<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1995
------------------------------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 0-17738
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Fiduciary Capital Pension Partners, L.P.
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(Exact name of registrant as specified in its charter)
Delaware 86-0653603
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(State of organization) (I.R.S. Employer
Identification No.)
410 17th Street
Suite 400
Denver, Colorado 80202
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(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 .
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<PAGE> 2
Fiduciary Capital Pension Partners, L.P.
Quarterly Report on Form 10-Q for the
Quarter Ended September 30, 1995
Table of Contents
<TABLE>
<CAPTION>
Part I. FINANCIAL INFORMATION Page
<S> <C> <C>
Item 1. Financial Statements (unaudited) 3
Schedule of Investments -
September 30, 1995 3
Balance Sheets - September 30, 1995 and
December 31, 1994 6
Statements of Operations for the three months
ended September 30, 1995 and 1994 7
Statements of Operations for the nine months
ended September 30, 1995 and 1994 8
Statements of Cash Flows for the nine months
ended September 30, 1995 and 1994 9
Statements of Changes in Net Assets for the
nine months ended September 30, 1995 and
for the year ended December 31, 1994 10
Selected Per Unit Data and Ratios 11
Notes to Financial Statements 12
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of
Operations 14
Part II. OTHER INFORMATION
Item 1. Legal Proceedings 21
Item 6. Exhibits and Reports on Form 8-K 21
</TABLE>
2
<PAGE> 3
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
FIDUCIARY CAPITAL PENSION PARTNERS, L.P.
SCHEDULE OF INVESTMENTS
SEPTEMBER 30, 1995
(unaudited)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Principal
Amount/ Investment Amortized % of Total
Shares Investment Date Cost Value Investments
- ------------------------------------------------------------------------------------------------------------------------------------
MANAGED COMPANIES:
<S> <C> <C> <C> <C> <C>
147,678 sh. Carr-Gottstein Foods Co.,
Class B Common Stock(1)* 10/23/90 $ 738,394 $ 841,765
- ------------------------------------------------------------------------------------------------------------------------------------
738,394 841,765 3.3%
- ------------------------------------------------------------------------------------------------------------------------------------
150,584.07 sh. Neodata Corporation,
10.00% Class A Convertible 12/27/90 &
Preferred Stock - Series 2* 09/30/92 278,916 2
8,754.89 sh. Neodata Corporation, 12/27/90 &
Common Stock* 09/30/92 1 1
- ------------------------------------------------------------------------------------------------------------------------------------
278,917 3 0.0
- ------------------------------------------------------------------------------------------------------------------------------------
45,660 sh. KEMET Corporation,
Common Stock(2)* 07/11/91 16,180 1,558,148
- ------------------------------------------------------------------------------------------------------------------------------------
16,180 1,558,148 6.1
- ------------------------------------------------------------------------------------------------------------------------------------
295.6 sh. Huntington Holdings, Inc.,
Warrants to Purchase
Common Stock(3)* 01/31/92 85,678 669,145
- ------------------------------------------------------------------------------------------------------------------------------------
85,678 669,145 2.6
- ------------------------------------------------------------------------------------------------------------------------------------
62,606 sh. Amity Leather Products Co.,
Warrants to Purchase Class B
Common Stock* 07/30/92 85,909 758,067
22,608 sh. Amity Leather Products Co.,
Class A Common Stock* 07/30/92 226,080 273,750
- ------------------------------------------------------------------------------------------------------------------------------------
311,989 1,031,817 4.1
- ------------------------------------------------------------------------------------------------------------------------------------
$2,938,997 KB Alloys, Inc.,
20.00% Senior Subordinated
Term Notes due 6/30/01(4) 05/28/93 2,891,274 2,891,274
- ------------------------------------------------------------------------------------------------------------------------------------
2,891,274 2,891,274 11.4
- ------------------------------------------------------------------------------------------------------------------------------------
$5,023,926 Elgin National Industries, Inc.,
13.00% Senior Subordinated
Notes due 9/01/01(5) 09/24/93 4,911,257 4,911,257
5,876.1 sh. ENI Holding Corp.,
10.00% Preferred Stock
due 12/31/01 09/24/93 587,610 706,111
403.81 sh. ENI Holding Corp.,
Class B Common Stock* 09/24/93 40,381 40,381
421.6 sh. ENI Holding Corp.,
Warrants to Purchase Class B
Common Stock* 09/24/93 42,156 42,156
- ------------------------------------------------------------------------------------------------------------------------------------
5,581,404 5,699,905 22.4
- ------------------------------------------------------------------------------------------------------------------------------------
15,405 sh. Protection One, Inc.,
Common Stock(6)* 11/03/93 84,984 139,608
- ------------------------------------------------------------------------------------------------------------------------------------
84,984 139,608 0.6
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes to financial statements are an
integral part of this schedule.
3
<PAGE> 4
FIDUCIARY CAPITAL PENSION PARTNERS, L.P.
SCHEDULE OF INVESTMENTS (CONTINUED)
SEPTEMBER 30, 1995
(unaudited)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Principal
Amount/ Investment Amortized % of Total
Shares Investment Date Cost Value Investments
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
$2,396,000 LMC Operating Corp.,
13.00% Senior Secured
Subordinated Term Notes
due 5/31/99(7) 06/10/94 2,276,286 2,276,286
16.054 sh. LMC Operating Corp.,
Warrants to Purchase
Common Stock* 06/10/94 107,820 107,820
15.973 sh. LMC Credit Corp.,
Warrants to Purchase
Common Stock* 06/10/94 1 1
- ------------------------------------------------------------------------------------------------------------------------------------
2,384,107 2,384,107 9.4
- ------------------------------------------------------------------------------------------------------------------------------------
34,996 sh. MTI Holdings II, Inc. 07/06/94 &
Common Stock* 12/28/94 237,627 31,496
- ------------------------------------------------------------------------------------------------------------------------------------
237,627 31,496 0.1
- ------------------------------------------------------------------------------------------------------------------------------------
$2,396,000 Canadian's Corp.,
13.50% Subordinated 09/09/94 &
Notes due 9/01/02(8) 12/29/94 2,299,502 2,299,502
$291,000 Canadian's Holdings, Inc.,
12.00% Exchangeable
Redeemable Debentures 09/09/94 &
due 8/31/04(9)* 12/29/94 279,034 1
$130,000 Canadian's Corp.,
Promissory Notes
due 01/31/97(10) 05/08/95 120,663 120,663
1,175,183 sh. Canadian's Holdings, Inc.,
Common Stock* 09/22/95 34,821 2
$1,369,166 Canadian's Corp.,
Colateralized Loan
Guarantee earning
interest at 13.75%
due 08/31/04 09/22/95 1,369,166 1,369,166
- ------------------------------------------------------------------------------------------------------------------------------------
4,103,186 3,789,334 14.9
- ------------------------------------------------------------------------------------------------------------------------------------
$1,290,000 R.B.M. Precision Metal
Products, Inc., 13.00%
Senior Subordinated
Secured Notes due
5/24/02(11) 05/24/95 1,193,894 1,193,894
439.694 sh. R.B.M. Precision Metal
Products, Inc., Warrants
to Purchase Common
Stock* 05/24/95 73,295 73,295
- ------------------------------------------------------------------------------------------------------------------------------------
1,267,189 1,267,189 5.0
- ------------------------------------------------------------------------------------------------------------------------------------
Total Investments in Managed Companies (78.5% of net assets) 17,980,929 20,303,791 79.9
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes to financial statements are an
integral part of this schedule.
4
<PAGE> 5
FIDUCIARY CAPITAL PENSION PARTNERS, L.P.
SCHEDULE OF INVESTMENTS (CONTINUED)
SEPTEMBER 30, 1995
(unaudited)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Principal
Amount/ Investment Amortized % of Total
Shares Investment Date Cost Value Investments
- ------------------------------------------------------------------------------------------------------------------------------------
TEMPORARY INVESTMENTS:
<S> <C> <C> <C> <C> <C>
$2,300,000 Ford Motor Credit Corporation,
5.562% Notes due 10/03/95 09/26/95 2,299,300 2,299,300
$2,800,000 Household Finance Corp.,
5.558% Notes due 10/10/95 09/26/95 2,796,171 2,796,171
- ------------------------------------------------------------------------------------------------------------------------------------
Total Temporary Investments (19.7% of net assets) 5,095,471 5,095,471 20.1
- ------------------------------------------------------------------------------------------------------------------------------------
Total Investments (98.2% of net assets) $23,076,400 $25,399,262 100.0%
====================================================================================================================================
</TABLE>
(1) The Carr-Gottstein Foods Company common stock trades on the New York
Stock Exchange. The Fund and Fiduciary Capital Partners, L.P. ("FCP")
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 7)
(2) The KEMET Corporation common stock trades on the NASDAQ National Market
System. (Note 7)
(3) Pursuant to the terms of the Fund's agreement with Huntington Holdings,
Inc., under certain circumstances the number of shares issuable upon
exercise of the warrants held by the Fund will increase periodically.
The most recent such increase occurred on August 1, 1995 when the Fund
received the right to an additional 27.7 shares.
(4) The notes will amortize in eight equal quarterly installments of
$367,375 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
$627,991 commencing on 11/30/99.
(6) The Protection One, Inc. common stock trades on the NASDAQ National
Market System. (Note 7)
(7) The notes will amortize as follows: $30,017 on 9/01/97, $30,992 on
12/01/97, $32,000 on 3/01/98, $33,040 on 6/01/98, $34,114 on 9/01/98,
$35,222 on 12/01/98, $36,367 on 3/01/99 and $2,164,248 on 5/31/99.
(8) The notes will amortize in twelve equal quarterly installments of
$199,333 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 22,065 shares of Canadian's
Holdings, Inc. common stock. The accrual of interest on the debentures
was discontinued by the Fund effective April 1, 1995. (Note 6)
(10) The notes bear interest equal to the prime rate, plus 5%.
(11) The notes will amortize in three equal annual installments of $430,000
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 PENSION PARTNERS, L.P.
BALANCE SHEETS
SEPTEMBER 30, 1995 AND DECEMBER 31, 1994
(unaudited)
<TABLE>
<CAPTION>
ASSETS: 1995 1994
---- ----
<S> <C> <C>
Investments (Notes 6 and 7)
Portfolio investments, at value:
Managed companies (amortized cost -
$17,980,929 and $16,052,631,
respectively) $20,303,791 $19,274,598
Temporary investments, at amortized cost 5,095,471 4,179,590
----------- -----------
Total investments 25,399,262 23,454,188
Cash and cash equivalents 224,120 173,095
Accrued interest receivable (Note 6) 698,043 521,794
Other assets, including receivables
from sale of investments 4,988 544,921
----------- -----------
Total assets $26,326,413 $24,693,998
=========== ===========
LIABILITIES:
Payable to affiliates (Notes 2, 3 and 4) $ 49,237 $ 44,384
Accounts payable and accrued liabilities 27,634 33,542
Prepaid interest income - 52,635
Distributions payable to partners 393,030 589,545
----------- -----------
Total liabilities 469,901 720,106
----------- -----------
CONTINGENCIES (Note 5)
NET ASSETS:
Managing General Partner 34,942 16,116
Limited Partners (equivalent to $19.91
and $18.47, respectively, per limited
partnership unit based on 1,296,999
units outstanding) 25,821,570 23,957,776
----------- -----------
Net assets 25,856,512 23,973,892
----------- -----------
Total liabilities and net assets $26,326,413 $24,693,998
=========== ===========
</TABLE>
The accompanying notes to financial statements are an
integral part of these financial statements.
6
<PAGE> 7
FIDUCIARY CAPITAL PENSION PARTNERS, L.P.
STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
(unaudited)
<TABLE>
<CAPTION>
1995 1994
---- ----
INVESTMENT INCOME:
<S> <C> <C>
Income:
Interest $634,928 $ 579,759
-------- ----------
Total investment income 634,928 579,759
-------- ----------
Expenses:
Investment advisory fees (Note 2) 49,757 55,222
Fund administration fees (Note 3) 29,581 29,582
Independent general partner fees
and expenses (Note 4) 10,577 10,656
Administrative expenses (Note 3) 17,223 17,190
Professional fees 14,792 11,292
Amortization 2,625 2,625
Other expenses 9,713 16,180
-------- ----------
Total expenses 134,268 142,747
-------- ----------
NET INVESTMENT INCOME 500,660 437,012
-------- ----------
REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Net realized gain (loss) on investments 528,313 (3,105,997)
Net (decrease) increase in unrealized
appreciation of investments (299,523) 3,723,523
-------- ----------
Net gain on investments 228,790 617,526
-------- ----------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $729,450 $1,054,538
======== ==========
</TABLE>
The accompanying notes to financial statements are an
integral part of these financial statements.
7
<PAGE> 8
FIDUCIARY CAPITAL PENSION PARTNERS, L.P.
STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
(unaudited)
<TABLE>
<CAPTION>
1995 1994
---- ----
INVESTMENT INCOME:
<S> <C> <C>
Income:
Interest $1,853,671 $1,709,461
--------- ---------
Total investment income 1,853,671 1,709,461
--------- ---------
Expenses:
Investment advisory fees (Note 2) 149,270 180,783
Fund administration fees (Note 3) 88,745 88,746
Independent general partner fees
and expenses (Note 4) 38,565 38,223
Administrative expenses (Note 3) 51,671 51,570
Professional fees 42,948 32,608
Amortization 7,875 7,875
Other expenses 25,949 41,420
---------- -----------
Total expenses 405,023 441,225
--------- ----------
NET INVESTMENT INCOME 1,448,648 1,268,236
--------- ---------
REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Net realized gain (loss) on investments 2,512,172 (2,609,534)
Net (decrease) increase in unrealized
appreciation of investments (899,110) 3,665,100
---------- ---------
Net gain on investments 1,613,062 1,055,566
---------- ---------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $3,061,710 $2,323,802
========== ==========
</TABLE>
The accompanying notes to financial statements are an
integral part of these financial statements.
8
<PAGE> 9
FIDUCIARY CAPITAL PENSION PARTNERS, L.P.
STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
(unaudited)
<TABLE>
<CAPTION>
1995 1994
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net increase in net assets resulting from operations $ 3,061,710 $2,323,802
Adjustments to reconcile net increase in net assets resulting
from operations to net cash provided by operating activities:
Accreted discount on portfolio investments (58,394) (27,559)
Amortization 7,875 7,875
Change in assets and liabilities:
Accrued interest receivable (176,249) (174,185)
Other assets (394) 6,561
Payable to affiliates 5,799 29,957
Accounts payable and accrued liabilities (5,908) 3,266
Prepaid interest income (52,635) 37,149
Net realized (gain) loss on investments (2,512,172) 2,609,534
Net decrease (increase) in unrealized
appreciation of investments 899,110 (3,665,100)
---------- ----------
Net cash provided by operating activities 1,168,742 1,151,300
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of portfolio investments (2,753,876) (4,146,079)
Proceeds from dispositions of portfolio investments 3,927,645 9,886,369
(Purchase) sale of temporary investments, net (915,881) (5,477,093)
---------- ----------
Net cash provided by investing activities 257,888 263,197
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions paid to partners (1,375,605) (1,947,204)
---------- ----------
Net cash used in financing activities (1,375,605) (1,947,204)
---------- ----------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 51,025 (532,707)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 173,095 792,425
---------- ----------
CASH AND CASH EQUIVALENTS AT
END OF PERIOD $ 224,120 $ 259,718
========== ==========
NONCASH INVESTING AND FINANCING ACTIVITIES:
Investments exchanged for other investments $ - $ 237,375
</TABLE>
The accompanying notes to financial statements are an
integral part of these financial statements.
9
<PAGE> 10
FIDUCIARY CAPITAL PENSION PARTNERS, L.P.
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995
AND FOR THE YEAR ENDED DECEMBER 31, 1994
(unaudited)
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Increase in net assets from operations:
Net investment income $ 1,448,648 $ 1,758,135
Net realized gain (loss) on investments 2,512,172 (2,089,653)
Net (decrease) increase in unrealized
appreciation of investments (899,110) 3,594,544
----------- -----------
Net increase in net assets resulting
from operations 3,061,710 3,263,026
Repurchase of limited partnership units - (2,402,951)
Distributions to partners from -
Net investmet income (1,179,090) (1,758,135)
Realized gain on investments - (778,614)
----------- -----------
Total increase (decrease) in net assets 1,882,620 (1,676,674)
Net assets:
Beginning of period 23,973,892 25,650,566
----------- -----------
End of period (includes net undistributed
net investment income of $269,558
and $0, respectively) $25,856,512 $23,973,892
=========== ===========
</TABLE>
The accompanying notes to financial statements are an
integral part of these financial statements.
10
<PAGE> 11
FIDUCIARY CAPITAL PENSION PARTNERS, L.P.
SELECTED PER UNIT DATA AND RATIOS
(unaudited)
<TABLE>
<CAPTION>
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
--------------------- -------------------
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
Per Unit Data:
Investment income $ .48 $ .40 $ 1.42 $ 1 .19
Expenses (.10) ( .10) (.31) ( .31)
------- -------- ------- --------
Net investment income .38 .30 1.11 .88
Net realized gain (loss) on investments .41 (2.15) 1.92 (1 .81)
Net (decrease) increase in unrealized
appreciation of investments (.23) 2 .58 (.69) 2 .54
Distributions declared to partners (.30) ( .45) (.90) (1 .35)
------- -------- ------- --------
Net increase in net asset value .26 .28 1.44 .26
Net asset value:
Beginning of period 19.65 17.94 18.47 17.96
------- -------- ------- --------
End of period $ 19.91 $ 18 .22 $ 19.91 $ 18 .22
======= ======== ======= ========
Ratios (annualized):
Ratio of expenses to average net assets 2.09% 2 .21% 2.17% 2 .28%
Ratio of net investment income to
average net assets 7.80% 6 .77% 7.75% 6 .55%
Number of limited partnership units at end of period 1,296,999 1,427,950 1,296,999 1,427,950
</TABLE>
The accompanying notes to financial statements are an
integral part of these selected per unit data and ratios.
11
<PAGE> 12
FIDUCIARY CAPITAL PENSION PARTNERS, L.P.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1995
(unaudited)
1. GENERAL
The accompanying unaudited interim financial statements include
all adjustments (consisting solely of normal recurring adjustments) which are,
in the opinion of the Managing General Partner, necessary to fairly present the
financial position of the Fund as of September 30, 1995 and the results of its
operations, changes in net assets and its cash flows for the periods then
ended.
These financial statements should be read in conjunction with the
Significant Accounting Policies and other Notes to Financial Statements
included in the Fund's annual audited financial statements for the year ended
December 31, 1994.
2. INVESTMENT ADVISORY FEES
As compensation for its services as investment adviser, FCM
Fiduciary Capital Management Company ("FCM") receives a subordinated monthly
fee at the annual rate of 1% of the Fund's available capital, as defined in the
Partnership Agreement. Investment advisory fees of $149,270 were paid by the
Fund for the nine months ended September 30, 1995.
3. FUND ADMINISTRATION FEES
As compensation for its services as fund administrator, FCM
receives a monthly fee at the annual rate of .45% of net proceeds available for
investment, as defined in the Partnership Agreement. Fund administration fees
of $88,745 were paid by the Fund for the nine months ended September 30, 1995.
FCM is also reimbursed, subject to various limitations, for administrative
expenses incurred in providing accounting and investor services to the Fund.
The Fund reimbursed FCM for administrative expenses of $51,671 for the nine
months ended September 30, 1995.
4. INDEPENDENT GENERAL PARTNER FEES AND EXPENSES
As compensation for services rendered to the Fund, each of the
Independent General Partners receives from the Fund and Fiduciary Capital
Partners, L.P., an affiliated fund, (collectively, the "Funds") an annual fee
of $30,000, payable monthly in arrears, together with all out-of-pocket
expenses. Each Fund's allocation of these fees and expenses is based on the
relative number of outstanding Units. Fees and expenses paid by the Fund for
the nine months ended September 30, 1995 totaled $38,565.
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 PENSION PARTNERS, L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 1995
(unaudited)
6. NON-ACCRUAL STATUS OF INVESTMENTS
In accordance with the Fund's accounting policies, the Fund
stopped accruing interest on the Canadian's Holdings, Inc. Exchangeable
Redeemable Debentures effective April 1, 1995.
7. SUBSEQUENT EVENTS
On October 13, 1995, Carr-Gottstein Foods Co. ("Carr-Gottstein")
announced an offer to purchase up to 7,500,000 shares (approximately 49%) of
its outstanding common stock at a purchase price of $11.00 per share. The
offer, which is subject to various contingencies, will expire on November 15,
1995. If more than 7,500,000 shares are tendered, the tendered shares will
generally be purchased on a pro rata basis. The Fund has tendered all of its
shares. However, it is likely that the number of shares actually purchased
will be pro rated.
On November 6, 1995, the Fund sold 22,604 shares of KEMET
Corporation common stock. The Fund received $789,049 of sales proceeds,
resulting in a realized gain of $781,040.
During November 1995, the Fund sold all of its Protection One,
Inc. common stock. The Fund received $124,173 of sales proceeds, resulting in
a realized gain of $39,189.
13
<PAGE> 14
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
LIQUIDITY AND CAPITAL RESOURCES
As of September 30, 1995, the Fund held portfolio investments in
twelve Managed Companies, with an aggregate cost of approximately $18.0
million. These portfolio investments, which were made from net offering
proceeds and the reinvestment of proceeds from the sale of other portfolio
investments, represent approximately 78.5% of the Fund's net assets. When
acquired, these portfolio investments generally consisted of high-yield
subordinated debt, linked with an equity participation or a comparable
participation feature in middle market companies. These securities were
typically issued in private placement transactions and were subject to certain
restrictions on transfer or sale, thereby limiting their liquidity. A number
of the portfolio companies have prepaid their subordinated debt that the Fund
held. In addition, three of the portfolio companies have successfully
completed initial public offerings ("IPOs") of their stock. The Fund continues
to hold all of the equity components of its original investments, except for a
substantial portion of its KEMET Corporation ("KEMET") stock and its Protection
One, Inc. stock.
As of September 30, 1995, the Fund's remaining assets were
invested in short-term commercial paper. These funds are available for
investment, for distribution to the partners or to fund the annual repurchase
offer.
The Fund sold a portion of its KEMET common stock during the nine
months ended September 30, 1995. In addition, the Fund's subordinated debt
investment in Protection One was prepaid during the nine months ended September
30, 1995. In the aggregate, the Fund received $3,395,193 of proceeds,
including applicable prepayment premiums, from these transactions.
On November 6, 1995, the Fund received $789,049 of sales proceeds
from the sale of 22,604 shares of KEMET common stock.
During November 1995, the Fund received $124,173 of sales proceeds
from the sale of all of its Protection One, Inc. common stock.
A portion of the proceeds representing gains from these
transactions were used by the Fund to fund a portion of the cost of the
follow-on investments in Canadian's Corp. ("Canadian's"), which were acquired
on December 29, 1994, May 8, 1995 and September 22, 1995 (see following
discussion). The remaining portion of the gains from these transactions have
been reserved by the Managing General Partner to partially fund either the 1995
repurchase offer or any additional follow-on investments that the Fund may make
in existing portfolio companies during 1995.
On October 13, 1995, Carr-Gottstein announced an offer to purchase
up to 7,500,000 shares (approximately 49%) of its outstanding common stock at a
purchase price of $11.00 per share. The offer, which is subject to various
contingencies, will expire on November 15, 1995. If more than 7,500,000
shares are tendered, the tendered shares will generally be purchased on a pro
rata basis. The Fund has tendered all of its shares. However, it is likely
that the number of shares actually purchased will be pro rated.
The Fund made its initial investment in Canadian's during
September 1994 as part of a financing used to settle Canadian's liabilities and
allow the company to emerge from bankruptcy. A follow-on investment was made
during December 1994 in order to finance the acquisition of store leases and
certain fixed assets of The Ormonds Shops ("Ormonds"). The company expected to
be able to fund certain costs relating to conversion of the Ormonds stores to
the Canadian's format out of operating cash flow. Unfortunately,
14
<PAGE> 15
the retail market, and particularly women's specialty retailing, has suffered a
prolonged and worsening downturn which has continued throughout 1995. As a
consequence, the company has not generated sufficient cash flow to fund its
operations, let alone fund the capital expenditures relating to the Ormonds
acquisition.
During May 1995, the Fund made a follow-on investment in
Canadian's at a cost of $117,000. The investment consisted of $130,000 of
floating rate Promissory Notes, with warrants to acquire common stock. The
Fund and certain of Canadian's equity investors provided a loan to the company
in order to finance unanticipated cash shortfalls arising from operations which
were below expectations. By August 1995, the company was facing a significant
working capital shortage and requested the Funds and its other investors to
make an additional investment in the company.
The company's major equity owners and the Funds agreed to provide
the requested funding. The Funds insisted that the new investment rank senior
to previous loans made to the company by all parties other than the company's
revolving line of credit lender. In order to accomplish this level of
seniority, the new financing was structured as a collateralized guarantee that
would support an overadvance under the company's revolving line of credit.
This new investment of $1,369,166 carries an interest rate of 13.75% and is due
on August 31, 2004. In consideration of the new financing, the Funds and the
other parties which participated now own approximately 92.5% of Canadian's
Holdings, Inc. ("Canadian's Holdings") common stock, which in turn owns 96.5%
of the company's common stock. All holders of the company's warrants,
including the Fund, surrendered their warrants in exchange for common stock of
Canadian's Holdings. The Fund's ownership of the company has increased from
approximately 7% to approximately 20% .
The Canadian's Holdings Exchangeable Redeemable Debentures are
secured by preferred stock issued by the company and the company has elected
not to pay dividends on the preferred stock. Therefore, Canadian's Holdings is
unable to pay interest on the debentures and is in default. The holders of
these debentures, other than the Funds (which hold a portion of the
debentures), were unable to participate in the latest financing. As a result,
holders of the debentures were diluted to an ownership percentage of
approximately 3.1%. This dilution reduced the Fund's interest in Canadian's
Holdings that is held through the debentures to less than 1%.
Officers of FCM are providing the company with managerial
assistance in order to identify areas where the company can save money and
reduce costs. Under consideration are steps such as closing unprofitable or
marginally profitable stores and staff reductions. The company is also
considering various proposals designed to raise additional equity capital.
With a lower cost structure and possibly additional capital, the company is
hopeful that its market strategy will be successful if the overall environment
improves.
One May 24, 1995, the Fund acquired a new portfolio investment in
R.B.M. Precision Metal Products, Inc. ("RBM") at a cost of approximately $1.26
million. The investment consists of $1,290,000 of 13.00% Senior Subordinated
Secured Notes due May 24, 2002, with warrants to acquire common stock.
The Fund anticipates being able to reinvest all available funds,
including the principal amount of any future prepayments received, in
additional portfolio investments. The Partnership Agreement provides that the
Fund's investment period will end on December 31, 1995. Although the Fund is
permitted to make additional investments in existing portfolio companies after
1995, the Fund will no longer be permitted to acquire investments in new
portfolio companies.
Pursuant to the terms of the Fund's periodic unit repurchase
policy that was adopted by the Fund's Limited Partners during 1993, the Fund
will annually offer to purchase from its Limited Partners up to 7.5% of its
outstanding Units for an amount equal to the current net asset value per Unit,
net of a fee (not to exceed 2%) to be retained by the
15
<PAGE> 16
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 was mailed to the Limited
Partners on October 6, 1995. Limited Partners tendered 245,447 Units for
repurchase. The Fund anticipates repurchasing approximately 40% of the
tendered Units, or approximately 100,435 Units, at the Fund's net asset value
per Unit as of November 14, 1995. The actual redemption of tendered Units
will occur on November 21, 1995.
Accrued interest receivable increased $176,249 from $521,794 at
December 31, 1994 to $698,043 at September 30, 1995. This increase resulted
primarily from a $178,299 increase in the deferred portion of the interest
receivable from KB Alloys, Inc. ("KB Alloys") with respect to the Fund's
investment in $2,938,997 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 September 30,
1995, the cumulative amount of deferred interest totaled $560,124. The Fund's
agreement with KB Alloys requires KB Alloys to pay all accumulated deferred
interest in excess of $452,153 no later than August 28, 1998, and the amount of
deferred interest cannot exceed $452,153 at any time thereafter. The amount of
accrued interest receivable with respect to other portfolio investments
decreased slightly during the nine months ended September 30, 1995.
Other assets decreased $539,933, from $544,921 at December 31,
1994 to $4,988 at September 30, 1995. The balance at December 31, 1994
included a $532,452 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 $52,635 at December 31,
1994 to zero at September 30, 1995. This prepaid interest income was related
to the Canadian's 13.50% Subordinated Notes, which required interest to be paid
quarterly, in advance, to the Fund. Effective June 1, 1995, the notes were
amended to provide for the interest to be paid monthly, in advance, on the
first day of each month.
Distributions payable to partners decreased $196,515, from
$589,545 at December 31, 1994 to $393,030 at September 30, 1995. This decrease
corresponds to the percentage decrease in the quarterly distribution rate from
$.45 per Unit to $.30 per Unit (as discussed in the following paragraphs).
During the nine months ended September 30, 1995, the Fund paid
cash distributions pertaining to the fourth quarter of 1994 and the first and
second quarters of 1995, in the amounts of $589,545, $393,030 and $393,030,
respectively. These quarterly distributions were equal to $.45, $.30 and $.30
per Unit, respectively, and represented annualized rates equal to 9.0%, 6.0%
and 6.0%, respectively, of contributed capital.
As discussed in previous reports, the quarterly distributions for
1995 are being paid at a reduced rate. The distribution for the third quarter
of 1995 will be paid on November 14, 1995 in an amount equal to $.30 per Unit,
or an annualized rate equal to 6.0% of contributed capital. This distribution
consists entirely of net investment income earned during the three months ended
September 30, 1995.
It is expected that the distribution for the fourth quarter 1995
will also be made at the same 6.0% rate. In the past, the Fund realized gains
from its investments that provided additional sources of cash for
distributions. Although there can be no assurances, the Fund may realize gains
during the fourth quarter of 1995 that could in turn result in a higher
distribution rate for the quarter. Gains can also be utilized to fund the
annual repurchase
16
<PAGE> 17
offer or to fund any follow-on investments that the Fund may make in existing
portfolio companies.
The Fund's investment period will end on December 31, 1995.
Although the Fund is permitted to make additional investments in existing
portfolio companies after 1995, the Fund will no longer be permitted to acquire
investments in new portfolio companies. This will impact the amount of the
Fund's quarterly distributions for 1996 and subsequent years because all
proceeds from dispositions or maturities of investments after December 31, 1995
will be distributed to investors, except to the extent the cash is needed to
fund the annual repurchase offer or to fund any follow-on investments that the
Fund may make in existing portfolio companies.
FCM, the Managing General Partner of the Fund, had been named as a
defendant in a class action lawsuit brought in March 1995 against PaineWebber
Incorporated and a number of its affiliates. During May 1995, the Court
entered an order certifying the class and dismissing the class action against
FCM without prejudice. FCM believes that this litigation will be resolved
without any material adverse effect on the Fund's financial condition.
RESULTS OF OPERATIONS
Investment Income and Expenses
The Fund's net investment income was $500,660 for the three months
ended September 30, 1995 as compared to net investment income of $437,012 for
the corresponding period of the prior year. Net investment income per limited
partnership unit increased from $.30 to $.38 and the ratio of net investment
income to average net assets increased from 6.77% to 7.80% for the three months
ended September 30, 1995 as compared to the corresponding period of the prior
year.
The Fund's net investment income was $1,448,648 for the nine
months ended September 30, 1995 as compared to net investment income of
$1,268,236 for the corresponding period of the prior year. Net investment
income per limited partnership unit increased from $.88 to $1.11 and the ratio
of net investment income to average net assets increased from 6.55% to 7.75%
for the nine months ended September 30, 1995 as compared to the corresponding
period of the prior year.
Net investment income for both the three and nine month periods
ended September 30, 1995 increased as a result of slight increases in
investment income and slight decreases in total expenses.
Investment income increased $55,169 and $144,210, or 9.5% and
8.4%, for the three and nine month periods ended September 30, 1995,
respectively, as compared to the corresponding periods of the prior year.
These increases were primarily the result of higher interest rates on both the
Fund's temporary investments and the Fund's higher- yielding subordinated debt
investments. The positive effect of the higher interest rates was partially
offset by a decrease in the amount of the Fund's average net assets.
The Fund had average net assets of approximately $24.9 million
during the nine months ended September 30, 1995 as compared to approximately
$25.8 million during the corresponding period of the prior year. This 3.5%
decrease in average net assets occurred primarily as a result of the Fund's
repurchase of 9.17% 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 $8,479 and $36,202, or 5.9% and 8.2%, for
the three
17
<PAGE> 18
and nine month periods ended September 30, 1995, respectively, as compared to
the corresponding periods of the prior year. These decreases resulted
primarily from decreases in investment advisory fees and other expenses. The
investment advisory fees decreased as a result of the repurchase of Units by
the Fund during the fourth quarter of 1994 and the realization during July 1994
of the loss on the Fund's Mobile Technology, Inc. ("MTI") investment. Both the
repurchase of Units and the realization of the MTI loss decreased the amount of
the Fund's available capital (as defined in the Partnership Agreement), which
is the base with respect to which the investment advisory fees are calculated.
Other 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 8,705 shares of KEMET common
stock. The Fund received $269,333 of sales proceeds, resulting in a realized
gain of $263,165.
During April and May 1995, the Fund sold an additional 37,080
shares of KEMET common stock. The Fund received $1,629,089 of sales proceeds,
resulting in realized gain of $1,602,802.
On May 17, 1995, Protection One prepaid its $917,000 of 12.00%
Senior Subordinated Notes that were carried by the Fund at an amortized cost of
$844,958. The Fund received $962,850 of proceeds, including a prepayment
premium, resulting in a realized gain of $117,892.
On July 25, 1995, the Fund sold 7,913 shares of KEMET common
stock. The Fund received $533,921 of sales proceeds, resulting in a realized
gain of $528,313.
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 $3,629,064 of
unrealized appreciation and $(407,097) of unrealized depreciation of
investments. Therefore, as of December 31, 1994, the Fund had recorded a total
net unrealized appreciation of investments of $3,221,967.
The net increase in unrealized appreciation of investments during
the three and nine month periods ended September 30, 1995 and the cumulative
net unrealized appreciation of
18
<PAGE> 19
investments as of September 30, 1995, consisted of the following components:
<TABLE>
<CAPTION>
Unrealized Appreciation (Depreciation) Recorded
-----------------------------------------------
During the Three During the Nine
Months Ended Months Ended As of
Portfolio Company September 30, 1995 September 30, 1995 September 30, 1995
- -------------------------------------- ------------------ ------------------ ------------------
<S> <C> <C> <C>
Unrealized net appreciation recorded
during prior periods with respect to
investments disposed of during
the period $(410,814) $(1,460,453) $ -
Carr-Gottstein (52,610) (70,147) 103,371
Neodata- (268,395) (278,914)
KE356,719 921,050 1,541,968
Huntington 62,696 107,285 583,467
Amity - 72,307 719,828
Elgin / ENI 14,690 44,394 118,501
Protection One 43,648 68,701 54,624
MTI - - (206,131)
Canadian's Holdings (313,852) (313,852) (313,852)
--------- ----------- -------------
$(299,523) $ (899,110) $ 2,322,862
========= =========== =============
</TABLE>
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 $6.00
on September 30, 1995. This price compares to closing prices of $6.50 on
December 31, 1994 and $6.375 on June 30, 1995. Based on the $6.00 closing
trading price of the common stock, the Fund's 147,678 shares of common stock
would have a market value of $886,068. However, the Fund's valuation
guidelines require the stock to be valued at a 5% discount to the public market
price to reflect the potential market impact that could result from the sale of
the material number of shares owned by the Funds.
The Neodata Corporation ("Neodata") stock was written down at
March 31, 1995. The Partnership has consistently valued this investment based
upon a multiple of Neodata's cash flow. Because Neodata's long-term debt
presently provides for the accrual, rather than current payment, of interest,
the Company's debt has grown to a level which now exceeds the Partnership's
valuation.
KEMET completed an IPO of its common stock on October 21, 1992.
KEMET declared a two-for-one stock split effective September 20, 1995. The
stock, which trades on the NASDAQ National Market System, closed at $34.125 (an
average of the closing bid and ask prices) on September 30, 1995. This price
is up from the closing prices (as restated for the two-for-one stock split) of
$14.6875 on December 31, 1994 and $26.3125 on June 30, 1995. Based on the
$34.125 closing trading price of the common stock, the 45,660 shares of common
stock that the Fund held at September 30, 1995 had a market value of
$1,558,148.
During June 1995, the Fund received an unsolicited offer from a
third party to purchase the Huntington Holdings, Inc. ("Huntington") warrants
which are held by the Fund. Although the Fund decided not to sell the
warrants, the warrants were written up in value at June 30, 1995 based upon the
offer price. During August 1995, the Fund received the right to an additional
27.7 shares of Huntington stock, in accordance with the terms of the Fund's
warrant agreement with Huntington. The warrants were written up in value at
September 30, 1995 in consideration of the receipt of these additional
warrants.
The Amity warrants and common stock were written up in value at
March 31, 1995 to bring Amity's valuation more in line with the valuation of
other comparable companies in
19
<PAGE> 20
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 $9.0625 (an average of the closing bid and
ask prices) on September 30, 1995. This price compares to closing prices of
$4.875 on December 31, 1994 and $6.0625 on June 30, 1995. Based on the $9.0625
closing trading price of the common stock, the Fund's 15,405 shares of common
stock had a market value of $139,608 at September 30, 1995.
The current status of Canadian's operations and the Fund's
investments in Canadian's and Canadian's Holdings are discussed above. As a
result of the uncertainties currently surrounding the retail industry in
general, and Canadian's in particular, the Fund wrote the Canadian's Holdings
debentures and common stock down in value to a negligible amount during the
third quarter of 1995. The debentures, which in essence represent ownership of
Canadian's preferred stock, are in default and were significantly diluted in
connection with the most recent financing.
FCM continually monitors both the Fund's portfolio companies and
the markets, and continually evaluates the decision to hold or sell its traded
securities.
20
<PAGE> 21
Part II. OTHER INFORMATION
Item 1. Legal Proceedings
As previously reported, FCM, the Managing General Partner of the
Fund, had been named as a defendant in a class action lawsuit against
PaineWebber Incorporated ("PaineWebber") and a number of its affiliates
relating to PaineWebber's direct investment offerings, including the offering
of the Units. Plaintiffs in the lawsuit allege, among other things, that the
defendants violated federal securities laws and committed common law fraud in
the marketing of direct investments.
On May 30, 1995, the United States District Court for the Southern
District of New York entered an order certifying the class and dismissing the
class action against FCM without prejudice. PaineWebber and Mezzanine Capital
Corporation, a minority general partner of FCM and an affiliate of
PaineWebber, remain as defendants.
The Fund was not named as a defendant in the lawsuit; however,
pursuant to certain contractual arrangements between FCM and PaineWebber in
connection with the offering of the Units, the Fund may be required to
indemnify PaineWebber and its affiliates for their costs and liability in
connection with any class action claims relating to the Fund. FCM believes
that the Fund's exposure in respect of the indemnity will not have any material
adverse effect on the Fund's financial condition.
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits and Reports to be filed:
Exhibit No. Description
----------- -----------
11.1 Statement of Computation of Net Investment
Income Per Limited Partnership Unit.
19.1 Reports Furnished to Securities Holders.
27.1 Financial Data Schedule.
(b) The Registrant did not file any reports on Form 8-K during
the third quarter of the fiscal year ending December 31, 1995.
21
<PAGE> 22
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Fiduciary Capital Pension Partners, L.P.
(Registrant)
By: FCM Fiduciary Capital Management Company
Managing General Partner
Date: November 14, 1995 By: /s/ Donald R. Jackson
--------------------------------------
Donald R. Jackson
Chief Financial Officer
22
<PAGE> 23
EXHIBIT INDEX
Exhibit No. Description Page
- ----------- ----------- ----
11.1 Statement of Computation of Net Investment Income Per
Limited Partnership Unit.
19.1 Reports Furnished to Securities Holders.
27.1 Financial Data Schedule.
E-1
<PAGE> 1
EXHIBIT 11.1
FIDUCIARY CAPITAL PENSION PARTNERS, L.P.
STATEMENT OF COMPUTATION OF NET
INVESTMENT INCOME PER LIMITED
PARTNERSHIP UNIT
<TABLE>
<CAPTION>
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
------------------- -------------------
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C>
Net Investment Income $ 500,660 $ 437,012 $1,448,648 $1,268,236
Percentage Allocable to Limited Partners 99% 99% 99% 99%
----------- ---------- --------- ----------
Net Investment Income Allocable
to Limited Partners $ 495,653 $ 432,642 $1,434,162 $1,255,554
=========== ========== ========== ==========
Weighted Average Number of Limited
Partnership Units Outstanding 1,296,999 1,427,950 1,296,999 1,427,950
=========== ========= ========= ==========
Net Investment Income Per Limited
Partnership Unit $ .38 $ .30 $ 1.11 $ .88
=========== ========= ========= ==========
</TABLE>
<PAGE> 1
Fiduciary Capital Pension Partners, L.P.
- --------------------------------------------------------------------------------
---------------------------------
SECOND QUARTER REPORT
1995
<PAGE> 2
FIDUCIARY CAPITAL PENSION PARTNERS, L.P.
- --------------------------------------------------------------------------------
MESSAGE TO INVESTORS
Dear Investor:
The Fund's net asset value per Unit was $19.65 at June 30, 1995. This net
asset value is up from the net asset values of $18.47 at December 31, 1994 and
$18.76 at March 31, 1995. These increases resulted primarily from gains
attributable to the Fund's investments in KEMET Corporation ("KEMET") and
Protection One, Inc. ("Protection One").
At June 30, 1995, the Fund held portfolio investments in twelve companies.
These portfolio investments represented approximately 75.3% of the Fund's net
assets. The Fund's remaining assets were invested in high-quality, short-term
commercial paper. These funds are available for investment, for distribution
to the partners or to fund the annual repurchase offer.
INVESTMENT UPDATE
During May 1995, Protection One prepaid its $917,000 of 12.00% Senior
Subordinated Notes that were held by the Fund. The Fund received $962,850 of
proceeds, including a prepayment premium. The Fund continues to hold 15,405
shares of Protection One common stock, which were received during July 1995
when the Fund exercised the Protection One warrants it previously held.
The Fund continues to periodically sell shares of KEMET common stock.
During April and May 1995, the Fund sold 37,080 shares at an average net sales
price of approximately $43.93. An additional 7,913 shares were sold during
July 1995 at an average net sales price of approximately $67.47. The Fund has
22,830 shares of KEMET stock remaining as of August 22, 1995.
During May 1995, the Fund acquired a new portfolio investment in R.B.M.
Precision Metal Products, Inc. ("RBM") at a cost of approximately $1.26
million. RBM, headquartered in Colorado Springs, Colorado, is a manufacturer
of precision sheet metal enclosures, chassis and assemblies for business
machines. Its principal customer is Hewlett Packard. This new investment
consists of $1,290,000 of 13.00% Senior Subordinated
--------------------
ONE
<PAGE> 3
FIDUCIARY CAPITAL PENSION PARTNERS, L.P.
- --------------------------------------------------------------------------------
Secured Notes due May 24, 2002, with warrants to acquire common stock.
During May 1995, the Fund made a follow-on investment in Canadian's Corp.
The investment consists of $130,000 of floating rate Promissory Notes, with
warrants to acquire common stock, which together were purchased at a discounted
price of $117,000. The Fund and certain of Canadian's equity investors
provided a loan to the company in order to finance unanticipated cash
shortfalls arising from operations which were below expectations.
CASH DISTRIBUTIONS
The Fund made its cash distribution for the second quarter of 1995 on
August 14, 1995. This distribution - amounting to $.30 per Unit - was equal to
an annualized rate of 6% of contributed capital. This distribution consisted
entirely of net investment income earned during the second quarter. We expect
the remaining 1995 distributions to be made at the same 6% rate.
The Fund's investment period will end on December 31, 1995. Although the
Fund is permitted to make additional investments in existing portfolio
companies after 1995, the Fund will no longer be permitted to acquire
investments in new portfolio companies. This will impact the amount of the
Fund's quarterly distributions for 1996 and subsequent years because all
proceeds from dispositions or maturities of investments after December 31, 1995
will be distributed to investors, except to the extent the cash is needed to
fund the annual repurchase offer or to fund any follow-on investments that the
Fund may make in existing portfolio companies.
PERIODIC UNIT REPURCHASE POLICY
Pursuant to the terms of the periodic unit repurchase policy that was
adopted by the Fund's investors during 1993, the Fund annually offers to
repurchase from investors, up to 7.5% of its outstanding Units for an amount
equal to the current net asset value per Unit, net of a fee (not to exceed 2%)
to be retained by the Fund to offset expenses incurred in con-
--------------------
TWO
<PAGE> 4
FIDUCIARY CAPITAL PENSION PARTNERS, L.P.
- --------------------------------------------------------------------------------
nection with the repurchase offer. If the number of tendered Units in any year
exceeds 7.5% of the outstanding Units, the Fund's General Partners may vote to
repurchase up to an additional 2% of the outstanding Units.
The next opportunity to have the Fund repurchase your Units will occur
during the fourth quarter of 1995. The repurchase offer will be mailed to
investors on October 6, 1995, and the deadline for tendering Units for
repurchase will be October 31, 1995. The repurchase price will be based on the
net asset value per Unit on November 14, 1995 and payment for tendered Units
will be made on November 21, 1995.
* * * * * * * *
We are currently reviewing several investment opportunities for the Fund.
We are confident that we will be able to identify sufficient attractive
investment opportunities to fully invest the remaining funds that are available
for reinvestment prior to December 31, 1995.
If you have any questions regarding your investment in the Fund, please
call us at 800-866-7607.
Sincerely,
/s/ PAUL BAGLEY
Paul Bagley, Chairman
FCM Fiduciary Capital Management Company
/s/ W. DUKE DEGRASSI
W. Duke DeGrassi, President
FCM Fiduciary Capital Management Company
August 22, 1995
--------------------
THREE
<PAGE> 5
FIDUCIARY CAPITAL PENSION 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:
147,678 sh. Carr-Gottstein Foods Co.,
Class B Common Stock(1)* 10/23/90 $ 738,394 $ 894,375
- ------------------------------------------------------------------------------------------------------------------------------------
738,394 894,375 3.6%
- ------------------------------------------------------------------------------------------------------------------------------------
150,584.1 sh. Neodata Corporation,
10.00% Class A Convertible 12/27/90 &
Preferred Stock - Series 2* 09/30/92 278,916 2
8,754.89 sh. Neodata Corporation, 12/27/90 &
Common Stock* 09/30/92 1 1
- ------------------------------------------------------------------------------------------------------------------------------------
278,917 3 0.0
- ------------------------------------------------------------------------------------------------------------------------------------
30,743 sh. KEMET Corporation,
Common Stock(2)* 07/11/91 21,787 1,617,850
- ------------------------------------------------------------------------------------------------------------------------------------
21,787 1,617,850 6.4
- ------------------------------------------------------------------------------------------------------------------------------------
267.9 sh. Huntington Holdings, Inc.,
Warrants to Purchase
Common Stock(3)* 01/31/92 85,678 606,449
- ------------------------------------------------------------------------------------------------------------------------------------
85,678 606,449 2.4
- ------------------------------------------------------------------------------------------------------------------------------------
62,606 sh. Amity Leather Products Co.,
Warrants to Purchase Class B
Common Stock* 07/30/92 85,909 758,067
22,608 sh. Amity Leather Products Co.,
Class A Common Stock* 07/30/92 226,080 273,750
- ------------------------------------------------------------------------------------------------------------------------------------
311,989 1,031,817 4.1
- ------------------------------------------------------------------------------------------------------------------------------------
$2,938,997 KB Alloys, Inc.,
20.00% Senior Subordinated
Term Notes due 6/30/01(4) 05/28/93 2,889,674 2,889,674
- -----------------------------------------------------------------------------------------------------------------------------------
2,889,674 2,889,674 11.5
- ------------------------------------------------------------------------------------------------------------------------------------
$5,023,926 Elgin National Industries, Inc.,
13.00% Senior Subordinated
Notes due 9/01/01(5) 09/24/93 4,907,085 4,907,085
5,876.1 sh. ENI Holding Corp.,
10.00% Preferred Stock
due 12/31/01 09/24/93 587,610 691,421
403.81 sh. ENI Holding Corp.,
Class B Common Stock* 09/24/93 40,381 40,381
421.6 sh. ENI Holding Corp.,
Warrants to Purchase Class B
Common Stock* 09/24/93 42,156 42,156
- ------------------------------------------------------------------------------------------------------------------------------------
5,577,232 5,681,043 22.5
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes to financial statements are an integral part of this
schedule.
--------------------
FOUR
<PAGE> 6
FIDUCIARY CAPITAL PENSION 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>
15,405.6 sh. Protection One, Inc.,
Warrants to Purchase
Common Stock(6)* 11/03/93 82,420 93,396
- ------------------------------------------------------------------------------------------------------------------------------------
82,420 93,396 0.4
- ------------------------------------------------------------------------------------------------------------------------------------
$2,396,000 LMCOperating Corp.,
13.00% Senior Secured
Subordinated Term Notes
due 5/31/99(7) 06/10/94 2,268,861 2,268,861
16.054 sh. LMCOperating Corp.,
Warrants to Purchase
Common Stock* 06/10/94 107,820 107,820
15.973 sh. LMCCredit Corp.,
Warrants to Purchase
Common Stock* 06/10/94 1 1
- ------------------------------------------------------------------------------------------------------------------------------------
2,376,682 2,376,682 9.4
- ------------------------------------------------------------------------------------------------------------------------------------
$2,392,000 Canadian's Corp.,
13.50% Subordinated 09/09/94 &
Notes due 9/01/02(8) 12/29/94 2,296,463 2,296,463
$291,000 Canadian's Holdings, Inc.,
12.00% Exchangeable
Redeemable Debentures 09/09/94 &
due 8/31/04(9) 12/29/84 279,034 279,034
$130,000 Canadian's Corp.,
Promissory Notes
due 6/30/96(10) 05/08/95 117,911 117,911
232,987 sh. Canadian's Corp.,
Warrants to Purchase 09/09/94 &
Common Stock* 12/29/94 34,171 34,171
26,966 sh. Canadina's Corp.,
Warrants to Purchase
Common Stock(11)* 05/08/95 650 650
- ------------------------------------------------------------------------------------------------------------------------------------
2,728,229 2,728,229 10.8
- ------------------------------------------------------------------------------------------------------------------------------------
$1,290,000 R.B.M. Precision Metal
Products, Inc., 13.00%
Senior Subordinated
Secured Notes due
5/24/02(12) 05/24/95 1,191,743 1,191,743
439.694 sh. R.B.M. Precision Metal
Products, Inc., Warrants
to Purchase Common Stock* 05/24/95 73,295 73,295
- ------------------------------------------------------------------------------------------------------------------------------------
1,265,038 1,265,038 5.0
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes to financial statements are an integral part of this
schedule.
--------------------
FIVE
<PAGE> 7
FIDUCIARY CAPITAL PENSION 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>
34,996 sh. MTIHoldings II, Inc., 07/06/94 &
Common Stock* 12/28/94 237,627 31,496
- ------------------------------------------------------------------------------------------------------------------------------------
237,627 31,496 0.1
- ------------------------------------------------------------------------------------------------------------------------------------
Total Investments in Managed
Companies (75.3% of net assets) 16,593,667 19,216,052 76.2
- ------------------------------------------------------------------------------------------------------------------------------------
TEMPORARY INVESTMENTS:
$2,218,000 Ford Motor Credit
Corporation, 5.761%
Notes due 7/13/95 06/29/95 2,213,808 2,213,808
$3,782,000 Philip Morris Companies,
Inc., 5.772% Notes
due 7/13/95 06/29/95 3,774,839 3,774,839
- ------------------------------------------------------------------------------------------------------------------------------------
Total Temporary Inve(23.5%sof net assets) 5,988,647 5,988,647 23.8
- ------------------------------------------------------------------------------------------------------------------------------------
Total Investments (98.8% of net assets) $22,582,314 $25,204,699 100.0%
====================================================================================================================================
</TABLE>
(1) The Carr-Gottstein Foods Company common stock trades on the New York Stock
Exchange. The Fund and Fiduciary Capital Partners, L.P. ("FCP") 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 29.6 shares.
(4) The notes will amortize in eight equal quarterly installments of $367,375
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 $627,991
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: $30,017 on 9/01/97, $30,992 on
12/01/97, $32,000 on 3/01/98, $33,040 on 6/01/98, $34,114 on 9/01/98,
$35,222 on 12/01/98, $36,367 on 3/01/99 and $2,164,248 on 5/31/99.
(8) The notes will amortize in twelve equal quarterly installments of $199,333
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 119,262 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 $430,000
commencing on 5/24/00.
* Non-income producing security.
The accompanying notes to financial statements are an integral part of this
schedule.
--------------------
SIX
<PAGE> 8
FIDUCIARY CAPITAL PENSION PARTNERS, L.P.
- --------------------------------------------------------------------------------
BALANCE SHEETS
JUNE 30, 1995 AND DECEMBER 31, 1994 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1995 1994
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS:
Investments (Note 6)
Portfolio investments, at value:
Managed companies (amortized cost -
$16,593,667 and $16,052,631,
respectively) $19,216,052 $19,274,598
Temporary investments, at amortized cost 5,988,647 4,179,590
- ------------------------------------------------------------------------------------------------------------------------------------
Total investments 25,204,699 23,454,188
Cash and cash equivalents 125,367 173,095
Accrued interest receivable 647,713 521,794
Other assets, including receivables from
sale of investments 5,084 544,921
- ------------------------------------------------------------------------------------------------------------------------------------
Total assets $25,982,863 $24,693,998
- ------------------------------------------------------------------------------------------------------------------------------------
LIABILITIES:
Payable to affiliates (Notes 2, 3 and 4) $ 44,545 $ 44,384
Accounts payable and accrued liabilities 25,196 33,542
Prepaid interest income - 52,635
Distributions payable to partners 393,030 589,545
- ------------------------------------------------------------------------------------------------------------------------------------
Total liabilities 462,771 720,106
- ------------------------------------------------------------------------------------------------------------------------------------
NET ASSETS:
Managing General Partner 31,578 16,116
Limited Partners (equivalent to $19.65
and $18.47, respectively, per limited
partnership unit based on 1,296,999
units outstanding) 25,488,514 23,957,776
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets 25,520,092 23,973,892
- ------------------------------------------------------------------------------------------------------------------------------------
Total liabilities and net assets $25,982,863 $24,693,998
====================================================================================================================================
</TABLE>
The accompanying notes to financial statements are an integral part of these
financial statements.
--------------------
SEVEN
<PAGE> 9
FIDUCIARY CAPITAL PENSION PARTNERS, L.P.
- --------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS FOR THE SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
- ------------------------------------------------------------------------------------------------------------------------------------
1995 1994 1995 1994
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Income:
Interest $ 619,678 $ 558,999 $1,218,743 $1,129,702
- ------------------------------------------------------------------------------------------------------------------------------------
Total investment income 619,678 558,999 1,218,743 1,129,702
- ------------------------------------------------------------------------------------------------------------------------------------
Expenses:
Investment advisory fees (Note 2) 49,756 63,009 99,513 125,561
Fund administration fees (Note 3) 29,582 29,582 59,164 59,164
Independent General Partner fees
and expenses (Note 4) 11,964 12,280 27,988 27,567
Administrative expenses (Note 3) 17,224 17,190 34,448 34,380
Professional fees 13,695 10,374 28,156 21,316
Amortization 2,625 2,625 5,250 5,250
Other expenses 10,340 12,961 16,236 25,240
- ------------------------------------------------------------------------------------------------------------------------------------
Total expenses 135,186 148,021 270,755 298,478
- ------------------------------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME 484,492 410,978 947,988 831,224
- ------------------------------------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Net realized gain on investments 1,720,694 - 1,983,859 496,463
Net decrease in unrealized
appreciation of investments (637,675) (49,443) (599,587) (58,423)
- ------------------------------------------------------------------------------------------------------------------------------------
Net gain (loss) on investments 1,083,019 (49,443) 1,384,272 438,040
- ------------------------------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $1,567,511 $361,535 $2,332,260 $1,269,264
====================================================================================================================================
</TABLE>
The accompanying notes to financial statements are an integral part of these
financial statements.
--------------------
EIGHT
<PAGE> 10
FIDUCIARY CAPITAL PENSION 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 $ 2,332,260 $1,269,264
Adjustments to reconcile net increase
in net assets resulting from operations
to net cash provided by operating activities:
Accreted discount on portfolio investments (37,254) (15,741)
Amortization 5,250 5,250
Change in assets and liabilities:
Accrued interest receivable (125,919) (77,237)
Other assets 2,135 3,101
Payable to affiliates 1,107 28,367
Accounts payable and accrued liabilities (8,346) 11,621
Prepaid interest income (52,635) -
Net realized gain on investments (1,983,859) (496,463)
Net decrease in unrealized appreciation
of investments 599,587 58,423
- ------------------------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 732,326 786,585
- ------------------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of portfolio investments (1,382,146) (2,348,079)
Proceeds from dispositions of portfolio investments 3,393,724 5,274,396
(Purchase) sale of temporary investments, net (1,809,057) (2,365,989)
- ------------------------------------------------------------------------------------------------------------------------------------
Net cash provided by investing activities 202,521 560,328
- ------------------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions paid to partners (982,575) (1,298,136)
- ------------------------------------------------------------------------------------------------------------------------------------
Net cash used in financing activities (982,575) (1,298,136)
- ------------------------------------------------------------------------------------------------------------------------------------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (47,728) 48,777
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 173,095 792,425
- ------------------------------------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 125,367 $ 841,202
====================================================================================================================================
</TABLE>
The accompanying notes to financial statements are an integral part of these
financial statements.
--------------------
NINE
<PAGE> 11
FIDUCIARY CAPITAL PENSION 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 $ 947,988 $ 1,758,135
Net realized gain (loss) on investments 1,983,859 (2,089,653)
Net (decrease) increase in unrealized
appreciation of investments (599,587) 3,594,544
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 2,332,260 3,263,026
Repurchase of limited partnership units - (2,402,951)
Distributions to partners from -
Net investment income (786,060) (1,758,135)
Realized gain on investments - (778,614)
- ------------------------------------------------------------------------------------------------------------------------------------
Total increase (decrease) in net assets 1,546,200 (1,676,674)
Net assets:
Beginning of period 23,973,892 25,650,566
- ------------------------------------------------------------------------------------------------------------------------------------
End of period (including undistributed
net investment income of $161,928
and $0, respectively) $ 25,520,092 $ 23,973,892
====================================================================================================================================
</TABLE>
The accompanying notes to financial statements are an integral part of these
financial statements.
--------------------
TEN
<PAGE> 12
FIDUCIARY CAPITAL PENSION 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 $ .38 $ .93 $ .78
Expenses (.10) (.10) (.21) (.20)
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income .37 .28 .72 .58
Net realized gain on investments 1.31 - 1.52 .34
Net decrease in unrealized appreciation
of investments (.49) (.03) (.46) (.04)
Distributions declared to partners (.30) (.45) (.60) (.90)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net
asset value .89 (.20) 1.18 (.02)
Net asset value:
Beginning of period 18.76 18.14 18.47 17.96
- ------------------------------------------------------------------------------------------------------------------------------------
End of period $ 19.65 $ 17.94 $ 19.65 $ 17.94
====================================================================================================================================
RATIOS (ANNUALIZED):
Ratio of expenses to average net assets 2.17% 2.30% 2.20% 2.32%
Ratio of net investment income to
average net assets 7.77% 6.38% 7.70% 6.46%
Number of limited partnership units at
end of period 1,296,999 11,296,999 1,427,950
</TABLE>
The accompanying notes to financial statements are an integral part
of these selected per unit data and ratios.
--------------------
ELEVEN
<PAGE> 13
FIDUCIARY CAPITAL PENSION 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 $99,513 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 $59,164 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 $34,448 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 FCP 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 $27,988.
--------------------
TWELVE
<PAGE> 14
FIDUCIARY CAPITAL PENSION PARTNERS, L.P.
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
5. CONTINGENCIES
FCM, the Managing General Partner of the Fund, had been named as a
defendant in a class action lawsuit brought in March 1995 against PaineWebber
Incorporated and a number of its affiliates. During May 1995, the Court
entered an order certifying the class and dismissing the class action against
FCM without prejudice. FCM believes that this litigation will be resolved
without any material adverse effect on the Fund's financial condition.
6. SUBSEQUENT EVENT
On July 25, 1995, the Fund sold 7,913 shares of KEMET Corporation common
stock. The Fund received $533,924 of sales proceeds, resulting in a realized
gain of $528,316.
--------------------
THIRTEEN
<PAGE> 15
FIDUCIARY CAPITAL PENSION PARTNERS, L.P.
- --------------------------------------------------------------------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
As of June 30, 1995, the Fund held portfolio investments in twelve Managed
Companies, with an aggregate cost of approximately $16.6 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 75.3% of the Fund's net assets. When acquired, these
portfolio investments generally consisted of high-yield subordinated debt,
linked with an equity participation or a comparable participation feature in
middle market companies. These securities were typically issued in private
placement transactions and were subject to certain restrictions on transfer or
sale, thereby limiting their liquidity. A number of the portfolio companies
have prepaid their subordinated debt that the Fund held. In addition, three of
the portfolio companies have successfully completed initial public offerings
("IPOs") of their stock. The Fund continues to hold all of the equity
components of its original investments, except for a substantial portion of its
KEMET Corporation ("KEMET") stock.
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 $2,861,272 of proceeds, including applicable
prepayment premiums, from these transactions.
On July 25, 1995, the Fund received $533,924 of sales proceeds from the
sale of 7,913 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 $117,000. The investment consists of $130,000 of floating rate
Promissory Notes, with warrants to acquire common stock.
--------------------
FOURTEEN
<PAGE> 16
FIDUCIARY CAPITAL PENSION PARTNERS, L.P.
- --------------------------------------------------------------------------------
On May 24, 1995, the Fund acquired a new portfolio investment in R.B.M.
Precision Metal Products, Inc. ("RBM") at a cost of approximately $1.26
million. The investment consists of $1,290,000 of 13.00% Senior Subordinated
Secured Notes due May 24, 2002, with warrants to acquire common stock.
The Fund expects to reinvest all available funds, including the principal
amount of any future prepayments received, in additional portfolio investments.
The Partnership Agreement provides that the Fund's investment period will end
on December 31, 1995. Although the Fund is permitted to make additional
investments in existing portfolio companies after 1995, the Fund will no longer
be permitted to acquire investments in new portfolio companies.
Pursuant to the terms of the Fund's periodic unit repurchase policy that
was adopted by the Fund's Limited Partners during 1993, the Fund will annually
offer to purchase from its Limited Partners up to 7.5% of its outstanding Units
for an amount equal to the current net asset value per Unit, net of a fee (not
to exceed 2%) to be retained by the Fund to offset expenses incurred in
connection with the repurchase offer. If the number of tendered Units in any
year exceeds 7.5% of the outstanding Units, the Fund's General Partners may
vote to repurchase up to an additional 2% of the outstanding Units. The 1995
repurchase offer will be mailed to the Limited Partners during October 1995.
The actual redemption of tendered Units will occur on November 21, 1995.
Accrued interest receivable increased $125,919 from $521,794 at December
31, 1994 to $647,713 at June 30, 1995. This increase resulted primarily from a
$118,213 increase in the deferred portion of the interest receivable from KB
Alloys, Inc. ("KB Alloys") with respect to the Fund's investment in $2,938,997
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 $500,038. The Fund's agreement with KB Alloys requires KB
Alloys to pay all accumulated deferred interest in excess of $452,153 no later
than August 28, 1998, and the amount of deferred interest cannot exceed
$452,153 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 $539,837, from $544,921 at December 31, 1994 to
$5,084 at June 30, 1995. The balance at December 31, 1994 included a $532,452
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 $52,635 at December 31, 1994 to zero
at June 30, 1995. This prepaid interest income was related to the Canadian's
13.50% Subordinated Notes, which required interest to be paid quarterly, in
advance, to the Fund.
--------------------
FIFTEEN
<PAGE> 17
FIDUCIARY CAPITAL PENSION PARTNERS, L.P.
- --------------------------------------------------------------------------------
Effective June 1, 1995, the notes were amended to provide for the interest to
be paid monthly, in advance, on the first day of each month.
Distributions payable to partners decreased $196,515, from $589,545 at
December 31, 1994 to $393,030 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 $589,545 and $393,030, respectively. These quarterly distributions
were equal to $.45 and $.30 per Unit, respectively, and represented an
annualized rate equal to 9.0% and 6.0%, respectively, of contributed capital.
As discussed in previous reports, the quarterly distributions for 1995 are
being paid at a reduced rate. The distribution for the second quarter of 1995
will be paid on August 14, 1995 in an amount equal to $.30 per Unit, or an
annualized rate equal to 6.0% of contributed capital. This distribution
consists entirely of net investment income earned during the three months ended
June 30, 1995.
It is expected that the remaining 1995 distributions will be made at the
same 6.0% rate. In the past, the Fund realized gains from its investments that
provided additional sources of cash for distributions. Although there can be
no assurances, the Fund may realize similar gains in 1995 that could in turn
result in a higher distribution rate for subsequent quarters. Gains can also
be utilized to fund the annual repurchase offer or to fund any follow-on
investments that the Fund may make in existing portfolio companies.
The Fund's investment period will end on December 31, 1995. Although the
Fund is permitted to make additional investments in existing portfolio
companies after 1995, the Fund will no longer be permitted to acquire
investments in new portfolio companies. This will impact the amount of the
Fund's quarterly distributions for 1996 and subsequent years because all
proceeds from dispositions or maturities of investments after December 31, 1995
will be distributed to investors, except to the extent the cash is needed to
fund the annual repurchase offer or to fund any follow-on investments that the
Fund may make in existing portfolio companies.
FCM, the Managing General Partner of the Fund, had been named as a
defendant in a class action lawsuit brought in March 1995 against PaineWebber
Incorporated and a number of its affiliates. During May 1995, the Court
entered an order certifying the class and dismissing the class action against
FCM without prejudice. FCM believes that this litigation will be resolved
without any material adverse effect on the Fund's financial condition.
--------------------
SIXTEEN
<PAGE> 18
FIDUCIARY CAPITAL PENSION PARTNERS, L.P.
- --------------------------------------------------------------------------------
RESULTS OF OPERATIONS
INVESTMENT INCOME AND EXPENSES
The Fund's net investment income was $484,492 for the three months ended
June 30, 1995 as compared to net investment income of $410,978 for the
corresponding period of the prior year. Net investment income per limited
partnership unit increased from $.28 to $.37 and the ratio of net investment
income to average net assets increased from 6.38% to 7.77% 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 $947,988 for the six months ended June
30, 1995 as compared to net investment income of $831,224 for the corresponding
period of the prior year. Net investment income per limited partnership unit
increased from $.58 to $.72 and the ratio of net investment income to average
net assets increased from 6.46% to 7.70% 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 $60,679 and $89,041, or 10.9% and 7.9%, 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 $24.6 million during the
six months ended June 30, 1995 as compared to approximately $25.7 million
during the corresponding period of the prior year. This 4.5% decrease in
average net assets occurred primarily as a result of the Fund's repurchase of
9.17% 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 $12,835 and $27,723, or 8.7% and 9.3%, for the
three and six month periods ended June 30, 1995, respectively, as compared to
the corresponding periods of the prior year. These decreases resulted
primarily from decreases in investment advisory fees and other expenses. The
investment advisory fees decreased as a result of the repurchase of Units by
the Fund during the fourth quarter of 1994 and the realization during July 1994
of the loss on the Fund's Mobile Technology, Inc. ("MTI") investment. Both the
repurchase of Units and the realization of the MTI loss decreased the amount of
the Fund's available capital (as defined in the Partnership Agreement), which
is the base with respect to which the investment advisory fees are calculated.
Other expenses
--------------------
SEVENTEEN
<PAGE> 19
FIDUCIARY CAPITAL PENSION PARTNERS, L.P.
- --------------------------------------------------------------------------------
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 8,705 shares of KEMET common
stock. The Fund received $269,333 of sales proceeds, resulting in a realized
gain of $263,165.
During April and May 1995, the Fund sold an additional 37,080 shares
of KEMET common stock. The Fund received $1,629,089 of sales proceeds,
resulting in realized gain of $1,602,802.
On May 17, 1995, Protection One prepaid its $917,000 of 12.00% Senior
Subordinated Notes that were carried by the Fund at an amortized cost of
$844,958. The Fund received $962,850 of proceeds, including a prepayment
premium, resulting in a realized gain of $117,892.
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 $3,629,064 of
unrealized appreciation and $(407,097) of unrealized depreciation of
investments. Therefore, as of December 31, 1994, the Fund had recorded a total
net unrealized appreciation of investments of $3,221,967.
--------------------
EIGHTEEN
<PAGE> 20
FIDUCIARY CAPITAL PENSION PARTNERS, L.P.
- --------------------------------------------------------------------------------
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:
<TABLE>
<CAPTION>
Unrealized Appreciation (Depreciation) Recorded
- ------------------------------------------------------------------------------------------------------------------------------------
During the Three During the Six
Months Ended Months Ended As of
Portfolio Company June 30, 1995 June 30, 1995 June 30, 1995
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Unrealized appreciation
recorded in prior periods
or investments disposed
of during the period $ (1,290,292) $ (1,245,240) $ -
Carr-Gottstein 52,610 (17,537) 155,981
Neodata - (268,395) (278,914)
KEMET 526,286 759,932 1,596,063
Huntington 44,589 44,589 520,771
Amity - 72,307 719,828
Elgin / ENI 14,690 29,704 103,811
Proctection One 14,442 25,053 10,976
MTI - - (206,131)
- ------------------------------------------------------------------------------------------------------------------------------------
$ (637,675) $ (599,587) $2,622,385
====================================================================================================================================
</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 147,678 shares ofcommon stock
would have a market value of $941,447. 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 30,743 shares of KEMET common stock at June 30, 1995.
Based on the $52.625 closing trading
--------------------
NINETEEN
<PAGE> 21
FIDUCIARY CAPITAL PENSION PARTNERS, L.P.
- --------------------------------------------------------------------------------
price of the common stock, the Fund's stock had a market value of $1,617,850 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, 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
15,405.6 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 $93,396 at June 30, 1995.
FCM continually monitors both the Fund's portfolio companies and the
markets, and continually evaluates the decision to hold or sell its traded
securities.
--------------------
TWENTY
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 30, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> SEP-30-1995
<INVESTMENTS-AT-COST> 23,076,400
<INVESTMENTS-AT-VALUE> 25,399,262
<RECEIVABLES> 698,043
<ASSETS-OTHER> 4,988
<OTHER-ITEMS-ASSETS> 224,120
<TOTAL-ASSETS> 26,326,413
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 469,901
<TOTAL-LIABILITIES> 469,901
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 1,296,999
<SHARES-COMMON-PRIOR> 1,296,999
<ACCUMULATED-NII-CURRENT> 269,558
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 2,322,862
<NET-ASSETS> 25,856,512
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 1,853,671
<OTHER-INCOME> 0
<EXPENSES-NET> 405,023
<NET-INVESTMENT-INCOME> 1,448,648
<REALIZED-GAINS-CURRENT> 2,512,172
<APPREC-INCREASE-CURRENT> (899,110)
<NET-CHANGE-FROM-OPS> 3,061,710
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 1,179,090
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 1,882,620
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 149,270
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 405,023
<AVERAGE-NET-ASSETS> 24,924,027
<PER-SHARE-NAV-BEGIN> 18.47
<PER-SHARE-NII> 1.11
<PER-SHARE-GAIN-APPREC> 1.23
<PER-SHARE-DIVIDEND> .90
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 19.91
<EXPENSE-RATIO> 2.17
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
