<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1995
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ___________________ to __________________________
Commission file number 0-17738
FIDUCIARY CAPITAL PENSION PARTNERS, L.P.
(Exact name of registrant as specified in its charter)
DELAWARE 86-0653603
(state of organization) (I.R.S. Employer
Identification No.)
410 17TH STREET
SUITE 400
DENVER, COLORADO 80202
(Address of principal (Zip Code)
executive offices)
Registrant's telephone number, including area code (800) 866-7607
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
YES X No .
----- -----
<PAGE> 2
Fiduciary Capital Pension Partners, L.P.
Quarterly Report on Form 10-Q for the
Quarter Ended June 30, 1995
Table of Contents
<TABLE>
<CAPTION>
Page
----
<S> <C>
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited) 3
Schedule of Investments -
June 30, 1995 3
Balance Sheets - June 30, 1995 and
December 31, 1994 6
Statements of Operations for the three
months ended June 30, 1995 and 1994 7
Statements of Operations for the six
months ended June 30, 1995 and 1994 8
Statements of Cash Flows for the six
months ended June 30, 1995 and 1994 9
Statements of Changes in Net Assets for
the six months ended June 30, 1995 and
for the year ended December 31, 1994 10
Selected Per Unit Data and Ratios 11
Notes to Financial Statements 12
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of
Operations 14
Part II. OTHER INFORMATION
Item 1. Legal Proceedings 20
Item 6. Exhibits and Reports on Form 8-K 20
</TABLE>
2
<PAGE> 3
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
FIDUCIARY CAPITAL 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%
- ------------------------------------------------------------------------------------------------------------
150,584.07 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
- ------------------------------------------------------------------------------------------------------------
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
- ------------------------------------------------------------------------------------------------------------
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
- ------------------------------------------------------------------------------------------------------------
</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)
JUNE 30, 1995
(unaudited)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
Principal
Amount/ Investment Amortized % of Total
Shares Investment Date Cost Value Investments
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$2,396,000 LMC Operating 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. 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
- ------------------------------------------------------------------------------------------------------------
2,376,682 2,376,682 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 2,296,463 2,296,463
$291,000 Canadian's Holdings, Inc.,
12.00% Exchangeable
Redeemable Debentures 09/09/94 &
due 8/31/04(9) 12/29/94 279,034 279,034
$130,000 Canadian's Corp.,
Promissory Notes
due 06/30/96(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. Canadian'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
- ------------------------------------------------------------------------------------------------------------
Total Investments in Managed Companies (75.3% of net assets) 16,593,667 19,216,052 76.2
- ------------------------------------------------------------------------------------------------------------
</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)
JUNE 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>
$2,218,000 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 Investments (23.5% of 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.
5
<PAGE> 6
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
---------- ----------
CONTINGENCIES (Note 5)
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.
6
<PAGE> 7
FIDUCIARY CAPITAL PENSION PARTNERS, L.P.
STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED JUNE 30, 1995 AND 1994
(unaudited)
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
INVESTMENT INCOME:
Income:
Interest $ 619,678 $558,999
--------- -------
Total investment income 619,678 558,999
--------- -------
Expenses:
Investment advisory fees (Note 2) 49,756 63,009
Fund administration fees (Note 3) 29,582 29,582
Independent general partner fees
and expenses (Note 4) 11,964 12,280
Administrative expenses (Note 3) 17,224 17,190
Professional fees 13,695 10,374
Amortization 2,625 2,625
Other expenses 10,340 12,961
--------- -------
Total expenses 135,186 148,021
--------- -------
NET INVESTMENT INCOME 484,492 410,978
--------- -------
REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Net realized gain on investments 1,720,694 -
Net decrease in unrealized appreciation
of investments (637,675) (49,443)
--------- -------
Net gain (loss) on investments 1,083,019 (49,443)
--------- -------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $1,567,511 $361,535
========= =======
</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 SIX MONTHS ENDED JUNE 30, 1995 AND 1994
(unaudited)
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
INVESTMENT INCOME:
Income:
Interest $1,218,743 $1,129,702
--------- ---------
Total investment income 1,218,743 1,129,702
--------- ---------
Expenses:
Investment advisory fees (Note 2) 99,513 125,561
Fund administration fees (Note 3) 59,164 59,164
Independent general partner fees
and expenses (Note 4) 27,988 27,567
Administrative expenses (Note 3) 34,448 34,380
Professional fees 28,156 21,316
Amortization 5,250 5,250
Other expenses 16,236 25,240
--------- ---------
Total expenses 270,755 298,478
--------- ---------
NET INVESTMENT INCOME 947,988 831,224
--------- ---------
REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Net realized gain on investments 1,983,859 496,463
Net decrease in unrealized appreciation
of investments (599,587) (58,423)
--------- ---------
Net gain on investments 1,384,272 438,040
--------- ---------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $2,332,260 $1,269,264
========= =========
</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 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.
9
<PAGE> 10
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 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 (includes net 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.
10
<PAGE> 11
FIDUCIARY CAPITAL PENSION PARTNERS, L.P.
SELECTED PER UNIT DATA AND RATIOS
FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND 1994
(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 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
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.
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)
JUNE 30, 1995
(unaudited)
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.
13
<PAGE> 14
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
LIQUIDITY AND CAPITAL RESOURCES
As of June 30, 1995, the Fund held portfolio investments in twelve
Managed Companies, with an aggregate cost of approximately $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.
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 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.
14
<PAGE> 15
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
GeneralPartners 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. 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
15
<PAGE> 16
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.
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 occurredprimarily 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).
16
<PAGE> 17
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 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.
The net increase in unrealized appreciation of investments during the
three and six month periods ended June 30, 1995 and the cumulative net
unrealized appreciation of investments as of June 30, 1995, consisted of the
following components:
17
<PAGE> 18
<TABLE>
<CAPTION>
Unrealized Appreciation (Depreciation) Recorded
-----------------------------------------------
During the Three During the Six
Months Ended Months Ended As of
Portfolio Company June 30, 1995 June 30, 1995 June 30, 1995
----------------- ---------------- -------------- -------------
<S> <C> <C> <C>
Unrealized net appreciation recorded
during prior periods with respect to
investments disposed of during
the period $(1,290,292) $(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
Protection 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 of common 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 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,
18
<PAGE> 19
closed at $6.0625 (an average of the closing bid and ask prices) on March 31,
1995. This price compares to closing prices of $4.875 on December 31, 1994 and
$5.125 on March 31, 1995. The Fund holds warrants to acquire 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.
19
<PAGE> 20
Part II. OTHER INFORMATION
Item 1. Legal Proceedings
As previously reported, FCM, the Managing General Partner of the Fund,
had been named as a defendant in a class action lawsuit against PaineWebber
Incorporated ("PaineWebber") and a number of its affiliates relating to
PaineWebber's direct investment offerings, including the offering of the Units.
Plaintiffs in the lawsuit allege, among other things, that the defendants
violated federal securities laws and committed common law fraud in the
marketing of direct investments.
On May 30, 1995, the United States District Court for the Southern
District of New York entered an order certifying the class and dismissing the
class action against FCM without prejudice. PaineWebber and Mezzanine Capital
Corporation, a minority general partner of FCM and an affiliate of
PaineWebber, remain as defendants.
The Fund was not named as a defendant in the lawsuit; however,
pursuant to certain contractual arrangements between FCM and PaineWebber in
connection with the offering of the Units, the Fund may be required to
indemnify PaineWebber and its affiliates for their costs and liability in
connection with any class action claims relating to the Fund. FCM believes
that the Fund's exposure in respect of the indemnity will not have any material
adverse effect on the Fund's financial condition.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits and Reports to be filed:
Exhibit No. Description
----------- -----------
11.1 Statement of Computation of Net Investment
Income Per Limited Partnership Unit.
19.1 Reports Furnished to Securities Holders
27 Financial Data Schedule
(b) The Registrant did not file any reports on Form 8-K during the
second quarter of the fiscal year ending December 31, 1995.
20
<PAGE> 21
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Fiduciary Capital Pension Partners, L.P.
(Registrant)
By: FCM Fiduciary Capital Management Company
Managing General Partner
Date: August 8, 1995 By: /s/ Donald R. Jackson
------------------------
Donald R. Jackson
Chief Financial Officer
21
<PAGE> 22
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description Page
- ----------- ----------- ----
<S> <C> <C>
11.1 Statement of Computation of Net Investment Income Per
Limited Partnership Unit.
19.1 Reports Furnished to Securities Holders.
27 Financial Data Schedule
</TABLE>
E-1
<PAGE> 1
EXHIBIT 11.1
FIDUCIARY CAPITAL PENSION PARTNERS, L.P.
STATEMENT OF COMPUTATION OF NET
INVESTMENT INCOME PER LIMITED
PARTNERSHIP UNIT
<TABLE>
<CAPTION>
For the Three Months For the Six Months
Ended June 30, Ended June 30,
-------------- --------------
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net Investment Income $ 484,492 $ 410,978 $ 947,988 $ 831,224
Percentage Allocable to Limited Partners 99% 99% 99% 99%
---------- ---------- ---------- ----------
Net Investment Income Allocable
to Limited Partners $ 479,647 $ 406,868 $ 938,508 $ 822,912
========== ========== ========== ==========
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 $ .37 $ .28 $ .72 $ .58
========== ========== ========== ==========
</TABLE>
<PAGE> 1
FIDUCIARY CAPITAL PENSION PARTNERS, L.P.
- --------------------------------------------------------------------------------
-----------------
ANNUAL REPORT
1994
<PAGE> 2
FIDUCIARY CAPITAL PENSION PARTNERS, L.P.
- --------------------------------------------------------------------------------
CONTENTS
Fund Profile and Financial Highlights Two
Message to Investors Three
Profiles of Portfolio Companies Six
Schedule of Investments Seven
Balance Sheets Ten
Statements of Operations Eleven
Statements of Cash Flows Twelve
Statements of Changes in Net Assets Thirteen
Selected Per Unit Data and Ratios Fourteen
Notes to Financial Statements Fifteen
Report of Independent Public Accountants Nineteen
Management's Discussion and Analysis of Financial
Condition and Results of Operations Twenty
------------------------------
ONE
<PAGE> 3
FIDUCIARY CAPITAL PENSION PARTNERS, L.P.
- --------------------------------------------------------------------------------
FUND PROFILE
Fiduciary Capital Pension Partners, L.P. (the "Fund") is a Delaware
limited partnership that commenced operations on August 14, 1990. The Fund has
elected to operate as a business development company under the Investment
Company Act of 1940, as amended. The investment objective of the Fund is to
provide current income and capital appreciation by investing primarily in
subordinated debt and related equity securities issued as the mezzanine
financing of privately structured, friendly leveraged buyouts, leveraged
acquisitions and leveraged recapitalizations.
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
As of
December 31, 1990
As of December 31 or the Period from the
or Year Ended December 31 Commencement of Operations
---------------------------------------- (August 14, 1990)
1994 1993 1992 1991 to December 31, 1990
(in thousands, except per Unit amounts)
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Total Investment Income $ 2,335 $ 2,587 $ 3,627 $ 3,159 $ 851
Net Investment Income 1,758 1,972 3,046 2,607 613
Net Realized and Unrealized
Gain on Investments 1,505 148 424 - -
Cash Distributions Declared to Partners 2,537 2,681 2,709 2,370 565
Repurchase of Units 2,403 1,134 - - -
Total Assets 24,694 26,362 28,106 27,315 27,002
Net Assets 23,974 25,651 27,345 26,584 26,347
Value of Investments 23,454 25,213 27,582 26,342 26,786
Per Unit of Limited Partnership Interest:(1)
Net Investment Income 1.23(2) 1.32(2) 2.03 1.73 .44(2)
Net Realized and Unrealized
Gain on Investments 1.06(2) .10(2) .28 - -
Cash Distributions Declared to Partners(3) 1.78 1.81 1.80 1.57 .41
Net Asset Value 18.47 17.96 18.35 17.84 17.68
</TABLE>
(1) Effective October 1, 1993, each $1,000 Unit was redenominated into
fifty $20 Units. All amounts shown for prior periods have been
restated to give effect to this redenomination.
(2) Calculated using the weighted average number of Units outstanding
during the years ended December 31, 1994 and 1993 of 1,413,240 and
1,482,514, respectively, and during the period from August 14, 1990
(commencement of operations) through December 31, 1990 of 1,368,600.
(3) Distribution amounts are reflected during the period in which the cash
for the distribution was generated. A portion of the actual cash
distributions are paid subsequent to such period.
------------------------------
TWO
<PAGE> 4
FIDUCIARY CAPITAL PENSION PARTNERS, L.P.
- --------------------------------------------------------------------------------
MESSAGE TO INVESTORS
Dear Investor:
We are pleased to provide a summary of the recent activities of
Fiduciary Capital Pension Partners, L.P. This Annual Report includes the
Fund's audited financial statements for the year ended December 31, 1994.
Unaudited interim financial statements for the first quarter of 1995 are also
enclosed along with this Annual Report.
HIGHLIGHTS
- Distributions for 1994 totaled $1.80 per Unit, which
represents an annualized rate equal to 9.0% of contributed
capital.
- The Fund's net asset value per Unit was $18.47 at December 31,
1994 and $18.76 at March 31, 1995 as compared to $17.96 at
December 31, 1993.
- The Fund redeemed 9.17% of its outstanding Units during
November 1994 pursuant to the Fund's annual repurchase offer.
NET ASSET VALUE AND CUMULATIVE DISTRIBUTION PER UNIT (CHART)
CASH DISTRIBUTIONS
The Fund paid cash distributions of $.45 per Unit for each quarter of
1994. Each of these quarterly distributions represented an annualized rate
equal to 9.0% of contributed capital. The 1994 cash distributions were paid
out of net investment income (69.3%) and gains from capital transactions
(30.7%).
As we have discussed in previous correspondence to you, the quarterly
distributions for 1995 will be paid at a reduced rate. The distribution for
the first quarter of 1995 was paid on May 12, 1995 in an amount equal to $.30
per Unit, or an annualized rate equal to 6.0% of contributed capital. This
distribution consisted entirely of net investment income earned during the
first quarter.
We expect the remaining 1995 distributions to be made at the same 6.0%
rate. In the past, the Fund has realized gains from its investments that have
provided additional sources of cash for distributions. Although there can be
no assurances, the Fund may realize similar gains in 1995 that could in turn
result in a higher distribution rate for subsequent quarters. Gains can also
be utilized to fund the annual repurchase offer or to fund any follow-on
investments that the Fund may make in existing portfolio companies.
The Fund's investment period will end on December 31, 1995. Although
the Fund is permitted to make additional investments in existing portfolio
companies after 1995, the Fund will no longer be permitted to acquire
investments in new portfolio companies. This will impact the amount of the
Fund's quarterly distributions for 1996 and subsequent years because all
proceeds from dispositions or maturities of investments after December 31, 1995
will be distributed to investors, except to the extent the cash is needed to
fund the annual repurchase offer or to fund any follow-on investments that the
Fund may make in existing portfolio companies.
SIGNIFICANT INVESTMENT PERFORMANCE
KEMET represents the Fund's most successful investment to date.
KEMET, headquartered in Greenville, South Carolina, is a leading manufacturer
and distributor of both solid tantalum and monolithic ceramic capacitors used
as components in circuit boards.
During 1991, the Fund acquired $3,391,150 of 15.50% Senior
Subordinated Term Notes due January 2, 2001 that were issued by a KEMET
subsidiary, along with warrants to purchase 94,614 shares of KEMET common stock
at an exercise price of $.01 per share.
KEMET became the first of the Fund's portfolio companies to
successfully complete an initial public offering ("IPO") of its common stock
during October 1992. During June 1993, KEMET prepaid its subordinated notes
that the Fund held, at par, following the successful completion of a secondary
stock offering. Thus, as of June 1993, the Fund had recovered 100% of its
original investment in KEMET (plus the interest payments received on the notes)
and continued to hold warrants to purchase 94,614 shares of KEMET common stock.
------------------------------
THREE
<PAGE> 5
FIDUCIARY CAPITAL PENSION PARTNERS, L.P.
- --------------------------------------------------------------------------------
MESSAGE TO INVESTORS (CONTINUED)
The KEMET common stock, which trades on the NASDAQ National Market
System under the symbol "KMET", closed at the following prices (an average of
the closing bid and ask prices) at the end of each calendar quarter since the
completion of the IPO:
December 31, 1992 $14.25
March 31, 1993 $15.25
June 30, 1993 $18.50
September 30, 1993 $15.75
December 31, 1993 $15.50
March 31, 1994 $16.25
June 30, 1994 $16.88
September 30, 1994 $20.63
December 31, 1994 $29.38
March 31, 1995 $37.38
On December 30, 1994, the Fund exercised the KEMET warrants and sold
18,086 shares of the common stock at a price of $29.50. The Fund sold an
additional 8,705 shares on February 28, 1995 at a price of $31.00 per share.
The Fund still owned 67,823 shares of the KEMET stock as of March 31,
1995. Based on the $37.38 closing trading price of the common stock at March
31, 1995, the remaining stock had a market value of $2,534,885. However, the
Fund's valuation guidelines require the common stock to be valued at a 5%
discount to the public market price, or $2,408,140 as of March 31, 1995, to
reflect the potential market impact that could result from the sale of the
material number of shares owned by the Fund and an affiliated fund.
In summary, the Fund invested approximately $3.4 million in this
investment and has received interest payments and proceeds from the repayment
of the notes and the sale of stock aggregating approximately $5.4 million. In
addition, the Fund still owned stock with an estimated market value, as of
March 31, 1995, of approximately $2.4 million. Thus, as of March 31, 1995, the
Fund had a total profit on this investment, including interest income and both
realized and unrealized gains, of approximately $4.4 million. This represents
an internal rate of return of approximately 34%. Both the total profit and
internal rate of return ultimately realized by the Fund with respect to this
investment will depend on the actual sales price of the remaining stock and the
timing of such sales.
Since March 31, 1995, the Fund has sold an additional 22,610 shares of
the KEMETstock at an average price of $43.66 per share.
OTHER INVESTMENT ACTIVITY
New portfolio investments in two companies were acquired during 1994:
LMC and Canadian's. The Fund's initial investments in these companies were
discussed in previous investor reports.
On December 29, 1994, the Fund made a follow-on investment of $802,190
in Canadian's and its parent company, Canadian's Holdings, Inc. Canadian's is
a specialty retailer of moderately priced junior women's apparel and
accessories. The follow-on investment consisted of (a) $768,000 of Canadian's
13.50% Subordinated Notes with warrants to acquire common stock and (b) $59,000
of Canadian's Holdings, Inc. 12.00% Exchangeable Redeemable Debentures that are
convertible into Canadian's common stock. Both the Notes and Debentures also
bear contingent additional interest to be computed under specified formulas.
The proceeds from the Fund's additional investment were used by Canadian's as a
portion of the capital needed to finance the acquisition of store leases, a
computer system, point-of-sale terminals and store fixtures from The Ormonds
Shops, Inc., a retailer operating under the protection of the federal
bankruptcy laws.
During 1994, the Fund's subordinated debt investments in Huntington
and Amity were prepaid. In both situations, the companies, which are still
privately owned, were successful in refinancing the subordinated debt held by
the Fund at lower interest rates. The Fund realized gains, including
applicable prepayment premiums, of $448,042 from these prepayments. The Fund
continues to hold its equity securities in these companies.
As discussed in previous correspondence, MTI successfully consummated
a financial restructuring during 1994. Pursuant to the terms of the
restructuring, the Fund and MTI's other subordinated lenders exchanged their
subordinated notes and other securities for common stock in a new holding
company that now owns 100% of MTI. The subordinated lender group received
87.75% of the new holding company's common stock. The Fund recognized a
realized loss of $3,291,004 during 1994 as a result of the restructuring.
(This loss had been recorded as an unrealized loss in prior years.) MTI is
continuing to experience significant financial and operating difficulties and
it is uncertain whether the Fund will ever recover any of its investment in
MTI. As a result, the Fund recorded an additional unrealized loss of $206,131
with respect to the MTI stock investment at December 31, 1994. In the
accompanying financial statements, the MTI common stock is valued at $31,496,
which constitutes approximately one-tenth of 1% of the Fund's net assets.
------------------------------
FOUR
<PAGE> 6
FIDUCIARY CAPITAL PENSION PARTNERS, L.P.
- --------------------------------------------------------------------------------
MESSAGE TO INVESTORS (CONTINUED)
During September 1994, Protection One completed an IPO of its common
stock. On May 17, 1995, Protection One prepaid its $917,000 of 12.00% Senior
Subordinated Notes that the Fund held. The Fund received $962,850, including a
prepayment premium. The Fund continues to hold the warrants to purchase
Protection One common stock.
NET UNREALIZED APPRECIATION OF PORTFOLIO INVESTMENTS
The cumulative net unrealized appreciation of investments held by the
Fund at December 31, 1994 and March 31, 1995, consisted of the following
components:
<TABLE>
<CAPTION>
Unrealized Appreciation
(Depreciation) Recorded as of
----------------------------------
December 31, 1994 March 31, 1995
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
KEMET $2,081,367 $2,360,065
Amity 647,521 719,828
Huntington 476,182 476,182
Carr-Gottstein 173,518 103,371
Elgin 74,107 89,121
MTI (206,131) (206,131)
Protection One (14,077) (3,466)
Neodata (10,519) (278,915)
- ------------------------------------------------------------------------------------------------
$3,221,968 $3,260,055
================================================================================================
</TABLE>
The KEMET, Carr-Gottstein and Protection One equity investments
consist of publicly traded common stock (and warrants to acquire common stock)
that were valued based upon actual trading prices. The Amity, Huntington,
Elgin, MTI and Neodata valuation adjustments all relate to equity securities
held by the Fund that are not traded in any liquid public markets. These
equity securities were valued by the Managing General Partner pursuant to
valuation policies and procedures that have been approved by the Independent
General Partners and subject to their supervision. The valuations are based
upon such factors as the portfolio company's earnings, cash flow and net worth,
the market prices for similar securities of comparable companies and an
assessment of the portfolio company's future financial prospects.
PERIODIC UNIT REPURCHASE POLICY
The Fund's investors adopted a periodic unit repurchase plan during
October 1993. Pursuant to the terms of the repurchase policy, the Fund will
annually offer to purchase from investors, up to 7.5% of its outstanding Units
for an amount equal to the current net asset value per Unit, net of a fee (not
to exceed 2%) to be retained by the Fund to offset expenses incurred in
connection with the repurchase offer. If the number of tendered Units in any
year exceeds 7.5% of the outstanding Units, the Fund's General Partners may
vote to repurchase up to an additional 2% of the outstanding Units. Pursuant
to the initial repurchase offer, 61,850 Units (4.15% of the outstanding Units)
were redeemed during November 1993 at a net asset value per Unit of $18.33
($17.96, net of the 2% fee). An additional 130,951 Units (9.17% of the
outstanding Units) were redeemed during November 1994 at a net asset value per
Unit of $18.35 ($17.98, net of the 2% fee).
The next opportunity to have the Fund repurchase your Units will occur
during the fourth quarter of 1995. The repurchase offer will be mailed to
investors on October 6, 1995, and the deadline for tendering Units for
repurchase will be October 31, 1995. The repurchase price will be based on the
net asset value per Unit on November 14, 1995 and payment for tendered Units
will be made on November 21, 1995.
* * *
We have recently seen an increase in the number of companies seeking
mezzanine financing and we are currently analyzing several potential investment
opportunities for the Fund. We are confident that we will be able to identify
sufficient attractive investment opportunities to fully invest the remaining
funds that are available for reinvestment prior to December 31, 1995.
If you have any questions regarding your investment in the Fund,
please call us at 800-866-7607.
Sincerely,
Paul Bagley, Chairman
FCM Fiduciary Capital Management Company
W. Duke DeGrassi, President
FCM Fiduciary Capital Management Company
May 17, 1995
------------------------------
FIVE
<PAGE> 7
FIDUCIARY CAPITAL PENSION PARTNERS, L.P.
- --------------------------------------------------------------------------------
PROFILES OF PORTFOLIO COMPANIES
Carr-Gottstein Foods Company ("Carr-Gottstein") Carr-Gottstein has
been the leading food and drug retailer in Alaska since 1915 and is the largest
private employer in Alaska.
Neodata Corporation ("Neodata") Neodata, headquartered in Louisville,
Colorado, is the largest contract fulfillment company in the world and a leader
in providing fulfillment and marketing services to the magazine publishing
industry.
VALUE IN 1994 YEAR-END INVESTMENTS BY PORTFOLIO COMPANY (PIE CHART)
KEMET Corporation ("KEMET") KEMET, headquartered in Greenville, South
Carolina, is a leading manufacturer and distributor of both solid tantalum and
monolithic ceramic capacitors used as components in circuit boards.
Huntington Holdings, Inc. ("Huntington") Huntington, headquartered in
Huntington, Indiana, is one of the largest manufacturers and marketers of
maintenance and cleaning chemicals in North America. Huntington produces a
wide range of intermediate and final-stage cleansers, sterilants and
disinfectants for use by hospitals, schools, nursing homes and various
industries.
Amity Leather Products Co. ("Amity") Amity, headquartered in West
Bend, Wisconsin, manufactures men's and ladies' fine personal leather goods and
distributes these products to department stores, mass merchandisers and
company- owned Wallet Works stores. Amity markets its products under the brand
names of Rolfs, Amity and LaGarde.
KB Alloys, Inc. (""KB Alloys") KB Alloys, headquartered in Reading,
Pennsylvania, is a leading North American manufacturer of aluminum master
alloys. Master alloys are added during the production of aluminum to enhance
or supply physical properties and to function as a hardener, refiner or
promoter of electrical conductivity.
Elgin National Industries, Inc. ("Elgin") Elgin, headquartered in
Chicago, Illinois, is a diversified industrial company that is organized into
three distinct segments. The Industrial Products Group manufactures specialty
industrial threaded fasteners. The Manufacturing Group manufactures machinery
and equipment for niches in coal and other mineral processing markets. The
Engineering and Construction Group provides a full range of engineering, design
and construction management services, including serving as a general contractor
under turn-key design and build contracts.
Protection One Alarm Monitoring, Inc. ("Protection One") Protection
One is a Portland, Oregon-based security alarm company operating in five
western states.
LMC Operating Corp. ("LMC") LMC, headquartered in Logan, Utah, is the
leading U.S. manufacturer of light track vehicles. These vehicles are
primarily used as snow-groomers and have several alternative uses including
infrastructure development and maintenance in remote locations, right-of-way
clean-up, search and rescue and military troop deployment. Primary purchasers
of the vehicles include ski resorts, utility companies and various governmental
agencies.
Mobile Technology, Inc. ("MTI") MTI is a leading domestic provider of
magnetic resonance imaging ("MRI") and computed tomography mobile
shared-services.
Canadian's Corp. ("Canadian's") Canadian's, headquartered in
Fairfield, New Jersey, is a specialty retailer of moderately priced junior
women's apparel and accessories. Canadian's emerged from Chapter 11 bankruptcy
proceedings in conjunction with the restructuring in which the Fund
participated.
------------------------------
SIX
<PAGE> 8
FIDUCIARY CAPITAL PENSION PARTNERS, L.P.
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1994
<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 $ 911,912
- ---------------------------------------------------------------------------------------------------------------
738,394 911,912 3.9%
- ---------------------------------------------------------------------------------------------------------------
340,951 sh. Neodata Corporation,
Warrants to Purchase
Common Stock and
10.00% Class A Convertible
Preferred Stock - Series 2* 12/27/90 33,912 210,280
32,606.87 sh. Neodata Corporation,
10.00% Class A Convertible
Preferred Stock - Series 2* 09/30/92 245,005 58,117
1,895.75 sh. Neodata Corporation,
Common Stock* 09/30/92 1 1
- ---------------------------------------------------------------------------------------------------------------
278,918 268,398 1.1
- ---------------------------------------------------------------------------------------------------------------
76,528 sh. KEMET Corporation, 03/28/91 &
Common Stock(2)* 07/11/91 54,242 2,135,609
- ---------------------------------------------------------------------------------------------------------------
54,242 2,135,609 9.1
- ---------------------------------------------------------------------------------------------------------------
267.9 sh. Huntington Holdings, Inc.,
Warrants to Purchase
Common Stock(3)* 01/31/92 85,678 561,860
- ---------------------------------------------------------------------------------------------------------------
85,678 561,860 2.4
- ---------------------------------------------------------------------------------------------------------------
62,606 sh. Amity Leather Products Co.,
Warrants to Purchase Class B
Common Stock* 07/30/92 85,909 704,944
22,608 sh. Amity Leather Products Co.,
Class A Common Stock* 07/30/92 226,080 254,566
- ---------------------------------------------------------------------------------------------------------------
311,989 959,510 4.1
- ---------------------------------------------------------------------------------------------------------------
$2,938,997 KB Alloys, Inc.,
20.00% Senior Subordinated
Term Notes due 6/30/01(4) 05/28/93 2,886,708 2,886,708
- ---------------------------------------------------------------------------------------------------------------
2,886,708 2,886,708 12.3
- ---------------------------------------------------------------------------------------------------------------
$5,023,926 Elgin National Industries, Inc.,
13.00% Senior Subordinated
Notes due 9/01/01(5) 09/24/93 4,899,149 4,899,149
5,876.1 sh. ENI Holding Corp.,
10.00% Preferred Stock
due 12/31/01 09/24/93 587,610 661,717
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
- ---------------------------------------------------------------------------------------------------------------
5,569,296 5,643,403 24.1
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes to financial statements are an
integral part of this schedule.
------------------------------
SEVEN
<PAGE> 9
FIDUCIARY CAPITAL PENSION PARTNERS, L.P.
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1994
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
PRINCIPAL
AMOUNT/ INVESTMENT AMORTIZED % OF TOTAL
SHARES INVESTMENT DATE COST VALUE INVESTMENTS
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$917,000 Protection One Alarm
Monitoring, Inc., 12.00%
Senior Subordinated Notes
due 11/01/03 11/03/93 842,226 842,226
15,405.6 sh. Protection One, Inc., Warrants
to Purchase Common Stock(6)* 11/03/93 82,420 68,343
- ---------------------------------------------------------------------------------------------------------------
924,646 910,569 3.9
- ---------------------------------------------------------------------------------------------------------------
$2,396,000 LMCOperating Corp.,
13.00% Senior Secured
Subordinated Term Notes
due 5/31/99(7) 06/10/94 2,254,799 2,254,799
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
- ---------------------------------------------------------------------------------------------------------------
2,362,620 2,362,620 10.1
- ---------------------------------------------------------------------------------------------------------------
34,996 sh. MTIHoldings II, Inc., 07/06/94 &
Common Stock* 12/28/94 237,627 31,496
- ---------------------------------------------------------------------------------------------------------------
237,627 31,496 0.1
- ---------------------------------------------------------------------------------------------------------------
$2,392,000 Canadian's Corp.,
13.50% Subordinated 09/09/94 &
Notes due 9/01/02(8) 12/29/94 2,290,675 2,290,675
$291,000 Canadian's Holdings, Inc.,
12.00% Exchangeable
Redeemable Debentures 09/09/94 &
due 8/31/04(9) 12/29/84 277,667 277,667
232,987 sh. Canadian's Corp.,
Warrants to Purchase 09/09/94 &
Common Stock* 12/29/94 34,171 34,171
- ---------------------------------------------------------------------------------------------------------------
2,602,513 2,602,513 11.1
- ---------------------------------------------------------------------------------------------------------------
Total Investments in Managed Companies (80.4% of net assets) 16,052,631 19,274,598 82.2
- ---------------------------------------------------------------------------------------------------------------
TEMPORARY INVESTMENTS:
$1,893,000 Ford Motor Credit Corporation,
5.872% Notes due 01/31/95 12/28/94 1,883,914 1,883,914
$2,307,000 Spiegel Funding Corporation,
6.005% Notes due 1/31/95 12/28/94 2,295,676 2,295,676
- ---------------------------------------------------------------------------------------------------------------
Total Temporary Investments (17.4% of net assets) 4,179,590 4,179,590 17.8
- ---------------------------------------------------------------------------------------------------------------
Total Investments (97.8% of net assets) $20,232,221 $23,454,188 100.0%
===============================================================================================================
</TABLE>
The accompanying notes to financial statements are an
integral part of this schedule.
------------------------------
EIGHT
<PAGE> 10
FIDUCIARY CAPITAL PENSION PARTNERS, L.P.
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1994
- --------------------------------------------------------------------------------
(1) The Carr-Gottstein Foods Company common stock trades on the New York
Stock Exchange. The Fund and Fiduciary Capital 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. The Fund and 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.
(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. If the warrants were converted to common stock, the
Fund would be subject to certain restrictions on its ability to
dispose of its shares. As a result of these trading restrictions, the
Fund has valued the warrants at a 9% discount to the public market
price.
(7) The notes will amortize as follows: $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.
* Non-income producing security.
The accompanying notes to financial statements are an
integral part of this schedule.
------------------------------
NINE
<PAGE> 11
FIDUCIARY CAPITAL PENSION PARTNERS, L.P.
- --------------------------------------------------------------------------------
BALANCE SHEETS
DECEMBER 31, 1994 AND 1993
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
1994 1993
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS:
Investments (Notes 2, 10 and 11)
Portfolio investments, at value:
Managed companies (amortized cost -
$16,052,631 and $23,258,218, respectively) $19,274,598 $22,773,789
Non-managed companies (amortized cost
- $495,554) - 607,406
Temporary investments, at amortized cost 4,179,590 1,831,848
- --------------------------------------------------------------------------------------------------------
Total investments 23,454,188 25,213,043
Cash and cash equivalents (Note 2) 173,095 792,425
Accrued interest receivable 521,794 311,352
Other assets, including receivables from sale of investments 544,921 44,901
- --------------------------------------------------------------------------------------------------------
Total assets $24,693,998 $26,361,721
========================================================================================================
LIABILITIES:
Due to affiliates (Notes 6, 7, 8 and 9) $ 44,384 $ 33,962
Accounts payable and accrued liabilities 33,542 28,125
Prepaid interest income 52,635 -
Distributions payable to partners (Note 3) 589,545 649,068
- --------------------------------------------------------------------------------------------------------
Total liabilities 720,106 711,155
- --------------------------------------------------------------------------------------------------------
NET ASSETS (NOTES 3 AND 4):
Managing General Partner 16,116 8,853
Limited Partners (equivalent to $18.47
and $17.96, respectively, per limited
partnership unit based on 1,296,999
and 1,427,950 units outstanding) (Note 5) 23,957,776 25,641,713
- --------------------------------------------------------------------------------------------------------
Net assets 23,973,892 25,650,566
- --------------------------------------------------------------------------------------------------------
Total liabilities and net assets $24,693,998 $26,361,721
========================================================================================================
</TABLE>
The accompanying notes to financial statements are an integral part
of these financial statements.
------------------------------
TEN
<PAGE> 12
FIDUCIARY CAPITAL PENSION PARTNERS, L.P.
- --------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS
FOR EACH OF THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
1994 1993 1992
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INVESTMENT INCOME:
Income:
Interest $2,310,063 $2,587,285 $3,514,411
Other income 25,248 - 113,038
- -------------------------------------------------------------------------------------------------------------
Total investment income 2,335,311 2,587,285 3,627,449
- -------------------------------------------------------------------------------------------------------------
Expenses:
Investment advisory fees (Note 6) 232,554 261,646 261,209
Fund administration fees (Note 7) 118,327 118,327 118,327
Independent General Partner fees
and expenses (Note 8) 48,777 46,083 32,781
Administrative expenses (Note 7) 67,980 67,631 65,751
Professional fees 42,613 51,660 50,936
Amortization 10,500 10,500 10,500
Other expenses 56,425 59,826 42,107
- -------------------------------------------------------------------------------------------------------------
Total expenses 577,176 615,673 581,611
- -------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME 1,758,135 1,971,612 3,045,838
- -------------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized (loss) gain on investments (Note 10) (2,089,653) 899,531 45,215
Net increase (decrease) in unrealized
appreciation of investments (Note 11) 3,594,544 (751,148) 378,571
- -------------------------------------------------------------------------------------------------------------
Net gain on investments 1,504,891 148,383 423,786
- -------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $3,263,026 $2,119,995 $3,469,624
=============================================================================================================
</TABLE>
The accompanying notes to financial statements are an integral part
of these financial statements.
------------------------------
ELEVEN
<PAGE> 13
FIDUCIARY CAPITAL PENSION PARTNERS, L.P.
- --------------------------------------------------------------------------------
STATEMENTS OF CASH FLOWS
FOR EACH OF THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
1994 1993 1992
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net increase in net assets resulting
from operations $ 3,263,026 $ 2,119,995 $ 3,469,624
Adjustments to reconcile net increase
in net assets resulting from operations
to net cash provided by operating activities:
Accreted discount on portfolio investments (49,282) (28,443) (23,945)
Amortization 10,500 10,500 10,500
Change in assets and liabilities:
Accrued interest receivable (210,442) (89,731) 100,628
Other assets 3,957 (2,487) (5,179)
Due to affiliates 9,476 (23,533) 14,462
Accounts payable and accrued liabilities 5,417 1,700 15,437
Prepaid interest income 52,635 - -
Net realized loss (gain) on investments 2,089,653 (899,531) (45,215)
Net (increase) decrease in unrealized
appreciation of investments (3,594,544) 751,148 (378,571)
- -------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 1,580,396 1,839,618 3,157,741
- -------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of portfolio investments (4,948,269) (11,538,976) (9,513,901)
Proceeds from dispositions of portfolio investments 10,077,533 10,610,110 4,566,748
(Purchase) sale of temporary investments, net (2,347,742) 3,474,375 4,154,927
- -------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) investing activities 2,781,522 2,545,509 (792,226)
- -------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions paid to partners (2,596,272) (2,708,728) (2,708,727)
Repurchase of limited partnership units (2,402,951) (1,133,710) -
Deferred repurchase plan costs 17,975 (17,975) -
- -------------------------------------------------------------------------------------------------------------
Net cash used in financing activities (4,981,248) (3,860,413) (2,708,727)
- -------------------------------------------------------------------------------------------------------------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (619,330) 524,714 (343,212)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 792,425 267,711 610,923
- -------------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 173,095 $ 792,425 $ 267,711
=============================================================================================================
NONCASH INVESTING AND FINANCING ACTIVITIES:
Investments exchanged for other investments $ 237,627 $ - $ -
=============================================================================================================
</TABLE>
The accompanying notes to financial statements are an integral part
of these financial statements.
------------------------------
TWELVE
<PAGE> 14
FIDUCIARY CAPITAL PENSION PARTNERS, L.P.
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
FOR EACH OF THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
1994 1993 1992
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Increase in net assets resulting from operations:
Net investment income $ 1,758,135 $ 1,971,612 $ 3,045,838
Net realized (loss) gain on investments (2,089,653) 899,531 45,215
Net increase (decrease) in unrealized
appreciation of investments 3,594,544 (751,148) 378,571
- -------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 3,263,026 2,119,995 3,469,624
Repurchase of limited partnership units (Note 5) (2,402,951) (1,133,710) -
Distributions to partners from -
Net investment income (1,758,135) (2,593,751) (2,708,582)
Net realized gain on investments (778,614) (86,863) -
- -------------------------------------------------------------------------------------------------------------
Total (decrease) increase in net assets (1,676,674) (1,694,329) 761,042
Net assets:
Beginning of year 25,650,566 27,344,895 26,583,853
- -------------------------------------------------------------------------------------------------------------
End of year (including undistributed net investment
income of $0, $0 and $622,139, respectively) $23,973,892 $25,650,566 $27,344,895
=============================================================================================================
</TABLE>
The accompanying notes to financial statements are an integral part
of these financial statements.
------------------------------
THIRTEEN
<PAGE> 15
FIDUCIARY CAPITAL PENSION PARTNERS, L.P.
- --------------------------------------------------------------------------------
SELECTED PER UNIT DATA AND RATIOS(1)
FOR EACH OF THE YEARS ENDED DECEMBER 31, 1994, 1993, 1992 AND 1991
AND FOR THE PERIOD FROM AUGUST 14, 1990 (COMMENCEMENT OF
OPERATIONS) THROUGH DECEMBER 31, 1990
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
1994 1993 1992 1991 1990
- ---------------------------------------------------------------------------------------------------------------
<S> <C>
PER UNIT DATA:
Investment income $1.63 (2) $1.73 (2) $2.41 $2.10 $.61 (2)
Expenses (.40)(2) (.41)(2) (.38) (.37) (.17)(2)
- ---------------------------------------------------------------------------------------------------------------
Net investment income 1.23 (2) 1.32 (2) 2.03 1.73 .44 (2)
Net proceeds from sale of limited
partnership units - - - - 17.65
Net realized (loss) gain on investments (1.46)(2) .60 (2) .03 - -
Net increase (decrease) in unrealized
appreciation of investments 2.52 (2) (.50)(2) .25 - -
Distributions declared to partners (1.78) (1.81) (1.80) (1.57) (.41)
- ---------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net asset value .51 (.39) .51 .16 17.68
Net asset value:
Beginning of period 17.96 18.35 17.84 17.68 -
- -------------------------------------------------------------------------------------------------------------
End of period $18.47 $17.96 $18.35 $17.84 $17.68
=============================================================================================================
RATIOS:
Ratio of expenses to average net assets 2.27% 2.27% 2.16% 2.06% 0.99%
Ratio of net investment income to
average net assets 6.91% 7.28% 11.33% 9.71% 2.56%
Number of limited partnership units
at end of period(1) 1,296,999 1,427,950 1,489,800 1,489,800 1,489,800
</TABLE>
(1) Effective October 1, 1993, each $1,000 limited partnership unit was
redenominated into fifty $20 limited partnership units. All amounts
shown for prior periods have been restated to give effect to this
redenomination.
(2) Calculated using the weighted average number of limited partnership
units outstanding during the years ended December 31, 1994 and 1993 of
1,413,240 and 1,482,514, respectively, and during the period from
August 14, 1990 (commencement of operations) through December 31, 1990
of 1,368,600.
The accompanying notes to financial statements are an integral
part of these selected per unit data and ratios.
------------------------------
FOURTEEN
<PAGE> 16
FIDUCIARY CAPITAL PENSION PARTNERS, L.P.
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1994 AND 1993
1. ORGANIZATION AND PURPOSE
Fiduciary Capital Pension Partners, L.P. (the "Fund"), a Delaware
limited partnership, was formed on October 20, 1988 to operate as a business
development company under the Investment Company Act of 1940. The Fund's
operations commenced on August 14, 1990.
FCM Fiduciary Capital Management Company ("FCM"), the Managing
General Partner of, and the investment adviser to, the Fund, is responsible,
subject to the supervision of the Independent General Partners, for overseeing
and monitoring the Fund's investments.
The investment objective of the Fund is to provide current income and
capital appreciation by investing primarily in subordinated debt and related
equity securities issued as the mezzanine financing of privately structured,
friendly leveraged buyouts, leveraged acquisitions and leveraged
recapitalizations. These investments usually involve established middle-market
companies and are referred to herein as "portfolio investments". Managed
companies are those to which significant managerial assistance is offered.
As set forth in the Partnership Agreement, the Fund's investment
period will end on December 31, 1995. Thereafter, the Fund will not be
permitted to acquire investments in new portfolio companies, but can make
additional investments in existing portfolio companies.
A separate fund, Fiduciary Capital Partners, L.P. ("FCP"), was also
formed on October 20, 1988 for taxable investors with investment objectives,
policies and restrictions similar to those of the Fund. While the Fund and FCP
have co-invested in each of the portfolio investments, each fund is accounted
for separately. Each fund's participation in the portfolio investments is in
proportion to the amount of capital that each fund had available for investment
at the time each investment was acquired. Certain expenses are allocated
between the funds based on the amount of each fund's total capital. The
accompanying financial statements include only the activities of the Fund.
2. SIGNIFICANT ACCOUNTING POLICIES
Accounting Method The Fund maintains its accounting records,
prepares financial statements and files its tax returns using the accrual
method of accounting.
Valuation of Investments FCM values the Fund's investments on a
weekly basis utilizing a variety of methods. For securities that are publicly
traded and for which market quotations are available, valuations are set by the
closing sales, or an average of the closing bid and ask prices, as of the
valuation date. The Fund discounts these closing market prices between 5% and
20% to reflect lack of liquidity, if the Fund's securities are subject to legal
or contractual trading restrictions, or to reflect the potential market impact
which could result from the sale of the securities, if the Fund and FCP
combined own a material percentage of the outstanding securities. The amount
of the discount varies based upon the type of restriction, the time remaining
on the restriction and the size of the holding.
Fair value for securities that are not fully traded in any liquid
public markets or that are privately held are determined pursuant to valuation
policies and procedures which have been approved by the Independent General
Partners and subject to their supervision. There is a range of values that are
reasonable for such investments at any particular time. Each such investment
is valued initially based upon its original cost to the Fund ("cost method").
Debt securities with attached warrants for the purchase of common stock are
initially recorded at a discount from face value equal to the estimated
relative value of the warrants at date of investment. The discount is amortized
to income as an adjustment to yield from the debt securities. Face value less
unamortized discount represents the "amortized cost" of the debt securities.
The cost method is used until significant developments affecting the
portfolio company provide a basis for use of an appraisal valuation. Appraisal
valuations are based upon such factors as the portfolio company's earnings,
cash flow and net worth, the market prices for similar securities of comparable
companies and an assessment of the portfolio company's future financial
prospects. In a case of unsuccessful operations, the appraisal may be based
upon liquidation value. Appraisal valuations are necessarily subjective. The
Fund also may use, when available, third-party transactions in a portfolio
company's securities as the basis of valuation ("private market method"). The
private market method is used only with respect to completed transactions or
firm offers made by sophisticated, independent investors.
Temporary investments with maturities of less than 60 days are stated
at amortized cost, which approximates market value. Under this method,
temporary investments are valued at cost when purchased and thereafter a
constant proportionate amortization of any discount or premium is recorded
until maturity of the investment.
------------------------------
FIFTEEN
<PAGE> 17
FIDUCIARY CAPITAL PENSION PARTNERS, L.P.
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Cash and Cash Equivalents The Fund considers investments in money
market funds to be cash equivalents.
Interest Receivable on Notes Notes are placed on non-accrual status
in the event of a default (after any applicable grace period expires) or if FCM
determines that there is no reasonable expectation of collecting the interest.
Deferred Organization Expenses Organization expenses, which are
included in other assets, are being amortized on a straight-line basis over a
period of five years.
Income Taxes No provision for income taxes has been made in the
financial statements because taxes on Fund income are the responsibility of the
individual partners rather than the Fund.
Investment Transactions The Fund records portfolio investment
transactions on the date on which it obtains an enforceable right to demand the
securities or payment thereof and records temporary investment transactions on
the trade date. Realized gains and losses on investments are determined on the
basis of specific identification for both accounting and tax purposes.
3. ALLOCATIONS OF PROFITS, LOSSES AND CASH DISTRIBUTIONS
Pursuant to the Partnership Agreement, all income derived from
temporary investments will be distributed and allocated 99% to the Limited
Partners and 1% to FCM. Net investment income will, in general, be distributed
and allocated: (i) 99% to the Limited Partners and 1% to FCM until the Limited
Partners have received a cumulative non- compounded preferred return of 9% per
annum on their capital contributions to the Fund, then (ii) 70% to the Limited
Partners and 30% to FCM until FCM has received 10% of all current and prior
distributions and allocations, and thereafter, (iii) 90% to the Limited
Partners and 10% to FCM.
Proceeds from capital transactions will, in general, be distributed
and allocated: (i) 99% to the Limited Partners and 1% to FCM until the
Limited Partners have received a cumulative, non-compounded preferred
return of 9% per annum on their capital contribution to the Fund from net
investment income, capital transactions, or both, then (ii) 100% to the Limited
Partners until they have received a return of their capital contributions to
the Fund, and thereafter, (iii) 80% to the Limited Partners and 20% to FCM.
All cash distributions and earnings since the inception of the Fund
have been allocated 99% to the Limited Partners and 1% to FCM.
4. CAPITAL CONTRIBUTIONS
Upon formation of the Fund, FCM contributed $4,000 for its general
partner interest in the Fund. Units of limited partnership interest ("Units")
were then sold in a public offering. The Fund held three closings between
August 14, 1990 and October 18, 1990, receiving gross offering proceeds of
$29,796,000. Commissions and other offering costs were charged against
proceeds resulting in net capital contributions from Limited Partners of
$26,294,970.
5. PERIODIC UNIT REPURCHASE PLAN
The Fund's Limited Partners adopted a periodic unit repurchase plan at
a special meeting of the Limited Partners on October 1, 1993. Pursuant to the
terms of the repurchase policy, the Fund will annually offer to repurchase from
its Limited Partners, up to 7.5% of its outstanding Units for an amount equal
to the current net asset value per Unit, net of a fee (not to exceed 2%) to be
retained by the Fund to offset expenses incurred in connection with the
repurchase offer. If the number of tendered Units in any year exceeds 7.5% of
the outstanding Units, the Fund's General Partners may vote to repurchase up to
an additional 2% of the outstanding Units. Pursuant to the initial repurchase
offer, 61,850 Units (4.15% of the outstanding Units) were redeemed during
November 1993 at a net asset value per Unit of $18.33 ($17.96, net of the 2%
fee). An additional 130,951 Units (9.17% of the outstanding Units) were
redeemed during November 1994 at a net asset value per Unit of $18.35 ($17.98,
net of the 2% fee).
6. INVESTMENT ADVISORY FEES
As compensation for its services as investment adviser, FCM receives a
subordinated monthly fee at the annual rate of 1% of the Fund's available
capital, as defined in the Partnership Agreement. Investment advisory fees of
$232,554, $261,646 and $261,209 were incurred by the Fund for 1994, 1993 and
1992, respectively.
7. Fund Administration Fees
As compensation for its services as fund administrator, FCM receives a
monthly fee at the annual rate of .45% of net proceeds available for
investment, as defined in the Partnership Agreement. Fund administration fees
of $118,327 were incurred each year by the Fund during 1994, 1993 and 1992.
FCM is also reimbursed, subject to various limitations, for administrative
expenses incurred in providing accounting and investor services to the
------------------------------
SIXTEEN
<PAGE> 18
FIDUCIARY CAPITAL PENSION PARTNERS, L.P.
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Fund. The Fund reimbursed FCM for administrative expenses of $67,980, $67,631
and $65,751 for 1994, 1993 and 1992, respectively.
8. INDEPENDENT GENERAL PARTNER FEES AND EXPENSES
As compensation for services rendered to the Fund, each of the
Independent General Partners receives from the Fund and 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 of $48,777, $46,083 and $32,781
were incurred by the Fund for 1994, 1993 and 1992, respectively.
9. OTHER RELATED PARTY TRANSACTIONS
FCM and its affiliates are entitled to reimbursement of certain direct
expenses paid on behalf of the Fund. Such reimbursable expenses amounted to
$144,184, $215,685 and $106,687 during 1994, 1993 and 1992, respectively.
10. PORTFOLIO INVESTMENTS
The Fund's portfolio investments consist primarily of high-yield
private placement securities issued as the mezzanine financing of privately
structured, friendly leveraged buyouts, leveraged acquisitions and leveraged
recapitalizations, and are generally linked with an equity participation. The
risk of loss upon default by an issuer is greater than with investment grade
securities because high-yield securities are generally unsecured and are
usually subordinated to other creditors of the issuer. Also, these issuers
usually have higher levels of indebtedness and are more sensitive to adverse
economic conditions than investment grade issuers. Most of these securities
are subject to resale restrictions and generally there is no quoted market for
such securities.
Although the Fund cannot eliminate the risks associated with its
investments in these high-yield securities, it has established risk management
procedures. The Fund subjects each prospective investment to rigorous
analysis, and makes only those investments that are recommended by FCM and that
meet the Fund's investment guidelines or that have otherwise been approved by
the Independent General Partners. The Fund also has procedures in place to
continually monitor its portfolio companies.
As of December 31, 1994, the Fund held portfolio investments in eleven
Managed Companies, with an aggregate cost of approximately $16.1 million.
During the year ended December 31, 1994, the Fund exercised the KEMET
Corporation warrants it held and acquired new portfolio investments in LMC
Operating Corp. and Canadian's Corp. at a total cost of approximately $4.9
million.
The Fund's subordinated debt investments in Huntington Holdings, Inc.
and Amity Leather Products Co. were prepaid during 1994. In addition, the Fund
sold a portion of its KEMET Corporation common stock during 1994. The Fund
received approximately $10.6 million in proceeds, including applicable
prepayment premiums, resulting in aggregate realized gains of $1,201,350.
During 1994, Mobile Technology, Inc. ("MTI") consummated a financial
restructuring. Pursuant to the terms of the restructuring, the Fund and MTI's
other subordinated lenders exchanged their subordinated notes for common stock
in a new holding company, MTI Holdings II, Inc., which now owns 100% of MTI.
The Fund also received a minimal number of additional shares of common stock in
MTI Holdings II, Inc. in connection with the liquidation of the original
holding company. As a result of the restructuring, the Fund recognized a
realized loss of $3,291,003, which was equal to the difference between the
estimated values of the new common stock on the dates it was received, and the
combined amortized cost of the subordinated notes that were exchanged and the
cost of the equity securities that were held by the Fund in the original
holding company.
The Fund has pledged the common stock and warrants it owns in Amity
Leather Products Co. ("Amity") as collateral for Amity's corporate debt. None
of the Fund's other portfolio investments have been pledged or otherwise
encumbered.
11. UNREALIZED APPRECIATION AND DEPRECIATION OF INVESTMENTS
As of December 31, 1993, the Fund had recorded net unrealized
depreciation of investments of $372,577. During 1994, the Fund recorded
$1,721,305 of unrealized appreciation and $1,052,484 of unrealized depreciation
of investments. In addition, the Fund disposed of investments during 1994 with
respect to which the Fund had recorded $2,925,723 of net unrealized
depreciation during prior years. Therefore, at December 31, 1994, the Fund had
net unrealized appreciation of investments of $3,221,967.
------------------------------
SEVENTEEN
<PAGE> 19
FIDUCIARY CAPITAL PENSION PARTNERS, L.P.
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
12. RECONCILIATION TO INCOME TAX METHOD OF ACCOUNTING
The following is a reconciliation of the net increase in net assets
resulting from operations in the accompanying financial statements to the
taxable income reported for federal income tax purposes:
<TABLE>
<CAPTION>
1994 1993 1992
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net increase in net assets resulting from operations
per financial statements $3,263,026 $2,119,995 $3,469,624
Increase (decrease) resulting from:
Losses on investments not yet recognized for
income tax purposes 2,927,625 - -
Unrealized (appreciation) depreciation of investments (3,594,544) 751,148 (378,571)
Interest income (32,992) - -
Amortization of organization and start-up costs (23,019) (23,019) (23,019)
Fee income, net of amortization (24,253) 154,975 -
Other (20,930) (1,300) 21,500
- -------------------------------------------------------------------------------------------------------------
Taxable income per federal income tax return $2,494,913 $3,001,799 $3,089,534
=============================================================================================================
</TABLE>
The following is a reconciliation of the amount of the Fund's net
assets as shown in the accompanying financial statements and the tax bases of
the Fund's net assets:
<TABLE>
<CAPTION>
1994 1993 1992
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net assets per financial statements $23,973,892 $25,650,566 $27,344,895
Syndication, organization and start-up costs, net 3,214,941 3,214,756 3,370,696
Losses on investments not yet recognized for
income tax purposes 2,927,625 - -
Distributions payable 589,545 - -
Fee income, net of amortization 130,722 154,975 -
Prepaid interest income 52,635 - -
Accrued expenses 24,518 20,200 21,500
Unrealized (appreciation) depreciation of investments (3,221,967) 372,577 (378,571)
Accrued interest income (85,627) - -
- -------------------------------------------------------------------------------------------------------------
Tax bases of net assets $27,606,284 $29,413,074 $30,358,520
=============================================================================================================
</TABLE>
------------------------------
EIGHTEEN
<PAGE> 20
FIDUCIARY CAPITAL PENSION PARTNERS, L.P.
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Partners of Fiduciary Capital Pension Partners, L.P.:
We have audited the accompanying balance sheets of Fiduciary Capital
Pension Partners, L.P. (a Delaware limited partnership) as of December 31, 1994
and 1993, including the schedule of investments as of December 31, 1994, and
the related statements of operations, cash flows and changes in net assets for
each of the three years in the period ended December 31, 1994 and the selected
per unit data and ratios for the four years then ended and for the period from
August 14, 1990 (commencement of operations) through December 31, 1990. These
financial statements and per unit data and ratios are the responsibility of the
partnership's managing general partner. Our responsibility is to express an
opinion on these financial statements and per unit data and ratios based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and per unit
data and ratios are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of securities
owned as of December 31, 1994 and 1993 by correspondence with the custodian.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and selected per unit data
and ratios referred to above present fairly, in all material respects, the
financial position of Fiduciary Capital Pension Partners, L.P. as of December
31, 1994 and 1993, and the results of its operations, its cash flows and the
changes in its net assets for each of the three years then ended and the
selected per unit data and ratios for the four years then ended and for the
period from August 14, 1990 (commencement of operations) through December 31,
1990, in conformity with generally accepted accounting principles.
As discussed in Note 2, the financial statements include investment
securities valued at $16,158,734 at December 31, 1994 (67.4% of net assets) and
$19,925,047 at December 31, 1993 (77.7% of net assets) whose values have been
estimated by the managing general partner in the absence of readily
ascertainable market values. We have reviewed the procedures used by the
managing general partner in arriving at its estimate of value of such
securities and have inspected the underlying documentation, and in the
circumstances we believe the procedures are reasonable and the documentation
appropriate. However, because of the inherent uncertainty of valuation, the
managing general partner's estimate of values may differ significantly from the
values that would have been used had a ready market existed for the securities
and the differences could be material.
ARTHUR ANDERSEN LLP
Denver, Colorado
February 3, 1995.
------------------------------
NINETEEN
<PAGE> 21
FIDUCIARY CAPITAL PENSION PARTNERS, L.P.
- --------------------------------------------------------------------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
During 1990, the Fund completed a public offering of its Units. Net
offering proceeds available to the Fund, after deducting commissions and other
offering costs, totaled $26,298,970.
The Fund's Limited Partners adopted a periodic unit repurchase plan at
a special meeting of the Limited Partners on October 31, 1993. Pursuant to the
terms of the repurchase policy, the Fund will annually offer to purchase from
its Limited Partners, up to 7.5% of its outstanding Units for an amount equal
to the current net asset value per Unit, net of a fee (not to exceed 2%) to be
retained by the Fund to offset expenses incurred in connection with the
repurchase offer. If the number of tendered Units in any year exceeds 7.5% of
the outstanding Units, the Fund's General Partners may vote to purchase up to
an additional 2% of the outstanding Units. Pursuant to the initial repurchase
offer, 61,850 Units (4.15% of the outstanding Units) were redeemed during
November 1993 at a net asset value per Unit of $18.33 ($17.96 net of the 2%
fee). An additional 130,951 Units (9.17% of the outstanding Units) were
redeemed during November 1994 at a net asset value per Unit of $18.35 ($17.98,
net of the 2% fee).
As of December 31, 1994, the Fund held portfolio investments in eleven
Managed Companies, with an aggregate cost of approximately $16.1 million.
These portfolio investments, which were made from net offering proceeds and the
reinvestment of proceeds from the sale of other portfolio investments,
represent approximately 80.4% 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 subordinated debt that the Fund held. In addition, three of the
portfolio companies have successfully completed IPOs of their stock. The Fund
continues to hold all of the equity components of its original investments,
except for a portion of its KEMET stock.
As of December 31, 1994, the Fund's remaining assets were invested in
short-term commercial paper. These funds are available for investment, for
distribution to the partners or to fund the annual repurchase offer.
During the year ended December 31, 1994, the Fund exercised the KEMET
warrants it held and acquired new portfolio investments in LMC and Canadian's
at a total cost of $4,949,215.
The Fund's subordinated debt investments in Huntington and Amity were
prepaid during 1994. In addition, the Fund sold a portion of its KEMET common
stock during 1994. In the aggregate, the Fund received $10,609,986 in
proceeds, including applicable prepayment premiums from these transactions.
The Fund stopped accruing interest on the MTI notes that it previously
held, effective October 1, 1992. During the fall of 1992, MTI notified its
lenders that it would probably be unable to meet its debt amortization and
interest obligations during 1993. In January 1993, MTI confirmed its inability
to pay and commenced restructuring negotiations with its various lenders
outside of bankruptcy proceedings. These restructuring negotiations were
successfully completed and the restructuring was consummated on July 6, 1994.
Pursuant to the terms of the restructuring, the Fund and MTI's other
subordinated lenders exchanged their subordinated notes for common stock in a
new holding company, MTI II, which now owns 100% of MTI. The Fund also
received a minimal number of additional shares of MTI II common stock on
December 28, 1994 in connection with the liquidation of the original holding
company.
Accrued interest receivable increased $210,442 from $311,352 at
December 31, 1993 to $521,794 at December 31, 1994. This increase resulted
primarily from a $238,385 increase in the deferred portion of the interest
receivable from KB Alloys with respect to the Fund's investment in $2,938,997
of KB Alloys' 20.00% Senior Subordinated Term Notes due June 30, 2001. KB
Alloys is required to pay 13.00% interest currently, while the remaining 7.00%
of the interest may be deferred at KB Alloys' option. During any period in
which the payment of interest is deferred, the interest rate on the notes
increases from 20.00% to 21.00%. To date, KB Alloys has elected to defer
payment of the interest. At December 31, 1994, the cumulative amount of
deferred interest totaled $381,825. 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. This increase was partially
offset by a decrease in the amount of accrued interest receivable with respect
to the Fund's other portfolio investments.
Other assets increased $500,020 from $44,901 at December 31, 1993 to
$544,921 at December 31, 1994. This increase resulted primarily from a
$532,452 receivable from the sale of KEMET common stock during December 1994.
This amount was received by the Fund during January 1995. This increase was
partially offset by a decrease in prepaid expenses and the amortization of
deferred organization expenses.
------------------------------
TWENTY
<PAGE> 22
FIDUCIARY CAPITAL PENSION PARTNERS, L.P.
- --------------------------------------------------------------------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
The Fund had prepaid interest income of $52,635 at December 31, 1994.
This prepaid interest was related to the Canadian's 13.50% Subordinated Notes
that were acquired during 1994 and which require interest to be paid quarterly,
in advance, to the Fund.
Distributions payable to partners decreased $59,523, from $649,068 at
December 31, 1993 to $589,545 at December 31, 1994. This 9.17% decrease
resulted from a corresponding percentage decrease in the number of outstanding
Units as a result of the repurchase of Units by the Fund during November 1994.
The Fund expects to reinvest all available funds, including the
principal amount of any future prepayments received, in additional portfolio
investments. The Partnership Agreement provides that the Fund's investment
period will end on December 31, 1995. Thereafter, the Fund will not be
permitted to acquire investments in new portfolio companies, but can make
additional investments in existing portfolio companies.
For 1994, the Fund declared cash distributions to its partners in the
aggregate amount of $2,536,749. The distributions were paid in four equal (on
a per-Unit basis) quarterly payments during the months of May, August and
November 1994 and February 1995. Each of the distributions were equal to an
annualized rate equal to 9% of contributed capital ($.45 per Unit). Total cash
distributions for 1994 were paid out of current net investment income (69.3%)
and gains from capital transactions (30.7%).
The Fund expects 1995 distributions, beginning with the distribution
payable during May 1995, to be made at a 6.0% distribution rate ($.30 per Unit
per quarter). In the past, the Fund has realized gains from its investments
that have provided additional sources of earnings for distributions. Although
there can be no assurances, the Fund may realize similar gains in 1995 that
could in turn result in a higher distribution rate.
RESULTS OF OPERATIONS
INVESTMENT INCOME AND EXPENSES
The Fund's investment income consists primarily of interest income
earned from the various debt investments which have been acquired by the Fund.
Major expenses include the investment advisory fee, fund administration fee,
professional fees and administrative expenses.
1994 Compared to 1993
The Fund's net investment income was $1,758,135 for the year ended
December 31, 1994 on total investment income of $2,335,311 as compared to net
investment income of $1,971,612 on total investment income of $2,587,285 for
the prior year. Net investment income per limited partnership unit decreased
from $1.32 to $1.23, and the ratio of net investment income to average net
assets decreased from 7.28% to 6.91% for the year ended December 31, 1994, in
comparison to the prior year.
Net investment income for the year ended December 31, 1994 decreased
primarily as a result of a decrease in investment income.
Investment income decreased $251,974, or 9.74%, for the year ended
December 31, 1994 in comparison to the prior year. This decrease resulted
primarily from a decrease of approximately 6.0% in the Fund's average net
assets. The decrease in average net assets was primarily a result of the
repurchase of Units by the Fund during both November 1993 and 1994. In
addition, there was an increase from 1993 to 1994 in the relative portion of
the Fund's total net assets that were invested in lower-yielding temporary
investments and non-income producing equity investments and a decrease in the
portion invested in higher-yielding subordinated debt investments. The
negative effect of these items was partially offset by higher interest rates
obtained in recent months on the Fund's temporary investments.
Total expenses decreased $38,497, or 6.3%, for the year ended December
31, 1994 in comparison to the prior year. This aggregate decrease was slightly
greater than the 6.0% percentage decline in the Fund's average net assets from
1993 to 1994. The decrease resulted primarily from decreases in investment
advisory fees, professional fees and other expenses. The investment advisory
fees decreased as a result of the repurchase of Units during November 1993 and
1994 and the realization during July 1994 of the loss on the Fund's MTI
investment (see above discussion). Both the repurchase of Units and the
realization of the MTI loss decreased the amount of the Fund's available
capital (as defined in the Partnership Agreement), which is the base with
respect to which the investment advisory fees are calculated. The decrease in
professional fees and other expenses resulted primarily from legal fees and
other costs incurred during 1993 in connection with the preparation of the
proxy and consent solicitation.
------------------------------
TWENTY-ONE
<PAGE> 23
FIDUCIARY CAPITAL PENSION PARTNERS, L.P.
- --------------------------------------------------------------------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
1993 Compared to 1992
The Fund's net investment income was $1,971,612 for the year ended
December 31, 1993 on total investment income of $2,587,285 as compared to net
investment income of $3,045,838 on total investment income of $3,627,449 for
the prior year. Net investment income per limited partnership unit decreased
from $2.03 to $1.32 and the ratio of net investment income to average net
assets decreased from 11.33% to 7.28% for the year ended December 31, 1993 in
comparison to the prior year.
Investment income declined $1,040,164 or 28.7%, for the year ended
December 31, 1993 in comparison to the prior year. This decline resulted
primarily from the effect of placing the MTI investment on non-accrual status,
effective October 1, 1992, and the prepayment of the Fund's subordinated debt
investments in Midwest Dental Products Corporation, Neodata, KEMET Electronics
and Carr-Gottstein during December 1992, May 1993, June 1993 and July 1993,
respectively. A portion of the cash received from these prepayments was used
to purchase new subordinated debt investments in KB Alloys, Elgin and
Protection One, an additional debt investment in KEMET Electronics (which was
subsequently prepaid) and non- income producing equity investments in KEMET and
ENI Holding Corp. The cash received from the prepayments was invested in
significantly lower-yielding temporary investments on an interim basis pending
the acquisition of additional portfolio investments. Approximately $1.8
million of temporary investments were still held at December 31, 1993. As a
result of these developments, the yield on this portion of the Fund's portfolio
declined significantly from 1992 to 1993. These declines were partially offset
by an increase from 1992 to 1993 in the interest income earned with respect to
the Huntington and Amity investments. Since these investments were acquired
during 1992, the Fund only received a partial year's interest for 1992.
Expenses increased $34,062 or 5.5%, for the year ended December 31,
1993 in comparison to the prior year. This increase reflects increases in the
Independent General Partner fees and expenses and other expenses. The increase
in the Independent General Partner fees and expenses resulted primarily from
the election of an additional Independent General Partner during the fourth
quarter of 1992. The increase in other expenses resulted primarily from the
costs incurred in connection with the proxy and consent solicitation during
1993 and an increase in costs associated with insurance and the preparation and
distribution of periodic reports to the partners.
NET REALIZED GAIN (LOSS) ON INVESTMENTS
The Fund realized gains of $899,531 and $45,215 during the years ended
December 31, 1993 and 1992, respectively. During the year ended December 31,
1994, the Fund realized net losses of $2,089,653, which consisted of gains of
$1,201,350 and losses of $3,291,003.
The realized gain for 1992 consisted of a prepayment premium received
from Midwest Dental Products Corporation. The realized gains for 1993
consisted of gains, including applicable prepayment premiums, resulting from
the prepayment by Neodata, KEMET Electronics and Carr-Gottstein of subordinated
notes which were held by the Fund.
The realized gains and losses for 1994 resulted from the following
transactions.
On February 1, 1994, Huntington prepaid its $4,521,533 of 14.65%
Senior Subordinated Term Notes which were carried by the Fund at an amortized
cost of $4,452,021. The Fund received $4,826,768, including a prepayment
premium, resulting in a realized gain of $374,747.
On March 16, 1994, the Fund sold 27,129 shares of KEMET common stock.
The Fund received $447,629 of sales proceeds, resulting in a realized gain of
$121,716.
On July 6, 1994, MTI consummated a financial restructuring. Pursuant
to the terms of the restructuring, the Fund and MTI's other subordinated
lenders exchanged their subordinated notes for common stock in a new holding
company, MTI II, which now owns 100% of MTI. As a result of the restructuring,
the Fund recognized a realized loss of $3,291,256, which was equal to the
difference between the $237,375 estimated value of the common stock received in
the restructuring and the $3,528,630 amortized cost of the Fund's total MTI
investment. On December 28, 1994, the Fund received a minimal number of
additional shares of common stock in MTI II in connection with the liquidation
of the original holding company. The $252 estimated value of these additional
shares was recorded as a reduction of the previously recognized loss amount.
On August 1, 1994, Amity prepaid its $4,521,533 of 10.50% Subordinated
Notes that were held by the Fund, at par. The Fund realized a gain of $73,295
as a result of the prepayment, because the notes were carried by the Fund at an
amortized cost of $4,448,238.
------------------------------
TWENTY-TWO
<PAGE> 24
FIDUCIARY CAPITAL PENSION PARTNERS, L.P.
- --------------------------------------------------------------------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
On September 22, 1994, the Fund sold 14,121 shares of KEMET common
stock. The Fund received $281,604 of sales proceeds, resulting in a realized
gain of $111,963.
On December 30, 1994, the Fund exercised its KEMET warrants and sold
18,086 shares of the common stock. The Fund received $532,452 of sales
proceeds, resulting in a realized gain of $519,629.
NET UNREALIZED APPRECIATION OF INVESTMENTS
FCM values the Fund's portfolio investments on a weekly basis
utilizing a variety of methods. For securities that are publicly traded and
for which market quotations are available, valuations are set by the closing
sales, or an average of the closing bid and ask prices, as of the valuation
date.
Fair value for securities that are not fully traded in any liquid
public markets or that are privately held are determined pursuant to valuation
policies and procedures that have been approved by the Independent General
Partners and subject to their supervision. There is a range of values that are
reasonable for such investments at any particular time. Each such investment
is valued initially based upon its original cost to the Fund ("cost method").
The cost method is used until significant developments affecting the portfolio
company provide a basis for use of an appraisal valuation. Appraisal
valuations are based upon such factors as the portfolio company's earnings,
cash flow and net worth, the market prices for similar securities of comparable
companies and an assessment of the portfolio company's future financial
prospects. In a case of unsuccessful operations, the appraisal may be based
upon liquidation value. Appraisal valuations are necessarily subjective. The
Fund also may use, when available, third-party transactions in a portfolio
company's securities as the basis of valuation ("private market method"). The
private market method will be used only with respect to completed transactions
or firm offers made by sophisticated, independent investors.
During the year ended December 31, 1992, the Fund recorded net
unrealized appreciation of investments of $378,571.
During the year ended December 31, 1993, the Fund recorded $452,824 of
unrealized appreciation and $662,221 of unrealized depreciation of investments.
In addition, the Fund disposed of investments during 1993 with respect to which
the Fund had recorded $541,751 of unrealized appreciation during 1992.
Therefore, at December 31, 1993, the Fund had net unrealized depreciation of
investments of $372,576.
The net increase in unrealized appreciation of investments during 1994
and the cumulative net unrealized appreciation of investments at December 31,
1994, consisted of the following components:
<TABLE>
<CAPTION>
Unrealized Appreciation
(Depreciation) Recorded
--------------------------------------
As of
Portfolio Investment During 1994 December 31, 1994
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
Unrealized net depreciation
recorded during prior years
with respect to investments
disposed of during 1994 $2,925,723 $ -
Carr-Gottstein common stock (543,639) 173,518
Neodata warrants (226,137) 176,369
Neodata preferred stock* (62,500) (186,888)
KEMET common stock** 1,007,972 2,081,367
Huntington warrants - 476,182
Amity warrants 637,121 619,035
Amity common stock 2,105 28,486
ENI preferred stock 74,107 74,107
Protection One warrants (14,077) (14,077)
MTI IIcommon stock (206,131) (206,131)
- ---------------------------------------------------------------------------------------------------
$3,594,544 $3,221,968
===================================================================================================
</TABLE>
* Stock received in exchange for common stock in connection with
recapitalization of company during 1994.
** Stock received from exercise of warrants during 1994.
Carr-Gottstein completed an IPO of its common stock on July 1, 1993.
The stock, which trades on the New York Stock Exchange, closed at $6.50 on
December 31, 1994. This price is down from the closing price of $10.375 on
December 31, 1993. Based on the $6.50 closing trading price of the common
stock, the Fund's 147,678 shares of common stock would have a market value of
$959,907. However, the Fund valued the shares at a 5% discount to the public
market price to reflect the potential market impact which could result from the
sale of the material number of shares owned by the Funds.
The Neodata preferred stock and warrants were written down during 1994
based on a comparative analysis of Neodata's recent operating results.
KEMET completed an IPO of its common stock on October 21, 1992. The
stock, which trades on the NASDAQ National Market System, closed at $29.375 (an
average of the
------------------------------
TWENTY-THREE
<PAGE> 25
FIDUCIARY CAPITAL PENSION PARTNERS, L.P.
- --------------------------------------------------------------------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
closing bid and ask prices) on December 31, 1994. This price is up from the
closing price of $15.50 on December 31, 1993. At December 31, 1994, the Fund
held 76,528 shares of KEMET common stock. Based on the $29.375 closing trading
price of the common stock, the Fund's common stock would have a market value of
$2,248,010. However, the Fund valued the shares at a 5% discount to the public
market price to reflect the potential market impact which could result from the
sale of the material number of shares owned by the Funds.
The Huntington warrants to purchase common stock were written up in
value at December 31, 1992 to bring Huntington's valuation more in line with
the valuation of other comparable companies in its industry. The warrants were
revalued at December 31, 1993 based on an updated comparison of Huntington to
the comparable companies. The revaluation took into consideration the receipt
of additional warrants by the Fund during 1993, in accordance with terms of
the Fund's agreement with Huntington.
The Amity warrants and common stock were written up in value during
1994 to bring Amity's valuation more in line with the valuation of comparable
companies in its industry.
The ENI Holding Corp. preferred stock was written up in value during
1994 to reflect the amount of the cumulative 10% preferential dividend that has
accrued with respect to the preferred stock.
Protection One completed an IPO of its common stock on September 29,
1994. The stock, which trades on the NASDAQ National Market System, closed at
$4.875 (an average of the closing bid and ask prices) on December 31, 1994.
The Fund holds warrants to acquire 15,405.6 shares of Protection One common
stock at a nominal exercise price. Based on the $4.875 closing trading price
of the common stock, the Fund's warrants would have a market value of $75,102.
However, the Fund valued the warrants at a 9% discount to the public market
price, because the Fund is subject to certain restrictions on its ability to
dispose of its shares.
The MTI II common stock was written down in value at December 31, 1994
based upon an independent third party valuation of the company which was
obtained by MTI's management.
FCM continually monitors both the Fund's portfolio companies and the
markets, and continually evaluates the decision to hold or sell its traded
securities.
------------------------------
TWENTY-FOUR
<PAGE> 26
FIDUCIARY CAPITAL PENSION PARTNERS, L.P.
- --------------------------------------------------------------------------------
FUND INFORMATION
Fiduciary Capital Pension Partners, L.P.
410 17th Street, Suite 400
Denver, Colorado 80202
(800) 866-7607
Managing General Partner
FCM Fiduciary Capital Management Company
Auditors
Arthur Andersen LLP
Denver, Colorado
Legal Counsel
Dorsey & Whitney P.L.L.P.
Denver, Colorado
Transfer Agent
Service Data Corporation
Omaha, Nebraska
A copy of the Annual Report
on Form 10-K, as filed with the
Securities and Exchange Commission,
will be furnished without charge to
Limited Partners upon request.
<PAGE> 27
FIDUCIARY CAPITAL PENSION PARTNERS, L.P.
- --------------------------------------------------------------------------------
------------------------------
FIRST QUARTER REPORT
1995
<PAGE> 28
FIDUCIARY CAPITAL PENSION PARTNERS, L.P.
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
MARCH 31, 1995 (UNAUDITED)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
PRINCIPAL
AMOUNT/ INVESTMENT AMORTIZED % OF TOTAL
SHARES INVESTMENT DATE COST VALUE INVESTMENTS
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
MANAGED COMPANIES:
147,678 sh. Carr-Gottstein Foods Co.,
Class B Common Stock(1)* 10/23/90 $ 738,394 $ 841,765
- --------------------------------------------------------------------------------------------------------------
738,394 841,765 3.5%
- --------------------------------------------------------------------------------------------------------------
340,951 sh. Neodata Corporation,
Warrants to Purchase
Common Stock and
10.00% Class A Convertible
Preferred Stock - Series 2* 12/27/90 33,912 1
32,606.87 sh. Neodata Corporation,
10.00% Class A Convertible
Preferred Stock - Series 2* 09/30/92 245,005 1
1,895.75 sh. Neodata Corporation,
Common Stock* 09/30/92 1 1
- --------------------------------------------------------------------------------------------------------------
278,918 3 0.0
- --------------------------------------------------------------------------------------------------------------
67,823 sh. KEMET Corporation, 03/28/91 &
Common Stock(2)* 07/11/91 48,075 2,408,140
- --------------------------------------------------------------------------------------------------------------
48,075 2,408,140 10.0
- --------------------------------------------------------------------------------------------------------------
267.9 sh. Huntington Holdings, Inc.,
Warrants to Purchase
Common Stock (3)* 01/31/92 85,678 561,860
- --------------------------------------------------------------------------------------------------------------
85,678 561,860 2.3
- --------------------------------------------------------------------------------------------------------------
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 4.3
- --------------------------------------------------------------------------------------------------------------
$2,938,997 KB Alloys, Inc.,
20.00% Senior Subordinated
Term Notes due 6/30/01(4) 05/28/93 2,888,153 2,888,153
- --------------------------------------------------------------------------------------------------------------
2,888,153 2,888,153 12.0
- --------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes to financial statements are an
integral part of this schedule.
--------------------
ONE
<PAGE> 29
FIDUCIARY CAPITAL PENSION PARTNERS, L.P.
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED)
MARCH 31, 1995 (UNAUDITED)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
PRINCIPAL
AMOUNT/ INVESTMENT AMORTIZED % OF TOTAL
SHARES INVESTMENT DATE COST VALUE INVESTMENTS
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$5,023,926 Elgin National Industries, Inc.,
13.00% Senior Subordinated
Notes due 9/01/01(5) 09/24/93 4,903,049 4,903,049
5,876.1 sh. ENI Holding Corp.,
10.00% Preferred Stock
due 12/31/01 09/24/93 587,610 676,731
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
- --------------------------------------------------------------------------------------------------------------
5,573,196 5,662,317 23.5
- --------------------------------------------------------------------------------------------------------------
$917,000 Protection One Alarm
Monitoring, Inc., 12.00%
Senior Subordinated Notes
due 11/01/03 11/03/93 844,031 844,031
15,405.6 sh. Protection One, Inc.,
Warrants to Purchase
Common Stock(6)* 11/03/93 82,420 78,954
- --------------------------------------------------------------------------------------------------------------
926,451 922,985 3.8
- --------------------------------------------------------------------------------------------------------------
$2,396,000 LMCOperating Corp.,
13.00% Senior Secured
Subordinated Term Notes
due 5/31/99(7) 06/10/94 2,261,702 2,261,702
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
- --------------------------------------------------------------------------------------------------------------
2,369,523 2,369,523 9.8
- --------------------------------------------------------------------------------------------------------------
$2,392,000 Canadian's Corp.,
13.50% Subordinated 09/09/94 &
Notes due 9/01/02(8) 12/29/94 2,293,531 2,293,531
$291,000 Canadian's Holdings, Inc.,
12.00% Exchangeable
Redeemable Debentures 09/09/94 &
due 8/31/04(9) 12/29/84 277,709 277,709
232,987 sh. Canadian's Corp.,
Warrants to Purchase 09/09/94 &
Common Stock* 12/29/94 34,171 34,171
- --------------------------------------------------------------------------------------------------------------
2,605,411 2,605,411 10.8
- --------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes to financial statements are an
integral part of this schedule.
--------------------
TWO
<PAGE> 30
FIDUCIARY CAPITAL PENSION PARTNERS, L.P.
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED)
MARCH 31, 1995 (UNAUDITED)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
PRINCIPAL
AMOUNT/ INVESTMENT AMORTIZED % OF TOTAL
SHARES INVESTMENT DATE COST VALUE INVESTMENTS
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
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 (79.3% of net assets) 16,063,415 19,323,470 80.1
- --------------------------------------------------------------------------------------------------------------
TEMPORARY INVESTMENTS:
$2,400,000 Ford Motor Credit
Corporation, 5.852%
Notes due 4/13/95 03/31/95 2,395,344 2,395,344
$2,400,000 Wal-Mart Stores, Inc.,
5.913% Notes due 4/13/95 03/31/95 2,395,392 2,395,392
- --------------------------------------------------------------------------------------------------------------
Total Temporary Investments (19.7% of net assets) 4,790,736 4,790,736 19.9
- --------------------------------------------------------------------------------------------------------------
Total Investments (99.0% of net assets) $20,854,151 $24,114,206 100.0%
==============================================================================================================
</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. The Fund and 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 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.
* Non-income producing security.
The accompanying notes to financial statements are an
integral part of this schedule.
--------------------
THREE
<PAGE> 31
FIDUCIARY CAPITAL PENSION PARTNERS, L.P.
- --------------------------------------------------------------------------------
BALANCE SHEETS
MARCH 31, 1995 AND DECEMBER 31, 1994 (UNAUDITED)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
1995 1994
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS:
Investments (Note 6)
Portfolio investments, at value:
Managed companies (amortized cost -
$16,063,415 and $16,052,631,
respectively) $19,323,470 $19,274,598
Temporary investments, at amortized cost 4,790,736 4,179,590
- ----------------------------------------------------------------------------------------------------------
Total investments 24,114,206 23,454,188
Cash and cash equivalents 130,725 173,095
Accrued interest receivable 609,738 521,794
Other assets, including receivables from
sale of investments 9,003 544,921
- ----------------------------------------------------------------------------------------------------------
Total assets $24,863,672 $24,693,998
==========================================================================================================
LIABILITIES:
Payable to affiliates (Notes 2, 3 and 4) $ 29,213 $ 44,384
Accounts payable and accrued liabilities 41,101 33,542
Prepaid interest income 54,717 52,635
Distributions payable to partners 393,030 589,545
- ----------------------------------------------------------------------------------------------------------
Total liabilities 518,061 720,106
- ----------------------------------------------------------------------------------------------------------
NET ASSETS:
Managing General Partner 19,833 16,116
Limited Partners (equivalent to $18.76
and $18.47, respectively, per limited
partnership unit based on 1,296,999
units outstanding) 24,325,778 23,957,776
- ----------------------------------------------------------------------------------------------------------
Net assets 24,345,611 23,973,892
- ----------------------------------------------------------------------------------------------------------
Total liabilities and net assets $24,863,672 $24,693,998
==========================================================================================================
</TABLE>
The accompanying notes to financial statements are an
integral part of these financial statements.
--------------------
FOUR
<PAGE> 32
FIDUCIARY CAPITAL PENSION PARTNERS, L.P.
- --------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1995 AND 1994 (UNAUDITED)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
1995 1994
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME:
Income:
Interest $599,065 $570,703
- ----------------------------------------------------------------------------------------------------------
Total investment income 599,065 570,703
- ----------------------------------------------------------------------------------------------------------
Expenses:
Investment advisory fees (Note 2) 49,757 62,552
Fund administration fees (Note 3) 29,582 29,582
Independent General Partner fees
and expenses (Note 4) 16,024 15,287
Administrative expenses (Note 3) 17,224 17,190
Professional fees 14,461 10,942
Amortization 2,625 2,625
Other expenses 5,896 12,279
- ----------------------------------------------------------------------------------------------------------
Total expenses 135,569 150,457
- ----------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME 463,496 420,246
- ----------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Net realized gain on investments 263,165 496,463
Net increase (decrease) in unrealized
appreciation of investments 38,088 (8,980)
- ----------------------------------------------------------------------------------------------------------
Net gain on investments 301,253 487,483
- ----------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $764,749 $907,729
==========================================================================================================
</TABLE>
The accompanying notes to financial statements are an
integral part of these financial statements.
--------------------
FIVE
<PAGE> 33
FIDUCIARY CAPITAL PENSION PARTNERS, L.P.
- --------------------------------------------------------------------------------
STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1995 AND 1994 (UNAUDITED)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
1995 1994
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net increase in net assets resulting from operations $764,749 $ 907,729
Adjustments to reconcile net increase
in net assets resulting from operations
to net cash provided by operating activities:
Accreted discount on portfolio investments (16,952) (7,510)
Amortization 2,625 2,625
Change in assets and liabilities:
Accrued interest receivable (87,944) (28,259)
Other assets 841 1,629
Payable to affiliates (14,225) 5,855
Accounts payable and accrued liabilities 7,559 18,419
Prepaid interest income 2,082 -
Net realized gain on investments (263,165) (496,463)
Net (increase) decrease in unrealized
appreciation of investments (38,088) 8,980
- ----------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 357,482 413,005
- ----------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of portfolio investments (946) -
Proceeds from dispositions of portfolio investments 801,785 5,274,396
(Purchase) sale of temporary investments, net (611,146) (4,963,686)
- ----------------------------------------------------------------------------------------------------------
Net cash provided by investing activities 189,693 310,710
- ----------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions paid to partners (589,545) (649,068)
- ----------------------------------------------------------------------------------------------------------
Net cash used in financing activities (589,545) (649,068)
- ----------------------------------------------------------------------------------------------------------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (42,370) 74,647
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 173,095 792,425
- ----------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $130,725 $867,072
==========================================================================================================
</TABLE>
The accompanying notes to financial statements are an
integral part of these financial statements.
--------------------
SIX
<PAGE> 34
FIDUCIARY CAPITAL PENSION PARTNERS, L.P.
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE THREE MONTHS ENDED MARCH 31, 1995 AND FOR
THE YEAR ENDED DECEMBER 31, 1994 (UNAUDITED)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
1995 1994
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase in net assets resulting from operations:
Net investment income $ 463,496 $ 1,758,135
Net realized gain (loss) on investments 263,165 (2,089,653)
Net increase in unrealized appreciation of investments 38,088 3,594,544
- ----------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 764,749 3,263,026
Repurchase of limited partnership units - (2,402,951)
Distributions to partners from -
Net investment income (393,030) (1,758,135)
Realized gain on investments - (778,614)
- ----------------------------------------------------------------------------------------------------------
Total increase (decrease) in net assets 371,719 (1,676,674)
Net assets:
Beginning of period 23,973,892 25,650,566
- ----------------------------------------------------------------------------------------------------------
End of period (including undistributed
net investment income of $70,466
and $0, respectively) $24,345,611 $23,973,892
=========================================================================================================
</TABLE>
The accompanying notes to financial statements are an
integral part of these financial statements.
--------------------
SEVEN
<PAGE> 35
FIDUCIARY CAPITAL PENSION PARTNERS, L.P.
- --------------------------------------------------------------------------------
SELECTED PER UNIT DATA AND RATIOS
FOR THE THREE MONTHS ENDED MARCH 31, 1995 AND 1994 (UNAUDITED)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
1995 1994
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
PER UNIT DATA:
Investment income $ .46 $ .39
Expenses (.10) (.10)
- ----------------------------------------------------------------------------------------------------------
Net investment income .36 .29
Net realized gain on investments .20 .35
Net increase (decrease) in unrealized
appreciation of investments .03 (.01)
Distributions declared to partners (.30) (.45)
- ----------------------------------------------------------------------------------------------------------
Net increase in net asset value .29 .18
Net asset value:
Beginning of period 18.47 17.96
- ----------------------------------------------------------------------------------------------------------
End of period $18.76 $18.14
==========================================================================================================
RATIOS (ANNUALIZED):
Ratio of expenses to average net assets 2.24% 2.33%
Ratio of net investment income to average net assets 7.67% 6.52%
Number of limited partnership units at end of period 1,296,999 1,427,950
</TABLE>
The accompanying notes to financial statements are an
integral part of these financial statements.
--------------------
EIGHT
<PAGE> 36
FIDUCIARY CAPITAL PENSION PARTNERS, L.P.
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1995 (UNAUDITED)
1. GENERAL
The accompanying unaudited interim financial statements include all
adjustments (consisting solely of normal recurring adjustments) which are, in
the opinion of the Managing General Partner, necessary to fairly present the
financial position of the Fund as of March 31, 1995 and the results of its
operations, changes in net assets and its cash flows for the 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 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
$49,757 were paid by the Fund for the three months ended March 31, 1995.
3. FUND ADMINISTRATION FEES
As compensation for its services as fund administrator, FCM receives a
monthly fee at the annual rate of .45% of net proceeds available for
investment, as defined in the Partnership Agreement. Fund administration fees
of $29,582 were paid by the Fund for the three months ended March 31, 1995.
FCM is also reimbursed, subject to various limitations, for administrative
expenses incurred in providing accounting and investor services to the Fund.
The Fund reimbursed FCM for administrative expenses of $17,224 for the three
months ended March 31, 1995.
4. INDEPENDENT GENERAL PARTNER FEES AND EXPENSES
As compensation for services rendered to the Fund, each of the
Independent General Partners receives from the Fund and 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 three
months ended March 31, 1995 totaled $16,024.
--------------------
NINE
<PAGE> 37
FIDUCIARY CAPITAL PENSION PARTNERS, L.P.
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
5. CONTINGENCIES
The Fund has been notified by PaineWebber Incorporated ("PaineWebber")
that FCM, the Managing General Partner of the Fund, is a named defendant in a
class action lawsuit brought in March 1995 against PaineWebber and a number of
its affiliates. FCM believes that this litigation will be resolved without
material adverse effect on the Fund's financial statements, taken as a whole.
6. SUBSEQUENT EVENT
On April 25, 1995, the Fund sold 5,426 shares of KEMET Corporation
common stock. The Fund received $217,040 of sales proceeds, resulting in a
realized gain of $213,194.
--------------------
TEN
<PAGE> 38
FIDUCIARY CAPITAL PENSION PARTNERS, L.P.
- --------------------------------------------------------------------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
As of March 31, 1995, the Fund held portfolio investments in eleven
Managed Companies, with an aggregate cost of approximately $16.1 million. These
portfolio investments, which were made from net offering proceeds and the
reinvestment of proceeds from the sale of other portfolio investments,
represent approximately 79.3% 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 portion of its KEMET
Corporation ("KEMET") stock.
As of March 31, 1995, the Fund's remaining assets were invested in
short-term commercial paper. These funds are available for investment, for
distribution to the partners or to fund the annual repurchase offer.
The Fund received $269,333 of proceeds from the sale of 8,705 shares
of KEMET common stock during the three months ended March 31, 1995. These
sales proceeds were used by the Fund to fund a portion of the cost of a
follow-on investment in Canadian's Corp., which was acquired on December 29,
1994.
On April 25, 1995, the Fund received $217,040 of sales proceeds from
the sale of 5,426 shares of KEMET common stock. The gain realized from this
transaction has been reserved by the Managing General Partner to partially fund
either the 1995 repurchase offer or any follow-on investments that the Fund may
make in existing portfolio companies during 1995.
The Fund expects to reinvest all available funds, including the
principal amount of any future prepayments received, in additional portfolio
investments. The Partnership Agreement provides that the Fund's investment
period will end on December 31, 1995. Thereafter, the Fund will not be
permitted to acquire investments in new portfolio companies, but will be able
to make additional investments in existing portfolio companies.
--------------------
ELEVEN
<PAGE> 39
FIDUCIARY CAPITAL PENSION PARTNERS, L.P.
- --------------------------------------------------------------------------------
Pursuant to the terms of the Fund's periodic unit repurchase policy
that was adopted by the Fund's Limited Partners during 1993, the Fund will
annually offer to purchase from its Limited Partners up to 7.5% of its
outstanding Units for an amount equal to the current net asset value per Unit,
net of a fee (not to exceed 2%) to be retained by the Fund to offset expenses
incurred in connection with the repurchase offer. If the number of tendered
Units in any year exceeds 7.5% of the outstanding Units, the Fund's General
Partners may vote to repurchase up to an additional 2% of the outstanding
Units. The 1995 repurchase offer will be mailed to the Limited Partners during
October 1995. The actual redemption of tendered Units will occur on November
21, 1995.
Accrued interest receivable increased $87,944 from $521,794 at
December 31, 1994 to $609,738 at March 31, 1995. This increase resulted
primarily from a $58,780 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 March 31,
1995, the cumulative amount of deferred interest totaled $440,605. 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 three months ended March 31, 1995.
Other assets decreased $535,918, from $544,921 at December 31, 1994 to
$9,003 at March 31, 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.
The payable to affiliates decreased $15,171 from $44,384 at December
31, 1994 to $29,213 at March 31, 1995. FCM Fiduciary Capital Management
Company ("FCM") pays expenses on behalf of the Fund and is then reimbursed on a
monthly basis. The payable at March 31, 1995 decreased because the total
expenses paid by FCM on behalf of the Fund during March 1995 were less than
those paid during December 1994.
Distributions payable to partners decreased $196,515, from $589,545 at
December 31, 1994 to $393,030 at March 31, 1995. This decrease corresponds to
the percentage decrease in the quarterly distribution rate from $.45 per Unit
to $.30 per Unit (as discussed in the following paragraphs).
During the three months ended March 31, 1995, the Fund paid a cash
distribution pertaining to the fourth quarter of 1994 in the amount of
$589,545. This quarterly distribu-
--------------------
TWELVE
<PAGE> 40
FIDUCIARY CAPITAL PENSION PARTNERS, L.P.
- --------------------------------------------------------------------------------
tion was equal to $.45 per Unit and represented an annualized rate equal to
9.0% of contributed capital.
As discussed in previous reports, the quarterly distributions for 1995
will be paid at a reduced rate. The distribution for the first quarter of 1995
will be paid on May 12, 1995 in an amount equal to $.30 per Unit, or an
annualized rate equal to 6.0% of contributed capital. This distribution
consists entirely of net investment income earned during the three months ended
March 31, 1995.
It is currently expected that the remaining 1995 distributions will be
made at the same 6.0% rate. In the past, the Fund has realized gains from its
investments that have provided additional sources of cash for distributions.
Although there can be no assurances, the Fund may realize similar gains in 1995
that could in turn result in a higher distribution rate for subsequent
quarters. Gains can also be utilized to fund the annual repurchase offer or to
fund any follow-on investments that the Fund may make in existing portfolio
companies.
The Fund's investment period will end on December 31, 1995. Although
the Fund will be permitted to make additional investments in existing portfolio
companies after 1995, the Fund will no longer be permitted to acquire
investments in new portfolio companies. This will impact the amount of the
Fund's quarterly distributions for 1996 and subsequent years because all
proceeds from dispositions or maturities of investments after December 31, 1995
will be distributed to investors, except to the extent the cash is needed to
fund the annual repurchase offer or to fund any follow-on investments that the
Fund may make in existing portfolio companies.
The Fund has been notified by PaineWebber Incorporated ("PaineWebber")
that FCM, the Managing General Partner of the Fund, is a named defendant in a
class action lawsuit brought in March 1995 against PaineWebber and a number of
its affiliates. FCM believes that this litigation will be resolved without
material adverse effect on the Fund's financial statements, taken as a whole.
RESULTS OF OPERATIONS
INVESTMENT INCOME AND EXPENSES
The Fund's net investment income was $463,496 for the three months
ended March 31, 1995 as compared to net investment income of $420,246 for the
corresponding period of the prior year. Net investment income per limited
partnership unit increased from $.29 to $.36 and the ratio of net investment
income to average net assets increased from 6.52% to 7.67% for the three months
ended March 31, 1995 as compared to the corresponding period of the prior year.
Net investment income for the three months ended March 31, 1995
increased as a result of a slight increase in investment income and a slight
decrease in total expenses.
--------------------
THIRTEEN
<PAGE> 41
FIDUCIARY CAPITAL PENSION PARTNERS, L.P.
- --------------------------------------------------------------------------------
Investment income increased $28,362, or 5.0%, for the three months
ended March 31, 1995 as compared to the corresponding period of the prior year.
This small increase was primarily the result of higher interest rates on the
Fund's temporary investments and a slight increase in the aggregate amount that
the Fund had invested in higher-yielding subordinated debt investments. The
positive effect of these items was partially offset by a reduction in the
amount of funds invested in temporary investments. This occurred as a result
of the repurchase of Units by the Fund during the fourth quarter of 1994, which
caused the Fund's total capital to decline by approximately 9.2%, and a slight
increase in the amount invested in non-income producing equity investments.
Total expenses decreased $14,888, or 9.9%, for the three months ended
March 31, 1995 as compared to the corresponding period of the prior year. This
decrease resulted primarily from a decrease in investment advisory fees and
other expenses. The investment advisory fees decreased as a result of the
repurchase of Units by the Fund during the fourth quarter of 1994 and the
realization during July 1994 of the loss on the Fund's Mobile Technology, Inc.
("MTI") investment. Both the repurchase of Units and the realization of the
MTI loss decreased the amount of the Fund's available capital (as defined in
the Partnership Agreement), which is the base with respect to which the
investment advisory fees are calculated. Other expenses decreased primarily as
a result of a decrease in consulting fees. These decreases were partially
offset by an increase in professional fees.
NET REALIZED GAIN ON INVESTMENTS
On February 28, 1995, the Fund sold 8,705 shares of KEMET common
stock. The Fund received $269,333 of sales proceeds, resulting in a realized
gain of $263,165.
NET UNREALIZED APPRECIATION OF INVESTMENTS
FCM values the Fund's portfolio investments on a weekly basis
utilizing a variety of methods. For securities that are publicly traded and
for which market quotations are available, valuations are set by the closing
sales, or an average of the closing bid and ask prices, as of the valuation
date.
Fair value for securities that are not traded in any liquid public
markets or that are privately held are determined pursuant to valuation
policies and procedures that have been approved by the Independent General
Partners and subject to their supervision. There is a range of values that are
reasonable for such investments at any particular time. Each such investment
is valued initially based upon its original cost to the Fund ("cost method").
The cost method is used until significant developments affecting the portfolio
company provide a basis for use of an appraisal valuation. Appraisal
valuations are based upon such factors as the portfolio company's earnings,
cash flow and net worth, the market prices for similar securities of comparable
companies and an assessment of the portfolio company's future financial
prospects. In a case of unsuccessful operations, the
--------------------
FOURTEEN
<PAGE> 42
FIDUCIARY CAPITAL PENSION PARTNERS, L.P.
- --------------------------------------------------------------------------------
appraisal may be based upon liquidation value. Appraisal valuations are
necessarily subjective. The Fund also may use, when available, third-party
transactions in a portfolio company's securities as the basis of valuation
("private market method"). The private market method is used only with respect
to completed transactions or firm offers made by sophisticated, independent
investors.
As of December 31, 1994, the Fund had recorded $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 months ended March 31, 1995 and the cumulative net unrealized
appreciation of investments as of March 31, 1995, consisted of the following
components:
<TABLE>
<CAPTION>
Unrealized Appreciation (Depreciation) Recorded
- ----------------------------------------------------------------------------------------------------------
During the Three
Months Ended As of
Portfolio Investment March 31, 1995 March 31, 1995
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Unrealized appreciation recorded
in prior periods for investments
disposed of during 1995 $(236,754) $ -
Carr-Gottstein (70,147) 103,371
Neodata (268,395) (278,915)
KEMET 515,452 2,360,065
Huntington - 476,182
Amity 72,307 719,828
Elgin / ENI 15,014 89,121
Protection One 10,611 (3,466)
MTI - (206,131)
- ----------------------------------------------------------------------------------------------------------
$ 38,088 $3,260,055
==========================================================================================================
</TABLE>
The amount of the Fund's unrealized appreciation or depreciation for
its other investments remains unchanged from the amounts, if any, recorded at
December 31, 1994.
Carr-Gottstein Foods Company completed an IPO of its common stock on
July 1, 1993. The stock, which trades on the New York Stock Exchange, closed
at $6.00 on March 31, 1995. This price is down from the closing price of $6.50
on December 31, 1994. Based on the $6.00 closing trading price of the common
stock, the Fund's 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.
--------------------
FIFTEEN
<PAGE> 43
FIDUCIARY CAPITAL PENSION PARTNERS, L.P.
- --------------------------------------------------------------------------------
The Neodata Corporation ("Neodata") stock and warrants were written
down at March 31, 1995. The Partnership has consistently valued this
investment based upon a multiple of Neodata's cash flow. Because Neodata's
long-term debt presently provides for the accrual, rather than current payment,
of interest, the Company's debt has grown to a level which now exceeds the
Partnership's valuation.
KEMET completed an IPO of its common stock on October 21, 1992. The
stock, which trades on the NASDAQ National Market System, closed at $37.375 (an
average of the closing bid and ask prices) on March 31, 1995. This price is up
from the closing price of $29.375 on December 31, 1994. The Fund held 67,823
shares of KEMET common stock as of March 31, 1995. Based on the $37.375
closing trading price of the common stock, the Fund's stock would have a market
value of $2,534,885. However, the Fund's valuation guidelines require the
stock to be valued at a 5% discount to the public market price to reflect the
potential market impact which could result from the sale of the material number
of shares owned by the Funds.
The Amity warrants and common stock were written up in value at March
31, 1995 to bring Amity's valuation more in line with the valuation of other
comparable companies in its industry.
The ENI Holding Corp. preferred stock is being written up in value
quarterly to reflect the amount of the cumulative 10% preferential dividend
that has accrued with respect to the preferred stock.
Protection One, Inc. ("Protection One") completed an IPO of its common
stock on September 29, 1994. The stock, which trades on the NASDAQ National
Market System, closed at $5.125 (an average of the closing bid and ask prices)
on March 31, 1995. The Fund holds warrants to acquire 15,405.6 shares of
Protection One common stock at a nominal exercise price. Based on the $5.125
closing trading price of the common stock, the Fund's warrants had a market
value of $78,954 as of March 31, 1995.
FCM continually monitors both the Fund's portfolio companies and the
markets, and continually evaluates the decision to hold or sell its traded
securities.
--------------------
SIXTEEN
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM (A) FORM-Q
FOR THE QUARTER ENDED JUNE 30, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH (B) FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> JUN-30-1995
<INVESTMENTS-AT-COST> 22,582,314
<INVESTMENTS-AT-VALUE> 25,204,699
<RECEIVABLES> 647,713
<ASSETS-OTHER> 5,084
<OTHER-ITEMS-ASSETS> 125,367
<TOTAL-ASSETS> 25,982,863
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 462,771
<TOTAL-LIABILITIES> 462,771
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 1,296,999
<SHARES-COMMON-PRIOR> 1,296,999
<ACCUMULATED-NII-CURRENT> 161,928
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 2,622,385
<NET-ASSETS> 25,520,092
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 1,218,743
<OTHER-INCOME> 0
<EXPENSES-NET> 270,755
<NET-INVESTMENT-INCOME> 947,988
<REALIZED-GAINS-CURRENT> 1,983,859
<APPREC-INCREASE-CURRENT> (599,587)
<NET-CHANGE-FROM-OPS> 2,332,260
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 786,060
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 1,546,200
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 99,513
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 270,755
<AVERAGE-NET-ASSETS> 24,613,198
<PER-SHARE-NAV-BEGIN> 18.47
<PER-SHARE-NII> .72
<PER-SHARE-GAIN-APPREC> 1.06
<PER-SHARE-DIVIDEND> .60
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 19.65
<EXPENSE-RATIO> 2.20
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
