<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13E-4
ISSUER TENDER OFFER STATEMENT
(PURSUANT TO SECTION 13(e)(1) OF THE SECURITIES EXCHANGE ACT OF 1934)
AUGUSTA PARTNERS, L.P.
(Name of Issuer)
AUGUSTA PARTNERS, L.P.
(Name of Person(s) Filing Statement)
PARTNERSHIP INTERESTS
(Title of Class of Securities)
Howard M. Singer
Augusta Management, L.L.C.
CIBC Oppenheimer Tower
One World Financial Center, 31st Floor
200 Liberty Street
New York, New York 10281
(212) 667-7649
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications
on Behalf of the Person(s) Filing Statement)
With a copy to:
Kenneth S. Gerstein, Esq.
Schulte Roth & Zabel LLP
900 Third Avenue
New York, New York 10022
(212) 756-2533
November ____, 1998
(Date Tender Offer First Published,
Sent or Given to Security Holders)
Calculation of Filing Fee
Transaction Valuation: $50,000,000 (a) Amount of Filing Fee: $10,000 (b)
(a) Calculated as the aggregate maximum purchase price for partnership
interests.
(b) Calculated at 1/50th of 1% of the Transaction Valuation.
[ ] Check box if any part of the fee is offset as provided by Rule
0-11(a)(2) and identify the filing with which the offsetting fee was
previously paid. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
Amount Previously Paid:_________________________________________________________
Form or Registration No.:_______________________________________________________
Filing Party:___________________________________________________________________
Date of Filing:_________________________________________________________________
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ITEM 1. SECURITY AND ISSUER.
(a) The name of the issuer is Augusta Partners, L.P. (the
"Partnership"). The Partnership is registered under the Investment Company Act
of 1940, as amended (the "1940 Act") as a closed-end, non-diversified,
management investment company and is organized as a Delaware limited
partnership. The principal executive office of the Partnership is located at
CIBC Oppenheimer Tower, One World Financial Center, 31st Floor, 200 Liberty
Street, New York, New York 10281.
(b) The title of the securities, which are the subject of the
offer to purchase ("Offer to Purchase"), is partnership interests or portions
thereof in the Partnership. (As used herein, the term "Interest" or "Interests,"
as the context requires, shall refer to the partnership interests in the
Partnership and portions thereof which constitute the class of security which is
the subject of this tender offer or the partnership interests in the Partnership
or portions thereof which are tendered by partners to the Partnership pursuant
to the Offer to Purchase.) As of the close of business on October 31, 1998,
there was approximately $145,611,104 outstanding in capital of the Partnership
held in Interests. Subject to the conditions set forth in the Offer to Purchase,
the Partnership will purchase up to $50,000,000 of Interests which are tendered
by and not withdrawn prior to 12:00 Midnight, New York time, on December 31,
1998, subject to any extension of the Offer to Purchase. The purchase price of
Interests tendered to the Partnership will be their net asset value as of the
close of business on December 31, 1998, if the Offer to Purchase expires on the
initial expiration date of December 31, 1998, and otherwise, at their net asset
value as of the close of business on such later date as corresponds to any
extension of the Offer to Purchase. Payment of the purchase price will consist
of: (1) cash and/or marketable securities (valued in accordance with the
Partnership's First Amended and Restated Limited Partnership Agreement dated as
of July 16, 1996 (the "L.P. Agreement")) in an aggregate amount equal to 95
percent of the estimated unaudited net asset value of Interests tendered and
accepted by the Partnership, determined as of the expiration date, which is
expected to be 12:00 Midnight, December 31, 1998, payable within ten days after
the expiration date. (the "Cash Payment"); and (2) a promissory note (the
"Note") entitling the holder thereof to a contingent payment equal to the
excess, if any, of (a) the net asset value of Interests tendered and accepted by
the Partnership as of the expiration date, determined based on audited financial
statements of the Partnership for 1998, over (b) the Cash Payment. The Note will
be delivered to the tendering partner in the manner set forth in the Letter of
Transmittal, attached hereto as Exhibit C, within ten days after expiration of
the Offer to Purchase and will not be transferable. The Note will be payable in
cash within ten days after completion of the audit of the financial statements
of the Partnership. The audit of the Partnership's 1998 financial statements
will be completed by no later than 60 days after the end of the year. Any
amounts payable under the Note will include interest, if any, earned by the
Partnership on an amount, deposited by the Partnership in a segregated custodial
account, equal to 5 percent of the estimated unaudited net asset value of
Interests tendered and accepted by the Partnership.
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The Partnership has been informed by Augusta Management, L.L.C., the
manager of the Partnership (the "Manager"), that the Manager intends to tender a
portion of the Interest held by it that was or will be acquired by it as a
result of any incentive allocation credited to its capital account as of
December 31, 1998 or as an allocation of net profits to its capital account
during the fiscal year ended December 31, 1998.
Although the Partnership has retained the option to pay all or a
portion of the purchase price by distributing marketable securities, the
purchase price will be paid entirely in cash except in the unlikely event that
the Partnership's Individual General Partners determine that the distribution of
securities is necessary to avoid or mitigate any adverse effect of the Offer to
Purchase on the remaining partners of the Partnership. A copy of (i) the cover
letter to the Offer to Purchase and Letter of Transmittal and (ii) the Offer to
Purchase are attached hereto as Exhibits A and B, respectively.
(c) Interests are not traded in any market, and any transfer
thereof is strictly limited by the terms of the L.P. Agreement.
(d) Not applicable.
ITEM 2. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
(a) The Partnership expects that the purchase price for Interests
acquired pursuant to the Offer to Purchase, which will not exceed $50,000,000,
will be derived from: (1) cash on hand; (2) the proceeds of the sale of and/or
delivery of securities and portfolio assets held by the Partnership; and (3)
possibly borrowings, as described in paragraph (b), below. The Partnership will
segregate with its custodian cash or U.S. government securities or other liquid
securities equal to the value of the amount estimated to be paid under any Notes
as described above. The purchase price for Interests acquired pursuant to the
Offer to Purchase shall not be derived from any of the General Partners.
(b) Neither the Partnership nor the General Partners has
determined at this time to borrow funds to purchase Interests in connection with
the Offer to Purchase. However, depending on the dollar amount of Interests
tendered and prevailing general economic and market conditions, the Partnership,
in its sole discretion, may decide to fund any portion of the purchase price,
subject to compliance with applicable law, from its existing margin facility
established with the Partnership's prime broker, Morgan Stanley & Co. ("Morgan
Stanley"). If the Partnership funds any portion of the purchase price in that
manner, it will be required to deposit assets in a special custody account with
Morgan Stanley Trust Company to serve as collateral for any amounts so borrowed,
and if the Partnership were to fail to repay any such amounts, Morgan Stanley
would be entitled to satisfy the Partnership's obligations from the collateral
deposited in the special custody account. The Partnership expects that the
repayment of any amounts borrowed from Morgan Stanley will be financed from
additional funds contributed to the Partnership by existing and/or new limited
partners, or from the proceeds of the sale of securities and portfolio assets
held by the Partnership.
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ITEM 3. PURPOSE OF THIS TENDER OFFER AND PLANS OR PROPOSALS OF THE ISSUER OR
AFFILIATE.
The purpose of the Offer to Purchase is to provide liquidity to limited
partners who hold Interests as contemplated by and in accordance with the
procedures set forth in the Partnership's Confidential Memorandum dated July 16,
1996, as supplemented (the "Confidential Memorandum"), and the L.P. Agreement.
Interests that are tendered to the Partnership in connection with the Offer to
Purchase will be retired, although the Partnership may issue Interests from time
to time in transactions not involving any public offering conducted pursuant to
Rule 506 of Regulation D promulgated under the Securities Act of 1933, as
amended. The Partnership expects that it will accept subscriptions for Interests
as of January 1, 1999. The Partnership currently has no other plans to offer for
sale any other additional Interests, but may do so in the future.
Neither the Partnership nor the General Partners have any plans or
proposals which relate to or would result in: (a) the acquisition by any person
of additional Interests in the Partnership (other than as the Individual General
Partners determine may be necessary or appropriate to fund any portion of the
purchase price for Interests acquired pursuant to the Offer to Purchase or the
ability to make additional Interests available for subscription from time to
time in the discretion of the Partnership), or the disposition of Interests in
the Partnership; (b) an extraordinary corporate transaction, such as a merger,
reorganization or liquidation, involving the Partnership; (c) a sale or transfer
of a material amount of assets of the Partnership (other than as the Individual
General Partners determine may be necessary or appropriate to fund any portion
of the purchase price for Interests acquired pursuant to the Offer to Purchase
or in connection with ordinary portfolio transactions of the Partnership); (d)
any change in the identity of the General Partners of the Partnership, or in the
management of the Partnership including, but not limited to, any plans or
proposals to change the number or the term of the Individual General Partners of
the Partnership, to fill any existing vacancy for an Individual General Partner
of the Partnership or to change any material term of the investment advisory
arrangements with the Manager; (e) any material change in the present
distribution policy or indebtedness or capitalization of the Partnership; (f)
any other material change in the Partnership's structure or business, including
any plans or proposals to make any changes in its fundamental investment
policies, as amended, for which a vote would be required by Section 13 of the
1940 Act; or (g) any changes in the L.P. Agreement or other actions which might
impede the acquisition of control of the Partnership by any person. Items (h)
through (j) of this Item 3 are not applicable to the Partnership.
ITEM 4. INTEREST IN SECURITIES OF THE ISSUER.
There have not been any transactions involving the Interests that were
effected during the past 40 business days by the Partnership, any General
Partner of the Partnership or any person controlling the Partnership or
controlling any General Partner of the Partnership.
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ITEM 5. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
TO THE ISSUER'S SECURITIES.
The Confidential Memorandum and the L.P. Agreement, which were provided
to each limited partner in advance of subscribing for Interests, provide that
the Individual General Partners have the discretion to determine whether the
Partnership will purchase Interests from time to time from partners pursuant to
written tenders. The Confidential Memorandum also states that the Manager of the
Partnership expects that generally it will recommend to the Individual General
Partners that the Partnership purchase Interests from partners once in each year
(other than 1996) effective as of the end of each such year. At the end of 1997,
the Partnership offered to purchase Interests from partners pursuant to written
tenders. That was the first such tender offer made by the Partnership. The
Partnership is not aware of any contract, arrangement, understanding or
relationship relating, directly or indirectly, to this tender offer (whether or
not legally enforceable) between: (i) the Partnership and any General Partner of
the Partnership or any person controlling the Partnership or controlling any
General Partner of the Partnership; and (ii) any person, with respect to
Interests.
ITEM 6. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
No persons have been employed, retained or are to be compensated by the
Partnership to make solicitations or recommendations in connection with the
Offer to Purchase.
ITEM 7. FINANCIAL INFORMATION.
(a) Reference is hereby made to the financial statements attached
as part of Exhibit B hereto, which are incorporated herein by reference. Audited
financial statements for 1996 and 1997 are included. The Partnership does not
file quarterly unaudited financial statements under the Securities Exchange Act
of 1934, as amended. Also included are the unaudited financial statements of the
Partnership for the six-month period ended June 30, 1998, which the Partnership
has prepared and furnished to limited partners pursuant to Rule 30d-1 under the
1940 Act, and filed with the Securities and Exchange Commission pursuant to Rule
30b2-1 under the 1940 Act. The Partnership does not have shares, and
consequently does not have earnings or book value per share information.
(b) The Partnership's assets will be reduced by the amount of the
tendered Interests. Thus, income relative to assets may be affected by the
tender offer. The Partnership does not have shares and consequently does not
have earnings or book value per share information.
ITEM 8. ADDITIONAL INFORMATION.
(a) None
(b) None
(c) Not Applicable
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(d) None
(e) Reference is hereby made to the information contained
in the Offer of Purchase attached as Exhibit B, which
is incorporated herein by reference.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
A. Cover letter to Offer to Purchase and Letter of Transmittal.
B. Offer to Purchase (including Financial Statements).
C. Form of Letter of Transmittal.
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SIGNATURE
After due inquiry and to the best of my knowledge and belief, I certify
that the information set forth in this statement is true, complete and correct.
AUGUSTA PARTNERS, L.P.
By: Augusta Management, L.L.C.
Manager
By: CIBC Oppenheimer Corp.
Managing Member
By: /s/ Howard M. Singer
__________________________
November 23, 1998 Name: Howard M. Singer
Title: Managing Director
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EXHIBIT INDEX
EXHIBIT PAGE NUMBER
A Cover letter to Offer to Purchase and Letter of Transmittal
B Offer to Purchase
(including Financial Statements)
C Form of Letter of Transmittal
-8-
<PAGE> 1
Exhibit A
<PAGE> 2
[CIBC Oppenheimer Corp. Letterhead]
November 25, 1998
Dear Limited Partner:
As indicated in the offering material, Augusta Partners, L.P. (the
"Partnership") provides investors with the opportunity to redeem some or all of
their investment by means of a tender offer. Accordingly, enclosed please find
the documentation necessary to tender interests in the Partnership. If you wish
to maintain your investment and withdraw nothing from your account you do not
have to do anything.
We hope you are pleased with your investment to date and elect to remain
invested in the Partnership. If you have any questions or require further
information, please contact your Account Executive.
Sincerely,
Howard Singer
For Augusta Management, L.L.C.
<PAGE> 1
Exhibit B
<PAGE> 2
EXHIBIT B
AUGUSTA PARTNERS, L.P.
CIBC Oppenheimer Tower
One World Financial Center, 31st Floor
200 Liberty Street
New York, New York 10281
OFFER TO PURCHASE $50,000,000 OF OUTSTANDING
PARTNERSHIP INTERESTS AT NET ASSET VALUE
DATED NOVEMBER 25, 1998
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT
12:00 MIDNIGHT, NEW YORK CITY TIME,
ON THURSDAY, DECEMBER 31, 1998, UNLESS THE OFFER IS EXTENDED
To the Partners of
Augusta Partners, L.P.:
Augusta Partners, L.P., a closed-end, non-diversified, management
investment company organized as a Delaware limited partnership (the
"Partnership"), is offering to purchase for cash upon the terms and conditions
set forth in this offer to purchase ("Offer to Purchase") and the related letter
of transmittal ("Letter of Transmittal," which together with the Offer to
Purchase constitutes the "Offer") up to $50,000,000 of interests in the
Partnership or portions thereof pursuant to tenders by partners at a price equal
to their unaudited net asset value as of December 31, 1998, if the Offer expires
on December 31, 1998, and otherwise, their unaudited net asset value on such
later date as corresponds to any extension of the Offer. (As used in this Offer,
the term "Interest" or "Interests", as the context requires, shall refer to the
interests in the Partnership and portions thereof representing beneficial
interests in the Partnership.) This Offer is being made to all partners of the
Partnership and is not conditioned upon any minimum amount of Interests being
tendered, but is subject to certain conditions described below. Interests are
not traded on any established trading market and are subject to strict
restrictions on transferability pursuant to the Partnership's First Amended and
Restated Limited Partnership Agreement dated as of July 16, 1996 (the "L.P.
Agreement").
If you desire to tender all or any portion of your Interest in the
Partnership in accordance with the terms of the Offer, you should complete and
sign the attached Letter of Transmittal and send or deliver it to the
Partnership in the manner set forth below.
IMPORTANT
NEITHER THE PARTNERSHIP NOR ITS GENERAL PARTNERS MAKE ANY
RECOMMENDATION TO ANY LIMITED PARTNER AS TO WHETHER TO TENDER OR REFRAIN FROM
TENDERING INTERESTS. LIMITED PARTNERS MUST MAKE THEIR OWN DECISIONS WHETHER TO
TENDER INTERESTS, AND IF SO, THE PORTION OF THEIR INTERESTS TO TENDER.
<PAGE> 3
NO PERSON HAS BEEN AUTHORIZED TO MAKE ANY RECOMMENDATION ON BEHALF OF
THE PARTNERSHIP AS TO WHETHER LIMITED PARTNERS SHOULD TENDER INTERESTS PURSUANT
TO THE OFFER. NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE
ANY REPRESENTATIONS IN CONNECTION WITH THE OFFER OTHER THAN THOSE CONTAINED
HEREIN OR IN THE LETTER OF TRANSMITTAL. IF GIVEN OR MADE, SUCH RECOMMENDATION
AND SUCH INFORMATION AND REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE PARTNERSHIP.
THIS TRANSACTION HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE FAIRNESS OR MERITS OF SUCH
TRANSACTION OR UPON THE ACCURACY OR ADEQUACY OF THE INFORMATION CONTAINED IN
THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
Questions and requests for assistance and requests for additional
copies of the Offer may be directed to the Partnership's service agent:
PFPC Inc.
P.O. Box 358
Claymont, Delaware 19703
Phone: (888) 697-9661
Fax: (302) 791-2386
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
1. Background and Purpose of the Offer.............................. 4
2. Offer to Purchase and Price...................................... 4
3. Amount of Tender................................................. 5
4. Procedure for Tenders............................................ 6
5. Withdrawal Rights................................................ 7
6. Purchases and Payment............................................ 7
7. Certain Conditions of the Offer.................................. 8
8. Certain Information About the Partnership........................ 9
9. Certain Federal Income Tax Consequences.......................... 10
10. Miscellaneous.................................................... 10
</TABLE>
Annex A Financial Statements
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1. BACKGROUND AND PURPOSE OF THE OFFER. The purpose of the Offer is to
provide liquidity to limited partners for Interests as contemplated by and in
accordance with the procedures set forth in the Partnership's Confidential
Memorandum dated July 16, 1996, as supplemented (the "Confidential Memorandum"),
and the L.P. Agreement. The Confidential Memorandum and the L.P. Agreement,
which were provided to each partner in advance of subscribing for Interests,
provide that the Individual General Partners have the discretion to determine
whether the Partnership will purchase Interests from time to time from partners
pursuant to written tenders. The Confidential Memorandum also states that
Augusta Management, L.L.C., the manager of the Partnership (the "Manager"),
expects that generally it will recommend to the Individual General Partners that
the Partnership purchase Interests from limited partners at the end of each
year. The Partnership offered to purchase Interests from limited partners
effective December 31, 1997 pursuant to written tenders. That was the first such
tender offer made by the Partnership. In light of the fact that there is no
secondary trading market for Interests and transfers of Interests are prohibited
without prior approval of the Partnership, the Individual General Partners have
determined, after consideration of various matters, including but not limited to
those set forth in the Confidential Memorandum, that the Offer is in the best
interests of limited partners of the Partnership in order to provide liquidity
for Interests as contemplated in the Confidential Memorandum and the L.P.
Agreement. The Individual General Partners intend to consider the continued
desirability of the Partnership making an offer to purchase Interests at the end
of each year, but the Partnership will at no time be required to make any such
offer.
The purchase of Interests pursuant to the Offer will have the effect of
increasing the proportionate interest in the Partnership of partners who do not
tender Interests. Partners who retain their Interests may be subject to
increased risks that may possibly result from the reduction in the Partnership's
aggregate assets resulting from payment for the Interests tendered. These risks
include the potential for greater volatility due to decreased diversification.
However, the Partnership believes that this result is unlikely given the nature
of the Partnership's assets. A reduction in the aggregate assets of the
Partnership may result in partners who do not tender interests bearing higher
costs to the extent that certain expenses borne by the Partnership are
relatively fixed and may not decrease if assets decline.
Interests that are tendered to the Partnership in connection with this
Offer will be retired, although the Partnership may issue new Interests from
time to time in transactions not involving any public offering conducted
pursuant to Rule 506 of Regulation D promulgated under the Securities Act of
1933, as amended. The Partnership expects that it will accept subscriptions for
Interests as of January 1, 1999. The Partnership currently has no other plans to
offer for sale any other additional Interests, but may do so in the future.
2. OFFER TO PURCHASE AND PRICE. The Partnership will, upon the terms
and subject to the conditions of the Offer, purchase up to $50,000,000 of
outstanding Interests which are properly tendered by and not withdrawn (in
accordance with Section 5 below) prior to 12:00 Midnight, New York City time, on
Thursday, December 31, 1998 (such time and date being hereinafter called the
"Initial Expiration Date"), or such later date as corresponds to any extension
of the Offer. The later of the Initial Expiration Date or the latest time and
date to
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which the Offer is extended is hereinafter called the "Expiration Date." The
Partnership reserves the right to extend, amend or cancel the Offer as described
in Sections 3 and 7 below. The purchase price of an Interest tendered will be
its net asset value as of the close of business on the Expiration Date, payable
as set forth in Section 6. As of the close of business on October 31, 1998, the
estimated unaudited net asset value of an Interest corresponding to an initial
capital contribution of $150,000 on the following closing dates of the
Partnership was:
<TABLE>
<CAPTION>
Closing Date Unaudited Net Asset Value
------------ as of October 31, 1998
-------------------------
<S> <C>
September 4, 1996 $218,563
October 1, 1996 $201,687
January 1, 1998 $158,290
</TABLE>
As of the close of business on October 31, 1998, there was
approximately $145,611,104 outstanding in capital of the Partnership held in
Interests (based on the unaudited net asset value of such Interests). Partners
may obtain weekly current net asset value information until the expiration of
the Offer, and daily net asset value information during the last five business
days of the Offer, by contacting PFPC Inc. ("PFPC"), at the telephone number or
address set forth on page 2 above, Monday through Friday, except holidays,
during normal business hours of 9:00 a.m. to 5:00 p.m. (E.S.T.).
3. AMOUNT OF TENDER. Subject to the limitations set forth below,
limited partners may tender their entire Interest or a portion of their
Interest, defined as a specific dollar value. However, a limited partner who
tenders for repurchase only a portion of such limited partner's Interest, and
any limited partner who tenders its entire Interest of which any portion thereof
has not been outstanding for at least 12 full calendar months, shall be required
to maintain a capital account balance equal to the greater of: (i) $150,000, net
of the amount of the incentive allocation, if any, that would be debited from
the capital account of the limited partner and credited to the capital account
of the Manager on the Expiration Date if the offer were a day on which an
incentive allocation was made (the "Tentative Incentive Allocation"); or (ii)
the Tentative Incentive Allocation. The Offer is being made to all partners of
the Partnership and is not conditioned upon any minimum amount of Interests
being tendered.
If the amount of the Interests that are properly tendered pursuant to
the Offer, and not withdrawn pursuant to Section 5 below, is less than or equal
to $50,000,000 (or such greater amount as the Partnership may elect to purchase
pursuant to the Offer), the Partnership will, upon the terms and subject to the
conditions of the Offer, purchase all of the Interests so tendered unless the
Partnership elects to cancel or amend the Offer, or postpone acceptance of
tenders made pursuant to the Offer, as provided in Section 7 below. If more than
$50,000,000 of Interests are duly tendered to the Partnership prior to the
expiration of the Offer, and not withdrawn pursuant to Section 5 below, the
Partnership will, in its sole discretion either (a) accept the
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<PAGE> 7
additional Interests permitted to be accepted pursuant to Rule 13e-4(f)(1)
promulgated under the Securities Exchange Act of 1934, as amended; (b) extend
the Offer, if necessary, and increase the amount of Interests that the
Partnership is offering to purchase to an amount it believes sufficient to
accommodate the excess Interests tendered as well as any Interests tendered
during the extended Offer; or (c) accept Interests tendered prior to or on the
Expiration Date for payment on a pro rata basis based on their net asset value.
The Offer may be extended, amended or canceled in various other circumstances
described in Section 7 below.
The Partnership has been informed by the Manager that the Manager
intends to tender a portion of the Interest held by it that was or will be
acquired as a result of any incentive allocation credited to its capital account
as of December 31, 1998 or as an allocation of net profits to its capital
account during the fiscal year ended December 31, 1998. The Manager may tender
such portion of its Interest by following the procedures for tenders set forth
in Item 4, below.
4. PROCEDURE FOR TENDERS. Limited partners wishing to tender Interests
pursuant to the Offer should send or deliver a completed and executed Letter of
Transmittal to PFPC, to the attention of Karen Castagna, at the address set
forth on page 2 above, or fax a completed and executed Letter of Transmittal to
PFPC, also to the attention of Karen Castagna, at the fax number set forth on
page 2 above. The completed and executed Letter of Transmittal must be received
by PFPC no later than the Expiration Date.
The Partnership recommends that all documents be submitted to PFPC via
registered mail, return receipt requested or by facsimile transmission. A
Limited partner choosing to fax to PFPC such Letter of Transmittal should also
send or deliver the original completed and executed Letter of Transmittal to
PFPC. Limited partners wishing to confirm receipt of a Letter of Transmittal may
contact PFPC at the address and phone numbers set forth on page 2 above. The
method of delivery of any documents is at the election and complete risk of the
partner tendering an Interest including, but not limited to, the failure of PFPC
to receive any Letter of Transmittal or other document submitted by facsimile
transmission. All questions as to the validity, form, eligibility (including
time of receipt) and acceptance of tenders will be determined by the
Partnership, in its sole discretion, and such determination shall be final and
binding. The Partnership reserves the absolute right to reject any or all
tenders determined by it not to be in appropriate form or the acceptance of or
payment for which would, in the opinion of counsel for the Partnership, be
unlawful. The Partnership also reserves the absolute right to waive any of the
conditions of the Offer or any defect in any tender with respect to any
particular Interest or any particular partner, and the Partnership's
interpretations of the terms and conditions of the Offer will be final and
binding. Unless waived, any defects or irregularities in connection with tenders
must be cured within such time as the Partnership shall determine. Tenders will
not be deemed to have been made until the defects or irregularities have been
cured or waived. Neither the Partnership nor any General Partner of the
Partnership shall be obligated to give notice of any defects or irregularities
in tenders, nor shall any of them incur any liability for failure to give such
notice.
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<PAGE> 8
5. WITHDRAWAL RIGHTS. Any partner tendering an Interest pursuant to
this Offer may withdraw such tender at any time prior to or on the Expiration
Date and, if Interests are not accepted by the Partnership at the close of the
Expiration Date, at any time after 40 business days after the commencement of
the Offer. To be effective, any notice of withdrawal must be timely received by
PFPC at the address or fax number set forth on page 2 above. Any notice of
withdrawal must specify the name of the person withdrawing a tender and the
amount of the Interest previously tendered which is being withdrawn. All
questions as to the form and validity (including time of receipt) of notices of
withdrawal will be determined by the Partnership, in its sole discretion, and
such determination shall be final and binding. Interests properly withdrawn
shall not thereafter be deemed to be tendered for purposes of the Offer.
However, withdrawn Interests may be tendered by following the procedures
described in Section 4 prior to the Expiration Date.
6. PURCHASES AND PAYMENT. For purposes of the Offer, the Partnership
will be deemed to have accepted (and thereby purchased) Interests which are
tendered as, if and when it gives oral or written notice to the tendering
partner of its election to purchase such Interest. As stated in Section 2 above,
the purchase price of an Interest tendered by any partner will be the net asset
value thereof as of the close of business on December 31, 1998, if the Offer
expires on the Initial Expiration Date, and otherwise the net asset value
thereof as of the close of business on such later date as corresponds to any
extension of the Offer. The net asset value will be determined after all
allocations to capital accounts of the partners required to be made by the L.P.
Agreement have been made.
Payment of the purchase price will consist of: (1) cash and/or
marketable securities (valued in accordance with the L.P. Agreement) in an
aggregate amount equal to 95% of the estimated unaudited net asset value of
Interests tendered and accepted by the Partnership, determined as of the
Expiration Date, which is expected to be 12:00 Midnight, New York City time, on
Thursday, December 31, 1998, payable within ten days after the Expiration Date
(the "Cash Payment") in the manner set forth below; and (2) a promissory note
(the "Note") entitling the holder thereof to a contingent payment equal to the
excess, if any, of (a) the net asset value of the Interests tendered and
accepted by the Partnership as of the Expiration Date, determined based on the
audited financial statements of the Partnership for 1998, over (b) the Cash
Payment. The Note will be delivered to the tendering partner in the manner set
forth below within ten days after the Expiration Date and will not be
transferable. The Note will be payable in cash (in the manner set forth below)
within ten days after completion of the audit of the financial statements of the
Partnership for 1998. It is anticipated that the audit of the Partnership's 1998
financial statements will be completed no later than 60 days after the end of
the year. Any amounts payable under the Note will include interest, if any,
earned by the Partnership on an amount, deposited by the Partnership in a
segregated custodial account, equal to 5 percent of the estimated unaudited net
asset value of Interests tendered and accepted by the Partnership. Although the
Partnership has retained the option to pay all or a portion of the purchase
price by distributing marketable securities, the purchase price will be paid
entirely in cash except in the unlikely event that the Partnership's Individual
General Partners determine that the distribution of securities is necessary to
avoid or mitigate any adverse effect of the Offer on the remaining partners of
the Partnership.
-7-
<PAGE> 9
The Cash Payment will be made by wire transfer directly to the
tendering partner's brokerage account with CIBC Oppenheimer Corp. ("CIBC Opco")
unless, pursuant to the Letter of Transmittal, the tendering partner elects to
receive the Cash Payment by check mailed first class (AT THE SOLE RISK OF THE
TENDERING PARTNER) to the address set forth in the Letter of Transmittal.
Partners who do not elect to have the Cash Payment mailed to them should note
that Cash Payments wired directly to brokerage accounts will be subject upon
withdrawal from such accounts to any fees that CIBC Opco would customarily
assess upon the withdrawal of cash from such brokerage account.
The Note will be deposited directly to the tendering partner's
brokerage account with CIBC Opco unless, pursuant to the Letter of Transmittal,
the tendering partner elects to have the Note delivered directly to the
tendering partner at the address set forth in the Letter of Transmittal (AT THE
SOLE RISK OF THE TENDERING PARTNER). Any amounts payable under the Note will be
paid to the tendering partner in the same manner designated in the Letter of
Transmittal for payment of the Cash Payment. Limited Partners who elect to
receive the Note directly will be required to return the Note pursuant to
instructions that will be provided at a later date in order to receive payment
of such amounts.
It is expected that cash payments for Interests acquired pursuant to
the Offer will be derived from: (a) cash on hand; (b) the proceeds of the sale
of securities and portfolio assets held by the Partnership; and (c) possibly
borrowings, as described below. The Partnership will segregate with its
custodian cash or U.S. government securities or other liquid securities equal to
the value of the amount estimated to be paid under any Notes, as described
above. The Partnership has not determined at this time to borrow funds to
purchase Interests tendered in connection with the Offer. However, depending on
the dollar amount of Interests tendered and prevailing general economic and
market conditions, the Partnership, in its sole discretion, may decide to fund
any portion of the purchase price, subject to compliance with applicable law,
from its existing margin facility established with the Partnership's prime
broker, Morgan Stanley & Co. ("Morgan Stanley"). If the Partnership funds any
portion of the purchase price in that manner, it will be required to deposit
assets in a special custody account with Morgan Stanley Trust Company to serve
as collateral for any amounts so borrowed, and if the Partnership were to fail
to repay any such amounts, Morgan Stanley would be entitled to satisfy the
Partnership's obligations from the collateral deposited in the special custody
account. The Partnership expects that the repayment of any amounts borrowed from
Morgan Stanley will be financed from additional funds contributed to the
Partnership by existing and/or new limited partners, or from the proceeds of the
sale of securities and portfolio assets held by the Partnership.
7. CERTAIN CONDITIONS OF THE OFFER. The Partnership reserves the right,
at any time and from time to time, to extend the period of time during which the
Offer is pending by notifying partners of such extension. In the event that the
Partnership so elects to extend the tender period, the net asset value of
Interests tendered will be determined as of a date after December 31, 1998,
corresponding to any extension of the Offer. During any such extension, all
Interests previously tendered and not withdrawn will remain subject to the
Offer. The Partnership also reserves the right, at any time and from time to
time, up to and including acceptance of tenders pursuant to the Offer, to: (a)
cancel the Offer in the circumstances set forth
-8-
<PAGE> 10
in the following paragraph and in the event of such cancellation not to purchase
or pay for any Interests tendered pursuant to the Offer; (b) amend the Offer;
and (c) postpone the acceptance of Interests. If the Partnership determines to
amend the Offer or to postpone the acceptance of Interests tendered, it will, to
the extent necessary, extend the period of time during which the Offer is open
as provided above and will promptly notify partners.
The Partnership may cancel the Offer, or amend the Offer, or postpone
the acceptance of tenders made pursuant to the Offer, if: (a) the Partnership
would not be able to liquidate portfolio securities in a manner which is orderly
and consistent with the Partnership's investment objectives and policies in
order to purchase Interests tendered pursuant to the Offer; (b) there is, in the
Individual General Partners' judgment, any (i) legal action or proceeding
instituted or threatened challenging the Offer or otherwise materially adversely
affecting the Partnership, (ii) declaration of a banking moratorium by Federal
or state authorities or any suspension of payment by banks in the United States
or New York State, which is material to the Partnership, (iii) limitation
imposed by Federal or state authorities on the extension of credit by lending
institutions, (iv) suspension of trading on any organized exchange or
over-the-counter market where the Partnership has a material investment, (v)
commencement of war, armed hostilities or other international or national
calamity directly or indirectly involving the United States which is material to
the Partnership, (vi) material decrease in the net asset value of the
Partnership from the net asset value of the Partnership as of commencement of
the Offer, or (vii) other event or condition which would have a material adverse
effect on the Partnership or its partners if Interests tendered pursuant to the
Offer were purchased; or (c) the Independent Individual General Partners of the
Partnership determine that it is not in the best interest of the Partnership to
purchase Interests pursuant to the Offer. However, there can be no assurance
that the Partnership will exercise its right to extend, amend or cancel the
Offer or to postpone acceptance of tenders pursuant to the Offer.
8. CERTAIN INFORMATION ABOUT THE PARTNERSHIP. The Partnership is
registered under the Investment company Act of 1940, as amended (the "1940 Act")
as a closed-end, non-diversified, management investment company. It is organized
as a Delaware limited partnership. The principal office of the Partnership is
located at CIBC Oppenheimer Tower, One World Financial Center, 31st Floor, 200
Liberty Street, New York, New York 10281. Interests are not traded on any
established trading market and are subject to strict restrictions on
transferability pursuant to the L.P. Agreement.
The Partnership does not have any plans or proposals which relate to or
would result in: (a) the acquisition by any person of additional Interests other
than the Partnership's intention to accept subscriptions for Interests from time
to time in the discretion of the Partnership or the disposition of Interests;
(b) an extraordinary corporate transaction, such as a merger, reorganization or
liquidation, involving the Partnership; (c) a sale or transfer of a material
amount of assets of the Partnership (other than as the Individual General
Partners determine may be necessary or appropriate to fund any portion of the
purchase price for Interests acquired pursuant to this Offer to Purchase or in
connection with ordinary portfolio transactions of the Partnership); (d) any
change in the identity of the General Partners of the Partnership, or in the
management of the Partnership including, but not limited to, any plans or
proposals to change
-9-
<PAGE> 11
the number or the term of the Individual General Partners of the Partnership, to
fill any existing vacancy for an Individual General Partner of the Partnership
or to change any material term of the investment advisory arrangements with the
Manager; (e) any material change in the present distribution policy or
indebtedness or capitalization of the Partnership; (f) any other material change
in the Partnership's structure or business, including any plans or proposals to
make any changes in its fundamental investment policy for which a vote would be
required by Section 13 of the 1940 Act; or (g) any changes in the L.P. Agreement
or other actions which may impede the acquisition of control of the Partnership
by any person.
The Manager of the Partnership is entitled under the terms of the L.P.
Agreement to receive, subject to certain limitations, an incentive allocation,
as specified in the L.P. Agreement and described in the Confidential Memorandum.
9. CERTAIN FEDERAL INCOME TAX CONSEQUENCES. The following discussion is
a general summary of the federal income tax consequences of the purchase by the
Partnership from partners of Interests pursuant to the Offer. Partners should
consult their own tax advisers for a complete description of the tax
consequences to them of a purchase by the Partnership of Interests pursuant to
the Offer.
In general, a partner from whom an Interest is purchased by the
Partnership will be treated as receiving a distribution from the Partnership.
Such partner generally will not recognize income or gain as a result of the
purchase, except to the extent (if any) that the amount of consideration
received by the partner exceeds such partner's then adjusted tax basis in such
partner's Interest. A partner's basis in such partner's Interest will be reduced
(but not below zero) by the amount of consideration received by the partner from
the Partnership in connection with the purchase of such Interest. A partner's
basis in such partner's Interest will be adjusted for income, gain or loss
allocated (for tax purposes) to such partner for periods prior to the purchase
of such Interest. Cash distributed to a partner in excess of the adjusted tax
basis of such partner's Interest is taxable as capital gain or ordinary income,
depending on the circumstances. A partner whose entire Interest is purchased by
the Partnership may recognize a loss, but only to the extent that the amount of
consideration received from the Partnership is less than the partner's then
adjusted tax basis in such partner's Interest.
10. MISCELLANEOUS. The Offer is not being made to, nor will tenders be
accepted from, partners in any jurisdiction in which the Offer or its acceptance
would not comply with the securities or Blue Sky laws of such jurisdiction. The
Partnership is not aware of any jurisdiction in which the Offer or tenders
pursuant thereto would not be in compliance with the laws of such jurisdiction.
However, the Partnership reserves the right to exclude partners from the Offer
in any jurisdiction in which it is asserted that the Offer cannot lawfully be
made. The Partnership believes such exclusion is permissible under applicable
laws and regulations, provided the Partnership makes a good faith effort to
comply with any state law deemed applicable to the Offer.
The Partnership has filed an Issuer Tender Offer Statement on Schedule
13E-4 with the Securities and Exchange Commission which includes certain
information relating to the
-10-
<PAGE> 12
Offer summarized herein. A copy of such statement may be obtained from the
Partnership by contacting PFPC at the address and phone numbers set forth on
page 2 above, or from the public reference office of the Securities and Exchange
Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549,
or from the Securities and Exchange Commission's web site, www.sec.gov.
-11-
<PAGE> 13
ANNEX A
Financial Statements
<PAGE> 14
AUGUSTA PARTNERS, L.P.
FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED
JUNE 30, 1998
(UNAUDITED)
<PAGE> 15
AUGUSTA PARTNERS, L.P.
FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED
JUNE 30, 1998
(UNAUDITED)
CONTENTS
Statement of Assets, Liabilities and Partners' Capital.................... 1
Statement of Operations................................................... 2
Statement of Changes in Partners' Capital - Net Assets.................... 3
Notes to Financial Statements............................................. 4
Schedule of Portfolio Investments......................................... 12
Schedule of Securities Sold, Not Yet Purchased............................ 17
Schedule of Written Options............................................... 18
<PAGE> 16
AUGUSTA PARTNERS, L.P.
STATEMENT OF ASSETS, LIABILITIES AND PARTNERS' CAPITAL (IN THOUSANDS)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
JUNE 30, 1998
ASSETS (UNAUDITED)
<S> <C>
Cash $ 1,492
Investments in securities, at market (identified cost - $138,524) 155,083
Due from broker 15,972
Dividends receivable 43
Interest receivable 92
Organizational costs (net of accumulated amortization of $252) 439
Other assets 11
---------
TOTAL ASSETS 173,132
---------
LIABILITIES
Securities sold, not yet purchased - at market (proceeds of sales - $15,734) 16,828
Outstanding options written, at value (premiums received - $585) 551
Dividends payable on securities sold, not yet purchased 11
Management fee payable 123
Accrued expenses 226
---------
TOTAL LIABILITIES 17,739
---------
NET ASSETS $ 155,393
=========
PARTNERS' CAPITAL - NET ASSETS
Represented by:
Capital contributions - net $ 90,666
Accumulated net investment loss (1,342)
Accumulated net realized gain on investments 50,570
Accumulated net unrealized appreciation on investments and
foreign currency transactions 15,499
---------
PARTNERS' CAPITAL - NET ASSETS $ 155,393
=========
</TABLE>
The accompanying notes are an integral part of these financial statements.
-1-
<PAGE> 17
AUGUSTA PARTNERS, L.P.
STATEMENT OF OPERATIONS (IN THOUSANDS)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
JUNE 30, 1998
(UNAUDITED)
<S> <C>
INVESTMENT INCOME
Interest $ 659
Dividends 383
--------
1,042
--------
EXPENSES
OPERATING EXPENSES:
Management fee 724
Professional fees 174
Administration fees 101
Amortization of organizational costs 69
Custodian fees 34
Insurance expense 33
Individual General Partners' fees and expenses 11
Miscellaneous 15
--------
1,161
INTEREST EXPENSE 219
DIVIDENDS ON SECURITIES SOLD, NOT YET PURCHASED 81
--------
TOTAL EXPENSES 1,461
--------
NET INVESTMENT LOSS (419)
--------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
REALIZED GAIN (LOSS) ON INVESTMENTS:
Investment securities 21,198
Purchased options (3,329)
Futures transactions (89)
Written options 121
Short sales 820
--------
NET REALIZED GAIN ON INVESTMENTS 18,721
--------
NET CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) ON
INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS (878)
--------
NET REALIZED AND UNREALIZED GAIN 17,843
--------
INCREASE IN PARTNERS' CAPITAL DERIVED FROM INVESTMENT ACTIVITIES $ 17,424
========
</TABLE>
The accompanying notes are an integral part of these financial statements.
-2-
<PAGE> 18
AUGUSTA PARTNERS, L.P.
STATEMENT OF CHANGES IN PARTNERS' CAPITAL - NET ASSETS (IN THOUSANDS)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1998 DECEMBER 31, 1997
(UNAUDITED)
<S> <C> <C>
FROM INVESTMENT ACTIVITIES
Net investment loss $ (419) $ (619)
Net realized gain on investments 18,721 23,297
Net change in unrealized appreciation
(depreciation) on investments and foreign
currency transactions (878) 7,585
--------- ---------
INCREASE IN PARTNERS' CAPITAL DERIVED
FROM INVESTMENT ACTIVITIES 17,424 30,263
PARTNERS' CAPITAL TRANSACTIONS
Capital contributions 9,390 0
Capital withdrawals - General Partner (187) (9,573)
Capital withdrawals - Limited Partners 0 (8,969)
--------- ---------
INCREASE (DECREASE) IN PARTNERS' CAPITAL
DERIVED FROM CAPITAL TRANSACTIONS 9,203 (18,542)
PARTNERS' CAPITAL AT BEGINNING OF PERIOD 128,766 117,045
--------- ---------
PARTNERS' CAPITAL AT END OF PERIOD $ 155,393 $ 128,766
========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
-3-
<PAGE> 19
AUGUSTA PARTNERS, L.P.
NOTES TO FINANCIAL STATEMENTS - JUNE 30, 1998 (UNAUDITED)
- --------------------------------------------------------------------------------
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. 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. ("CIBC Opco") and Ardsley Advisory Partners
("Ardsley"). Investment professionals at Ardsley manage the
Partnership's investment portfolio on behalf of the Manager under CIBC
Opco's 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.
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.
-4-
<PAGE> 20
AUGUSTA PARTNERS, L.P.
NOTES TO FINANCIAL STATEMENTS - JUNE 30, 1998 (UNAUDITED) (CONTINUED)
- -------------------------------------------------------------------------------
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 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.
-5-
<PAGE> 21
AUGUSTA PARTNERS, L.P.
NOTES TO FINANCIAL STATEMENTS - JUNE 30, 1998 (UNAUDITED) (CONTINUED)
- -------------------------------------------------------------------------------
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
0.08333% (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 six months ended June 30, 1998, CIBC Opco and CIBC Wood
Gundy earned $20,550 and $2,507, respectively, 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 cumulative
net profits with respect to such limited partner through the close of
any prior period. For the six months ended June 30, 1998 there were no
incentive allocations.
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"
-6-
<PAGE> 22
AUGUSTA PARTNERS, L.P.
NOTES TO FINANCIAL STATEMENTS - JUNE 30, 1998 (UNAUDITED) (CONTINUED)
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 six months ended June 30, 1998, fees paid to the
Individual General Partners (including meeting fees and the annual
retainer) and expenses totaled $19,761.
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 six months ended June 30, 1998, amounted
to $529,268,526 and $529,405,732, respectively.
At June 30, 1998, the cost of investments for federal income tax
purposes was substantially the same as the cost for financial reporting
purposes. At June 30, 1998, accumulated net unrealized appreciation on
investments, options, and securities sold, not yet purchased, was
$15,498,559, consisting of $22,146,663 gross unrealized appreciation
and $6,648,104 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 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 0.875%. The Partnership pledges securities as collateral for
the margin borrowings, which are maintained in a segregated account
held by the Custodian. As of June 30, 1998, the Partnership did not
have any margin borrowings outstanding. For the six months ended June
30, 1998, the average daily amount of such borrowings was $5,558,041.
-7-
<PAGE> 23
AUGUSTA PARTNERS, L.P.
NOTES TO FINANCIAL STATEMENTS - JUNE 30, 1998 (UNAUDITED) (CONTINUED)
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 June 30, 1998, 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.
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.
-8-
<PAGE> 24
AUGUSTA PARTNERS, L.P.
NOTES TO FINANCIAL STATEMENTS - JUNE 30, 1998 (UNAUDITED) (CONTINUED)
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 750 $ 847,562 340,000 $ 4,743,000
Options purchased 20,555 10,957,328 9,490 11,935,328
Options closed (16,510) (9,038,353) (348,680) (16,148,892)
Expired options (975) (137,844) (675) (151,166)
----------- ----------- ----------- ------------
Options outstanding at
June 30, 1998 3,820 $ 2,628,693 135 $ 378,270
=========== =========== =========== ============
</TABLE>
Transactions in written options were as follows:
<TABLE>
<CAPTION>
INDEX AND CROSS CURRENCY, INDEX
CALL OPTIONS AND PUT OPTIONS
-------------------------- ---------------------------
NUMBER AMOUNT OF NUMBER AMOUNT OF
OF CONTRACTS PREMIUM OF CONTRACTS PREMIUM
------------ ----------- ------------ ------------
<S> <C> <C> <C> <C>
Beginning balance 1,125 $ 176,657 270,000 $ 4,209,000
Options written 10,965 7,551,805 3,275 4,621,522
Options closed (9,780) (7,044,705) (273,140) (8,722,796)
Expired options (1,375) (206,533) 0 0
----------- ----------- ----------- ------------
Options outstanding at
June 30, 1998 935 $ 477,224 135 $ 107,726
=========== =========== =========== ============
</TABLE>
-9-
<PAGE> 25
AUGUSTA PARTNERS, L.P.
NOTES TO FINANCIAL STATEMENTS - JUNE 30, 1998 (UNAUDITED) (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:
<TABLE>
<CAPTION>
NET GAINS / (LOSSES)
FOR THE SIX MONTHS ENDED
JUNE 30, 1998
------------------------
<S> <C>
Equity securities $ 22,465,436
Equity option (210,456)
Equity index options (3,159,254)
Cross currency options (9,103,617)
Written options 3,845,374
Fixed income securities 2,611,227
Futures (88,726)
FOREIGN SECURITIES:
Equity securities 1,483,429
-------------
$ 17,843,413
=============
</TABLE>
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 SIX MONTHS
JUNE 30, 1998 ENDED JUNE 30, 1998
--------------- --------------------
<S> <C> <C>
ASSETS:
Equity options $ 2,402,250 $ 2,510,498
Equity index options 239,625 2,198,054
Cross currency options 0 334,705
LIABILITIES:
Written options (551,125) (4,038,084)
</TABLE>
Average market values presented above are based upon month-end market
value during the six months ended June 30, 1998.
-10-
<PAGE> 26
AUGUSTA PARTNERS, L.P.
NOTES TO FINANCIAL STATEMENTS - JUNE 30, 1998 (UNAUDITED) (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
SIX MONTHS ENDED YEAR ENDED OPERATIONS) TO
JUNE 30, 1998 DECEMBER 31, 1997 DECEMBER 31, 1996
---------------- ----------------- -----------------
<S> <C> <C> <C>
Ratio of net investment loss to
average net assets (0.49%)* (0.48%) (0.83%)*
Ratio of operating expenses to
average net assets 1.35%* 1.61% 2.27%*
Ratio of interest expense to
average net assets 0.25%* 0.07% 0.01%*
Ratio of dividends on securities
sold, not yet purchased
to average net assets 0.10%* 0.12% 0.06%*
Total return *** 12.62% 25.94% 17.20%
Portfolio turnover rate 354% 627% 215%
Average commission rate paid ** $ 0.0575 $ 0.0527 $ 0.0569
Average debt ratio 3.21% 1.04% 0.28%
</TABLE>
* 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.
-11-
<PAGE> 27
AUGUSTA PARTNERS, L.P.
SCHEDULE OF PORTFOLIO INVESTMENTS (UNAUDITED)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
JUNE 30, 1998
SHARES MARKET VALUE
<S> <C> <C>
COMMON STOCKS - 87.49%
AGRICULTURAL BIOTECHNOLOGY - 1.80%
50,000 Monsanto Co. $ 2,793,750
--------------------------
APPLICATIONS SOFTWARE - 1.38%
50,000 J.D. Edwards & Co. * 2,146,900
--------------------------
AUTO - MED & HEAVY DUTY TRUCKS - 1.21%
65,000 Navistar International Corp. * 1,876,875
--------------------------
CABLE TV - 4.24%
150,000 MediaOne Group, Inc. * 6,590,700
--------------------------
COMMERCIAL BANKS - 1.24%
20,000 UnionBanCal Corp. 1,930,000
--------------------------
COMPUTERS - INTEGRATED SYSTEMS - 1.39%
80,000 Systems & Computer Technology Corp. * 2,160,000
--------------------------
COMPUTERS - MICRO - 0.98%
35,000 Sun Microsystems, Inc. * 1,520,313
--------------------------
COMPUTER SOFTWARE - 7.23%
125,000 Compuware Corp. * (a) 6,390,625
25,000 Microsoft Corp. * 2,709,375
75,000 Platinum Technology, Inc. * 2,142,225
--------------------------
11,242,225
--------------------------
DATA PROCESSING/MANAGEMENT - 1.52%
75,000 Arbor Software Corp. * (b) 2,357,850
--------------------------
FINANCIAL SAVINGS & LOANS/THRIFTS - 2.16%
125,000 Bank Plus Corp. * (b) 1,531,250
80,000 Staten Island Bancorp, Inc. 1,820,000
--------------------------
3,351,250
--------------------------
GOLD MINING - 1.14%
75,000 Newmont Mining Corp. 1,771,875
--------------------------
HEALTH CARE COST CONTAINMENT - 3.09%
800,000 Medaphis Corp. * 4,800,000
--------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
-12-
<PAGE> 28
AUGUSTA PARTNERS, L.P.
SCHEDULE OF PORTFOLIO INVESTMENTS (UNAUDITED) (CONTINUED)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
JUNE 30, 1998
MARKET VALUE
SHARES
<S> <C> <C>
COMMON STOCKS - (CONTINUED)
HOTELS & MOTELS - 0.47%
35,000 La Quinta Inns, Inc. $ 739,375
--------------------------
HUMAN RESOURCES - 1.31%
100,000 RCM Technologies, Inc. * 2,031,300
--------------------------
MEDICAL - BIOMEDICAL/GENE - 2.04%
35,000 Biogen, Inc.* 1,715,000
40,000 Centocor, Inc. * 1,450,000
--------------------------
3,165,000
--------------------------
MEDICAL - DRUGS - 6.56%
285,000 Alteon, Inc.* 997,500
80,000 ICN Pharmaceuticals, Inc. 3,655,040
80,000 Warner-Lambert Co. 5,550,000
--------------------------
10,202,540
--------------------------
MULTI-LINE INSURANCE - 1.17%
30,000 Travelers Group, Inc. 1,818,750
--------------------------
OFFICE FURNISHINGS - 0.67%
40,000 Steelcase, Inc., Class A 1,040,000
--------------------------
OIL COMPANY - INTEGRATED - 1.67%
40,000 ENI SPA, Sponsored ADR 2,600,000
--------------------------
OIL FIELD MACHINERY & EQUIPMENT - 1.15%
35,000 Cooper Cameron Corp. * 1,785,000
--------------------------
OIL FIELD SERVICES - 1.40%
75,000 BJ Services Co. * 2,179,725
--------------------------
OIL & GAS DRILLING - 1.55%
100,000 Noble Drilling Corp. * 2,406,300
--------------------------
PRIVATE CORRECTIONS - 3.93%
260,000 Corrections Corporation of America * (a) 6,110,000
--------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
-13-
<PAGE> 29
AUGUSTA PARTNERS, L.P.
SCHEDULE OF PORTFOLIO INVESTMENTS (UNAUDITED) (CONTINUED)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
JUNE 30, 1998
MARKET VALUE
SHARES
<S> <C> <C>
COMMON STOCKS - (CONTINUED)
PROPERTY/CASUALTY INSURANCE - 1.63%
55,000 Chicago Title Corp. * $ 2,540,340
--------------------------
PUBLISHING - PERIODICALS - 1.32%
80,000 Petersen Companies, Inc., Class A * 2,050,000
--------------------------
RENTAL AUTO/ EQUIPMENT - 0.93%
50,000 Leasing Solutions, Inc. * (b) 1,437,500
--------------------------
RETAIL - INTERNET - 1.85%
150,000 software.net Corp. * 2,868,750
--------------------------
RETAIL - MAJOR DEPARTMENT STORE - 0.98%
25,000 Sears, Roebuck and Co. 1,526,575
--------------------------
RETAIL - RESTAURANTS - 2.18%
60,000 Outback Steakhouse, Inc. * 2,340,000
300,000 Shoney's, Inc. * 1,050,000
--------------------------
3,390,000
--------------------------
SATELLITE TELECOMMUNICATIONS - 5.88%
250,000 ICG Communications, Inc. * 9,140,750
--------------------------
TELECOMMUNICATIONS EQUIPMENT - 4.69%
70,000 Associated Group, Inc., Class B * (b) 2,782,500
150,000 DSC Communications Corp. * 4,500,000
--------------------------
7,282,500
--------------------------
TELECOMMUNICATIONS SERVICES - 2.05%
100,000 Hyperion Telecommunications, Inc., Class A * 1,568,800
55,000 Teligent, Inc., Class A * 1,619,090
--------------------------
3,187,890
--------------------------
TELEPHONE - INTEGRATED - 3.51%
50,000 Telecomunicacoes Brasileiras S.A., Sponsored ADR 5,450,000
--------------------------
TELEPHONE - LONG DISTANCE - 10.66%
285,000 MCI Communications Corp. (a) 16,565,625
--------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
-14-
<PAGE> 30
AUGUSTA PARTNERS, L.P.
SCHEDULE OF PORTFOLIO INVESTMENTS (UNAUDITED) (CONTINUED)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
JUNE 30, 1998
MARKET VALUE
SHARES
<S> <C> <C>
COMMON STOCKS - (CONTINUED)
TELEVISION - 2.51%
60,000 Young Broadcasting, Inc., Class A * (a) $ 3,900,000
--------------------------
TOTAL COMMON STOCKS (COST $121,203,619) 135,959,658
==========================
PREFERRED STOCKS - 3.74%
COMMERCIAL SERVICES - 1.21%
50,000 Cendant Corp., 7.5%, 02/16/01, PRF Conv., $48.10 1,871,900
--------------------------
DRUG DELIVERY SYSTEMS - 1.33%
15,000 Alkermes, Inc., 6.5%, 12/31/49, PRF Conv., $29.625 620,625
35,000 Alkermes, Inc., 6.5%, 12/31/49, 144A PRF Conv., $29.625 1,448,125
--------------------------
2,068,750
--------------------------
TELECOMMUNICATIONS SERVICES - 1.20%
40,000 Omnipoint Corp., 7.0%, 12/31/49, 144A PRF Conv., $31.12 1,870,000
--------------------------
TOTAL PREFERRED STOCKS (COST $6,108,783) 5,810,650
==========================
FACE
AMOUNT
BONDS - 6.87%
TELECOMMUNICATIONS SERVICES - 6.87%
$ 7,250,000 NTL Inc., 7.00%, 06/15/08, Conv., $37.87 10,670,550
--------------------------
TOTAL BONDS (COST $8,204,745) 10,670,550
==========================
NUMBER OF
CONTRACTS
CALL OPTIONS - 1.55%
CABLE TV - 0.10%
270 MediaOne Group, Inc., 07/18/98, $40.00 148,500
--------------------------
OIL COMPANY - EXPLORATION & PRODUCTION - 0.10%
600 Triton Energy Ltd., 07/18/98, $40.00 52,500
400 Triton Energy Ltd., 08/22/98, $40.00 97,500
--------------------------
150,000
--------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
-15-
<PAGE> 31
AUGUSTA PARTNERS, L.P.
SCHEDULE OF PORTFOLIO INVESTMENTS (UNAUDITED) (CONTINUED)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
JUNE 30, 1998
NUMBER OF MARKET VALUE
CONTRACTS
<S> <C> <C>
CALL OPTIONS - (CONTINUED)
PRIVATE CORRECTIONS - 0.08%
700 Corrections Corporation of America, 7/18/98, $22.50 $ 122,500
--------------------------
TELEPHONE - INTEGRATED - 1.23%
475 Telecomunicacoes Brasileiras S.A., Sponsored ADR, 08/22/98, $105.00 546,250
625 Telecomunicacoes Brasileiras S.A., Sponsored ADR, 10/17/98, $110.00 796,875
550 Telecomunicacoes Brasileiras S.A., Sponsored ADR, 10/17/98, $115.00 570,625
--------------------------
1,913,750
--------------------------
TELEPHONE - LONG DISTANCE - 0.04%
200 MCI Communications Corp., 07/18/98, $55.00 67,500
--------------------------
TOTAL CALL OPTIONS (COST $2,628,693) 2,402,250
==========================
PUT OPTIONS - 0.15%
INDEX - .15%
135 S & P 500 Index, 09/19/98, $1,075.00 239,625
--------------------------
TOTAL PUT OPTIONS (COST $378,270) 239,625
==========================
TOTAL INVESTMENTS (COST $138,524,110)** - 99.80% 155,082,733
==========================
OTHER ASSETS, LESS LIABILITIES - 0.20% 310,660
--------------------------
NET ASSETS - 100.00% $ 155,393,393
==========================
</TABLE>
(a) Partially or wholly held in a pledged account by the Custodian as
collateral for securities sold short.
(b) Wholly held in a pledged account by the Custodian as collateral for open
written options.
* Non-income producing security.
** Also cost for federal income tax purposes.
The accompanying notes are an integral part of these financial statements.
-16-
<PAGE> 32
AUGUSTA PARTNERS, L.P.
SCHEDULE OF SECURITIES SOLD, NOT YET PURCHASED (UNAUDITED)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
JUNE 30, 1998
MARKET VALUE
SHARES
<S> <C> <C>
SHORT COMMON STOCK - (10.83%)
AUTO/TRUCK PARTS & EQUIPMENT - (0.32%)
30,000 Exide Corp. $ (504,390)
------------------------
COLLECTIBLES - (0.73%)
35,000 Action Performance Companies, Inc. (1,126,580)
------------------------
COMMERCIAL BANKS - (2.29)%
150,000 Synovus Financial Corp. (3,562,500)
------------------------
COMPUTER DATA SECURITY - (0.40%)
10,000 SCM Microsystems, Inc. (625,000)
------------------------
MEDICAL - BIOMEDICAL/GENE - (0.39%)
31,250 Organogenesis, Inc. (613,281)
------------------------
MEDICAL - DRUGS - (3.02%)
35,000 Merck & Co., Inc. (4,681,250)
------------------------
MEDICAL INSTRUMENTS - (1.85%)
40,000 Boston Scientific Corp. (2,865,000)
------------------------
MEDICAL PRODUCTS - (0.48%)
30,000 Closure Medical Corp. (746,250)
------------------------
TELECOMMUNICATIONS SERVICES - (0.95%)
20,000 Level 3 Communications, Inc. (1,480,000)
------------------------
25,000 WIRELESS EQUIPMENT - (0.40%)
American Tower Corp., Class A (623,450)
------------------------
TOTAL SHORT COMMON STOCK PROCEEDS ($15,733,812) $ (16,827,701)
========================
</TABLE>
The accompanying notes are an integral part of these financial statements.
-17-
<PAGE> 33
AUGUSTA PARTNERS, L.P.
SCHEDULE OF WRITTEN OPTIONS (UNAUDITED)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
JUNE 30, 1998
NUMBER OF MARKET VALUE
CONTRACTS
<S> <C> <C>
WRITTEN CALL OPTIONS - (0.31%)
AGRICULTURAL BIOTECHNOLOGY - (0.08%)
500 Monsanto Co., 10/17/98, $60.00 $ (118,750)
-------------------------
INDEX - (0.20%)
135 S & P 500, 09/19/98, $1,175.00 (313,875)
-------------------------
MEDICAL - DRUGS - (0.03%)
300 Warner-Lambert Co., 08/22/98, $75.00 (54,375)
-------------------------
TOTAL WRITTEN CALL OPTIONS - PROCEEDS ($477,224) (487,000)
-------------------------
WRITTEN PUT OPTIONS - (0.04%)
INDEX -(0.04%)
135 S & P 500, 09/19/98, $950.00 (64,125)
-------------------------
TOTAL WRITTEN PUT OPTIONS - PROCEEDS ($107,726) (64,125)
-------------------------
TOTAL OPTIONS WRITTEN - PROCEEDS ($584,950) $ (551,125)
=========================
</TABLE>
The accompanying notes are an integral part of these financial statements.
-18-
<PAGE> 34
AUGUSTA PARTNERS, L.P.
FINANCIAL STATEMENTS
WITH REPORT OF INDEPENDENT AUDITORS
FOR THE YEAR ENDED
DECEMBER 31, 1997
<PAGE> 35
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> 36
[ERNST & YOUNG LETTERHEAD]
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/ Ernst & Young LLP
New York, New York
February 9, 1998
-1-
<PAGE> 37
AUGUSTA PARTNERS, L.P.
STATEMENT OF ASSETS, LIABILITIES AND PARTNERS' CAPITAL (IN THOUSANDS)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DECEMBER 31, 1997
<S> <C>
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
=========
</TABLE>
The accompanying notes are an integral part of these financial statements.
-2-
<PAGE> 38
AUGUSTA PARTNERS, L.P.
STATEMENT OF OPERATIONS (IN THOUSANDS)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1997
<S> <C>
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
========
</TABLE>
The accompanying notes are an integral part of these financial statements.
-3-
<PAGE> 39
AUGUSTA PARTNERS, L.P.
STATEMENT OF CHANGES IN PARTNERS' CAPITAL - NET ASSETS (IN THOUSANDS)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERIOD FROM
SEPTEMBER 4, 1996
(COMMENCEMENT OF
YEAR ENDED OPERATIONS) TO
DECEMBER 31, 1997 DECEMBER 31, 1996
<S> <C> <C>
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
========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
-4-
<PAGE> 40
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> 41
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> 42
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> 43
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> 44
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> 45
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> 46
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:
<TABLE>
<CAPTION>
NET GAINS / (LOSSES)
FOR THE YEAR ENDED
DECEMBER 31, 1997
--------------------
<S> <C>
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
</TABLE>
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> 47
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%
</TABLE>
* 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.
9. SUBSEQUENT EVENT
Effective January 1, 1998, the Partnership received additional Limited
Partner capital contributions of approximately $9,390,000.
-12-
<PAGE> 48
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:
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN
--- ------- -------
<S> <C> <C>
89,949,651 479,120 2,190,264
</TABLE>
-13-
<PAGE> 49
AUGUSTA PARTNERS, L.P.
SCHEDULE OF PORTFOLIO INVESTMENTS
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DECEMBER 31, 1997
SHARES MARKET VALUE
<S> <C> <C>
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
--------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
-14-
<PAGE> 50
AUGUSTA PARTNERS, L.P.
SCHEDULE OF PORTFOLIO INVESTMENTS (CONTINUED)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DECEMBER 31, 1997
MARKET VALUE
SHARES
<S> <C> <C>
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
--------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
-14-
<PAGE> 51
AUGUSTA PARTNERS, L.P.
SCHEDULE OF PORTFOLIO INVESTMENTS (CONTINUED)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DECEMBER 31, 1997
MARKET VALUE
SHARES
<S> <C> <C>
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
--------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
-16-
<PAGE> 52
AUGUSTA PARTNERS, L.P.
SCHEDULE OF PORTFOLIO INVESTMENTS (CONTINUED)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DECEMBER 31, 1997
MARKET VALUE
SHARES
<S> <C> <C>
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
--------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
-17-
<PAGE> 53
AUGUSTA PARTNERS, L.P.
SCHEDULE OF PORTFOLIO INVESTMENTS (CONTINUED)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DECEMBER 31, 1997
MARKET VALUE
SHARES
<S> <C> <C>
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
==========================
</TABLE>
The accompanying notes are an integral part of these financial statements.
-18-
<PAGE> 54
AUGUSTA PARTNERS, L.P.
SCHEDULE OF PORTFOLIO INVESTMENTS (CONTINUED)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DECEMBER 31, 1997
FACE MARKET VALUE
AMOUNT
<S> <C> <C>
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
</TABLE>
The accompanying notes are an integral part of these financial statements.
-19-
<PAGE> 55
AUGUSTA PARTNERS, L.P.
SCHEDULE OF PORTFOLIO INVESTMENTS (CONTINUED)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DECEMBER 31, 1997
NUMBER OF MARKET VALUE
CONTRACTS
<S> <C> <C>
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
=========================
</TABLE>
(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> 56
AUGUSTA PARTNERS, L.P.
SCHEDULE OF SECURITIES SOLD, NOT YET PURCHASED
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DECEMBER 31, 1997
MARKET VALUE
SHARES
<S> <C> <C>
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)
--------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
-21-
<PAGE> 57
AUGUSTA PARTNERS, L.P.
SCHEDULE OF SECURITIES SOLD, NOT YET PURCHASED (CONTINUED)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DECEMBER 31, 1997
MARKET VALUE
SHARES
<S> <C> <C>
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)
==========================
</TABLE>
The accompanying notes are an integral part of these financial statements.
-22-
<PAGE> 58
AUGUSTA PARTNERS, L.P.
SCHEDULE OF WRITTEN OPTIONS
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DECEMBER 31, 1997
NUMBER OF MARKET VALUE
CONTRACTS
<S> <C> <C>
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)
--------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
-23-
<PAGE> 59
AUGUSTA PARTNERS, L.P.
SCHEDULE OF WRITTEN OPTIONS (CONTINUED)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DECEMBER 31, 1997
NUMBER OF MARKET VALUE
CONTRACTS
<S> <C> <C>
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)
==========================
</TABLE>
The accompanying notes are an integral part of these financial statements.
-24-
<PAGE> 60
FINANCIAL STATEMENTS
WITH REPORT OF INDEPENDENT AUDITORS
AUGUSTA PARTNERS, L.P.
PERIOD FROM SEPTEMBER 4, 1996
(COMMENCEMENT OF OPERATIONS)
TO DECEMBER 31, 1996
<PAGE> 61
AUGUSTA PARTNERS, L.P.
FINANCIAL STATEMENTS
WITH REPORT OF INDEPENDENT AUDITORS
PERIOD FROM SEPTEMBER 4, 1996 (COMMENCEMENT OF OPERATIONS)
TO DECEMBER 31, 1996
CONTENTS
<TABLE>
<S> <C>
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
Schedule of Portfolio Investments ........................................ 13
Schedule of Securities Sold. Not Yet Purchased ........................... 18
</TABLE>
<PAGE> 62
[Ernst & Young LLP Letterhead]
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 and securities sold, not yet purchased, as of December 31, 1996, and
the related statements of operations and changes in partners' capital - net
assets for the period from September 4, 1996 (commencement of operations) to
December 31, 1996. 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, 1996, 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, 1996, the results of its operations, and the changes in its
partners' capital - net assets for the period from September 4, 1996 to December
31, 1996, in conformity with generally accepted accounting principles.
/s/ Ernst & Young LLP
New York, New York
February 5, 1997
- 1 -
<PAGE> 63
AUGUST PARTNERS, L.P.
STATEMENT OF ASSETS, LIABILITIES AND PARTNERS' CAPITAL (IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31, 1996
<S> <C>
ASSETS:
Cash $ 2,758
Investments in securities, at market
(identified cost - $92,000) 100,349
Due from broker 20,931
Dividends receivable 23
Interest receivable 120
Organizational costs (net of accumulated amortization of $45) 646
Other assets 48
---------
TOTAL ASSETS 124,875
---------
LIABILITIES
Due to broker 951
Securities sold, not yet purchased - at market
(proceeds of sales - $6,839) 6,395
Due to affiliate 4
Management fee payable 97
Accrued expenses 383
---------
TOTAL LIABILITIES 7,830
---------
NET ASSETS $ 117,045
=========
PARTNERS' CAPITAL
Represented by:
Capital contributions, (net of syndication costs of $50) $ 100,005
Accumulated net investment loss (304)
Accumulated net realized gain on investments 8,552
Net unrealized appreciation on investments and foreign
currency transactions 8,792
---------
PARTNERS' CAPITAL - NET ASSETS $ 117,045
=========
</TABLE>
The accompanying notes are an integral part of these financial statements.
- 2 -
<PAGE> 64
AUGUST PARTNERS, L.P.
STATEMENT OF OPERATIONS (IN THOUSANDS)
<TABLE>
<CAPTION>
PERIOD FROM SEPTEMBER 4, 1996
(COMMENCEMENT OF OPERATIONS)
TO DECEMBER 31, 1996
<S> <C>
INVESTMENT INCOME:
Dividends $ 142
Interest 414
--------
556
--------
OPERATING EXPENSES
Management fee 350
Professional fees 295
Administration fees 71
Amortization of organizational costs 45
Custodian fees 16
Dividends on securities sold, not yet purchased 20
Individual General Partners' fees and expenses 14
Miscellaneous 49
--------
860
--------
NET INVESTMENT LOSS (304)
--------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
REALIZED GAIN (LOSS) ON INVESTMENTS
Investment securities 9,747
Futures transactions (84)
Purchased options (341)
Written options (64)
Short sales (706)
--------
NET REALIZED GAIN ON INVESTMENTS 8,552
--------
UNREALIZED APPRECIATION ON INVESTMENTS
AND FOREIGN CURRENCY TRANSACTIONS
Beginning of period --
End of period 8,792
--------
8,792
--------
NET REALIZED AND UNREALIZED GAIN 17,344
--------
INCREASE IN PARTNERS' CAPITAL DERIVED
FROM INVESTMENT ACTIVITIES $ 17,040
========
</TABLE>
The accompanying notes are an integral part of these financial statements.
- 3 -
<PAGE> 65
AUGUST PARTNERS, L.P.
STATEMENT OF CHANGES IN PARTNERS' CAPITAL - NET ASSETS (IN THOUSANDS)
<TABLE>
<CAPTION>
PERIOD FROM SEPTEMBER 4, 1996
(COMMENCEMENT OF OPERATIONS)
TO DECEMBER 31,1996
<S> <C>
INVESTMENT ACTIVITIES
Net investment loss $ (304)
Net realized gain on investments 8,552
Change in unrealized appreciation on
investments and foreign currency transactions 8,792
---------
INCREASE IN PARTNERS' CAPITAL DERIVED
FROM INVESTMENT ACTIVITIES 17,040
PARTNERS' CAPITAL TRANSACTIONS
Capital contributions 100,055
Syndication costs (50)
---------
INCREASE IN PARTNERS' CAPITAL DERIVED
FROM CAPITAL TRANSACTIONS 100,005
PARTNERS' CAPITAL AT BEGINNING OF PERIOD --
---------
PARTNERS' CAPITAL AT END OF PERIOD $ 117,045
=========
</TABLE>
The accompanying notes are an integral part of these financial statements.
- 4 -
<PAGE> 66
AUGUSTA PARTNERS, L.P.
NOTES TO FINANCIAL STATEMENTS - DECEMBER 31, 1996
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. 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
will also invest in equity securities of foreign issuers and
in bonds and other fixed-income securities of U.S. and foreign
issuers.
The Agreement provides for five "Individual General Partners"
and a "Manager." The Manager is Augusta Management, L.L.C.
whose principal members are Oppenheimer & Co., Inc. ("Opco")
and Ardsley Advisory Partners ("Ardsley"). Investment
professionals employed by Ardsley will manage the
Partnership's investment portfolio on behalf of the Manager
under Opco's supervision.
The acceptance of initial and additional contributions, as
well as the repurchase of Partnership interests, are 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 (other than in 1996)
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.
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.
- 5 -
<PAGE> 67
AUGUSTA PARTNERS, L.P.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
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. 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 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
- 6 -
<PAGE> 68
AUGUSTA PARTNERS, L.P.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
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.
Morgan Stanley Trust Company serves as custodian of the
Partnership's assets.
b. PARTNERSHIP EXPENSES
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.
Syndication costs totaling $50,000 related to the
partnership's initial offering have been charged directly to
the capital accounts of the limited and general partners.
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. RELATED PARTY TRANSACTIONS
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 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 period ended December 31, 1996, Opco earned $19,106
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
cumulative net profits with
- 7 -
<PAGE> 69
AUGUSTA PARTNERS, L.P.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
respect to such limited partner through the close of any prior
period. As of December 31, 1996, there was no incentive
allocation.
Each Independent General Partner receives an annual retainer
of $5,000 plus a fee for each meeting attended. The other
Individual General Partners do not receive any annual or other
fees. 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 period from
September 4, 1996 to December 31, 1996, these fees (including
meeting fees and a pro-rata portion of the annual retainer)
and expenses totaled $13,517. One Individual General Partner,
who is an "Interested person" of the Partnership, as defined
by the Act, holds a limited partnership interest in the
Partnership.
4. SECURITIES TRANSACTIONS
Aggregate purchases and sales of investment securities,
excluding short-term debt securities, for the period from
September 4, 1996 to December 31, 1996, amounted to
$296,890,226 and $215,761,834, respectively.
At December 31, 1996, the cost of investments for federal
income tax purposes was substantially the same as the cost for
financial reporting purposes. At December 31, 1996,
accumulated net unrealized appreciation on investments in
securities, and securities sold, not yet purchased, was
$8,792,156, consisting of $11,254,994 gross unrealized
appreciation and $2,462,838 gross unrealized depreciation.
Due from broker primarily represents proceeds from unsettled
trades and short sales. Due to broker primarily represents
liabilities from unsettled security purchases.
5. 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
contain varying decrees 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.
- 8 -
<PAGE> 70
AUGUSTA PARTNERS, L.P.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
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, 1996, 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.
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 counter
party 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 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.
A summary of the notional amounts of open purchased option
contracts as of December 31, 1996, is as follows:
<TABLE>
<CAPTION>
NOTIONAL AMOUNT
---------------
<S> <C>
Equity Options $ 7,078,750
Equity Index Options 8,750,000
Foreign Exchange Options 49,514,200
</TABLE>
- 9 -
<PAGE> 71
AUGUST PARTNERS, L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Transactions in written options were as follows:
<TABLE>
<CAPTION>
CALL OPTIONS PUT OPTIONS
--------------------------- ---------------------------
NUMBER AMOUNT NUMBER AMOUNT
OF CONTRACTS OF PREMIUM OF CONTRACTS OF PREMIUM
------------ ---------- ------------ ----------
<S> <C> <C> <C> <C>
Beginning balance -- $ 0 -- $ 0
Options Written 2,680 890,170 1,000 61,498
Options Closed (2,680) (890,170) (1,000) (61,498)
----- --------- ----- ---------
Options outstanding at December 31, 1996 -- $ 0 -- $ 0
===== ========= ===== =========
</TABLE>
6. 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:
<TABLE>
<CAPTION>
NET GAINS
(LOSSES)
FOR 1996
-----------
<S> <C>
Equity transactions $15,263,691
Fixed income 135,175
Foreign Exchange (including realized gains of $566,945) 1,945,522
-----------
Net Gain from investment transactions $17,344,388
===========
</TABLE>
- 10 -
<PAGE> 72
AUGUST PARTNERS, L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
The following table presents the year-end fair values of
derivative financial instruments and the average fair values
during the year of those instruments:
<TABLE>
<CAPTION>
FAIR VALUE AT AVERAGE FAIR
DECEMBER 31, VALUE FOR
1996 1996
------------- ------------
<S> <C> <C>
ASSETS:
Equity $1,745,438 $1,234,430
Fixed Income -- --
Foreign Exchange 2,024,103 1,311,029
</TABLE>
Average fair values presented above are based upon each type's
month-end fair value during the period ended December 31,
1996.
7. SHORT-TERM BORROWINGS
The Partnership has the ability to trade on margin and, in
that connection, borrow funds from brokers and banks for the
purchase of equity and fixed income securities. 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 satisfy
an asset coverage requirement of 300% of its indebtedness,
including amounts borrowed, measured at the time the
Partnership incurs the indebtedness. As of December 31, 1996,
the Partnership had no outstanding margin borrowings. During
the period ended December 31, 1996, the average daily amount
of short term debt was not material to the Partnership's total
net assets.
- 11 -
<PAGE> 73
AUGUST PARTNERS, L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
8. SELECTED FINANCIAL RATIOS AND OTHER SUPPLEMENTAL INFORMATION
The following, represents the ratios to average net assets and
other supplemental information for the period:
<TABLE>
<CAPTION>
SEPTEMBER 4, 1996
(COMMENCEMENT OF
OPERATIONS) TO
DECEMBER 31, 1996
-----------------
<S> <C>
Investment loss (.83%)*
Operating expenses 2.34%*
Dividends on securities
sold, not yet purchased .06%*
Portfolio turnover 215%
Average Commission Rate $ .0569**
Total return 17.20%***
</TABLE>
* Annualized.
** Average commission rate per share on purchases and sales of
investment securities.
*** 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 General Partner, if any.
Total returns for a period of less than a full year are not
annualized.
- 12 -
<PAGE> 74
AUGUST PARTNERS, L.P.
SCHEDULE OF PORTFOLIO INVESTMENTS
<TABLE>
<CAPTION>
DECEMBER 31, 1996
MARKET VALUE
SHARES
<S> <C> <C>
COMMON STOCKS - 74.38%
AGRICULTURAL OPERATIONS - 1.23%
45,000 Delta & Pine Land Co. $1,440,000
----------
AIRLINES - 1.57%
65,000 Continental Airlines, Inc., Class B* 1,836,250
----------
COMMERCIAL SERVICES - 3.11%
150,000 CUC International, Inc.* 3,637,500
----------
COMPUTER SERVICES & SOFTWARE - 3.96%
50,000 BMC Software, Inc.* 2,068,750
10,000 Computer Associates Int'l, Inc. 497,500
75,000 Jetform Corp.* 1,387,500
50,000 Platinum Technology, Inc.* 681,250
----------
4,635,000
----------
COMPUTER HARDWARE - 1.31%
40,000 Interphase Corp.* 400,000
20,000 Western Digital Corp.* 1,137,500
----------
1,537,500
----------
DIVERSIFIED OPERATIONS - .99%
25,000 Corning, Inc. 1,156,250
----------
ELECTRONICS - 3.55%
85,000 Kent Electronics Corp.* 2,188,750
60,000 Sheldahl, Inc.* 1,125,000
27,500 Ultrak, Inc.* 838,750
----------
4,152,500
----------
FINANCIAL SERVICES - 5.09%
50,000 Big Foot Financial Corp.% 650,000
33,000 Chase Manhattan Corp. 2,949,375
75,000 Lehman Brothers Holdings, Inc. 2,353,125
----------
5,952,500
----------
</TABLE>
* Non-income producing security.
The accompanying notes are an integral part of these financial statements.
- 13 -
<PAGE> 75
AUGUST PARTNERS, L.P.
SCHEDULE OF PORTFOLIO INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
DECEMBER 31, 1996
MARKET VALUE
SHARES
<S> <C> <C>
COMMON STOCKS - 74.38% (CONTINUED)
HEALTHCARE SERVICES & MANAGEMENT - 1.18%
135,000 American Oncology Resources, Inc.* $ 1,383,750
-----------
HOTELS & MOTELS - 1.52%
110,000 Prime Hospitality Corp.* 1,773,750
-----------
HOUSEHOLD PRODUCTS/WARES - .98%
70,000 AJL Peps Trust 1,146,250
-----------
HUMAN RESOURCES - 1.19%
60,000 Emcare Holdings, Inc.* 1,395,000
-----------
MANUFACTURING - 1.06%
75,000 Foamex Int'l, Inc.* 1,237,500
-----------
MEDICAL / BIOMEDICAL - 9.84%
150,000 Alpha-Beta Tech., Inc.* 1,584,375
30,000 Biochem Pharmaceuticals, Inc.* 1,507,500
100,000 Cellpro, Inc.* 1,250,000
20,000 Centocor, Inc.* 715,000
200,000 Liposome Co., Inc.* 3,825,000
80,000 Myriad Genetics, Inc.* 2,020,000
150,000 NeoRx Corp.* 618,750
-----------
11,520,625
-----------
MEDICAL INSTRUMENTS & PRODUCTS - 12.21%
80,500 Boston Scientific Corp.* 4,830,000
100,000 Cytyc Corp.* 2,700,000
45,000 Interneuron Pharmaceuticals, Inc.* 1,170,000
60,000 OccuSystems, Inc.* 1,620,000
31,000 Sabratek Corp.* 492,125
75,000 Ventritex, Inc.* 1,846,875
45,000 Vivus, Inc.* 1,631,258
-----------
14,290,258
-----------
NETWORKING PRODUCTS - 1.90%
35,000 Cisco Systems, Inc.* 2,226,875
-----------
</TABLE>
* Non-income producing security.
The accompanying notes are an integral part of these financial statements.
- 14 -
<PAGE> 76
AUGUST PARTNERS, L.P.
SCHEDULE OF PORTFOLIO INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
DECEMBER 31, 1996
MARKET VALUE
SHARES
<S> <C> <C>
COMMON STOCKS - 74.38% (CONTINUED)
OFFICE SUPPLIES & FORMS - 2.26%
25,000 Alco Standard Corp.* $ 1,290,625
75,000 Staples, Inc.* 1,354,688
-----------
2,645,313
-----------
OIL/GAS EQUIPMENT & SERVICES - 15.16%
80,000 Baker Hughes, Inc. 2,760,000
15,000 Callon Petroleum Co.* 285,000
70,000 Global Industries, Ltd.* 1,303,750
115,000 Input/Output, Inc.* 2,127,500
65,000 Marine Drilling Companies, Inc.* 1,279,688
100,000 Nabors Industries, Inc.* 1,925,000
35,000 Nobel Drilling Corp.* 695,625
30,000 Nuevo Energy Co.* 1,560,000
50,000 Reading and Bates Corp.* 1,325,000
80,000 Texas Meridian Resources Corp.* 1,370,000
30,000 Union Pacific Resources Group Inc. 870,000
75,000 Weatherford Enterra, Inc.* 2,250,000
-----------
17,751,563
-----------
RESTAURANTS - .86%
50,000 Dave & Busters, Inc.* 1,006,250
-----------
RETAIL & MERCHANDISING - 1.38%
20,000 Home Depot, Inc. 1,002,500
52,000 Micro Warehouse, Inc.* 616,875
-----------
1,619,375
-----------
RETIREMENT/AGED CARE - .45%
45,000 ARV Assisted Living, Inc.* 523,125
-----------
TELECOMMUNICATIONS EQUIPMENT & LONG DISTANCE SERVICE - 2.42%
50,000 ACC Corp. * 1,512,500
75,000 ICG Communications, Inc.* 1,321,875
-----------
2,834,375
-----------
</TABLE>
* Non-income producing security.
The accompanying notes are an integral part of these financial statements.
- 15 -
<PAGE> 77
AUGUST PARTNERS, L.P.
SCHEDULE OF PORTFOLIO INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
DECEMBER 31, 1996
MARKET VALUE
SHARES
<S> <C> <C>
COMMON STOCKS - 74.38% (CONTINUED)
THERAPEUTICS - 1.16%
20,000 Agouron Pharmaceuticals, Inc. * $ 1,355,000
-----------
TOTAL COMMON STOCKS (COST $80,910,903) 87,056,509
===========
PREFERRED STOCKS - 2.29%
TELECOMMUNICATIONS EQUIPMENT &
LONG DISTANCE SERVICE
50,000 Globalstar Telecom, Ltd., PRF, Conv. 6.50% 144A* 2,675,000
-----------
TOTAL PREFERRED STOCKS (COST $2,125,000) 2,675,000
===========
FACE
AMOUNT
BONDS - 5.85%
BROADCASTING - 1.19%
$1,500,000 Comcast Corp., 3.375%, 09/09/05, Conv. 1,391,250
-----------
CABLE & OTHER PAY TELEVISION SERVICES - 3.90%
4,250,000 International Cabletel, Inc., 7.25%, 04/15/05,
Conv., 144A
4,568,750
-----------
RETIREMENT / AGED CARE - .76%
1,250,000 Sterling House Corp., 6.75%, 06/30/06, Conv. 144A 887,500
-----------
TOTAL BONDS (COST $6,712,325) 6,847,500
===========
NUMBER OF
CONTRACTS
CALL OPTIONS - 1.39%
COMPUTER SERVICES & SOFTWARE - .19%
500 Platinum Technology, Inc., 06/21/97, $10.00 218,750
-----------
MEDICAL / BIOMEDICAL - .68%
500 Autoimmune, Inc., 04/19/97, $12.50 193,000
1,000 Autoimmune, Inc., 07/19/97, $12.50 475,000
400 Liposome Co., Inc., 02/22/97, $17.50 125,000
-----------
793,750
-----------
</TABLE>
* Non-income producing security.
The accompanying notes are an integral part of these financial statements.
- 16 -
<PAGE> 78
AUGUST PARTNERS, L.P.
SCHEDULE OF PORTFOLIO INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
NUMBER OF DECEMBER 31, 1996
CONTRACTS MARKET VALUE
<S> <C> <C>
CALL OPTIONS - 1.39% (CONTINUED)
OIL/GAS EQUIPMENT & SERVICES - .06%
150 Ashland, Inc., 01/18/97, $40.00 $ 58,125
300 Ashland, Inc., 01/18/97, $45.00 13,125
------------
71,250
------------
TELECOMMUNICATIONS EQUIPMENT & LONG DISTANCE SERVICE - .46%
180 WorldCom, Inc., 01/98, $20.00 162,000
175 WorldCom, Inc. 01/98, $22.50 122,500
400 WorldCom, Inc. 01/98, $25.00 255,000
------------
539,500
------------
TOTAL CALL OPTIONS (COST $1,322,627) 1,623,250
============
PUT OPTIONS - 1.83%
CROSS CURRENCY - 1.73%
2 OTC ITL Call/CHF Put, 09/27/97, strike 1210
ITL/CHF, Notional 66,250,000 CHF 2,024,103
------------
LEISURE & RECREATION/GAMING - .02%
100 Callaway Golf Co., 01/18/97, $30.00 20,000
------------
STOCK INDEX - .08%
250 S & P 400 Midcap, 01/18/97, $250 60,937
100 S & P 400 Midcap, 01/18/97 $255 41,250
------------
TOTAL PUT OPTIONS (COST $929,256) 2,146,290
============
TOTAL INVESTMENTS (COST $92,000,111) - 85.74% 100,348,549
============
OTHER ASSETS, LESS LIABILITIES - 14.26% 16,696,523
------------
NET ASSETS - 100.00% $117,045,072
============
</TABLE>
The accompanying notes are an integral part of these financial statements.
- 17 -
<PAGE> 79
AUGUSTA PARTNERS, L.P.
SCHEDULE OF SECURITIES SOLD, NOT YET PURCHASED
<TABLE>
<CAPTION>
DECEMBER 31, 1996
SHARES MARKET VALUE
<S> <C> <C>
SHORT COMMON STOCK - (5.46%)
COMMERCIAL SERVICES - (.67%)
(30,000) TeleTech Holdings, Inc.
$ (780,000)
-----------
COSMETICS & TOILETRIES - (.17%)
(12,500) Thermolase Corp. (196,875)
-----------
CONSULTING SERVICES - (.30%)
(7,500) Registry, Inc. (345,938)
-----------
FOOD - (1.96%)
(35,000) Kellog Co. (2,296,875)
-----------
MEDICAL INSTRUMENTS & PRODUCTS - (.44%)
(15,000) HENRY SCHEIN, INC. (515,625)
-----------
NETWORK PRODUCTS - (.54%)
(30,000) Bay Networks, Inc. (630,000)
-----------
TELECOMMUNICATIONS EQUIPMENT & LONG DISTANCE
SERVICE - (1.38%)
(80,000) Deutsche Telekom AG - Sponsored
ADR
(1,630,000)
-----------
TOTAL SHORT COMMON STOCK
PROCEEDS ($6,839,031) $(6,395,313)
===========
</TABLE>
- 18 -
<PAGE> 1
Exhibit C
<PAGE> 2
Exhibit C
LETTER OF TRANSMITTAL
Regarding the
Interests
in
AUGUSTA PARTNERS, L.P.
Tendered Pursuant to the Offer to Purchase
Dated November 25, 1998
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE
AT, AND THIS LETTER OF TRANSMITTAL MUST BE
RECEIVED BY THE PARTNERSHIP BY, 12:00 MIDNIGHT NEW YORK
CITY TIME, ON THURSDAY, DECEMBER 31, 1998,
UNLESS THE OFFER IS EXTENDED.
Complete This Letter Of Transmittal And Return Or Deliver To:
PFPC Inc.
P.O. Box 358
Claymont, Delaware 19703
Attn: Karen Castagna
For additional information call:
Phone: (888) 697-9661
Fax: (302) 791-2386
Ladies and Gentlemen:
The undersigned hereby tenders to Augusta Partners, L.P., a
closed-end, non-diversified, management investment company organized under the
laws of the State of Delaware (the "Partnership"), the partnership interest in
the Partnership or portion thereof held by the undersigned, described and
specified below, upon the terms and conditions set forth in the offer to
purchase, dated November 25, 1998 ("Offer to Purchase"), receipt of which is
hereby acknowledged, and in this letter of transmittal (which together
constituted the "Offer"). THE TENDER AND THIS LETTER OF TRANSMITTAL ARE SUBJECT
TO ALL THE TERMS AND CONDITIONS SET FORTH IN THE OFFER TO PURCHASE, INCLUDING,
BUT NOT LIMITED TO, THE ABSOLUTE RIGHT OF THE PARTNERSHIP TO
<PAGE> 3
REJECT ANY AND ALL TENDERS DETERMINED BY IT, IN ITS SOLE DISCRETION, NOT TO BE
IN THE APPROPRIATE FORM.
The undersigned hereby sells to the Partnership the
partnership interest in the Partnership or portion thereof tendered hereby
pursuant to the Offer. The undersigned hereby warrants that the undersigned has
full authority to sell the partnership interest in the Partnership or portion
thereof tendered hereby and that the Partnership will acquire good title
thereto, free and clear of all liens, charges, encumbrances, conditional sales
agreements or other obligations relating to the sale thereof, and not subject to
any adverse claim, when and to the extent the same are purchased by it. Upon
request, the undersigned will execute and deliver any additional documents
necessary to complete the sale in accordance with the terms of the Offer.
The undersigned recognizes that under certain circumstances
set forth in the Offer, the Partnership may not be required to purchase any of
the partnership interests in the Partnership or portions thereof tendered
hereby.
Payment of the cash portion of the purchase price for the
partnership interest in the Partnership or portion thereof of the undersigned
(the "Cash Payment"), as described in Section 6 of the Offer to Purchase, shall
be sent to the undersigned by wire transfer to the undersigned's brokerage
account at CIBC Oppenheimer Corp. ("CIBC Opco") unless the undersigned elects to
receive such payment by check posted first class (AT THE SOLE RISK OF ADDRESSEE)
as based on the direction of the undersigned as indicated below. (The
undersigned hereby represents and warrants that the undersigned understands
that, for cash payments wired directly to a partner's brokerage account, upon a
withdrawal of such cash payment from such account, CIBC Opco will subject such
withdrawal to any fees that CIBC Opco would customarily assess upon the
withdrawal of cash from such brokerage account.) (Any payment in the form of
marketable securities would be made by means of special arrangement with the
tendering partner in the sole discretion of the Individual General Partners of
the Partnership.) A promissory note reflecting the contingent payment portion of
the purchase price, as described in Section 6 of the Offer to Purchase, will be
deposited directly to the undersigned's brokerage account with CIBC Opco unless
the undersigned elects below to have the promissory note delivered directly to
the undersigned at the address set forth below. (Any amounts payable under this
promissory note shall be paid to the undersigned in the same manner designated
in this Letter of Transmittal for payment of the Cash Payment. Limited Partners
who elect to receive the Note directly must return the Note pursuant to
instructions that will be provided at a later date in order to receive payment
of such amounts.) The undersigned recognizes that the amount of the Cash Payment
is based on the unaudited net asset value as of December 31, 1998, of the
partnership interest of the Partnership or portion thereof tendered, and that
the contingent payment portion of the purchase price shall be determined upon
completion of the audit of the Partnership's financial statements for 1998,
which is anticipated to be completed not later than 60 days after the
Partnership's fiscal year end, and shall be paid within ten days thereafter in
cash.
All authority herein conferred or agreed to be conferred shall
survive the death or incapacity of the undersigned and the obligation of the
undersigned hereunder shall be binding
-2-
<PAGE> 4
upon the heirs, personal representatives, successors and assigns of the
undersigned. Except as stated in Section 5 of the Offer to Purchase, this tender
is irrevocable.
PART 1. NAME AND ADDRESS:
Name of partner:______________________________________________
Address:______________________________________________________
______________________________________________________
______________________________________________________
Social Security No.
or Taxpayer
Identification No.:___________________________________________
Telephone Number:____( )___________________________________
PART 2. AMOUNT OF PARTNERSHIP INTEREST IN THE PARTNERSHIP TENDERED:
[ ] Entire partnership interest
[ ] Portion of partnership interest expressed in dollar
value (a minimum interest of the greater of $150,000,
net of the tentative incentive allocation, or the
tentative incentive allocation, must be maintained)
$_________
PART 3. PAYMENT INSTRUCTIONS.
CASH PAYMENT
Cash payments will be wire transferred directly to the
undersigned's brokerage account at CIBC Opco unless the
undersigned elects (by checking the box below) to receive such
cash payment by check. (The undersigned hereby represents and
warrants that the undersigned understands that, for cash
payments wired directly to a partner's brokerage account, upon
a withdrawal of such cash payment from such account, CIBC Opco
will subject such withdrawal to any fees that CIBC Opco would
customarily assess upon the withdrawal of cash from such
brokerage account.)
[ ] Remit cash payments by check mailed first class (at the
sole risk of addressee) to the address set forth above.
(Any payment in the form of marketable securities would
be made by means of special arrangements with the
tendering partner.)
-3-
<PAGE> 5
PROMISSORY NOTE
The promissory note reflecting the contingent payment portion
of the purchase price, if applicable, will be deposited
directly to the undersigned's brokerage account at CIBC Opco
unless the undersigned elects (by checking the box below) to
have the promissory note delivered by first class mail
directly to the undersigned at the address set forth above.
[ ] Deliver promissory note to the address set forth above
(at the sole risk of the addressee).
PART 4. SIGNATURE.
FOR INDIVIDUAL INVESTORS: FOR INVESTORS OTHER THAN INDIVIDUALS:
___________________________________ ___________________________________
Signature Print Name of Investor
(SIGNATURE OF OWNER(S) EXACTLY AS
APPEARED ON SUBSCRIPTION AGREEMENT)
___________________________________ ___________________________________
Print Name of Investor Signature
(SIGNATURE OF OWNER(S) EXACTLY AS
APPEARED ON SUBSCRIPTION AGREEMENT)
___________________________________
Print Name of Signatory and Title
___________________________________
Co-signatory (or Joint Tenant
Signature)
if necessary
(SIGNATURE OF OWNER(S) EXACTLY AS
APPEARED ON SUBSCRIPTION AGREEMENT)
___________________________________
Print Name of Co-signatory (or
Joint Tenant)
Date:______________________________
-4-
