<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 June 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 June 30, 1995
Table of Contents
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited) 3
Schedule of Investments -
June 30, 1995 3
Balance Sheets - June 30, 1995 and
December 31, 1994 6
Statements of Operations for the three
months ended June 30, 1995 and 1994 7
Statements of Operations for the six
months ended June 30, 1995 and 1994 8
Statements of Cash Flows for the six
months ended June 30, 1995 and 1994 9
Statements of Changes in Net Assets for
the six months ended June 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 20
Item 6. Exhibits and Reports on Form 8-K 20
</TABLE>
2
<PAGE> 3
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
FIDUCIARY CAPITAL PARTNERS, L.P.
SCHEDULE OF INVESTMENTS
JUNE 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 $1,083,669
- -----------------------------------------------------------------------------------------------------------------------
894,666 1,083,669 3.6%
- -----------------------------------------------------------------------------------------------------------------------
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
- -----------------------------------------------------------------------------------------------------------------------
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
- -----------------------------------------------------------------------------------------------------------------------
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
- -----------------------------------------------------------------------------------------------------------------------
</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)
JUNE 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 2,465,824 2,465,824
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
- -----------------------------------------------------------------------------------------------------------------------
2,583,005 2,583,005 8.7
- -----------------------------------------------------------------------------------------------------------------------
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 2,623,897 2,623,897
$334,000 Canadian's Holdings, Inc.,
12.00% Exchangeable
Redeemable Debentures 09/09/94 &
due 8/31/04(9) 12/29/94 320,321 320,321
$147,778 Canadian's Corp.,
Promissory Notes
due 06/30/96(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. Canadian'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 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
- -----------------------------------------------------------------------------------------------------------------------
Total Investments in Managed Companies (75.1% of net assets) 19,517,611 22,695,053 76.1
- -----------------------------------------------------------------------------------------------------------------------
</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)
JUNE 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:
$2,605,000 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.
5
<PAGE> 6
FIDUCIARY CAPITAL PARTNERS, L.P.
BALANCE SHEETS
JUNE 30, 1995 AND DECEMBER 31, 1994
(unaudited)
<TABLE>
<CAPTION>
ASSETS: 1995 1994
---- ----
<S> <C> <C>
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
------------ ------------
CONTINGENCIES (Note 5)
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.
6
<PAGE> 7
FIDUCIARY CAPITAL PARTNERS, L.P.
STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED JUNE 30, 1995 AND 1994
(unaudited)
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
INVESTMENT INCOME:
Income:
Interest $ 728,420 $ 668,021
----------- -----------
Total investment income 728,420 668,021
----------- -----------
Expenses:
Investment advisory fees (Note 2) 58,353 74,444
Fund administration fees (Note 3) 35,842 35,842
Independent General Partner fees
and expenses (Note 4) 14,084 14,563
Administrative expenses (Note 3) 20,277 20,310
Professional fees 15,153 12,775
Amortization 2,790 2,790
Other expenses 9,377 14,012
----------- -----------
Total expenses 155,876 174,736
----------- -----------
NET INVESTMENT INCOME 572,544 493,285
----------- -----------
REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Net realized gain on investments 2,080,925 --
Net decrease in unrealized appreciation
of investments (772,676) (59,811)
----------- -----------
Net gain (loss) on investments 1,308,249 (59,811)
----------- -----------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $ 1,880,793 $ 433,474
=========== ===========
</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 SIX MONTHS ENDED JUNE 30, 1995 AND 1994
(unaudited)
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
INVESTMENT INCOME:
Income:
Interest $ 1,433,175 $ 1,353,212
------------ ------------
Total investment income 1,433,175 1,353,212
------------ ------------
Expenses:
Investment advisory fees (Note 2) 116,706 148,360
Fund administration fees (Note 3) 71,685 71,685
Independent General Partner fees
and expenses (Note 4) 32,946 32,560
Administrative expenses (Note 3) 40,553 40,620
Professional fees 32,441 26,092
Amortization 5,580 5,580
Other expenses 17,901 28,049
------------ ------------
Total expenses 317,812 352,946
------------ ------------
NET INVESTMENT INCOME 1,115,363 1,000,266
------------ ------------
REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Net realized gain on investments 2,399,777 601,467
Net decrease in unrealized appreciation
of investments (727,238) (70,600)
------------ ------------
Net gain on investments 1,672,539 530,867
------------ ------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $ 2,787,902 $ 1,531,133
============ ============
</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 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.
9
<PAGE> 10
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.
10
<PAGE> 11
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.
11
<PAGE> 12
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.
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)
JUNE 30, 1995
(unaudited)
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.
13
<PAGE> 14
Item 2. 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.
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 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
14
<PAGE> 15
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. 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
15
<PAGE> 16
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 $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
16
<PAGE> 17
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.
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 month periods ended June 30, 1995 and the cumulative net
unrealized appreciation of investments as of June 30, 1995, consisted of the
following components:
17
<PAGE> 18
<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 net appreciation recorded
during prior periods with respect to
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.
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,
18
<PAGE> 19
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.
19
<PAGE> 20
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:
Exhibit No. Description
----------- -----------
11.1 Statement of Computation of Net
Investment Income Per
Limited Partnership Unit.
19.1 Reports Furnished to Securities Holders.
27 Financial Data Schedule.
(b) The Registrant did not file any reports on Form 8-K during the
second quarter of the fiscal year ending December 31, 1995.
20
<PAGE> 21
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: August 8, 1995 By: /s/ Donald R. Jackson
---------------------
Donald R. Jackson
Chief Financial Officer
21
<PAGE> 22
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description Page
- ----------- ----------- ----
<S> <C>
11.1 Statement of Computation of Net Investment Income Per
Limited Partnership Unit.
19.1 Reports Furnished to Securities Holders.
27 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 Six Months
Ended June 30, Ended June 30,
-------------- --------------
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net Investment Income $ 572,544 $ 493,285 $1,115,363 $1,000,266
Percentage Allocable to Limited Partners 99% 99% 99% 99%
---------- ---------- ---------- ----------
Net Investment Income Allocable
to Limited Partners $ 566,819 $ 488,352 $1,104,209 $ 990,263
========== ========== ========== ==========
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 $ .37 $ .29 $ .72 $ .59
========== ========== ========== ==========
</TABLE>
<PAGE> 1
FIDUCIARY CAPITAL PARTNERS, L.P.
- --------------------------------------------------------------------------------
--------------------------------
FIRST QUARTER REPORT
1995
<PAGE> 2
FIDUCIARY CAPITAL PARTNERS, L.P.
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
MARCH 31, 1995 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
PRINCIPAL
AMOUNT/ INVESTMENT AMORTIZED % OF TOTAL
SHARES INVESTMENT DATE COST VALUE INVESTMENTS
- --------------------------------------------------------------------------------------------------------------
MANAGED COMPANIES:
<S> <C> <C> <C> <C> <C>
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 3.6%
- --------------------------------------------------------------------------------------------------------------
413,111 sh. Neodata Corporation,
Warrants to Purchase
Common Stock and
10.00% Class A Convertible
Preferred Stock - Series 2* 12/27/90 41,088 1
39,507.63 sh. Neodata Corporation,
10.00% Class A Convertible
Preferred Stock - Series 2* 09/30/92 296,857 1
2,296.95 sh. Neodata Corporation,
Common Stock* 09/30/92 1 1
- --------------------------------------------------------------------------------------------------------------
337,946 3 0.0
- --------------------------------------------------------------------------------------------------------------
82,177 sh. KEMET Corporation, 03/28/91 &
Common Stock(2)* 07/11/91 58,249 2,917,797
- --------------------------------------------------------------------------------------------------------------
58,249 2,917,797 10.2
- --------------------------------------------------------------------------------------------------------------
324.6 sh. Huntington Holdings, Inc.,
Warrants to Purchase
Common Stock(3)* 01/31/92 103,811 680,773
- --------------------------------------------------------------------------------------------------------------
103,811 680,773 2.4
- --------------------------------------------------------------------------------------------------------------
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 4.4
- --------------------------------------------------------------------------------------------------------------
$3,561,003 KB Alloys, Inc.,
20.00% Senior Subordinated
Term Notes due 6/30/01(4) 05/28/93 3,499,277 3,499,277
- --------------------------------------------------------------------------------------------------------------
3,499,277 3,499,277 12.3
- --------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes to financial statements are an integral part of this
schedule.
--------------------------------
ONE
<PAGE> 3
FIDUCIARY CAPITAL PARTNERS, L.P.
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED)
MARCH 31, 1995 (UNAUDITED)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
PRINCIPAL
AMOUNT/ INVESTMENT AMORTIZED % OF TOTAL
SHARES INVESTMENT DATE COST VALUE INVESTMENTS
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$6,087,185 Elgin National Industries, Inc.,
13.00% Senior Subordinated
Notes due 9/01/01(5) 09/24/93 5,940,726 5,940,726
7,119.71 sh. ENI Holding Corp.,
10.00% Preferred Stock
due 12/31/01 09/24/93 711,971 819,952
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
- --------------------------------------------------------------------------------------------------
6,752,702 6,860,683 24.1
- --------------------------------------------------------------------------------------------------
$1,083,000 Protection One Alarm
Monitoring, Inc., 12.00%
Senior Subordinated Notes
due 11/01/03 11/03/93 996,822 996,822
18,194.4 sh. Protection One, Inc.,
Warrants to Purchase
Common Stock(6)* 11/03/93 97,340 93,246
- --------------------------------------------------------------------------------------------------
1,094,162 1,090,068 3.8
- --------------------------------------------------------------------------------------------------
$2,604,000 LMCOperating Corp.,
13.00% Senior Secured
Subordinated Term Notes
due 5/31/99(7) 06/10/94 2,458,043 2,458,043
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
- --------------------------------------------------------------------------------------------------
2,575,224 2,575,224 9.0
- --------------------------------------------------------------------------------------------------
$2,733,000 Canadian's Corp.,
13.50% Subordinated 09/09/94 &
Notes due 9/01/02(8) 12/29/94 2,620,548 2,620,548
$334,000 Canadian's Holdings, Inc.,
12.00% Exchangeable
Redeemable Debentures 09/09/94 &
due 8/31/04(9) 12/29/84 318,784 318,784
266,201 sh. Canadian's Corp.,
Warrants to Purchase 09/09/94 &
Common Stock* 12/29/94 39,043 39,043
- --------------------------------------------------------------------------------------------------
2,978,375 2,978,375 10.5
- --------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes to financial statements are an integral part of this
schedule.
--------------------------------
TWO
<PAGE> 4
FIDUCIARY CAPITAL PARTNERS, L.P.
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED)
MARCH 31, 1995 (UNAUDITED)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
PRINCIPAL
AMOUNT/ INVESTMENT AMORTIZED % OF TOTAL
SHARES INVESTMENT DATE COST VALUE INVESTMENTS
- ---------------------------------------------------------------------------------------------
<S> <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 (79.6% of net assets) 18,960,353 22,910,471 80.4
- ---------------------------------------------------------------------------------------------
TEMPORARY INVESTMENTS:
$2,800,000 Ford Motor Credit
Corporation, 5.852%
Notes due 4/13/95 03/31/95 2,794,568 2,794,568
$2,800,000 Wal-Mart Stores, Inc.,
5.913% Notes due 4/13/95 03/31/95 2,794,624 2,794,624
- ---------------------------------------------------------------------------------------------
Total Temporary Investments (19.4% of net assets) 5,589,192 5,589,192 19.6
- ---------------------------------------------------------------------------------------------
Total Investments (99.0% of net assets) $24,549,545 $28,499,663 100.0%
=============================================================================================
</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. The Fund and 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. (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.
* Non-income producing security.
The accompanying notes to financial statements are an integral part of this
schedule.
--------------------------------
THREE
<PAGE> 5
FIDUCIARY CAPITAL PARTNERS, L.P.
- --------------------------------------------------------------------------------
BALANCE SHEETS
MARCH 31, 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 -
$18,960,353 and $18,948,391,
respectively) $22,910,471 $22,853,071
Temporary investments, at amortized cost 5,589,192 4,876,188
- ------------------------------------------------------------------------------------
Total investments 28,499,663 27,729,259
Cash and cash equivalents 153,503 171,999
Accrued interest receivable 733,724 627,846
Other assets, including receivables from
sale of investments 14,418 659,011
- ------------------------------------------------------------------------------------
Total assets $29,401,308 $29,188,115
====================================================================================
LIABILITIES:
Payable to affiliates (Notes 2, 3 and 4) $ 40,092 $ 52,354
Accounts payable and accrued liabilities 44,730 34,688
Prepaid interest income 62,518 60,146
Distributions payable to partners 462,712 694,068
- ------------------------------------------------------------------------------------
Total liabilities 610,052 841,256
- ------------------------------------------------------------------------------------
NET ASSETS:
Managing General Partner 24,409 19,965
Limited Partners (equivalent to $18.84
and $18.55, respectively, per limited
partnership unit based on 1,526,949
units outstanding) 28,766,847 28,326,894
- ------------------------------------------------------------------------------------
Net assets 28,791,256 28,346,859
- ------------------------------------------------------------------------------------
Total liabilities and net assets $29,401,308 $29,188,115
====================================================================================
</TABLE>
The accompanying notes to financial statements are an integral part of these
financial statements.
--------------------------------
FOUR
<PAGE> 6
FIDUCIARY CAPITAL PARTNERS, L.P.
- --------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1995 AND 1994 (UNAUDITED)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------
1995 1994
- ---------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME:
Income:
Interest $704,755 $ 685,191
- ---------------------------------------------------------------------------------
Total investment income 704,755 685,191
- ---------------------------------------------------------------------------------
Expenses:
Investment advisory fees (Note 2) 58,353 73,916
Fund administration fees (Note 3) 35,843 35,843
Independent General Partner fees
and expenses (Note 4) 18,862 17,997
Administrative expenses (Note 3) 20,276 20,310
Professional fees 17,288 13,317
Amortization 2,790 2,790
Other expenses 8,524 14,037
- ---------------------------------------------------------------------------------
Total expenses 161,936 178,210
- ---------------------------------------------------------------------------------
NET INVESTMENT INCOME 542,819 506,981
- ---------------------------------------------------------------------------------
REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Net realized gain on investments 318,852 601,467
Net increase (decrease) in unrealized
appreciation of investments 45,438 (10,789)
- ---------------------------------------------------------------------------------
Net gain on investments 364,290 590,678
- ---------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $907,109 $1,097,659
=================================================================================
</TABLE>
The accompanying notes to financial statements are an integral part of these
financial statements.
--------------------------------
FIVE
<PAGE> 7
FIDUCIARY CAPITAL PARTNERS, L.P.
- --------------------------------------------------------------------------------
STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1995 AND 1994 (UNAUDITED)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------
1995 1994
- -----------------------------------------------------------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net increase in net assets resulting from operations $ 907,109 $ 1,097,659
Adjustments to reconcile net increase
in net assets resulting from operations
to net cash provided by operating activities:
Accreted discount on portfolio investments (19,434) (9,075)
Amortization 2,790 2,790
Change in assets and liabilities:
Accrued interest receivable (105,878) (35,008)
Other assets (3,345) (28,372)
Payable to affiliates (11,116) 30,250
Accounts payable and accrued liabilities 10,042 19,354
Prepaid interest income 2,372 --
Net realized gain on investments (318,852) (601,467)
Net (increase) decrease in unrealized
appreciation of investments (45,438) 10,789
- -----------------------------------------------------------------------------------
Net cash provided by operating activities 418,250 486,920
- -----------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of portfolio investments (1,146) --
Proceeds from dispositions of portfolio investments 971,472 6,390,603
(Purchase) sale of temporary investments, net (713,004) (5,381,583)
- -----------------------------------------------------------------------------------
Net cash provided by investing activities 257,322 1,009,020
- -----------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions paid to partners (694,068) (766,873)
- -----------------------------------------------------------------------------------
Net cash used in financing activities (694,068) (766,873)
- -----------------------------------------------------------------------------------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (18,496) 729,067
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 171,999 317,279
- -----------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 153,503 $ 1,046,346
===================================================================================
</TABLE>
The accompanying notes to financial statements are an integral part of these
financial statements.
--------------------------------
SIX
<PAGE> 8
FIDUCIARY CAPITAL PARTNERS, L.P.
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE THREE MONTHS ENDED MARCH 31, 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 $ 542,819 $ 2,126,889
Net realized gain (loss) on investments 318,852 (2,532,109)
Net increase in unrealized appreciation of investments 45,438 4,356,233
- -------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 907,109 3,951,013
Repurchase of limited partnership units -- (2,948,767)
Distributions to partners from -
Net investment income (462,712) (2,126,889)
Realized gain on investments -- (867,798)
- -------------------------------------------------------------------------------------
Total increase (decrease) in net assets 444,397 (1,992,441)
Net assets:
Beginning of period 28,346,859 30,339,300
- -------------------------------------------------------------------------------------
End of period (including undistributed
net investment income of $80,107
and $0, respectively) $28,791,256 $28,346,859
=====================================================================================
</TABLE>
The accompanying notes to financial statements are an integral part of these
financial statements.
--------------------------------
SEVEN
<PAGE> 9
FIDUCIARY CAPITAL PARTNERS, L.P.
- --------------------------------------------------------------------------------
SELECTED PER UNIT DATA AND RATIOS
FOR THE THREE MONTHS ENDED MARCH 31, 1995 AND 1994 (UNAUDITED)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------
1995 1994
- -----------------------------------------------------------------------------------
<S> <C> <C>
PER UNIT DATA:
Investment income $ .46 $ .40
Expenses (.11) (.10)
- -----------------------------------------------------------------------------------
Net investment income .35 .30
Net realized gain on investments .21 .35
Net increase (decrease) in unrealized
appreciation of investments .03 (.01)
Distributions declared to partners (.30) (.45)
- -----------------------------------------------------------------------------------
Net increase in net asset value .29 .19
Net asset value:
Beginning of period 18.55 17.98
- -----------------------------------------------------------------------------------
End of period $18.84 $18.17
===================================================================================
RATIOS (ANNUALIZED):
Ratio of expenses to average net assets 2.27% 2.34%
Ratio of net investment income to average net assets 7.60% 6.65%
Number of limited partnership units at end of period 1,526,949 1,687,121
</TABLE>
The accompanying notes to financial statements are an integral part of these
financial statements.
--------------------------------
EIGHT
<PAGE> 10
FIDUCIARY CAPITAL PARTNERS, L.P.
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 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 March 31, 1995 and the results of its
operations, changes in net assets and its cash flows for the three months 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 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
$58,353 were paid by the Fund for the three months ended March 31, 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 $35,843
were paid by the Fund for the three months ended March 31, 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 $20,276 for the three months ended March 31,
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 three months
ended March 31, 1995 totaled $18,862.
--------------------------------
NINE
<PAGE> 11
FIDUCIARY CAPITAL PARTNERS, L.P.
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
5. CONTINGENCIES
The Fund has been notified by PaineWebber Incorporated ("PaineWebber") that
FCM, the Managing General Partner of the Fund, is a named defendant in a class
action lawsuit brought in March 1995 against PaineWebber and a number of its
affiliates. FCM believes that this litigation will be resolved without material
adverse effect on the Fund's financial statements, taken as a whole.
6. SUBSEQUENT EVENT
On April 25, 1995, the Fund sold 6,574 shares of KEMET Corporation common
stock. The Fund received $262,960 of sales proceeds, resulting in a realized
gain of $258,300.
--------------------------------
TEN
<PAGE> 12
FIDUCIARY CAPITAL PARTNERS, L.P.
- --------------------------------------------------------------------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
As of March 31, 1995, the Fund held portfolio investments in eleven Managed
Companies, with an aggregate cost of approximately $18.9 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 79.6% 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 portion of its KEMET
Corporation ("KEMET") stock.
As of March 31, 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 received $326,324 of proceeds from the sale of 10,547 shares of
KEMET common stock during the three months ended March 31, 1995. These sales
proceeds were used by the Fund to fund a portion of the cost of a follow-on
investment in Canadian's Corp., which was acquired on December 29, 1994.
On April 25, 1995, the Fund received $262,960 of sales proceeds from the
sale of 6,574 shares of KEMET common stock. The gain realized from this
transaction has been reserved by the Managing General Partner to partially fund
either the 1995 repurchase offer or any follow-on investments that the Fund may
make in existing portfolio companies during 1995.
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. Thereafter, the Fund will not be permitted to acquire
investments in new portfolio companies, but will be able to make additional
investments in existing portfolio companies.
--------------------------------
ELEVEN
<PAGE> 13
FIDUCIARY CAPITAL PARTNERS, L.P.
- --------------------------------------------------------------------------------
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 $105,878 from $627,846 at December 31,
1994 to $733,724 at March 31, 1995. This increase resulted primarily from a
$71,220 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 March 31, 1995, the cumulative amount of deferred
interest totaled $533,854. 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 three months
ended March 31, 1995.
Other assets decreased $644,593, from $659,011 at December 31, 1994 to
$14,418 at March 31, 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.
The payable to affiliates decreased $12,262 from $52,354 at December 31,
1994 to $40,092 at March 31, 1995. FCM Fiduciary Capital Management Company
("FCM") pays expenses on behalf of the Fund and is then reimbursed on a monthly
basis. The payable at March 31, 1995 decreased because the total expenses paid
by FCM on behalf of the Fund during March 1995 were less than those paid during
December 1994.
Distributions payable to partners decreased $231,356, from $694,068 at
December 31, 1994 to $462,712 at March 31, 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 three months ended March 31, 1995, the Fund paid a cash
distribution pertaining to the fourth quarter of 1994 in the amount of $694,068.
This quarterly distribu-
--------------------------------
TWELVE
<PAGE> 14
FIDUCIARY CAPITAL PARTNERS, L.P.
- --------------------------------------------------------------------------------
tion was equal to $.45 per Unit and represented an annualized rate equal to 9.0%
of contributed capital.
As discussed in previous reports, the quarterly distributions for 1995 will
be paid at a reduced rate. The distribution for the first quarter of 1995 will
be paid on May 12, 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 March 31, 1995.
It is currently expected that the remaining 1995 distributions will be made
at the same 6.0% rate. In the past, the Fund has realized gains from its
investments that have 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 will be 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.
The Fund has been notified by PaineWebber Incorporated ("PaineWebber") that
FCM, the Managing General Partner of the Fund, is a named defendant in a class
action lawsuit brought in March 1995 against PaineWebber and a number of its
affiliates. FCM believes that this litigation will be resolved without material
adverse effect on the Fund's financial statements, taken as a whole.
RESULTS OF OPERATIONS
INVESTMENT INCOME AND EXPENSES
The Fund's net investment income was $542,819 for the three months ended
March 31, 1995 as compared to net investment income of $506,981 for the
corresponding period of the prior year. Net investment income per limited
partnership unit increased from $.30 to $.35 and the ratio of net investment
income to average net assets increased from 6.65% to 7.60% for the three months
ended March 31, 1995 as compared to the corresponding period of the prior year.
Net investment income for the three months ended March 31, 1995 increased as
a result of a slight increase in investment income and a slight decrease in
total expenses.
--------------------------------
THIRTEEN
<PAGE> 15
FIDUCIARY CAPITAL PARTNERS, L.P.
- --------------------------------------------------------------------------------
Investment income increased $19,564, or 2.9%, for the three months ended
March 31, 1995 as compared to the corresponding period of the prior year. This
small increase was primarily the result of higher interest rates on the Fund's
temporary investments and a slight increase in the aggregate amount that the
Fund had invested in higher-yielding subordinated debt investments. The
positive effect of these items was partially offset by a reduction in the amount
of funds invested in temporary investments. This occurred as a result of the
repurchase of Units by the Fund during the fourth quarter of 1994, which caused
the Fund's total capital to decline by approximately 9.5%, and a slight increase
in the amount invested in non-income producing equity investments.
Total expenses decreased $16,274, or 9.1%, for the three months ended March
31, 1995 as compared to the corresponding period of the prior year. This
decrease resulted primarily from a decrease 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 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.
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
--------------------------------
FOURTEEN
<PAGE> 16
FIDUCIARY CAPITAL PARTNERS, L.P.
- --------------------------------------------------------------------------------
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
months ended March 31, 1995 and the cumulative net unrealized appreciation of
investments as of March 31, 1995, consisted of the following components:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Unrealized Appreciation
(Depreciation) Recorded
------------------------------------
During the Three
Months Ended As of
Portfolio Investment March 31, 1995 March 31, 1995
- --------------------------------------------------------------------------------
<S> <C> <C>
Unrealized appreciation recorded
in prior periods for investments
disposed of during 1995 $ (286,852) $ --
Carr-Gottstein (84,993) 125,258
Neodata (325,199) (337,943)
KEMET 624,543 2,859,548
Huntington -- 576,962
Amity 87,610 872,172
Elgin / ENI 17,798 107,981
Protection One 12,531 (4,094)
MTI -- (249,766)
- --------------------------------------------------------------------------------
$ 45,438 $3,950,118
- --------------------------------------------------------------------------------
</TABLE>
The amount of the Fund's unrealized appreciation or depreciation for its
other investments remains unchanged from the amounts, if any, recorded at
December 31, 1994.
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 March 31, 1995. This price is down from the closing price of $6.50 on
December 31, 1994. 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.
--------------------------------
FIFTEEN
<PAGE> 17
FIDUCIARY CAPITAL PARTNERS, L.P.
- --------------------------------------------------------------------------------
The Neodata Corporation ("Neodata") stock and warrants were 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 $37.375 (an average
of the closing bid and ask prices) on March 31, 1995. This price is up from the
closing price of $29.375 on December 31, 1994. The Fund held 82,177 shares of
KEMET common stock as of March 31, 1995. Based on the $37.375 closing trading
price of the common stock, the Fund's stock would have a market value of
$3,071,365. 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 which could result from the sale of the material number of shares
owned by the Funds.
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 $5.125 (an average of the closing bid and ask prices) 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 $5.125 closing trading
price of the common stock, the Fund's warrants had a market value of $93,246 as
of March 31, 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.
--------------------------------
SIXTEEN
<PAGE> 18
FIDUCIARY CAPITAL PARTNERS, L.P.
- --------------------------------------------------------------------------------
--------------------------------
ANNUAL REPORT
1994
<PAGE> 19
FIDUCIARY CAPITAL PARTNERS, L.P.
- --------------------------------------------------------------------------------
CONTENTS
<TABLE>
<S> <C>
Fund Profile and Financial Highlights Two
Message to Investors Three
Profiles of Portfolio Companies Six
Schedule of Investments Seven
Balance Sheets Ten
Statements of Operations Eleven
Statements of Cash Flows Twelve
Statements of Changes in Net Assets Thirteen
Selected Per Unit Data and Ratios Fourteen
Notes to Financial Statements Fifteen
Report of Independent Public Accountants Nineteen
Management's Discussion and Analysis of Financial
Condition and Results of Operations Twenty
</TABLE>
--------------------------------
ONE
<PAGE> 20
FIDUCIARY CAPITAL PARTNERS, L.P.
- --------------------------------------------------------------------------------
FUND PROFILE
Fiduciary Capital Partners, L.P. (the "Fund") is a Delaware limited
partnership that commenced operations on August 14, 1990. The Fund has elected
to operate as a business development company under the Investment Company Act of
1940, as amended. The investment objective of the Fund is to provide current
income and capital appreciation by investing primarily in subordinated debt and
related equity securities issued as the mezzanine financing of privately
structured, friendly leveraged buyouts, leveraged acquisitions and leveraged
recapitalizations.
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
As of
December 31, 1990
As of December 31 or the Period from the
or Year Ended December 31 Commencement of Operations
----------------------------------------- (August 14, 1990)
1994 1993 1992 1991 to December 31, 1990
(in thousands, except per Unit amounts)
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Total Investment Income $ 2,802 $ 3,133 $ 4,396 $ 3,827 $ 985
Net Investment Income 2,127 2,400 3,703 3,168 719
Net Realized and Unrealized
Gain on Investments 1,824 180 513 -- --
Cash Distributions Declared to Partners 2,995 3,228 3,282 2,872 660
Repurchase of Units 2,949 2,165 -- -- --
Total Assets 29,188 31,188 34,068 33,104 32,683
Net Assets 28,347 30,339 33,153 32,219 31,923
Value of Investments 27,729 30,465 33,419 31,917 32,459
Per Unit of Limited Partnership Interest:(1)
Net Investment Income 1.26(2) 1.33(2) 2.03 1.74 .45(2)
Net Realized and Unrealized
Gain on Investments 1.08(2) .10(2) .29 -- --
Cash Distributions Declared to Partners(3) 1.77 1.81 1.80 1.58 .42
Net Asset Value 18.55 17.98 18.36 17.84 17.68
</TABLE>
(1) Effective October 1, 1993, each $1,000 Unit was redenominated into fifty
$20 Units. All amounts shown for prior periods have been restated to give
effect to this redenomination.
(2) Calculated using the weighted average number of Units outstanding during
the years ended December 31, 1994 and 1993 of 1,669,129 and 1,791,201,
respectively, and during the period from August 14, 1990 (commencement of
operations) through December 31, 1990 of 1,576,800.
(3) Distribution amounts are reflected during the period in which the cash
for the distribution was generated. A portion of the actual cash
distributions are paid subsequent to such period.
--------------------------------
TWO
<PAGE> 21
FIDUCIARY CAPITAL PARTNERS, L.P.
- --------------------------------------------------------------------------------
MESSAGE TO INVESTORS
Dear Investor:
We are pleased to provide a summary of the recent activities of Fiduciary
Capital Partners, L.P. This Annual Report includes the Fund's audited
financial statements for the year ended December 31, 1994. Unaudited interim
financial statements for the first quarter of 1995 are also enclosed along with
this Annual Report.
HIGHLIGHTS
- Distributions for 1994 totaled $1.80 per Unit, which represents an
annualized rate equal to 9.0% of contributed capital.
- The Fund's net asset value per Unit was $18.55 at December 31, 1994
and $18.84 at March 31, 1995 as compared to $17.98 at December 31,
1993.
- The Fund redeemed 9.49% of its outstanding Units during November
1994 pursuant to the Fund's annual repurchase offer.
[BAR GRAPH]
NET ASSET VALUE AND CUMULATIVE DISTRIBUTIONS PER UNIT
1990 - 1994
CASH DISTRIBUTIONS
The Fund paid cash distributions of $.45 per Unit for each quarter of 1994.
Each of these quarterly distributions represented an annualized rate equal to
9.0% of contributed capital. The 1994 cash distributions were paid out of net
investment income (71.0%) and gains from capital transactions (29.0%).
As we have discussed in previous correspondence to you, the quarterly
distributions for 1995 will be paid at a reduced rate. The distribution for
the first quarter of 1995 was paid on May 12, 1995 in an amount equal to $.30
per Unit, or an annualized rate equal to 6.0% of contributed capital. This
distribution consisted entirely of net investment income earned during the
first quarter.
We expect the remaining 1995 distributions to be made at the same 6.0%
rate. In the past, the Fund has realized gains from its investments that have
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.
SIGNIFICANT INVESTMENT PERFORMANCE
KEMET represents the Fund's most successful investment to date. KEMET,
headquartered in Greenville, South Carolina, is a leading manufacturer and
distributor of both solid tantalum and monolithic ceramic capacitors used as
components in circuit boards.
During 1991, the Fund acquired $4,108,850 of 15.50% Senior Subordinated
Term Notes due January 2, 2001 that were issued by a KEMET subsidiary, along
with warrants to purchase 114,638 shares of KEMET common stock at an exercise
price of $.01 per share.
KEMET became the first of the Fund's portfolio companies to successfully
complete an initial public offering ("IPO") of its common stock during October
1992. During June 1993, KEMET prepaid its subordinated notes that the Fund
held, at par, following the successful completion of a secondary stock
offering. Thus, as of June 1993, the Fund had recovered 100% of its original
investment in KEMET (plus the interest payments received on the notes) and
continued to hold warrants to purchase 114,638 shares of KEMET common stock.
--------------------------------
THREE
<PAGE> 22
FIDUCIARY CAPITAL PARTNERS, L.P.
- --------------------------------------------------------------------------------
MESSAGE TO INVESTORS (CONTINUED)
The KEMET common stock, which trades on the NASDAQ National Market System
under the symbol "KMET", closed at the following prices (an average of the
closing bid and ask prices) at the end of each calendar quarter since the
completion of the IPO:
<TABLE>
<S> <C>
December 31, 1992 $14.25
March 31, 1993 $15.25
June 30, 1993 $18.50
September 30, 1993 $15.75
December 31, 1993 $15.50
March 31, 1994 $16.25
June 30, 1994 $16.88
September 30, 1994 $20.63
December 31, 1994 $29.38
March 31, 1995 $37.38
</TABLE>
On December 30, 1994, the Fund exercised the KEMET warrants and sold 21,914
shares of the common stock at a price of $29.50. The Fund sold an additional
10,547 shares on February 28, 1995 at a price of $31.00 per share.
The Fund still owned 82,177 shares of the KEMET stock as of March 31, 1995.
Based on the $37.38 closing trading price of the common stock at March 31, 1995,
the remaining stock had a market value of $3,071,365. However, the Fund's
valuation guidelines require the common stock to be valued at a 5% discount to
the public market price, or $2,917,797 as of March 31, 1995, to reflect the
potential market impact that could result from the sale of the material number
of shares owned by the Fund and an affiliated fund.
In summary, the Fund invested approximately $4.1 million in this investment
and has received interest payments and proceeds from the repayment of the notes
and the sale of stock aggregating approximately $6.5 million. In addition, the
Fund still owned stock with an estimated market value, as of March 31, 1995, of
approximately $2.9 million. Thus, as of March 31, 1995, the Fund had a total
profit on this investment, including interest income and both realized and
unrealized gains, of approximately $5.3 million. This represents an internal
rate of return of approximately 34%. Both the total profit and internal rate
of return ultimately realized by the Fund with respect to this investment will
depend on the actual sales price of the remaining stock and the timing of such
sales.
Since March 31, 1995, the Fund has sold an additional 27,390 shares of the
KEMET stock at an average price of $43.66 per share.
OTHER INVESTMENT ACTIVITY
New portfolio investments in two companies were acquired during 1994: LMC
and Canadian's. The Fund's initial investments in these companies were
discussed in previous investor reports.
On December 29, 1994, the Fund made a follow-on investment of $895,310 in
Canadian's and its parent company, Canadian's Holdings, Inc. Canadian's is a
specialty retailer of moderately priced junior women's apparel and accessories.
The follow-on investment consisted of (a) $857,000 of Canadian's 13.50%
Subordinated Notes with warrants to acquire common stock and (b) $66,000 of
Canadian's Holdings, Inc. 12.00% Exchangeable Redeemable Debentures that are
convertible into Canadian's common stock. Both the Notes and Debentures also
bear contingent additional interest to be computed under specified formulas.
The proceeds from the Fund's additional investment were used by Canadian's as a
portion of the capital needed to finance the acquisition of store leases, a
computer system, point-of-sale terminals and store fixtures from The Ormonds
Shops, Inc., a retailer operating under the protection of the federal
bankruptcy laws.
During 1994, the Fund's subordinated debt investments in Huntington and
Amity were prepaid. In both situations, the companies, which are still
privately owned, were successful in refinancing the subordinated debt held by
the Fund at lower interest rates. The Fund realized gains, including
applicable prepayment premiums, of $542,796 from these prepayments. The Fund
continues to hold its equity securities in these companies.
As discussed in previous correspondence, MTI successfully consummated a
financial restructuring during 1994. Pursuant to the terms of the
restructuring, the Fund and MTI's other subordinated lenders exchanged their
subordinated notes and other securities for common stock in a new holding
company that now owns 100% of MTI. The subordinated lender group received
87.75% of the new holding company's common stock. The Fund recognized a
realized loss of $3,987,656 during 1994 as a result of the restructuring.
(This loss had been recorded as an unrealized loss in prior years.) MTI is
continuing to experience significant financial and operating difficulties and
it is uncertain whether the Fund will ever recover any of its investment in
MTI. As a result, the Fund recorded an additional unrealized loss of $249,766
with respect to the MTI stock investment at December 31, 1994. In the
accompanying financial statements, the MTI common stock is valued at $38,164,
which constitutes approximately one-tenth of 1% of the Fund's net assets.
--------------------------------
FOUR
<PAGE> 23
FIDUCIARY CAPITAL PARTNERS, L.P.
- --------------------------------------------------------------------------------
MESSAGE TO INVESTORS (CONTINUED)
During September 1994, Protection One completed an IPO of its common stock.
On May 17, 1995, Protection One prepaid its $1,083,000 of 12.00% Senior
Subordinated Notes that the Fund held. The Fund received $1,137,150, including
a prepayment premium. The Fund continues to hold the warrants to purchase
Protection One common stock.
NET UNREALIZED APPRECIATION OF PORTFOLIO INVESTMENTS
The cumulative net unrealized appreciation of investments held by the Fund
at December 31, 1994 and March 31, 1995, consisted of the following components:
<TABLE>
<CAPTION>
Unrealized Appreciation
(Depreciation) Recorded as of
-------------------------------------
December 31, 1994 March 31, 1995
- -----------------------------------------------------------
<S> <C> <C>
KEMET $2,521,857 $2,859,548
Amity 784,562 872,172
Huntington 576,962 576,962
Carr-Gottstein 210,251 125,258
Elgin 90,183 107,981
MTI (249,766) (249,766)
Protection One (16,625) (4,094)
Neodata (12,744) (337,943)
- -----------------------------------------------------------
$3,904,680 $3,950,118
- -----------------------------------------------------------
</TABLE>
The KEMET, Carr-Gottstein and Protection One equity investments consist of
publicly traded common stock (and warrants to acquire common stock) that were
valued based upon actual trading prices. The Amity, Huntington, Elgin, MTI and
Neodata valuation adjustments all relate to equity securities held by the Fund
that are not traded in any liquid public markets. These equity securities were
valued by the Managing General Partner pursuant to valuation policies and
procedures that have been approved by the Independent General Partners and
subject to their supervision. The 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.
PERIODIC UNIT REPURCHASE POLICY
The Fund's investors adopted a periodic unit repurchase plan during October
1993. Pursuant to the terms of the repurchase policy, the Fund will annually
offer to purchase 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 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. Pursuant to the
initial repurchase offer, 117,979 Units (6.54% of the outstanding Units) were
redeemed during November 1993 at a net asset value per Unit of $18.35 ($17.98,
net of the 2% fee). An additional 160,172 Units (9.49% of the outstanding
Units) were redeemed during November 1994 at a net asset value per Unit of
$18.41 ($18.04, net of the 2% fee).
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 have recently seen an increase in the number of companies seeking
mezzanine financing and we are currently analyzing several potential 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,
Paul Bagley, Chairman
FCM Fiduciary Capital Management Company
W. Duke DeGrassi, President
FCM Fiduciary Capital Management Company
May 17, 1995
--------------------------------
FIVE
<PAGE> 24
FIDUCIARY CAPITAL PARTNERS, L.P.
- --------------------------------------------------------------------------------
PROFILES OF PORTFOLIO COMPANIES
Carr-Gottstein Foods Company ("Carr-Gottstein") Carr-Gottstein has been
the leading food and drug retailer in Alaska since 1915 and is the largest
private employer in Alaska.
Neodata Corporation ("Neodata") Neodata, headquartered in Louisville,
Colorado, is the largest contract fulfillment company in the world and a leader
in providing fulfillment and marketing services to the magazine publishing
industry.
KEMET Corporation ("KEMET") KEMET, headquartered in Greenville, South
Carolina, is a leading manufacturer and distributor of both solid tantalum and
monolithic ceramic capacitors used as components in circuit boards.
Huntington Holdings, Inc. ("Huntington") Huntington, headquartered in
Huntington, Indiana, is one of the largest manufacturers and marketers of
maintenance and cleaning chemicals in North America. Huntington produces a
wide range of intermediate and final-stage cleansers, sterilants and
disinfectants for use by hospitals, schools, nursing homes and various
industries.
Amity Leather Products Co. ("Amity") Amity, headquartered in West Bend,
Wisconsin, manufactures men's and ladies' fine personal leather goods and
distributes these products to department stores, mass merchandisers and
company-owned Wallet Works stores. Amity markets its products under the brand
names of Rolfs, Amity and LaGarde.
KB Alloys, Inc. (""KB Alloys") KB Alloys, headquartered in Reading,
Pennsylvania, is a leading North American manufacturer of aluminum master
alloys. Master alloys are added during the production of aluminum to enhance
or supply physical properties and to function as a hardener, refiner or
promoter of electrical conductivity.
Elgin National Industries, Inc. ("Elgin") Elgin, headquartered in Chicago,
Illinois, is a diversified industrial company that is organized into three
distinct segments. The Industrial Products Group manufactures specialty
industrial threaded fasteners. The Manufacturing Group manufactures machinery
and equipment for niches in coal and other mineral processing markets. The
Engineering and Construction Group provides a full range of engineering, design
and construction management services, including serving as a general contractor
under turn-key design and build contracts.
Protection One Alarm Monitoring, Inc. ("Protection One") Protection One is
a Portland, Oregon-based security alarm company operating in five western
states.
LMC Operating Corp. ("LMC") LMC, headquartered in Logan, Utah, is the
leading U.S. manufacturer of light track vehicles. These vehicles are
primarily used as snow-groomers and have several alternative uses including
infrastructure development and maintenance in remote locations, right-of-way
clean-up, search and rescue and military troop deployment. Primary purchasers
of the vehicles include ski resorts, utility companies and various governmental
agencies.
Mobile Technology, Inc. ("MTI") MTI is a leading domestic provider of
magnetic resonance imaging ("MRI") and computed tomography mobile
shared-services.
Canadian's Corp. ("Canadian's") Canadian's, headquartered in Fairfield,
New Jersey, is a specialty retailer of moderately priced junior women's apparel
and accessories. Canadian's emerged from Chapter 11 bankruptcy proceedings in
conjunction with the restructuring in which the Fund participated.
VALUE OF 1994 YEAR-END INVESTMENTS BY PORTFOLIO COMPANY
<TABLE>
<S> <C>
Carr-Gottstein 4.0%
Neodata 1.2%
KEMET 9.3%
Huntington 2.4%
Amity 4.2%
KB Alloys 12.6%
Elgin 24.7%
Protection One 4.0%
LMC 9.2%
MTI 0.1%
Canadian's 10.7%
Temporary Investments 17.6%
</TABLE>
--------------------------------
SIX
<PAGE> 25
FIDUCIARY CAPITAL PARTNERS, L.P.
- -------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
<TABLE>
<CAPTION>
DECEMBER 31, 1994
- -------------------------------------------------------------------------------------------------------------------------------
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 $1,104,917
- -------------------------------------------------------------------------------------------------------------------------------
894,666 1,104,917 4.0%
- -------------------------------------------------------------------------------------------------------------------------------
413,111 sh. Neodata Corporation,
Warrants to Purchase
Common Stock and
10.00% Class A Convertible
Preferred Stock - Series 2* 12/27/90 41,088 254,784
39,507.63 sh. Neodata Corporation,
10.00% Class A Convertible
Preferred Stock - Series 2* 09/30/92 296,857 70,417
2,296.95 sh. Neodata Corporation,
Common Stock* 09/30/92 1 1
- -------------------------------------------------------------------------------------------------------------------------------
337,946 325,202 1.2
- -------------------------------------------------------------------------------------------------------------------------------
92,724 sh. KEMET Corporation, 03/28/91 &
Common Stock(2)* 07/11/91 65,722 2,587,579
- -------------------------------------------------------------------------------------------------------------------------------
65,722 2,587,579 9.3
- -------------------------------------------------------------------------------------------------------------------------------
324.6 sh. Huntington Holdings, Inc.,
Warrants to Purchase
Common Stock(3)* 01/31/92 103,811 680,773
- -------------------------------------------------------------------------------------------------------------------------------
103,811 680,773 2.4
- -------------------------------------------------------------------------------------------------------------------------------
75,856 sh. Amity Leather Products Co.,
Warrants to Purchase Class B
Common Stock* 07/30/92 104,091 854,139
27,392 sh. Amity Leather Products Co.,
Class A Common Stock* 07/30/92 273,920 308,434
- -------------------------------------------------------------------------------------------------------------------------------
378,011 1,162,573 4.2
- -------------------------------------------------------------------------------------------------------------------------------
$3,561,003 KB Alloys, Inc.,
20.00% Senior Subordinated
Term Notes due 6/30/01(4) 05/28/93 3,497,526 3,497,526
- -------------------------------------------------------------------------------------------------------------------------------
3,497,526 3,497,526 12.6
- -------------------------------------------------------------------------------------------------------------------------------
$6,087,185 Elgin National Industries, Inc.,
13.00% Senior Subordinated
Notes due 9/01/01(5) 09/24/93 5,936,000 5,936,000
7,119.71 sh. ENI Holding Corp.,
10.00% Preferred Stock
due 12/31/01 09/24/93 711,971 802,154
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
- -------------------------------------------------------------------------------------------------------------------------------
6,747,976 6,838,159 24.7
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes to financial statements are an integral part of this
schedule.
-------------------------------
SEVEN
<PAGE> 26
FIDUCIARY CAPITAL PARTNERS, L.P.
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
DECEMBER 31, 1994
- -------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL
AMOUNT/ INVESTMENT AMORTIZED % OF TOTAL
SHARES INVESTMENT DATE COST VALUE INVESTMENTS
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$1,083,000 Protection One Alarm
Monitoring, Inc., 12.00%
Senior Subordinated Notes
due 11/01/03 11/03/93 994,690 994,690
18,194.4 sh. Protection One, Inc., Warrants
to Purchase Common Stock(6)* 11/03/93 97,340 80,715
- -------------------------------------------------------------------------------------------------------------------------------
1,092,030 1,075,405 4.0
- -------------------------------------------------------------------------------------------------------------------------------
$2,604,000 LMCOperating Corp.,
13.00% Senior Secured
Subordinated Term Notes
due 5/31/99(7) 06/10/94 2,450,541 2,450,541
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
- -------------------------------------------------------------------------------------------------------------------------------
2,567,722 2,567,722 9.2
- -------------------------------------------------------------------------------------------------------------------------------
42,404 sh. MTIHoldings 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 9/01/02(8) 12/29/94 2,617,286 2,617,286
$334,000 Canadian s Holdings, Inc.,
12.00% Exchangeable
Redeemable Debentures 09/09/94 &
due 8/31/04(9) 12/29/84 318,722 318,722
266,201 sh. Canadian s Corp.,
Warrants to Purchase 09/09/94 &
Common Stock* 12/29/94 39,043 39,043
- -------------------------------------------------------------------------------------------------------------------------------
2,975,051 2,975,051 10.7
- -------------------------------------------------------------------------------------------------------------------------------
Total Investments in Managed Companies (80.6% of net assets) 18,948,391 22,853,071 82.4
- -------------------------------------------------------------------------------------------------------------------------------
TEMPORARY INVESTMENTS:
$2,207,000 Ford Motor Credit Corporation,
5.872% Notes due 01/31/95 12/28/94 2,196,406 2,196,406
$2,693,000 Spiegel Funding Corporation,
6.005% Notes due 1/31/95 12/28/94 2,679,782 2,679,782
- -------------------------------------------------------------------------------------------------------------------------------
Total Temporary Investments (17.2% of net assets) 4,876,188 4,876,188 17.6
- -------------------------------------------------------------------------------------------------------------------------------
Total Investments (97.8% of net assets) $23,824,579 $27,729,259 100.0%
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes to financial statements are an integral part of this
schedule.
-------------------------------
EIGHT
<PAGE> 27
FIDUCIARY CAPITAL PARTNERS, L.P.
- -------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1994
- -------------------------------------------------------------------------------
(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. The Fund and 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.
(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. If the warrants were converted to common stock, the
Fund would be subject to certain restrictions on its ability to
dispose of its shares. As a result of these trading restrictions, the
Fund has valued the warrants at a 9% discount to the public market
price.
(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.
* Non-income producing security.
The accompanying notes to financial statements are an integral part of this
schedule.
-------------------------------
NINE
<PAGE> 28
FIDUCIARY CAPITAL PARTNERS, L.P.
- -------------------------------------------------------------------------------
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, 1994 AND 1993
- ----------------------------------------------------------------------------------------------------------------------
1994 1993
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS:
Investments (Notes 2, 10, and 11)
Portfolio investments, at value:
Managed companies (amortized cost -
$18,948,391 and $28,152,612, respectively) $22,853,071 $27,565,532
Non-managed companies (amortized cost
- $600,443) -- 735,970
Temporary investments, at amortized cost 4,876,188 2,163,458
- ----------------------------------------------------------------------------------------------------------------------
Total investments 27,729,259 30,464,960
Cash and cash equivalents (Note 2) 171,999 317,279
Accrued interest receivable 627,846 375,047
Other assets, including receivables from sale of investments 659,011 30,808
- ----------------------------------------------------------------------------------------------------------------------
Total assets $29,188,115 $31,188,094
======================================================================================================================
LIABILITIES:
Due to affiliates (Notes 6, 7, 8 and 9) $ 52,354 $ 50,496
Accounts payable and accrued liabilities 34,688 31,425
Prepaid interest income 60,146 --
Distributions payable to partners (Note 3) 694,068 766,873
- ----------------------------------------------------------------------------------------------------------------------
Total liabilities 841,256 848,794
- ----------------------------------------------------------------------------------------------------------------------
NET ASSETS (NOTES 3 AND 4):
Managing General Partner 19,965 10,402
Limited Partners (equivalent to $18.55
and $17.98, respectively, per limited
partnership unit based on 1,526,949
and 1,687,121 units outstanding) (Note 5) 28,326,894 30,328,898
- ----------------------------------------------------------------------------------------------------------------------
Net assets 28,346,859 30,339,300
- ----------------------------------------------------------------------------------------------------------------------
Total liabilities and net assets $29,188,115 $31,188,094
======================================================================================================================
</TABLE>
The accompanying notes to financial statements are an integral part of these
financial statements.
-------------------------------
TEN
<PAGE> 29
FIDUCIARY CAPITAL PARTNERS, L.P.
- -------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR EACH OF THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
- ----------------------------------------------------------------------------------------------------------------------
1994 1993 1992
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INVESTMENT INCOME:
Income:
Interest $2,748,575 $3,132,724 $4,258,784
Other income 53,171 -- 136,962
- ----------------------------------------------------------------------------------------------------------------------
Total investment income 2,801,746 3,132,724 4,395,746
- ----------------------------------------------------------------------------------------------------------------------
Expenses:
Investment advisory fees (Note 6) 274,085 316,113 316,476
Fund administration fees (Note 7) 143,370 143,370 143,370
Independent General Partner fees
and expenses (Note 8) 57,620 55,687 39,719
Administrative expenses (Note 7) 80,269 81,695 79,666
Professional fees 51,252 59,701 61,076
Amortization 11,160 11,160 11,160
Other expenses 57,101 64,982 41,711
- ----------------------------------------------------------------------------------------------------------------------
Total expenses 674,857 732,708 693,178
- ----------------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME 2,126,889 2,400,016 3,702,568
- ----------------------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized (loss) gain on investments (Note 10) (2,532,109) 1,089,907 54,785
Net increase (decrease) in unrealized
appreciation of investments (Note 11) 4,356,233 (910,109) 458,556
- ----------------------------------------------------------------------------------------------------------------------
Net gain on investments 1,824,124 179,798 513,341
- ----------------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $3,951,013 $2,579,814 $4,215,909
======================================================================================================================
</TABLE>
The accompanying notes to financial statements are an integral
part of these financial statements.
-------------------------------
ELEVEN
<PAGE> 30
FIDUCIARY CAPITAL PARTNERS, L.P.
- -------------------------------------------------------------------------------
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR EACH OF THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
- ----------------------------------------------------------------------------------------------------------------------
1994 1993 1992
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net increase in net assets resulting
from operations $ 3,951,013 $ 2,579,814 $ 4,215,909
Adjustments to reconcile net increase
in net assets resulting from operations
to net cash provided by operating activities:
Accreted discount on portfolio investments (57,498) (34,431) (29,012)
Amortization 11,160 11,160 11,160
Change in assets and liabilities:
Accrued interest receivable (252,799) (106,925) 122,384
Other assets 4,749 (3,014) (6,275)
Due to affiliates 712 (16,859) 15,213
Accounts payable and accrued liabilities 3,263 4,500 14,442
Prepaid interest income 60,146 -- --
Net realized loss (gain) on investments 2,532,109 (1,089,907) (54,785)
Net (increase) decrease in unrealized
appreciation of investments (4,356,233) 910,109 (458,556)
- ----------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 1,896,622 2,254,447 3,830,480
- ----------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of portfolio investments (5,524,231) (13,953,009) (11,527,408)
Proceeds from dispositions of portfolio investments 12,210,282 12,855,622 5,533,252
(Purchase) sale of temporary investments, net (2,712,730) 4,265,332 5,035,194
- ----------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) investing activities 3,973,321 3,167,945 (958,962)
- ----------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions paid to partners (3,067,492) (3,282,000) (3,281,998)
Repurchase of limited partnership units (2,948,767) (2,164,915) --
Deferred repurchase plan costs 1,036 (1,036) --
- ----------------------------------------------------------------------------------------------------------------------
Net cash used in financing activities (6,015,223) (5,447,951) (3,281,998)
- ----------------------------------------------------------------------------------------------------------------------
NET DECREASE IN CASH AND CASH EQUIVALENTS (145,280) (25,559) (410,480)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 317,279 342,838 753,318
- ----------------------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 171,999 $ 317,279 $ 342,838
======================================================================================================================
NONCASH INVESTING AND FINANCING ACTIVITIES:
Investments exchanged for other investments $ 287,930 $ -- $ --
======================================================================================================================
</TABLE>
The accompanying notes to financial statements are an integral part of these
financial statements.
-------------------------------
TWELVE
<PAGE> 31
FIDUCIARY CAPITAL PARTNERS, L.P.
- -------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR EACH OF THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
- ----------------------------------------------------------------------------------------------------------------------
1994 1993 1992
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Increase in net assets resulting from operations:
Net investment income $ 2,126,889 $ 2,400,016 $ 3,702,568
Net realized (loss) gain on investments (2,532,109) 1,089,907 54,785
Net increase (decrease) in unrealized
appreciation of investments 4,356,233 (910,109) 458,556
- ----------------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 3,951,013 2,579,814 4,215,909
Repurchase of limited partnership units (Note 5) (2,948,767) (2,164,915) --
Distributions to partners from -
Net investment income (2,126,889) (3,175,434) (3,281,796)
Net realized gain on investments (867,798) (52,939) --
- ----------------------------------------------------------------------------------------------------------------------
Total (decrease) increase in net assets (1,992,441) (2,813,474) 934,113
Net assets:
Beginning of year 30,339,300 33,152,774 32,218,661
- ----------------------------------------------------------------------------------------------------------------------
End of year (including undistributed net investment
income of $0, $0 and $775,418, respectively) $28,346,859 $30,339,300 $33,152,774
======================================================================================================================
</TABLE>
The accompanying notes to financial statements are an integral part of these
financial statements.
-------------------------------
THIRTEEN
<PAGE> 32
FIDUCIARY CAPITAL PARTNERS, L.P.
- --------------------------------------------------------------------------------
SELECTED PER UNIT DATA AND RATIOS(1)
FOR EACH OF THE YEARS ENDED DECEMBER 31, 1994, 1993, 1992 AND 1991 AND FOR THE
PERIOD FROM AUGUST 14, 1990 (COMMENCEMENT OF OPERATIONS) THROUGH DECEMBER 31,
1990
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
1994 1993 1992 1991 1990
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER UNIT DATA:
Investment income $ 1.66(2) $ 1.73 (2) $ 2.41 $ 2.10 $ .62 (2)
Expenses (.40)(2) (.40)(2) (.38) (.36) (.17)(2)
- -------------------------------------------------------------------------------------------------------------------------------
Net investment income 1.26(2) 1.33 (2) 2.03 1.74 .45 (2)
Net proceeds from sale of limited
partnership units -- -- -- -- 17.65
Net realized (loss) gain on investments (1.50)(2) .60 (2) .03 -- --
Net increase (decrease) in unrealized
appreciation of investments 2.58(2) (.50)(2) .26 -- --
Distributions declared to partners (1.77) (1.81) (1.80) (1.58) (.42)
- -------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net asset value .57 (.38) .52 .16 17.68
Net asset value:
Beginning of period 17.98 18.36 17.84 17.68
- -------------------------------------------------------------------------------------------------------------------------------
End of period $18.55 $17.98 $18.36 $17.84 $17.68
===============================================================================================================================
RATIOS:
Ratio of expenses to average net assets 2.24% 2.24% 2.13% 2.03% 0.97%
Ratio of net investment income to
average net assets 7.06% 7.34% 11.36% 9.74% 2.63%
Number of limited partnership units
at end of period(1) 1,526,949 1,687,121 1,805,100 1,805,100 1,805,100
</TABLE>
(1) Effective October 1, 1993, each $1,000 limited partnership unit was
redenominated into fifty $20 limited partnership units. All amounts shown
for prior periods have been restated to give effect to this redenomination.
(2) Calculated using the weighted average number of limited partnership units
outstanding during the years ended December 31, 1994 and 1993 of 1,669,129
and 1,791,201, respectively, and during the period from August 14, 1990
(commencement of operations) through December 31, 1990 of 1,576,800.
The accompanying notes to financial statements are an integral part of these
selected per unit data and ratios.
--------------------------------
FOURTEEN
<PAGE> 33
FIDUCIARY CAPITAL PARTNERS, L.P.
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1994 AND 1993
1. ORGANIZATION AND PURPOSE
Fiduciary Capital Partners, L.P. (the "Fund"), a Delaware limited
partnership, was formed on October 20, 1988 to operate as a business development
company under the Investment Company Act of 1940. The Fund's operations
commenced on August 14, 1990.
FCM Fiduciary Capital Management Company ("FCM"), the Managing General
Partner of, and the investment adviser to, the Fund, is responsible, subject to
the supervision of the Independent General Partners, for overseeing and
monitoring the Fund's investments.
The investment objective of the Fund is to provide current income and
capital appreciation by investing primarily in subordinated debt and related
equity securities issued as the mezzanine financing of privately structured,
friendly leveraged buyouts, leveraged acquisitions and leveraged
recapitalizations. These investments usually involve established middle-market
companies and are referred to herein as "portfolio investments". Managed
companies are those to which significant managerial assistance is offered.
As set forth in the Partnership Agreement, the Fund's investment period will
end on December 31, 1995. Thereafter, the Fund will not be permitted to acquire
investments in new portfolio companies, but can make additional investments in
existing portfolio companies.
A separate fund, Fiduciary Capital Pension Partners, L.P. ("FCPP"), was also
formed on October 20, 1988 for tax-exempt investors with investment objectives,
policies and restrictions similar to those of the Fund. While the Fund and FCPP
have co-invested in each of the portfolio investments, each fund is accounted
for separately. Each Fund's participation in the portfolio investments is in
proportion to the amount of capital that each fund had available for investment
at the time each investment was acquired. Certain expenses are allocated
between the funds based on the amount of each Fund's total capital. The
accompanying financial statements include only the activities of the Fund.
2. SIGNIFICANT ACCOUNTING POLICIES
Accounting Method The Fund maintains its accounting records, prepares
financial statements and files its tax returns using the accrual method of
accounting.
Valuation of Investments FCM values the Fund's 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. The Fund discounts these closing market prices between 5% and 20% to
reflect lack of liquidity, if the Fund's securities are subject to legal or
contractual trading restrictions, or to reflect the potential market impact
which could result from the sale of the securities, if the Fund and FCPP
combined own a material percentage of the outstanding securities. The amount of
the discount varies based upon the type of restriction, the time remaining on
the restriction and the size of the holding.
Fair value for securities that are not fully traded in any liquid public
markets or that are privately held are determined pursuant to valuation policies
and procedures which 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"). Debt
securities with attached warrants for the purchase of common stock are initially
recorded at a discount from face value equal to the estimated relative value of
the warrants at date of investment. The discount is amortized to income as an
adjustment to yield from the debt securities. Face value less unamortized
discount represents the "amortized cost" of the debt securities.
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.
Temporary investments with maturities of less than 60 days are stated at
amortized cost, which approximates market value. Under this method, temporary
investments are valued at cost when purchased and thereafter a constant
proportionate amortization of any discount or premium is recorded until maturity
of the investment.
--------------------------------
FIFTEEN
<PAGE> 34
FIDUCIARY CAPITAL PARTNERS, L.P.
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Cash and Cash Equivalents The Fund considers investments in money market
funds to be cash equivalents.
Interest Receivable on Notes Notes are placed on non-accrual status in the
event of a default (after any applicable grace period expires) or if FCM
determines that there is no reasonable expectation of collecting the interest.
Deferred Organization Expenses Organization expenses, which are included in
other assets, are being amortized on a straight- line basis over a period of
five years.
Income Taxes No provision for income taxes has been made in the financial
statements because taxes on Fund income are the responsibility of the individual
partners rather than the Fund.
Investment Transactions The Fund records portfolio investment transactions
on the date on which it obtains an enforceable right to demand the securities or
payment thereof and records temporary investment transactions on the trade date.
Realized gains and losses on investments are determined on the basis of specific
identification for both accounting and tax purposes.
3. ALLOCATIONS OF PROFITS, LOSSES AND CASH DISTRIBUTIONS
Pursuant to the Partnership Agreement, all income derived from temporary
investments will be distributed and allocated 99% to the Limited Partners and 1%
to FCM. Net investment income will, in general, be distributed and allocated:
(i) 99% to the Limited Partners and 1% to FCM until the Limited Partners have
received a cumulative non-compounded preferred return of 9% per annum on their
capital contributions to the Fund, then (ii) 70% to the Limited Partners and 30%
to FCM until FCM has received 10% of all current and prior distributions and
allocations, and thereafter, (iii) 90% to the Limited Partners and 10% to FCM.
Proceeds from capital transactions will, in general, be distributed and
allocated: (i) 99% to the Limited Partners and 1% to FCM until the Limited
Partners have received a cumulative, non-compounded preferred return of 9%
per annum on their capital contribution to the Fund from net investment income,
capital transactions, or both, then (ii) 100% to the Limited Partners until they
have received a return of their capital contributions to the Fund, and
thereafter, (iii) 80% to the Limited Partners and 20% to FCM.
All cash distributions and earnings since the inception of the Fund have
been allocated 99% to the Limited Partners and 1% to FCM.
4. CAPITAL CONTRIBUTIONS
Upon formation of the Fund, FCM contributed $4,000 for its general partner
interest in the Fund. Units of limited partnership interest ("Units") were then
sold in a public offering. The Fund held three closings between August 14, 1990
and October 18, 1990, receiving gross offering proceeds of $36,102,000.
Commissions and other offering costs were charged against proceeds resulting in
net capital contributions from Limited Partners of $31,860,015.
5. PERIODIC UNIT REPURCHASE PLAN
The Fund's Limited Partners adopted a periodic unit repurchase plan at a
special meeting of the Limited Partners on October 1, 1993. Pursuant to the
terms of the repurchase policy, the Fund will annually offer to repurchase 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. Pursuant to the initial repurchase
offer, 117,979 Units (6.54% of the outstanding Units) were redeemed during
November 1993 at a net asset value per Unit of $18.35 ($17.98, net of the 2%
fee). An additional 160,172 Units (9.49% of the outstanding Units) were
redeemed during November 1994 at a net asset value per Unit of $18.41 ($18.04,
net of the 2% fee).
6. INVESTMENT ADVISORY FEES
As compensation for its services as investment adviser, 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
$274,085, $316,113 and $316,476 were incurred by the Fund for 1994, 1993 and
1992, respectively.
7. 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 $143,370
were incurred each year by the Fund during 1994, 1993 and 1992. FCM is also
reimbursed, subject to various limitations, for administrative expenses incurred
in providing accounting and investor services to the
--------------------------------
SIXTEEN
<PAGE> 35
FIDUCIARY CAPITAL PARTNERS, L.P.
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Fund. The Fund reimbursed FCM for administrative expenses of $80,269, $81,695
and $79,666 for 1994, 1993 and 1992, respectively.
8. 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 of $57,620, $55,687 and $39,719 were
incurred by the Fund for 1994, 1993 and 1992, respectively.
9. OTHER RELATED PARTY TRANSACTIONS
FCM and its affiliates are entitled to reimbursement of certain direct
expenses paid on behalf of the Fund. Such reimbursable expenses amounted to
$175,297, $242,719 and $125,118 during 1994, 1993 and 1992, respectively.
10. PORTFOLIO INVESTMENTS
The Fund's portfolio investments consist primarily of high-yield private
placement securities issued as the mezzanine financing of privately structured,
friendly leveraged buyouts, leveraged acquisitions and leveraged
recapitalizations, and are generally linked with an equity participation. The
risk of loss upon default by an issuer is greater than with investment grade
securities because high-yield securities are generally unsecured and are usually
subordinated to other creditors of the issuer. Also, these issuers usually have
higher levels of indebtedness and are more sensitive to adverse economic
conditions than investment grade issuers. Most of these securities are subject
to resale restrictions and generally there is no quoted market for such
securities.
Although the Fund cannot eliminate the risks associated with its investments
in these high-yield securities, it has established risk management procedures.
The Fund'subjects each prospective investment to rigorous analysis, and makes
only those investments that are recommended by FCM and that meet the Fund's
investment guidelines or that have otherwise been approved by the Independent
General Partners. The Fund also has procedures in place to continually monitor
its portfolio companies.
As of December 31, 1994, the Fund held portfolio investments in eleven
Managed Companies, with an aggregate cost of approximately $18.9 million. During
the year ended December 31, 1994, the Fund exercised the KEMET Corporation
warrants it held and acquired new portfolio investments in LMC Operating Corp.
and Canadian's Corp. at a total cost of approximately $5.5 million.
The Fund's subordinated debt investments in Huntington Holdings, Inc. and
Amity Leather Products Co. were prepaid during 1994. In addition, the Fund'sold
a portion of its KEMET Corporation common stock during 1994. The Fund received
approximately $12.9 million in proceeds, including applicable prepayment
premiums, resulting in aggregate realized gains of $1,455,547.
During 1994, Mobile Technology, Inc. ("MTI") consummated a financial
restructuring. Pursuant to the terms of the restructuring, the Fund and MTI's
other subordinated lenders exchanged their subordinated notes for common stock
in a new holding company, MTI Holdings II, Inc., which now owns 100% of MTI. The
Fund also received a minimal number of additional shares of common stock in MTI
Holdings II, Inc. in connection with the liquidation of the original holding
company. As a result of the restructuring, the Fund recognized a realized loss
of $3,987,656, which was equal to the difference between the estimated values of
the new common stock on the dates it was received, and the combined amortized
cost of the subordinated notes that were exchanged and the cost of the equity
securities that were held by the Fund in the original holding company.
The Fund has pledged the common stock and warrants it owns in Amity Leather
Products Co. ("Amity") as collateral for Amity's corporate debt. None of the
Fund's other portfolio investments have been pledged or otherwise encumbered.
11. UNREALIZED APPRECIATION AND DEPRECIATION OF INVESTMENTS
As of December 31, 1993, the Fund had recorded net unrealized depreciation
of investments of $451,553. During 1994, the Fund recorded $2,085,989 of
unrealized appreciation and $1,274,817 of unrealized depreciation of
investments. In addition, the Fund disposed of investments during 1994 with
respect to which the Fund had recorded $3,545,061 of net unrealized depreciation
during prior years. Therefore, at December 31, 1994, the Fund had net
unrealized appreciation of investments of $3,904,680.
--------------------------------
SEVENTEEN
<PAGE> 36
FIDUCIARY CAPITAL PARTNERS, L.P.
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
12. RECONCILIATION TO INCOME TAX METHOD OF ACCOUNTING
The following is a reconciliation of the net increase in net assets
resulting from operations in the accompanying financial statements to the
taxable income reported for federal income tax purposes:
<TABLE>
<CAPTION>
1994 1993 1992
- ----------------------------------------------------------------------------------
<S> <C> <C> <C>
Net increase in net assets
resulting from operations
per financial statements $3,951,013 $2,579,814 $4,215,909
Increase (decrease)
resulting from:
Losses on investments
not yet recognized for
income tax purposes 3,547,375 -- --
Unrealized (appreciation)
depreciation of
investments (4,356,233) 910,109 (458,556)
Interest income (43,604) -- --
Amortization of
organization and
start-up costs (29,452) (29,452) (29,453)
Fee income, net of
amortization (29,167) 187,759 --
Other (51,753) 7,100 16,000
- ----------------------------------------------------------------------------------
Taxable income per
federal income tax
return $2,988,179 $3,655,330 $3,743,900
==================================================================================
</TABLE>
The following is a reconciliation of the amount of the Fund's net assets as
shown in the accompanying financial statements and the tax bases of the Fund's
net assets:
<TABLE>
<CAPTION>
1994 1993 1992
- -----------------------------------------------------------------------------------
<S> <C> <C> <C>
Net assets per
financial statements $28,346,859 $30,339,300 $33,152,774
Syndication, organization
and start-up costs, net 3,371,072 3,805,823 4,088,482
Losses on investments
not yet recognized for
income tax purposes 3,547,375 -- --
Distributions payable 694,068 -- --
Fee income, net of
amortization 158,592 187,759 --
Prepaid interest income 60,146 -- --
Accrued expenses 24,518 23,100 16,000
Unrealized (appreciation)
depreciation of
investments (3,904,680) 451,553 (458,556)
Accrued interest income (103,750) -- --
- -----------------------------------------------------------------------------------
Tax bases of net assets $32,194,200 $34,807,535 $36,798,700
===================================================================================
</TABLE>
--------------------------------
EIGHTEEN
<PAGE> 37
FIDUCIARY CAPITAL PARTNERS, L.P.
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Partners of Fiduciary Capital Partners, L.P.:
We have audited the accompanying balance sheets of Fiduciary Capital
Partners, L.P. (a Delaware limited partnership) as of December 31, 1994 and
1993, including the schedule of investments as of December 31, 1994, and the
related statements of operations, cash flows and changes in net assets for each
of the three years in the period ended December 31, 1994 and the selected per
unit data and ratios for the four years then ended and for the period from
August 14, 1990 (commencement of operations) through December 31, 1990. These
financial statements and per unit data and ratios are the responsibility of the
partnership's managing general partner. Our responsibility is to express an
opinion on these financial statements and per unit data and ratios based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and per unit data
and ratios are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1994 and 1993, by correspondence with the custodian. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and selected per unit data and
ratios referred to above present fairly, in all material respects, the financial
position of Fiduciary Capital Partners, L.P. as of December 31, 1994 and 1993,
and the results of its operations, its cash flows and the changes in its net
assets for each of the three years then ended and the selected per unit data and
ratios for the four years then ended and for the period from August 14, 1990
(commencement of operations) through December 31, 1990, in conformity with
generally accepted accounting principles.
As discussed in Note 2, the financial statements include investment
securities valued at $19,079,860 at December 31, 1994 (67.3% of net assets) and
$24,113,869 at December 31, 1993 (79.5% of net assets) whose values have been
estimated by the managing general partner in the absence of readily
ascertainable market values. We have reviewed the procedures used by the
managing general partner in arriving at its estimate of value of such securities
and have inspected the underlying documentation, and in the circumstances we
believe the procedures are reasonable and the documentation appropriate.
However, because of the inherent uncertainty of valuation, the managing general
partner's estimate of values may differ significantly from the values that would
have been used had a ready market existed for the securities and the differences
could be material.
ARTHUR ANDERSEN LLP
Denver, Colorado
February 3, 1995.
--------------------------------
NINETEEN
<PAGE> 38
FIDUCIARY CAPITAL PARTNERS, L.P.
- --------------------------------------------------------------------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
During 1990, the Fund completed a public offering of its Units. Net offering
proceeds available to the Fund, after deducting commissions and other offering
costs, totaled $31,860,015.
The Fund has authority to borrow funds for operational purposes. To date,
however, the Fund has not borrowed any funds and it has no established credit
arrangements.
The Fund's Limited Partners adopted a periodic unit repurchase plan at a
special meeting of the Limited Partners on October 31, 1993. Pursuant to the
terms of the repurchase policy, 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 purchase up to an
additional 2% of the outstanding Units. Pursuant to the initial repurchase
offer, 117,979 Units (6.54% of the outstanding Units) were redeemed during
November 1993 at a net asset value per Unit of $18.35 ($17.98, net of the 2%
fee). An additional 160,172 Units (9.49% of the outstanding Units) were
redeemed during November 1994 at a net asset value per Unit of $18.41 ($18.04,
net of the 2% fee).
As of December 31, 1994, the Fund held portfolio investments in eleven
Managed Companies, with an aggregate cost of approximately $18.9 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 80.6% 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 IPOs of their stock. The Fund
continues to hold all of the equity components of its original investments,
except for a portion of its KEMET stock.
As of December 31, 1994, 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.
During the year ended December 31, 1994, the Fund exercised the KEMET
warrants it held and acquired new portfolio investments in LMC and Canadian's at
a total cost of $5,525,377.
The Fund's subordinated debt investments in Huntington and Amity were prepaid
during 1994. In addition, the Fund'sold a portion of its KEMET common stock
during 1994. In the aggregate, the Fund received $12,855,430 in proceeds,
including applicable prepayment premiums, from these transactions.
The Fund'stopped accruing interest on the MTI notes that it previously held,
effective October 1, 1992. During the fall of 1992, MTI notified its lenders
that it would probably be unable to meet its debt amortization and interest
obligations during 1993. In January 1993, MTI confirmed its inability to pay
and commenced restructuring negotiations with its various lenders outside of
bankruptcy proceedings. These restructuring negotiations were successfully
completed and the restructuring was consummated on July 6, 1994. Pursuant to
the terms of the restructuring, the Fund and MTI's other subordinated lenders
exchanged their subordinated notes for common stock in a new holding company,
MTI II, which now owns 100% of MTI. The Fund also received a minimal number of
additional shares of MTI II common stock on December 28, 1994 in connection with
the liquidation of the original holding company.
Accrued interest receivable increased $252,799 from $375,047 at December 31,
1993 to $627,846 at December 31, 1994. This increase resulted primarily from a
$288,837 increase in the deferred portion of the interest receivable from KB
Alloys with respect to the Fund's investment in $3,561,003 of KB Alloys 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
December 31, 1994, the cumulative amount of deferred interest totaled $462,634.
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. This
increase was partially offset by a decrease in the amount of accrued interest
receivable with respect to the Fund's other portfolio investments.
Other assets increased $628,203, from $30,808 at December 31, 1993 to
$659,011 at December 31, 1994. This increase resulted primarily from a $645,148
receivable from the sale of
--------------------------------
TWENTY
<PAGE> 39
FIDUCIARY CAPITAL PARTNERS, L.P.
- --------------------------------------------------------------------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
KEMET common stock during December 1994. This amount was received by the Fund
during January 1995. This increase was partially offset by a decrease in
prepaid expenses and the amortization of deferred organization expenses.
The Fund had prepaid interest income of $60,146 at December 31, 1994. This
prepaid interest was related to the Canadian's 13.50% Subordinated Notes that
were acquired during 1994 and which require interest to be paid quarterly, in
advance, to the Fund.
Distributions payable to partners decreased $72,805, from $766,873 at
December 31, 1993 to $694,068 at December 31, 1994. This 9.49% decrease
resulted from a corresponding percentage decrease in the number of outstanding
Units as a result of the repurchase of Units by the Fund during November 1994.
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. Thereafter, the Fund will not be permitted to acquire
investments in new portfolio companies, but can make additional investments in
existing portfolio companies.
For 1994, the Fund declared cash distributions to its partners in the
aggregate amount of $2,994,687. The distributions were paid in four equal (on a
per-Unit basis) quarterly payments during the months of May, August and November
1994 and February 1995. Each of the distributions was equal to an annualized
rate equal to 9% of contributed capital ($.45 per Unit). Total cash
distributions for 1994 were paid out of current net investment income (71.0%)
and gains from capital transactions (29.0%).
The Fund expects 1995 distributions, beginning with the distribution payable
during May 1995, to be made at a 6.0% distribution rate ($.30 per Unit per
quarter). In the past, the Fund has realized gains from its investments that
have provided additional sources of earnings 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.
RESULTS OF OPERATIONS
INVESTMENT INCOME AND EXPENSES
The Fund's investment income consists primarily of interest income earned
from the various debt investments which have been acquired by the Fund. Major
expenses include the investment advisory fee, fund administration fee,
professional fees and administrative expenses.
1994 Compared to 1993
The Fund's net investment income was $2,126,889 for the year ended December
31, 1994 on total investment income of $2,801,746 as compared to net investment
income of $2,400,016 on total investment income of $3,132,724 for the prior
year. Net investment income per limited partnership unit decreased from $1.33
to $1.26, and the ratio of net investment income to average net assets decreased
from 7.34% to 7.06% for the year ended December 31, 1994, in comparison to the
prior year.
Net investment income for the year ended December 31, 1994 decreased
primarily as a result of a decrease in investment income.
Investment income decreased $330,978, or 10.6%, for the year ended December
31, 1994 in comparison to the prior year. This decrease resulted primarily from
a decrease of approximately 7.9% in the Fund's average net assets. The decrease
in average net assets was primarily a result of the repurchase of Units by the
Fund during both November 1993 and 1994. In addition, there was an increase
from 1993 to 1994 in the relative portion of the Fund's total net assets that
were invested in lower-yielding temporary investments and non-income producing
equity investments and a decrease in the portion invested in higher-yielding
subordinated debt investments. The negative effect of these items was partially
offset by higher interest rates obtained in recent months on the Fund's
temporary investments.
Total expenses decreased $57,851, or 7.9%, for the year ended December 31,
1994 in comparison to the prior year. This aggregate decrease was equal to the
percentage decline in the Fund's average net assets from 1993 to 1994. The
decrease resulted primarily from decreases in investment advisory fees,
professional fees and other expenses. The investment advisory fees decreased as
a result of the repurchase of Units during November 1993 and 1994 and the
realization during July 1994 of the loss on the Fund's MTI investment (see above
discussion). 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. The decrease in professional fees and other
expenses resulted primarily from legal fees and other costs incurred during 1993
in connection with the preparation of the proxy and consent solicitation.
--------------------------------
TWENTY-ONE
<PAGE> 40
FIDUCIARY CAPITAL PARTNERS, L.P.
- --------------------------------------------------------------------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
1993 Compared to 1992
The Fund's net investment income was $2,400,016 for the year ended December
31, 1993 on total investment income of $3,132,724 as compared to net investment
income of $3,702,568 on total investment income of $4,395,746 for the prior
year. Net investment income per limited partnership unit decreased from $2.03
to $1.33 and the ratio of net investment income to average net assets decreased
from 11.36% to 7.34% for the year ended December 31, 1993 in comparison to the
prior year.
Investment income declined $1,263,022, or 28.7%, for the year ended December
31, 1993 in comparison to the prior year. This decline resulted primarily from
the effect of placing the MTI investment on non-accrual status, effective
October 1, 1992, and the prepayment of the Fund's subordinated debt investments
in Midwest Dental Products Corporation, Neodata, KEMET Electronics and Carr-
Gottstein during December 1992, May 1993, June 1993 and July 1993, respectively.
A portion of the cash received from these prepayments was used to purchase new
subordinated debt investments in KB Alloys, Elgin and Protection One, an
additional debt investment in KEMET Electronics (which was subsequently prepaid)
and non-income producing equity investments in KEMET and ENI Holding Corp. The
cash received from the prepayments was invested in significantly lower-yielding
temporary investments on an interim basis pending the acquisition of additional
portfolio investments. Approximately $2.2 million of temporary investments were
still held at December 31, 1993. As a result of these developments, the yield
on this portion of the Fund's portfolio declined significantly from 1992 to
1993. These declines were partially offset by an increase from 1992 to 1993 in
the interest income earned with respect to the Huntington and Amity investments.
Since these investments were acquired during 1992, the Fund only received a
partial year's interest for 1992.
Expenses increased $39,530, or 5.7%, for the year ended December 31, 1993 in
comparison to the prior year. This increase reflects increases in the
Independent General Partner fees and expenses and other expenses. The increase
in the Independent General Partner fees and expenses resulted primarily from the
election of an additional Independent General Partner during the fourth quarter
of 1992. The increase in other expenses resulted primarily from the costs
incurred in connection with the proxy and consent solicitation during 1993 and
an increase in costs associated with insurance and the preparation and
distribution of periodic reports to the partners.
NET REALIZED GAIN (LOSS) ON INVESTMENTS
The Fund realized gains of $1,089,907 and $54,785 during the years ended
December 31, 1993 and 1992, respectively. During the year ended December 31,
1994, the Fund realized net losses of $2,532,109, which consisted of gains of
$1,455,547 and losses of $3,987,656.
The realized gain for 1992 consisted of a prepayment premium received from
Midwest Dental Products Corporation. The realized gains for 1993 consisted of
gains, including applicable prepayment premiums, resulting from the prepayment
by Neodata, KEMET Electronics and Carr-Gottstein of subordinated notes which
were held by the Fund.
The realized gains and losses for 1994 resulted from the following
transactions.
On February 1, 1994, Huntington prepaid its $5,478,467 of 14.65% Senior
Subordinated Term Notes which were carried by the Fund at an amortized cost of
$5,394,243. The Fund received $5,848,232, including a prepayment premium,
resulting in a realized gain of $453,989.
On March 16, 1994, the Fund'sold 32,871 shares of KEMET common stock. The
Fund received $542,371 of sales proceeds, resulting in a realized gain of
$147,478.
On July 6, 1994, MTI consummated a financial restructuring. Pursuant to the
terms of the restructuring, the Fund and MTI's other subordinated lenders
exchanged their subordinated notes for common stock in a new holding company,
MTI II, which now owns 100% of MTI. As a result of the restructuring, the Fund
recognized a realized loss of $3,987,961, which was equal to the difference
between the $287,625 estimated value of the common stock received in the
restructuring and the $4,275,586 amortized cost of the Fund's total MTI
investment. On December 28, 1994, the Fund received a minimal number of
additional shares of common stock in MTI II in connection with the liquidation
of the original holding company. The $305 estimated value of these additional
shares was recorded as a reduction of the previously recognized loss amount.
On August 1, 1994, Amity prepaid its $5,478,467 of 10.50% Subordinated Notes
that were held by the Fund, at par. The Fund realized a gain of $88,807 as a
result of the prepayment, because the notes were carried by the Fund at an
amortized cost of $5,389,660.
--------------------------------
TWENTY-TWO
<PAGE> 41
FIDUCIARY CAPITAL PARTNERS, L.P.
- --------------------------------------------------------------------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
On September 22, 1994, the Fund' sold 17,110 shares of KEMET common stock.
The Fund received $341,212 of sales proceeds, resulting in a realized gain of
$135,662.
On December 30, 1994, the Fund exercised its KEMET warrants and sold 21,914
shares of the common stock. The Fund received $645,148 of sales proceeds,
resulting in a realized gain of $629,611.
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 fully 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 will be
used only with respect to completed transactions or firm offers made by
sophisticated, independent investors.
During the year ended December 31, 1992, the Fund recorded net unrealized
appreciation of investments of $458,556.
During the year ended December 31, 1993, the Fund recorded $548,663 of
unrealized appreciation and $802,365 of unrealized depreciation of investments.
In addition, the Fund disposed of investments during 1993 with respect to which
the Fund had recorded $656,407 of unrealized appreciation during 1992.
Therefore, at December 31, 1993, the Fund had net unrealized depreciation of
investments of $451,553.
The net increase in unrealized appreciation of investments during 1994 and
the cumulative net unrealized appreciation of investments at December 31, 1994,
consisted of the following components:
<TABLE>
<CAPTION>
Unrealized Appreciation
(Depreciation) Recorded
------------------------------
As of
Portfolio Investment During 1994 December 31, 1994
- ------------------------------------------------------------------
<S> <C> <C>
Unrealized net depreciation
recorded during prior years
with respect to investments
disposed of during 1994 $3,545,061 $ --
Carr-Gottstein common stock (658,701) 210,251
Neodata warrants (273,998) 213,696
Neodata preferred stock* (75,727) (226,440)
KEMET common stock** 1,221,294 2,521,857
Huntington warrants -- 576,962
Amity warrants 771,962 750,048
Amity common stock 2,550 34,514
ENI preferred stock 90,183 90,183
Protection One warrants (16,625) (16,625)
MTI IIcommon stock (249,766) (249,766)
- --------------------------------------------------------------
$4,356,233 $3,904,680
==============================================================
</TABLE>
* Stock received in exchange for common stock in connection with
recapitalization of company during 1994.
** Stock received from exercise of warrants during 1994.
Carr-Gottstein completed an IPO of its common stock on July 1, 1993. The
stock, which trades on the New York Stock Exchange, closed at $6.50 on December
31, 1994. This price is down from the closing price of $10.375 on December 31,
1993. Based on the $6.50 closing trading price of the common stock, the Fund's
178,934 shares of common stock would have a market value of $1,163,071. However,
the Fund valued the shares at a 5% discount to the public market price to
reflect the potential market impact which could result from the sale of the
material number of shares owned by the Funds.
The Neodata preferred stock and warrants were written down during 1994
based on a comparative analysis of Neodata's recent operating results.
KEMET completed an IPO of its common stock on October 21, 1992. The stock,
which trades on the NASDAQ National Market System, closed at $29.375 (an average
of the closing bid and ask
--------------------------------
TWENTY-THREE
<PAGE> 42
FIDUCIARY CAPITAL PARTNERS, L.P.
- --------------------------------------------------------------------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
prices) on December 31, 1994. This price is up from the closing price of $15.50
on December 31, 1993. At December 31, 1994, the Fund held 92,724 shares of
KEMET common stock. Based on the $29.375 closing trading price of the common
stock, the Fund's common stock would have a market value of $2,723,768. However,
the Fund valued the shares at a 5% discount to the public market price to
reflect the potential market impact which could result from the sale of the
material number of shares owned by the Funds.
The Huntington warrants to purchase common stock were written up in value at
December 31, 1992 to bring Huntington's valuation more in line with the
valuation of other comparable companies in its industry. The warrants were
revalued at December 31, 1993 based on an updated comparison of Huntington to
the comparable companies. The revaluation took into consideration the receipt
of additional warrants by the Fund during 1993, in accordance with terms of the
Fund's agreement with Huntington.
The Amity warrants and common stock were written up in value during 1994 to
bring Amity's valuation more in line with the valuation of comparable companies
in its industry.
The ENI Holding Corp. preferred stock was written up in value during 1994 to
reflect the amount of the cumulative 10% preferential dividend that has accrued
with respect to the preferred stock.
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 $4.875
(an average of the closing bid and ask prices) on December 31, 1994. The Fund
holds warrants to acquire 18,194.4 shares of Protection One common stock at a
nominal exercise price. Based on the $4.875 closing trading price of the common
stock, the Fund's warrants would have a market value of $88,698. However, the
Fund valued the warrants at a 9% discount to the public market price, because
the Fund is subject to certain restrictions on its ability to dispose of its
shares.
The MTI II common stock was written down in value at December 31, 1994 based
upon an independent third party valuation of the company which was obtained by
MTI's management.
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-FOUR
<PAGE> 43
FIDUCIARY CAPITAL PARTNERS, L.P.
- --------------------------------------------------------------------------------
FUND INFORMATION
FIDUCIARY CAPITAL PARTNERS, L.P.
410 17th Street, Suite 400
Denver, Colorado 80202
(800) 866-7607
MANAGING GENERAL PARTNER
FCM Fiduciary Capital Management Company
AUDITORS
Arthur Andersen LLP
Denver, Colorado
LEGAL COUNSEL
Dorsey & Whitney P.L.L.P.
Denver, Colorado
TRANSFER AGENT
Service Data Corporation
Omaha, Nebraska
A copy of the Annual Report
on Form 10-K, as filed with the
Securities and Exchange Commission,
will be furnished without charge to
Limited Partners upon request.
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM (A) FORM
10-Q FOR THE QUARTER ENDED JUNE 30, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH (B) FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> JUN-30-1995
<INVESTMENTS-AT-COST> 26,654,083
<INVESTMENTS-AT-VALUE> 29,831,525
<RECEIVABLES> 778,769
<ASSETS-OTHER> 6,956
<OTHER-ITEMS-ASSETS> 129,654
<TOTAL-ASSETS> 30,746,904
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 537,567
<TOTAL-LIABILITIES> 537,567
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 1,526,949
<SHARES-COMMON-PRIOR> 1,526,949
<ACCUMULATED-NII-CURRENT> 189,940
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 3,177,442
<NET-ASSETS> 30,209,337
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 1,433,175
<OTHER-INCOME> 0
<EXPENSES-NET> 317,812
<NET-INVESTMENT-INCOME> 1,115,363
<REALIZED-GAINS-CURRENT> 2,399,777
<APPREC-INCREASE-CURRENT> (727,238)
<NET-CHANGE-FROM-OPS> 2,787,902
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 925,424
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 1,862,478
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 116,706
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 317,812
<AVERAGE-NET-ASSETS> 29,115,817
<PER-SHARE-NAV-BEGIN> 18.55
<PER-SHARE-NII> .72
<PER-SHARE-GAIN-APPREC> 1.09
<PER-SHARE-DIVIDEND> .60
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 19.76
<EXPENSE-RATIO> 2.18
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
