<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 March 31, 1996
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 0-17738
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Fiduciary Capital Pension Partners, L.P.
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(Exact name of registrant as specified in its charter)
Delaware 86-0653603
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(State of organization) (I.R.S. Employer
Identification No.)
410 17th Street
Suite 400
Denver, Colorado 80202
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(Address of principal (Zip Code)
executive offices)
Registrant's telephone number, including area code (800) 866-7607
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Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No .
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Fiduciary Capital Pension Partners, L.P.
Quarterly Report on Form 10-Q for the
Quarter Ended March 31, 1996
Table of Contents
<TABLE>
<CAPTION>
Page
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<S> <C> <C>
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited) 3
Schedule of Investments -
March 31, 1996 3
Balance Sheets - March 31, 1996 and
December 31, 1995 5
Statements of Operations for the three months
ended March 31, 1996 and 1995 6
Statements of Cash Flows for the three months
ended March 31, 1996 and 1995 7
Statements of Changes in Net Assets for the
three months ended March 31, 1996 and
for the year ended December 31, 1995 8
Selected Per Unit Data and Ratios 9
Notes to Financial Statements 10
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of
Operations 12
Part II. OTHER INFORMATION
Item 1. Legal Proceedings 17
Item 6. Exhibits and Reports on Form 8-K 17
</TABLE>
2
<PAGE> 3
FIDUCIARY CAPITAL PENSION PARTNERS, L.P.
SCHEDULE OF INVESTMENTS
MARCH 31, 1996
(unaudited)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Principal
Amount/ Investment Amortized % of Total
Shares Investment Date Cost Value Investments
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
MANAGED COMPANIES:
150,584.07 sh. Neodata Corporation,
10.00% Class A Convertible 12/27/90 &
Preferred Stock - Series 2* 09/30/92 $ 278,916 $ 1
8,754.89 sh. Neodata Corporation, 12/27/90 &
Common Stock* 09/30/92 1 1
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278,917 2 0.0
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23,056 sh. KEMET Corporation,
Common Stock(1)* 07/11/91 8,170 521,643
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8,170 521,643 2.6
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62,606 sh. Amity Leather Products Co.,
Warrants to Purchase Class B
Common Stock* 07/30/92 85,909 674,584
22,608 sh. Amity Leather Products Co.,
Class A Common Stock* 07/30/92 226,080 243,604
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311,989 918,188 4.6
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$5,023,926 Elgin National Industries, Inc.,
13.00% Senior Subordinated
Notes due 9/01/01(2) 09/24/93 4,920,038 4,920,038
5,876.1 sh. ENI Holding Corp.,
10.00% Preferred Stock
due 12/31/01 09/24/93 587,610 735,491
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
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5,590,185 5,738,066 28.9
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239,600 sh. LMC Operating Corp., 7.00%
Cumulative Redeemable
Preferred Stock* 06/10/94 2,389,210 2,384,408
22.72 sh. LMC Operating Corp.,
Common Stock* 02/09/96 454,399 1
47.92 sh. LMC Credit Corp.,
Common Stock* 02/09/96 1 1
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2,843,610 2,384,410 12.0
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34,996 sh. MTI Holdings II, Inc. 07/06/94 &
Common Stock* 12/28/94 237,627 31,496
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237,627 31,496 0.2
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</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)
MARCH 31, 1996
(unaudited)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
Principal
Amount/ Investment Amortized % of Total
Shares Investment Date Cost Value Investments
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$1,290,000 R.B.M. Precision Metal
Products, Inc., 13.00%
Senior Subordinated
Secured Notes due
5/24/02(3) 05/24/95 1,201,004 1,201,004
439.694 sh. R.B.M. Precision Metal
Products, Inc., Warrants
to Purchase Common
Stock* 05/24/95 73,295 73,295
- --------------------------------------------------------------------------------------------------------------------------
1,274,299 1,274,299 6.4
- --------------------------------------------------------------------------------------------------------------------------
$3,265,920 Atlas Environmental, Inc.
13.50% Senior Subordinated
Secured Notes due 01/19/03(4) 01/25/96 3,170,036 3,170,036
338,423 sh. Atlas Environmental, Inc.,
Warrants to Purchase
Common Stock(5)* 01/25/96 33,842 33,842
- --------------------------------------------------------------------------------------------------------------------------
3,203,878 3,203,878 16.1
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Total Investments in Managed Companies (70.8% of net assets) 13,748,675 14,071,982 70.8
- --------------------------------------------------------------------------------------------------------------------------
TEMPORARY INVESTMENTS:
$2,900,000 Ford Motor Credit Corporation,
5.13% Notes due 04/10/96 03/27/96 2,896,288 2,896,288
$2,900,000 Anheuser-Busch Companies,
Inc., 5.09% Notes due 04/10/96 03/27/96 2,896,317 2,896,317
- --------------------------------------------------------------------------------------------------------------------------
Total Temporary Investments (29.2% of net assets) 5,792,605 5,792,605 29.2
- --------------------------------------------------------------------------------------------------------------------------
Total Investments (100.0% of net assets) $19,541,280 $19,864,587 100.0%
==========================================================================================================================
</TABLE>
(1) The KEMET Corporation common stock trades on the NASDAQ National Market
System.
(2) The notes will amortize in eight equal quarterly installments of $627,991
commencing on 11/30/99.
(3) The notes will amortize in three equal annual installments of $430,000
commencing on 5/24/00.
(4) The notes will amortize in five equal annual installments of $640,120
commencing on 1/19/99.
(5) The Atlas Environmental, Inc. common stock trades over the counter on a
limited basis with quotations provided via the OTC Bulletin Board. The
warrants have an exercise price of $8.00 per share.
* Non-income producing security.
The accompanying notes to financial statements are an
integral part of this schedule.
4
<PAGE> 5
FIDUCIARY CAPITAL PENSION PARTNERS, L.P.
BALANCE SHEETS
MARCH 31, 1996 AND DECEMBER 31, 1995
(unaudited)
<TABLE>
<CAPTION>
1996 1995
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<S> <C> <C>
ASSETS:
Investments:
Portfolio investments, at value:
Managed companies (amortized cost -
$13,748,675 and $14,272,465,
respectively) $14,071,982 $11,377,790
Temporary investments, at amortized cost 5,792,605 8,647,334
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Total investments 19,864,587 20,025,124
Cash and cash equivalents 322,588 175,768
Accrued interest receivable 165,528 117,461
Other assets 2,881 3,095
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Total assets $20,355,584 $20,321,448
=========== ===========
LIABILITIES:
Payable to affiliates (Notes 2, 3 and 4) $ 59,200 $ 54,494
Accounts payable and accrued liabilities 63,140 31,327
Distributions payable to partners 362,595 362,595
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Total liabilities 484,935 448,416
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CONTINGENCIES (Note 5)
NET ASSETS:
Managing General Partner (5,322) (5,298)
Limited Partners (equivalent to $16.61
and $16.61, respectively, per limited
partnership unit based on 1,196,564
units outstanding) 19,875,971 19,878,330
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Net assets 19,870,649 19,873,032
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Total liabilities and net assets $20,355,584 $20,321,448
=========== ===========
</TABLE>
The accompanying notes to financial statements are an
integral part of these financial statements.
5
<PAGE> 6
FIDUCIARY CAPITAL PENSION PARTNERS, L.P.
STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1995
(unaudited)
<TABLE>
<CAPTION>
1996 1995
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<S> <C> <C>
INVESTMENT INCOME:
Income:
Interest $ 400,352 $ 599,065
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Total investment income 400,352 599,065
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Expenses:
Investment advisory fees (Note 2) 41,540 49,757
Professional fees 39,498 14,461
Fund administration fees (Note 3) 29,582 29,582
Administrative expenses (Note 3) 17,224 17,224
Independent general partner fees
and expenses (Note 4) 15,562 16,024
Other expenses 14,985 5,896
Amortization - 2,625
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Total expenses 158,391 135,569
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NET INVESTMENT INCOME 241,961 463,496
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REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Net realized (loss) gain on investments (3,099,731) 263,165
Net change in unrealized gain (loss)
on investments 3,217,982 38,088
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Net gain on investments 118,251 301,253
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NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $ 360,212 $ 764,749
============ ===========
</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 CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1995
(unaudited)
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net increase in net assets resulting from operations $ 360,212 $ 764,749
Adjustments to reconcile net increase in net assets resulting
from operations to net cash provided by operating activities:
Accreted discount on portfolio investments (10,834) (16,952)
Amortization - 2,625
Change in assets and liabilities:
Accrued interest receivable (48,067) (87,944)
Other assets 214 841
Payable to affiliates 4,706 (14,225)
Accounts payable and accrued liabilities 31,813 7,559
Prepaid interest income - 2,082
Net realized loss (gain) on investments 3,099,731 (263,165)
Net change in unrealized (gain) loss
on investments (3,217,982) (38,088)
------------ ----------
Net cash provided by operating activities 219,793 357,482
------------ ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of portfolio investments (3,655,003) (946)
Proceeds from dispositions of portfolio investments 1,089,896 801,785
Sale (purchase) of temporary investments, net 2,854,729 (611,146)
------------ ----------
Net cash provided by investing activities 289,622 189,693
------------ ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions paid to partners (362,595) (589,545)
------------ ----------
Net cash used in financing activities (362,595) (589,545)
------------ ----------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 146,820 (42,370)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 175,768 173,095
------------ ----------
CASH AND CASH EQUIVALENTS AT
END OF PERIOD $ 322,588 $ 130,725
============ ==========
</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 CHANGES IN NET ASSETS
FOR THE THREE MONTHS ENDED MARCH 31, 1996
AND FOR THE YEAR ENDED DECEMBER 31, 1995
(unaudited)
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Increase in net assets from operations:
Net investment income $ 241,961 $ 1,725,971
Net realized (loss) gain on investments (3,099,731) 3,790,988
Net change in unrealized gain (loss)
on investments 3,217,982 (6,116,647)
------------ -----------
Net increase (decrease) in net
assets resulting from operations 360,212 (599,688)
Repurchase of limited partnership units - (1,959,487)
Distributions to partners from net
investment income (362,595) (1,541,685)
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Total decrease in net assets (2,383) (4,100,860)
Net assets:
Beginning of period 19,873,032 23,973,892
------------ -----------
End of period (includes net undistributed
net investment income of $63,652
and $184,286, respectively) $ 19,870,649 $19,873,032
============ ===========
</TABLE>
The accompanying notes to financial statements are an
integral part of these financial statements.
8
<PAGE> 9
FIDUCIARY CAPITAL PENSION PARTNERS, L.P.
SELECTED PER UNIT DATA AND RATIOS
FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1995
(unaudited)
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Per Unit Data:
Investment income $ .33 $ .46
Expenses (.13) (.10)
-------- ---------
Net investment income .20 .36
Net realized (loss) gain on investments (2.56) .20
Net change in unrealized gain (loss)
on investments 2.66 .03
Distributions declared to partners (.30) (.30)
-------- ---------
Net increase in net asset value - .29
Net asset value:
Beginning of period 16.61 18.47
-------- ---------
End of period $ 16.61 $ 18.76
======== =========
Ratios (annualized):
Ratio of expenses to average net assets 3.19% 2.24%
Ratio of net investment income to
average net assets 4.87% 7.67%
Number of limited partnership units at end of period 1,196,564 1,296,999
</TABLE>
The accompanying notes to financial statements are an
integral part of these selected per unit data and ratios.
9
<PAGE> 10
FIDUCIARY CAPITAL PENSION PARTNERS, L.P.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1996
(unaudited)
1. GENERAL
The accompanying unaudited interim financial statements include all
adjustments (consisting solely of normal recurring adjustments) which are, in
the opinion of FCM Fiduciary Capital Management Company ("FCM"), the Managing
General Partner of the Fund, necessary to fairly present the financial position
of the Fund as of March 31, 1996 and the results of its operations, changes in
net assets and its cash flows for the period 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, 1995.
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
$41,540 were paid by the Fund for the three months ended March 31, 1996.
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, 1996.
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, 1996.
4. INDEPENDENT GENERAL PARTNER FEES AND EXPENSES
As compensation for services rendered to the Fund, each of the
Independent General Partners receives from the Fund and Fiduciary Capital
Partners, L.P., an affiliated fund, (collectively, the "Funds") an annual fee
of $30,000, payable monthly in arrears, together with all out-of-pocket
expenses. Each Fund's allocation of these fees and expenses is based on the
relative number of outstanding Units. Fees and expenses paid by the Fund for
the three months ended March 31, 1996 totaled $15,562.
5. CONTINGENCIES
FCM was named as a defendant in a class action lawsuit brought in
March 1995 against PaineWebber Incorporated ("PaineWebber") and a number of its
affiliates concerning the sale of 70 different limited partnerships and other
direct investment programs. During May 1995, the Court entered an order
certifying the class and dismissing the class action against FCM without
prejudice.
10
<PAGE> 11
FIDUCIARY CAPITAL PENSION PARTNERS, L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1996
(unaudited)
During January 1996, PaineWebber signed a memorandum of understanding
with the plaintiffs in the class action outlining the terms under which the
parties have agreed to settle the case. Pursuant to that memorandum of
understanding, PaineWebber irrevocably deposited $125 million into an escrow
fund under the supervision of the United States District Court for the Southern
District of New York to be used to resolve the litigation in accordance with a
definitive settlement agreement and plan of allocation which the parties expect
to submit to the court for its consideration and approval within the next
several months. Until a definitive settlement and plan of allocation is
approved by the court, there can be no assurance what, if any, payment or
non-monetary benefits will be made available to unitholders in the Fund.
A similar, though smaller, suit was filed against PaineWebber and
various affiliated entities (not including FCM) during February 1996 in a
California state court.
FCM believes that this litigation will be resolved without any
material adverse effect on the Fund's financial condition.
11
<PAGE> 12
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
LIQUIDITY AND CAPITAL RESOURCES
As of March 31, 1996, the Fund held portfolio investments in eight
Managed Companies, with an aggregate cost of approximately $13.7 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 70.8% 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 has sold the stock it held in these three
companies, except for a portion of its KEMET Corporation ("KEMET") stock.
As of March 31, 1996, the Fund's remaining assets were invested in
short-term commercial paper. These funds are available to fund follow-on
investments, for distribution to the partners or to fund the annual repurchase
offer.
During February 1996, the Fund sold its Huntington Holdings, Inc.
("Huntington") warrants. As discussed below, the Fund received $1,089,896 of
proceeds from this transaction. These proceeds have been reserved by the
Managing General Partner to partially fund either the Fund's 1996 repurchase
offer or any additional follow-on investments that the Fund may make in
existing portfolio companies.
During January 1996, the Fund invested $3,200,602 in Atlas
Environmental, Inc. ("Atlas"). The investment consists of $3,265,920 of 13.5%
Senior Subordinated Secured Notes due January 19, 2003, with warrants to
acquire 338,423 shares of common stock. The warrants have an exercise price of
$8.00 per share. The Atlas common stock is currently traded over the counter
on a limited basis with quotations provided via the OTC Bulletin Board under
the symbol "ATEV".
During June 1994, the Fund invested $2,348,080 in LMC Operating Corp.
("LMC"). The investment consisted of $2,396,000 of 13.00% Senior Subordinated
Notes due May 31, 1999 with warrants to acquire common stock.
LMC has experienced significant operating difficulties since the Fund
acquired its LMC investment during 1994. LMC's majority owner has taken a
number of steps to improve LMC's operating and financial performance. These
steps included hiring new senior management and significantly reducing staff.
The majority owner has also contributed a significant amount of additional
capital. However, it is anticipated that it will take some time for the company
to regain its previous market position and return to profitability.
During 1995, the majority owner requested that the Fund participate in
a financial restructuring of LMC. The Fund agreed to the proposed
restructuring, which was consummated during February 1996. As part of the
restructuring, the Fund converted its existing LMC subordinated debt and
warrants into preferred stock and agreed to make a follow-on investment for the
purchase of $454,400 of new common stock. As a result of the restructuring,
the Fund increased its ownership of LMC from approximately 12% to approximately
23%.
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 fromits Limited Partners up to 7.5% of its
outstanding Units for an amount equal
12
<PAGE> 13
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 1996 repurchase offer will be
mailed to the Limited Partners during October 1996. The actual redemption of
tendered Units will occur on November 21, 1996.
Accrued interest receivable increased $48,067 from $117,461 at
December 31, 1995 to $165,528 at March 31, 1996. This increase resulted
primarily from the accrual of interest due on the Atlas notes that were
acquired during January 1996. This increase was partially offset by a
decrease, to zero, in the accrued interest receivable attributable to the
Fund's Canadian's investment.
During the three months ended March 31, 1996, the Fund paid a cash
distribution pertaining to the fourth quarter of 1995, in the amount of
$362,595. The distribution for the first quarter of 1996 will be paid on May
15, 1996. Both of these quarterly distributions are equal to $.30 per Unit and
represent an annualized rate equal to 6.0% of contributed capital.
The Fund's investment period ended on December 31, 1995. Although the
Fund is permitted to make additional investments in existing portfolio
companies after 1995, the Fund is no longer permitted to acquire investments in
new portfolio companies, except to fund commitments made prior to December 31,
1995. 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 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.
As of December 31, 1995, the Fund had committed to make three new
portfolio investments. In addition, the Fund had agreed in principle to the
financial restructuring of LMC. As discussed above, one of the committed
investments, Atlas, was acquired during January 1996 and the LMC financial
restructuring was consummated during February 1996. The other two committed
investments have been abandoned. The portion of the Fund's available capital
that had been reserved for these abandoned investments is now reserved to fund
either the Fund's 1996 repurchase offer or any additional follow-on investments
that the Fund may make in existing portfolio companies.
FCM was named as a defendant in a class action lawsuit brought in
March 1995 against PaineWebber and a number of it affiliates concerning the
sale of 70 different limited partnerships and other direct investment programs.
During May 1995, the Court entered an order certifying the class and dismissing
the class action against FCM without prejudice.
During January 1996, PaineWebber signed a memorandum of understanding
with the plaintiffs in the class action outlining the terms under which the
parties have agreed to settle the case. Pursuant to that memorandum of
understanding, PaineWebber irrevocably deposited $125 million into an escrow
fund under the supervision of the United States District Court for the Southern
District of New York to be used to resolve the litigation in accordance with a
definitive settlement agreement and plan of allocation which the parties expect
to submit to the court for its consideration and approval within the next
several months. Until a definitive settlement and plan of allocation is
approved by the court, there can be no assurance what, if any, payment or
non-monetary benefits will be made available to unitholders in the Fund.
A similar, though smaller, suit was filed against PaineWebber and
various affiliated entities (not including FCM) during February 1996 in a
California state court.
FCM believes that this litigation will be resolved without any
material adverse effect on the Fund's financial condition.
13
<PAGE> 14
RESULTS OF OPERATIONS
Investment Income and Expenses
The Fund's net investment income was $241,691 for the three months
ended March 31, 1996 as compared to net investment income of $463,496 for the
corresponding period of the prior year. Net investment income per limited
partnership unit decreased from $.36 to $.20 and the ratio of net investment
income to average net assets decreased from 7.67% to 4.87% for the three months
ended March 31, 1996 as compared to the corresponding period of the prior year.
Net investment income for the three months ended March 31, 1996
decreased primarily as a result of a decrease in investment income.
Investment income decreased $198,713, or 33.2%, for the three months
ended March 31, 1996, as compared to the corresponding period of the prior
year. This decrease resulted primarily from the conversion of the Fund's LMC
debt securities into non-dividend paying equity securities and the Canadian's
bankruptcy. (Both of these items are discussed elsewhere in this Report.) The
Fund's total investments also decreased as a result of the Fund's repurchase of
7.74% of its Units during the fourth quarter of 1995.
Total expenses increased $22,822, or 16.8%, for the three months ended
March 31, 1996, as compared to the corresponding period of the prior year.
This increase resulted primarily from increases in professional fees and other
expenses. These increases were primarily the result of legal fees and other
costs incurred in connection with Canadian's bankruptcy proceedings. The
increases in professional fees and other expenses were partially offset by
decreases in investment advisory fees and amortization expense. The investment
advisory fees decreased as a result of the repurchase of Units by the Fund
during the fourth quarter of 1995 and the realization during February 1996 of
the loss on the Fund's Canadian's investment. Both the repurchase of Units
and the realization of the Canadian's 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 Fund
amortized its organization costs over a five year period beginning with the
inception of the Fund in 1990. Therefore, these costs became fully amortized
during 1995.
Net Realized Gain (Loss) on Investments
Canadian's was a women's specialty retailer, which had 53 stores on
the East Coast, including stores in the New York City and Philadelphia
metropolitan areas. As widely reported in the business press, retailers almost
universally experienced extremely disappointing sales during the 1995 holiday
season. Women's specialty retailers were especially hard hit. This situation
was exacerbated by severe winter weather which hampered store operations from
Boston to Washington, D.C. As a result, a number of apparel retailers filed
for bankruptcy.
Canadian's did not escape the retailing downturn and experienced
significant operating problems. These problems culminated in Canadian's filing
for Chapter 11 bankruptcy protection on February 21, 1996 and ceasing all
operations during March 1996. As discussed in the Fund's previous filings,
Canadian's had embarked on a significant cost cutting program during the fall
of 1995, which included closing marginal stores and reducing general and
administrative costs. However, these measures were not sufficient to offset
the negative impact of the unusually bad holiday season.
As a result of these developments, it is now evident that the Fund
will not recover any of its Canadian's investment. Accordingly, the Fund
recognized the $4,103,949 loss on its Canadian's investment as a realized loss
during the three months ended March 31,
14
<PAGE> 15
1996. This loss recognition did not significantly affect the Fund's total net
gain (loss) on investments for the three months ended March 31, 1996 because
all but $5 of the loss was recorded as an unrealized loss during 1995.
During December 1995, Huntington entered into a letter of intent,
under the terms of which all Huntington stock would be sold for cash. The sale
was consummated during February 1996. The Fund's share of the actual sales
proceeds totaled $1,247,229, of which $1,089,896 was received during February
1996. The balance is being held in escrow to fund various transaction expenses
and potential contingent purchase price adjustments, and as collateral for
potential claims of the buyer with respect to representations made by the
selling shareholders, including the Fund. While the escrow amount must be
maintained for a two year period, certain of the sellers' representations will
survive for longer periods of time, which could result in the Fund being
required to reimburse the purchaser for certain costs and expenses after the
escrow is released. The Fund valued the Huntington warrants at December 31,
1995 at an amount approximately equal to 75% of the ultimate sales proceeds
(not including the Fund's share of the escrow) due to the inherent uncertainty
that existed at that time as to whether the sale would actually be consummated.
The Fund recognized a realized gain of $1,004,218 from this
transaction during February 1996. The Fund has not assigned any value to its
$157,333 share of the escrow because it is uncertain how much, if any, of the
escrowed funds will ultimately be received by the Fund. Additional gain will
be recognized if the Fund actually receives a distribution of any of the
escrowed funds.
Net Unrealized Gain (Loss) on 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, 1995, the Fund had recorded $2,153,515 of
unrealized gain and $5,048,190 of unrealized loss on investments. Therefore,
as of December 31, 1995, the Fund had recorded a total net unrealized loss on
investments of $2,894,675.
15
<PAGE> 16
The net increase in unrealized gain (loss) of investments during the
three months ended March 31, 1996 and the cumulative net unrealized gain on
investments as of March 31, 1996, consisted of the following components:
<TABLE>
<CAPTION>
Unrealized Gain (Loss) Recorded
-------------------------------
During the Three
Months Ended As of
Portfolio Company March 31, 1996 March 31, 1996
- ---------------------------------- --------------- ---------------
<S> <C> <C>
Unrealized net loss recorded during
prior periods with respect to
investments disposed of during
the period $ 3,348,623 $ -
Neodata - (278,915)
KEMET (31,702) 513,473
Amity (113,629) 606,199
Elgin / ENI 14,690 147,881
LMC - (459,200)
MTI II - (206,131)
------------ ------------
$ 3,217,982 $ 323,307
============ ============
</TABLE>
The Neodata Corporation ("Neodata") stock was written down to a
negligible amount during 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 exceeds the
Partnership's valuation.
KEMET completed an IPO of its common stock during 1992. The stock,
which trades on the NASDAQ National Market System, closed at $22.625 (an
average of the closing bid and ask prices) on March 31, 1996. This price is
down from the closing price of $34.125 on December 31, 1995. Based on the
$22.625 closing trading price of the common stock, the 23,056 shares of common
stock that the Fund held at March 31, 1996 had a market value of $521,643.
The Amity warrants and common stock were written down in value at
March 31, 1996 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.
As discussed above, LMC has experienced significant operating problems
since the Fund acquired its LMC investment during 1994 and the Fund's LMC
investment was recently restructured. As a result of LMC's operational
difficulties and the fact that the Fund now owns equity securities rather than
debt securities, the Fund wrote its LMC investment down by $459,200 during
1995.
The MTI II common stock was written down in value during 1994 based
upon an independent third party valuation of the company that was obtained by
MTI II'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.
16
<PAGE> 17
Part II. OTHER INFORMATION
Item 1. Legal Proceedings
There are no material legal proceedings pending directly against the
Fund.
As previously reported, FCM, the Managing General Partner of the Fund,
was named as a defendant in a class action lawsuit against PaineWebber and a
number of its affiliates concerning its sale of 70 different limited
partnerships and other direct investment programs, 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 in FCM and an affiliate of PaineWebber,
remain as defendants.
During January 1996, PaineWebber signed a memorandum of understanding
with the plaintiffs in the class action outlining the terms under which the
parties have agreed to settle the case. Pursuant to that memorandum of
understanding, PaineWebber irrevocably deposited $125 million into an escrow
fund under the supervision of the United States District Court for the Southern
District of New York to be used to resolve the litigation in accordance with a
definitive settlement agreement and plan of allocation that the parties expect
to submit to the court for its consideration and approval within the next
several months. Until a definitive settlement and plan of allocation is
approved by the court, there can be no assurance what, if any, payment or
non-monetary benefits will be made available to unitholders in the Fund.
During February 1996, approximately 150 plaintiffs filed an action in
Sacramento, California Superior Court against PaineWebber and various
affiliated entities concerning the plaintiffs' purchase of various limited
partnership interests. The complaint alleges, among other things, that
PaineWebber and its related entities committed fraud by selling or promoting
limited partnership investments that were unsuitable for the plaintiffs and by
overstating the benefits, understating the risks and failing to state material
facts concerning the investments. The complaint seeks compensatory damages of
$15 million, plus punitive damages.
The Fund was not named as a defendant in either 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 with respect to the indemnity will not have any
material adverse effect on the Fund's financial condition.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits and Reports to be filed:
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<S> <C>
11.1 Statement of Computation of Net Investment Income Per Limited
Partnership Unit.
19.1 Reports Furnished to Securities Holders.
27.1 Financial Data Schedule.
</TABLE>
17
<PAGE> 18
(b) The Registrant did not file any reports on Form 8-K during the
first quarter of the fiscal year ending December 31, 1996.
18
<PAGE> 19
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: May 10, 1996 By: /s/ Donald R. Jackson
---------------------
Donald R. Jackson
Chief Financial Officer
19
<PAGE> 20
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description Page
- ----------- ----------- ----
<S> <C> <C>
11.1 Statement of Computation of Net Investment Income Per Limited Partnership Unit.
19.1 Reports Furnished to Securities Holders.
27.1 Financial Data Schedule.
</TABLE>
E-1
<PAGE> 1
FIDUCIARY CAPITAL PENSION PARTNERS, L.P.
STATEMENT OF COMPUTATION OF NET
INVESTMENT INCOME PER LIMITED
PARTNERSHIP UNIT
FOR THREE MONTHS ENDED MARCH 31, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C>
Net Investment Income $ 241,961 $ 463,496
Percentage Allocable to Limited Partners 99% 99%
------------ ------------
Net Investment Income Allocable
to Limited Partners $ 239,541 $ 458,861
============ ============
Weighted Average Number of Limited
Partnership Units Outstanding 1,196,564 1,296,999
============ ============
Net Investment Income Per Limited
Partnership Unit $ .20 $ .36
============ ============
</TABLE>
<PAGE> 1
January 31, 1995
Dear Investor:
This letter is to inform you of certain developments which will have
an effect on the net asset value of your Units in Fiduciary Capital Pension
Partners, L.P.
Canadian's Corp. is women's specialty retailer with 53 stores on the
East Coast, including stores in the New York City and Philadelphia metropolitan
areas, and approximately 820 employees. As reported in the business press,
retailers almost universally experienced extremely disappointing sales during
the recent holiday season. For reasons which are not entirely clear, women's
specialty retailers were especially hard hit. This situation was exacerbated
by severe winter weather which hampered store operations from Boston to
Washington, D.C. As a result, a number of apparel retailers have filed for
bankruptcy.
Canadian's has not escaped the retailing downturn and is experiencing
substantial operating problems. As discussed in the Fund's last quarterly
report, the company had embarked on a significant cost cutting program in the
Fall which included closing marginal stores and reducing general and
administrative costs. These measures, however, have not been sufficient to
offset an unusually bad holiday season. Canadian's is in the process of
continuing to evaluate its options, but, in light of the situation, the
Managing General Partner has decided to completely write-off the Fund's
investment in Canadian's, which had a book value of $3,411,797 prior to this
write-off. This write-off follows earlier writedowns of $692,152 in the
investment.
The Canadian's write-off results in a net asset per Unit of $16.73 as
of January 26, 1996. This write-off will also be reflected in the December 31,
1995 net asset value of the Fund, which is now being examined by the Fund's
independent accountants in connection with the Fund's year-end audit.
Please be assured that we will closely monitor the Candian's
situation, and we will apprise you of significant developments in our regular
quarterly reporting. In the meantime, if you have any questions, please call
us at 800-866- 7607.
Sincerely,
Paul Bagley, Chairman
FCM Fiduciary Capital Management Company
W. Duke DeGrassi, President
FCM Fiducairy Capital Management Company
cc: Investment Excutive
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-Q
FOR THE QUARTER ENDED MARCH 31, 1996, AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<INVESTMENTS-AT-COST> 19,541,280
<INVESTMENTS-AT-VALUE> 19,864,587
<RECEIVABLES> 165,528
<ASSETS-OTHER> 2,881
<OTHER-ITEMS-ASSETS> 322,588
<TOTAL-ASSETS> 20,355,584
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 484,935
<TOTAL-LIABILITIES> 484,935
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 1,196,564
<SHARES-COMMON-PRIOR> 1,196,564
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 120,634
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 323,307
<NET-ASSETS> 19,870,649
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 400,352
<OTHER-INCOME> 0
<EXPENSES-NET> 158,391
<NET-INVESTMENT-INCOME> 241,961
<REALIZED-GAINS-CURRENT> (3,099,731)
<APPREC-INCREASE-CURRENT> 3,217,982
<NET-CHANGE-FROM-OPS> 360,212
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 362,595
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (2,383)
<ACCUMULATED-NII-PRIOR> 184,286
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 41,540
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 158,391
<AVERAGE-NET-ASSETS> 19,871,841
<PER-SHARE-NAV-BEGIN> 16.61
<PER-SHARE-NII> .20
<PER-SHARE-GAIN-APPREC> .10
<PER-SHARE-DIVIDEND> .30
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 16.61
<EXPENSE-RATIO> 3.19
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
