<PAGE>
AH&H PARTNERS FUND LIMITED PARTNERSHIP
Report on Financial Statements
For the Year Ending December 31, 1998
(audited)
<PAGE>
AH&H PARTNERS FUND LIMITED PARTNERSHIP
Report on Financial Statements
For the Year Ending December 31, 1998
(audited)
CONTENTS
PAGE
Report of Independent Auditors 3
Investment Portfolio
as of December 31,1998 (audited) 4-5
Statement of Assets and Liabilities 6
as of December 31,1998 (audited)
Statement of Operations
for the year ended December 31, 1998 7
(audited)
Statement of Changes in Net Assets
for the year ended December 31, 1998 8
(audited)
Notes to Financial Statements 9-10
<PAGE>
To the General Partner and Limited Partners of
AH&H Partners Fund Limited Partnership
Boston, Massachusetts
REPORT OF INDEPENDENT AUDITORS
In our opinion, the accompanying statement of assets and
liabilities, including the schedule of investments, and the related
statements of operations and of changes in net assets, present
fairly, in all material respects, the financial position of
AH&H Partners Fund Limited Partnership (the Partnership) at
December 31, 1998, the results of its operations and the changes in
its net assets for each of the periods indicated, in conformity
with generally accepted accounting principals. These financial
statements are the responsibility of the Partnership's management;
our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits of these financial statements in accordance
with generally accepted auditing standards which 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, assesing
management, and evaluating the overall financial statement
presentation.
We believe that our audits, which included confirmation of
securities at December 31, 1998 by correspondence with the
custodian, provide a reasonable basis for the opinion expressed
above.
Creelman & Smith, P.C.
Certified Public Accountants
Boston, Massachusetts
January, 15, 1999
3
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AH&H PARTNERS FUND LIMITED PARTNERSHIP
Investment Portfolio
As of December 31, 1998
(audited)
<TABLE>
<CAPTION>
INDUSTRY & COMPANY Shares Value
<S> <C> <C>
EQUITY SECURITIES - COMMON STOCK 68.5%
COMMUNICATIONS 8.3%
Alpha Industries 8.3% 50,000 $1,800,000
CONSUMER- Electronics 9.7%
CompUSA, Inc. 30,000 $391,875
ScanSource 80,000 $1,720,000
CONSUMER-GENERAL 6.9%
Party City 66,500 $960,094
Safety First 152,500 $533,750
ELECTRONIC COMPONENTS 13.8%
PCD, Inc. 106,500 $1,384,500
Unitrode 93,000 $1,627,500
Information Technology 7.5%
Tier Technology 95,328 $1,642,856
INTERNET 3.2%
Asymetrix Corp. 10,543 $46,124
Restrac 100,000 $650,000
Medical 4.0%
Ascent Pediarics 205,069 $884,360
Natural Products 6.5%
AMBI 430,000 $456,875
Opta Food Ingredients, Inc. 239,000 $956,000
Semiconductors .6%
Aseco Corp. 98,820 $135,878
Software 8.0%
INSO Corp. 70,000 $1,750,000
Total Common Stock (Cost $15,309,526) $14,939,812
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
AH&H PARTNERS FUND LIMITED PARTNERSHIP
Investment Portfolio
As of December 31, 1998
(audited)
<TABLE>
<CAPTION>
INDUSTRY & COMPANY Shares Value
<S> <C> <C>
PRIVATE HOLDINGS 17.1%
Advanced UroScience, Inc. 346,429 $1,818,752
Cerulean Technology-Series B Pfd. 255,546 $321,988
Cerulean Technology-Series C Pfd. 42,857 $54,000
Marathon Technologies - Series B Pfd. 31,250 $375,000
Marathon Technologies - Series D 20,833 $249,996
Molecular Geodesics 500,000 $500,000
Sys-Tech Solutions (Common Stock) 149,965 $14,996
Sys-Tech Solutions- Series A Pfd 2,777 $277,700
Sys-Tech Solutions0 Series B Pfd 1,020 $102,000
Total Private Holdings (Cost $3,033,905) $3,714,432
CASH & EQUIVALENTS 14.4%
Fidelity Daily Money Market Fund $800,614
Fidelity US Treasury Income Fund $839,450
State Street Repos $1,501,490
Total Cash & Equivalents (Cost $3,141,554) $3,141,554
TOTAL INVESTMENT PORTFOLIO 100% $21,795,798
(Cost $21,484,985)
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
AH&H PARTNERS FUND LIMITED PARTNERSHIP
Statement of Assets and Liabilities
As of December 31, 1998
(Audited)
<TABLE>
<CAPTION>
Year Ended
Dec. 31, 1998
--------------
ASSETS
<S> <C>
Investments at value (Cost Basis $21,484,985) $21,795,798
Receivable foe investment sold $573,415
Note and interest receivable from limited partners $14,042
Cash $100
Total Assets $22,383,355
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-------------
LIABILITIES
Accrued management fees $55,517
Accrued capital withdrawals $463,243
Accrued BOD fees $2,500
Payable foe investments purchased $93,901
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Total Liabilities $615,161
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NET ASSETS $21,768,194
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-------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
6
<PAGE>
AH&H PARTNERS FUND LIMITED PARTNERSHIP
Statement of Operations
For the year ended December 31, 1998
(audited)
<TABLE>
<CAPTION>
Year Ended
Dec. 31, 1998
----------------
INVESTMENT INCOME
<S> <C>
Income:
Dividends $88,685
Interest $3,520
----------------
Total Income $92,205
Expenses:
Management Fees $276,020
Other expenses $10,070
---------------
Total expenses $286,090
Net investment loss ($193,885)
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NET REALIZED & UNREALIZED GAIN(LOSS)
Net realized gain $323,813
Net unrealized depreciation ($4,531,370)
Net loss on investments $4,207,557
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NET DECREASE IN NET ASSETS $4,401,442
---------------
---------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
7
<PAGE>
AH&H PARTNERS FUND LIMITED PARTNERSHIP
Statement of Changes in Net Assets
For year ended Dec. 31, 1998
(audited)
<TABLE>
<CAPTION>
Year Ended
Dec. 31, 1998
------------------
DECREASE IN NET ASSETS
<S> <C>
Operations:
Net investment loss ($193,885)
Net realized Gain from investments $323,813
Net unrealized depreciation ($4,531,370)
----------------
Net decrease in net assets from operations $4,401,442
Contributions to capital $450,000
Withdrawals from capital ($8,437,734)
-----------------
DECREASE IN NET ASSETS ($12,389,176)
Net assets at beginning of period $34,157,370
NET ASSETS AT END OF PERIOD $21,768,194
-----------------
-----------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
8
<PAGE>
AH&H PARTNERS FUND LIMITED PARTNERSHIP
Notes to Financial Statements
For Year ended Dec. 31, 1998
(audited)
1 - SIGNIFICANT ACCOUNTING POLICIES
The AH&H Partners Fund Limited Partnership(the "Partnership")was
organized June 8,1990 as a Massachusetts limited partnership and
is registered with the Securities and Exchange Commission as a
closed-end, non-diversified management investment company. The
Agreement of Limited Partnership was amended and restated on
September 13,1990, April 1,1992 and January 1,1996. The Partner-
ship operates under the Investment Company Act of 1940(the "1940 Act")
as an interval fund. The Partnership's interests are not registered
under the Securities Act of 1933.
Adams, Harkness & Hill, Inc., a Massachusetts Corporation, serves as
Managing General Partner. The Managing General Partner must maintain
a capital account balance equal to the lesser of 1% of the sum of all
the positive capital account balances of all the Partners or the
greater of $500,000 or 0.2% of the sum of the positive capital account
balances of all the Partners.
The policies described below are followed consistently by the Partner-
ship in preparation of its financial statements in conformity with
generally accepted accounting principles.
Security Valuation
Portfolio securities which are traded on U.S. stock exchanges are
valued at the most recent sale price reported on the exchange on
which the security is traded most extensively. If no sale occurred,
the security is valued at the mean between the closing bid and asked
prices. Securities for which market quotations are not readily
available are valued at "fair value" as determined in good faith by
the general partner.
Securities Sold Short
The Partnership is engaged in selling securities short, which
obligates the Partnership to replace a security borrowed by purchas-
ing the same security at current market value. The Partnership would
incur a loss if the price of the security increases between the date
of the short sale and the date on which the Partnership replaces the
borrowed security. The Partnership would realize a gain if the price
of the security declines between those dates.
Securities Transactions and Investment Income
Securities transactions are recorded on a trade-date basis. Securities
gains or losses are determined on the identified cost basis. Dividend
income is recorded on the ex-dividend date. Interest income, includ-
ing original issue discount, where applicable, is recorded on an accrual
basis, except for bonds trading "flat", in which case interest is recorded
when received.
9
<PAGE>
AH&H PARTNERS FUND LIMITED PARTNERSHIP
Notes to Financial Statements
For year ended Dec. 31, 1998
(audited)
1 - SIGNIFICANT ACCOUNTING POLICIES (Continued)
Federal and State Income Taxes
No federal or state income tax is imposed on the Partnership
as an entity. The Partnership's income, gains, losses, deductions
and credits flow through to the Partners. Each partner must
include his or her share of partnership income in his or her
tax returns.
2 - INVESTMENT ADVISORY AGREEMENTS & TRANSACTIONS WITH AFFILIATED PERSONS
The Partnership has an investment advisory agreement with the
Managing General Partner. Certain individuals who are executive
officers and directors of the Managing General Partner are also
Limited Partners of the Partnership.
For the year ended December 31, 1998, the Managing
General Partner received fees of $276,020 for investment and
advisory services under the agreement. The fee is paid quarterly
with an annual fee basis of 1%. In addition, the Partnership
Agreement provides for a performance allocation from the Limited
Partners to the General Partner, equal to 15% of the return which
exceeds a cumulative 6% annual return. The performance allocation,
if there is one, is determined after the close of the calendar year.
3 - INVESTMENT TRANSACTIONS
Purchases and proceeds from sales of investment securities (excluding
short term investments) for the year ended Dec. 31, 1998
aggregated $7,381,704 and $17,307,821 respectively.
4 - SIGNIFICANT SUBSEQUENT EVENT
The Partnership agreement provides for a Partnership termination
date of December 31, 2050.
10
