ANNUAL REPORT
SEPTEMBER 30, 1998
Fiduciary
Capital Growth
Fund, Inc.
A NO-LOAD
MUTUAL FUND
Fiduciary
Capital Growth
Fund, Inc.
October 27, 1998
Dear Fellow Shareholder:
When the markets are going up most people don't believe that anything will
occur to derail the gravy train. Just a few short months ago, Wall Street was
cheering the "Goldilocks" economy -- not too hot, not too cold, but just right.
Unfortunately, the real world sometimes creates "speed-bumps" on the stock
market's road to the "long run." When markets like the one through which we are
presently going occur -- and we have been through more of these than we care to
recall -- we are reminded of a few realities of investing that tend to fade, the
longer a bull market runs. First, the excesses on the upside, about which we
cautioned, seem only to be exceeded by the selling excesses on the downside.
Second, stocks go down much faster than they go up, with the corollary that the
fact that the market goes up 75% of the time fails to offer much solace during
the other 25%. Third, investors/speculators will hold on tenaciously to their
favorite "out-performing" stocks. As holders look around for something to sell
that hasn't gone down, prices on most of these will gradually slide until a
final capitulation brings them into line with the market. Fourth, in a bear
market sellers don't care about valuation. When someone wants out, it matters
not whether the stock is selling at 35 times earnings or 5 times earnings. This
does not mean that valuation does not matter. It matters greatly. In the short
run, however, fear is a much more powerful emotion than the rational
contemplation of investment value.
We have forever preached the gospel that stocks, long-term, follow the
fundamental progress of the individual companies. Peter Lynch recently pointed
out that since WWII the US stock market has grown 60 fold. This is 8% per year,
almost exactly the same rate as corporate earnings growth of 7.8% during the
same period. The problem with becoming accustomed to market returns that
outstrip the underlying fundamentals, is that it is so painful when reality sets
in. Stock prices rising faster than the underlying growth is unsustainable. It
is unsustainable for a single company, and it is unsustainable for an index, or
group of companies. As difficult as 1998 has been so far, our returns of about
13% compounded for the past 3 3/4 years just about equal the earnings growth of
our companies. The S&P 500 has increased about 3 times the rate of growth in
earnings. In our view this suggests that future returns in the S&P will be
limited until earnings catch up with the stock prices.
In previous letters and meetings, we have pointed out that ebullient markets
are generally shaken by unanticipated events, rather than events that investors
have addressed. We have discussed most of the factors that have shaken this
market in recent quarters. In January we cautioned that the Asian crisis would
have a greater impact on corporate earnings than most analysts were expecting.
In fact, we have been concerned about a downturn in corporate profits for over a
year. As we entered 1998 we talked about flat to down earnings for this year,
and possibly next. Market seers were still forecasting double-digit increases
for 1998 and 1999. These examples of "whistling past the graveyard" are not
unusual at inflection points in the market. Throw in a Russian bankruptcy and
the financial stress resulting in the bailout of the huge hedge fund, Long Term
Capital Management (there's more than a little irony in the name), not to
mention impeachment hearings, and you have the ingredients for a severe jolt to
investors' confidence.
If we saw much of this coming, then why are our stocks down so much? What we
saw was the likelihood of these events occurring. We overlooked the grim
reality that fear does not recognize value (nor does greed). Warren Buffett
noted that "The fact that people will be full of greed, fear, or folly is
predictable. The sequence is not predictable." Momentum investing, and the
willingness of investors to place increasingly larger bets on fewer and fewer
companies, relegated mid- to small-cap value investing to second class
citizenship. As the pressure to beat the S&P has increased, the self-
preservation instinct of portfolio managers led many to become "closet
indexers." If GE and Microsoft comprise 6% of the S&P, you must own them
irrespective of valuation criteria. Relatively lackluster performance of small-
to mid-cap stocks for a number of quarters exacerbated the problem as many
investors capitulated and bought large-cap stocks, which were doing better. The
Wall Street Journal reported recently that a number of small-cap mutual funds
have been investing increasingly in large-cap stocks to improve their
performance. Market history suggests that in a bear market there is usually no
place to hide. Many recognizable stocks have now suffered severe declines.
DECLINE FROM
COMPANY 52-WEEK HIGH
------- ------------
Merrill Lynch & Co. -61%
Halliburton Co. -58%
Citicorp -56%
Travelers Group -56%
Toys 'R' Us -54%
Walt Disney Co. -45%
Lucent Technologies -45%
CBS Corp. -41%
Nabisco Holdings -37%
Gillette Co. -36%
Other well known but smaller companies have declined even more.
DECLINE FROM
COMPANY 52-WEEK HIGH
------- ------------
W.R. Grace & Co. -87%
Adaptec Inc. -83%
National Semiconductor -81%
Revlon Inc. -78%
Coleman Co. -76%
Olsten Corp. -75%
Reebok International -72%
Northwest Airlines -71%
Neiman-Marcus Corp. -63%
Avis Rent A Car -69%
Sooner or later, a bear market drags down almost all stocks. We take no
consolation in the fact that most indices have now declined significantly, and
that the majority of stocks are now down 50% or more. In our view most of the
damage, which has been considerable, has been done to our stocks. We believe,
though, that the remaining excesses will likely be purged from the market before
we can move forward on a more rational investment basis. This is the downside
of investing in stocks. The upside is the superior long-term returns which
stocks have provided in the past, and will again in the future.
Will anyone ever care again about small and mid-size companies? Of course.
When? That's a little tougher. But such things usually occur when there seems
to be the least hope. The 1973-74 bear market ushered in a 10-year period of
significant out-performance by smaller companies, during which small companies
outperformed the S&P 500, 26.9% compared to 9.7% per year. The 1990 market was
followed by three strong years for small caps. Markets like this can have the
effect of refocusing investors' attention on fundamentals and valuation. Many
large-caps are still over-valued and the earnings outlook for them is
problematic. Earnings for our companies should continue to be up, though not as
much as we thought a few months ago. And they are very cheap. If the companies
keep growing they will do just fine. Potential catalysts which could refocus
investors' attention on smaller companies might include the fact that insiders,
and the companies themselves, are significant buyers of the stocks. Presently,
almost half of our companies have legitimate share buybacks in effect.
Takeovers may well bring attention to the cheap valuation of our stocks.
Generally, though, the stocks simply start to do better. At 10-12 times
earnings for companies that we feel will grow between 12-15% over the next few
years, the values are compelling. It is incumbent upon all of us to remember
that we are investors, not speculators. We strive for singles and doubles, but
occasionally go into a slump when we strike out a few times. WE CAN'T PROVIDE
20% RETURNS WITH 12-15% GROWTH INDEFINITELY, AND THE S&P CERTAINLY CAN'T PROVIDE
20% RETURNS WITH 6% GROWTH INDEFINITELY.
Do not misunderstand. The problems that the US as well as the other world
economies face are real -- they are not imagined; the possibility of a recession
is real. But the problems are always real during bear markets. The question
becomes, how much is already discounted by the prices. We feel that our stocks
have discounted a great deal of uncertainty, and that the recovery prospects are
huge. This bear market will pass and our stocks will again climb to new highs.
Such a statement always seems hard to believe in a market like this. Remember,
as Yogi said, "Our future is still ahead of us".
The Board of Directors has declared a distribution of $3.673060 from net
long-term realized capital gains and $1.037972 from net short-term capital
gains. Early in the year we sold several holdings, which we felt had become
overvalued, at substantial gains. Your distribution confirmation is enclosed.
Thank you for your continued confidence in Fiduciary Capital Growth Fund,
Inc.
Sincerely,
/s/ Ted D. Kellner /s/ Donald S. Wilson /s/ Patrick J. English
Ted D. Kellner, C.F.A Donald S. Wilson, C.F.A Patrick J. English,
C.F.A.
Fiduciary Capital Growth Fund, Inc 100 East Wisconsin Avenue.
REPORT OF INDEPENDENT ACCOUNTANTS Suite 1500
Milwaukee, WI 53202
(PricewaterhouseCoopers Logo)
October 27, 1998
To the Shareholders and Board of Directors
of Fiduciary Capital Growth Fund, Inc.
In our opinion, the accompanying statement of net assets and the related
statements of operations and of changes in net assets and the financial
highlights present fairly, in all material respects, the financial position of
Fiduciary Capital Growth Fund, Inc. (the "Fund") at September 30, 1998, the
results of its operations for the year then ended, the changes in its net assets
for each of the two years in the period then ended and the financial highlights
for each of the ten years in the period then ended, in conformity with generally
accepted accounting principles. These financial statements and financial
highlights (hereafter referred to as "financial statements") are the
responsibility of the Fund'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, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at September 30, 1998 by
correspondence with the custodian, provide a reasonable basis for the opinion
expressed above.
/s/ PricewaterhouseCoopers
Fiduciary Capital Growth Fund, Inc.
STATEMENT OF NET ASSETS
September 30, 1998
QUOTED
MARKET
SHARES COST VALUE
------ ---- ------
LONG-TERM INVESTMENTS -- 97.3% (A)<F2>
COMMON STOCKS -- 94.8% (A)<F2>
CHEMICAL/SPECIALTY MATERIALS -- 13.4%
44,000 Cambrex Corp. $ 1,055,624 $ 1,036,772
31,000 Great Lakes Chemical Corp. 1,461,269 1,205,125
37,000 Minerals Technologies Inc. 1,385,535 1,630,331
23,000 OM Group, Inc. 605,360 648,324
25,000 Sigma-Aldrich Corp. 873,828 721,875
---------- ----------
5,381,616 5,242,427
CONSUMER PRODUCTS -- NON DURABLE -- 2.3%
42,500 Jostens, Inc. 848,886 881,875
CONSUMER SERVICES -- 1.8%
2,100 Grey Advertising Inc. 466,200 688,800
DISTRIBUTION -- 6.6%
80,000 Arrow Electronics, Inc.*<F1> 1,611,667 1,050,000
34,500 Black Box Corp.*<F1> 950,100 836,625
100,000 Pioneer-Standard Electronics, Inc. 1,436,801 631,300
2,500 VWR Scientific Products Corp.*<F1> 57,500 62,657
---------- ----------
4,056,068 2,580,582
ELECTRONICS -- 2.2%
58,500 Methode Electronics, Inc. 905,250 877,500
ENERGY/ENERGY SERVICES -- 10.0%
59,600 Burlington Resources Inc. 2,422,718 2,227,550
35,500 Noble Affiliates, Inc. 1,445,021 1,131,562
36,100 Pogo Producing Co. 1,093,727 539,262
---------- ----------
4,961,466 3,898,374
HEALTH INDUSTRIES -- 8.6%
30,000 Concentra Managed Care, Inc.*<F1> 204,792 240,000
77,500 Dentsply International Inc. 1,492,723 1,734,063
27,000 Haemonetics Corp.*<F1> 440,370 519,750
46,000 Sybron International Corp.*<F1> 279,923 879,750
---------- ----------
2,417,808 3,373,563
INSURANCE -- 3.7%
12,750 Delphi Financial Group, Inc.*<F1> 534,637 502,031
42,000 Old Republic International Corp.<F1> 442,861 945,000
---------- ----------
977,498 1,447,031
LEISURE/RESTAURANTS -- 1.0%
20,000 International Game Technology 385,594 371,260
MISCELLANEOUS -TECHNOLOGY MANUFACTURING -- 9.1%
51,600 Bell & Howell Co.*<F1> 1,535,250 1,338,401
80,000 Paxar Corp.*<F1> 1,034,831 710,000
61,700 Raychem Corp. 1,701,972 1,503,937
---------- ----------
4,272,053 3,552,338
PAPER/PACKAGING -- 5.5%
21,800 Liqui-Box Corp. 461,900 959,200
83,500 Wausau-Mosinee Paper Corp. 1,640,105 1,200,313
---------- ----------
2,102,005 2,159,513
PRINTING/PUBLISHING/FORMS -- 8.9%
72,000 PRIMEDIA Inc.*<F1> 932,350 783,000
25,000 Scholastic Corp.*<F1> 967,187 1,062,500
42,000 Thomas Nelson, Inc. 537,411 535,500
61,100 Wallace Computer Services, Inc. 1,623,219 1,096,012
---------- ----------
4,060,167 3,477,012
PRODUCER MANUFACTURING -- 4.7%
36,000 Regal-Beloit Corp. 274,810 801,000
57,000 Watts Industries, Inc. 1,168,999 1,026,000
---------- ----------
1,443,809 1,827,000
RETAIL TRADE -- 10.6%
41,000 Autozone, Inc.*<F1> 964,140 1,009,625
83,000 Casey's General Stores, Inc. 470,625 1,245,000
45,000 Consolidated Stores Corp.*<F1> 1,356,811 883,125
21,500 Elder-Beerman Stores Corp.*<F1> 530,065 373,563
76,700 Stein Mart, Inc.*<F1> 913,916 613,600
---------- ----------
4,235,557 4,124,913
SOFTWARE/SERVICE -- 6.4%
28,000 CCC Information Services
Group Inc.*<F1> 466,105 350,000
51,000 First Data Corp. 1,440,442 1,198,500
53,000 Reynolds & Reynolds Co. 941,912 944,089
---------- ----------
2,848,459 2,492,589
---------- ----------
Total common stocks 39,362,436 36,994,777
REITS -- 2.5% (A)<F2>
43,400 Prologis Trust 972,799 981,925
---------- ----------
Total long-term investments 40,335,235 37,976,702
PRINCIPAL
AMOUNT
- ---------
SHORT-TERM INVESTMENTS -- 2.8% (A)<F2>
VARIABLE RATE DEMAND NOTE
$1,088,289 Firstar Bank U.S.A., N.A. 1,088,289 1,088,289
---------- ----------
Total investments $41,423,524 39,064,991
----------
----------
Liabilities, less cash and
receivables (0.1%) (A)<F2> (18,376)
----------
NET ASSETS $39,046,615
----------
----------
Net Asset Value Per Share
($0.01 par value, 10,000,000
shares authorized), offering
and redemption price
($39,046,615 / 2,111,214
shares outstanding) $18.49
------
------
*<F1> Non-income producing security.
(a)<F2> Percentages for the various classifications relate to net assets.
The accompanying notes to financial statements are an integral part of this
statement.
Fiduciary Capital Growth Fund, Inc.
STATEMENT OF OPERATIONS
For the Year Ended September 30, 1998
INCOME:
Dividends $ 419,797
Interest 139,440
-----------
Total income 559,237
-----------
EXPENSES:
Management fees 447,738
Administrative services 39,849
Professional fees 27,182
Registration fees 23,954
Transfer agent fees 17,519
Printing and postage expense 17,020
Custodian fees 11,579
Board of Directors fees 3,600
Other expenses 1,396
-----------
Total expenses 589,837
-----------
NET INVESTMENT LOSS (30,600)
-----------
NET REALIZED GAIN ON INVESTMENTS 10,326,329
NET DECREASE IN UNREALIZED APPRECIATION ON INVESTMENTS (18,869,020)
-----------
NET LOSS ON INVESTMENTS (8,542,691)
-----------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS $(8,573,291)
-----------
-----------
STATEMENTS OF CHANGES IN NET ASSETS
For the Years Ended September 30, 1998 and 1997
<TABLE>
1998 1997
------------ ------------
<S> <C> <C>
OPERATIONS:
Net investment (loss) income $ (30,600) $ 54,095
Net realized gain on investments 10,326,329 8,190,081
Net (decrease) increase in unrealized
appreciation on investments (18,869,020) 6,869,858
------------ ------------
Net (decrease) increase in net assets
resulting from operations (8,573,291) 15,114,034
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS:
Dividends from net investment income
($0.01248 and $0.14920 per share, respectively) (24,737) (309,757)
Distributions from net realized gains
($3.85996 and $2.50232 per share, respectively) (7,692,320) (5,193,478)
------------ ------------
Total distributions (7,717,057)*<F3> (5,503,235)
------------ ------------
FUND SHARE ACTIVITIES:
Proceeds from shares issued
(107,186 and 137,861 shares, respectively) 2,444,856 2,981,658
Net asset value of shares issued
in distributions
(332,984 and 270,000 shares, respectively) 7,128,996 5,367,989
Cost of shares redeemed
(314,365 and 529,154 shares, respectively) (6,914,398) (11,117,853)
------------ ------------
Net increase (decrease) in net
assets derived from Fund share activities 2,659,454 (2,768,206)
------------ ------------
TOTAL (DECREASE) INCREASE (13,630,894) 6,842,593
NET ASSETS AT THE BEGINNING OF THE YEAR 52,677,509 45,834,916
------------ ------------
NET ASSETS AT THE END OF THE YEAR
(including undistributed net investment
income of $-0- and $24,724, respectively) $39,046,615 $52,677,509
------------ ------------
------------ ------------
</TABLE>
*<F3> See Note 7.
The accompanying notes to financial statements are an integral part of these
statements.
Fiduciary Capital Growth Fund, Inc.
FINANCIAL HIGHLIGHTS
(Selected Data for each share of the Fund outstanding throughout each year)
<TABLE>
YEARS ENDED SEPTEMBER 30,
------------------------------------------------------------------------------------------------
1998 1997 1996 1995 1994 1993 1992 1991 1990 1989
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING
PERFORMANCE:
Net asset value,
beginning of year $26.53 $21.76 $21.58 $19.52 $20.08 $18.65 $17.55 $14.16 $18.79 $15.19
Income from
investment operations:
Net investment (loss) income (0.02) 0.03 0.13 0.11 0.06 0.07 0.10 0.19 0.23 0.14
Net realized and unrealized
(losses) gains
on investments (4.15) 7.39 2.24 3.87 0.72 3.33 2.39 4.35 (4.66) 3.49
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total from investment operations (4.17) 7.42 2.37 3.98 0.78 3.40 2.49 4.54 (4.43) 3.63
Less distributions:
Dividends from net
investment income (0.01) (0.15) (0.12) (0.04) (0.05) (0.11) (0.16) (0.23) (0.20) (0.03)
Distributions from net
realized gains (3.86) (2.50) (2.07) (1.88) (1.29) (1.86) (1.23) (0.92) -- --
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total from distributions (3.87) (2.65) (2.19) (1.92) (1.34) (1.97) (1.39) (1.15) (0.20) (0.03)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net asset value, end of year $18.49 $26.53 $21.76 $21.58 $19.52 $20.08 $18.65 $17.55 $14.16 $18.79
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
TOTAL INVESTMENT RETURN (17.6%) 38.4% 12.7% 22.7% 4.1% 20.1% 15.3% 34.9% (23.8%) 24.0%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year
(in 000's $) 39,047 52,678 45,835 42,197 38,871 47,420 38,476 30,684 19,460 40,387
Ratio of expenses to
average net assets 1.2% 1.2% 1.2% 1.2% 1.2% 1.2% 1.3% 1.5% 1.4% 1.3%
Ratio of net investment (loss)
income to average net assets (0.1%) 0.1% 0.6% 0.5% 0.3% 0.4% 0.6% 1.2% 1.1% 0.8%
Portfolio turnover rate 54.3% 60.7% 43.7% 28.6% 20.9% 32.5% 58.9% 62.7% 55.1% 42.2%
</TABLE>
The accompanying notes to financial statements are an integral part of this
statement.
Fiduciary Capital Growth Fund, Inc.
NOTES TO FINANCIAL STATEMENTS
September 30, 1998
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES --
The following is a summary of significant accounting policies of the
Fiduciary Capital Growth Fund, Inc. (the "Fund"), which is registered as a
diversified, open-end management investment company under the Investment
Company Act of 1940. The Fund was incorporated under the laws of Wisconsin on
July 29, 1981. The investment objective of the Fund is to produce long-term
capital appreciation principally through investing in common stocks.
(a) Each security, excluding short-term investments, is valued at the last sale
price reported by the principal security exchange on which the issue is
traded, or if no sale is reported, the latest bid price. Securities which
are traded over-the-counter are valued at the latest bid price. Securities
for which quotations are not readily available are valued at fair value as
determined by the investment adviser under the supervision of the Board of
Directors. Short-term investments (securities with maturities of 60 days
or less) are valued at amortized cost which approximates quoted market
value. For financial reporting purposes, investment transactions are
recorded on trade date. Cost amounts as reported on the statement of net
assets are the same for Federal income tax purposes.
(b) Net realized gains and losses on common stock are computed on the
identified cost basis.
(c) Provision has not been made for Federal income taxes since the Fund has
elected to be taxed as a "regulated investment company" and intends to
distribute substantially all net investment company taxable income and net
capital gains to its shareholders and otherwise comply with the provisions
of the Internal Revenue Code applicable to regulated investment companies.
(d) Dividend income is recorded on the ex-dividend date. Interest income is
recorded on the accrual basis.
(e) The Fund has investments in short-term variable rate demand notes, which
are unsecured instruments. The Fund may be susceptible to credit risk with
respect to these notes to the extent the issuer defaults on its payment
obligation. The Fund's policy is to monitor the creditworthiness of the
issuer and the Fund does not anticipate nonperformance by these
counterparties.
(f) Generally accepted accounting principles require that permanent differences
between income for financial reporting and tax purposes be reclassified in
the capital accounts.
(g) The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from these
estimates.
(2) INVESTMENT ADVISER AND MANAGEMENT AGREEMENT AND TRANSACTIONS WITH RELATED
PARTIES --
The Fund has a management agreement with Fiduciary Management, Inc. ("FMI"),
with whom certain officers and directors of the Fund are affiliated, to serve as
investment adviser and manager. Under the terms of the agreement, the Fund will
pay FMI a monthly management fee at the annual rate of 1% of the daily net
assets up to and including $30,000,000 and 0.75% of the daily net assets of the
Fund in excess of $30,000,000. The Fund has an administrative agreement with
FMI to supervise all aspects of the Fund's operations except those performed by
FMI pursuant to the management agreement. Under the terms of the agreement, the
Fund will pay FMI a monthly administrative fee at the annual rate of 0.1% of the
daily net assets up to and including $30,000,000 and 0.05% of the daily net
assets of the Fund in excess of $30,000,000.
(3) DISTRIBUTION TO SHAREHOLDERS --
Net investment income and net realized gains, if any, are distributed to
shareholders. On October 27, 1998, the Fund distributed $2,198,727 from net
short-term realized gains ($1.037972 per share) and $7,780,616 from net long-
term realized gains ($3.673060 per share). The distributions were declared on
October 26, 1998, to shareholders of record on October 23, 1998.
(4) INVESTMENT TRANSACTIONS --
For the year ended September 30, 1998, purchases and proceeds of sales of
investment securities (excluding short-term investments) were $25,327,161 and
$29,720,389, respectively.
(5) ACCOUNTS PAYABLE AND ACCRUED LIABILITIES --
As of September 30, 1998, liabilities of the Fund included the following:
Payable to FMI for management and administrative fees $ 33,198
Other liabilities 14,670
(6) SOURCES OF NET ASSETS --
As of September 30, 1998, the sources of net assets were as follows:
Fund shares issued and outstanding $31,425,805
Net unrealized depreciation on investments (2,358,533)
Accumulated net realized gains on investments 9,979,343
-------------
$39,046,615
-------------
-------------
Aggregate net unrealized depreciation as of September 30,1998, consisted of
the following:
Aggregate gross unrealized appreciation $ 4,377,326
Aggregate gross unrealized depreciation (6,735,859)
-------------
Net unrealized depreciation $ (2,358,533)
-------------
-------------
(7) REQUIRED FEDERAL INCOME TAX DISCLOSURES (UNAUDITED) --
In early 1998, shareholders received information regarding all distributions
paid to them by the Fund during the fiscal year ended September 30, 1998. The
Fund hereby designates the following amounts as long-term capital gains
distributions.
Capital gains taxed at 20% $ 3,780,438
Capital gains taxed at 28% 2,483,552
-------------
Total long-term capital gains $ 6,263,990
-------------
-------------
The percentage of ordinary income which is eligible for the corporate
dividend received deduction for the fiscal year ended September 30, 1998 was
22%.
(8) MATTERS SUBMITTED TO A SHAREHOLDER VOTE (UNAUDITED) --
During fiscal 1998, a special shareholders meeting was held and the following
matters were approved by at least 96% of the voting shares: (a) Election of
Directors and (b) amend the Fund's investment restrictions concerning the
amount of its total assets it may invest in the securities of any one issuer
and the percentage of any one issuer's securities that it may purchase.
FIDUCIARY CAPITAL GROWTH FUND, INC.
225 East Mason Street
Milwaukee, Wisconsin 53202
414-226-4555
BOARD OF DIRECTORS
BARRY K. ALLEN
GEORGE D. DALTON
PATRICK J. ENGLISH
TED D. KELLNER
THOMAS W. MOUNT
DONALD S. WILSON
INVESTMENT ADVISER
AND ADMINISTRATOR
FIDUCIARY MANAGEMENT, INC.
225 East Mason Street
Milwaukee, Wisconsin 53202
TRANSFER AGENT AND
DIVIDEND DISBURSING AGENT
FIRSTAR MUTUAL FUND SERVICES, LLC
615 East Michigan Street
Milwaukee, Wisconsin 53202
800-811-5311
or
414-765-4124
INDEPENDENT ACCOUNTANTS
PRICEWATERHOUSECOOPERS LLP
100 East Wisconsin Avenue
Suite 1500
Milwaukee, Wisconsin 53202
LEGAL COUNSEL
FOLEY & LARDNER
777 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
This report is not authorized for use as an offer of sale or a solicitation of
an offer to buy shares of Fiduciary Capital Growth Fund unless accompanied or
preceded by the Fund's current prospectus. Past performance is not indicative of
future performance. Investment return and principal value of an investment may
fluctuate so that an investor's shares, when redeemed, may be worth more or less
than their original cost.
