AUGUSTA PARTNERS, L.P.
FINANCIAL STATEMENTS
WITH REPORT OF INDEPENDENT AUDITORS
FOR THE YEAR ENDED DECEMBER 31, 1998
AUGUSTA PARTNERS, L.P.
FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1998
<PAGE>
AUGUSTA PARTNERS, L.P.
FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1998
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
Schedule of Portfolio Investments 15
Schedule of Securities Sold, Not Yet Purchased 20
Schedule of Written Options 21
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Partners of
Augusta Partners, L.P.
We have audited the accompanying statement of assets, liabilities and partners'
capital of Augusta Partners, L.P., including the schedules of portfolio
investments, securities sold, not yet purchased, and written options, as of
December 31, 1998, and the related statement of operations for the year then
ended, and the statement of changes in partners' capital - net assets for each
of the two years in the period then ended. These financial statements are the
responsibility of the Partnership's management. Our responsibility is to express
an opinion on these financial statements based on our 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, 1998, 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, 1998, the results of its operations for the year then ended, and
the changes in its partners' capital - net assets for each of the two years in
the period then ended, in conformity with generally accepted accounting
principles.
[GRAPHIC OMITTED]
/S/ ERNST & YOUNG LLP
New York, New York
February 12, 1999
1
<PAGE>
AUGUSTA PARTNERS, L.P.
STATEMENT OF ASSETS, LIABILITIES AND PARTNERS' CAPITAL (IN THOUSANDS)
- --------------------------------------------------------------------------------
DECEMBER 31, 1998
ASSETS
Cash $ 10,502
Investments in securities, at market
(identified cost - $127,558) 157,826
Due from broker 17,418
Dividends receivable 1
Interest receivable 169
Organizational costs
(net of accumulated amortization of $321) 370
Other assets 53
--------
TOTAL ASSETS 186,339
--------
LIABILITIES
Securities sold, not yet purchased, at market
(proceeds of sales - $15,247) 18,565
Outstanding options written, at value
(premiums received - $5,326) 5,221
Withdrawals payable 43,611
Dividends payable on securities sold, not
yet purchased 34
Management fee payable 128
Accrued expenses 329
--------
TOTAL LIABILITIES 67,888
--------
NET ASSETS $118,451
========
PARTNERS' CAPITAL - NET ASSETS
Represented by:
Capital contributions - net $ 47,054
Accumulated net investment loss (1,284)
Accumulated net realized gain on investments 45,626
Accumulated net unrealized appreciation 27,055
---------
PARTNERS' CAPITAL - NET ASSETS $ 118,451
=========
The accompanying notes are an integral part of these financial statements.
2
<PAGE>
AUGUSTA PARTNERS, L.P.
STATEMENT OF OPERATIONS (IN THOUSANDS)
- --------------------------------------------------------------------------------
YEAR ENDED
DECEMBER 31, 1998
INVESTMENT INCOME
Interest $ 1,715
Dividends 616
--------
2,331
--------
EXPENSES
OPERATING EXPENSES:
Management fee 1,442
Professional fees 316
Administration fees 200
Amortization of organizational costs 138
Custodian fees 68
Insurance expense 49
Individual General Partners' fees and expenses 25
Miscellaneous 22
--------
TOTAL OPERATING EXPENSES 2,260
Interest expense 257
Dividends on securities sold, not yet purchased 175
--------
TOTAL EXPENSES 2,692
--------
NET INVESTMENT LOSS (361)
--------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
REALIZED GAIN (LOSS) ON INVESTMENTS:
Investment securities 19,460
Purchased options (4,373)
Futures transactions (89)
Written options (1,377)
Short sales 156
--------
NET REALIZED GAIN ON INVESTMENTS 13,777
--------
NET CHANGE IN UNREALIZED APPRECIATION ON INVESTMENTS 10,678
--------
NET REALIZED AND UNREALIZED GAIN 24,455
--------
INCREASE IN PARTNERS' CAPITAL DERIVED FROM
INVESTMENT ACTIVITIES $ 24,094
========
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
AUGUSTA PARTNERS, L.P.
STATEMENT OF CHANGES IN PARTNERS' CAPITAL - NET ASSETS (IN THOUSANDS)
- --------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED
DECEMBER 31, 1998 DECEMBER 31, 1997
FROM INVESTMENT ACTIVITIES
Net investment loss $ (361) $ (619)
Net realized gain on investments 13,777 23,297
Net change in unrealized appreciation on
investments 10,678 7,585
-------- --------
INCREASE IN PARTNERS' CAPITAL DERIVED
FROM INVESTMENT ACTIVITIES 24,094 30,263
PARTNERS' CAPITAL TRANSACTIONS
Capital contributions 9,618 0
Capital withdrawals - General Partner (5,067) (9,573)
Capital withdrawals - Limited Partners (38,960) (8,969)
-------- --------
DECREASE IN PARTNERS' CAPITAL
DERIVED FROM CAPITAL TRANSACTIONS (34,409) (18,542)
PARTNERS' CAPITAL AT BEGINNING OF PERIOD 128,766 117,045
-------- --------
PARTNERS' CAPITAL AT END OF PERIOD $118,451 $128,766
======== ========
4
<PAGE>
AUGUSTA PARTNERS, L.P.
NOTES TO FINANCIAL STATEMENTS - DECEMBER 31, 1998
- --------------------------------------------------------------------------------
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, 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. (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.
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>
AUGUSTA PARTNERS, L.P.
NOTES TO FINANCIAL STATEMENTS - DECEMBER 31, 1998
- --------------------------------------------------------------------------------
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
a. PORTFOLIO VALUATION (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
6
<PAGE>
AUGUSTA PARTNERS, L.P.
NOTES TO FINANCIAL STATEMENTS - DECEMBER 31, 1998
- --------------------------------------------------------------------------------
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED
a. PORTFOLIO VALUATION (CONTINUED)
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. The Partnership did not hold
any financial futures, foreign exchange options or foreign currency
forward contracts at December 31, 1998.
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, 1998, CIBC Opco earned $31,757 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
7
<PAGE>
AUGUSTA PARTNERS, L.P.
NOTES TO FINANCIAL STATEMENTS - DECEMBER 31, 1998
- --------------------------------------------------------------------------------
3. MANAGEMENT FEE, RELATED PARTY TRANSACTIONS AND OTHER (CONTINUED)
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.
During the year ended December 31, 1998, incentive allocation to the
Manager was $4,779,468.
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, 1998, fees paid to the Individual General Partners (including meeting
fees and the annual retainer) and expenses totaled $25,015. One Individual
General Partner is an "interested person" of the Partnership.
The Chase Manhattan Bank 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, 1998, amounted to
$1,001,476,737 and $1,010,690,845, respectively.
At December 31, 1998, the cost of investments for Federal income tax
purposes was substantially the same as the cost for financial reporting
purposes. At December 31, 1998, accumulated net unrealized appreciation on
investments, options, and securities sold, not yet purchased, was
$27,054,777, consisting of $36,182,803 gross unrealized appreciation and
$9,128,026 gross unrealized depreciation.
Due from broker primarily represents receivables and payables from
unsettled security trades, short sales and written options.
8
<PAGE>
AUGUSTA PARTNERS, L.P.
NOTES TO FINANCIAL STATEMENTS - DECEMBER 31, 1998
- --------------------------------------------------------------------------------
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 .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, 1998, the Partnership did not have any margin borrowings outstanding.
For the year ended December 31, 1998, the average daily amount of such
borrowings was $3,138,396.
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 maintains cash in bank deposit accounts which, at times,
may exceed federally insured limits. The Partnership has not experienced
any losses in such accounts and does not believe it is exposed to any
significant credit risk on cash.
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,
1998, the Partnership had no spot currency, futures or forward contracts
outstanding.
Securities sold, not yet purchased represent obligations of the Partnership
to deliver specified securities and thereby creates a liability to purchase
such securities in the market at prevailing prices. Accordingly, these
transactions result in off-balance sheet risk as the
9
<PAGE>
AUGUSTA PARTNERS, L.P.
NOTES TO FINANCIAL STATEMENTS - DECEMBER 31, 1998
- --------------------------------------------------------------------------------
6. FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK OR CONCENTRATIONS OF
CREDIT RISK (CONTINUED)
Partnership's ultimate obligation to satisfy the sale of securities sold,
not yet purchased may exceed the amount indicated 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.
Transactions in purchased options were as follows:
CALL OPTIONS PUT OPTIONS
------------------------ ------------------------------
NUMBER NUMBER
OF CONTRACTS COST OF CONTRACTS COST
------------ ------------ ------------ --------------
Beginning balance 750 $ 847,562 340,000 $ 4,743,000
Options purchased 100,070 30,811,515 187,965 18,532,203
Options closed (56,430) (28,237,740) (526,810) (22,402,597)
Expired options (5,720) (1,669,999) (675) (151,166)
--------- ------------ --------- --------------
Options outstanding at
December 31, 1998 38,670 $ 1,751,338 480 $ 721,440
========= ============ ========= ==============
10
<PAGE>
AUGUSTA PARTNERS, L.P.
NOTES TO FINANCIAL STATEMENTS - DECEMBER 31, 1998
- --------------------------------------------------------------------------------
6. FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK OR CONCENTRATIONS OF
CREDIT RISK (CONTINUED)
Transactions in written options were as follows:
CALL OPTIONS PUT OPTIONS
------------------------ ------------------------------
NUMBER AMOUNT OF NUMBER AMOUNT OF
OF CONTRACTS PREMIUM OF CONTRACTS PREMIUM
---------- ------------ ------------ --------------
Beginning balance 1,125 $ 176,657 270,000 $ 4,209,000
Options written 38,235 19,742,867 182,185 8,114,639
Options closed (24,965) (14,021,963) (452,185) (12,323,639)
Expired options (2,835) (571,500) (0) (0)
---------- ------------ ------------ --------------
Options outstanding at
December 31, 1998 11,560 $ 5,326,061 0 $ 0
7. FINANCIAL INSTRUMENTS HELD OR ISSUED FOR TRADING PURPOSES
The Partnership maintains positions in a variety of financial instruments.
The following table summarizes the components of net realized and
unrealized gains from investment transactions:
NET GAINS / (LOSSES)
FOR THE YEAR ENDED
DECEMBER 31, 1998
--------------------
Equity securities $29,451,879
Equity options (319,360)
Equity index options (1,799,520)
Cross currency options (9,625,237)
Written options 2,418,763
Fixed income securities 2,869,638
Futures (88 ,726)
FOREIGN SECURITIES:
Equities 1,547,063
-----------
$24,454,500
11
<PAGE>
AUGUSTA PARTNERS, L.P.
NOTES TO FINANCIAL STATEMENTS - DECEMBER 31, 1998
- --------------------------------------------------------------------------------
7. Financial Instruments Held or Issued for Trading Purposes (continued)
The following table presents the market values of derivative financial
instruments and the average market values of those instruments:
AVERAGE MARKET VALUE
MARKET VALUE AT FOR THE YEAR ENDED
DECEMBER 31, 1998 DECEMBER 31, 1998
------------------ ---------------------
ASSETS:
Equity options $3,209,590 $2,495,471
Equity index options 672,000 2,119,683
Cross currency options 0 284,352
LIABILITIES:
Written options (5,220,625) (3,640,028)
Average market values presented above are based upon month-end market
values during the year ended December 31, 1998.
12
<PAGE>
AUGUSTA PARTNERS, L.P.
NOTES TO FINANCIAL STATEMENTS - DECEMBER 31, 1998
- --------------------------------------------------------------------------------
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 YEAR ENDED OPERATIONS) TO
DECEMBER 31, 1998 DECEMBER 31, 1997 DECEMBER 31, 1996
------------------ ----------------- -----------------
<S> <C> <C> <C>
Ratio of net investment loss to
average net assets (0.25%) (0.48%) (0.83%)*
Ratio of operating expenses to
average net assets 1.57% 1.61% 2.27%*
Ratio of interest expense to
average net assets 0.18% 0.07% 0.01%*
Ratio of dividends on securities
sold, not yet purchased
to average net assets 0.12% 0.12% 0.06%*
Total return *** 17.45% 25.94% 17.20%
Portfolio turnover rate 723% 627% 215%
Average commission rate paid ** $0.0584 $0.0527 $0.0569
Average debt ratio 2.19% 1.04% 0.28%
<FN>
* Annualized.
** Average commission rate paid on purchases and sales of investment
securities held long.
*** Total return assumes a purchase of a Limited Partnership interest in
the Partnership on the first day and a sale of the Partnership interest
on the last day of the period noted, before incentive allocation to the
Manager, if any. Total returns for a period of less than a full year
are not annualized.
</FN>
</TABLE>
13
<PAGE>
AUGUSTA PARTNERS, L.P.
NOTES TO FINANCIAL STATEMENTS - DECEMBER 31, 1998
- --------------------------------------------------------------------------------
9. SUBSEQUENT EVENT
On January 1, 1999 the Partnership received additional Limited Partner
capital contributions of approximately $1,875,000.
10. YEAR 2000 (UNAUDITED)
Like other investment companies, financial and business organizations
around the world, the Partnership could be adversely affected if the
computer systems it uses and those used by the Partnership's brokers and
other major service providers do not properly process and calculate
date-related information and data from and after January 1, 2000. This is
commonly known as the "Year 2000 Issue."
The Partnership has assessed its computer systems and the systems
compliance issues of its brokers and other major service providers. The
Partnership has taken steps that it believes are reasonably designed to
address the Year 2000 Issue with respect to the computer systems it uses
and has obtained satisfactory assurances that comparable steps are being
taken by its brokers and other major service providers. At this time,
however, there can be no assurance that these steps will be sufficient to
address all Year 2000 Issues. The inability of the Partnership or its third
party providers to timely complete all necessary procedures to address the
Year 2000 Issue could have a material adverse effect on the Partnership's
operations. Management will continue to monitor the status of and its
exposure to this issue. For the year ended December 31, 1998, the
Partnership incurred no Year 2000 related expenses, and it does not expect
to incur significant Year 2000 expenses in the future.
The Partnership intends to develop contingency plans intended to ensure
that third party non-compliance will not materially affect the
Partnership's operations.
14
<PAGE>
AUGUSTA PARTNERS, L.P.
SCHEDULE OF PORTFOLIO INVESTMENTS
- --------------------------------------------------------------------------------
DECEMBER 31, 1998
SHARES MARKET VALUE
COMMON STOCKS - 116.56%
AIRLINES - 5.49%
125,000 US Airways Group, Inc. (a) $6,500,000
------------
APPLICATIONS SOFTWARE - 5.13%
110,000 Clarify, Inc. * 2,688,180
100,000 Siebel Systems, Inc. * 3,393,800
------------
6,081,980
------------
CABLE TV - 2.58%
65,000 MediaOne Group, Inc. * (a) 3,055,000
------------
CELLULAR TELECOMMUNICATIONS - 1.18%
150,000 Omnipoint Corp. * 1,396,950
------------
COMPUTER GRAPHICS - 1.99%
125,000 Discreet Logic, Inc. * (b) 2,359,375
------------
COMPUTER SERVICES - 2.12%
50,000 Electronic Data Systems Corp. 2,509,400
------------
COMPUTER SOFTWARE - 18.03%
120,000 Compuware Corp. * 9,375,000
45,000 Microsoft Corp. * (a) 6,240,960
300,000 Platinum Technology, Inc. * (b) 5,737,500
------------
21,353,460
------------
COMPUTERS - INTEGRATED SYSTEMS - 5.61%
350,000 Saville Systems PLC,
Sponsored ADR * (b) 6,650,000
------------
DIVERSIFIED FINANCIAL SERVICES - 3.98%
95,000 Citigroup, Inc. (a) 4,720,360
------------
DRUG DELIVERY SYSTEMS - 2.34%
125,000 Alkermes, Inc. * (b) 2,773,500
------------
The accompanying notes are an integral part of these financial statements.
15
<PAGE>
AUGUSTA PARTNERS, L.P.
SCHEDULE OF PORTFOLIO INVESTMENTS (CONTINUED)
- --------------------------------------------------------------------------------
DECEMBER 31, 1998
SHARES MARKET VALUE
COMMON STOCKS - (CONTINUED)
EDUCATIONAL SOFTWARE - 1.88%
150,000 CBT Group PLC, Sponsored ADR * $ 2,231,250
------------
LIFE/HEALTH INSURANCE - 1.93%
75,000 Conseco, Inc. 2,287,500
------------
MEDICAL - BIOMEDICAL/GENE - 4.90%
40,000 Biogen, Inc. * (b) 3,320,000
55,000 Centocor, Inc. * 2,481,875
------------
5,801,875
------------
MEDICAL - DRUGS - 9.78%
75,000 BioChem Pharma, Inc. * 2,146,875
125,000 ChiRex, Inc. * (a) 2,671,875
50,000 Forest Laboratories, Inc. * 2,659,400
100,000 Gilead Sciences, Inc. * (a) 4,106,300
------------
11,584,450
------------
NETWORKING PRODUCTS - 4.73%
125,000 3Com Corp. * 5,601,625
------------
OFFICE AUTOMATION & EQUIPMENT - 2.19
620,000 Danka Business Systems PLC, Sponsored ADR 2,596,560
------------
OIL EXPLORATION & PRODUCTION - 0.50%
85,000 EEX Corp. 595,000
------------
OIL FIELD MACHINERY & EQUIPMENT - 1.64%
100,000 Weatherford International, Inc. * 1,937,500
------------
OIL & GAS DRILLING - 0.47%
73,000 R & B Falcon Corp. * 552,099
------------
PRIVATE CORRECTIONS - 4.76%
275,000 Corrections Corporation of America * 5,637,500
------------
The accompanying notes are an integral part of these financial statements.
16
<PAGE>
AUGUSTA PARTNERS, L.P.
SCHEDULE OF PORTFOLIO INVESTMENTS (CONTINUED)
- --------------------------------------------------------------------------------
DECEMBER 31, 1998
SHARES MARKET VALUE
COMMON STOCKS - (CONTINUED)
RETAIL - COMPUTER EQUIPMENT - 1.38%
125,000 CompUSA, Inc. * $ 1,632,875
----------
RETAIL - OFFICE SUPPLIES - 0.66%
150,000 Corporate Express, Inc. * 778,200
----------
RETAIL - REGIONAL DEPARTMENT STORES - 2.00%
75,000 Saks, Inc. * 2,367,225
-------------
RETAIL - RESTAURANTS - 3.03%
90,000 Outback Steakhouse, Inc. * 3,588,750
-------------
SATELLITE TELECOMMUNICATIONS - 5.08%
280,000 ICG Communications, Inc. * (b) 6,020,000
-------------
TELECOMMUNICATIONS EQUIPMENT - 8.12%
100,000 Associated Group, Inc., Class B * (a) 4,250,000
250,000 Premisys Communications, Inc. * 2,297,000
65,000 Superior TeleCom, Inc. 3,071,250
-------------
9,618,250
-------------
TELECOMMUNICATIONS SERVICES - 5.94%
195,000 Hyperion Telecommunications, Inc.,
Class A * 2,949,375
40,000 Level 3 Communications, Inc. * 1,725,000
30,000 NTL, Inc. * 1,693,140
250,000 SmarTalk TeleServices, Inc. * 664,000
-------------
7,031,515
-------------
TELEPHONE - LOCAL - 0.94%
175,000 e.spire Communications, Inc. * 1,115,625
-------------
TELEPHONE - LONG DISTANCE - 8.18%
135,000 MCI WorldCom, Inc. * 9,686,250
-------------
TOTAL COMMON STOCKS (COST $112,348,973) 138,064,074
=============
The accompanying notes are an integral part of these financial statements.
17
<PAGE>
AUGUSTA PARTNERS, L.P.
SCHEDULE OF PORTFOLIO INVESTMENTS (CONTINUED)
- --------------------------------------------------------------------------------
DECEMBER 31, 1998
SHARES MARKET VALUE
PREFERRED STOCKS - 2.07%
AGRICULTURAL BIOTECHNOLOGY - 2.07%
50,000 Monsanto Co., 6.50%, Adjustable Conversion-Rate
Equity Security Units $2,450,000
------------
TOTAL PREFERRED STOCKS (COST $2,071,400) 2,450,000
============
FACE
AMOUNT
CONVERTIBLE BONDS - 11.33%
TELECOMMUNICATIONS EQUIPMENT - 11.33%
$8,000,000 NTL, Inc., 7.00%, 06/15/08, 144A** 12,080,000
5,000,000 SmarTalk TeleServices, Inc.,
5.75%, 09/15/04 1,350,000
------------
13,430,000
------------
TOTAL CONVERTIBLE BONDS (COST $10,665,236) 13,430,000
============
NUMBER OF
CONTRACTS
CALL OPTIONS - 2.71%
COMMERCIAL SERVICES - 0.55%
1,495 Cendant Corp., 01/16/99, $15.00 654,063
------------
OTC DERIVATIVE - 2.16%
175 OTC Stock Basket, 04/19/99, $100.00 1,804,283
37,000 OTC Stock Basket, 06/14/99, $100.00 751,244
------------
2,555,527
------------
TOTAL CALL OPTIONS (COST $1,751,338) 3,209,590
============
The accompanying notes are an integral part of these financial statements.
18
<PAGE>
AUGUSTA PARTNERS, L.P.
SCHEDULE OF PORTFOLIO INVESTMENTS (CONTINUED)
- --------------------------------------------------------------------------------
DECEMBER 31, 1998
SHARES MARKET VALUE
PUT OPTIONS - 0.57%
INDEX - 0.57%
480 S&P 500 Index, 01/16/99, $1,220.00 $ 672,000
-------------
TOTAL PUT OPTIONS (COST $721,440) 672,000
=============
TOTAL INVESTMENTS (COST $127,558,387)
133.24% 157,825,664
=============
OTHER ASSETS, LESS LIABILITIES - (33.24%) (39,374,974)
-------------
NET ASSETS - 100.00% $ 118,450,690
=============
(a) Partially or wholly held in a pledged account by the Custodian as
collateral for securities sold short.
(b) Partially or wholly held in a pledged account by the Custodian as
collateral for open written options.
* Non-income producing security.
** Security exempt from registration under Rule 144A of the Securities
Act of 1933. This security may be resold in transactions exempt
from registration normally to qualified buyers. At December 31,
1998, this security amounted to $12,080,000 or 10.2% of net assets.
The accompanying notes are an integral part of these financial statements.
19
<PAGE>
AUGUSTA PARTNERS, L.P.
SCHEDULE OF SECURITIES SOLD, NOT YET PURCHASED
- --------------------------------------------------------------------------------
DECEMBER 31, 1998
SHARES MARKET VALUE
SHORT COMMON STOCK - (15.67%)
CELLULAR TELECOMMUNICATIONS - (0.82%)
25,000 WinStar Communications, Inc. $ (975,000)
-------------
CHEMICALS - DIVERSIFIED - (1.15%)
15,000 Dow Chemical Co. (1,364,070)
-------------
COMMERCIAL BANKS - (2.33%)
115,000 Synovus Financial Corp. (2,760,000)
-------------
COSMETICS & TOILETRIES - (1.68%)
45,000 Avon Products, Inc. (1,991,250)
-------------
FOOD - RETAIL - (1.15%)
1,800 Carrefour SA (1,359,501)
-------------
MACHINERY - CONSTRUCTION & MINING - (0.97%)
25,000 Caterpillar, Inc. (1,150,000)
-------------
MEDICAL PRODUCTS - (0.49%)
19,296 Closure Medical Corp. (575,272)
-------------
TELECOMMUNICATIONS SERVICES - (3.64%)
100,000 Level 3 Communications, Inc. (4,312,500)
-------------
THERAPEUTICS - (3.44%)
70,000 Biomatrix, Inc. (4,077,500)
-------------
TOTAL SHORT COMMON STOCK - (PROCEEDS $15,247,157) $ (18,565,093)
=============
The accompanying notes are an integral part of these financial statements.
20
<PAGE>
AUGUSTA PARTNERS, L.P.
SCHEDULE OF WRITTEN OPTIONS
- --------------------------------------------------------------------------------
NUMBER OF DECEMBER 31, 1998
CONTRACTS MARKET VALUE
WRITTEN CALL OPTIONS - (4.41%)
APPLICATIONS SOFTWARE - (0.62%)
1,100 Clarify, Inc., 02/20/99, $22.50 $ (343,750)
1,000 Siebel System, Inc., 01/16/99, $30.00 (387,500)
-------------
(731,250)
-------------
COMPUTER SERVICES - (0.08%)
500 Electronic Data Systems Corp.,
01/16/99, $50.00 (93,750)
-------------
COMPUTER SOFTWARE - (0.33%)
600 Autodesk Corp., 01/16/99, $45.00 (67,500)
600 Compuware Corp., 02/20/99, $80.00 (330,000)
-------------
(397,500)
-------------
COSMETICS & TOILETRIES - (0.96%)
1,075 Colgate-Palmolive Co., 01/22/00, $100.00 (1,142,188)
-------------
DIVERSIFIED FINANCIAL SERVICES - (0.12%)
950 Citigroup, Inc. 01/16/99, $50.00 (142,500)
-------------
EDUCATIONAL SOFTWARE - 0.06%)
600 CBT Group PLC, Sponsored ADR 02/20/99,
$17.50 (67,500)
-------------
MEDICAL - BIOMEDICAL/GENE - (0.01%)
300 Centocor, Inc., 01/16/99, $50.00 (11,250)
250 Centocor, Inc., 01/16/99, $55.00 (3,125)
-------------
(14,375)
-------------
MEDICAL - DRUGS - (2.18%)
270 American Home Products Corp., 01/16/99,
$55.00 (54,000)
500 Forest Laboratories, Inc., 02/20/99,
$55.00 (143,750)
1,045 Merck & Co., Inc., 01/22/00, $160.00 (1,489,125)
870 Warner-Lambert Co., 01/22/00, $85.00 (891,750)
-------------
(2,578,625)
-------------
OIL & GAS DRILLING - (0.04%)
730 R & B Falcon Corp., 03/20/99, $10.00 (45,625)
-------------
The accompanying notes are an integral part of these financial statements.
21
<PAGE>
AUGUSTA PARTNERS, L.P.
SCHEDULE OF WRITTEN OPTIONS (CONTINUED)
- --------------------------------------------------------------------------------
NUMBER OF DECEMBER 31, 1998
CONTRACTS MARKET VALUE
WRITTEN CALL OPTIONS - (CONTINUED)
TELECOMMUNICATIONS EQUIPMENT - (0.01%)
1,170 Premisys Communications, Inc., 01/16/99,
$12.50 $ (7,312)
-------------
TOTAL WRITTEN CALL OPTIONS -
(PROCEEDS $5,326,061) $ (5,220,625)
============
The accompanying notes are an integral part of these financial statements.
22
