AUGUSTA PARTNERS, L.P.
FINANCIAL STATEMENTS
WITH REPORT OF INDEPENDENT AUDITORS
FOR THE YEAR ENDED
DECEMBER 31, 1997
<PAGE>
AUGUSTA PARTNERS, L.P.
FINANCIAL STATEMENTS
FOR THE YEAR ENDED
DECEMBER 31, 1997
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
Proxy Results (Unaudited) ................................................. 13
Schedule of Portfolio Investments.......................................... 14
Schedule of Securities Sold, Not Yet Purchased............................. 21
Schedule of Written Options................................................ 23
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Partners of
Augusta Partners, L.P.
We have audited the accompanying statement of assets, liabilities and partners'
capital of Augusta Partners, L.P., including the schedules of portfolio
investments, securities sold, not yet purchased, and written options, as of
December 31, 1997, and the related statements of operations and changes in
partners' capital - net assets for the year ended December 31, 1997. 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 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 as of December 31, 1997, by correspondence with
the custodian. 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 Augusta Partners, L.P. at
December 31, 1997, the results of its operations, and the changes in its
partners' capital - net assets for the year ended December 31, 1997, in
conformity with generally accepted accounting principles.
s/s/Ernst & Young LLP
[GRAPHIC OMITTED]
New York, New York
February 9, 1998
1
Ernst & Young LLP is a member of Ernst & Young International, Ltd.
<PAGE>
AUGUSTA PARTNERS, L.P.
STATEMENT OF ASSETS, LIABILITIES AND PARTNERS' CAPITAL (IN THOUSANDS)
- --------------------------------------------------------------------------------
DECEMBER 31, 1997
ASSETS
Cash $ 13,338
Investments in securities, at market
(identified cost - $120,285) 139,951
Due from broker 16,612
Due from affiliate 7
Dividends receivable 69
Interest receivable 142
Organizational costs (net of accumulated amortization of $183) 508
Other assets 35
--------
Total assets 170,662
--------
LIABILITIES
Securities sold, not yet purchased - at market
(proceeds of sales - $20,498) 20,097
Outstanding options written, at value
(premiums received - $4,386) 8,076
Withdrawals payable 13,227
Dividends payable on securities sold, not yet purchased 54
Management fee payable 111
Accrued expenses 331
--------
TOTAL LIABILITIES 41,896
--------
NET ASSETS $128,766
========
PARTNERS' CAPITAL - NET ASSETS
Represented by:
Capital contributions - net $81,463
Accumulated net investment loss (923)
Accumulated net realized gain on investments 31,849
Accumulated net unrealized appreciation on investments and
foreign currency transactions 16,377
--------
Partners' Capital - Net Assets $128,766
========
The accompanying notes are an integral part of these financial statements.
-2-
<PAGE>
Augusta Partners, L.P.
STATEMENT OF OPERATIONS (IN THOUSANDS)
- --------------------------------------------------------------------------------
YEAR ENDED
DECEMBER 31, 1997
INVESTMENT INCOME
Interest $ 1,178
Dividends 534
--------
1,712
--------
EXPENSES
OPERATING EXPENSES:
Management fee 1,240
Professional fees 331
Administration fees 181
Amortization of organizational costs 138
Insurance expense 77
Custodian fees 61
Individual General Partners' fees and expenses 27
Miscellaneous 25
--------
2,080
INTEREST EXPENSE 91
DIVIDENDS ON SECURITIES SOLD, NOT YET PURCHASED 160
--------
TOTAL EXPENSES 2,331
--------
NET INVESTMENT LOSS (619)
--------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
REALIZED GAIN (LOSS) ON INVESTMENTS:
Investment securities 24,259
Futures transactions (643)
Purchased options (3,327)
Written options 1,045
Short sales 1,963
--------
NET REALIZED GAIN ON INVESTMENTS 23,297
--------
NET CHANGE IN UNREALIZED APPRECIATION ON INVESTMENTS
AND FOREIGN CURRENCY TRANSACTIONS 7,585
--------
NET REALIZED AND UNREALIZED GAIN 30,882
--------
INCREASE IN PARTNERS' CAPITAL DERIVED FROM
INVESTMENT ACTIVITIES $ 30,263
========
The accompanying notes are an integral part of these financial statements.
-3-
<PAGE>
AUGUSTA PARTNERS, L.P.
STATEMENT OF CHANGES IN PARTNERS' CAPITAL - NET ASSETS (IN THOUSANDS)
- --------------------------------------------------------------------------------
PERIOD FROM
SEPTEMBER 4, 1996
(COMMENCEMENT OF
YEAR ENDED OPERATIONS) TO
DECEMBER 31, DECEMBER 31,
1997 1996
FROM INVESTMENT ACTIVITIES
Net investment loss $ (619) $ (304)
Net realized gain on investments 23,297 8,552
Net change in unrealized appreciation on
investments and foreign currency
transactions 7,585 8,792
-------- --------
INCREASE IN PARTNERS' CAPITAL DERIVED
FROM INVESTMENT ACTIVITIES 30,263 17,040
PARTNERS' CAPITAL TRANSACTIONS
Capital contributions 0 100,055
Syndication costs 0 (50)
Capital withdrawals - General Partner (9,573) 0
Capital withdrawals - Limited Partners (8,969) 0
-------- --------
INCREASE (DECREASE) IN PARTNERS' CAPITAL
DERIVED FROM CAPITAL TRANSACTIONS (18,542) 100,005
PARTNERS' CAPITAL AT BEGINNING OF PERIOD 117,045 0
-------- --------
PARTNERS' CAPITAL AT END OF PERIOD $128,766 $117,045
======== ========
The accompanying notes are an integral part of these financial statements.
-4-
<PAGE>
AUGUSTA PARTNERS, L.P.
NOTES TO FINANCIAL STATEMENTS - DECEMBER 31, 1997
- --------------------------------------------------------------------------------
1. ORGANIZATION
Augusta Partners, L.P. (the "Partnership") was organized under the
Delaware Revised Uniform Limited Partnership Act on May 30, 1996. The
Partnership is registered under the Investment Company Act of 1940 (the
"Act") as a closed-end, non-diversified management investment company.
The Partnership will operate until December 31, 2021 unless further
extended or sooner terminated as provided for in the Limited
Partnership Agreement (the "Agreement"), as amended and restated on
July 16, 1996, and as further amended October 29, 1997 (see Proxy
Results on page 13). The Partnership's investment objective is to
achieve capital appreciation. The Partnership pursues this objective by
investing principally in equity securities of publicly-traded U.S.
companies. The Partnership may also invest in equity securities of
foreign issuers and in bonds, options and other fixed-income securities
of U.S. and foreign issuers, as well as other financial instruments.
There are four "Individual General Partners" and a "Manager." The
Manager is Augusta Management, L.L.C. whose principal members are CIBC
Oppenheimer Corp. (formerly Oppenheimer & Co., Inc.) and Ardsley
Advisory Partners ("Ardsley"). Investment professionals at Ardsley
manage the Partnership's investment portfolio on behalf of the Manager
under CIBC Oppenheimer Corp.'s ("CIBC Opco") supervision.
The acceptance of initial and additional contributions is subject to
approval by the Manager. The Partnership may from time to time offer to
repurchase interests pursuant to written tenders by Partners. Such
repurchases will be made at such times and on such terms as may be
determined by the Individual General Partners, in their complete and
exclusive discretion. The Manager expects that generally it will
recommend to the Individual General Partners that the Partnership
repurchase interests from Partners once in each year effective as of
the end of each such year.
2. SIGNIFICANT ACCOUNTING POLICIES
The preparation of financial statements in conformity with generally
accepted accounting principles requires the Manager to make estimates
and assumptions that affect the amounts reported in the financial
statements and accompanying notes. The Manager believes that the
estimates utilized in preparing the Partnership's financial statements
are reasonable and prudent; however, actual results could differ from
these estimates.
-5-
<PAGE>
AUGUSTA PARTNERS, L.P.
NOTES TO FINANCIAL STATEMENTS - DECEMBER 31, 1997 (CONTINUED)
- --------------------------------------------------------------------------------
a. PORTFOLIO VALUATION
Securities and commodities transactions, including related revenue and
expenses, are recorded on a trade-date basis and dividends are recorded
on an ex-dividend date basis. Interest income is recorded on the
accrual basis.
Domestic exchange traded or NASDAQ listed equity securities will be
valued at their last composite sale prices as reported on the exchanges
where such securities are traded. If no sales of such securities are
reported on a particular day, the securities will be valued based upon
their composite bid prices for securities held long, or their composite
ask prices for securities held short, as reported by such exchanges.
Securities traded on a foreign securities exchange will be valued at
their last sale prices on the exchange where such securities are
primarily traded, or in the absence of a reported sale on a particular
day, at their bid prices (in the case of securities held long) or ask
prices (in the case of securities held short) as reported by such
exchange. Listed options will be valued using last sales prices as
reported by the exchange with the highest reported daily volume for
such options or, in the absence of any sales on a particular day, at
their bid prices as reported by the exchange with the highest volume on
the last day a trade was reported. Other securities for which market
quotations are readily available will be valued at their bid prices (or
ask prices in the case of securities held short) as obtained from one
or more dealers making markets for such securities. If market
quotations are not readily available, securities and other assets will
be valued at fair value as determined in good faith by, or under the
supervision of, the Individual General Partners.
Debt securities will be valued in accordance with the procedures
described above, which with respect to such securities may include the
use of valuations furnished by a pricing service, which employs a
matrix to determine valuation for normal institutional size trading
units, or consultation with brokers and dealers in such securities. The
Individual General Partners will periodically monitor the
reasonableness of valuations provided by any such pricing service. Debt
securities with remaining maturities of 60 days or less will, absent
unusual circumstances, be valued at amortized cost, so long as such
valuation is determined by the Individual General Partners to represent
fair value.
Futures contracts and options thereon, which are traded on commodities
exchanges, are valued at their settlement value as of the close of such
exchanges.
All assets and liabilities initially expressed in foreign currencies
will be converted into U.S. dollars using foreign exchange rates
provided by a pricing service compiled as of 4:00 p.m. London time.
Trading in foreign securities generally is completed, and the values of
such securities are determined, prior to the close of securities
markets in the U.S. Foreign exchange rates are also determined prior to
such close. On occasion, the
-6-
<PAGE>
AUGUSTA PARTNERS, L.P.
NOTES TO FINANCIAL STATEMENTS - DECEMBER 31, 1997 (CONTINUED)
- --------------------------------------------------------------------------------
values of such securities and exchange rates may be affected by events
occurring between the time as of which determination of such values or
exchange rates are made and the time as of which the net asset value of
the Partnership is determined. When such events materially affect the
values of securities held by the Partnership or its liabilities, such
securities and liabilities will be valued at fair value as determined
in good faith by, or under the supervision of, the Individual General
Partners.
The Partnership may enter into transactions in financial futures,
foreign exchange options and foreign currency forward contracts that
are used for hedging and nonhedging purposes. These contracts are
valued at fair value with the resulting gains and losses included in
net gain from investment transactions.
b. ORGANIZATION COSTS
The expenses incurred by the Partnership in connection with its
organization are being amortized over a 60 month period beginning with
the commencement of operations, September 4, 1996.
c. INCOME TAXES
No federal, state or local income taxes will be provided on the profits
of the Partnership since the partners are individually liable for their
share of the Partnership's income.
3. MANAGEMENT FEE, RELATED PARTY TRANSACTIONS AND OTHER
CIBC Opco provides certain management and administrative services to
the Partnership including, among other things, providing office space
and other support services to the Partnership. In exchange for such
services, the Partnership pays CIBC Opco a monthly management fee of
.08333% (1% on an annualized basis) of the Partnership's net assets
determined as of the beginning of the month, excluding assets
attributable to the Manager's capital account.
During the year ended December 31, 1997, CIBC Opco earned $15,260 in
brokerage commissions from portfolio transactions executed on behalf of
the Partnership.
At the end of the twelve month period following the admission of a
limited partner to the Partnership, and generally at the end of each
fiscal year thereafter, the Manager is entitled to an incentive
allocation of 20% of net profits, if any, that have been credited to
the capital account of such limited partner during such period. The
incentive allocation will be charged to a limited partner only to the
extent that cumulative net profits with respect to such limited partner
through the close of any period exceeds the highest level of
-7-
<PAGE>
AUGUSTA PARTNERS, L.P.
NOTES TO FINANCIAL STATEMENTS - DECEMBER 31, 1997 (CONTINUED)
- --------------------------------------------------------------------------------
cumulative net profits with respect to such limited partner through the
close of any prior period. During the year ended December 31, 1997,
Incentive Allocations to the General Partner were $9,373,135.
Each Independent Individual General Partner, who is not an "interested
person" of the Partnership, as defined by the Act, receives an annual
retainer of $5,000 plus a fee for each meeting attended. Any Individual
General Partner who is an "interested person" does not receive any
annual or other fee from the Partnership. All Individual General
Partners are reimbursed by the Partnership for all reasonable
out-of-pocket expenses incurred by them in performing their duties. For
the year ended December 31, 1997, fees paid to the Individual General
Partners (including meeting fees and the annual retainer) and expenses
totaled $26,587. One Individual General Partner, who is an "interested
person" of the Partnership, holds a limited partnership interest in the
Partnership.
Morgan Stanley Trust Company serves as Custodian of the Partnership's
assets.
PFPC Inc. serves as Administrator and Accounting Agent to the
Partnership, and in that capacity provides certain accounting, record
keeping, tax and investor related services.
4. SECURITIES TRANSACTIONS
Aggregate purchases and sales of investment securities, excluding
short-term securities, for the year ended December 31, 1997, amounted
to $749,741,873 and $749,053,592, respectively.
At December 31, 1997, the cost of investments for federal income tax
purposes was substantially the same as the cost for financial reporting
purposes. At December 31, 1997, accumulated net unrealized appreciation
on investments, options, and securities sold, not yet purchased, was
$16,377,339, consisting of $23,550,104 gross unrealized appreciation
and $7,172,765 gross unrealized depreciation.
Due from broker primarily represents receivables and payables from
unsettled security trades and short sales.
5. SHORT-TERM BORROWINGS
The Partnership has the ability to trade on margin and, in that
connection, borrow 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 Act
requires the Partnership to
-8-
<PAGE>
AUGUSTA PARTNERS, L.P.
NOTES TO FINANCIAL STATEMENTS - DECEMBER 31, 1997 (CONTINUED)
- --------------------------------------------------------------------------------
satisfy an asset coverage requirement of 300% of its indebtedness,
including amounts borrowed, measured at the time the Partnership incurs
the indebtedness. The Partnership pays interest on outstanding margin
borrowings at an annualized rate of LIBOR plus .875%. The Partnership
pledges securities as collateral for the margin borrowings, which are
maintained in a segregated account held by the Custodian. As of
December 31, 1997, the Partnership did not have any margin borrowings
outstanding. For the year ended December 31, 1997, the average daily
amount of such borrowings was $1,338,430.
6. FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK OR
CONCENTRATIONS OF CREDIT RISK
In the normal course of business, the Partnership 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 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 partners' capital.
The Partnership's foreign exchange trading activities involve the
purchase and sale (writing) of foreign exchange options having various
maturity dates. The Partnership may seek to limit its exposure to
foreign exchange rate movements by hedging such option positions with
foreign exchange positions in spot currency, futures and forward
contracts. At December 31, 1997, the Partnership had no spot currency,
futures or forward contracts outstanding.
Securities sold, not yet purchased represent obligations of the
Partnership to deliver the specified security and thereby creates a
liability to purchase the security in the market at prevailing prices.
Accordingly, these transactions result in off-balance sheet risk as the
Partnership's ultimate obligation to satisfy the sale of securities
sold, not yet purchased, may exceed the amount recognized in the
statement of assets, liabilities and partners' capital.
-9-
<PAGE>
AUGUSTA PARTNERS, L.P.
NOTES TO FINANCIAL STATEMENTS - DECEMBER 31, 1997 (CONTINUED)
- --------------------------------------------------------------------------------
The risk associated with purchasing an option is that the Partnership
pays a premium whether or not the option is exercised. Additionally,
the Partnership bears the risk of loss of premium and change in market
value should the counterparty not perform under the contract. Put and
call options purchased are accounted for in the same manner as
investment securities.
When the Partnership writes an option, the premium received by the
Partnership is recorded as a liability and is subsequently adjusted to
the current market value of the option written. If a call option is
exercised, the premium is added to the proceeds from the sale of the
underlying security or currency in determining whether the Partnership
has realized a gain or loss. In writing an option, the Partnership
bears the market risk of an unfavorable change in the price of the
security or currency underlying the written option.
Exercise of an option written by the Partnership could result in the
Partnership selling or buying a security or currency at a price
different from the current market value.
Transactions in purchased options were as follows:
<TABLE>
<CAPTION>
CROSS CURRENCY, INDEX
CALL OPTIONS AND PUT OPTIONS
------------------------------ --------------------------------
NUMBER NUMBER
OF CONTRACTS COST OF CONTRACTS COST
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Beginning balance 3,605 $ 1,322,627 452 $ 929,256
Options purchased 35,045 16,160,917 890,701 30,111,088
Options closed ( 34,750) (15,567,537) (432,052) (24,294,007)
Expired options ( 3,150) ( 1,068,445) (119,101) ( 2,003,337)
-------- ------------ -------- ------------
Options outstanding at
December 31, 1997 750 $ 847,562 340,000 $ 4,743,000
======== ============ ======== ============
</TABLE>
Transactions in written options were as follows:
<TABLE>
<CAPTION>
CROSS CURRENCY AND
CALL OPTIONS PUT OPTIONS
------------------------------ --------------------------------
NUMBER AMOUNT OF NUMBER AMOUNT OF
OF CONTRACTS PREMIUM OF CONTRACTS PREMIUM
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Beginning balance -- $ 0 -- $ 0
Options written 27,500 12,646,991 447,075 13,594,003
Options closed ( 22,320) (11,696,897) (112,575) ( 7,734,924)
Expired options ( 4,055) ( 773,437) ( 64,500) ( 1,650,079)
-------- ------------ -------- ------------
Options outstanding at
December 31, 1997 1,125 $ 176,657 270,000 $ 4,209,000
======== ============ ========= ============
</TABLE>
-10-
<PAGE>
AUGUSTA PARTNERS, L.P.
NOTES TO FINANCIAL STATEMENTS - DECEMBER 31, 1997 (CONTINUED)
- --------------------------------------------------------------------------------
7. FINANCIAL INSTRUMENTS HELD OR ISSUED FOR TRADING PURPOSES
The Partnership maintains positions in a variety of financial
instruments. The following table summarizes the components of net
realized and unrealized gains from investment transactions:
NET GAINS / (LOSSES)
FOR THE YEAR ENDED
DECEMBER 31, 1997
--------------------
Equity securities $ 30,419,179
Equity options ( 2,095,133)
Equity index options ( 422,164)
Cross currency options 7,751,138
Written options ( 3,349,799)
Fixed income securities 367,040
Futures ( 643,313)
FOREIGN SECURITIES:
Equities ( 1,284,978)
Bonds 140,004
--------------
$ 30,881,974
==============
The following table presents the market values of derivative financial
instruments and the average market values of those instruments:
<TABLE>
<CAPTION>
AVERAGE MARKET VALUE
MARKET VALUE AT FOR THE YEAR ENDED
DECEMBER 31, 1997 DECEMBER 31, 1997
----------------- ---------------------
<S> <C> <C>
ASSETS:
Equity options $ 796,875 $1,564,893
Equity index options 1,487,500 1,202,112
Cross currency options 12,085,618 1,285,413
LIABILITIES:
Written options (8,075,806) ( 1,016,592)
</TABLE>
Average market values presented above are based upon month-end market
value during the year ended December 31, 1997.
-11-
<PAGE>
AUGUSTA PARTNERS, L.P.
NOTES TO FINANCIAL STATEMENTS - DECEMBER 31, 1997 (CONTINUED)
- --------------------------------------------------------------------------------
8. SELECTED FINANCIAL RATIOS AND OTHER SUPPLEMENTAL INFORMATION
The following represents the ratios to average net assets and other
supplemental information for each period:
<TABLE>
<CAPTION>
SEPTEMBER 4, 1996
(COMMENCEMENT OF
YEAR ENDED OPERATIONS) TO
DECEMBER 31, 1997 DECEMBER 31, 1996
----------------- -----------------
<S> <C> <C>
Ratio of net investment loss to
average net assets (0.48%) (0.83%)*
Ratio of operating expenses to
average net assets 1.61% 2.27%*
Ratio of interest expense to
average net assets 0.07% 0.01% *
Ratio of dividends on securities
sold, not yet purchased
to average net assets 0.12% 0.06%*
Total return 25.94%*** 17.20% ***
Portfolio turnover rate 627% 215%
Average commission rate paid $0.0527** $0.0569**
Average debt ratio 1.04% 0.28%
<FN>
* Annualized.
** Average commission rate paid on purchases and sales of investment
securities held long.
*** Total return assumes a purchase of a Limited Partnership interest
in the Partnership on the first day and a sale of the Partnership
interest on the last day of the period noted, before incentive
allocation to the Manager, if any. Total returns for a period of
less than a full year are not annualized.
</FN>
</TABLE>
9. SUBSEQUENT EVENT
Effective January 1, 1998, the Partnership received additional Limited
Partner capital contributions of approximately $9,390,000.
-12-
<PAGE>
AUGUSTA PARTNERS, L.P.
PROXY RESULTS (UNAUDITED) - DECEMBER 31, 1997
- --------------------------------------------------------------------------------
On September 30, 1997, a Special Meeting of the Partners of the
Partnership was held to approve a proposed amendment to the Limited
Partnership Agreement which authorized the Manager to continue to
provide investment advice and management to the Partnership upon the
consummation of the acquisition of Oppenheimer & Co., Inc. by CIBC Wood
Gundy Securities Corp. A total of 298 Partners, representing
$92,619,035 of the interests in the Partnership and 67.7% of the votes
eligible to be cast at the Special Meeting, voted to approve the
amended Limited Partnership Agreement as follows:
FOR AGAINST ABSTAIN
---------- ------- ---------
89,949,651 479,120 2,190,264
-13-
<PAGE>
AUGUSTA PARTNERS, L.P.
SCHEDULE OF PORTFOLIO INVESTMENTS
- --------------------------------------------------------------------------------
DECEMBER 31, 1997
SHARES MARKET VALUE
COMMON STOCKS - 92.21%
APPAREL MANUFACTURERS - 1.36%
50,000 Tommy Hilfiger Corp. * (a) $ 1,756,250
------------
APPLICATIONS SOFTWARE - 0.72%
80,000 Clarify, Inc. * 930,000
------------
CABLE & OTHER PAY TELEVISION
SERVICES - 2.24%
100,000 US West Media Group * 2,887,500
------------
CHEMICALS - DIVERSIFIED - 2.28%
70,000 Monsanto Co. 2,940,000
------------
COMMERCIAL BANKS - 1.59%
75,000 MBNA Corp. 2,048,475
------------
COMPUTERS - INTEGRATED SYSTEMS - 1.42%
120,000 FORE Systems, Inc. * 1,830,000
------------
COMPUTERS - MAINFRAME - 1.08%
100,000 Unisys Corp. 1,387,500
------------
COMPUTERS - MICRO - 1.24%
80,000 Sequent Computer Systems, Inc. * 1,600,000
------------
COMPUTER SOFTWARE - 3.74%
10,000 BMC Software, Inc. * 656,250
130,000 Compuware Corp. * (b) 4,160,000
------------
4,816,250
------------
FINANCE - OTHER SERVICES - 1.54%
50,000 Newcourt Credit Group, Inc., F/P Rights 1,652,667
10,000 Newcourt Credit Group, Inc. 334,377
------------
1,987,044
------------
The accompanying notes are an integral part of these financial statements.
-14-
<PAGE>
AUGUSTA PARTNERS, L.P.
SCHEDULE OF PORTFOLIO INVESTMENTS (CONTINUED)
- --------------------------------------------------------------------------------
DECEMBER 31, 1997
MARKET VALUE
SHARES
COMMON STOCKS - (CONTINUED)
FINANCIAL SAVINGS & LOANS/THRIFTS - 6.99%
25,000 H. F. Ahmanson & Co. $ 1,673,450
25,000 Coast Savings Financial, Inc. (a) 1,714,075
100,000 Empire Federal Bancorp, Inc. 1,712,500
100,000 FirstFed America Bancorp, Inc. * (a) 2,187,500
25,000 First Federal Bancshares of AK, Inc. 593,750
30,000 Ocean Financial Corp. 1,117,500
------------
8,998,775
------------
GOLF - 0.11%
5,000 Callaway Golf Co. 142,815
------------
HEALTH CARE COST CONTAINMENT - 4.27%
110,000 American Oncology Resources, Inc. * 1,760,000
575,000 Medaphis Corp. * 3,737,500
------------
5,497,500
------------
HOTELS & MOTELS - 0.53%
35,000 La Quinta Inns, Inc. 675,955
------------
INTERNET SOFTWARE - 0.72%
180,000 PSINet, Inc. * 922,500
------------
INVESTMENT COMPANIES - 1.43%
65,000 Tele-Communications TCI
Ventures Group, Class A * 1,840,345
------------
LIFE/HEALTH INSURANCE - 1.00%
55,000 ESG Re Limited * 1,292,500
------------
MACHINES/TOOLS & RELATED PRODUCTS - 0.57%
28,200 Cincinnati Milacron, Inc. 731,452
------------
The accompanying notes are an integral part of these financial statements.
-15-
<PAGE>
AUGUSTA PARTNERS, L.P.
SCHEDULE OF PORTFOLIO INVESTMENTS (CONTINUED)
- --------------------------------------------------------------------------------
DECEMBER 31, 1997
MARKET VALUE
SHARES
COMMON STOCKS - (CONTINUED)
MEDICAL - BIOMEDICAL/GENE - 3.21%
45,000 BioChem Pharmaceutical, Inc. * $ 939,375
45,000 Centocor, Inc. * 1,496,250
70,000 Myriad Genetics, Inc. * 1,697,500
------------
4,133,125
------------
MEDICAL - HOSPITALS - 2.07%
90,000 Columbia/HCA Healthcare Corp. (a) 2,666,250
------------
METAL - ALUMINUM - 1.40%
30,000 Reynolds Metals Co. 1,800,000
------------
OIL COMPANY - EXPLORATION &
PRODUCTION - 2.11%
125,000 Hurricane Hydrocarbons Ltd., Class A * 969,588
60,000 Triton Energy Ltd. 1,751,280
------------
2,720,868
------------
OIL FIELD MACHINERY & EQUIPMENT - 3.65%
45,000 Camco International, Inc. 2,865,960
30,000 Cooper Cameron Corp. * 1,830,000
------------
4,695,960
------------
OIL & GAS DRILLING - 6.24%
75,000 Nabors Industries, Inc. * 2,371,875
125,000 Noble Drilling Corp. * (a) & (b) 3,828,125
75,000 Precision Drilling Corp. * 1,828,125
------------
8,028,125
------------
PRIVATE CORRECTIONS - 6.48%
225,000 Corrections Corporation of America* (a) 8,339,175
PUBLISHING - NEWSPAPERS - 1.42%
34,000 Dow Jones & Co., Inc. (a) 1,825,392
The accompanying notes are an integral part of these financial statements.
-16-
<PAGE>
AUGUSTA PARTNERS, L.P.
SCHEDULE OF PORTFOLIO INVESTMENTS (CONTINUED)
- --------------------------------------------------------------------------------
DECEMBER 31, 1997
MARKET VALUE
SHARES
COMMON STOCKS - (CONTINUED)
PUBLISHING - PERIODICALS - 1.43%
80,000 The Petersen Companies, Inc., Class A* $ 1,840,000
------------
RACETRACKS - 1.08%
56,000 Speedway Motorsports, Inc. * 1,389,528
------------
REAL ESTATE INVESTMENT TRUST -
DIVERSIFIED - 1.73%
50,000 CCA Prison Realty Trust 2,231,250
------------
REAL ESTATE INVESTMENT TRUST -
REGIONAL MALLS - 0.92%
70,000 Westfield America, Inc. 1,190,000
------------
REAL ESTATE INVESTMENT TRUST -
SHOPPING CENTERS - 2.73%
75,000 Vornado Realty Trust (a) 3,520,350
------------
RENTAL AUTO/ EQUIPMENT - 0.93%
50,000 Leasing Solutions, Inc. * 1,193,750
------------
RETAIL - BUILDING PRODUCTS - 1.20%
80,000 Eagle Hardware & Garden, Inc. * 1,550,000
------------
RETAIL - CONSUMER ELECTRONICS - 1.05%
35,000 Tandy Corp. 1,349,687
------------
RETAIL - DEPARTMENT STORE - 3.51%
100,000 Sears, Roebuck & Co. 4,525,000
------------
RETAIL - JEWELRY - 0.98%
65,000 Claire's Stores, Inc. 1,263,470
------------
RETAIL - RESTAURANTS - 1.93%
50,000 Foodmaker, Inc. * 753,125
60,000 Outback Steakhouse, Inc. * 1,725,000
------------
2,478,125
------------
The accompanying notes are an integral part of these financial statements.
-17-
<PAGE>
AUGUSTA PARTNERS, L.P.
SCHEDULE OF PORTFOLIO INVESTMENTS (CONTINUED)
- --------------------------------------------------------------------------------
DECEMBER 31, 1997
MARKET VALUE
SHARES
COMMON STOCKS - (CONTINUED)
RETIREMENT/AGED CARE - 1.24%
100,000 ARV Assisted Living, Inc. * $ 1,600,000
------------
SATELLITE TELECOMMUNICATIONS - 1.69%
80,000 ICG Communications, Inc. * 2,180,000
------------
STEEL - PIPE & TUBE - 1.34%
100,000 NS Group, Inc. 1,725,000
------------
TELECOMMUNICATIONS EQUIPMENT - 1.58%
70,000 Associated Group, Inc., Class B * 2,038,750
------------
TELECOMMUNICATIONS SERVICES - 1.01%
75,000 MetroNet Communications Corp., Class B * 1,303,125
------------
TELEPHONE - LONG DISTANCE - 7.18%
127,500 MCI Communications Corp. (b) 5,458,658
125,000 WorldCom, Inc. * (a) 3,781,250
------------
9,239,908
------------
TELEVISION - 1.27%
35,000 Sinclair Broadcast Group, Inc., Class A* 1,631,875
------------
TOTAL COMMON STOCKS (COST $108,723,947) 118,743,574
============
PREFERRED STOCKS - 1.31%
SATELLITE TELECOMMUNICATIONS - 1.31%
20,000 Globalstar Telecommunications. Ltd., 6.5%,
03/01/06, PRF Conv., $30.80 1,685,000
------------
TOTAL PREFERRED STOCKS (COST $1,213,750) 1,685,000
============
The accompanying notes are an integral part of these financial statements.
-18-
<PAGE>
AUGUSTA PARTNERS, L.P.
SCHEDULE OF PORTFOLIO INVESTMENTS (CONTINUED)
- --------------------------------------------------------------------------------
DECEMBER 31, 1997
FACE MARKET VALUE
AMOUNT
BONDS - 4.00%
TELECOMMUNICATIONS SERVICES - 4.00%
$ 4,500,000 NTL Inc., 7.25%, 04/15/05, Conv., $27.56 $ 5,152,500
------------
TOTAL BONDS (COST $4,756,191) 5,152,500
============
NUMBER OF
CONTRACTS
CALL OPTIONS - 0.62%
CHEMICALS - DIVERSIFIED - 0.62%
750 Monsanto Co., 01/17/99, $40.00 796,875
------------
TOTAL CALL OPTIONS (COST $847,562) 796,875
============
CROSS CURRENCY OPTIONS - 9.39%
30,000 OTC USD Call/YEN Put-KO, 09/04/98,
Strike-114.50/118.00 USD/YEN,
Notional 30,000,000 USD 2,489,461
30,000 OTC USD Call/YEN Put-KO, 09/04/98,
Strike-114.50/118.20 USD/YEN,
Notional 30,000,000 USD 2,467,140
30,000 OTC USD Call/YEN Put-KO, 11/10/98,
Strike-120.00/120.00 USD/YEN,
Notional 30,000,000 USD 1,583,284
30,000 OTC USD Call/YEN Put-KO, 11/16/98,
Strike-125.00/122.00 USD/YEN,
Notional 30,000,000 USD 1,045,235
30,000 OTC USD Call/YEN Put-KO, 11/16/98,
Strike-125.00/122.50 USD/YEN,
Notional 30,000,000 USD 1,005,795
30,000 OTC USD Call/YEN Put-KO, 11/19/98,
Strike-125.00/123.00 USD/YEN
Notional 30,000,000 USD 955,953
The accompanying notes are an integral part of these financial statements.
-19-
<PAGE>
AUGUSTA PARTNERS, L.P.
SCHEDULE OF PORTFOLIO INVESTMENTS (CONTINUED)
- --------------------------------------------------------------------------------
DECEMBER 31, 1997
NUMBER OF MARKET VALUE
CONTRACTS
CROSS CURRENCY OPTIONS - (CONTINUED)
30,000 OTC USD Call/YEN Put-KO, 11/19/98,
Strike-125.00/123.00 USD/YEN,
Notional 30,000,000 USD $ 903,750
30,000 OTC USD Call/YEN Put-KO, 11/19/98,
Strike-125.00/123.50 USD/YEN,
Notional 30,000,000 USD 948,750
30,000 OTC USD Call/YEN Put-KO, 12/02/98,
Strike-125.00/125.50 USD/YEN,
Notional 30,000,000 USD 686,250
------------
TOTAL CROSS CURRENCY OPTIONS
(COST $4,155,000) 12,085,618
============
EQUITY INDEX OPTION - 1.16%
70,000 Bank Basket, 03/04/98, Strike - $100.00,
Notional 7,000,000 USD 1,487,500
------------
TOTAL EQUITY INDEX OPTION (COST $588,000) 1,487,500
============
TOTAL INVESTMENTS
(COST $120,284,450) - 108.69% 139,951,067
============
OTHER ASSETS, LESS LIABILITIES - (8.69%) (11,184,594)
------------
NET ASSETS - 100.00% $128,766,473
============
(a) Partially or wholly held in a pledged account by the Custodian as collateral
for securities sold short.
(b) Partially held in a pledged account by the Custodian as collateral for open
covered calls.
* Non-income producing security.
The accompanying notes are an integral part of these financial statements.
-20-
<PAGE>
AUGUSTA PARTNERS, L.P.
SCHEDULE OF SECURITIES SOLD, NOT YET PURCHASED
- --------------------------------------------------------------------------------
DECEMBER 31, 1997
MARKET VALUE
SHARES
SHORT COMMON STOCK - (15.61%)
ATHLETIC FOOTWEAR - (1.06%)
35,000 Nike, Inc., Class B $ (1,367,205)
------------
AUTO - TRUCK TRAILERS - (0.22%)
10,000 Wabash National Corp. (284,380)
------------
COMMERCIAL BANKS - (2.55%)
100,000 Synovus Financial Corp. (3,275,000)
------------
COMMERCIAL SERVICES - (0.35%)
40,000 TeleTech Holdings, Inc. (455,000)
------------
DISPOSABLE MEDICAL PRODUCTS - (0.99%)
22,500 Safeskin Corp. (1,276,875)
------------
DIVERSIFIED MANUFACTURING OPERATIONS - (1.14%)
50,000 CBS Corp. (1,471,875)
------------
FOOD - (1.16%)
30,000 Kellogg Co. (1,488,750)
------------
FOOD - RETAIL - (0.68%)
20,000 Winn-Dixie Stores, Inc. (873,760)
------------
HEALTH CARE COST CONTAINMENT - (0.34%)
15,000 Access Health, Inc. (440,625)
------------
MACHINERY - CONSTRUCTION & MINING - (1.13%)
30,000 Caterpillar, Inc. (1,455,000)
------------
MEDICAL - BIOMEDICAL/GENE - (0.31%)
15,000 Organogenesis, Inc. (403,125)
------------
MEDICAL - HMO - (0.35%)
30,000 PHP Healthcare Corp. (451,890)
------------
The accompanying notes are an integral part of these financial statements.
-21-
<PAGE>
AUGUSTA PARTNERS, L.P.
SCHEDULE OF SECURITIES SOLD, NOT YET PURCHASED (CONTINUED)
- --------------------------------------------------------------------------------
DECEMBER 31, 1997
MARKET VALUE
SHARES
SHORT COMMON STOCK - CONTINUED
MEDICAL LASER SYSTEMS - (0.43%)
52,400 ThermoLase Corp. $ (550,200)
------------
OIL FIELD MACHINERY & EQUIPMENT - (0.41%)
15,000 Dril-Quip, Inc. (526,875)
------------
PHARMACY SERVICES - (0.60%)
25,000 Omnicare, Inc. (775,000)
------------
PHOTO EQUIPMENT & SUPPLIES - (1.16%)
65,000 Innovex, Inc. (1,490,970)
------------
STEEL - PRODUCERS - (0.38%)
10,000 Nucor Corp. (483,130)
------------
TELEPHONE - LOCAL - (2.35%)
15,000 Ameritech Corp. (1,207,500)
20,000 Bell Atlantic Corp. (1,820,000)
------------
(3,027,500)
------------
TOTAL SHORT COMMON STOCK
PROCEEDS ($20,498,031) $(20,097,160)
============
The accompanying notes are an integral part of these financial statements.
-22-
<PAGE>
AUGUSTA PARTNERS, L.P.
SCHEDULE OF WRITTEN OPTIONS
- --------------------------------------------------------------------------------
DECEMBER 31, 1997
NUMBER OF MARKET VALUE
CONTRACTS
WRITTEN CROSS CURRENCY OPTIONS- (6.23%)
30,000 OTC USD Call/YEN Put, 09/04/98,
Strike-125.00 USD/YEN,
Notional 30,000,000 USD $ (1,433,461)
30,000 OTC USD Call/YEN Put, 09/04/98,
Strike-123.80 USD/YEN,
Notional 30,000,000 USD (1,576,140)
30,000 OTC USD Call/YEN Put, 11/10/98,
Strike-130.00 USD/YEN,
Notional 30,000,000 USD (974,284)
30,000 OTC USD Call/YEN Put-KO, 11/16/98,
Strike-135.00/122.00 USD/YEN,
Notional 30,000,000 USD (742,235)
30,000 OTC USD Call/YEN Put-KO, 11/16/98,
Strike-135.00/122.50 USD/YEN,
Notional 30,000,000 USD (711,795)
30,000 OTC USD Call/YEN Put-KO, 11/19/98,
Strike-135.00/123.00 USD/YEN,
Notional 30,000,000 USD (736,953)
30,000 OTC USD Call/YEN Put-KO, 11/19/98,
Strike-135.00/123.00 USD/YEN,
Notional 30,000,000 USD (585,750)
30,000 OTC USD Call/YEN Put-KO, 11/19/98,
Strike-135.00/123.50 USD/YEN,
Notional 30,000,000 USD (699,750)
30,000 OTC USD Call/YEN Put-KO, 12/02/98,
Strike-135.00/125.50 USD/YEN,
Notional 30,000,000 USD (563,250)
------------
TOTAL WRITTEN CROSS CURRENCY
OPTIONS - PROCEEDS ($4,209,000) (8,023,618)
------------
WRITTEN CALL OPTIONS - (0.04%)
COMPUTER SOFTWARE - (0.02%)
300 Compuware Corp., 02/21/98, $40.00 (35,625)
------------
The accompanying notes are an integral part of these financial statements.
-23-
<PAGE>
AUGUSTA PARTNERS, L.P.
SCHEDULE OF WRITTEN OPTIONS (CONTINUED)
- --------------------------------------------------------------------------------
DECEMBER 31, 1997
NUMBER OF MARKET VALUE
CONTRACTS
WRITTEN CALL OPTIONS - (CONTINUED)
OIL & GAS DRILLING - (0.01%)
575 Noble Drilling Corp., 01/17/98, $35.00 $ (7,188)
------------
TELEPHONE - LONG DISTANCE - (0.01%)
250 MCI Communications Corp., 04/18/98, $50.00 (9,375)
------------
TOTAL WRITTEN CALL OPTIONS -
PROCEEDS ($176,657) (52,188)
------------
TOTAL OPTIONS WRITTEN -
PROCEEDS ($4,385,657) $ (8,075,806)
------------
The accompanying notes are an integral part of these financial statements.
-24-
