<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ___________________ to________________________
Commission file number 0-17737
Fiduciary Capital Partners, L.P.
(Exact name of registrant as specified in its charter)
Delaware 86-0653600
(State of organization) (I.R.S. Employer
Identification No.)
410 17th Street
Suite 400
Denver, Colorado 80202
(Address of principal (Zip Code)
executive offices)
Registrant's telephone number, including area code (800) 866-7607
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No .
--- ---
<PAGE> 2
Fiduciary Capital Partners, L.P.
Quarterly Report on Form 10-Q for the
Quarter Ended September 30, 1995
Table of Contents
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited) 3
Schedule of Investments -
September 30, 1995 3
Balance Sheets - September 30, 1995 and
December 31, 1994 6
Statements of Operations for the three months
ended September 30, 1995 and 1994 7
Statements of Operations for the nine months
ended September 30, 1995 and 1994 8
Statements of Cash Flows for the nine months
ended September 30, 1995 and 1994 9
Statements of Changes in Net Assets for the
nine months ended September 30, 1995 and
for the year ended December 31, 1994 10
Selected Per Unit Data and Ratios 11
Notes to Financial Statements 12
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of
Operations 14
Part II. OTHER INFORMATION
Item 1. Legal Proceedings 21
Item 6. Exhibits and Reports on Form 8-K 21
</TABLE>
2
<PAGE> 3
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
FIDUCIARY CAPITAL PARTNERS, L.P.
SCHEDULE OF INVESTMENTS
SEPTEMBER 30, 1995
(unaudited)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
Principal
Amount/ Investment Amortized % of Total
Shares Investment Date Cost Value Investments
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
MANAGED COMPANIES:
178,934 sh. Carr-Gottstein Foods Co.,
Class B Common Stock(1)* 10/23/90 $ 894,666 $1,019,924
- -----------------------------------------------------------------------------------------------------------------
894,666 1,019,924 3.4%
- -----------------------------------------------------------------------------------------------------------------
182,453.91 sh. Neodata Corporation,
10.00% Class A Convertible 12/27/90 &
Preferred Stock - Series 2* 09/30/92 337,945 2
10,607.78 sh. Neodata Corporation, 12/27/90 &
Common Stock* 09/30/92 1 1
- -----------------------------------------------------------------------------------------------------------------
337,946 3 0.0
- -----------------------------------------------------------------------------------------------------------------
55,340 sh. KEMET Corporation,
Common Stock(2)* 07/11/91 19,614 1,888,477
- -----------------------------------------------------------------------------------------------------------------
19,614 1,888,477 6.3
- -----------------------------------------------------------------------------------------------------------------
358.2 sh. Huntington Holdings, Inc.,
Warrants to Purchase
Common Stock(3)* 01/31/92 103,811 810,855
- -----------------------------------------------------------------------------------------------------------------
103,811 810,855 2.7
- -----------------------------------------------------------------------------------------------------------------
75,856 sh. Amity Leather Products Co.,
Warrants to Purchase Class B
Common Stock* 07/30/92 104,091 918,506
27,392 sh. Amity Leather Products Co.,
Class A Common Stock* 07/30/92 273,920 331,677
- -----------------------------------------------------------------------------------------------------------------
378,011 1,250,183 4.2
- -----------------------------------------------------------------------------------------------------------------
$3,561,003 KB Alloys, Inc.,
20.00% Senior Subordinated
Term Notes due 6/30/01(4) 05/28/93 3,503,059 3,503,059
- -----------------------------------------------------------------------------------------------------------------
3,503,059 3,503,059 11.6
- -----------------------------------------------------------------------------------------------------------------
$6,087,185 Elgin National Industries, Inc.,
13.00% Senior Subordinated
Notes due 9/01/01(5) 09/24/93 5,950,669 5,950,669
7,119.71 sh. ENI Holding Corp.,
10.00% Preferred Stock
due 12/31/01 09/24/93 711,971 855,551
489.27 sh. ENI Holding Corp.,
Class B Common Stock* 09/24/93 48,927 48,927
510.83 sh. ENI Holding Corp.,
Warrants to Purchase Class B
Common Stock* 09/24/93 51,078 51,078
- -----------------------------------------------------------------------------------------------------------------
6,762,645 6,906,225 22.9
- -----------------------------------------------------------------------------------------------------------------
18,194 sh. Protection One, Inc.,
Common Stock(6)* 11/03/93 100,370 164,883
- -----------------------------------------------------------------------------------------------------------------
100,370 164,883 0.6
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes to financial statements are an
integral part of this schedule.
3
<PAGE> 4
FIDUCIARY CAPITAL PARTNERS, L.P.
SCHEDULE OF INVESTMENTS (CONTINUED)
SEPTEMBER 30, 1995
(unaudited)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
Principal
Amount/ Investment Amortized % of Total
Shares Investment Date Cost Value Investments
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$2,604,000 LMC Operating Corp.,
13.00% Senior Secured
Subordinated Term Notes
due 5/31/99(7) 06/10/94 2,473,894 2,473,894
17.447 sh. LMC Operating Corp.,
Warrants to Purchase
Common Stock* 06/10/94 117,180 117,180
17.36 sh. LMC Credit Corp.,
Warrants to Purchase
Common Stock* 06/10/94 1 1
- ----------------------------------------------------------------------------------------------------------------
2,591,075 2,591,075 8.6
- ----------------------------------------------------------------------------------------------------------------
42,404 sh. MTI Holdings II, Inc., 07/06/94 &
Common Stock* 12/28/94 287,930 38,164
- ----------------------------------------------------------------------------------------------------------------
287,930 38,164 0.1
- ----------------------------------------------------------------------------------------------------------------
$2,733,000 Canadian's Corp.,
13.50% Subordinated 09/09/94 &
Notes due 09/01/02(8) 12/29/94 2,627,368 2,627,368
$334,000 Canadian's Holdings, Inc.,
12.00% Exchangeable
Redeemable Debentures 09/09/94 &
due 8/31/04(9)* 12/29/94 320,321 1
$147,778 Canadian's Corp.,
Promissory Notes
due 01/31/97(10) 05/08/95 137,164 137,164
1,392,336 sh. Canadian's Holdngs, Inc.,
Common Stock* 09/22/95 39,782 2
$1,630,834 Canadian's Corp.,
Colateralized Loan
Guarantee earning
interest at 13.75%
due 08/31/04 09/22/95 1,630,834 1,630,834
- ----------------------------------------------------------------------------------------------------------------
4,755,469 4,395,369 14.6
- ----------------------------------------------------------------------------------------------------------------
$1,460,000 R.B.M. Precision Metal
Products, Inc., 13.00%
Senior Subordinated
Secured Notes due
5/24/02(11) 05/24/95 1,351,167 1,351,167
497.639 sh. R.B.M. Precision Metal
Products, Inc., Warrants
to Purchase Common Stock* 05/24/95 82,955 82,955
- ----------------------------------------------------------------------------------------------------------------
1,434,122 1,434,122 4.8
- ----------------------------------------------------------------------------------------------------------------
Total Investments in Managed Companies (78.3% of net assets) 21,168,718 24,002,339 79.8
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes to financial statements are an
integral part of this schedule.
4
<PAGE> 5
FIDUCIARY CAPITAL PARTNERS, L.P.
SCHEDULE OF INVESTMENTS (CONTINUED)
SEPTEMBER 30, 1995
(unaudited)
<TABLE>
<CAPTION>
Principal
Amount/ Investment Amortized % of Total
Shares Investment Date Cost Value Investments
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
TEMPORARY INVESTMENTS:
$2,700,000 Ford Motor Credit Corporation,
5.562% Notes due 10/03/95 09/26/95 2,699,178 2,699,178
$3,400,000 Household Finance Corp.,
5.558% Notes due 10/10/95 09/26/95 3,395,350 3,395,350
- ----------------------------------------------------------------------------------------------------------------
Total Temporary Investments (19.9% of net assets) 6,094,528 6,094,528 20.2
- ----------------------------------------------------------------------------------------------------------------
Total Investments (98.2% of net assets) $27,263,246 $30,096,867 100.0%
================================================================================================================
</TABLE>
(1) The Carr-Gottstein Foods Company common stock trades on the New York Stock
Exchange. The Fund and Fiduciary Capital Pension Partners, L.P. ("FCPP")
combined own a material percentage of the outstanding shares. To reflect
the resultant lack of liquidity, the Fund valued the shares at a 5%
discount to the public market price.
(2) The KEMET Corporation common stock trades on the NASDAQ National Market
System. (Note 7)
(3) Pursuant to the terms of the Fund's agreement with Huntington Holdings,
Inc., under certain circumstances the number of shares issuable upon
exercise of the warrants held by the Fund will increase periodically. The
most recent such increase occurred on August 1, 1995 when the Fund
received the right to an additional 33.6 shares.
(4) The notes will amortize in eight equal quarterly installments of $445,125
commencing on 6/30/99. The current payment of 7.0% of the interest may be
deferred at the borrower's option. During any period in which the payment
of interest is deferred, the interest rate on the notes increases from
20.00% to 21.00%.
(5) The notes will amortize in eight equal quarterly installments of $760,898
commencing on 11/30/99.
(6) The Protection One, Inc. common stock trades on the NASDAQ National Market
System. (Note 7)
(7) The notes will amortize as follows: $32,623 on 9/01/97, $33,683 on
12/01/97, $34,777 on 3/01/98, $35,908 on 6/01/98, $37,075 on 9/01/98,
$38,280 on 12/01/98, $39,524 on 3/01/99 and $2,352,130 on 5/31/99.
(8) The notes will amortize in twelve equal quarterly installments of $227,750
commencing on 12/01/99. The notes also bear contingent additional interest
to be computed under a specified formula.
(9) The debentures are convertible into 25,326 shares of Canadian's Holdings,
Inc. common stock. The accrual of interest on the debentures was
discontinued by the Fund effective April 1, 1995. (Note 6)
(10) The notes bear interest equal to the prime rate, plus 5%.
(11) The notes will amortize in three equal annual installments of $486,667
commencing on 5/24/00.
* Non-income producing security.
The accompanying notes to financial statements are an
integral part of this schedule.
5
<PAGE> 6
FIDUCIARY CAPITAL PARTNERS, L.P.
BALANCE SHEETS
SEPTEMBER 30, 1995 AND DECEMBER 31, 1994
(unaudited)
<TABLE>
<CAPTION>
ASSETS: 1995 1994
---- ----
<S> <C> <C>
Investments (Notes 6 and 7)
Portfolio investments, at value:
Managed companies (amortized cost -
$21,168,718 and $18,948,391,
respectively) $24,002,339 $22,853,071
Temporary investments, at amortized cost 6,094,528 4,876,188
----------- -----------
Total investments 30,096,867 27,729,259
Cash and cash equivalents 239,238 171,999
Accrued interest receivable (Note 6) 840,908 627,846
Other assets, including receivables
from sale of investments 4,592 659,011
----------- -----------
Total assets $31,181,605 $29,188,115
=========== ===========
LIABILITIES:
Payable to affiliates (Notes 2, 3 and 4) $ 55,687 $ 52,354
Accounts payable and accrued liabilities 27,420 34,688
Prepaid interest income -- 60,146
Distributions payable to partners 462,712 694,068
----------- -----------
Total liabilities 545,819 841,256
----------- -----------
CONTINGENCIES (Note 5)
NET ASSETS:
Managing General Partner 42,855 19,965
Limited Partners (equivalent to $20.04
and $18.55, respectively, per limited
partnership unit based on 1,526,949
units outstanding) 30,592,931 28,326,894
----------- -----------
Net assets 30,635,786 28,346,859
----------- -----------
Total liabilities and net assets $31,181,605 $29,188,115
=========== ===========
</TABLE>
The accompanying notes to financial statements are an
integral part of these financial statements.
6
<PAGE> 7
FIDUCIARY CAPITAL PARTNERS, L.P.
STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
(unaudited)
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
INVESTMENT INCOME:
Income:
Interest $ 747,069 $ 686,189
----------- -----------
Total investment income 747,069 686,189
----------- -----------
Expenses:
Investment advisory fees (Note 2) 58,354 65,010
Fund administration fees (Note 3) 35,843 35,844
Independent General Partner fees
and expenses (Note 4) 12,452 12,589
Administrative expenses (Note 3) 20,275 20,310
Professional fees 16,507 12,676
Amortization 2,790 2,790
Other expenses 7,945 15,235
----------- -----------
Total expenses 154,166 164,454
----------- -----------
NET INVESTMENT INCOME 592,903 521,735
----------- -----------
REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Net realized gain (loss) on investments 640,078 (3,763,492)
Net (decrease) increase in unrealized
appreciation of investments (343,821) 4,511,790
----------- -----------
Net gain on investments 296,257 748,298
----------- -----------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $ 889,160 $ 1,270,033
=========== ===========
</TABLE>
The accompanying notes to financial statements are an
integral part of these financial statements.
7
<PAGE> 8
FIDUCIARY CAPITAL PARTNERS, L.P.
STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
(unaudited)
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
INVESTMENT INCOME:
Income:
Interest $ 2,180,244 $ 2,039,401
----------- -----------
Total investment income 2,180,244 2,039,401
----------- -----------
Expenses:
Investment advisory fees (Note 2) 175,060 213,370
Fund administration fees (Note 3) 107,528 107,529
Independent General Partner fees
and expenses (Note 4) 45,398 45,149
Administrative expenses (Note 3) 60,828 60,930
Professional fees 48,948 38,768
Amortization 8,370 8,370
Other expenses 25,846 43,284
----------- -----------
Total expenses 471,978 517,400
----------- -----------
NET INVESTMENT INCOME 1,708,266 1,522,001
----------- -----------
REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Net realized gain (loss) on investments 3,039,855 (3,162,025)
Net (decrease) increase in unrealized
appreciation of investments (1,071,059) 4,441,190
----------- -----------
Net gain on investments 1,968,796 1,279,165
----------- -----------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $ 3,677,062 $ 2,801,166
=========== ===========
</TABLE>
The accompanying notes to financial statements are an
integral part of these financial statements.
8
<PAGE> 9
FIDUCIARY CAPITAL PARTNERS, L.P.
STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
(unaudited)
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net increase in net assets resulting from operations $ 3,677,062 $ 2,801,166
Adjustments to reconcile net increase in net assets resulting
from operations to net cash provided by operating activities:
Accreted discount on portfolio investments (66,686) (32,386)
Amortization 8,370 8,370
Change in assets and liabilities:
Accrued interest receivable (213,062) (208,380)
Other assets 901 8,582
Payable to affiliates 4,479 24,517
Accounts payable and accrued liabilities (7,268) 2,055
Prepaid interest income (60,146) 42,914
Net realized (gain) loss on investments (3,039,855) 3,162,025
Net decrease (increase) in unrealized
appreciation of investments 1,071,059 (4,441,190)
------------ ------------
Net cash provided by operating activities 1,374,854 1,367,673
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of portfolio investments (3,198,810) (4,628,920)
Proceeds from dispositions of portfolio investments 4,729,027 11,978,610
(Purchase) sale of temporary investments, net (1,218,340) (6,463,530)
------------ ------------
Net cash provided by investing activities 311,877 886,160
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions paid to partners (1,619,492) (2,300,619)
------------ ------------
Net cash used in financing activities (1,619,492) (2,300,619)
------------ ------------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 67,239 (46,786)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 171,999 317,279
------------ ------------
CASH AND CASH EQUIVALENTS AT
END OF PERIOD $ 239,238 $ 270,493
============ ============
NONCASH INVESTING AND FINANCING ACTIVITIES:
Investments exchanged for other investments $ -- $ 287,625
</TABLE>
The accompanying notes to financial statements are an
integral part of these financial statements.
9
<PAGE> 10
FIDUCIARY CAPITAL PARTNERS, L.P.
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995
AND FOR THE YEAR ENDED DECEMBER 31, 1994
(unaudited)
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Increase in net assets resulting from operations:
Net investment income $ 1,708,266 $ 2,126,889
Net realized gain (loss) on investments 3,039,855 (2,532,109)
Net (decrease) increase in unrealized
appreciation of investments (1,071,059) 4,356,233
------------ ------------
Net increase in net assets resulting
from operations 3,677,062 3,951,013
Repurchase of limited partnership units -- (2,948,767)
Distributions to partners from -
Net investment income (1,388,135) (2,126,889)
Realized gain on investments -- (867,798)
------------ ------------
Total increase (decrease) in net assets 2,288,927 (1,992,441)
Net assets:
Beginning of period 28,346,859 30,339,300
------------ ------------
End of period (including undistributed
net investment income of $320,131
and $0, respectively) $ 30,635,786 $ 28,346,859
============ ============
</TABLE>
The accompanying notes to financial statements are an
integral part of these financial statements.
10
<PAGE> 11
FIDUCIARY CAPITAL PARTNERS, L.P.
SELECTED PER UNIT DATA AND RATIOS
(unaudited)
<TABLE>
<CAPTION>
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
---------------------- ---------------------
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
Per Unit Data:
Investment income $ .48 $ .40 $ 1.41 $ 1.20
Expenses (.10) (.10) (.30) (.31)
------ ------ ------ ------
Net investment income .38 .30 1.11 .89
Net realized gain (loss) on investments .42 (2.21) 1.97 (1.86)
Net (decrease) increase in unrealized appreciation
of investments (.22) 2.65 (.69) 2.61
Distributions declared to partners (.30) (.45) (.90) (1.35)
------ ------ ------ ------
Net increase in net asset value .28 .29 1.49 .29
Net asset value:
Beginning of period 19.76 17.98 18.55 17.98
------ ------ ------ ------
End of period $20.04 $18.27 $20.04 $18.27
====== ====== ====== ======
Ratios (annualized):
Ratio of expenses to average net assets 2.03% 2.15% 2.13% 2.26%
Ratio of net investment income to
average net assets 7.80% 6.82% 7.72% 6.64%
Number of limited partnership units at end of period 1,526,949 1,687,121 1,526,949 1,687,121
</TABLE>
The accompanying notes to financial statements are an
integral part of these selected per unit data and ratios.
11
<PAGE> 12
FIDUCIARY CAPITAL PARTNERS, L.P.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1995
(unaudited)
1. GENERAL
The accompanying unaudited interim financial statements include all
adjustments (consisting solely of normal recurring adjustments) which are, in
the opinion of the Managing General Partner, necessary to fairly present the
financial position of the Fund as of September 30, 1995 and the results of its
operations, changes in net assets and its cash flows for the periods then ended.
These financial statements should be read in conjunction with the
Significant Accounting Policies and other Notes to Financial Statements included
in the Fund's annual audited financial statements for the year ended December
31, 1994.
2. INVESTMENT ADVISORY FEES
As compensation for its services as investment adviser, FCM Fiduciary
Capital Management Company ("FCM") receives a subordinated monthly fee at the
annual rate of 1% of the Fund's available capital, as defined in the Partnership
Agreement. Investment advisory fees of $175,060 were paid by the Fund for the
nine months ended September 30, 1995.
3. FUND ADMINISTRATION FEES
As compensation for its services as fund administrator, FCM receives a
monthly fee at the annual rate of .45% of net proceeds available for investment,
as defined in the Partnership Agreement. Fund administration fees of $107,528
were paid by the Fund for the nine months ended September 30, 1995. FCM is also
reimbursed, subject to various limitations, for administrative expenses incurred
in providing accounting and investor services to the Fund. The Fund reimbursed
FCM for administrative expenses of $60,828 for the nine months ended September
30, 1995.
4. INDEPENDENT GENERAL PARTNER FEES AND EXPENSES
As compensation for services rendered to the Fund, each of the
Independent General Partners receives from the Fund and Fiduciary Capital
Pension Partners, L.P., an affiliated fund, (collectively, the "Funds") an
annual fee of $30,000, payable monthly in arrears, together with all
out-of-pocket expenses. Each Fund's allocation of these fees and expenses is
based on the relative number of outstanding Units. Fees and expenses paid by the
Fund for the nine months ended September 30, 1995 totaled $45,398.
5. CONTINGENCIES
FCM, the Managing General Partner of the Fund, had been named as a
defendant in a class action lawsuit brought in March 1995 against PaineWebber
Incorporated and a number of its affiliates. During May 1995, the Court entered
an order certifying the class and dismissing the class action against FCM
without prejudice. FCM believes that this litigation will be resolved without
any material adverse effect on the Fund's financial condition.
12
<PAGE> 13
FIDUCIARY CAPITAL PARTNERS, L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 1995
(unaudited)
6. NON-ACCRUAL STATUS OF INVESTMENTS
In accordance with the Fund's accounting policies, the Fund stopped
accruing interest on the Canadian's Holdings, Inc. Exchangeable Redeemable
Debentures effective April 1, 1995.
7. SUBSEQUENT EVENTS
On October 13, 1995, Carr-Gottstein Foods Co. ("Carr-Gottstein")
announced an offer to purchase up to 7,500,000 shares (approximately 49%) of its
outstanding common stock at a purchase price of $11.00 per share. The offer,
which is subject to various contingencies, will expire on November 15, 1995.
If more than 7,500,000 shares are tendered, the tendered shares will generally
be purchased on a pro rata basis. The Fund has tendered all of its shares.
However, it is likely that the number of shares actually purchased will be pro
rated.
On November 6, 1995, the Fund sold 27,396 shares of KEMET Corporation
common stock. The Fund received $956,326 of sales proceeds, resulting in a
realized gain of $946,617.
During November 1995, the Fund sold all of its Protection One, Inc.
common stock. The Fund received $146,589 of sales proceeds, resulting in a
realized gain of $46,219.
13
<PAGE> 14
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
LIQUIDITY AND CAPITAL RESOURCES
As of September 30, 1995, the Fund held portfolio investments in twelve
Managed Companies, with an aggregate cost of approximately $21.2 million. These
portfolio investments, which were made from net offering proceeds and the
reinvestment of proceeds from the sale of other portfolio investments, represent
approximately 78.3% of the Fund's net assets. When acquired, these portfolio
investments generally consisted of high-yield subordinated debt, linked with an
equity participation or a comparable participation feature in middle market
companies. These securities were typically issued in private placement
transactions and were subject to certain restrictions on transfer or sale,
thereby limiting their liquidity. A number of the portfolio companies have
prepaid their subordinated debt that the Fund held. In addition, three of the
portfolio companies have successfully completed initial public offerings
("IPOs") of their stock. The Fund continues to hold all of the equity components
of its original investments, except for a substantial portion of its KEMET
Corporation ("KEMET") stock and its Protection One, Inc. stock.
As of September 30, 1995, the Fund's remaining assets were invested in
short-term commercial paper. These funds are available for investment, for
distribution to the partners or to fund the annual repurchase offer.
The Fund sold a portion of its KEMET common stock during the nine
months ended September 30, 1995. In addition, the Fund's subordinated debt
investment in Protection One was prepaid during the nine months ended September
30, 1995. In the aggregate, the Fund received $4,083,879 of proceeds, including
applicable prepayment premiums, from these transactions.
On November 6, 1995, the Fund received $956,326 of sales proceeds from
the sale of 27,396 shares of KEMET common stock.
During November 1995, the Fund received $146,589 of sales proceeds from
the sale of all of its Protection One, Inc. common stock.
A portion of the proceeds representing gains from these transactions
were used by the Fund to fund a portion of the cost of the follow-on investments
in Canadian's Corp. ("Canadian's"), which were acquired on December 29, 1994,
May 8, 1995 and September 22, 1995 (see following discussion). The remaining
portion of the gains from these transactions have been reserved by the Managing
General Partner to partially fund either the 1995 repurchase offer or any
additional follow-on investments that the Fund may make in existing portfolio
companies during 1995.
On October 13, 1995, Carr-Gottstein announced an offer to purchase up
to 7,500,000 shares (approximately 49%) of its outstanding common stock at a
purchase price of $11.00 per share. The offer, which is subject to various
contingencies, will expire on November 15, 1995. If more than 7,500,000 shares
are tendered, the tendered shares will generally be purchased on a pro rata
basis. The Fund has tendered all of its shares. However, it is likely that
the number of shares actually purchased will be pro rated.
The Fund made its initial investment in Canadian's during September
1994 as part of a financing used to settle Canadian's liabilities and allow the
company to emerge from bankruptcy. A follow-on investment was made during
December 1994 in order to finance the acquisition of store leases and certain
fixed assets of The Ormonds Shops ("Ormonds"). The company expected to be able
to fund certain costs relating to conversion of the Ormonds stores to the
Canadian's format out of operating cash flow. Unfortunately, the retail market,
and particularly women's specialty retailing, has suffered a prolonged and
worsening
14
<PAGE> 15
downturn which has continued throughout 1995. As a consequence, the company has
not generated sufficient cash flow to fund its operations, let alone fund the
capital expenditures relating to the Ormonds acquisition.
During May 1995, the Fund made a follow-on investment in Canadian's at
a cost of $133,000. The investment consisted of $147,778 of floating rate
Promissory Notes, with warrants to acquire common stock. The Fund and certain of
Canadian's equity investors provided a loan to the company in order to finance
unanticipated cash shortfalls arising from operations which were below
expectations. By August 1995, the company was facing a significant working
capital shortage and requested the Funds and its other investors to make an
additional investment in the company.
The company's major equity owners and the Funds agreed to provide the
requested funding. The Funds insisted that the new investment rank senior to
previous loans made to the company by all parties other than the company's
revolving line of credit lender. In order to accomplish this level of seniority,
the new financing was structured as a collateralized guarantee that would
support an overadvance under the company's revolving line of credit. This new
investment of $1,630,834 carries an interest rate of 13.75% and is due on August
31, 2004. In consideration of the new financing, the Funds and the other parties
which participated now own approximately 92.5% of Canadian's Holdings, Inc.
("Canadian's Holdings") common stock, which in turn owns 96.5% of the company's
common stock. All holders of the company's warrants, including the Fund,
surrendered their warrants in exchange for common stock of Canadian's Holdings.
The Fund's ownership of the company has increased from approximately 9% to
approximately 22% .
The Canadian's Holdings Exchangeable Redeemable Debentures are secured
by preferred stock issued by the company and the company has elected not to pay
dividends on the preferred stock. Therefore, Canadian's Holdings is unable to
pay interest on the debentures and is in default. The holders of these
debentures, other than the Funds (which hold a portion of the debentures), were
unable to participate in the latest financing. As a result, holders of the
debentures were diluted to an ownership percentage of approximately 3.1%. This
dilution reduced the Fund's interest in Canadian's Holdings that is held through
the debentures to less than 1%.
Officers of FCM are providing the company with managerial assistance in
order to identify areas where the company can save money and reduce costs. Under
consideration are steps such as closing unprofitable or marginally profitable
stores and staff reductions. The company is also considering various proposals
designed to raise additional equity capital. With a lower cost structure and
possibly additional capital, the company is hopeful that its market strategy
will be successful if the overall environment improves.
One May 24, 1995, the Fund acquired a new portfolio investment in
R.B.M. Precision Metal Products, Inc. ("RBM") at a cost of approximately $1.43
million. The investment consists of $1,460,000 of 13.00% Senior Subordinated
Secured Notes due May 24, 2002, with warrants to acquire common stock.
The Fund anticipates being able to reinvest all available funds,
including the principal amount of any future prepayments received, in additional
portfolio investments. The Partnership Agreement provides that the Fund's
investment period will end on December 31, 1995. Although the Fund is permitted
to make additional investments in existing portfolio companies after 1995, the
Fund will no longer be permitted to acquire investments in new portfolio
companies.
Pursuant to the terms of the Fund's periodic unit repurchase policy
that was adopted by the Fund's Limited Partners during 1993, the Fund will
annually offer to purchase from its Limited Partners up to 7.5% of its
outstanding Units for an amount equal to the current net asset value per Unit,
net of a fee (not to exceed 2%) to be retained by the Fund to offset expenses
incurred in connection with the repurchase offer. If the number of tendered
Units in any year exceeds 7.5% of the outstanding Units, the Fund's General
Partners may vote to
15
<PAGE> 16
repurchase up to an additional 2% of the outstanding Units. The 1995 repurchase
offer was mailed to the Limited Partners on October 6, 1995. Limited Partners
tendered 341,692 Units for repurchase. The Fund anticipates repurchasing
approximately 35% of the tendered Units, or approximately 119,705 Units, at the
Fund's net asset value per Unit as of November 14, 1995. The actual redemption
of tendered Units will occur on November 21, 1995.
Accrued interest receivable increased $213,062 from $627,846 at
December 31, 1994 to $840,908 at September 30, 1995. This increase resulted
primarily from a $216,034 increase in the deferred portion of the interest
receivable from KB Alloys, Inc. ("KB Alloys") with respect to the Fund's
investment in $3,561,003 principal amount of 20.00% Senior Subordinated Term
Notes due June 30, 2001. KB Alloys is required to pay 13.00% interestcurrently,
while the remaining 7.00% of the interest may be deferred at KB Alloys' option.
During any period in which the payment of interest is deferred, the interest
rate on the notes increases from 20.00% to 21.00%. To date, KB Alloys has
elected to defer payment of the interest. At September 30, 1995, the cumulative
amount of deferred interest totaled $678,668. The Fund's agreement with KB
Alloys requires KB Alloys to pay all accumulated deferred interest in excess of
$547,847 no later than August 28, 1998, and the amount of deferred interest
cannot exceed $547,847 at any time thereafter. The amount of accrued interest
receivable with respect to other portfolio investments decreased slightly during
the nine months ended September 30, 1995.
Other assets decreased $654,419, from $659,011 at December 31, 1994 to
$4,592 at September 30, 1995. The balance at December 31, 1994 included a
$645,148 receivable from the sale of KEMET common stock during December 1994.
This amount was received by the Fund during January 1995.
Prepaid interest income decreased from $60,146 at December 31, 1994 to
zero at September 30, 1995. This prepaid interest income was related to the
Canadian's 13.50% Subordinated Notes, which required interest to be paid
quarterly, in advance, to the Fund. Effective June 1, 1995, the notes were
amended to provide for the interest to be paid monthly, in advance, on the first
day of each month.
Distributions payable to partners decreased $231,356, from $694,068 at
December 31, 1994 to $462,712 at September 30, 1995. This decrease corresponds
to the percentage decrease in the quarterly distribution rate from $.45 per Unit
to $.30 per Unit (as discussed in the following paragraphs).
During the nine months ended September 30, 1995, the Fund paid cash
distributions pertaining to the fourth quarter of 1994 and the first and second
quarters of 1995, in the amounts of $694,068, $462,712 and $462,712,
respectively. These quarterly distributions were equal to $.45, $.30 and $.30
per Unit, respectively, and represented annualized rates equal to 9.0%, 6.0% and
6.0%, respectively, of contributed capital.
As discussed in previous reports, the quarterly distributions for 1995
are being paid at a reduced rate. The distribution for the third quarter of 1995
will be paid on November 14, 1995 in an amount equal to $.30 per Unit, or an
annualized rate equal to 6.0% of contributed capital. This distribution consists
entirely of net investment income earned during the three months ended September
30, 1995.
It is expected that the distribution for the fourth quarter of 1995
will also be made at the same 6.0% rate. In the past, the Fund realized gains
from its investments that provided additional sources of cash for distributions.
Although there can be no assurances, the Fund may realize similar gains during
the fourth quarter of 1995 that could in turn result in a higher distribution
rate for the quarter. Gains can also be utilized to fund the annual repurchase
offer or to fund any follow-on investments that the Fund may make in existing
portfolio companies.
The Fund's investment period will end on December 31, 1995. Although
the Fund is permitted to make additional investments in existing portfolio
companies after 1995, the Fund
16
<PAGE> 17
will no longer be permitted to acquire investments in new portfolio companies.
This will impact the amount of the Fund's quarterly distributions for 1996 and
subsequent years because all proceeds from dispositions or maturities of
investments after December 31, 1995 will be distributed to investors, except to
the extent the cash is needed to fund the annual repurchase offer or to fund any
follow-on investments that the Fund may make in existing portfolio companies.
FCM, the Managing General Partner of the Fund, had been named as a
defendant in a class action lawsuit brought in March 1995 against PaineWebber
Incorporated and a number of its affiliates. During May 1995, the Court entered
an order certifying the class and dismissing the class action against FCM
without prejudice. FCM believes that this litigation will be resolved without
any material adverse effect on the Fund's financial condition.
RESULTS OF OPERATIONS
Investment Income and Expenses
The Fund's net investment income was $592,903 for the three months
ended September 30, 1995 as compared to net investment income of $521,735 for
the corresponding period of the prior year. Net investment income per limited
partnership unit increased from $.30 to $.38 and the ratio of net investment
income to average net assets increased from 6.82% to 7.80% for the three months
ended September 30, 1995 as compared to the corresponding period of the prior
year.
The Fund's net investment income was $1,708,266 for the nine months
ended September 30, 1995 as compared to net investment income of $1,522,001 for
the corresponding period of the prior year. Net investment income per limited
partnership unit increased from $.89 to $1.11 and the ratio of net investment
income to average net assets increased from 6.64% to 7.72% for the nine months
ended September 30, 1995 as compared to the corresponding period of the prior
year.
Net investment income for both the three and nine month periods ended
September 30, 1995 increased as a result of slight increases in investment
income and slight decreases in total expenses.
Investment income increased $60,880 and $140,843, or 8.9% and 6.9%, for
the three and nine month periods ended September 30, 1995, respectively, as
compared to the corresponding periods of the prior year. These increases were
primarily the result of higher interest rates on both the Fund's temporary
investments and the Fund's higher-yielding subordinated debt investments. The
positive effect of the higher interest rates was partially offset by a decrease
in the amount of the Fund's average net assets.
The Fund had average net assets of approximately $29.5 million during
the nine months ended September 30, 1995 as compared to approximately $30.5
million during the corresponding period of the prior year. This 3.3% decrease in
average net assets occurred primarily as a result of the Fund's repurchase of
9.49% of its Units during the fourth quarter of 1994. The negative effect of the
repurchase of Units was partially offset by gains achieved with respect to the
Fund's investments (primarily the KEMET common stock).
Total expenses decreased $10,288 and $45,422, or 6.3% and 8.8%, for the
three and nine month periods ended September 30, 1995, respectively, as compared
to thecorresponding periods of the prior year. These decreases resulted
primarily from decreases in investment advisory fees and other expenses. The
investment advisory fees decreased as a result of the repurchase of Units by the
Fund during the fourth quarter of 1994 and the realization during July 1994 of
the loss on the Fund's Mobile Technology, Inc.
17
<PAGE> 18
("MTI") investment. Both the repurchase of Units and the realization of the MTI
loss decreased the amount of the Fund's available capital (as defined in the
Partnership Agreement), which is the base with respect to which the investment
advisory fees are calculated. Other expenses decreased primarily as a result of
a decrease in consulting fees. These decreases were partially offset by an
increase in professional fees.
Net Realized Gain on Investments
On February 28, 1995, the Fund sold 10,547 shares of KEMET common
stock. The Fund received $326,324 of sales proceeds, resulting in a realized
gain of $318,852.
During April and May 1995, the Fund sold an additional 44,920 shares of
KEMET common stock. The Fund received $1,973,532 of sales proceeds, resulting in
realized gains of $1,941,692.
On May 17, 1995, Protection One prepaid its $1,083,000 of 12.00% Senior
Subordinated Notes that were carried by the Fund at an amortized cost of
$997,917. The Fund received $1,137,150 of proceeds, including a prepayment
premium, resulting in a realized gain of $139,233.
On July 25, 1995, the Fund sold 9,587 shares of KEMET common stock. The
Fund received $646,873 of sales proceeds, resulting in a realized gain of
$640,078.
Net Unrealized Appreciation of Investments
FCM values the Fund's portfolio investments on a weekly basis utilizing
a variety of methods. For securities that are publicly traded and for which
market quotations are available, valuations are set by the closing sales, or an
average of the closing bid and ask prices, as of the valuation date.
Fair value for securities that are not traded in any liquid public
markets or that are privately held are determined pursuant to valuation policies
and procedures that have been approved by the Independent General Partners and
subject to their supervision. There is a range of values that are reasonable for
such investments at any particular time. Each such investment is valued
initially based upon its original cost to the Fund ("cost method"). The cost
method is used until significant developments affecting the portfolio company
provide a basis for use of an appraisal valuation. Appraisal valuations are
based upon such factors as the portfolio company's earnings, cash flow and net
worth, the market prices for similar securities of comparable companies and an
assessment of the portfolio company's future financial prospects. In a case of
unsuccessful operations, the appraisal may be based upon liquidation value.
Appraisal valuations are necessarily subjective. The Fund also may use, when
available, third-party transactions in a portfolio company's securities as the
basis of valuation ("private market method"). The private market method is used
only with respect to completed transactions or firm offers made by
sophisticated, independent investors.
As of December 31, 1994, the Fund had recorded $4,397,511 of unrealized
appreciation and $(492,831) of unrealized depreciation of investments.
Therefore, as of December 31, 1994, the Fund had recorded a total net unrealized
appreciation of investments of $3,904,680.
The net increase in unrealized appreciation of investments during the
three and nine month periods ended September 30, 1995 and the cumulative net
unrealized appreciation of investments as of September 30, 1995, consisted of
the following components:
18
<PAGE> 19
<TABLE>
<CAPTION>
Unrealized Appreciation (Depreciation) Recorded
-----------------------------------------------
During the Three During the Nine
Months Ended Months Ended As of
Portfolio Company September 30, 1995 September 30, 1995 September 30, 1995
- ------------------------------------ ------------------ ------------------ ------------------
<S> <C> <C> <C>
Unrealized net appreciation recorded
during prior periods with respect to
investments disposed of during
the period $(497,720) $(1,769,303) $ -
Carr-Gottstein (63,745) (84,993) 125,258
Neodata - (325,199) (337,943)
KEMET 432,342 1,116,309 1,868,863
Huntington 76,054 130,082 707,044
Amity - 87,610 872,172
Elgin / ENI 17,799 53,397 143,580
Protection One 51,549 81,138 64,513
MTI - - (249,766)
Canadian's Holdings (360,100) (360,100) (360,100)
--------- ----------- ----------
$(343,821) $(1,071,059) $2,833,621
========= =========== ==========
</TABLE>
Carr-Gottstein Foods Company completed an IPO of its common stock on
July 1, 1993. The stock, which trades on the New York Stock Exchange, closed at
$6.00 on September 30, 1995. This price compares to closing prices of $6.50 on
December 31, 1994 and $6.375 on June 30, 1995. Based on the $6.00 closing
trading price of the common stock, the Fund's 178,934 shares of common stock
would have a market value of $1,073,604. However, the Fund's valuation
guidelines require the stock to be valued at a 5% discount to the public market
price to reflect the potential market impact that could result from the sale of
the material number of shares owned by the Funds.
The Neodata Corporation ("Neodata") stock was written down at March 31,
1995. The Partnership has consistently valued this investment based upon a
multiple of Neodata's cash flow. Because Neodata's long-term debt presently
provides for the accrual, rather than current payment, of interest, the
Company's debt has grown to a level which now exceeds the Partnership's
valuation.
KEMET completed an IPO of its common stock on October 21, 1992. KEMET
declared a two-for-one stock split effective September 20, 1995. The stock,
which trades on the NASDAQ National Market System, closed at $34.125 (an average
of the closing bid and ask prices) on September 30, 1995. This price is up from
the closing prices (as restated for the two-for-one stock split) of $14.6875 on
December 31, 1994 and $26.3125 on June 30, 1995. Based on the $34.125 closing
trading price of the common stock, the 55,340 shares of common stock that the
Fund held at September 30, 1995 had a market value of $1,888,477.
During June 1995, the Fund received an unsolicited offer from a third
party to purchase the Huntington Holdings, Inc. ("Huntington") warrants which
are held by the Fund. Although the Fund decided not to sell the warrants, the
warrants were written up in value at June 30, 1995 based upon the offer price.
During August 1995, the Fund received the right to an additional 33.6 shares of
Huntington stock, in accordance with the terms of the Fund's warrant agreement
with Huntington. The warrants were written up in value at September 30, 1995 in
consideration of the receipt of these additional warrants.
The Amity warrants and common stock were written up in value at March
31, 1995 to bring Amity's valuation more in line with the valuation of other
comparable companies in its industry.
The ENI Holding Corp. preferred stock is being written up in value
quarterly to reflect the amount of the cumulative 10% preferential dividend that
has accrued with respect to the preferred stock.
19
<PAGE> 20
Protection One, Inc. ("Protection One") completed an IPO of its common
stock on September 29, 1994. The stock, which trades on the NASDAQ National
Market System, closed at $9.0625 (an average of the closing bid and ask prices)
on September 30, 1995. This price compares to closing prices of $4.875 on
December 31, 1994 and $6.0625 on June 30, 1995. Based on the $9.0625 closing
trading price of the common stock, the Fund's 18,194 shares of common stock had
a market value of $164,883 at September 30, 1995.
The current status of Canadian's operations and the Fund's investments
in Canadian's and Canadian's Holdings are discussed above. As a result of the
uncertainties currently surrounding the retail industry in general, and
Canadian's in particular, the Fund wrote the Canadian's Holdings debentures and
common stock down in value to a negligible amount during the third quarter of
1995. The debentures, which in essence represent ownership of Canadian's
preferred stock, are in default and were significantly diluted in connection
with the most recent financing.
FCM continually monitors both the Fund's portfolio companies and the
markets, and continually evaluates the decision to hold or sell its traded
securities.
20
<PAGE> 21
Part II. OTHER INFORMATION
Item 1. Legal Proceedings
As previously reported, FCM, the Managing General Partner of the Fund,
had been named as a defendant in a class action lawsuit against PaineWebber
Incorporated ("PaineWebber") and a number of its affiliates relating to
PaineWebber's direct investment offerings, including the offering of the Units.
Plaintiffs in the lawsuit allege, among other things, that the defendants
violated federal securities laws and committed common law fraud in the marketing
of direct investments.
On May 30, 1995, the United States District Court for the Southern
District of New York entered an order certifying the class and dismissing the
class action against FCM without prejudice. PaineWebber and Mezzanine Capital
Corporation, a minority general partner of FCM and an affiliate of PaineWebber,
remain as defendants.
The Fund was not named as a defendant in the lawsuit; however, pursuant
to certain contractual arrangements between FCM and PaineWebber in connection
with the offering of the Units, the Fund may be required to indemnify
PaineWebber and its affiliates for their costs and liability in connection with
any class action claims relating to the Fund. FCM believes that the Fund's
exposure in respect of the indemnity will not have any material adverse effect
on the Fund's financial condition.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits and Reports to be filed:
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<S> <C>
11.1 Statement of Computation of Net Investment Income
Per Limited Partnership Unit.
19.1 Reports Furnished to Securities Holders.
27.1 Financial Data Schedule.
</TABLE>
(b) The Registrant did not file any reports on Form 8-K during the
third quarter of the fiscal year ending December 31, 1995.
21
<PAGE> 22
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Fiduciary Capital Partners, L.P.
(Registrant)
By: FCM Fiduciary Capital Management Company
Managing General Partner
Date: November 14, 1995 By: /s/ Donald R. Jackson
---------------------
Donald R. Jackson
Chief Financial Officer
22
<PAGE> 23
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description Page
- ----------- ----------- ----
<S> <C> <C>
11.1 Statement of Computation of Net Investment Income
Per Limited Partnership Unit.
19.1 Reports Furnished to Securities Holders.
27.1 Financial Data Schedule.
</TABLE>
E-1
<PAGE> 1
EXHIBIT 11.1
FIDUCIARY CAPITAL PARTNERS, L.P.
STATEMENT OF COMPUTATION OF NET
INVESTMENT INCOME PER LIMITED
PARTNERSHIP UNIT
<TABLE>
<CAPTION>
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
-------------------- -------------------
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net Investment Income $ 592,903 $ 521,735 $1,708,266 $1,522,001
Percentage Allocable to Limited Partners 99% 99% 99% 99%
---------- ---------- ---------- ----------
Net Investment Income Allocable
to Limited Partners $ 586,974 $ 516,518 $1,691,183 $1,506,781
========== ========== ========== ==========
Weighted Average Number of Limited
Partnership Units Outstanding 1,526,949 1,687,121 1,526,949 1,687,121
========== ========== ========== ==========
Net Investment Income Per Limited
Partnership Unit $ .38 $ .30 $ 1.11 $ .89
========== ========== ========== ==========
</TABLE>
<PAGE> 1
FIDUCIARY CAPITAL PARTNERS, L.P.
- --------------------------------------------------------------------------------
-----------------------------
SECOND QUARTER REPORT
1995
<PAGE> 2
FIDUCIARY CAPITAL PARTNERS, L.P.
- --------------------------------------------------------------------------------
MESSAGE TO INVESTORS
Dear Investor:
The Fund's net asset value per Unit was $19.76 at June 30, 1995. This net
asset value is up from the net asset values of $18.55 at December 31, 1994 and
$18.84 at March 31, 1995. These increases resulted primarily from gains
attributable to the Fund's investments in KEMET Corporation ("KEMET") and
Protection One, Inc. ("Protection One").
At June 30, 1995, the Fund held portfolio investments in twelve companies.
These portfolio investments represented approximately 75.1% of the Fund's net
assets. The Fund's remaining assets were invested in high-quality, short-term
commercial paper. These funds are available for investment, for distribution to
the partners or to fund the annual repurchase offer.
INVESTMENT UPDATE
During May 1995, Protection One prepaid its $1,083,000 of 12.00% Senior
Subordinated Notes that were held by the Fund. The Fund received $1,137,150 of
proceeds, including a prepayment premium. The Fund continues to hold 18,194
shares of Protection One common stock, which were received during July 1995 when
the Fund exercised the Protection One warrants it previously held.
The Fund continues to periodically sell shares of KEMET common stock.
During April and May 1995, the Fund sold 44,920 shares at an average net sales
price of approximately $43.93. An additional 9,587 shares were sold during July
1995 at an average net sales price of approximately $67.47. The Fund has 27,670
shares of KEMET stock remaining as of August 22, 1995.
During May 1995, the Fund acquired a new portfolio investment in R.B.M.
Precision Metal Products, Inc. ("RBM") at a cost of approximately $1.43 million.
RBM, headquartered in Colorado Springs, Colorado, is a manufacturer of precision
sheet metal enclosures, chassis and assemblies for business machines. Its
principal customer is Hewlett Packard. This new investment consists of
$1,460,000 of 13.00% Senior Subordinated
ONE
<PAGE> 3
FIDUCIARY CAPITAL PARTNERS, L.P.
- --------------------------------------------------------------------------------
Secured Notes due May 24, 2002, with warrants to acquire common stock.
During May 1995, the Fund made a follow-on investment in Canadian's Corp.
The investment consists of $147,778 of floating rate Promissory Notes, with
warrants to acquire common stock, which together were purchased at a discounted
price of $133,000. The Fund and certain of Canadian's equity investors provided
a loan to the company in order to finance unanticipated cash shortfalls arising
from operations which were below expectations.
CASH DISTRIBUTIONS
The Fund made its cash distribution for the second quarter of 1995 on
August 14, 1995. This distribution - amounting to $.30 per Unit - was equal to
an annualized rate of 6% of contributed capital. This distribution consisted
entirely of net investment income earned during the second quarter. We expect
the remaining 1995 distributions to be made at the same 6% rate.
The Fund's investment period will end on December 31, 1995. Although the
Fund is permitted to make additional investments in existing portfolio companies
after 1995, the Fund will no longer be permitted to acquire investments in new
portfolio companies. This will impact the amount of the Fund's quarterly
distributions for 1996 and subsequent years because all proceeds from
dispositions or maturities of investments after December 31, 1995 will be
distributed to investors, except to the extent the cash is needed to fund the
annual repurchase offer or to fund any follow-on investments that the Fund may
make in existing portfolio companies.
PERIODIC UNIT REPURCHASE POLICY
Pursuant to the terms of the periodic unit repurchase policy that was
adopted by the Fund's investors during 1993, the Fund annually offers to
repurchase from investors, up to 7.5% of its outstanding Units for an amount
equal to the current net asset value per Unit, net of a fee (not to exceed 2%)
to be retained by the Fund to offset expenses incurred in con-
TWO
<PAGE> 4
FIDUCIARY CAPITAL PARTNERS, L.P.
- --------------------------------------------------------------------------------
nection with the repurchase offer. If the number of tendered Units in any year
exceeds 7.5% of the outstanding Units, the Fund's General Partners may vote to
repurchase up to an additional 2% of the outstanding Units.
The next opportunity to have the Fund repurchase your Units will occur
during the fourth quarter of 1995. The repurchase offer will be mailed to
investors on October 6, 1995, and the deadline for tendering Units for
repurchase will be October 31, 1995. The repurchase price will be based on the
net asset value per Unit on November 14, 1995 and payment for tendered Units
will be made on November 21, 1995.
* * * * * * * *
We are currently reviewing several investment opportunities for the Fund.
We are confident that we will be able to identify sufficient attractive
investment opportunities to fully invest the remaining funds that are available
for reinvestment prior to December 31, 1995.
If you have any questions regarding your investment in the Fund, please
call us at 800-866-7607.
Sincerely,
/s/ Paul Bagley
- ---------------
Paul Bagley, Chairman
FCM Fiduciary Capital Management Company
/s/ W. Duke DeGrassi
- --------------------
W. Duke DeGrassi, President
FCM Fiduciary Capital Management Company
August 22, 1995
THREE
<PAGE> 5
FIDUCIARY CAPITAL PARTNERS, L.P.
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
<TABLE>
<CAPTION>
JUNE 30, 1995 (UNAUDITED)
- ----------------------------------------------------------------------------------------------------------------
PRINCIPAL
AMOUNT/ INVESTMENT AMORTIZED % OF TOTAL
SHARES INVESTMENT DATE COST VALUE INVESTMENTS
<S> <C> <C> <C> <C> <C>
MANAGED COMPANIES:
178,934 sh. Carr-Gottstein Foods Co.,
Class B Common Stock(1)* 10/23/90 $ 894,666 $1,083,669
- ----------------------------------------------------------------------------------------------------------------
894,666 1,083,669 3.6%
- ----------------------------------------------------------------------------------------------------------------
182,453.9 sh. Neodata Corporation,
10.00% Class A Convertible 12/27/90 &
Preferred Stock - Series 2* 09/30/92 337,945 2
10,607.78 sh. Neodata Corporation, 12/27/90 &
Common Stock* 09/30/92 1 1
- ----------------------------------------------------------------------------------------------------------------
337,946 3 0.0
- ----------------------------------------------------------------------------------------------------------------
37,257 sh. KEMET Corporation,
Common Stock(2)* 07/11/91 26,409 1,960,650
- ----------------------------------------------------------------------------------------------------------------
26,409 1,960,650 6.6
- ----------------------------------------------------------------------------------------------------------------
324.6 sh. Huntington Holdings, Inc.,
Warrants to Purchase
Common Stock(3)* 01/31/92 103,811 734,801
- ----------------------------------------------------------------------------------------------------------------
103,811 734,801 2.5
- ----------------------------------------------------------------------------------------------------------------
75,856 sh. Amity Leather Products Co.,
Warrants to Purchase Class B
Common Stock* 07/30/92 104,091 918,506
27,392 sh. Amity Leather Products Co.,
Class A Common Stock* 07/30/92 273,920 331,677
- ----------------------------------------------------------------------------------------------------------------
378,011 1,250,183 4.2
- ----------------------------------------------------------------------------------------------------------------
$3,561,003 KB Alloys, Inc.,
20.00% Senior Subordinated
Term Notes due 6/30/01(4) 05/28/93 3,501,120 3,501,120
- ----------------------------------------------------------------------------------------------------------------
3,501,120 3,501,120 11.7
- ----------------------------------------------------------------------------------------------------------------
$6,087,185 Elgin National Industries, Inc.,
13.00% Senior Subordinated
Notes due 9/01/01(5) 09/24/93 5,945,613 5,945,613
7,119.71 sh. ENI Holding Corp.,
10.00% Preferred Stock
due 12/31/01 09/24/93 711,971 837,752
489.27 sh. ENI Holding Corp.,
Class B Common Stock* 09/24/93 48,927 48,927
510.83 sh. ENI Holding Corp.,
Warrants to Purchase Class B
Common Stock* 09/24/93 51,078 51,078
- ----------------------------------------------------------------------------------------------------------------
6,757,589 6,883,370 23.1
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes to financial statements are an integral part of this
schedule.
FOUR
<PAGE> 6
FIDUCIARY CAPITAL PARTNERS, L.P.
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
JUNE 30, 1995 (UNAUDITED)
- ----------------------------------------------------------------------------------------------------------------
PRINCIPAL
AMOUNT/ INVESTMENT AMORTIZED % OF TOTAL
SHARES INVESTMENT DATE COST VALUE INVESTMENTS
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
18,194.4 sh. Protection One, Inc.,
Warrants to Purchase
Common Stock(6)* 11/03/93 97,340 110,304
- ----------------------------------------------------------------------------------------------------------------
97,340 110,304 0.4
- ----------------------------------------------------------------------------------------------------------------
$2,604,000 LMCOperating Corp.,
13.00% Senior Secured
Subordinated Term Notes
due 5/31/99(7) 06/10/94 2,465,824 2,465,824
17.447 sh. LMCOperating Corp.,
Warrants to Purchase
Common Stock* 06/10/94 117,180 117,180
17.36 sh. LMCCredit Corp.,
Warrants to Purchase
Common Stock* 06/10/94 1 1
- ----------------------------------------------------------------------------------------------------------------
2,583,005 2,583,005 8.7
- ----------------------------------------------------------------------------------------------------------------
$2,733,000 Canadian's Corp.,
13.50% Subordinated 09/09/94 &
Notes due 9/01/02(8) 12/29/94 2,623,897 2,623,897
$334,000 Canadian's Holdings, Inc.,
12.00% Exchangeable
Redeemable Debentures 09/09/94 &
due 8/31/04(9) 12/29/84 320,321 320,321
$147,778 Canadian's Corp.,
Promissory Notes
due 6/30/96(10) 05/08/95 134,035 134,035
266,201 sh. Canadian's Corp.,
Warrants to Purchase 09/09/94 &
Common Stock* 12/29/94 39,043 39,043
30,653 sh. Canadina's Corp.,
Warrants to Purchase
Common Stock(11)* 05/08/95 739 739
- ----------------------------------------------------------------------------------------------------------------
3,118,035 3,118,035 10.4
- ----------------------------------------------------------------------------------------------------------------
$1,460,000 R.B.M. Precision Metal
Products, Inc., 13.00%
Senior Subordinated
Secured Notes due
5/24/02(12) 05/24/95 1,348,794 1,348,794
497.639 sh. R.B.M. Precision Metal
Products, Inc., Warrants
to Purchase Common Stock* 05/24/95 82,955 82,955
- ----------------------------------------------------------------------------------------------------------------
1,431,749 1,431,749 4.8
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes to financial statements are an integral part of this
schedule.
FIVE
<PAGE> 7
FIDUCIARY CAPITAL PARTNERS, L.P.
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
JUNE 30, 1995 (UNAUDITED)
- ----------------------------------------------------------------------------------------------------------------
PRINCIPAL
AMOUNT/ INVESTMENT AMORTIZED % OF TOTAL
SHARES INVESTMENT DATE COST VALUE INVESTMENTS
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
42,404 sh. MTI Holdings II, Inc., 07/06/94 &
Common Stock* 12/28/94 287,930 38,164
- ----------------------------------------------------------------------------------------------------------------
287,930 38,164 0.1
- ----------------------------------------------------------------------------------------------------------------
Total Investments in Managed
Companies (75.1% of net assets) 19,517,611 22,695,053 76.1
- ----------------------------------------------------------------------------------------------------------------
TEMPORARY INVESTMENTS:
$2,605,0000 Ford Motor Credit
Corporation, 5.761%
Notes due 7/13/95 06/29/95 2,600,077 2,600,077
$4,545,000 Philip Morris Companies,
Inc., 5.772% Notes
due 7/13/95 06/29/95 4,536,395 4,536,395
- ----------------------------------------------------------------------------------------------------------------
Total Temporary Investments (23.6% of net assets) 7,136,472 7,136,472 23.9
- ----------------------------------------------------------------------------------------------------------------
Total Investments (98.7% of net assets) $26,654,083 $29,831,525 100.0%
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
1) The Carr-Gottstein Foods Company common stock trades on the New York Stock
Exchange. The Fund and Fiduciary Capital Pension Partners, L.P. ("FCPP")
combined own a material percentage of the outstanding shares. To reflect
the resultant lack of liquidity, the Fund valued the shares at a 5%
discount to the public market price.
(2) The KEMET Corporation common stock trades on the NASDAQ National Market
System. (Note 6)
(3) Pursuant to the terms of the Fund's agreement with Huntington Holdings,
Inc., under certain circumstances the number of shares issuable upon
exercise of the warrants held by the Fund will increase periodically. The
first such increase occurred on February 1, 1993 when the Fund received the
right to an additional 35.9 shares.
(4) The notes will amortize in eight equal quarterly installments of $445,125
commencing on 6/30/99. The current payment of 7.0% of the interest may be
deferred at the borrower's option. During any period in which the payment
of interest is deferred, the interest rate on the notes increases from
20.00% to 21.00%.
(5) The notes will amortize in eight equal quarterly installments of $760,898
commencing on 11/30/99.
(6) The Protection One, Inc. common stock trades on the NASDAQ National Market
System.
(7) The notes will amortize as follows: $32,623 on 9/01/97, $33,683 on
12/01/97, $34,777 on 3/01/98, $35,908 on 6/01/98, $37,075 on 9/01/98,
$38,280 on 12/01/98, $39,524 on 3/01/99 and $2,352,130 on 5/31/99.
(8) The notes will amortize in twelve equal quarterly installments of $227,750
commencing on 12/01/99. The notes also bear contingent additional interest
to be computed under a specified formula.
(9) The debentures are convertible into 136,885 shares of Canadian's Corp.
common stock. The debentures also bear contingent additional interest to be
computed under a specified formula.
(10) The notes bear interest equal to the prime rate, plus 5%.
(11) The warrants have an exercise price of $2.44 per share.
(12) The notes will amortize in three equal annual installments of $486,667
commencing on 5/24/00.
* Non-income producing security.
The accompanying notes to financial statements are an integral part of this
schedule.
SIX
<PAGE> 8
FIDUCIARY CAPITAL PARTNERS, L.P.
- --------------------------------------------------------------------------------
BALANCE SHEETS
JUNE 30, 1995 AND DECEMBER 31, 1994 (UNAUDITED)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
1995 1994
- --------------------------------------------------------------------------------
<S> <C> <C>
ASSETS:
Investments (Note 6)
Portfolio investments, at value:
Managed companies (amortized cost -
$19,517,611 and $18,948,391,
respectively) $22,695,053 $22,853,071
Temporary investments, at amortized cost 7,136,472 4,876,188
- --------------------------------------------------------------------------------
Total investments 29,831,525 27,729,259
Cash and cash equivalents 129,654 171,999
Accrued interest receivable 778,769 627,846
Other assets, including receivables from
sale of investments 6,956 659,011
- --------------------------------------------------------------------------------
Total assets $30,746,904 $29,188,115
- --------------------------------------------------------------------------------
LIABILITIES:
Payable to affiliates (Notes 2, 3 and 4) $ 49,546 $ 52,354
Accounts payable and accrued liabilities 25,309 34,688
Prepaid interest income -- 60,146
Distributions payable to partners 462,712 694,068
- --------------------------------------------------------------------------------
Total liabilities 537,567 841,256
- --------------------------------------------------------------------------------
NET ASSETS:
Managing General Partner 38,590 19,965
Limited Partners (equivalent to $19.76
and $18.55, respectively, per limited
partnership unit based on 1,526,949
units outstanding) 30,170,747 28,326,894
- --------------------------------------------------------------------------------
Net assets 30,209,337 28,346,859
Total liabilities and net assets $30,746,904 $29,188,115
- --------------------------------------------------------------------------------
</TABLE>
The accompanying notes to financial statements are an integral part of these
financial statements.
SEVEN
<PAGE> 9
FIDUCIARY CAPITAL PARTNERS, L.P.
- --------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS FOR THE SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
- ---------------------------------------------------------------------------------------------------
1995 1994 1995 1994
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Income:
Interest $ 728,420 $ 668,021 $ 1,433,175 $ 1,353,212
- ---------------------------------------------------------------------------------------------------
Total investment income 728,420 668,021 1,433,175 1,353,212
Expenses:
Investment advisory fees (Note 2) 58,353 74,444 116,706 148,360
Fund administration fees (Note 3) 35,842 35,842 71,685 71,685
Independent General Partner fees
and expenses (Note 4) 14,084 14,563 32,946 32,560
Administrative expenses (Note 3) 20,277 20,310 40,553 40,620
Professional fees 15,153 12,775 32,441 26,092
Amortization 2,790 2,790 5,580 5,580
Other expenses 9,377 14,012 17,901 28,049
- ---------------------------------------------------------------------------------------------------
Total expenses 155,876 174,736 317,812 352,946
- ---------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME 572,544 493,285 1,115,363 1,000,266
- ---------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Net realized gain on investments 2,080,925 -- 2,399,777 601,467
Net decrease in unrealized
appreciation of investments (772,676) (59,811) (727,238) (70,600)
- ---------------------------------------------------------------------------------------------------
Net gain (loss) on investments 1,308,249 (59,811) 1,672,539 530,867
- ---------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $ 1,880,793 $ 433,474 $ 2,787,902 $ 1,531,133
- ---------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes to financial statements are an integral part of these
financial statements.
EIGHT
<PAGE> 10
FIDUCIARY CAPITAL PARTNERS, L.P.
- --------------------------------------------------------------------------------
STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND 1994 (UNAUDITED)
<TABLE>
<CAPTION>
1995 1994
- ---------------------------------------------------------------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net increase in net assets resulting from operations $ 2,787,902 $ 1,531,133
Adjustments to reconcile net increase
in net assets resulting from operations
to net cash provided by operating activities:
Accreted discount on portfolio investments (42,649) (18,817)
Amortization 5,580 5,580
Change in assets and liabilities:
Accrued interest receivable (150,923) (92,698)
Other assets 1,327 847
Payable to affiliates (1,662) 22,742
Accounts payable and accrued liabilities (9,379) 12,127
Prepaid interest income (60,146) --
Net realized gain on investments (2,399,777) (601,467)
Net decrease in unrealized appreciation
of investments 727,238 70,600
- ---------------------------------------------------------------------------------------
Net cash provided by operating activities 857,511 930,047
- ---------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of portfolio investments (1,564,946) (2,551,921)
Proceeds from dispositions of portfolio investments 4,082,154 6,390,603
(Purchase) sale of temporary investments, net (2,260,284) (2,627,649)
- ---------------------------------------------------------------------------------------
Net cash provided by investing activities 256,924 1,211,033
- ---------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions paid to partners (1,156,780) (1,533,746)
- ---------------------------------------------------------------------------------------
Net cash used in financing activities (1,156,780) (1,533,746)
- ---------------------------------------------------------------------------------------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (42,345) 607,334
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 171,999 317,279
- ---------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 129,654 $ 924,613
- ---------------------------------------------------------------------------------------
</TABLE>
The accompanying notes to financial statements are an integral part of these
financial statements.
NINE
<PAGE> 11
FIDUCIARY CAPITAL PARTNERS, L.P.
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND FOR
THE YEAR ENDED DECEMBER 31, 1994 (UNAUDITED)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
1995 1994
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
Increase in net assets resulting from operations:
Net investment income $ 1,115,363 $ 2,126,889
Net realized gain (loss) on investments 2,399,777 (2,532,109)
Net (decrease) increase in unrealized
appreciation of investments (727,238) 4,356,233
- -----------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 2,787,902 3,951,013
Repurchase of limited partnership units -- (2,948,767)
Distributions to partners from -
Net investment income (925,424) (2,126,889)
Realized gain on investments -- (867,798)
- -----------------------------------------------------------------------------------------------
Total increase (decrease) in net assets 1,862,478 (1,992,441)
Net assets:
Beginning of period 28,346,859 30,339,300
- -----------------------------------------------------------------------------------------------
End of period (including undistributed
net investment income of $189,940
and $0, respectively) $ 30,209,337 $ 28,346,859
- -----------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes to financial statements are an integral part of these
financial statements.
TEN
<PAGE> 12
FIDUCIARY CAPITAL PARTNERS, L.P.
- --------------------------------------------------------------------------------
SELECTED PER UNIT DATA AND RATIOS (UNAUDITED)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS FOR THE SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
- ------------------------------------------------------------------------------------------------------------------
1995 1994 1995 1994
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PER UNIT DATA:
Investment income $ .47 $ .39 $ .93 $ .80
Expenses (.10) (.10) (.21) (.21)
- ------------------------------------------------------------------------------------------------------------------
Net investment income .37 .29 .72 .59
Net realized gain on investments 1.35 -- 1.56 .35
Net decrease in unrealized appreciation
of investments (.50) (.03) (.47) (.04)
Distributions declared to partners (.30) (.45) (.60) (.90)
- ------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net asset value .92 (.19) 1.21 --
Net asset value:
Beginning of period 18.84 18.17 18.55 17.98
- ------------------------------------------------------------------------------------------------------------------
End of period $ 19.76 $ 17.98 $ 19.76 $ 17.98
- ------------------------------------------------------------------------------------------------------------------
RATIOS (ANNUALIZED):
Ratio of expenses to average net assets 2.11% 2.29% 2.18% 2.32%
Ratio of net investment income to
average net assets 7.76% 6.47% 7.66% 6.57%
Number of limited partnership units at
end of period 1,526,949 1,687,121 1,526,949 1,687,121
</TABLE>
The accompanying notes to financial statements are an integral part of these
selected per unit data and ratios.
ELEVEN
<PAGE> 13
FIDUCIARY CAPITAL PARTNERS, L.P.
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1995 (UNAUDITED)
1. GENERAL
The accompanying unaudited interim financial statements include all
adjustments (consisting solely of normal recurring adjustments) which are, in
the opinion of the Managing General Partner, necessary to fairly present the
financial position of the Fund as of June 30, 1995 and the results of its
operations, changes in net assets and its cash flows for the periods then ended.
These financial statements should be read in conjunction with the
Significant Accounting Policies and other Notes to Financial Statements included
in the Fund's annual audited financial statements for the year ended December
31, 1994.
2. INVESTMENT ADVISORY FEES
As compensation for its services as investment adviser, FCM Fiduciary
Capital Management Company ("FCM") receives a subordinated monthly fee at the
annual rate of 1% of the Fund's available capital, as defined in the Partnership
Agreement. Investment advisory fees of $116,706 were paid by the Fund for the
six months ended June 30, 1995.
3. FUND ADMINISTRATION FEES
As compensation for its services as fund administrator, FCM receives a
monthly fee at the annual rate of .45% of net proceeds available for investment,
as defined in the Partnership Agreement. Fund administration fees of $71,685
were paid by the Fund for the six months ended June 30, 1995. FCM is also
reimbursed, subject to various limitations, for administrative expenses incurred
in providing accounting and investor services to the Fund. The Fund reimbursed
FCM for administrative expenses of $40,553 for the six months ended June 30,
1995.
4. INDEPENDENT GENERAL PARTNER FEES AND EXPENSES
As compensation for services rendered to the Fund, each of the Independent
General Partners receives from the Fund and FCPP an annual fee of $30,000,
payable monthly in arrears, together with all out-of-pocket expenses. Each
Fund's allocation of these fees and expenses is based on the relative number of
outstanding Units. Fees and expenses paid by the Fund for the six months ended
June 30, 1995 totaled $32,946.
TWELVE
<PAGE> 14
FIDUCIARY CAPITAL PARTNERS, L.P.
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
5. CONTINGENCIES
FCM, the Managing General Partner of the Fund, had been named as a
defendant in a class action lawsuit brought in March 1995 against PaineWebber
Incorporated and a number of its affiliates. During May 1995, the Court entered
an order certifying the class and dismissing the class action against FCM
without prejudice. FCM believes that this litigation will be resolved without
any material adverse effect on the Fund's financial condition.
6. SUBSEQUENT EVENT
On July 25, 1995, the Fund sold 9,587 shares of KEMET Corporation common
stock. The Fund received $646,876 of sales proceeds, resulting in a realized
gain of $640,081.
THIRTEEN
<PAGE> 15
FIDUCIARY CAPITAL PARTNERS, L.P.
- --------------------------------------------------------------------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
As of June 30, 1995, the Fund held portfolio investments in twelve Managed
Companies, with an aggregate cost of approximately $19.5 million. These
portfolio investments, which were made from net offering proceeds and the
reinvestment of proceeds from the sale of other portfolio investments, represent
approximately 75.1% of the Fund's net assets. When acquired, these portfolio
investments generally consisted of high-yield subordinated debt, linked with an
equity participation or a comparable participation feature in middle market
companies. These securities were typically issued in private placement
transactions and were subject to certain restrictions on transfer or sale,
thereby limiting their liquidity. A number of the portfolio companies have
prepaid their subordinated debt that the Fund held. In addition, three of the
portfolio companies have successfully completed initial public offerings
("IPOs") of their stock. The Fund continues to hold all of the equity components
of its original investments, except for a substantial portion of its KEMET
Corporation ("KEMET") stock.
As of June 30, 1995, the Fund's remaining assets were invested in
short-term commercial paper. These funds are available for investment, for
distribution to the partners or to fund the annual repurchase offer.
The Fund sold a portion of its KEMET common stock during the six months
ended June 30, 1995. In addition, the Fund's subordinated debt investment in
Protection One was prepaid during the six months ended June 30, 1995. In the
aggregate, the Fund received $3,437,006 of proceeds, including applicable
prepayment premiums, from these transactions.
On July 25, 1995, the Fund received $646,876 of sales proceeds from the
sale of 9,587 shares of KEMET common stock.
A portion of the proceeds representing gains from these transactions were
used by the Fund to fund a portion of the cost of the follow-on investments in
Canadian's Corp., which were acquired on December 29, 1994 and May 8, 1995 (see
following discussion). The remaining portion of the gains from these
transactions have been reserved by the Managing General Partner to partially
fund either the 1995 repurchase offer or any additional follow-on investments
that the Fund may make in existing portfolio companies during 1995.
On May 8, 1995, the Fund made a follow-on investment in Canadian's Corp. at
a cost of $133,000. The investment consists of $147,778 of floating rate
Promissory Notes, with warrants to acquire common stock.
FOURTEEN
<PAGE> 16
FIDUCIARY CAPITAL PARTNERS, L.P.
- --------------------------------------------------------------------------------
On May 24, 1995, the Fund acquired a new portfolio investment in R.B.M.
Precision Metal Products, Inc. ("RBM") at a cost of approximately $1.43 million.
The investment consists of $1,460,000 of 13.00% Senior Subordinated Secured
Notes due May 24, 2002, with warrants to acquire common stock.
The Fund expects to reinvest all available funds, including the principal
amount of any future prepayments received, in additional portfolio investments.
The Partnership Agreement provides that the Fund's investment period will end on
December 31, 1995. Although the Fund is permitted to make additional investments
in existing portfolio companies after 1995, the Fund will no longer be permitted
to acquire investments in new portfolio companies.
Pursuant to the terms of the Fund's periodic unit repurchase policy that
was adopted by the Fund's Limited Partners during 1993, the Fund will annually
offer to purchase from its Limited Partners up to 7.5% of its outstanding Units
for an amount equal to the current net asset value per Unit, net of a fee (not
to exceed 2%) to be retained by the Fund to offset expenses incurred in
connection with the repurchase offer. If the number of tendered Units in any
year exceeds 7.5% of the outstanding Units, the Fund's General Partners may vote
to repurchase up to an additional 2% of the outstanding Units. The 1995
repurchase offer will be mailed to the Limited Partners during October 1995. The
actual redemption of tendered Units will occur on November 21, 1995.
Accrued interest receivable increased $150,923 from $627,846 at December
31, 1994 to $778,769 at June 30, 1995. This increase resulted primarily from a
$143,231 increase in the deferred portion of the interest receivable from KB
Alloys, Inc. ("KB Alloys") with respect to the Fund's investment in $3,561,003
principal amount of 20.00% Senior Subordinated Term Notes due June 30, 2001. KB
Alloys is required to pay 13.00% interest currently, while the remaining 7.00%
of the interest may be deferred at KB Alloys' option. During any period in which
the payment of interest is deferred, the interest rate on the notes increases
from 20.00% to 21.00%. To date, KB Alloys has elected to defer payment of the
interest. At June 30, 1995, the cumulative amount of deferred interest totaled
$605,865. The Fund's agreement with KB Alloys requires KB Alloys to pay all
accumulated deferred interest in excess of $547,847 no later than August 28,
1998, and the amount of deferred interest cannot exceed $547,847 at any time
thereafter. The amount of accrued interest receivable with respect to other
portfolio investments also increased slightly during the six months ended June
30, 1995.
Other assets decreased $652,055, from $659,011 at December 31, 1994 to
$6,956 at June 30, 1995. The balance at December 31, 1994 included a $645,148
receivable from the sale of KEMET common stock during December 1994. This amount
was received by the Fund during January 1995.
Prepaid interest income decreased from $60,146 at December 31, 1994 to zero
at June 30, 1995. This prepaid interest income was related to the Canadian's
13.50% Subordinated Notes, which required interest to be paid quarterly, in
advance, to the Fund.
FIFTEEN
<PAGE> 17
FIDUCIARY CAPITAL PARTNERS, L.P.
- --------------------------------------------------------------------------------
Effective June 1, 1995, the notes were amended to provide for the interest to be
paid monthly, in advance, on the first day of each month.
Distributions payable to partners decreased $231,356, from $694,068 at
December 31, 1994 to $462,712 at June 30, 1995. This decrease corresponds to the
percentage decrease in the quarterly distribution rate from $.45 per Unit to
$.30 per Unit (as discussed in the following paragraphs).
During the six months ended June 30, 1995, the Fund paid cash distributions
pertaining to the fourth quarter of 1994 and the first quarter of 1995, in the
amounts of $694,068 and $462,712, respectively. These quarterly distributions
were equal to $.45 and $.30 per Unit, respectively, and represented an
annualized rate equal to 9.0% and 6.0%, respectively, of contributed capital.
As discussed in previous reports, the quarterly distributions for 1995 are
being paid at a reduced rate. The distribution for the second quarter of 1995
will be paid on August 14, 1995 in an amount equal to $.30 per Unit, or an
annualized rate equal to 6.0% of contributed capital. This distribution consists
entirely of net investment income earned during the three months ended June 30,
1995.
It is expected that the remaining 1995 distributions will be made at the
same 6.0% rate. In the past, the Fund realized gains from its investments that
provided additional sources of cash for distributions. Although there can be no
assurances, the Fund may realize similar gains in 1995 that could in turn result
in a higher distribution rate for subsequent quarters. Gains can also be
utilized to fund the annual repurchase offer or to fund any follow-on
investments that the Fund may make in existing portfolio companies.
The Fund's investment period will end on December 31, 1995. Although the
Fund is permitted to make additional investments in existing portfolio companies
after 1995, the Fund will no longer be permitted to acquire investments in new
portfolio companies. This will impact the amount of the Fund's quarterly
distributions for 1996 and subsequent years because all proceeds from
dispositions or maturities of investments after December 31, 1995 will be
distributed to investors, except to the extent the cash is needed to fund the
annual repurchase offer or to fund any follow-on investments that the Fund may
make in existing portfolio companies
FCM, the Managing General Partner of the Fund, had been named as a
defendant in a class action lawsuit brought in March 1995 against PaineWebber
Incorporated and a number of its affiliates. During May 1995, the Court entered
an order certifying the class and dismissing the class action against FCM
without prejudice. FCM believes that this litigation will be resolved without
any material adverse effect on the Fund's financial condition.
SIXTEEN
<PAGE> 18
FIDUCIARY CAPITAL PARTNERS, L.P.
- --------------------------------------------------------------------------------
RESULTS OF OPERATIONS
INVESTMENT INCOME AND EXPENSES
The Fund's net investment income was $572,544 for the three months ended
June 30, 1995 as compared to net investment income of $493,285 for the
corresponding period of the prior year. Net investment income per limited
partnership unit increased from $.29 to $.37 and the ratio of net investment
income to average net assets increased from 6.47% to 7.76% for the three months
ended June 30, 1995 as compared to the corresponding period of the prior year.
The Fund's net investment income was $1,115,363 for the six months ended
June 30, 1995 as compared to net investment income of $1,000,266 for the
corresponding period of the prior year. Net investment income per limited
partnership unit increased from $.59 to $.72 and the ratio of net investment
income to average net assets increased from 6.57% to 7.66% for the six months
ended June 30, 1995 as compared to the corresponding period of the prior year.
Net investment income for both the three and six month periods ended June
30, 1995 increased as a result of slight increases in investment income and
slight decreases in total expenses.
Investment income increased $60,399 and $79,963, or 9.0% and 5.9%, for the
three and six month periods ended June 30, 1995, respectively, as compared to
the corresponding periods of the prior year. These increases were primarily the
result of higher interest rates on the Fund's temporary investments and to a
lesser extent on the Fund's higher-yielding subordinated debt investments. The
positive effect of the higher interest rates was partially offset by a decrease
in the amount of the Fund's average net assets.
The Fund had average net assets of approximately $29.1 million during the
six months ended June 30, 1995 as compared to approximately $30.4 million during
the corresponding period of the prior year. This 4.3% decrease in average net
assets occurred primarily as a result of the Fund's repurchase of 9.49% of its
Units during the fourth quarter of 1994. The negative effect of the repurchase
of Units was partially offset by gains achieved with respect to the Fund's
investments (primarily the KEMET common stock).
Total expenses decreased $18,860 and $35,134, or 10.8% and 10.0%, for the
three and six month periods ended June 30, 1995, respectively, as compared to
the corresponding periods of the prior year. These decreases resulted primarily
from decreases in investment advisory fees and other expenses. The investment
advisory fees decreased as a result of the repurchase of Units by the Fund
during the fourth quarter of 1994 and the realization during July 1994 of the
loss on the Fund's Mobile Technology, Inc. ("MTI") investment. Both the
repurchase of Units and the realization of the MTI loss decreased the amount of
the Fund's available capital (as defined in the Partnership Agreement), which is
the base with respect to which the investment advisory fees are calculated.
Other
SEVENTEEN
<PAGE> 19
FIDUCIARY CAPITAL PARTNERS, L.P.
- --------------------------------------------------------------------------------
expenses decreased primarily as a result of a decrease in consulting fees. These
decreases were partially offset by an increase in professional fees.
NET REALIZED GAIN ON INVESTMENTS
On February 28, 1995, the Fund sold 10,547 shares of KEMET common stock.
The Fund received $326,324 of sales proceeds, resulting in a realized gain of
$318,852.
During April and May 1995, the Fund sold an additional 44,920 shares of
KEMET common stock. The Fund received $1,973,532 of sales proceeds, resulting in
realized gains of $1,941,692.
On May 17, 1995, Protection One prepaid its $1,083,000 of 12.00% Senior
Subordinated Notes that were carried by the Fund at an amortized cost of
$997,917. The Fund received $1,137,150 of proceeds, including a prepayment
premium, resulting in a realized gain of $139,233.
NET UNREALIZED APPRECIATION OF INVESTMENTS
FCM values the Fund's portfolio investments on a weekly basis utilizing a
variety of methods. For securities that are publicly traded and for which market
quotations are available, valuations are set by the closing sales, or an average
of the closing bid and ask prices, as of the valuation date.
Fair value for securities that are not traded in any liquid public markets
or that are privately held are determined pursuant to valuation policies and
procedures that have been approved by the Independent General Partners and
subject to their supervision. There is a range of values that are reasonable for
such investments at any particular time. Each such investment is valued
initially based upon its original cost to the Fund ("cost method"). The cost
method is used until significant developments affecting the portfolio company
provide a basis for use of an appraisal valuation. Appraisal valuations are
based upon such factors as the portfolio company's earnings, cash flow and net
worth, the market prices for similar securities of comparable companies and an
assessment of the portfolio company's future financial prospects. In a case of
unsuccessful operations, the appraisal may be based upon liquidation value.
Appraisal valuations are necessarily subjective. The Fund also may use, when
available, third-party transactions in a portfolio company's securities as the
basis of valuation ("private market method"). The private market method is used
only with respect to completed transactions or firm offers made by
sophisticated, independent investors.
As of December 31, 1994, the Fund had recorded $4,397,511 of unrealized
appreciation and $(492,831) of unrealized depreciation of investments.
Therefore, as of December 31, 1994, the Fund had recorded a total net unrealized
appreciation of investments of $3,904,680.
The net increase in unrealized appreciation of investments during the three
and six
EIGHTEEN
<PAGE> 20
FIDUCIARY CAPITAL PARTNERS, L.P.
- --------------------------------------------------------------------------------
month periods ended June 30, 1995 and the cumulative net unrealized appreciation
of investments as of June 30, 1995, consisted of the following components:
<TABLE>
<CAPTION>
Unrealized Appreciation (Depreciation) Recorded
- ---------------------------------------------------------------------------------
During the Three During the Six
Months Ended Months Ended As of
Portfolio Company June 30 , 1995 June 30, 1995 June 30, 1995
- ---------------------------------------------------------------------------------
<S> <C> <C> <C>
Unrealized appreciation
recorded in prior periods
for investments disposed
of during the period $(1,563,100) $(1,508,561) $ --
Carr-Gottstein 63,745 (21,248) 189,003
Neodata -- (325,199) (337,943)
KEMET 637,793 920,945 1,934,241
Huntington 54,028 54,028 630,990
Amity -- 87,610 872,172
Elgin / ENI 17,800 35,598 125,781
Protection One 17,058 29,589 12,964
MTI -- -- (249,766)
- ---------------------------------------------------------------------------------
$ (772,676) $ (727,238) $ 3,177,442
- ---------------------------------------------------------------------------------
</TABLE>
Carr-Gottstein Foods Company completed an IPO of its common stock on July
1, 1993. The stock, which trades on the New York Stock Exchange, closed at
$6.375 on June 30, 1995. This price compares to closing prices of $6.50 on
December 31, 1994 and $6.00 on March 31, 1995. Based on the $6.375 closing
trading price of the common stock, the Fund's 178,934 shares of common stock
would have a market value of $1,140,704. However, the Fund's valuation
guidelines require the stock to be valued at a 5% discount to the public market
price to reflect the potential market impact that could result from the sale of
the material number of shares owned by the Funds.
The Neodata Corporation ("Neodata") stock was written down at March 31,
1995. The Partnership has consistently valued this investment based upon a
multiple of Neodata's cash flow. Because Neodata's long-term debt presently
provides for the accrual, rather than current payment, of interest, the
Company's debt has grown to a level which now exceeds the Partnership's
valuation.
KEMET completed an IPO of its common stock on October 21, 1992. The stock,
which trades on the NASDAQ National Market System, closed at $52.625 (an average
of the closing bid and ask prices) on June 30, 1995. This price is up from the
closing prices of $29.375 on December 31, 1994 and $37.375 on March 31, 1995.
The Fund held 37,257 shares of KEMET common stock at June 30, 1995. Based on the
$52.625 closing trading price of the common stock, the Fund's stock had a market
value of $1,960,650 at June 30, 1995.
NINETEEN
<PAGE> 21
FIDUCIARY CAPITAL PARTNERS, L.P.
- --------------------------------------------------------------------------------
During June 1995, the Fund received an unsolicited offer from a third party
to purchase the Huntington Holdings, Inc. ("Huntington") warrants which are held
by the Fund. Although the Fund decided not to sell the warrants, the warrants
were written up in value at June 30, 1995 based upon the offer price.
The Amity warrants and common stock were written up in value at March 31,
1995 to bring Amity's valuation more in line with the valuation of other
comparable companies in its industry.
The ENI Holding Corp. preferred stock is being written up in value
quarterly to reflect the amount of the cumulative 10% preferential dividend that
has accrued with respect to the preferred stock.
Protection One, Inc. ("Protection One") completed an IPO of its common
stock on September 29, 1994. The stock, which trades on the NASDAQ National
Market System, closed at $6.0625 (an average of the closing bid and ask prices)
on March 31, 1995. This price compares to closing prices of $4.875 on December
31, 1994 and $5.125 on March 31, 1995. The Fund holds warrants to acquire
18,194.4 shares of Protection One common stock at a nominal exercise price.
Based on the $6.0625 closing trading price of the common stock, the Fund's
warrants had a market value of $110,304 at June 30, 1995.
FCM continually monitors both the Fund's portfolio companies and the
markets, and continually evaluates the decision to hold or sell its traded
securities.
TWENTY
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 30, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> SEP-30-1995
<INVESTMENTS-AT-COST> 27,263,246
<INVESTMENTS-AT-VALUE> 30,096,867
<RECEIVABLES> 840,908
<ASSETS-OTHER> 4,592
<OTHER-ITEMS-ASSETS> 239,238
<TOTAL-ASSETS> 31,181,605
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 545,819
<TOTAL-LIABILITIES> 545,819
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 1,526,949
<SHARES-COMMON-PRIOR> 1,526,949
<ACCUMULATED-NII-CURRENT> 320,131
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 2,833,621
<NET-ASSETS> 30,635,786
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 2,180,244
<OTHER-INCOME> 0
<EXPENSES-NET> 471,978
<NET-INVESTMENT-INCOME> 1,708,266
<REALIZED-GAINS-CURRENT> 3,039,855
<APPREC-INCREASE-CURRENT> (1,071,059)
<NET-CHANGE-FROM-OPS> 3,677,062
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 1,388,135
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 2,288,927
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 175,060
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 471,978
<AVERAGE-NET-ASSETS> 30,422,562
<PER-SHARE-NAV-BEGIN> 18.55
<PER-SHARE-NII> 1.11
<PER-SHARE-GAIN-APPREC> 1.28
<PER-SHARE-DIVIDEND> .90
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 20.04
<EXPENSE-RATIO> 2.13
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
