investment decision or for any other purpose. This document is not intended to be. nor should it be construed et used as an offer to sell. or a solicitation of any offer to buy, interests or shares in the Funds. No offer or solicitation may be made prior to the delivery of a definitive offering memorandwn (the 'Memorandum') which will contain additional information about the Funds, including disclosures relating to risk factors and conflicts of interest. The information contained herein does not take 1610 account the particular investment objectives or finanoal circumstances of any scenic person who may receive it and is qualified in its entirely by the Memorandum. In the event of any discrepancies between the information contained herein and the Memorandum, the Memorandum will control. The inlormation herein a not intended to provide. and should not be relied upon for, accounting, and legal or tax advice or investment recommendations. Each reopient 01 this document should make an independent investigation as to all matters concerning an investment in the Funds or otherwise deserted herein. including consulting with its own lax, legal. accounting or other advisors about the matters concerning an investment in the Funds or otherwise discussed herein. In making an investment decision, investors must rely upon their own examination of the Funds and the leans of the offering, including the merits and risks involved. An Investment in the Funds may not be sulfide for al Investors. An investment in the Funds will be sLortabb only for certain financially sophisticated investors who meet certain eligibility requirements. have no need for immediate liquidity in their investment. and can bear the risk of an investment in the Funds for an extended period of lime. Investing in financial markets involves a substanbal degree of risk. There can be no assurance that the investment objectives described herein will be achieved. Investment losses may occur, and investors could lose some or all 01 thew investment. No guarantee or representation is made that the Funds' investment program. including. without Irritation, its invesbnent objectives. diversification strategies. or isk monitoring goals, wil be successful, and investment results may vary subsiaMially over time. Nothing herein is intended to imply that the Fwids investment methodology may be considered 'conservative', 'sale', 'risk free' or 'risk averse-. Economic, market and other conditions could also cause the Funds to alter their investment objectives. guidelines and restriction. Certain Information contained in this document constitutes "omen:Hooking statements', which can be identified by the use of forward-locking terminology such as "may'. ler. 'should'. 'expect'. 'anticipate'. 'target'. 'project', 'estimate', ;Mend'. 'continue' or 'believe' or the negatives thereof or other valatons thereon or °covetableterminology. Due to various risks and uncertainties and assumptions made by the investment Manager, actual events or results or the actual performance of the Funds may differ materially from those reflected or contemplated in such forward-looking statements. The estimates. investment strategies and investment themes, and views expressed in this document are based won past or current market conditions andbr data and information provided by unaffiliated third parties (which has not been independently verified) and is subject to change wehout notice. In addition. many of the views expressed herein are subjective andbr reflect the Investment Managers estimates or forecasts on future decisions and market events. Such statements should not be understood lobe predictions or guarantees of any particular outcome, or of the Investment Manager's commitment to invest in any particular Industry, sector, region. or company. In particular, you should be aware that any new technologies or products discussed herein are unproven, may never develop as the investment Manager anticipates. could be superseded by other technologies, and are subject to sigrificani investment risks. Past performance is not indicative nor a guarantee of future returns. Honeycomb Offshore Fund Lid. (the 'Offshore Fund') has not been approved for distribution in or from Switzerland by the Swiss Financial Market Supervisory Authority. Asa result. the Offshore Fund's shares may only be offered or distributed to qualified investors within the meaning of Swiss law. The Representative of the Offshore Fund n Switzerland is Bastions Partners Office SA with registered office at Route de Chene 61A. 1208 Geneva. Switzerland. The Paying Agent n Switzerland is Banque Heritage SA. with registered office al Route de Chene 61.1208 Geneva. Switzerland. The place of performance and jurisdiction for shares of the Offshore Fund distributed in or from Switzerland are at the registered office of the Representative. 5 Conti:tenon! - Not for Disaixban EFTA00603449