<PAGE> 1
FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1999
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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: (303) 446-2187
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Limited Partnership Interests
(Title of Class)
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 [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
State the aggregate market value of the voting stock held by non-affiliates of
the registrant: Not applicable.
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Fiduciary Capital Pension Partners, L.P.
Annual Report on Form 10-K for the
Fiscal Year Ended December 31, 1999
Table of Contents
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
Part I
Item 1 Business.........................................................................................1
Item 2 Properties.......................................................................................6
Item 3 Legal Proceedings................................................................................6
Item 4 Submission of Matters to a Vote
of Security Holders..........................................................................6
Part II
Item 5 Market for Registrant's Common Equity
and Related Stockholder Matters..............................................................7
Item 6 Selected Financial Data..........................................................................8
Item 7 Management's Discussion and
Analysis of Financial Condition
and Results of Operations....................................................................8
Item 8 Financial Statements and
Supplementary Data..........................................................................F-1
Item 9 Changes in and Disagreements with
Accountants on Accounting and
Financial Disclosure........................................................................16
Part III
Item 10 Directors and Executive Officers
of the Registrant ..........................................................................17
Item 11 Executive Compensation..........................................................................20
Item 12 Security Ownership of Certain
Beneficial Owners and Management ...........................................................20
Item 13 Certain Relationships and
Related Transactions .......................................................................20
Part IV
Item 14 Exhibits, Financial Statement Schedules
and Reports on Form 8-K ....................................................................22
</TABLE>
<PAGE> 3
PART I
Item 1. Business
General
Fiduciary Capital Pension Partners, L.P. (the "Fund" or the "Registrant") is a
limited partnership organized under the laws of the State of Delaware on October
20, 1988. The managing general partner of the Fund is FCM Fiduciary Capital
Management Company, a Delaware general partnership (the "Managing General
Partner" or "FCM"). The independent general partners of the Fund are E. Bruce
Fredrikson, Mark A. Sargent and Phillip Siegel (the "Independent General
Partners"). (The Managing Partner and the Independent General Partners are
collectively referred to herein as the "General Partners.")
The general partners of the Managing General Partner are FCM Fiduciary Capital
Corporation, a Delaware corporation, Mezzanine Capital Corporation, a Delaware
corporation and an affiliate of PaineWebber Incorporated ("PaineWebber"), and
Paul Bagley. Paul Bagley owns 100% of the stock of FCM Fiduciary Capital
Corporation.
The Managing General Partner serves as investment adviser ("Investment Adviser")
to the Fund and is responsible for the identification of all investments made by
the Fund and all other investment advisory services necessary for the operation
of the Fund in carrying out its investment objectives and policies. The
Independent General Partners oversee the investment activities of the Investment
Adviser.
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
was 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. A separate fund, Fiduciary Capital
Partners, L.P., a Delaware limited partnership ("FCP") was also formed on
October 20, 1988 for taxable investors with investment objectives, policies and
restrictions similar to those of the Fund. The Fund and FCP co-invest in the
investments; however, each fund is accounted for separately. As discussed below,
the Fund is now in a liquidation mode.
On January 26, 1990, the Fund and its affiliate, FCP (collectively, the
"Funds"), began a public offering of their units of limited partnership
interests (the "Units"). The Units were registered pursuant to a Registration
Statement on Form N-2 under the Securities Act of 1933, as amended.
The Funds collectively held three closings for the sale of the Units during the
period from August 14, 1990 through October 18, 1990. As a result of the
closings, the Funds sold 65,898 Units representing an aggregate purchase price
of $65,898,000. Of these amounts, 29,796 Units representing an aggregate
purchase price of $29,796,000 and 36,102 Units representing an aggregate
purchase price of $36,102,000 were received by the Fund and FCP, respectively.
A special meeting of the Fund's Limited Partners was held on October 1, 1993. At
the meeting, the Limited Partners approved the extension of the Fund's
investment period until December 31, 1995 and the adoption of a fundamental
policy of periodic unit repurchases. In connection with the adoption of the
repurchase policy, each $1,000 Unit was redenominated into fifty $20 Units.
After giving effect to this redenomination, the Fund had 1,489,800 Units
outstanding as of October 1, 1993.
Pursuant to the terms of the repurchase policy, the Fund has annually offered 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%), which is 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
1
<PAGE> 4
General Partners may vote to repurchase up to an additional 2% of the
outstanding Units. If Units in excess of this amount are tendered, Units are
purchased on a prorated basis, after giving priority to Limited Partners owning
less than 100 Units.
Repurchases of Units since the adoption of the plan are summarized as follows:
<TABLE>
<CAPTION>
Units Repurchased Net Asset Value per Unit
---------------------------- -------------------------
Percentage
Date of of Outstanding Net of the
Repurchase Offer Number Units Gross 2% Fee
---------------- ------- -------------- ------ ----------
<S> <C> <C> <C> <C>
November 1993 61,850 4.15% $18.33 $17.96
November 1994 130,951 9.17% 18.35 17.98
November 1995 100,435 7.74% 19.51 19.12
November 1996 91,683 7.66% 15.71 15.40
November 1997 84,739 7.67% 13.72 13.45
November 1998 79,806 7.82% 9.43 9.24
November 1999 70,540 7.50% 4.21 4.13
</TABLE>
The Fund's investment period ended on December 31, 1995. Although the Fund has
been permitted to make additional investments in existing portfolio companies
since 1995, the Fund is no longer permitted to acquire investments in new
portfolio companies. Consequently, the Fund has been in a liquidation mode.
Since the middle of 1997, the Fund has liquidated a significant percentage of
its investments and has distributed approximately $6.23 per Unit to the Limited
Partners, with the cash coming primarily from the liquidation of these
investments.
During the last year, the General Partners considered a number of possible plans
that would have permitted the Fund to be liquidated by the end of 2000. However,
it was determined that none of these plans were feasible. As a result, it is
currently expected that the Fund will remain in existence until the remaining
debt investments either mature or are prepaid by the respective portfolio
companies, and the remaining equity investments are sold or otherwise
liquidated.
Each Fund's participation in the following portfolio investments is in
proportion to the amount of capital that each fund had available for investment
at the time each investment was acquired. All amounts shown in this Report with
respect to investments represent only the Fund's proportionate share of the
amounts involved.
Portfolio Investments
As of December 31, 1999, the Fund held portfolio investments in two Managed
Companies, with an aggregate cost of approximately $8.5 million, and two
Non-Managed Companies, with an aggregate cost of approximately $1.1 million.
Managed Companies are those to which significant managerial assistance is
offered.
During 1999, the Fund purchased $650,250 of LMC Corporation ("LMC") Senior
Subordinated Revolving Notes due October 1, 1999. During August 1999, the Fund
exchanged these notes and a receivable for $69,360 of accrued interest for LMC
Class B preferred stock having a par value of $719,610. In addition, (i) the
outstanding principal amount of the Fund's LMC 12% Senior Subordinated Revolving
Notes due October 31, 2000, increased by $45,360, from to $1,587,600 at December
31, 1998 to $1,632,960 at December 31, 1999, and (ii) the Fund purchased $53,540
of Niigata Engineering Co., Ltd. ("Niigata") receivables from LMC at a cost of
$42,284. (For a further discussion, see section below, "Follow-On Investments in
1999".)
Also in 1999, the Fund liquidated its remaining KEMET Corporation ("KEMET")
stock, receiving $423,824 of net proceeds. (For a further discussion, see
section below, "Disposition of Portfolio Investments in 1999".)
2
<PAGE> 5
Follow-On Investments in 1999
LMC Corporation and Niigata Engineering Co., Ltd.
The Company LMC, headquartered in Brigham City, Utah, is a manufacturer of low
ground pressure track equipment used for construction, infrastructure
development and landscaping. The primary purchasers of this equipment include
private contractors, ski resorts, utility companies and governmental agencies
for use on construction sites and/or environmentally sensitive locations.
LMC experienced significant cash flow shortfalls in December 1999 and January
2000. These cash flow shortfalls, combined with significant reductions in the
cash available under the Company's revolving line of credit with CIT Corporation
("CIT"), forced a cessation of production of equipment and severely curtailed
LMC's ability to fulfill orders for spare parts. LMC received a notice of
default, dated April 6, 2000, from CIT.
LMC has initiated conversations with several potential purchasers of its
business, in whole or in part. To date, no meaningful offers have been received.
LMC is also exploring a consignment joint venture for its spare parts business.
The majority of LMC's employees, including Clyde Noorda, the President, have
been released.
The LMC Board of Directors has authorized management to file for bankruptcy
protection when, and if, it determines that it is in the best interests of the
company to do so. In an effort to preserve value and facilitate the possible
sale of the business, the Fund's General Partners approved an additional loan of
up to $38,498, subsequent to December 31, 1999. As of March 31, 2000, LMC has
drawn down $20,533 of this amount. When these funds are exhausted, LMC will
probably have no alternative to a bankruptcy filing.
History of Investment During June 1994, the Fund invested $2,348,080 in LMC. The
investment consisted of $2,396,000 of 13.00% Senior Subordinated Notes due May
31, 1999 with warrants to acquire common stock.
During February 1996, the Fund participated in a financial restructuring of its
LMC investment. The Fund converted its existing LMC subordinated debt and
warrants into Series C preferred stock and purchased $454,400 of new common
stock. As a result of the restructuring, the Fund increased its ownership of
LMC's common stock from approximately 12% to approximately 23%.
During November 1996, the Fund purchased $1,632,960 of LMC's 12% Senior
Subordinated Revolving Notes due October 31, 2000. The outstanding principal
balance of these revolving notes, which has fluctuated, totaled $1,632,960 at
December 31, 1999.
During February and March 1998, the Fund purchased $449,000 of LMC's Senior
Subordinated Revolving Notes due August 20, 1998.
During April 1998, the Fund agreed to again restructure and increase its
aggregate investment in LMC. In the restructuring, $1,360,800 of the Fund's LMC
Senior Subordinated Revolving Notes due October 31, 2000 were converted into
additional LMC common stock. This left LMC with the ability to reborrow the
$1,360,800.
LMC periodically made draw downs under the terms of the Revolving Note agreement
to fund working capital requirements and to retire the $449,000 of LMC Senior
Subordinated Revolving Notes due August 20, 1998, as described in the preceding
paragraph. As a result of this second restructuring, the Fund's percentage
ownership of LMC's common stock increased from approximately 23% to
approximately 40%.
During August 1998, the Fund purchased an additional 1,300,500 shares of LMC
common stock for $650,250. As a result of this stock purchase, the Fund's
percentage ownership of LMC's common stock increased from approximately 40% to
approximately 41%.
During February 1999, the Fund agreed to purchase $650,250 of LMC's Senior
Subordinated Revolving Notes due October 1, 1999. During August 1999, the Fund
exchanged these notes and a receivable for $69,360 of accrued interest for LMC
Class B preferred stock having a par value of $719,610.
3
<PAGE> 6
During December 1999, the Fund purchased $53,540 of Niigata receivables from LMC
at a cost of $42,284. An additional $76,083 of Niigata receivables were
purchased during January 2000 at a cost of $68,935. These various receivables
are payable on specified dates between May 21, 2000 and May 21, 2002.
Dispositions of Portfolio Investments in 1999
KEMET Corporation The Fund acquired various subordinated debt and equity
investments in KEMET and its subsidiary, KEMET Electronics Corporation ("KEMET
Electronics"), during 1991 and 1993.
During October 1992, KEMET completed an initial public offering of its common
stock. During June 1993, KEMET Electronics prepaid its subordinated notes which
the Fund held following the successful completion of a secondary stock offering.
As of December 31, 1993, the Fund continued to hold the KEMET common stock and
warrants. During 1994, the Fund exercised its warrants and sold a portion of the
common stock, realizing total sales proceeds of $1,261,685. During 1995, the
Fund sold additional shares of stock, realizing total additional sales proceeds
of $3,221,392. The Fund did not sell any additional stock from 1995 until 1999.
During 1999, the Fund liquidated its remaining KEMET stock, receiving $423,824
of net proceeds.
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.
Other Portfolio Investments
R.B.M. Precision Metal Products, Inc. ("RBM") During May 1995, the Fund invested
$1,264,200 in RBM. The investment consisted of $1,290,000 of 13.00% Senior
Subordinated Secured Notes due May 24, 2002, with warrants to acquire common
stock.
RBM, headquartered in Colorado Springs, Colorado, is a manufacturer of precision
sheet metal enclosures, chassis and assemblies for business machines.
For its fiscal year ended October 31, 1999, RBM's revenues were $11.6 million
versus a budget of $12.0 million. For the year, RBM's loss was $1.3 million
(pretax) versus a budgeted loss of $1.9 million.
RBM projects sales of approximately $17 million for its fiscal year ended
October 31, 2000, with a positive EBITDA. Sales and cash flows for the quarter
ended January 31, 2000 were slightly below budget.
RBM remains current with its interest payments and is currently in compliance
with all of its senior and subordinated loan covenants. However, it will not
make the principal payment scheduled for May 2000 on the Fund's note, because it
is not permitted to do so under the terms of an Intercreditor and Subordination
Agreement ("Intercreditor Agreement"), between the Fund and RBM's other
creditors. This Intercreditor Agreement was a stipulated pre-condition to RBM's
debt restructuring, which occurred in late 1998.
The CEO of RBM's principle shareholder, 13i Capital Corporation ("13i"), has
taken over as CEO of RBM. He has brought in a number of new professionals and is
working to create new sales opportunities and restore the company to
profitability. If this continues, the Fund could possibly receive a partial
principal payment in the second quarter of 2001, since the Intercreditor
Agreement permits such payments, limited to 85% of RBM's EBITDA. Originally, our
debt was scheduled to be repaid over the three years ending May 2002. It now
appears that it will take considerably longer than this. There is no assurance
that any payments will be permitted and any such payments are entirely dependent
upon RBM's continued improved performance. The Fund continues to urge a sale or
refinancing of the company, but has been unable to obtain the agreement of 13i.
4
<PAGE> 7
WasteMasters, Inc. ("WMI") and Atlas Environmental, Inc. ("Atlas") During
January 1996, the Fund invested $3,200,601 in Atlas. The investment consisted of
$3,265,920 of 13.5% Senior Subordinated Secured Notes due January 19, 2003, with
warrants to acquire common stock. The warrants had an exercise price of $8.00
per share.
The companies that Atlas acquired during 1996 with the proceeds of the Fund's
subordinated debt investment did not perform as well as expected. As a result,
Atlas defaulted on certain financial covenants in its agreements with its senior
lender and with the Fund. The senior lender, the Bank of New York, reacted to
the covenant defaults by limiting Atlas' availability under its revolving credit
facility and by instructing Atlas not to pay the quarterly interest payments
that were due on the Fund's subordinated debt, beginning in July 1996. During
January 1997, Atlas filed for Chapter 11 bankruptcy protection.
As a result of these developments, the Fund stopped accruing interest on the
subordinated notes during April 1996 and wrote the carrying value of its Atlas
investment down during 1996 and 1997 to a nominal amount.
During June 1998, the Fund exchanged its Atlas subordinated notes and warrants
for 821,376 shares of common stock in WMI, an Atlanta, Georgia based waste
management company.
Pursuant to the terms of the exchange agreement, the Fund is prohibited from
selling its WMI common stock for 24 months. In addition, the Fund granted the
entity acquiring the Fund's Atlas securities a call on the Fund's WMI common
stock during the 24 month lock up period and a right to first refusal
thereafter. The call price is $11.25 per share.
The WMI common stock, which trades on the OTC Bulletin Board System ("WAST"),
closed at $1.78 (an average of the closing bid and ask prices) on June 3, 1998
(the date of the exchange). However, due to a number of factors, including the
speculative nature of the WMI stock, the two year lock up period and the
relative size of the Fund's stock position, FCM recorded the WMI stock at the
same nominal value that the Atlas securities had previously been carried by the
Fund.
The Fund recorded a realized loss of $2,125,574 on the exchange, which is equal
to the amount of the loss that the Fund claimed for income tax purposes from the
disposition of the Atlas securities. The balance of the unrealized loss
previously recorded by the Fund with respect to the Atlas securities continues
to be carried by the Fund as an unrealized loss.
The 52-week low for the WMI common stock is $0.02 per share and the current bid
price (March 31, 2000) is $0.30 per share.
Competition
The Fund's investment period ended on December 31, 1995, and the Fund is engaged
in an orderly liquidation. Each of the Fund's remaining portfolio companies
experience substantial competition in their respective businesses.
Employees
The Fund has no employees. As discussed above, the Managing General Partner
manages the Fund's investments, subject to the supervisory oversight of the
Independent General Partners, and performs services on behalf of the Fund. The
General Partners are entitled to certain fees and reimbursements of certain
out-of-pocket expenses incurred in connection with the performance of these
management services. See Item 10 of this Report, "Directors and Executive
Officers of the Registrant" and Item 13 of this Report, "Certain Relationships
and Related Transactions".
5
<PAGE> 8
Item 2. Properties
The Fund does not own or lease any physical properties.
Item 3. Legal Proceedings
There are no legal proceedings pending against the Fund.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of the Limited Partners of the Fund, through
the solicitation of proxies or otherwise, during the fourth quarter of the
fiscal year ended December 31, 1999.
6
<PAGE> 9
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
There is no organized trading market for the purchase and sale of the Units and
certain measures have been adopted and implemented to assure that no such
organized trading market will develop.
The Fund's Limited Partners adopted a periodic unit repurchase plan during 1993.
Pursuant to the terms of the repurchase policy, the Fund has annually offered 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. If Units in excess
of this amount are tendered, Units are purchased on a pro-rata basis, after
giving priority to Limited Partners owning less than 100 Units.
Repurchases of Units since the adoption of the plan are summarized in Item 1 of
this Report, "Business".
As of March 31, 2000, the number of Limited Partners of record was approximately
2,400.
The Fund made the following distributions to its partners with respect to 1998
and 1999:
<TABLE>
<CAPTION>
Quarter During Total Amount of
Which Distributed Amount of Distribution
Cash was Generated Distribution (1) Per $20 Unit Payment Date
------------------ ---------------- ------------- ------------
<S> <C> <C> <C>
1st Quarter 1998 $1,139,142 $1.13/1.00(2) May 15, 1998
2nd Quarter 1998 1,024,761 1.00 August 14, 1998
3rd Quarter 1998 309,134 .30 November 13, 1998
4th Quarter 1998 284,950 .30 February 12, 1999
1st Quarter 1999 284,950 .30 May 15, 1999
2nd Quarter 1999 284,950 .30 August 13, 1999
3rd Quarter 1999 284,950 .30 November 15, 1999
4th Quarter 1999 263,575 .30 February 15, 2000
</TABLE>
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(1) Includes distributions to the Managing General Partner.
(2) The per Unit distribution amount varied between $1.00 and $1.13
depending upon the closing in which the particular Units were
issued. This disproportionate cash distribution resulted from the
Units being issued on different dates during 1990, and thus being
entitled to differing Preferred Return amounts, as defined in the
Fund's Partnership Agreement. These disproportionate distribution
rates eliminated the remaining Preferred Return amounts, leaving
all Units on an equal basis going forward.
Cash distributions for 1998 were paid out of current net investment income
(3.1%), realized gains on investments (50.8%) and a return of capital (46.1%).
All of the cash distributions for 1999 represented a return of capital.
The 1999 distributions and the 1999 repurchase offer utilized a substantial
portion of the Fund's remaining cash. As a result, it is unlikely that the Fund
will be able to continue to pay quarterly distributions during 2000 and beyond.
The distribution question will be addressed on a quarterly basis by the General
Partners, and will involve the consideration of a number of issues.
The Fund's investment period ended on December 31, 1995. Although the Fund has
been permitted to make additional investments in existing portfolio companies
since 1995, the Fund is no longer permitted to acquire investments in new
portfolio companies. Consequently, the Fund has been in a liquidation mode.
Since the middle of 1997, the Fund has liquidated a significant percentage of
its investments and has distributed
7
<PAGE> 10
approximately $6.23 per Unit to the Limited Partners, with the cash coming
primarily from the liquidation of these investments.
During the last year, the General Partners considered a number of possible plans
that would have permitted the Fund to be liquidated by the end of 2000. However,
it was determined that none of these plans were feasible. As a result, it is
currently expected that the Fund will remain in existence until the remaining
debt investments either mature or are prepaid by the respective portfolio
companies, and the remaining equity investments are sold or otherwise
liquidated.
Item 6. Selected Financial Data
The following selected financial data of the Fund has been derived from the
financial statements for the indicated periods. The information set forth below
should be read in conjunction with the Fund's financial statements and notes
thereto and "Management's Discussion and Analysis of Financial Condition and
Results of Operations" included in Items 8 and 7, respectively, of this Report.
<TABLE>
<CAPTION>
As of December 31
or Year Ended December 31
--------------------------------------------------------
1999 1998 1997 1996 1995
-------- -------- -------- -------- --------
(in thousands, except per Unit amounts)
<S> <C> <C> <C> <C> <C>
Total Investment Income $ 316 $ 607 $ 1,370 $ 1,329 $ 2,268
Net Investment (Loss) Income (279) 58 831 772 1,726
Net Realized and Unrealized
(Loss) Gain on Investments (6,084) (945) (294) (1,143) (2,326)
Cash Distributions Declared
to Partners 1,118 2,758 3,151 1,423 1,542
Cash Utilized to Repurchase Units 297 753 1,163 1,440 1,959
Total Assets 1,472 9,248 14,352 17,441 20,321
Net Assets 687 8,466 12,864 16,640 19,873
Value of Investments 1,302 8,506 13,949 17,105 20,025
Per Unit of Limited Partnership Interest:
Net Investment (Loss) Income(1) (.30) .05 .75 .64 1.33
Net Realized and Unrealized
(Loss) Gain on Investments(1) (6.52) (.82) (.27) (.95) (1.79)
Cash Distributions Declared
to Partners(2) 1.20 2.71 2.90 1.20 1.20
Net Asset Value 0.98 9.19 12.66 15.08 16.61
</TABLE>
- ---------------
(1) Calculated using the weighted average number of Units outstanding
during the years ended December 31, 1999, 1998, 1997, 1996 and 1995 of
932,412, 1,010,959, 1,095,362, 1,186,294 and 1,285,717, respectively.
(2) 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 year.
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operation
The following discussion should be read in conjunction with the Fund's audited
Financial Statements and the Notes thereto. This Report contains, in addition to
historical information, forward-looking statements that include risks and other
uncertainties. The Fund's actual results may differ materially from those
anticipated in these forward-looking statements. While the Fund can not always
predict what factors would cause actual results to differ materially from those
indicated by the forward-looking statements, factors that might cause such a
difference include general economic and business conditions, effects of
competition and the Year 2000 issue
8
<PAGE> 11
on the business of the portfolio companies and other factors discussed elsewhere
in this Report. Readers are urged to consider statements that include the terms
"believes", "expects", "plans", "anticipates", "intends" or the like to be
uncertain and forward-looking. The Fund undertakes no obligation to release
publicly any revisions to these forward-looking statements to reflect events or
circumstances after the date hereof or to reflect the occurrence of anticipated
or unanticipated events.
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 during 1993.
Pursuant to the terms of the repurchase policy, the Fund has annually offered 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. If Units in excess of this
amount are tendered, Units are purchased on a prorata basis, after giving
priority to Limited Partners owning less than 100 Units.
Repurchases of Units since the adoption of the plan are summarized as follows:
<TABLE>
<CAPTION>
Units Repurchased Net Asset Value per Unit
------------------------------ ------------------------
Percentage
Date of of Outstanding Net of the
Repurchase Offer Number Units Gross 2% Fee
---------------- ------- --------------- ------ ----------
<S> <C> <C> <C> <C>
November 1993 61,850 4.15% $18.33 $17.96
November 1994 130,951 9.17% 18.35 17.98
November 1995 100,435 7.74% 19.51 19.12
November 1996 91,683 7.66% 15.71 15.40
November 1997 84,739 7.67% 13.72 13.45
November 1998 79,806 7.82% 9.43 9.24
November 1999 70,540 7.50% 4.21 4.13
</TABLE>
The Fund's investment period ended on December 31, 1995. Although the Fund has
been permitted to make additional investments in existing portfolio companies
since 1995, the Fund is no longer permitted to acquire investments in new
portfolio companies. Consequently, the Fund has been in a liquidation mode.
Since the middle of 1997, the Fund has liquidated a significant percentage of
its investments and has distributed approximately $6.23 per Unit to the Limited
Partners, with the cash coming primarily from the liquidation of these
investments.
During the last year, the General Partners considered a number of possible plans
that would have permitted the Fund to be liquidated by the end of 2000. However,
it was determined that none of these plans were feasible. As a result, it is
currently expected that the Fund will remain in existence until the remaining
debt investments either mature or are prepaid by the respective portfolio
companies, and the remaining equity investments are sold or otherwise
liquidated.
As of December 31, 1999, the Fund held portfolio investments in two Managed
Companies, with an aggregate cost of approximately $8.5 million, and two
Non-Managed Companies, with an aggregate cost of approximately $1.1 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 134.9% 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. These securities
were typically issued in private placement transactions and were subject to
certain restrictions on transfer or sale, thereby limiting their liquidity.
9
<PAGE> 12
As of December 31, 1999, the Fund's remaining liquid assets were invested in
short-term commercial paper. These funds are available to fund the annual
repurchase offer, to fund follow-on investments in existing portfolio companies,
to pay Fund expenses and for distribution to the partners.
During 1999, the Fund liquidated its remaining KEMET stock, with the Fund
receiving $423,824 of sales proceeds.
Accrued interest receivable decreased $66,430 from $85,556 at December 31, 1998
to $19,126 at December 31, 1999. The $85,556 receivable at December 31, 1998
consisted primarily of interest due on the LMC notes and the $19,126 receivable
at December 31, 1999 consisted primarily of interest due on the RBM notes. Both
receivable amounts also included a small receivable for interest earned on money
market investments. The Funds had placed the RBM notes on non-accrual status at
December 31, 1998. During 1999, the Fund again began accruing interest on the
RBM notes, but placed the LMC notes on non-accrual status. (See discussions
below concerning the Fund's LMC and RBM investments.)
Accounts payable and accrued liabilities increased $22,429 from $470,840 at
December 31, 1998 to $493,269 at December 31, 1999. This increase resulted
primarily from increases in accrued legal fees and the Fund's litigation related
reserves during 1999. These litigation related reserves represent $442,971, or
approximately 90%, of the total accounts payable and accrued liabilities at
December 31, 1999.
Distributions payable to partners decreased $21,375, from $284,950 at December
31, 1998 to $263,575 at December 31, 1999. This decrease resulted from a 7.50%
decrease in the number of outstanding Units as a result of the repurchase of
Units by the Fund during November 1999.
During 1999, the Fund declared quarterly cash distributions to its partners in
the aggregate amount of $1,118,426, which were paid during the months of May,
August and November 1999 and February 2000. The per Unit distribution rates were
$.30 per Unit per quarter. All of these 1999 distributions represented a return
of capital.
The 1999 distributions and the 1999 repurchase offer utilized a substantial
portion of the Fund's remaining cash. As a result, it is unlikely that the Fund
will be able to continue to pay quarterly distributions during 2000 and beyond.
The distribution question will be addressed on a quarterly basis by the General
Partners, and will involve the consideration of a number of issues.
The Fund has accrued approximately $443,000 for certain known potential
liabilities related to two former investments of the Fund. In addition, the Fund
may be exposed to other asserted or unasserted legal claims encountered in the
course of its activities, past and present. Other than those amounts for which
the Fund has specifically accrued, management does not believe the ultimate
resolution of these matters will have a material impact on the operating
results, financial position or cash flows of the Fund.
Results of Operations
Investment Income and Expenses
The Fund's investment income consists primarily of interest income earned from
the various debt investments held by the Fund. Major expenses include
professional fees, fund administration fees, investment advisory fees and
administrative expenses.
1999 Compared to 1998
The Fund's net investment loss was $279,357 for the year ended December 31, 1999
on total investment income of $315,738 as compared to net investment income of
$57,840 on total investment income of $607,354 for the
10
<PAGE> 13
prior year. Net investment income (loss) per limited partnership unit decreased
from $0.05 to $(0.30) and the ratio of net investment income (loss) to average
net assets decreased from 0.54% to (4.63)% for the year ended December 31, 1999
in comparison to the prior year.
Net investment income (loss) for the year ended December 31, 1999 decreased
primarily as a result of a decrease in investment income in comparison to the
prior year. Total expenses also increased, though by a much smaller amount.
Investment income decreased $291,616, or 48.0%, for the year ended December 31,
1999 in comparison to the prior year, This decrease resulted primarily from a
decrease in the amount of the Fund's temporary investments and the decisions not
to record interest on the Fund's LMC notes during the period from July 1, 1999
through December 31, 1999 and the Fund's RBM notes during the period from August
25, 1998 through May 24, 1999 (see discussions below). The amount of the Fund's
temporary investments decreased because of (i) return of capital distributions
by the Fund, (ii) the Fund's repurchase of Units during the fourth quarters of
1998 and 1999, (iii) purchases of additional follow-on investments, and (iv) the
incurrence of net investment losses by the Fund.
Total expenses increased $45,581 or 8.3%, for the year ended December 31, 1999
in comparison to the prior year. This increase resulted primarily from an
increase in professional fees. This increase was partially offset by a decrease
in investment advisory fees, and to a lesser extent, other expenses.
Professional fees increased primarily as a result of increases in legal fees
incurred in connection with litigation related to LMC's defined contribution
pension plan (as discussed below).
Investment advisory fees decreased primarily as a result of (i) the repurchase
of Units during the fourth quarters of 1998 and 1999, (ii) the payment of
quarterly cash distributions during 1998 that exceeded the Limited Partners'
Preferred Return (as defined in the Fund's Partnership Agreement), and (iii)
losses realized by the Fund during the second quarter of 1998 with respect to
the Mobile Technology, Inc. ("MTI"), Atlas and AR Accessories Group, Inc.
("ARA") portfolio investments. All three of these items 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.
1998 Compared to 1997
The Fund's net investment income was $57,840 for the year ended December 31,
1998 on total investment income of $607,354 as compared to net investment income
of $831,359 on total investment income of $1,370,252 for the prior year. Net
investment income per limited partnership unit decreased from $0.75 to $0.05 and
the ratio of net investment income to average net assets decreased from 5.55% to
0.54% for the year ended December 31, 1998 in comparison to the prior year.
Net investment income for the year ended December, 31, 1998 decreased primarily
as a result of a decrease in investment income in comparison to the prior year.
Investment income decreased $762,898, or 55.7%, for the year ended December 31,
1998 in comparison to the prior year. This decrease resulted primarily from (i)
the prepayment of the Fund's Elgin National Industries, Inc. ("Elgin")
subordinated debt investment during November 1997, (ii) the disposition of the
ENI preferred stock during November 1997, and (iii) the decision to stop
accruing interest on the Fund's RBM subordinated debt investment effective
during August 1998. The combined negative impact of these items was partially
offset by increases in the amount of interest income earned on temporary
investments and the various LMC debt investments.
Total expenses increased $10,621, or 2.0%, for the year ended December 31, 1998
in comparison to the prior year. This increase resulted primarily from increases
in other expenses and Independent General Partner fees and expenses. These
increases were substantially offset by a decrease in investment advisory fees.
11
<PAGE> 14
Other expenses increased during 1998 primarily as a result of insurance expense
associated with a new liability insurance policy for the Fund's general partners
that was initially purchased during September 1997.
Independent General Partner fees and expenses increased during 1998 primarily
because one of the Fund's three Independent General Partners resigned during the
fourth quarter of 1996 and was not replaced until the third quarter of 1997.
Investment advisory fees decreased during 1998 primarily as a result of (i) the
repurchase of Units during November 1997 and 1998, (ii) the payment of quarterly
cash distributions during 1998 that exceeded the Limited Partners' Preferred
Return (as defined in the Fund's Partnership Agreement) and (iii) losses
realized by the Fund during the second quarter of 1998 with respect to the MTI,
Atlas and ARA investments. All three of these items decreased the amount of the
Fund's available capital (as defined in the Fund's Partnership Agreement), which
is the base with respect to which the investment advisory fees are calculated.
Net Realized Gain (Loss) on Investments
The Fund realized net gains of $410,023 during the year ended December 31, 1999,
net losses of $2,497,650 during the year ended December 31, 1998 and net gains
of $2,925,017 during the year ended December 31, 1997.
The net realized gains for 1997 resulted from gains on the Fund's Neodata
Corporation, Elgin National Industries, Inc., ENI Holding Corp. and Huntington
Holdings, Inc. ("Huntington") investments, including a prepayment premium, and
an additional realized loss on the Fund's Canadian's investment. The net
realized losses for 1998 resulted from losses on the Fund's ARA, MTI and Atlas
investments and an additional realized gain on the Fund's Huntington investment.
During 1999, the Fund liquidated its remaining KEMET common stock investment,
The Fund received $423,824 of sales proceeds, resulting in aggregate net
realized gains of $415,653.
The Fund incurred approximately $6,000 of realized losses during the year ended
December 31, 1999 as a result of adjustments relating to certain previously held
investments.
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 will be
used only with respect to completed transactions or firm offers made by
sophisticated, independent investors.
12
<PAGE> 15
Prior to 1997, the Fund had recorded cumulative net unrealized loss on
investments of $583,302. During 1997, the Fund recorded $9,765 of unrealized
gain and $3,315,700 of unrealized loss on investments. In addition, the Fund
disposed of investments during 1997 with respect to which the Fund had recorded
$86,966 of net unrealized loss during prior years. Therefore, at December 31,
1997, the Fund had net unrealized loss on investments of $3,802,269.
During 1998, the Fund recorded $1,944,753 of unrealized loss on investments. In
addition, the Fund disposed of investments during 1998 with respect to which the
Fund had recorded $3,497,448 of net unrealized loss during prior years.
Therefore, at December 31, 1998, the Fund had net unrealized loss on investments
of $2,249,574.
The net increase in unrealized loss on investments during 1999 and the
cumulative net unrealized loss on investments at December 31, 1999, consisted of
the following components:
<TABLE>
<CAPTION>
Net Changes Net Unrealized
in Unrealized Gain (Loss)
Gain (Loss) Recorded as of
Portfolio Investment During 1999 December 31, 1999
-------------------- ----------------- -----------------
<S> <C> <C>
Unrealized gains recorded during prior
years with respect to investments
disposed of during 1999 $ (255,533) $ --
LMC (6,238,506) (6,980,426)
RBM -- (665,881)
WMI -- (1,097,306)
----------------- -----------------
$ (6,494,039) $ (8,743,613)
================= =================
</TABLE>
LMC has a defined contribution plan (the "Plan"), which was closed during 1995.
The current and previous trustees of the Plan failed to assure that the Plan was
properly funded. In order to rectify this problem, LMC made demands on the
current and previous trustees of the Plan and the previous controlling
shareholder that these parties make the necessary payments to the Plan. LMC
filed suit against Mr. Wallace, the former controlling shareholder of LMC and
the current Plan trustee.
All matters relative to the Plan, including the attendant litigation, were
settled during 1999. Mr. Wallace contributed $750,000 to pay the assessed
underfunding. He received Class A preferred stock in return for this
contribution. LMC gave Mr. Wallace a full release from all claims relative to
this matter and has received letters from both the Internal Revenue Service and
the Department of Labor indicating that they have "accepted" LMC's actions to
date. While this does not mean that future action is precluded, LMC's management
believes it to be unlikely.
Simultaneously with the above settlement, the Fund converted its revolving notes
that were due October 1, 1999, plus all accrued interest due from LMC, into
Class B preferred stock. Effective July 1, 1999, the Fund also discontinued
accruing interest on the LMC Senior Subordinated Revolving Notes due October 31,
2000, which it still holds.
LMC experienced significant cash flow shortfalls in December 1999 and January
2000. These cash flow shortfalls, combined with significant reductions in the
cash available under the Company's revolving line of credit with CIT Corporation
("CIT"), forced a cessation of production of equipment and severely curtailed
LMC's ability to fulfill orders for spare parts. LMC received a notice of
default, dated April 6, 2000, from CIT.
LMC has initiated discussions with several potential purchasers of its business,
in whole or in part. To date, no meaningful offers have been received. LMC is
also exploring a consignment joint venture for its spare parts business. The
majority of LMC's employees, including Clyde Noorda, the President, have been
released.
13
<PAGE> 16
The LMC Board of Directors has authorized management to file for bankruptcy
protection when, and if, it determines that it is in the best interests of the
company to do so. In an effort to preserve value and facilitate the possible
sale of the business, the Fund's General Partners approved an additional loan of
up to $38,498, subsequent to December 31, 1999. As of March 31, 2000, LMC has
drawn down $20,533 of this amount. When these funds are exhausted, LMC will
probably have no alternative to a bankruptcy filing.
The Fund previously wrote its LMC investment down by $459,200 and $282,720
during 1995 and 1997, respectively. As a result of the above-described
developments, the Fund created additional reserves of $6,238,506 against the
carrying values of the Fund's LMC investment during 1999. Thus, as of December
31, 1999, the Fund's total LMC investment had a net carrying value of $226,804,
versus its cost of $7,207,230.
RBM had a record year for fiscal 1998, with sales of approximately $30 million
and EBITDA of approximately $2.7 million. However, these sales were achieved
primarily through one contract with Digital Equipment Corporation ("DEC").
During August 1998, RBM notified the Fund that anticipated sales to DEC and
other large customers were expected to decline significantly in the upcoming
year. Of particular concern were sales to DEC, which has been acquired by Compaq
Computer Corp. As a result of the expected decline in sales, RBM began the
process of restructuring its debt, including the subordinated debt held by the
Fund. The Fund received the quarterly interest payment that was due from RBM on
August 24, 1998. The interest payment that was due during November 1998 was
deferred and subsequently converted to equity pursuant to the restructuring
described below.
During December 1998, RBM and its lenders completed a restructuring under which
a new senior lender, Wells Fargo Business Credit, replaced Bank of America. As
part of this transaction, RBM's principle shareholder, 13i Capital Corporation
("13i"), contributed additional equity to the company and the subordinated
lenders, including the Fund, agreed to accept shares of RBM's common stock as
payment for the next three quarterly interest payments beginning with the
payment that was due during November 1998. As a consequence, the Fund's
ownership of RBM, on a fully diluted basis, increased from 5.9% to 7.2%,
assuming exercise of its warrants. The restructuring was designed to provide RBM
with a period of time in which to secure additional customers and return to a
more stable financial position under which RBM could meet its interest
obligations to its creditors, including the Fund.
As a result of these developments, the Fund stopped accruing interest on its RBM
subordinated debt effective August 24, 1998. In addition, the Fund recorded
aggregate writedowns of $665,881 relating to RBM during the year ended December
31, 1998.
RBM resumed paying the quarterly interest payments in cash, commencing with the
quarterly interest payment due on August 24, 1999. The Fund placed a $1
aggregate valuation on the RBM common stock that was received in payments of the
interest with respect to the nine-month period beginning August 25, 1998 and
ending May 24, 1999.
For its fiscal year ended October 31, 1999, RBM's revenue were $11.6 million
versus a budget of $12.0 million. For the year, RBM's loss was $1.3 million
(pretax) versus a budgeted loss of $1.9 million.
RBM projects sales of approximately $17 million for its fiscal year ended
October 31, 2000, with a positive EBITDA. Sales and cash flows for the quarter
ended January 31, 2000 were slightly below budget.
RBM remains current with its interest payments and is currently in compliance
with all of its senior and subordinated loan covenants. However, it will not
make the principal payment scheduled for May 2000 on the Fund's note, because it
is not permitted to do so under the terms of an Intercreditor and Subordination
Agreement ("Intercreditor Agreement"), between the Fund and RBM's other
creditors. This Intercreditor Agreement was a stipulated pre-condition to RBM's
debt restructuring, which occurred in late 1998.
14
<PAGE> 17
13i's CEO has taken over as CEO of RBM. He has brought in a number of new
professionals and seems to have stabilized the company. If this continues, the
Fund could possibly receive a partial principal payment in the second quarter of
2001, since the Intercreditor Agreement permits such payments, limited to 85% of
RBM's EBITDA. Originally, our debt was scheduled to be repaid over the three
years ending May 2002. It now appears that it will take considerably longer than
this. There is no assurance that any payments will be permitted and any such
payments are entirely dependent upon RBM's continued improved performance. The
Fund continues to urge a sale or refinancing of the company, but has been unable
to obtain the agreement of 13i.
During June 1998, the Fund exchanged its Atlas (which was in bankruptcy
proceedings) subordinated notes and warrants for 821,376 shares of common stock
of WMI, an Atlanta, Georgia based waste management company. Pursuant to the
terms of the agreement, the Fund is prohibited from selling its WMI common stock
for 24 months. In addition, the Fund granted the entity acquiring the Fund's
Atlas securities a call on the Fund's WMI common stock during the 24-month lock
up period and a right of first refusal thereafter. The call price is $11.25 per
share.
The WMI common stock, which trades on the OTC Bulletin Board System ("WAST"),
closed at $1.78 (an average of the closing bid and ask prices) on the date of
the exchange (June 3, 1998). Based on this price, the Fund's WMI common stock
had a trading value of $1,462,049 on the date of the exchange. However, due to a
number of factors, including the speculative nature of the WMI stock, the two
year lock up period and the relative size of the Fund's stock position versus
the daily trading volume, FCM decided to carry the WMI stock at the same $1
nominal value that the Atlas securities were previously carried by the Fund.
The Fund recorded a realized loss of $2,125,574 on the exchange, which is equal
to the amount of the loss which the Fund claimed for income tax purposes from
the disposition of the Atlas securities. The $1,097,306 balance of the
unrealized loss previously recorded by the Fund with respect to the Atlas
securities continues to be carried by the Fund as an unrealized loss.
The 52-week low for the WMI common stock is $0.02 per share and the current bid
price (March 31, 2000) is $0.30 per share.
Readiness for Year 2000
During 1999, FCM completed a review of the accounting and other information
systems that are currently being utilized by FCM and the Fund with regard to
Year 2000 issues. This review involved both actual tests of parts of the
information systems that were conducted by third party consultants and
representations received from various software vendors. As a result of this
review, FCM believed that all of these systems were Year 2000 compliant. All of
the costs associated with this review were paid by FCM.
FCM also corresponded with appropriate third parties, such as the Fund's
custodian and transfer agent, concerning whether their information systems were
Year 2000 compliant. These third parties represented that their information
systems were also Year 2000 compliant.
As a result of the above discussed review, Year 2000 issues were not expected to
have any material adverse effects on the Fund's results of operations or
financial condition. As of March 31, 2000, the Fund has incurred no Year 2000
related issues.
Inflation and Changing Prices
Inflation has had no material impact on the operations or financial condition of
the Fund from inception through December 31, 1999. However, inflation and
changing prices, in addition to other factors, may effect the value and the
eventual selling price of the Fund's remaining investments.
15
<PAGE> 18
Item 8. Financial Statements and Supplementary Data
FIDUCIARY CAPITAL PENSION PARTNERS, L.P.
List of Financial Statements
<TABLE>
<CAPTION>
Page
----
<S> <C>
Report of Independent Public Accountants F-2
Schedule of Investments - December 31, 1999 F-3
Balance Sheets - December 31, 1999 and 1998 F-5
Statements of Operations for each of the years
ended December 31, 1999, 1998 and 1997 F-6
Statements of Cash Flows for each of the years
ended December 31, 1999, 1998 and 1997 F-7
Statements of Changes in Net Assets for each of the
years ended December 31, 1999, 1998 and 1997 F-8
Selected Per Unit Data and Ratios for each of the years
ended December 31, 1999, 1998, 1997, 1996 and 1995 F-9
Notes to Financial Statements F-10
</TABLE>
All schedules for which provision is made in the applicable accounting
regulations of the Securities and Exchange Commission have been omitted because
(1) the information required is disclosed in the financial statements and notes
thereto; (2) the schedules are not required under the related instructions; or
(3) the schedules are inapplicable.
F-1
<PAGE> 19
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, 1999 and
1998, including the schedule of investments as of December 31, 1999, 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, 1999 and the selected per
unit data and ratios for each of the five years in the period then ended. 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 auditing standards generally accepted
in the United States. 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, 1999 and 1998 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, 1999 and
1998, and the results of its operations, its cash flows and the changes in its
net assets for each of the three years in the period ended December 31, 1999,
and the selected per unit data and ratios for each of the five years in the
period then ended, in conformity with accounting principles generally accepted
in the United States.
As discussed in Note 2, the financial statements include investment securities
valued at $927,078 at December 31, 1999 (134.9% of net assets) and $6,345,343 at
December 31, 1998 (74.9% of net assets) whose values have been estimated by the
managing general partner in the absence of readily ascertainable market values.
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.
/s/ Arthur Andersen LLP
Denver, Colorado
February 3, 2000.
F-2
<PAGE> 20
FIDUCIARY CAPITAL PENSION PARTNERS, L.P.
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1999
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
Principal
Amount/ Investment Amortized % of Total
Shares Investment Date Cost Value Investments
- --------- ------------------------ ---------- ---------- ----------- -----------
MANAGED COMPANIES:
<S> <C> <C> <C> <C> <C>
$1,632,960 LMC Corporation, 12.00%
Senior Subordinated 11/01/96
Revolving Notes through
due 10/31/00(1) 01/13/99 $1,632,960 $ 226,800
71,961 sh. LMC Corporation
Class B Preferred Stock* 08/09/99 719,610 1
239,600 sh. LMC Corporation,
Class C Preferred Stock* 06/10/94 2,389,210 1
4,476,500 sh. LMC Corporation, 02/09/96
Common Stock* through
08/05/98 2,465,449 1
47.92 sh. LMC Credit Corp.,
Common Stock* 02/09/96 1 1
------------------------ ---------- ---------- ----------- -----------
7,207,230 226,804 17.4%
------------------------ ---------- ---------- ----------- -----------
$1,290,000 R.B.M. Precision Metal
Products, Inc., 13.00%
Senior Subordinated
Secured Notes due
5/24/02(2) 05/24/95 1,250,254 657,667
12,603.7 sh. R.B.M. Precision Metal
Products, Inc., Warrants to
Purchase Common Stock* 05/24/95 73,295 1
12,717 sh. R.B.M. Precision Metal
Products, Inc., Common
Stock* 12/09/98 1 1
------------------------ ---------- ---------- ----------- -----------
1,323,550 657,669 50.5
------------------------ ---------- ---------- ----------- -----------
Total Investments in Managed Companies (128.7% of net assets) 8,530,780 884,473 67.9
---------- ------------ -----------
NON-MANAGED COMPANIES:
$53,540 Niigata Engineering 12/01/99
Co., Ltd. through
Receivables(3) 12/10/99 42,604 42,604
------------------------ ---------- ---------- ----------- -----------
42,604 42,604 3.3
------------------------ ---------- ---------- ----------- -----------
821,376 sh. WasteMasters, Inc.,
Common Stock(4)* 06/03/98 1,097,307 1
------------------------ ---------- ---------- ----------- -----------
1,097,307 1 0.0
------------------------ ---------- ---------- ----------- -----------
Total Investment in Non-Managed Company (6.2% of net assets) 1,139,911 42,605 3.3
---------- ----------- -----------
</TABLE>
The accompanying notes to financial statements are an
integral part of this schedule.
F-3
<PAGE> 21
FIDUCIARY CAPITAL PENSION PARTNERS, L.P.
SCHEDULE OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1999
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
Principal
Amount/ Investment Amortized % of Total
Shares Investment Date Cost Value Investments
- --------- ------------------------------ ---------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C>
TEMPORARY INVESTMENTS:
$375,000 Ford Motor Credit Corporation,
5.77% Notes due 1/04/00 12/14/99 374,820 374,820
------------------------------ ---------- ----------- ---------- -----------
Total Temporary Investments (54.5% of net assets) 374,820 374,820 28.8
----------- ---------- -----------
Total Investments (189.4% of net assets) $10,045,511 $1,301,898 100.0%
=========== ========== ===========
</TABLE>
(1) The accrual of interest on the notes was discontinued by the Fund effective
July 1, 1999.
(2) The terms of the notes provide for three equal annual principal payments of
$430,000 commencing on May 24, 2000. However, the Fund is a party to an
Intercreditor and Subordination Agreement with R.B.M. Precision Metal
Products, Inc.'s ("RBM's") other creditors, which prohibits principal
payments on the notes prior to October 31, 2000 and restricts payments
thereafter, based on a number of financial formulas contained in the
Agreement.
(3) These are non-interest bearing receivables, which were purchased from LMC
Corporation ("LMC") at a discount. Payments are due November 21, 2001 and
May 21, 2002 in the amounts of $25,361 and $28,179, respectively.
(4) The WasteMasters, Inc. common stock, which trades on the OTC Bulletin Board
System, is subject to a 24 month lock up period, a call option and a right
of first refusal.
* Non-income producing security.
The accompanying notes to financial statements are an
integral part of this schedule.
F-4
<PAGE> 22
FIDUCIARY CAPITAL PENSION PARTNERS, L.P.
BALANCE SHEETS - DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
ASSETS:
Investments
Portfolio investments, at fair value:
Managed companies (amortized cost -
$8,530,780 and $7,761,313, respectively) $ 884,473 $ 6,609,045
Non-managed companies (amortized cost -
$1,139,911 and $1,097,307, respectively) 42,605 1
Temporary investments, at amortized cost 374,820 1,897,223
----------- -----------
Total investments 1,301,898 8,506,269
Cash and cash equivalents 130,566 628,670
Accrued interest receivable 19,126 85,556
Other assets 20,834 27,234
----------- -----------
Total assets $ 1,472,424 $ 9,247,729
=========== ===========
LIABILITIES:
Due to affiliates $ 28,161 $ 25,748
Accounts payable and accrued liabilities 493,269 470,840
Distributions payable to partners 263,575 284,950
----------- -----------
Total liabilities 785,005 781,538
----------- -----------
COMMITMENTS AND CONTINGENCIES
NET ASSETS:
Managing General Partner (166,208) (180,012)
Limited Partners (equivalent to $0.98 and $9.19,
respectively, per limited partnership unit based on
869,796 and 940,336 units outstanding) 853,627 8,646,203
----------- -----------
Total net assets 687,419 8,466,191
----------- -----------
Total liabilities and net assets $ 1,472,424 $ 9,247,729
=========== ===========
</TABLE>
The accompanying notes to financial statements are an
integral part of these financial statements.
F-5
<PAGE> 23
FIDUCIARY CAPITAL PENSION PARTNERS, L.P.
STATEMENTS OF OPERATIONS
FOR EACH OF THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
<TABLE>
<CAPTION>
1999 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
INVESTMENT INCOME:
Income:
Interest $ 314,326 $ 596,296 $ 1,109,776
Dividend -- -- 241,806
Other income 1,412 11,058 18,670
----------- ----------- -----------
Total investment income 315,738 607,354 1,370,252
----------- ----------- -----------
Expenses:
Professional fees 210,116 141,780 140,520
Fund administration fees 118,327 118,327 118,327
Investment advisory fees 82,162 102,251 120,800
Administrative expenses 68,895 68,895 68,895
Independent General Partner fees
and expenses 53,861 52,076 46,966
Other expenses 61,734 66,185 43,385
----------- ----------- -----------
Total expenses 595,095 549,514 538,893
----------- ----------- -----------
NET INVESTMENT (LOSS) INCOME (279,357) 57,840 831,359
----------- ----------- -----------
REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Net realized gain (loss) on investments 410,023 (2,497,650) 2,925,017
Net change in unrealized loss on
investments (6,494,039) 1,552,695 (3,218,969)
----------- ----------- -----------
Net loss on investments (6,084,016) (944,955) (293,952)
----------- ----------- -----------
NET (DECREASE) INCREASE IN NET
ASSETS RESULTING FROM OPERATIONS $(6,363,373) $ (887,115) $ 537,407
=========== =========== ===========
</TABLE>
The accompanying notes to financial statements are an
integral part of these financial statements.
F-6
<PAGE> 24
FIDUCIARY CAPITAL PENSION PARTNERS, L.P.
STATEMENTS OF CASH FLOWS
FOR EACH OF THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
<TABLE>
<CAPTION>
1999 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (decrease) increase in net assets
resulting from operations $(6,363,373) $ (887,115) $ 537,407
Adjustments to reconcile net (decrease) increase
in net assets resulting from operations to net cash
(used in) provided by operating activities:
Accreted discount on portfolio investments (12,987) (11,424) (33,210)
Interest income received in stock (69,360) -- --
Change in assets and liabilities:
Accrued interest receivable 66,430 (17,592) 27,243
Other assets 6,400 31,692 (52,280)
Due to affiliates 2,413 (8,048) (13,572)
Accounts payable and accrued liabilities 16,798 2,227 (16,882)
Net realized (gain) loss on investments (410,023) 2,497,650 (2,925,017)
Net change in unrealized loss on investments 6,494,039 (1,552,695) 3,218,969
----------- ----------- -----------
Net cash (used in) provided by operating activities (269,663) 54,695 742,658
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of portfolio investments (737,894) (2,868,290) (834,624)
Proceeds from dispositions of portfolio investments 423,824 1,124,615 8,848,738
Sale (purchase) of temporary investments, net 1,522,403 6,297,597 (5,097,059)
----------- ----------- -----------
Net cash provided by investing activities 1,208,333 4,553,922 2,917,055
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions paid to partners (1,139,801) (3,503,484) (2,455,291)
Repurchase of limited partnership units (296,973) (752,571) (1,162,619)
----------- ----------- -----------
Net cash used in financing activities (1,436,774) (4,256,055) (3,617,910)
----------- ----------- -----------
NET (DECREASE) INCREASE IN CASH
AND CASH EQUIVALENTS (498,104) 352,562 41,803
CASH AND CASH EQUIVALENTS AT
BEGINNING OF YEAR 628,670 276,108 234,305
----------- ----------- -----------
CASH AND CASH EQUIVALENTS AT
END OF YEAR $ 130,566 $ 628,670 $ 276,108
=========== =========== ===========
NONCASH INVESTING AND
FINANCING ACTIVITIES
Investments exchanged for other investments $ -- $ 1,360,801 $ --
=========== =========== ===========
</TABLE>
The accompanying notes to financial statements are an
integral part of these financial statements.
F-7
<PAGE> 25
FIDUCIARY CAPITAL PENSION PARTNERS, L.P.
STATEMENTS OF CHANGES IN NET ASSETS
FOR EACH OF THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
<TABLE>
<CAPTION>
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
(Decrease) increase in net assets resulting from operations:
Net investment (loss) income $ (279,357) $ 57,840 $ 831,359
Net realized gain (loss) on investments 410,023 (2,497,650) 2,925,017
Net change in unrealized loss on
investments (6,494,039) 1,552,695 (3,218,969)
------------ ------------ ------------
Net (decrease) increase in net
assets resulting from operations (6,363,373) (887,115) 537,407
Repurchase of limited partnership units (296,973) (752,571) (1,162,618)
Distributions to partners from -
Net investment income -- (85,585) (831,359)
Realized gain on investments -- (1,402,287) (1,608,939)
Return of capital (1,118,426) (1,270,116) (710,627)
------------ ------------ ------------
Total decrease in net assets (7,778,772) (4,397,674) (3,776,136)
Net assets:
Beginning of year 8,466,191 12,863,865 16,640,001
------------ ------------ ------------
End of year (including no undistributed
net investment income) $ 687,419 $ 8,466,191 $ 12,863,865
============ ============ ============
</TABLE>
The accompanying notes to financial statements are an
integral part of these financial statements.
F-8
<PAGE> 26
FIDUCIARY CAPITAL PENSION PARTNERS, L.P.
SELECTED PER UNIT DATA AND RATIOS
FOR EACH OF THE YEARS ENDED DECEMBER 31, 1999, 1998, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
1999 1998 1997 1996 1995
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Per Unit Data:
Investment income(1) $ .34 $ .53 $ 1.24 $ 1.11 $ 1.75
Expenses(1) (.64) (.48) (.49) (.47) (.42)
------------- ------------- ------------- ------------- -------------
Net investment (loss) income(1) (.30) .05 .75 .64 1.33
Net realized gain (loss) on investments(1) .44 (2.17) 2.64 (2.88) 2.92
Net change in unrealized loss on
investments(1) (6.96) 1.35 (2.91) 1.93 (4.71)
Effect of unit repurchases on
net asset value (.19) .01 -- (.02) (.20)
Distributions declared to partners (1.20) (2.71) (2.90) (1.20) (1.20)
------------- ------------- ------------- ------------- -------------
Net decrease in net asset value (8.21) (3.47) (2.42) (1.53) (1.86)
Net asset value:
Beginning of period 9.19 12.66 15.08 16.61 18.47
------------- ------------- ------------- ------------- -------------
End of period $ 0.98 $ 9.19 $ 12.66 $ 15.08 $ 16.61
============= ============= ============= ============= =============
Ratios:
Ratio of expenses to average net assets 9.87% 5.15% 3.60% 2.92% 2.27%
Ratio of net investment (loss) income
to average net assets (4.63)% 0.54% 5.55% 4.05% 7.22%
Number of limited partnership units
at the end of period 869,796 940,336 1,020,142 1,104,881 1,196,564
</TABLE>
- ----------
(1) Calculated using the weighted average number of limited partnership
units outstanding during the years ended December 31, 1999, 1998, 1997,
1996 and 1995 of 932,412, 1,010,959, 1,095,362, 1,186,294 and
1,285,717, respectively.
The accompanying notes to financial statements are an
integral part of these selected per unit data and ratios.
F-9
<PAGE> 27
FIDUCIARY CAPITAL PENSION PARTNERS, L.P.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
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 was 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 are referred to herein as "portfolio investments". Managed companies
are those to which significant managerial assistance is offered. As discussed
below, the Fund is now in a liquidation mode.
As set forth in the Partnership Agreement, the Fund's investment period ended on
December 31, 1995. Although the Fund is permitted to make additional investments
in existing portfolio companies, the Fund is no longer permitted to acquire
investments in new portfolio companies. A number of alternative actions through
which the Fund could be liquidated by the end of 2000 are currently being
considered. Once a specific plan of liquidation is developed, the requisite
regulatory procedures required to liquidate the Fund will be followed.
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
Use of Estimates The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Accounting Method The Fund maintains its accounting records, prepares financial
statements and files its tax returns using the accrual method of accounting.
F-10
<PAGE> 28
FIDUCIARY CAPITAL PENSION PARTNERS, L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999 AND 1998
Realized and Unrealized Gain or Loss on Investments Realized gains and losses
are recorded upon disposition of investments and are calculated based upon the
difference between the proceeds and the cost basis determined using the specific
identification method. All other changes in the valuation of investments, as
determined by FCM, are included as changes in the unrealized appreciation or
depreciation of investments in the Fund's Statements of Operations.
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 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.
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.
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.
F-11
<PAGE> 29
FIDUCIARY CAPITAL PENSION PARTNERS, L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999 AND 1998
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.
Prior to 1998, cash distributions and earnings of the Fund were allocated 99% to
the Limited Partners and 1% to FCM. Pursuant to the terms of the Fund's
Partnership Agreement, the Fund's 1998 loss was allocated approximately 88% to
the Limited Partners and approximately 12% o FCM, and the portion of the 1998
cash distributions that exceeded the partners' cumulative preferred return was
allocated 100% to the Limited Partners. Approximately 100% of the Fund's 1999
loss was allocated to the Limited Partners, and 1999 distributions were
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 during 1993.
Pursuant to the terms of the repurchase policy, the Fund has annually offered 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. If Units in excess
of this amount are tendered, Units are purchased on a pro-rated basis, after
giving priority to Limited Partners owning less than 100 Units.
F-12
<PAGE> 30
FIDUCIARY CAPITAL PENSION PARTNERS, L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999 AND 1998
Repurchases of Units since the adoption of the plan are summarized as follows:
<TABLE>
<CAPTION>
Units Repurchased Net Asset Value per Unit
----------------------------- -------------------------
Percentage
Date of of Outstanding Net of the
Repurchase Offer Number Units Gross 2% Fee
---------------- ------- -------------- ------ ----------
<S> <C> <C> <C> <C>
November 1993 61,850 4.15% $18.33 $17.96
November 1994 130,951 9.17% 18.35 17.98
November 1995 100,435 7.74% 19.51 19.12
November 1996 91,683 7.66% 15.71 15.40
November 1997 84,739 7.67% 13.72 13.45
November 1998 79,806 7.82% 9.43 9.24
November 1999 70,540 7.50% 4.21 4.13
</TABLE>
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, net of certain fees received
directly by FCM from the Fund's portfolio companies. Investment advisory fees of
$82,162, $102,251 and $120,800 were incurred by the Fund for 1999, 1998 and
1997, respectively.
7. FUND ADMINISTRATION FEES
As compensation for its services as fund administrator, FCM receives a monthly
fee at the annual rate of 0.45% 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 1999, 1998 and 1997. 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 $68,895 each year during 1999, 1998 and 1997.
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 $53,861, $52,076 and $46,966 were
incurred by the Fund for 1999, 1998 and 1997, respectively.
9. OTHER RELATED PARTY TRANSACTIONS
FCM and its affiliates are entitled to reimbursement of direct expenses paid on
behalf of the Fund. Such reimbursements amounted to $260,320, $238,068 and
$256,851 during 1999, 1998 and 1997, respectively.
F-13
<PAGE> 31
FIDUCIARY CAPITAL PENSION PARTNERS, L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999 AND 1998
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 subjected each prospective investment to rigorous analysis, and made only
those investments that were recommended by FCM and that met the Fund's
investment guidelines or that were otherwise approved by the Independent General
Partners. The Fund also has procedures in place to continually monitor its
portfolio companies.
As of December 31, 1999, the Fund held portfolio investments in two Managed
Companies, with an aggregate cost of approximately $8.5 million, and two
Non-Managed Companies, with an aggregate cost of approximately $1.1 million.
During the year ended December 31, 1999, the Fund acquired additional follow-on
investments in LMC at an aggregate cost of approximately $0.7 million, including
the Niigata receivables that were purchased from LMC.
During 1999, the Fund liquidated its remaining KEMET Corporation common stock
investment. The Fund received $423,824 of sales proceeds, resulting in aggregate
net realized gains of $415,653.
The Fund has pledged the common stock it owns in LMC Credit Corp. as collateral
for the corporation's debt. None of the Fund's other portfolio investments are
pledged or otherwise encumbered.
11. UNREALIZED GAIN (LOSS) ON INVESTMENTS
As of December 31, 1998, the Fund had recorded net unrealized loss on
investments of $2,249,574. During 1999, the Fund recorded $6,238,506 of
additional unrealized loss on investments. In addition, the Fund disposed of
investments during 1999 with respect to which the Fund had recorded $255,533 of
net unrealized gain during prior years. Therefore, at December 31, 1999, the
Fund had recorded net unrealized loss on investments of $8,743,613.
12. NON-ACCRUAL STATUS OF INVESTMENTS
In accordance with the Fund's accounting policies, the Fund stopped accruing
interest on the LMC Senior Subordinated Revolving Notes effective July 1, 1999.
In addition, the Fund did not record interest income with respect to the R.B.M.
Precision Metal Products, Inc. ("RBM") Senior Subordinated Secured Notes during
the period from August 25, 1998 through May 24, 1999. The Fund received RBM
common stock in payment of the interest with respect to this nine month period
and the stock was valued at $1 by the Fund.
F-14
<PAGE> 32
FIDUCIARY CAPITAL PENSION PARTNERS, L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999 AND 1998
13. COMMITMENTS AND CONTENGENCIES
Litigation The Fund has accrued approximately $443,000 for certain known
potential liabilities related to former investments of the Fund. In addition,
the Fund may be exposed to other asserted or unasserted legal claims encountered
in the course of its activities, past and present. Other than those amounts for
which the Fund has specifically accrued, management does not believe the
ultimate resolution of these matters will have a material adverse impact on the
operating results, financial position or cash flows of the Fund.
14. 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>
1999 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
Net (decrease) increase in net assets resulting
from operations per financial statements $(6,363,373) $ (887,115) $ 537,407
Increase (decrease) resulting from:
Unrealized loss on investments 6,494,038 (1,552,695) 3,218,969
Realized gains and losses on investments 5,631 (2,919,771) (73,962)
Fee income, net of amortization -- -- (47,396)
Interest income 7,690 133,320 --
Other 11,606 (11,221) (19,564)
----------- ----------- -----------
Taxable income (loss) per federal
income tax return $ 155,592 $(5,237,482) $ 3,615,454
=========== =========== ===========
</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>
1999 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
Net assets per financial statements $ 687,419 $ 8,466,191 $12,863,865
Unrealized loss on investments 8,743,612 2,249,574 3,802,271
Syndication, organization and
start-up costs, net 2,517,779 2,851,719 2,982,080
Realized gains and losses on investments 442,971 437,340 3,357,111
Distributions payable 263,575 284,950 1,030,446
Additional stock and note basis 141,012 133,322 --
Accrued expenses 34,524 22,800 24,050
----------- ----------- -----------
Tax bases of net assets $12,830,892 $14,445,896 $24,059,823
=========== =========== ===========
</TABLE>
F-15
<PAGE> 33
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
There were no changes in accountants or disagreements with accountants with
respect to accounting or financial disclosure issues during 1999 or 1998.
16
<PAGE> 34
PART III
Item 10. Directors and Executive Officers of the Registrant
The Fund has no directors or executive officers. The General Partners of the
Fund jointly manage and control the affairs of the Fund and have general
responsibility and authority in all matters affecting its business.
FCM serves as Investment Adviser to the Fund and is responsible for the
identification of all investments made by the Fund and all other investment
advisory services necessary for the operation of the Fund in carrying out its
investment objectives and policies. The Investment Committee of FCM is
responsible for approval of all investment decisions of FCM with respect to the
Fund and consists of seven members. Five of the seven members are appointed by
FCM Fiduciary Capital Corporation ("FCC") and two are appointed by Mezzanine
Capital Corporation ("MCC"). The current members of the Investment Committee are
Paul Bagley, W. Duke DeGrassi and Michael G. Rafferty, appointed by FCC; and
Stephen R. Dyer and Clifford B. Wattley, appointed by MCC. Election of two
additional members to the Investment Committee by FCC remains undetermined as of
the date of this Report. The Independent General Partners oversee the investment
activities of the Investment Adviser.
Information concerning the directors and executive officers of the Managing
General Partner (and of its partners) and the Independent General Partners is as
follows:
FCM Fiduciary Capital Management Company
(a Delaware general partnership, the partners of which
are FCM Fiduciary Capital Corporation, Mezzanine
Capital Corporation and Paul Bagley)
Name Positions Held
---- --------------
Paul Bagley Chairman and Chief Executive Officer
W. Duke DeGrassi President
Donald R. Jackson Senior Vice President, Treasurer,
Chief Financial and Accounting
Officer and Compliance Officer
Paul Bagley, age 57, is Chairman, Chief Executive Officer and an Investment
Committee Member of FCM. Mr. Bagley is a founding principal of Stone Pine
Capital, LLC, a group that provides mezzanine capital to fund acquisitions,
buyouts, growth and recapitalization and is also associated with Stone Pine
Asset Management, LLC and Stone Pine Investment Banking, LLC. Mr. Bagley was
Chief Executive Officer of Laidlaw Holdings, Inc., an investment services
company, from January 1995 until November 1996. For more than twenty years prior
to October 1988, Mr. Bagley was engaged in investment banking activities with
Shearson Lehman Hutton Inc. and its predecessor, E.F. Hutton & Company Inc. Mr.
Bagley served in various capacities with Shearson and E.F. Hutton, including
Executive Vice President and Director, Managing Director, Head of Direct
Investment Origination and Manager of Corporate Finance. Mr. Bagley serves as
Chairman of the Board of Directors of Silver Screen Management, Inc. and
International Film Investors, Inc., which manage film portfolios. Mr. Bagley is
also a director of Consolidated Capital of North America, Inc. and Hollis-Eden
Pharmaceuticals, Inc., both publicly held companies, LMC Corporation, a
privately held manufacturer of low ground pressure vehicles, and Hamilton Lane
Private Equity Fund, PLC, an Irish Stock Exchange listed investment partnership.
Mr. Bagley graduated from the University of California at Berkeley in 1965 with
a B.Sc. in Business and Economics and from Harvard Business School in 1968 with
an M.B.A. in Finance.
W. Duke DeGrassi, age 53, is the President and an Investment Committee Member of
FCM. Mr. DeGrassi is also the Chief Investment Officer of Hamilton Lane Advisors
and an owner of The Stone Pine Companies, a group of private entities, that
provide asset management and investment banking services to third parties, which
17
<PAGE> 35
are not related to the Funds. From May 1988 to December 1993, Mr. DeGrassi was a
Corporate Vice President with PaineWebber Incorporated. From 1986 and until
joining PaineWebber, Mr. DeGrassi was a Vice President in the Direct Investments
Group at Shearson Lehman Hutton Inc. Prior to that, Mr. DeGrassi spent seventeen
years as a financial executive in the energy business, working both domestically
and in foreign operations. Mr. DeGrassi received a Bachelor of Business
Administration in accounting from the University of Texas at Austin in 1969. Mr.
DeGrassi serves as Chairman of the Board and Chief Executive Officer of LMC
Corporation.
Donald R. Jackson, age 50, is a Senior Vice President, Treasurer, Chief
Financial and Accounting Officer and Compliance Officer of FCM. Mr. Jackson is
also an owner of The Stone Pine Companies, a group of private entities, that
provide asset management and investment banking services to third parties, which
are not related to the Funds. From January 1990 to June 1994, Mr. Jackson was a
Corporate Vice President with PaineWebber Incorporated, where he was involved in
the financial administration of various publicly and privately offered
investment programs. During 1989, Mr. Jackson was self-employed. Immediately
prior to that he was a First Vice President in the Direct Investments Group with
Shearson Lehman Hutton Inc. From 1972 to 1986, Mr. Jackson was associated with
the accounting firm of Arthur Andersen & Co., serving as a partner from 1981 to
1986. He received a Bachelor of Science degree in accounting in 1971 from the
University of Denver and is a Certified Public Accountant. Mr. Jackson serves as
a director of LMC Corporation and Consolidated Capital of North America, Inc.
FCM Fiduciary Capital Corporation
Name Positions Held
---- --------------
Paul Bagley Chief Executive Officer and
Sole Member of the Board
of Directors
W. Duke DeGrassi President
Donald R. Jackson Vice President, Treasurer, Secretary
and Chief Financial and Accounting
Officer
For information regarding Paul Bagley, W. Duke DeGrassi, and Donald R. Jackson
see the above section concerning the management of FCM.
Mezzanine Capital Corporation
Name Positions Held
---- --------------
Stephen R. Dyer President and Director
Clifford B. Wattley Vice President, Assistant Secretary
and Director
Carmine Fusco Vice President, Secretary, Treasurer
and Chief Financial and
Accounting Officer
Stephen R. Dyer, age 40, is President, Assistant Secretary and Director of
Mezzanine Capital Corporation. He joined PaineWebber Incorporated in June 1988
as a Divisional Vice President and is currently a Senior Vice President and
Director of Private Investments. Prior to joining PaineWebber Incorporated, Mr.
Dyer had been employed, since June 1987, as an Assistant Vice President in the
Retail National Products Group of L.F. Rothschild & Co. Incorporated. Prior to
joining L.F. Rothschild, he was employed, beginning in January 1985, as an
Associate in the Real Estate Department of Thomson McKinnon Securities Inc. From
July 1981 to August
18
<PAGE> 36
1983, Mr. Dyer was on the audit staff of the accounting firm of Arthur Young &
Company. He received his Bachelor of Science degree in Accounting in 1981 from
Boston College and a Masters of Business Administration from Indiana University
in December 1984. Mr. Dyer is a Certified Public Accountant.
Clifford B. Wattley, age 50, is a Vice President, Assistant Secretary and
Director of Mezzanine Capital Corporation. Mr. Wattley is a Corporate Vice
President with PaineWebber Incorporated, having joined the firm in 1986. He also
was employed previously by Paine, Webber, Jackson & Curtis from 1979 to 1980.
From 1986 to 1992, Mr. Wattley participated in PaineWebber's Principal
Transactions Group. Since 1992, Mr. Wattley has been a member of the Private
Investment Department. He holds a Bachelor of Science degree in engineering from
Columbia University and a Masters in Business Administration from Harvard
University.
Carmine Fusco, age 31, is a Vice President, Secretary, Treasurer and Chief
Financial and Accounting Officer of Mezzanine Capital Corporation. He also
serves as an Assistant Vice President within the Private Investments Department
of PaineWebber Incorporated. Mr. Fusco was previously employed as a Financial
Valuation Consultant in the Business Valuation Group of Deloitte & Touche, LLP
from January 1997 to August 1998. He was employed as a Commodity Fund Analyst in
the Managed Futures Department of Dean Witter Reynolds Incorporated, from
October 1994 to November 1995. Prior to joining Dean Witter, Mr. Fusco was a
Mutual Fund Accountant with the Bank of New York Company Incorporated. He
received his Bachelor of Science degree in Accounting and Finance in May 1991
from Rider University and a Master of Business Administration from Seton Hall
University in June 1996.
Independent General Partners
A. E. Bruce Fredrikson
E. Bruce Fredrikson, age 62, has been an Independent General Partner since 1992.
Dr. Fredrikson is a Professor of Finance at Syracuse University School of
Management where he has taught since 1966 and has previously served as Chairman
of the Finance Department. Dr. Fredrikson has a bachelor's degree in economics
from Princeton University and a master's degree in business administration and a
Ph.D. in finance from Columbia University. Dr. Fredrikson serves as a director
of Innodata Corporation and Track Data Corporation.
B. Mark A. Sargent
Mark A. Sargent, age 48, is the Dean and a Professor of Law at Villanova
University School of Law. From 1989 to 1997, he was a Professor of Law at the
University of Maryland School of Law, and served as Associate Dean from 1995 to
1997. Mr. Sargent is also currently a member of the editorial boards for several
business law publications, a consultant on corporate and securities law matters,
and an arbitrator for disputes in the securities industry. In 2000, he was
elected to the National Adjudicatory Council of NASD regulation. Mr. Sargent has
a bachelors degree from Wesleyan University, a masters degree in history from
Cornell University and a J.D. degree from Cornell Law School.
C. Phillip Siegel
Phillip Siegel, age 57, is an independent business consultant. From June through
November 1999, Mr. Siegel was Chairman and Chief Executive Officer of Vidikron
Technologies Group, Inc. From May 1996 through February 1998, Mr. Siegel was a
Vice President and Chief Financial Officer of Health Management Systems, Inc.
From 1993 until May 1996, Mr. Siegel was an independent business consultant. He
served as senior executive officer of Presidential Life Insurance Company from
December 1989 until February 1993, most recently as Senior Vice President.
During 1988, Mr. Siegel served as Chief Operating Officer and Chief Financial
Officer of Sherwood Group and Sherwood Securities. From 1972 through 1987, Mr.
Siegel served in various senior executive capacities for the American subsidiary
of Reuters Limited, PLC, including as Vice President for Acquisitions, as Vice
President and General Counsel, and as the senior financial officer.
19
<PAGE> 37
Compliance with Section 16(a) of the Exchange Act
Based solely upon a review of Forms 3 and 4 furnished to the Fund during 1999
and 2000, and written representations by the persons listed above, the Fund has
not identified any such person that failed to file on a timely basis the forms
required by Section 16(a) of the Exchange Act for fiscal year 1999.
Item 11. Executive Compensation
No compensation was paid by the Fund to the officers and directors of the
General Partners during 1999. See Item 13 of this Report, "Certain Relationships
and Related Transactions" for a description of the compensation and fees paid to
the General Partners and their affiliates by the Fund during 1999.
Item 12. Security Ownership of Certain Beneficial Owners and Management
(a) As of the date hereof, no person is known by the Fund to be
the beneficial owner of more than 5% of the Units of the Fund.
The Fund has no directors or officers, and none of the General
Partners of the Fund owns any Units.
The name and address of the Managing General Partner is as
follows:
FCM Fiduciary Capital Management Company
410 17th Street, Suite 400
Denver, Colorado 80202
(b) No directors of FCM Fiduciary Capital Corporation, no
directors or officers of Mezzanine Capital Corporation and no
Independent General Partners owned any Units as of March 1,
2000. One officer of FCM Fiduciary Capital Management Company
and FCM Fiduciary Capital Corporation owned 26 Units as of
March 1, 2000.
(c) The Fund knows of no arrangements, the operation of the terms
of which may at a subsequent date result in a change in
control of the Fund.
Item 13. Certain Relationships and Related Transactions
The Fund may co-invest in portfolio investments with FCP, under certain terms
and conditions, pursuant to a co-investment order issued by the Securities and
Exchange Commission. The Funds have co-invested in the past and are continuing
to do so. See Item 1 of this Report, "Business", which is incorporated herein by
reference, for a description of these co-investments.
The General Partners and their affiliates have received, or will receive,
certain types of compensation, fees or other distributions in connection with
the operations of the Fund. The fees and compensation were determined in
accordance with the applicable provisions of the Partnership Agreement.
Following is a summary of the amounts paid, or payable, to the General Partners
and their affiliates for 1999.
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, net of
certain fees received directly by FCM from the Fund's portfolio companies.
During 1999, FCM earned investment advisory fees of $82,162.
20
<PAGE> 38
Fund Administration Fees. As compensation for its services as fund
administrator, FCM receives a monthly fee at an annual rate of 0.45% of net
proceeds available for investment, as defined in the Partnership Agreement.
During 1999, FCM earned fund administration fees of $118,327. The Fund also
reimbursed FCM for $68,895 of administrative expenses incurred in providing
accounting and investor services to the Fund during 1999.
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 $53,861
were incurred by the Fund during 1999.
Accountable Expenses. FCM and its affiliates are entitled to reimbursement of
direct expenses paid on behalf of the Fund. During 1999, such reimbursements
amounted to $260,320.
Partnership Interest. FCM received cash distributions of $11,184 as their
allocable share of distributions for 1999. In addition, $24,988 of the Fund's
net investment income and net gain (loss) on investments for 1999 was allocated
to FCM.
21
<PAGE> 39
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) and (d) The following documents are filed as part of this Report:
1. Financial Statements: See List of Financial
Statements in Item 8.
2. Financial Statement Schedules: None.
(b) The Partnership did not file any reports on Form 8-K during
the fourth quarter of the fiscal year ended December 31, 1999.
(c) Exhibits required to be filed.
Exhibit No. Description
3.1 (a) Fourth Amended and Restated Certificate of Limited
Partnership of Fiduciary Capital Pension Partners,
L.P., dated as of January 29, 1990. Filed as
Exhibit 3.1(a) to the Registrant's Annual Report on
Form 10-K for the year ended December 31, 1992.*
(b) Second Amended and Restated Agreement of Limited
Partnership of Fiduciary Capital Pension Partners,
L.P., dated as of October 1, 1993. Filed as Exhibit
3.1(b) to the Registrant's Annual Report on Form
10-K for the year ended December 31, 1993.*
(c) Amendment Number One to the Second Amended and
Restated Agreement of Limited Partnership of
Fiduciary Capital Pension Partners, L.P., dated as
of October 1, 1993. Filed as Exhibit 3.1(c) to the
Registrant's Annual Report on Form 10-K for the
year ended December 31, 1994.*
10.1 Investment Advisory Contract, dated as of
October 1, 1993, between Fiduciary Capital Pension
Partners, L.P. and FCM Fiduciary Capital Management
Company. Filed as Exhibit 10.1 to the Registrant's
Annual Report on Form 10-K for the year ended
December 31, 1993.*
10.2 (a) Custody Agreement, dated as of July 19, 1990,
between Fiduciary Capital Pension Partners, L.P.
and M&I First National Bank. Filed as Exhibit 10-C
to the Registrant's Annual Report on Form 10-K for
the year ended December 31, 1990.*
(b) Amendment to Custody Agreement of Fiduciary Capital
Pension Partners, L.P., dated as of October 13,
1992. Filed as Exhibit 10.2(b) to the Registrant's
Annual Report on Form 10-K for the year ended
December 31, 1992.*
- ----------
* Not filed herewith. In accordance with Rule 12b-32 of the General Rules
and Regulations under the Securities Exchange Act of 1934, reference is
made to the document previously filed with the Commission which is
incorporated herein by reference.
22
<PAGE> 40
Exhibit No. Description
10.2 (c) Second Amendment to Custody Agreement of Fiduciary
Capital Pension Partners, L.P., dated as of January
21, 1994. Filed as Exhibit 10.2(c) to the
Registrant's Annual Report on Form 10-K for the
year ended December 31, 1993.*
10.3 Administrative Services Contract, dated as of
August 14, 1990, between Fiduciary Capital Pension
Partners, L.P. and FFCA Fiduciary Capital
Management Company. Filed as Exhibit 10-D to the
Registrant's Annual Report on Form 10-K for the
year ended December 31, 1990.*
10.5 Transfer Agent Agreement, dated as of
April 1, 1999, by and among Fiduciary Capital
Pension Partners, L.P., FCM Fiduciary Capital
Management Company and GEMISYS Corporation.
11.1 Statement of Computation of Net Investment Income
per Limited Partnership Unit.
20.1 Report Furnished to Securities Holders.
27.1 Financial Data Schedule.
28.1 Portions of the Prospectus of Fiduciary Capital
Partners, L.P. and Fiduciary Capital Pension
Partners, L.P., dated January 24, 1990, filed with
the Securities and Exchange Commission pursuant to
Rule 424(b), as supplemented by Supplements dated
August 15, 1990, September 18, 1990 and October 11,
1990 filed with the Securities and Exchange
Commission pursuant to Rule 497(b). Filed as
Exhibit 28 to the Registrant's Annual Report on
Form 10-K for the year ended December 31, 1990.*
- ----------
* Not filed herewith. In accordance with Rule 12b-32 of the General Rules
and Regulations under the Securities Exchange Act of 1934, reference is
made to the document previously filed with the Commission which is
incorporated herein by reference.
23
<PAGE> 41
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
Dated: April 10, 2000
FIDUCIARY CAPITAL PENSION PARTNERS, L.P.
(Registrant)
By: FCM FIDUCIARY CAPITAL MANAGEMENT COMPANY
its Managing General Partner
By: /s/ W. Duke DeGrassi
--------------------------
W. Duke DeGrassi
President
By: /s/ Donald R. Jackson
--------------------------
Donald R. Jackson
Senior Vice President, Treasurer and
Chief Financial and Accounting Officer
By: E. BRUCE FREDRIKSON
Independent General Partner
/s/ E. Bruce Fredrikson
---------------------------
By: MARK A. SARGENT
---------------------------
Independent General Partner
/s/ Mark A. Sargent
---------------------------
By: PHILLIP SIEGEL
Independent General Partner
/s/ Phillip Siegel
---------------------------
24
<PAGE> 42
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended,
this report has been signed below by the following person on behalf of the
Registrant and in the capacities indicated on April 10, 2000.
SIGNATURE OF THE SOLE DIRECTOR OF THE MANAGING GENERAL PARTNER OF FCM
FIDUCIARY CAPITAL MANAGEMENT COMPANY (A DELAWARE GENERAL PARTNERSHIP),
MANAGING GENERAL PARTNER OF THE REGISTRANT.
<TABLE>
<CAPTION>
Signature Title
--------- -----
<S> <C>
/s/ Paul Bagley Chief Executive Officer and Sole
----------------------------------- Director of FCM Fiduciary Capital
Paul Bagley Corporation, managing general partner
of FCM Fiduciary Capital Management
Company
</TABLE>
25
<PAGE> 43
Exhibit Index
<TABLE>
Exhibit No. Description Page
----------- ----------- ----
<S> <C> <C> <C>
3.1 (a) Fourth Amended and Restated Certificate of Limited
Partnership of Fiduciary Capital Pension Partners, L.P.,
dated as of January 29, 1990. (Incorporated by Reference.) *
(b) Second Amended and Restated Agreement of Limited Partnership
of Fiduciary Capital Pension Partners, L.P., dated as of
October 1, 1993. (Incorporated by Reference.) *
(c) Amendment Number One to the Second Amended and Restated
Agreement of Limited Partnership of Fiduciary Capital
Pension Partners, L.P., dated as of October 1, 1993.
(Incorporated by Reference.) *
10.1 Investment Advisory Contract, dated as of October 1, 1993,
between Fiduciary Capital Pension Partners, L.P. and FCM
Fiduciary Capital Management Company. (Incorporated by
Reference.) *
10.2 (a) Custody Agreement, dated as of July 19, 1990, between
Fiduciary Capital Pension Partners, L.P. and M&I First
National Bank. (Incorporated by Reference.) *
(b) Amendment to Custody Agreement of Fiduciary Capital Pension
Partners, L.P., dated as of October 13, 1992. (Incorporated
by Reference.) *
(c) Second Amendment to Custody Agreement of Fiduciary Capital
Pension Partners, L.P., dated as of January 21, 1994.
(Incorporated by Reference.) *
10.3 Administrative Services Contract, dated as of August 14,
1990, between Fiduciary Capital Pension Partners, L.P. and
FFCA Fiduciary Capital Management Company. (Incorporated by
Reference.) *
10.5 Transfer Agent Agreement, dated as of April 1, 1999, by and
among Fiduciary Capital Pension Partners, L.P., FCM
Fiduciary Capital Management Company and GEMISYS
Corporation.
11.1 Statement of Computation of Net Investment Income per
Limited Partnership Unit.
20.1 Report Furnished to Securities Holders.
27.1 Financial Data Schedule.
28.1 Portions of the Prospectus of Fiduciary Capital Pension
Partners, L.P. and Fiduciary Capital Partners, L.P., dated
January 24, 1990, filed with the Securities and Exchange
Commission pursuant to Rule 424(b), as supplemented by
Supplements dated August 15, 1990, September 18, 1990 and
October 11, 1990 filed with the Securities and Exchange
Commission pursuant to Rule 497(b). (Incorporated by
Reference.) *
</TABLE>
- ----------
* See Item 14(c) for statement of location of exhibits incorporated by
reference.
<PAGE> 1
EXHIBIT 10.5
INVESTOR SERVICES PROCESSING
AGREEMENT
----------------------------------
BY AND BETWEEN
FIDUCIARY CAPITAL PENSION PARTNERS, L.P.
FCM FIDUCIARY CAPITAL MANAGEMENT COMPANY
FCM FIDUCIARY CAPITAL CORPORATION
AND
GEMISYS CORPORATION
<PAGE> 2
FIDUCIARY CAPITAL PENSION PARTNERS, L.P.
INVESTOR SERVICES PROCESSING AGREEMENT
- --------------------------------------------------------------------------------
INVESTOR SERVICES AGREEMENT
TERMS AND CONDITIONS
- --------------------------------------------------------------------------------
This Investor Services Agreement ("Agreement") is entered into this 1st
day of April, 1999, by Fiduciary Capital Pension Partners, L.P., a Delaware
Limited Partnership (the Partnership/Client); FCM Fiduciary Capital Management
Company, a Delaware General Partnership (the Managing General Partner/Client);
FCM Fiduciary Capital Corporation, a Delaware Corporation (the Managing General
Partner/Client); and GEMISYS Corporation, a California Corporation ("GEMISYS").
RECITALS
This Agreement is made with reference to the following facts,
objectives, and definitions:
A. The Client is a limited partnership desiring Transfer Agent
Services.
B. GEMISYS is engaged in the business of providing data processing,
securities transfer, administrative, and other services in connection with the
operation of limited partnerships and other investment vehicle forms.
C. Unless the context otherwise requires, the following terms when used
in this Agreement shall have the following meanings:
1. Affiliate: Any "parent," subsidiary, or other entity which
directly or indirectly through one or more intermediaries controls, is
controlled by, or is in common control with a party.
2. Confidential Information: That certain confidential and
proprietary information and techniques which GEMISYS has and will develop,
compile, and own, which has great value in its business including, without
limitation, all information that has or could have commercial value or utility
in the business in which GEMISYS, or any persons or entities for whom GEMISYS
performs services ("GEMISYS' Clients") or from whom GEMISYS obtains information,
is engaged or contemplates engaging in. Confidential Information also includes
all information which the unauthorized disclosure of could be detrimental to the
interests of GEMISYS or GEMISYS' Clients, whether or not such information is
identified as Confidential Information by GEMISYS or GEMISYS' Clients. By
example and without limitation, Confidential Information includes any and all
information concerning GEMISYS' reference materials, procedure manuals,
2
<PAGE> 3
FIDUCIARY CAPITAL PENSION PARTNERS, L.P.
INVESTOR SERVICES PROCESSING AGREEMENT
- --------------------------------------------------------------------------------
teaching techniques, processes, formulae, specifications, methods, systems,
reports, screen appearances, innovations, inventions, discoveries, improvements,
research or development and test results, know-how, data, or trade secrets, or
other elements created, learned or developed by GEMISYS in connection with
GEMISYS' computer software and with GEMISYS' performance under this Agreement.
Confidential Information also includes, by example and without limitation, any
and all GEMISYS marketing and business plans, strategies, forecasts, unpublished
financial information, budgets, projections, and customer and supplier
identities, characteristics, and agreements.
3. Client Data: That certain confidential and proprietary
information which the Client has and will develop, compile, and own, which has
great value in its business including, by example and without limitation, any
and all information provided to GEMISYS by the Client or by the Client's
investors or their representatives (as defined below) which concerns the
Client's investors and is contained in the "SUB Client" database sub-system, or
in correspondence, memoranda, or telecommunications.
4. Client Investor(s) or Their Representative(s): Any owner of
limited partnership units in the Client Partnership ("Client Investor") or that
owner's Broker/Dealer or other representative ("Representative"), as reflected
in Client Data provided to GEMISYS.
D. The Client and GEMISYS acknowledge and agree that each has taken and
hereby agrees to take reasonable and affirmative efforts to maintain the
confidentiality of Client Data and Confidential Information.
NOW, THEREFORE, in consideration of the mutual covenants, conditions,
and undertakings set forth below, the Client, and GEMISYS agree as follows:
AGREEMENT
1. PROCESSING SERVICES
1.01 Master File. GEMISYS shall maintain the file containing all Client
Investor and Representative information previously supplied to GEMISYS by Client
(the "Master File").
1.02 Standard Services. GEMISYS shall regularly perform all services
described in this Investor Services Processing Agreement and the Investor
Services Summary and Fee Supplement, attached hereto ("Standard Services").
3
<PAGE> 4
FIDUCIARY CAPITAL PENSION PARTNERS, L.P.
INVESTOR SERVICES PROCESSING AGREEMENT
- --------------------------------------------------------------------------------
1.03 Quality Assurance. GEMISYS shall perform all Services in a
consistently error-free manner and all output produced by GEMISYS as part of its
Services shall be uniform in appearance, clean, and presentable. For purposes of
this Section, errors are defined as failure to meet the Client's functional
requirements as specified in requests or instructions communicated to GEMISYS by
the Client in connection with GEMISYS' Services. Any error discovered by the
Client shall be promptly corrected by GEMISYS without cost to the Client,
subject to Section 7.05(b), below, provided that the Client deliver its written
or telephonic request for error resolution to GEMISYS within five (5) business
days following the Client's receipt of the erroneous output. In the event that
the Client fails to request error resolution from GEMISYS within that time
period, all Services and output produced shall be deemed to be satisfactory.
1.04 Client Requests and Instructions. The Client shall be exclusively
responsible for authorizing and communicating to GEMISYS all Client Data,
requests, or instructions in connection with Services. GEMISYS shall have no
authority or duty to supervise the investment of or to make or issue any
instructions or recommendations with respect to the operation or disposition of
the Client or of any securities, limited partner interests, or other assets
owned or controlled by the Client or by Client Investors. Any Client Data,
requests, or instructions received by GEMISYS from the Client or duly authorized
representatives of the Client shall be deemed to be genuine and duly authorized
by the Client, and GEMISYS may rely solely upon their accuracy and upon the
authority of the requesting or instructing party in acting upon such. GEMISYS
may rely solely upon the accuracy of information or instructions received from
Client Investors or their Representatives as is more fully set forth in Section
9.02, below.
1.05 Ownership of and Access to Client Data. The Client's records and
information supplied to and utilized by GEMISYS in performing Services
including, without limitation, Client Data, are the exclusive property of the
Client. GEMISYS shall preserve and retain those records and information during
the initial term and any renewal term of this Agreement under appropriate
safeguards to prevent their destruction and to preserve their confidentiality.
The Client shall have access to such records and information for inspection and
audit at the Client's sole expense upon reasonable prior notice to GEMISYS and
during normal business hours.
1.06 Ownership of GEMISYS Programs and Procedures. All computer
programs and procedures developed by GEMISYS in performing Services including,
without limitation, Confidential Information and user documentation, are the
exclusive property of GEMISYS.
1.07 Warranties. GEMISYS makes no warranty, either express or implied,
in connection with this Agreement or any Services rendered by GEMISYS pursuant
to this Agreement including, without limitation, any warranty of merchantability
or of fitness for a particular purpose.
2. SOFTWARE DEVELOPMENT SERVICES
4
<PAGE> 5
FIDUCIARY CAPITAL PENSION PARTNERS, L.P.
INVESTOR SERVICES PROCESSING AGREEMENT
- --------------------------------------------------------------------------------
The Client may request that GEMISYS modify, enhance, or upgrade
GEMISYS' computer programs, Services, or reports due to changes in the Client's
requirements. GEMISYS shall use its best efforts to so meet the Client's changed
requirements within mutually agreed upon time periods. Such services shall be
subject to Section 4.03, below, and GEMISYS shall retain full proprietary rights
in and to any such modification, enhancement, or upgrade.
3. TERM AND TERMINATION OF AGREEMENT
3.01 Term. This Agreement shall be for an initial term of three (3)
years, commencing on April 1, 1999, and shall thereafter be automatically
renewed for successive one (1) year terms unless either party terminates this
Agreement for any reason by written notice to the other party not less than
ninety (90) days prior to expiration date of the initial term or of any renewal
term.
3.02 Default. This Agreement may be terminated by either party upon the
occurrence of any Event of Default which continues uncured for more than ten
(10) days after written notice thereof is received by the defaulting party from
the non-defaulting party. For purposes of this Section, the occurrence of any
one or more of the events described in Section 5.01, below, or the unauthorized
disclosure of Confidential Information or Client Data in violation of Section 6,
below, shall constitute an "Event of Default".
3.03 Transition. Upon termination, the parties shall cooperate in the
orderly transition to a new vendor. Prior to termination, the Client shall pay
in full all fees set forth in Section 4, below, for all Services performed up to
the date of termination, together with all reasonable attorneys' fees and costs
incurred by GEMISYS including, without limitation, the cost of all unused
materials purchased by GEMISYS for the Client's use, which have not previously
been paid for by Client, and the cost of shipping the same to the Client.
4. FEES
4.01 Master File Fee. The fee payable by the Client to GEMISYS for
creation of a Master File is included in the Standard Service Fee (as defined in
Section 4.02, below).
4.02 Standard Service Fee. The Client shall pay to GEMISYS, as fees for
Standard Services performed for the Client, the sum set out in the Investor
Services Summary and Fee Supplement (the "Standard Service Fee"). The Standard
Service Fee shall be invoiced on a monthly basis and payment shall be due within
thirty (30) days of date of the invoice.
5
<PAGE> 6
FIDUCIARY CAPITAL PENSION PARTNERS, L.P.
INVESTOR SERVICES PROCESSING AGREEMENT
- --------------------------------------------------------------------------------
4.03 Extraordinary Services Fees. The Client shall pay to GEMISYS, all
charges required to produce any Extraordinary Services other than standard
services for the Client, on either a mutually agreed upon unit basis or, if no
specific agreement is reached, on the basis of current hourly billing rates for
GEMISYS personnel then in effect and the actual costs of materials used. Such
Services shall be invoiced whenever incurred and payment shall be due within
thirty (30) days of date of the invoice.
4.04 Pass-Through Costs. In addition to the Standard Service Fee and
any Extraordinary Services fees, the Client shall pay or reimburse GEMISYS'
costs incurred in connection with telecommunications, mailing, postage,
printing, delivery, storage, or bonding services to or for the Client or Client
Investors or their Representatives.
4.05 Fee Increases. During the initial term or any renewal term of this
Agreement, GEMISYS may increase its fees set forth in Section 4.02, above, not
more than once in any twelve (12) month period, and no such increase shall
exceed the proportionate increase in the Consumer Price Index for Urban Wage
Earners and Clerical Workers for Denver-Boulder, Colorado, published by the
United States Department of Labor, Bureau of Labor Statistics, which is
published for the month immediately preceding the date of the commencement of
any twelve (12) month period. If the Index is discontinued or revised during any
term, such other government index or computation shall be used by mutual
agreement of the parties in order to obtain substantially the same results as
would be obtained if the Index had not been discontinued or revised.
4.06 Late Charges. If the Client should fail to make any payment of
fees due under this Agreement within thirty (30) days of the date of any
invoice, the Client shall pay to GEMISYS, as a late charge, an additional sum
equal to one and one-half percent (1.5%) per month of the overdue payment, which
amount the parties agree represents a fair and reasonable estimate of the
damages which GEMISYS would sustain as a result of late payment.
5. TERMINATION
5.01 Events of Default. At its option, GEMISYS or the Client shall have
the right to declare the other party to be in default of this Agreement in the
event that the other party:
(a) fails to cure any default (including, without limitation, any
failure to pay any fees when due) within ten (10) days after written notice
thereof is received by that party from the non-defaulting party;
(b) for any reason ceases to conduct business in the normal course,
provided that GEMISYS understands and acknowledges that the Client is in the
process of a phased liquidation;
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(c) files (i) a general assignment for the benefit of creditors; (ii) a
petition in bankruptcy, (iii) a petition seeking for itself any reorganization,
arrangement, composition, readjustment, liquidation, dissolution, or similar
arrangement under any statute, law, or regulation, or (iv) an answer admitting
the material allegations of a petition against it in any such proceeding;
(d) consents to or acquiesces in the appointment of a custodian,
trustee, receiver, or liquidator of it or all or any substantial part of its
assets or properties;
(e) its shareholders or investors shall take any action looking to its
dissolution or liquidation; or
(f) becomes subject to any order for relief entered against it by a
bankruptcy court or other court of competent jurisdiction.
5.02 Actions Upon Default. Upon the declaration by either party of a
default hereunder:
(a) the non-defaulting party shall promptly provide written notice
thereof to the defaulting party;
(b) in the event of a default by the Client, the Client shall cease
using the "SUB Client" database sub-system and shall return to GEMISYS all
GEMISYS programs, procedures, and user documentation without delay; and
(c) the non-defaulting party may, at its option, terminate or suspend
its performance under this Agreement if the default remains uncured for more
than ten (10) days after written notice thereof is received by the defaulting
party.
(d) Upon termination and written request by the Client, and after all
payments due have been received, GEMISYS shall provide within a reasonable time
at a reasonable fee, a copy of all Client Data in the standard GEMISYS format.
6. CONFIDENTIALITY
6.01 Client's Obligations. The Client acknowledges that during the
performance of this Agreement it may be necessary for GEMISYS to disclose to the
Client certain proprietary information and trade secrets of GEMISYS developed at
GEMISYS' expense including, without limitation, proprietary information and
trade secrets relating to Confidential Information, and to permit the Clients
access to facilities which embody such matter. The Client acknowledges that the
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unauthorized disclosure of Confidential Information may be highly prejudicial to
GEMISYS' interests and may constitute an improper disclosure of trade secrets.
In order to protect GEMISYS' rights in and to Confidential Information,
the Client agrees that Confidential Information shall be deemed confidential and
proprietary to GEMISYS, and shall not be disclosed by the Client to unauthorized
third parties, and shall be safeguarded by the Client to the same extent that
the Client safeguards confidential matters relating to its own operation, which
shall include safeguards that a reasonably prudent person would take under
similar circumstances. To these ends, the Client shall take such steps as may be
necessary to ensure that neither Confidential Information nor any information
comprising or relating to Confidential Information is used, copied, replicated
in form or function, modified, disclosed, or made available to third parties by
the Client or its employees, agents, representatives, or affiliates in any
manner or for any purpose other than as provided in this Agreement without prior
written consent of an authorized officer of GEMISYS. Such steps shall include,
without limitation, (i) the taking of appropriate action by the Client via
instruction, agreement, or otherwise with its employees, agents,
representatives, and affiliates permitted access to the Confidential Information
to ensure that the Client's obligations under this Section can be fully
satisfied, and (ii) compliance by the Client and its employees, agents,
representatives, and affiliates with the provisions Section 10.03, below, if and
when that Section should become applicable.
6.02 GEMISYS' Obligations. GEMISYS acknowledges that during the
performance of this Agreement it will be necessary for Client to disclose to
GEMISYS certain Client Data relating to the Client's operation and to Client
Investors or their Representatives. GEMISYS acknowledges that the unauthorized
disclosure of Client Data may be highly prejudicial to the Client's or Client
Investors' interests and may constitute an improper disclosure of trade secrets.
In order to protect the Client's rights in Client Data, GEMISYS agrees the
Client Data shall be deemed confidential and proprietary to the Client, shall
not be disclosed by GEMISYS to parties other than the Client, and shall be
safeguarded by GEMISYS to the same extent that GEMISYS safeguards confidential
matters relating to its own operation, which shall include the safeguards that a
reasonably prudent person would take under similar circumstances. To these ends,
GEMISYS shall take such steps as may be necessary to ensure that neither Client
Data nor any information comprising or relating to Client Data is used, copied,
replicated in form or function, modified, disclosed, or made available to
parties other than the Client by GEMISYS or by its employees, agents,
representatives, or affiliates in any manner or for any purpose other than as
provided in this Agreement without the prior consent of the Client. Such steps
shall include, without limitation: (i) the taking of appropriate action by
GEMISYS via instruction, agreement, or otherwise with its employees, agents,
representatives, and affiliates permitted access to Client Data to ensure that
GEMISYS' obligations under this Section can be fully satisfied, and (ii)
compliance by GEMISYS and its employees, agents, representatives, and affiliates
with the provisions of Section 10.03, below, if and when that Section should
become applicable.
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6.03 Exceptions. The parties' obligations set forth in Section 6.01 and
6.02, above, shall not apply to: (i) information which is in the public domain,
other than as a result of any breach of this Agreement, or (ii) information
which the Client or GEMISYS is obligated to disclose pursuant to the lawful
order of any court of government instrumentality of the United States, but only
to the extent required by such order and subject to the provisions of Section
10.03, below.
6.04. Remedies Upon Breach. If the parties or their employees, agents,
representatives, or affiliates attempt to use, disclose, or misappropriate any
Confidential Information or Client Data in any manner contrary to the terms of
this Agreement, the non-disclosing party shall have the right, in addition to
any other remedies which may otherwise be available to it at law or in equity,
to: (i) apply to a court of competent jurisdiction for an order restraining and
enjoining such acts or attempts, it being acknowledged by the Client and GEMISYS
that in such event legal remedies are inadequate, and/or (ii) suspend or
terminate this Agreement without the disclosing party's consent and without the
requirements of any additional instructions, authorizations, or signatures of
any persons or entities.
6.05 Survival of Obligations. All rights and obligations of the parties
set forth in Section 6.01, 6.02, and 6.04, above, shall survive the expiration
or termination of this Agreement and the termination of the employment, agency,
representation, or affiliation of any individual or entity referred to therein,
even if occasioned by the employer's or principal's breach or wrongful
termination.
7. INDEMNIFICATION AND LIABILITY
7.01 Indemnification by GEMISYS. GEMISYS shall indemnify, defend, and
hold harmless the Client and its directors, officers, employees, agents,
representatives, and affiliates from and against any claims, liability, losses,
damages, and expenses including, without limitation, reasonable attorneys' fees
and costs incurred by the Client, its directors, officers, employees, agents,
representatives, and affiliates which arise out of or relate to the negligence
or willful misconduct of GEMISYS or from any breach or default by GEMISYS of any
of its obligations under this Agreement or any of its provisions. In the event
that any action or proceeding is brought against the Client by reason of any
claims or liability, GEMISYS shall defend that action or proceeding at GEMISYS'
sole expense by counsel of the Client's choice or by counsel reasonably
satisfactory to the Client.
7.02 Indemnification by the Client. The Client shall indemnify, defend,
and hold harmless GEMISYS, and its directors, officers, employees, agents,
representatives, and affiliates from and against any claims, liability, losses,
damages, and expenses including, without limitation,
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reasonable attorneys' fees and costs incurred by GEMISYS, its directors,
officers, employees, agents, representatives, and affiliates which arise out of
or relate to: (i) the negligence or willful misconduct of the Client or the
Client's Investors or their Representatives; or (ii) any breach or default by
the Client of any of its obligations under this Agreement or in connection with
the enforcement of this Agreement or any of its provisions, or (iii) any claim
brought against GEMISYS by a third party including, without limitation, any
claim by the Client's Investor(s) or their Representative(s) which relates in
any way to the fulfillment of any obligation under this Agreement by the Client.
In the event that any action or proceeding is brought against GEMISYS by reason
of such claims or liability, the Client shall defend that action or proceeding
at the Client's sole expense by counsel of GEMISYS' choice or by counsel
reasonably satisfactory to GEMISYS.
7.03 Duty to Notify. As an express condition precedent to either
party's rights or obligations described in Sections 7.01 and 7.02, above, the
party invoking its right to indemnification (the "Indemnified Party") must
provide written notification of any such claim or liability to the party from
whom indemnification is sought (the "Indemnifying Party") within a reasonable
time after the Indemnified Party's receipt of the written claim against it. As
used in this Section, "reasonable time" shall mean that period of time within
which the rights or interests of the Indemnifying Party in defending that claim
or liability are not substantially prejudiced or impaired as a result of delay
by the Indemnified Party. This condition precedent is deemed to be for the
benefit of both the Client and GEMISYS, and may be waived only by the
Indemnified Party in writing.
7.04 Survival of Indemnities. The rights and obligations of the parties
set forth in Sections 7.01, 7.02, and 7.03, above, shall survive the expiration
or termination of this Agreement with respect to any claim or liability
occurring prior to such expiration or termination.
7.05 Limitations on Liability. Notwithstanding the provisions of
Sections 7.01 and 7.02, above:
(a) Consequential Damages. No party shall bear any liability under this
Agreement for any lost profits or consequential, special, or indirect damages,
even if a party has been informed of the possibility of such damages or could
have reasonably foreseen them.
(b) Error. GEMISYS' liability in the event of any request by the Client
for error resolution pursuant to Section 1.03, above, shall not exceed GEMISYS'
internal costs incurred in investigating and correcting the error identified or,
in the event that the error is not promptly investigated and corrected, the
Client's internal and external costs incurred in investigating and correcting
the error.
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(c) Force Majeure. In no event shall any party bear any responsibility
for delays or failures in the performance of its obligations under this
Agreement which result from acts beyond that party's control, and such party
shall be excused from such delays or performance. Such acts shall include,
without limitation, acts of God, strikes, lockouts, riots, acts of war,
epidemics, any act or omission by any governmental authority, regulations or
restrictions superimposed after the fact by any governmental authority, fire,
explosions, communications line failures, power failures, earthquakes, or other
disasters. At all times during the performance of this Agreement, GEMISYS shall
maintain a reasonable recovery plan providing for back-up capability in the
event of any unplanned interruption of its operations or inaccessibility to its
computer facilities.
(d) Value of Contract. In no event shall GEMISYS' liability under this
Agreement, in the aggregate, exceed one (1) month's Standard Service Fee.
8. COOPERATION AND ACCESS TO INFORMATION
8.01 Cooperation of the Parties. The parties agree to cooperate and, if
requested, to use all efforts reasonably required to assist the other party in
fulfilling its obligations under this Agreement. In the event that any party is
(a) involuntarily made a party-defendant to any litigation concerning this
Agreement or any Client-sponsored investment vehicle, or (b) subjected to or
suffers any claim, liability, loss, damage, or expense as described in Sections
7.01 or 7.02, above, the parties agree to execute and deliver any instrument,
furnish any information, or perform any other act reasonably necessary to assist
the other party in defending such litigation, claim, or liability without undue
delay or expense.
8.02 Access to Records and Documents. The parties shall maintain,
preserve, and make available to one another all printed materials including,
without limitation, negotiation notes, internal memoranda, Agreement drafts, and
post-Agreement documents and correspondence relevant to this Agreement, in the
event of the commencement of any litigation (including claims or liabilities
under Section 7.01 and 7.02 under this Agreement) arising out of any breach or
default under this Agreement or in connection with the enforcement of this
Agreement or any of its provisions. The requesting party shall have the right to
examine and make copies of such materials upon reasonable prior notice to the
non-requesting party and during normal business hours. Original materials shall
be retained by the parties for a period of not less than six (6) years following
the date of termination or expiration of this Agreement.
9. RELATIONS OF ENTITIES
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9.01 Relations Between the Parties. GEMISYS shall act solely as an
independent contractor to the Client and neither GEMISYS nor any GEMISYS
employee shall be the employee of any Client or its agent for any purpose. No
party is granted any express or implied right or authority by any other party to
assume or create any obligation or responsibility on behalf of or in the name of
any other party, or to bind any other party in any manner or thing whatsoever.
GEMISYS is not in any way a fiduciary, named or unnamed, actual or constructive,
under this Agreement or under any Client-sponsored investment vehicle. GEMISYS
shall be responsible only for those duties and responsibilities detailed in this
Agreement and it shall have no discretionary powers or abilities other than
those specifically set forth in this Agreement, if any. No implied covenant or
obligation shall be read into this Agreement against GEMISYS.
9.02 Relations Between GEMISYS and Third Parties. In performing its
Services under this Agreement GEMISYS may rely solely upon the accuracy of all
facts and representations supplied or made at any time by Client Investor(s) or
their Representative(s) which GEMISYS reasonably believes to be genuine. GEMISYS
shall be protected in accordance with Sections 1.04 and 7.02, above, in the
event that GEMISYS reasonably relies solely upon the instructions or information
received from a duly authorized representative of the Client or Client
Investor(s) or their Representative(s) in effecting any transactions with
respect to the Client, and GEMISYS shall be under no duty to inquire or
ascertain whether the approval or direction of the Client Investor or its
Representative(s) has been lawfully obtained.
10. DISPUTE RESOLUTION
10.01 Arbitration. If any controversy or claim arises between the
parties concerning this Agreement or the rights or duties of any party in
relation thereto or by reason of the breach or alleged breach thereof, then that
controversy or claim shall be submitted to binding arbitration in the County of
Denver, State of Colorado, in accordance with the rules then prevailing of the
American Arbitration Association.
10.02 Judgment. Any judgment on the award rendered by the arbitrator(s)
under Section 10.01, above, may be entered and enforced in any court of
competent jurisdiction, provided, that within seven (7) days after service of
that award on the parties, no party has served the other party with a written
rejection of and election not to be bound by that arbitrator(s)' award. If
either party rejects the award in a timely manner, then the parties shall submit
their dispute to a binding adjudication before a retired judge of the Superior
Court of California for the Counties of Santa Clara, San Mateo, San Francisco,
or Marin in accordance with Section 638 of the California Code of Civil
Procedure. Any judgment on the award rendered by the retired judge under this
Section may be entered and enforced in any court of competent jurisdiction.
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10.03 Protection of Proprietary Information. In the event of
arbitration, private adjudication, or litigation between the parties concerning
this Agreement or the rights or duties of any party in relation thereto or by
reason of the breach or alleged breach thereof, then any document or material of
any type, form, or media which is proffered as evidence or is otherwise
presented, submitted, or filed therein which contains, may contain, or is
designated as containing any Confidential Information or Client Data shall be:
(i) placed under seal or other safeguard adequate to prevent any publication,
misappropriation, or disclosure which may endanger the proprietary nature or
status of that Information or Data; and (ii) designated as "Confidential" by any
manner reasonably calculated to impart notice that such Information or Data is
being disclosed; and (iii) used only for the purpose of conducting that
arbitration or litigation; and (iv) subject to a protective order to avoid
unnecessary disclosure therein and, if necessary, to an order restraining
further disclosure, by both of which the parties and their counsel shall abide.
10.04 Attorneys' Fees. Each party shall be responsible for the payment
of its attorneys' fees, costs, and expenses previously incurred, or to be
incurred in the future, in connection with the preparation, drafting, and
execution of this Agreement or any amendment to it. In the event that
arbitration or litigation is commenced between the parties concerning this
Agreement or the rights or duties of any party in relation thereto or by reason
of the breach of alleged breach thereof, then the prevailing party in such a
proceeding shall be entitled to its reasonable attorneys' fees and costs
incurred as a result.
11. NON-HIRING OF EMPLOYEES
During the term of this Agreement, and for a period of two (2) years
immediately following the termination or expiration of this Agreement, the
parties shall not interfere with the business of one another in any manner
including, without limitation, by inducing any Client or GEMISYS employee to
leave the others' employ or by inducing a consultant or other independent
contractor to breach that person's contract with the Client or with GEMISYS.
12. NON-COMPETITION
During the term of this Agreement, the Client, the Client's Managers,
the Client's sponsors, and their affiliates shall not solicit the trade or
patronage of GEMISYS' clients or potential clients of GEMISYS for the purpose of
rendering services similar to those to be performed by GEMISYS under this
Agreement, whether or not competitive therewith.
13. MISCELLANEOUS
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13.01 Notices. Any notice, consent, demand, request, or other
communication required or permitted under this Agreement shall be in writing and
shall be deemed to have been duly given on the date of service if served
personally, or on the third (3rd) day after mailing if sent by first class,
postage prepaid United States mail and addressed to the addressee at the address
stated opposite its name set forth below, or at the most recent address
specified by written notice given to the sender by the addressee under this
Section. Such written communication(s) shall be addressed as follows:
TO THE CLIENT: FIDUCIARY CAPITAL PENSION PARTNERS, L.P.
Donald R. Jackson
Vice President, Secretary, Treasurer
and Chief Financial Officer
410 17th Street, Suite 400
Denver, Colorado 80202
TO GEMISYS: GEMISYS CORPORATION
Stephen A. Finn, Chief Executive Officer
7103 South Revere Parkway
Englewood, Colorado 80112
13.02 Assignment Restricted. None of the Client's rights and
obligations under this Agreement may be assigned or transferred without the
prior written consent of GEMISYS, which consent shall not be unreasonably
withheld. None of GEMISYS' rights and obligations under this Agreement may be
assigned or transferred without the prior written consent of the Client, which
consent shall not be unreasonably withheld.
13.03 Rules of Construction. The rule of construction, to the effect
that any ambiguities are to be resolved against the drafting party, shall not be
employed in the interpretation of this Agreement or any amendment to it. No
course of dealing, usage of trade, or course of performance shall be relevant to
explain or supplement any terms of this Agreement. All activities undertaken by
GEMISYS pursuant to this Agreement shall constitute "services" and shall not be
considered as "goods" by or under any definition or law.
13.04 Warranty of Capacity to Execute Agreement. The Client and GEMISYS
hereby represents and warrants to the other that no other person or entity has
any interest, liens, or assignment at law or in equity or otherwise which would
materially impair its ability to perform its obligations under this Agreement.
The Client further represents and warrants that the persons executing this
Agreement on behalf of that corporation have the sole right and exclusive
authority
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to do so, and have the authority to bind the Client to this Agreement and to
execute such other documents as may be required to be delivered under it on
behalf of the Client. The Client and GEMISYS further represents and warrants
that each has the sole right to receive the services, sums, or other
consideration specified in it, and is fully entitled to enter into this
Agreement. Also, GEMISYS certifies that its systems and applications are Year
2000 compliant pursuant to SEC requirements.
13.05 Taxes. While GEMISYS knows at this time of no taxes applicable to
it as a result of the execution and performance of this Agreement other than
income taxes, each Client shall pay or reimburse GEMISYS for any other taxes,
excluding income or similar taxes, levied upon GEMISYS in connection with the
Services performed for the Client. GEMISYS shall have no duty to see to the
payment or discharge of any tax or other governmental charge or lien of any kind
owing with respect to, assessed, or levied against the assets of the Client or
any other Client-sponsored investment vehicle, or to the filing of any tax or
other governmental information in connection with any Client-sponsored
investment vehicle.
13.06 Right of Review of Client Materials. Except for those Client
materials which identify GEMISYS merely as "Transfer Agent," "Investor Services
Representative," or other similarly descriptive title, the Client shall deliver
to GEMISYS draft copies of all printed Client materials intended for public
distribution or distribution to Client Investors or their Representatives which
identify or refer to GEMISYS including, without limitation, prospectuses or
promotional materials, on or before the tenth (10th) business day prior to that
document's proposed distribution date. GEMISYS shall have the right to review,
at its sole expense and to object to any such document which it reasonably
believes creates a legal duty or liability on GEMISYS' part which it has not
expressly agreed to assume under this Agreement. GEMISYS' objection(s), if any,
shall be in writing and shall be delivered to the Client within five (5)
business days after GEMISYS' receipt of the Client materials. The Client shall
not distribute any document so objected to unless and until GEMISYS'
objection(s) has been addressed to the reasonable satisfaction of both parties.
14. GENERAL PROVISIONS
14.01 Governing Law. This Agreement is executed and intended to be
performed in the State of California, and the laws of the State of California
shall govern its interpretations, construction, enforcement, and effect. Except
as provided in Sections 10.01 and 10.02, above, the forum for the resolution of
any dispute arising out of this Agreement shall be the Superior Court of the
State of California in and for the County of Santa Clara. Each party agrees to
submit to the jurisdiction of such Court and that venue is proper therein.
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14.02 Successors. This Agreement shall be binding upon and inure to the
benefit of the respective successors, heirs, permissible assigns, and legal
representatives of the parties, except to the extent of any contrary provision
in this Agreement.
14.03 Severability. If any term, provision, covenant, or condition of
this Agreement is held by a court of competent jurisdiction to be invalid, void,
or unenforceable, then the rest of this Agreement shall remain in full force and
effect and shall in no way be affected, impaired, or invalidated.
14.04 Captions. The captions to the various sections of this Agreement
are for convenience only. Those captions or titles shall not amend or modify
this Agreement, or be resorted to in interpreting it.
14.05 Gender, Etc. As used in this Agreement, the masculine, feminine,
or neuter gender, and the singular or plural number, shall be deemed to include
the others whenever the context so indicates or requires.
14.06 Remedies Not Exclusive and Waivers. No remedy conferred by any of
the provisions of this Agreement is intended to be exclusive of any other
remedy, and each and every remedy shall be cumulative and shall be in addition
to every other remedy given under this Agreement or now or hereafter existing at
law or in equity or by statute or otherwise. The election of any one or more
remedies shall not constitute a wavier of the right to pursue other available
remedies.
14.07 Waiver. No waiver of any provisions of this Agreement shall be
valid unless in writing and signed by the party against whom charged.
14.08 Schedules. The Exhibit and all of the Schedules attached to this
Agreement and all schedules or exhibits to the Schedules attached to this
Agreement are incorporated herein as though set forth in full and shall be
considered as a material part of the Agreement of the parties.
14.09 Survival. The provisions, representations, and warranties
contained in this Agreement shall survive GEMISYS' delivery of Services and the
Clients' payment of any Fees.
14.10 Entire Agreement. This Agreement contains the entire agreement of
the parties relating to the rights granted and obligations assumed in this
Agreement. Any modifications or amendments must be in writing and signed by the
parties. The parties acknowledge that such modifications or amendments may also
include or result in changes in the various Schedules attached hereto.
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14.11 Confidentiality. Client shall treat the terms of this Agreement
as confidential; provided, however, that Client shall be permitted, as required
by the terms of the corporate charter and bylaws, the securities laws of the
United States, or other regulatory authority, to disclose the terms hereof, but
only to the extent required by such agreements, laws, or authority.
14.12 Counterpart Copies. This Agreement may be signed in counterpart
or duplicate copies, and any signed counterpart or duplicate copy shall be
equivalent to a signed original for all purposes.
SIGNATURE PAGE
SIGNATURE PAGE
IN WITNESS WHEREOF, Client, and GEMISYS execute this Agreement as of
____________________, 19___.
Date: May 24 , 1999. FIDUCIARY CAPITAL PENSION PARTNERS, L.P.
---------- --
By: FCM Fiduciary Capital Management Company
Managing General Partner
By: FCM Fiduciary Capital Corporation
Managing General Partner
By: /s/ Donald R. Jackson
-----------------------------------------
Donald R. Jackson
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FIDUCIARY CAPITAL PENSION PARTNERS, L.P.
INVESTOR SERVICES PROCESSING AGREEMENT
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Vice President, Secretary, Treasurer
and Chief Financial Officer
Date: May 25, 1999. GEMISYS CORPORATION,
------ --
a California corporation
By: /s/ Stephen A. Finn
----------------------------------------
Stephen A. Finn
Chief Executive Officer
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INVESTOR SERVICES SUMMARY AND FEE SUPPLEMENT
CLIENT: FIDUCIARY CAPITAL PENSION PARTNERS, L.P.
ADDRESS: 410 - 17th Street, Suite 400
CITY: Denver STATE: Colorado ZIP: 80202
================================================================================
The Investor Services Processing Agreement includes all services detailed below
in support of Fiduciary Capital Pension Partners, L.P.
GEMISYS Corporation will provide the following services, which include on-line
system use, investor record-keeping, transfer agent services, address changes
and data maintenance, response to telephone or written investor inquiries,
disbursement agent, K-1 tax processing, and printing and mailing services, at
the rates set forth.
I. MONTHLY INVESTMENT MANAGEMENT SYSTEM AND SERVICES FEE: $0.583/INVESTOR
Including:
o Timeshare use of central processing equipment
o Timeshare use of Investment Management System
o Investor Relations Account Maintenance and Administration
o Quarterly distributions
o Stock Transfer Agent and Registration Services
o Mailing labels for Quarterly Reports
o K-1 tax processing services including K-1 letters
o Account Executive Services
A. ON-LINE INVESTMENT MANAGEMENT SYSTEM INCLUDED
GEMISYS will make available the Investment Management System for Client's
on-line access to the investor data base for the benefit of sales
management, telemarketing, wholesaler management, rep fulfillment, document
inventory, marketing research, investor relations/fund performance calls,
and retention of control of the investment management information.
o On-line computer accessibility at your PC workstations
19
<PAGE> 20
FIDUCIARY CAPITAL PENSION PARTNERS, L.P.
INVESTOR SERVICES SUMMARY AND FEE SUPPLEMENT
- --------------------------------------------------------------------------------
o Data saves ("backups") archived off-site
o Use of the Investment Management System
o Software application updates
o Unlimited reporting capability at Client's offices
NOTE: Equipment, data circuit and/or dial-up telephone line costs are not
included.
B. DISBURSEMENT AGENT SERVICES INCLUDED
GEMISYS will provide quarterly distributions for the partnership. Checks
will be signed by GEMISYS and will be drawn on a disbursing account for the
benefit of the investors (subject to the control of GEMISYS).
o System processing of distribution amounts
o Prepare and mail distributions
o Prepare distribution report as of each distribution record date
o Periodic reporting of accumulated uncashed distribution checks
o Automated interface with selected brokerage and financial institutions
o Automatic update of on-line distribution inquiry files and related
screens
o Laser print and sign distribution checks
o Laser print investor payment advices (e.g. for checks to IRA
Custodian)
o Laser print broker and distribution summary and letter (at Client's
option)
o Insert, meter, seal and mail all checks, payment advices and broker
summaries
NOTE: Postage, check stock, envelopes, forms, offset printing and mail
house services not included. Electronic payment (ACH) to alternative payee
on behalf of investor available at $0.60/each.
C. BANK RECONCILIATION N/C*
o Provide on-line check inquiry (PC/CRT)
o Paid checks updated daily by data transmission from bank
o Complete check services:
o Investor re-issue requests
o Stop-payment handling
o Print and mail replacement checks
o Provide photocopies of canceled checks, as requested
o Periodic Account Reconciliation:
20
<PAGE> 21
FIDUCIARY CAPITAL PENSION PARTNERS, L.P.
INVESTOR SERVICES SUMMARY AND FEE SUPPLEMENT
- --------------------------------------------------------------------------------
o Cash on hand
o Outstanding checks
o All unresolved reconciliation items
o Maintain check register
o Provide Escheat service as required
* NOTE: In the event that Client does not utilize GEMISYS' bank, the
following service fees will be charged: $60.00/bank tape/transmission
loaded; $15.00/check reissue; postage, forms, envelopes and photocopies are
extra. Electronic payment to payees on investor's behalf in lieu of check
is at $0.60/each (ACH utilized).
D. STOCK TRANSFER AGENT AND REGISTRAR FEE PAID BY PRESENTER
GEMISYS will process ownership transfers within the rules, regulations and
guidelines established by the Securities and Exchange Commission, the
National Association of Securities Dealers, and the New York, American,
NASDAQ or over-the-counter Stock Exchanges. The ownership transfer process
will include, but is not limited to, the following:
o Administrative services as Transfer Agent and Registrar
o Check good delivery of request and process transfer within the
required legal time frame as established by transfer agent governing
agencies
o Update investor and investment files
o Any transfer request not in good delivery form will be rejected to the
presenter with letter specifying the requirements for completion
o Handle phone and written inquiries about transfer issues and items
o Maintain appropriate records to monitor response time, including date
stamp and log number, of all written correspondence, whether received
directly from Client, unit holder, or other presenter
o Cancel all certificates which are surrendered for exchange,
substitution, transfer or exercised in whole or in part
o Produce monthly transfer journal
o Transfer fees will be collected by GEMISYS and credited to client
NOTE: Surety bond or indemnity, postage, offset printed material,
certificates, forms and envelopes not included.
21
<PAGE> 22
FIDUCIARY CAPITAL PENSION PARTNERS, L.P.
INVESTOR SERVICES SUMMARY AND FEE SUPPLEMENT
- --------------------------------------------------------------------------------
E. INVESTOR RELATIONS ACCOUNT MAINTENANCE AND ADMINISTRATION INCLUDED
o Investor telephone service and correspondence
o Maintenance of investor accounts: address changes, transfers, change
of selling firm, or registered representative
o Maintenance of broker dealer file: address changes, adding names of
registered representatives, and adding selling agreements
o Toll-free (800) number can be made available to your investors upon
request (at extra cost to Client)
o Performance calls: at Client's request, we will handle inquiries
regarding fund performance or refer those calls to Client's staff
F. TAX WITHHOLDING SERVICES INCLUDED
o W-9 solicitation, W-8 solicitation and Form 1078, as needed
o Withholding of taxes from investor accounts
o Reconciling and reporting taxes withheld
o Mailing to new accounts who have had taxes withheld, to inform them of
procedures to be followed to curtail subsequent back-up withholding
G. USER SUPPORT SERVICES
GEMISYS' Account Executive support is included in the base fee.
NOTE: Postage, forms, envelopes and other offset printed material, travel,
PC equipment, modems, PC LAN, data circuits, telephone services, mailing
services and pass-through costs are not included.
H. K-1 TAX PROCESSING SERVICES INCLUDED
o Perform Federal K-1 allocations
o Laser print the K-1
o Produce investor K-1 letter
o Update K-1 inquiry files automatically
o K-1 reports to Client and states, as requested
NOTE: K-1/1099 paper is included. Offset printing, postage, and envelopes
are not included. K-1/1099 copies faxed by our GEMISYS telephone agents at
$5.00/each.
22
<PAGE> 23
FIDUCIARY CAPITAL PENSION PARTNERS, L.P.
INVESTOR SERVICES SUMMARY AND FEE SUPPLEMENT
- --------------------------------------------------------------------------------
II. ADDITIONAL SUPPORT SERVICES
A. LASER PRINTING: $.05 PER IMAGE
o Forms, letters, reports, etc.
NOTE: Forms set-up, graphics digitization, and special forms not included.
Client has the option of printing at Client's offices with appropriate data
link and equipment.
B. MAIL HANDLING SERVICES
o Generate and print labels $40.00/1000 Items
o Insert, affix label, fold, meter
and mail service package $80.00/1000 Items
o Each additional insert $20.00/1000 Items
o Hand sort and insert $70.00/1000 Items
o Cost for any item burst and decollated $50.00/1000 Items
o Postal Discount Presort $50.00/1000 Items
NOTE: Postage, offset printing and envelopes not included.
C. OFFSET PRINTING SERVICE GEMISYS QUOTE*
o Letterhead stationery and envelopes o Checks
o Annual and quarterly reports o K-1 roadmaps
o Proxy packets o Tax envelopes
o Dividend materials o Investor letters
D. CONSULTING/SUPPORT SERVICES
o System Design/Project Manager/PC/Lan Technician $105.00/Hour
o Programmer/Senior Account Executive $95.00/Hour
o Account Executive $75.00/Hour
o Clerical Support Representative $35.00/Hour
o Travel and out-of-pocket expenses additional
23
<PAGE> 24
FIDUCIARY CAPITAL PENSION PARTNERS, L.P.
INVESTOR SERVICES SUMMARY AND FEE SUPPLEMENT
- --------------------------------------------------------------------------------
E. INTERACTIVE EQUIPMENT REQUIREMENTS SUPPLIED BY CLIENT
o Frame Relay Data Link
o Communication Equipment
o PCs/PC-LAN
Date: May 24, 1999. FIDUCIARY CAPITAL PENSION PARTNERS, L.P.
------ --
By: FCM Fiduciary Capital Management Company
Managing General Partner
By: FCM Fiduciary Capital Corporation
Managing General Partner
By: /s/ Donald R. Jackson
----------------------------------------
Donald R. Jackson
Vice President, Secretary, Treasurer
and Chief Financial Officer
Date: ___May 25 , 1999
------------- -- GEMISYS CORPORATION
a California corporation
By: /s/ Stephen A. Finn
----------------------------------------
Stephen A. Finn
Chief Executive Officer
24
<PAGE> 1
FIDUCIARY CAPITAL PENSION PARTNERS, L.P.
STATEMENT OF COMPUTATION OF NET
INVESTMENT INCOME PER LIMITED
PARTNERSHIP UNIT
<TABLE>
<CAPTION>
For the Year Ended December 31,
---------------------------------------
1999 1998 1997
---------- ---------- ----------
<S> <C> <C> <C>
Net Investment (Loss) Income $ (279,357) $ 57,840 $ 831,359
----------
Percentage Allocable to Limited Partners 100% 99% 99%
---------- ---------- ----------
Net Investment (Loss) Income
Allocable to Limited Partners $ (279,357) $ 50,899 $ 823,045
========== ========== ==========
Weighted Average Number of Limited
Partnership Units Outstanding 932,412 1,010,959 1,095,362
========== ========== ==========
Net Investment (Loss) Income
Per Limited Partnership Unit $ (.30) $ .05 $ .75
========== ========== ==========
</TABLE>
<PAGE> 1
EXHIBIT 20.1
FIDUCIARY CAPITAL PENSION PARTNERS, L.P.
-------------------------------------------------
---------------------------
THIRD QUARTER REPORT
1999
<PAGE> 2
FIDUCIARY CAPITAL PENSION PARTNERS, L.P.
================================================================================
MESSAGE TO INVESTORS
Dear Investor:
In this Quarterly Report, we will summarize the status of your cash
distributions and the results of the Fund's 1999 Repurchase Offer. In addition,
we will highlight recent developments with respect to the Fund and its remaining
portfolio investments.
CASH DISTRIBUTIONS
The cash distribution for the third quarter of 1999 was paid on November 15,1999
at a rate of $0.30 per Unit. Cumulative cash distributions paid to Investors
since the Fund's inception during 1990 now total between $16.31 and $15.99 on a
per Unit ($20.000 cost) basis, depending upon the closing in which the
particular Units were issued. All of the 1999 distributions constitute a return
of capital.
The 1999 Repurchase Offer and the distribution for the third quarter of 1999
utilized a substantial portion of the Fund's remaining cash. As a result,the
Fund's ability to pay quarterly distributions for the fourth quarter of 1999 and
subsequent quarters is uncertain at this time. The distribution question will be
addressed on a quarterly basis, and will involve the consideration of a number
of issues.
PERIODIC UNIT REPURCHASE POLICY
Pursuant to the terms of the Fund's periodic unit repurchase policy, the Fund
has annually offered 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 2%
fee,which is 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. If Units in excess of this amount
are tendered,Units are purchased on a prorated basis,after giving priority to
Investors owning less than 100 Units.
The 1999 Repurchase Offer was mailed to Investors during October 1999. Investors
tendered 93,090 Units, or approximately 9.90% of the Fund's outstanding Units,
for repurchase. The Fund repurchased 70,540 Units, or approximately 7.50% of the
Fund's outstanding Units, during November 1999 at a net asset value per Unit of
$4.21 ($4.13, net of the 2% fee).
------------------
ONE
<PAGE> 3
FIDUCIARY CAPITAL PENSION PARTNERS, L.P.
================================================================================
As discussed below, the General Partners are presently considering a number of
alternative actions through which the Fund could be completely liquidated by the
end of next year. As a result, the 1999 Repurchase Offer will likely be the
Fund's last Repurchase Offer.
NET ASSET VALUE
The Fund's net asset value per Unit was $5.38 at September 30, 1999 and $4.21 at
November 12, 1999. The November 12th net asset value was used to establish the
repurchase price for the 1999 Repurchase Offer. These net asset values compare
to net asset values of $9.19 at December 31, 1998 and $8.67 at June 30, 1999.
These declines in the net asset value during 1999 resulted primarily from
writedowns in the value of the Fund's investments in LMC Corporation ("LMC") and
the fact that all of the Fund's quarterly cash distributions for the nine months
ended September 30, 1999 represented a return of capital.
POSSIBLE LIQUIDATION PLANS
The General Partners are presently considering a number of alternative actions
through which the Fund could be liquidated by the end of next year. An overall
plan of liquidation was adopted at a meeting of the General Partners held during
January 1999. The General Partners will follow the requisite regulatory
procedures required to liquidate the Fund. These procedures are expected to
include requesting an exemptive order from the Securities and Exchange
Commission (the "SEC"), which will permit the Fund to act as an operating
company instead of an SEC registered investment company. Once this order is
obtained,the Fund will finalize its liquidation plan and prepare a proxy
statement setting forth the details of the plan as well as the changes required
in the Fund's Partnership Agreement. Early in 2000, Investors will be requested
to approve the implementation plan and the Partnership Agreement changes. As
currently contemplated, Fund investors would become direct shareholders of LMC
as a result of the liquidation plan, if all approvals are received.
PORTFOLIO UPDATE
KEMET Corporation ("KEMET") The Fund has completed the liquidation of its
remaining KEMET common stock investment. This liquidation process, which
involved the writing of covered call options, began during May 1999 and was
------------------
TWO
<PAGE> 4
FIDUCIARY CAPITAL PENSION PARTNERS, L.P.
================================================================================
completed during October 1999. In the aggregate, during this six-month period
the Fund generated $423,824 of net cash proceeds from the liquidation of this
investment.
R.B.M. Precision Metal Products, Inc. ("RBM") During 1998, RBM and its lenders
completed a restructuring under which a new senior lender, Wells Fargo Business
Credit, replaced Bank of America. As part of this restructuring, RBM's principal
shareholder contributed additional equity to the company and the subordinated
lenders, including the Fund, agreed to accept shares of RBM's common stock as
payment for three quarterly interest payments. As a consequence, the Fund's
ownership of RBM, on a fully diluted basis, increased from 5.9% to 7.2%,
assuming exercise of its warrants. The Fund did not assign any value to the RBM
common stock that was received.
RBM resumed paying the quarterly interest payments in cash commencing with the
quarterly interest payment due on August 24, 1999. The Fund has received the
August and November quarterly interest payments. As a result, the Fund resumed
recording interest income with respect to the RBM subordinated debt, effective
May 25, 1999.
At October 31,1999,RBM held $855,000 of cash and its line of credit had a zero
outstanding balance. RBM appears to have managed its balance sheet well and its
latest report states that "RBM met all covenant requirements for the fourth
quarter and year end".
For the year ended October 31, 1999, RBM's revenues were $11.7 million versus a
budget of $12.0 million. Losses continue,but are more favorable than budgeted.
For the year, RBM's loss was $1.2 million (pretax) versus a budgeted loss for
the year of $1.9 million.
RBM continues to experience high turnover. The CEO, the CFO/VP of Finance and
the Human Resources Manager all resigned during the last quarter. The equity
sponsor and majority holder, 13i Capital Corporation ("13i"), has taken over
direct management of the company and the CEO of 13i has moved to Colorado
Springs in order to take full time responsibility for the management of RBM.
LMC Corporation ("LMC") LMC has successfully reoriented its business away from
fleet snow grooming to the production of light construction vehicles,known as
the TrackMaster 85. Unfortunately, production and moving delays, combined with
CIT's unilateral reductions in loan availability under the company's CIT loan
facility, have eliminated the working capital necessary for continued vehicle
production.
------------------
THREE
<PAGE> 5
FIDUCIARY CAPITAL PENSION PARTNERS, L.P.
================================================================================
We, along with LMC management, are assessing various options and alternatives
including refinancing options,sales of certain assets and sale of the company.
We are also considering the establishment of TrackMaster as a separate
corporation and refinancing that business directly.
All matters relative to LMC's defined contribution pension plan (the "Plan"),
including the attendant litigation have been settled. Mr. Wallace, the former
controlling shareholder of LMC and the Plan trustee,contributed $750,000 to pay
the assessed underfunding. He received Class A preferred stock in return for
this contribution. LMC gave Mr. Wallace a full release from all claims related
to this matter and has received letters from both the Internal Revenue Service
and the Department of Labor indicating that they have "accepted" LMC's actions
to date. While this does not mean that future action is precluded, management
believes it to be unlikely.
Simultaneously with the above settlement,the Fund converted $650,250 of Senior
Subordinated Revolving Notes due October 1,1999 (the "Notes") which had been
purchased earlier during 1999,plus all accrued interest due from LMC,into Class
B preferred stock. Due to the working capital shortage referred to above,the
Fund is no longer accruing interest on the LMC Senior Subordinated Revolving
Notes due October 31, 2000, which it continues to hold. This situation is
expected to continue indefinitely,unless and until,a refinancing is
accomplished. As a further result of these circumstances, the Fund created
additional reserves of $2,681,930 and $1,073,796 against the carrying values of
the Fund's LMC notes and preferred stock at September 30, 1999 and November 12,
1999, respectively. The November 12th reserve,which was created following the
receipt of disappointing information concerning LMC's recent financial and
operating results,was created in connection with the need to establish a net
asset value for the 1999 Repurchase Offer. Following the November 12th
writedown, the Fund's total LMC investment has a net carrying value of
$2,709,584, versus its cost of $7,207,230.
INVESTMENT PERFORMANCE
The following analysis reflects only the Fund's investments that have gone full
cycle,i.e.,the investments that have been sold and with respect to which the
Fund has recorded a realized gain or loss. Thus, investments that the Fund still
owns, such as LMC,RBM and WasteMasters,are not included. In addition,the
analysis does not consider fees and other operating expenses incurred by the
Fund.
------------------
FOUR
<PAGE> 6
FIDUCIARY CAPITAL PENSION PARTNERS, L.P.
================================================================================
As reflected in the schedules on pages six and seven of this Quarterly Report,
the Fund invested a total of $41.9 million in subordinated debt investments and
received total realized proceeds of $47.6 million, including interest income,
fees and prepayment penalties. In the aggregate, these debt investments yielded
a return on investment of 1.1 to 1 and an annualized internal rate of return of
7.40%. The Fund also invested $3.1 million in equity securities, from which it
realized total proceeds of $11.4 million. In the aggregate,these equity
investments yielded a return on investment of 3.7 to 1 and an internal rate of
return of 33.42%. Please note that prior performance is not necessarily
indicative of future results.
* * * * * * * *
If you have any questions concerning your investment in the Fund, please call us
at 800-866-7607.
Sincerely,
/s/ PAUL BAGLEY, CHAIRMAN
- ----------------------------------------
Paul Bagley, Chairman
FCM Fiduciary Capital Management Company
/s/ W. DUKE DEGRASSI, PRESIDENT
- ----------------------------------------
W. Duke DeGrassi, President
FCM Fiduciary Capital Management Company
December 1, 1999
------------------
FIVE
<PAGE> 7
FIDUCIARY CAPITAL PENSION PARTNERS, L.P.
================================================================================
DEBT INVESTMENTS
REALIZED GAINS AND LOSSES(1)
(UNAUDITED)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------
Internal
Year of Investment / Year of Gain(3) Rate of
Portfolio Company(2) Repayment Cost Proceeds(3) (Loss) Return
- -------------------- --------- ----------- ----------- ---------- --------
<S> <C> <C> <C> <C> <C>
1990
Carr-Gottstein Foods Co. 1993 $ 2,426,680 $ 4,125,587 $1,698,907 23.56%
Midwest Dental Products
Corporation 1992 4,521,533 6,558,107 2,036,574 22.63
Neodata Corporation 1993 2,215,553 3,200,305 984,752 17.11
1991
KEMET Corporation 1993 3,313,477 4,534,392 1,220,915 17.63
Mobile Technology, Inc. 1998 3,117,525 850,225 (2,267,300) N/A
1992
Huntington Holdings, Inc. 1994 4,368,034 6,173,665 1,805,631 20.07
AR Accessories Group, Inc. 1994 4,521,533 5,518,907 997,374 11.74
1993
ENI Holding Corp. 1997 4,881,293 7,822,395 2,941,102 13.91
KB Alloys, Inc. 1995 2,880,217 4,279,396 1,399,179 18.32
KEMET Corporation(4) 1993 1,695,575 1,804,351 108,776 26.41
Protection One, Inc. 1995 834,580 1,133,054 298,474 22.11
1994
Canadian's Holdings, Inc. 1996 2,516,176 319,782 (2,196,394) N/A
1995
Canadian's Holdings, Inc.(4) 1996 1,473,895 51,908 (1,421,987) N/A
1996
Atlas Environmental, Inc. 1998 3,166,759 1,208,756 (1,958,003) N/A
---- ----------- ----------- ---------- ----
Totals $41,932,830 $47,580,830 $5,648,000 7.40%
=========== =========== ========== ====
</TABLE>
(1) Note that prior performance is not necessarily indicative of future results.
(2) Includes investment in subsidiaries, if applicable.
(3) Includes interest income, fees and prepayment penalties.
(4) Represents a follow-on investment in an existing portfolio company.
------------------
SIX
<PAGE> 8
FIDUCIARY CAPITAL PENSION PARTNERS, L.P.
================================================================================
EQUITY INVESTMENTS
REALIZED GAINS AND LOSSES(1)
(UNAUDITED)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Internal
Year of Investment / Year of Gain Rate of
Portfolio Company(2) Realization Cost Proceeds (Loss) Return
- -------------------- ----------- ---------- ----------- ----------- --------
<S> <C> <C> <C> <C> <C>
1990
Carr-Gottstein Foods Co. 1995 $ 738,394 $ 1,197,018 $ 458,624 9.78%
Neodata Corporation 1997 33,912 923,039 889,127 52.07
1991
KEMET Corporation 1994/1999 66,454 4,176,971 4,110,517 112.42
Mobile Technology, Inc. 1992 363,630 -- (363,630) N/A
1992
Huntington Holdings, Inc. 1996/1998 85,677 1,220,088 1,134,411 70.09
Neodata Corporation(3) 1997 245,006 255,112 10,106 0.81
AR Accessories Group, Inc. 1998 226,080 -- (226,080) N/A
1993
ENI Holding Corp. 1997 670,147 2,745,910 2,075,763 34.60
KEMET Corporation(3) 1994 495,554 729,233 233,679 41.10
Protection One, Inc. 1995 82,420 124,163 41,743 21.02
1994
Canadian's Holdings, Inc. 1996 34,821 -- (34,821) N/A
1996
Atlas Environmental, Inc. 1998 33,842 -- (33,842) N/A
--------- ---------- ----------- ---------- -----
Totals $3,075,937 $11,371,534 $8,295,597 33.42%
========== =========== ========== =====
</TABLE>
(1) Note that prior performance is not necessarily indicative of future results.
(2) Includes investment in subsidiaries, if applicable.
(3) Represents a follow-on investment in an existing portfolio company.
------------------
SEVEN
<PAGE> 9
FIDUCIARY CAPITAL PENSION PARTNERS, L.P.
================================================================================
SCHEDULE OF INVESTMENTS
<TABLE>
<CAPTION>
SEPTEMBER 30, 1999 (UNAUDITED)
- ----------------------------------------------------------------------------------------------
PRINCIPAL
AMOUNT/ INVESTMENT AMORTIZED % OF TOTAL
SHARES INVESTMENT DATE COST VALUE INVESTMENTS
- --------- ---------- ---------- --------- ----------- -----------
MANAGED COMPANIES:
<S> <C> <C> <C> <C> <C>
3,617 sh. KEMET Corporation,
Common Stock(1)(*) 07/11/91 $ 1,282 $ 115,631
---------- ---------- ----------- -----
1,282 115,631 2.1%
---------- ---------- ----------- -----
$1,632,960 LMC Corporation, 12.00%
Senior Subordinated 11/01/96
Revolving Notes through
due 10/31/00(2 ) 01/13/99 1,632,960 1,632,960
71,961 sh. LMC Corporation
Class B Preferred Stock(*) 08/09/99 719,610 719,610
239,600 sh. LMC Corporation, 7.00%
Class C Preferred Stock(*) 06/10/94 2,389,210 1,430,808
4,476,500 sh. LMC Corporation, 02/09/96
Common Stock(*) through
08/05/98 2,465,449 1
49.72 sh. LMC Credit Corp.,
Common Stock(*) 02/09/96 1 1
---------- ---------- ----------- -----
7,207,230 3,783,380 67.8
---------- ---------- ----------- -----
$1,290,000 R.B.M. Precision Metal
Products, Inc., 13.00%
Senior Subordinated
Secured Notes due
5/24/02(3) 05/24/95 1,244,881 652,294
12,603.7 sh. R.B.M. Precision Metal
Products, Inc.,Warrants to
Purchase Common Stock(*) 05/24/95 73,295 1
12,717 sh. R.B.M. Precision Metal
Products, Inc., Common
Stock(*) 12/09/98 1 1
---------- ---------- ----------- -----
1,318,177 652,296 11.7
---------- ---------- ----------- -----
Total Investments in Managed
Companies (93.2% of net assets) 8,526,689 4,551,307 81.6
---------- ---------- ----------- -----
NON-MANAGED COMPANY:
821,376 sh. WasteMasters, Inc.,
Common Stock(4)(*) 06/03/98 1,097,307 1
---------- ---------- ----------- -----
Total Investment in Non-Managed
Company (0.0% of net assets) 1,097,307 1 0.0
---------- ---------- ----------- -----
</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)
<TABLE>
<CAPTION>
SEPTEMBER 30, 1999 (UNAUDITED)
- ---------------------------------------------------------------------------------------------
PRINCIPAL
AMOUNT/ INVESTMENT AMORTIZED % OF TOTAL
SHARES INVESTMENT DATE COST VALUE INVESTMENTS
-------- ----------- ---------- -----------
TEMPORARY INVESTMENTS:
<S> <C> <C> <C> <C>
$1,025,000 Ford Motor Credit
Corporation, 5.05%
Notes due 10/5/99 09/21/99 1,024,426 1,024,426
-------- ----------- ---------- -----
Total Temporary Investments
(21.0% of net assets) 1,024,426 1,024,426 18.4
-------- ----------- ---------- -----
Total Investments (114.2% of net assets) $10,648,422 $5,575,734 100.0%
======== =========== ========== =====
</TABLE>
(1) The KEMET Corporation common stock trades on the NASDAQ National Market
System.
(2) The accrual of interest on the notes was discontinued by the Fund
effective July 1, 1999.
(3) The notes will amortize in three equal annual installments of $430,000
commencing on May 24, 2000.
(3) The WasteMasters, Inc. common stock, which trades on the OTC Bulletin
Board System, is subject to a 24 month lock up period, a call option
and a right of first refusal.
(*) 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.
================================================================================
SCHEDULE OF COVERED CALL OPTIONS WRITTEN
<TABLE>
<CAPTION>
SEPTEMBER 30, 1999 (UNAUDITED)
- --------------------------------------------------------------------------------
SHARES
SUBJECT TO COMMON STOCK EXPIRATION DATE /
CALL INVESTMENT EXERCISE PRICE VALUE
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
3,617 sh. KEMET Corporation October / $17.50 $52,896
- --------------------------------------------------------------------------------
Total (premiums received $4,514) $52,896
================================================================================
</TABLE>
The accompanying notes to financial statements are an integral part of
this schedule.
------------------
TEN
<PAGE> 12
FIDUCIARY CAPITAL PENSION PARTNERS, L.P.
================================================================================
BALANCE SHEETS
September 30, 1999 and December 31, 1998 (unaudited)
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
ASSETS:
Investments:
Portfolio investments, at value:
Managed companies (amortized cost -
$8,526,689 and $7,761,313,
respectively) $ 4,551,307 $ 6,609,045
Non-managed company (amortized cost -
$1,097,307) 1 1
Temporary investments, at amortized cost 1,024,426 1,897,223
----------- -----------
Total investments 5,575,734 8,506,269
Cash and cash equivalents 133,060 628,670
Accrued interest receivable 18,215 85,556
Other assets 27,433 27,234
----------- -----------
Total assets $ 5,754,442 $ 9,247,729
=========== ===========
LIABILITIES:
Covered call options written, at value
(premiums received $4,514) $ 52,896 $ --
Payable to affiliates (Notes 2, 3 and 4) 34,573 25,748
Accounts payable and accrued liabilities 498,959 470,840
Distributions payable to partners 284,950 284,950
----------- -----------
Total liabilities 871,378 781,538
----------- -----------
NET ASSETS:
Managing General Partner (180,012) (180,012)
Limited Partners (equivalent to $5.38
and $9.19, respectively, per limited
partnership unit based on 940,336
units outstanding) 5,063,076 8,646,203
----------- -----------
Net assets 4,883,064 8,466,191
----------- -----------
Total liabilities and net assets $ 5,754,442 $ 9,247,729
=========== ===========
</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 OPERATIONS
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998 (UNAUDITED)
- ------------------------------------------------------------------------------------
1999 1998
----------- -----------
<S> <C> <C>
INVESTMENT INCOME:
Income:
Interest $ 73,052 $ 150,238
----------- -----------
Total investment income 73,052 150,238
----------- -----------
Expenses:
Professional fees 106,379 22,212
Fund administration fees (Note 3) 29,581 29,581
Investment advisory fees (Note 2) 20,741 22,501
Administrative expenses (Note 3) 17,223 17,223
Independent General Partner fees
and expenses (Note 4) 10,844 10,725
Other expenses 15,268 20,339
----------- -----------
Total expenses 200,036 122,581
----------- -----------
NET INVESTMENT (LOSS) INCOME (126,984) 27,657
----------- -----------
REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Net realized gain (loss) on investments 329,952 (10,148)
Net change in unrealized loss
on investments (3,009,825) (365,064)
----------- -----------
Net loss on investments (2,679,873) (375,212)
----------- -----------
NET DECREASE IN NET ASSETS
RESULTING FROM OPERATIONS $(2,806,857) $ (347,555)
=========== ===========
</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 OPERATIONS
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998 (UNAUDITED)
- -------------------------------------------------------------------------------
1999 1998
----------- -----------
<S> <C> <C>
INVESTMENT INCOME:
Income:
Interest $ 253,972 $ 532,023
----------- -----------
Total investment income 253,972 532,023
----------- -----------
Expenses:
Professional fees 143,927 130,285
Fund administration fees (Note 3) 88,745 88,745
Investment advisory fees (Note 2) 62,222 80,981
Administrative expenses (Note 3) 51,671 51,671
Independent General Partner fees
and expenses (Note 4) 43,062 41,474
Other expenses 44,856 53,282
----------- -----------
Total expenses 434,483 446,438
----------- -----------
NET INVESTMENT (LOSS) INCOME (180,511) 85,585
----------- -----------
REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Net realized gain (loss) on investments 323,730 (2,486,531)
Net change in unrealized loss
on investments (2,871,496) 1,893,140
----------- -----------
Net loss on investments (2,547,766) (593,391)
----------- -----------
NET DECREASE IN NET ASSETS
RESULTING FROM OPERATIONS $(2,728,277) $ (507,806)
=========== ===========
</TABLE>
The accompanying notes to financial statements are an integral part of these
financial statements.
===============================
THIRTEEN
<PAGE> 15
FIDUCIARY CAPITAL PENSION PARTNERS, L.P.
================================================================================
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998 (UNAUDITED)
- --------------------------------------------------------------------------------------
1999 1998
----------- --------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net decrease in net assets
resulting from operations $(2,728,277) $ (507,806)
Adjustments to reconcile net decrease in net
assets resulting from operations to net cash
(used in) provided by operating activities:
Accreted discount on portfolio investments (7,293) (12,932)
Interest income received in stock (69,360) --
Change in assets and liabilities:
Accrued interest receivable 67,341 7,038
Other assets (199) 27,827
Payable to affiliates 8,825 1,780
Accounts payable and accrued liabilities 2,175 1,433
Net realized (gain) loss on investments (323,730) 2,486,531
Net change in unrealized loss
on investments 2,871,496 (1,893,140)
----------- -----------
Net cash (used in) provided
by operating activities (179,022) 110,731
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of portfolio investments (695,610) (2,618,810)
Proceeds from dispositions of portfolio investments 361,075 1,124,615
Sale of temporary investments, net 872,797 4,495,359
----------- -----------
Net cash (used in) provided by investing activities 538,262 3,001,164
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions paid to partners (854,850) (3,194,350)
----------- -----------
Net cash used in financing activities (854,850) (3,194,350)
----------- -----------
NET DECREASE IN CASH AND CASH EQUIVALENTS (495,610) (82,455)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 628,670 276,108
----------- -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 133,060 $ 193,653
=========== ===========
NONCASH INVESTING AND FINANCING ACTIVITIES:
Investments exchanged for other investments $ -- $ 1,360,801
=========== ===========
</TABLE>
The accompanying notes to financial statements are an integral part of these
financial statements.
===============================
FOURTEEN
<PAGE> 16
FIDUCIARY CAPITAL PENSION PARTNERS, L.P.
================================================================================
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND FOR THE YEAR ENDED DECEMBER 31,
1998 (UNAUDITED)
- --------------------------------------------------------------------------------------
1999 1998
------------ ------------
<S> <C> <C>
Increase in net assets resulting from operations:
Net investment (loss) income $ (180,511) $ 57,840
Net realized gain (loss) on investments 323,730 (2,497,650)
Net change in unrealized loss on investments (2,871,496) 1,552,695
------------ ------------
Net decrease in net assets
resulting from operations (2,728,277) (887,115)
Repurchase of limited partnership units -- (752,571)
Distributions to partners from -
Net investment income -- (85,585)
Realized gain on investments -- (1,402,287)
Return of capital (854,850) (1,270,116)
------------ ------------
Total decrease in net assets (3,583,127) (4,397,674)
Net assets:
Beginning of period 8,466,191 12,863,865
------------ ------------
End of period (including no undistributed
net investment income) $ 4,883,064 $ 8,466,191
============ ============
</TABLE>
The accompanying notes to financial statements are an integral part of these
financial statements.
===============================
FIFTEEN
<PAGE> 17
FIDUCIARY CAPITAL PENSION PARTNERS, L.P.
================================================================================
SELECTED PER UNIT DATA AND RATIOS
<TABLE>
<CAPTION>
FOR THE THREE MONTHS FOR THE NINE MONTHS
ENDED SEPTEMBER 30, ENDED SEPTEMBER 30,
----------------------------- --------------------------------
1999 1998 1999 1998
----------- ------------- ------------- --------------
<S> <C> <C> <C> <C>
PER UNIT DATA:
Investment income $ .07 $ .15 $ .27 $ .51
Expenses (.21) (.12) (.46) (.43)
----------- ------------- ------------- --------------
Net investment (loss) income (.14) .03 (.19) .08
Net realized gain (loss) on investments .35 (.01) .34 (2.41)
Net change in unrealized loss
on investments (3.20) (.36) (3.06) 1.84
Distributions declared to partners (.30) (.30) (.90) (2.41)
----------- ------------- ------------- --------------
Net decrease in net asset value (3.29) (.64) (3.81) (2.90)
Net asset value:
Beginning of period 8.67 10.40 9.19 12.66
----------- ------------- ------------- --------------
End of period $ 5.38 $ 9.76 $ 5.38 $ 9.76
=========== ============= ============= ==============
RATIOS (ANNUALIZED):
Ratio of expenses to average net assets 12.45% 4.80% 7.86% 5.31%
Ratio of net investment (loss) income to
average net assets (7.90)% 1.08% (3.27)% 1.02%
Number of limited partnership units at
end of period 940,336 1,020,142 940,336 1,020,142
</TABLE>
The accompanying notes to financial statements are an integral
part of these selected per unit data and ratios.
===============================
SIXTEEN
<PAGE> 18
FIDUCIARY CAPITAL PENSION PARTNERS, L.P.
================================================================================
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1999 (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 Fiduciary Capital Pension Partners, L.P. (the "Fund"), necessary to fairly
present the financial position of the Fund as of September 30, 1999 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, 1998.
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
$62,222 were paid by the Fund for the nine months ended September 30, 1999.
3. FUND ADMINISTRATION FEES
As compensation for its services as fund administrator,FCM receives a monthly
fee at the annual rate of .45% of net proceeds available for investment,as
defined in the Partnership Agreement. Fund administration fees of $88,745 were
paid by the Fund for the nine months ended September 30, 1999. FCM is also
reimbursed, subject to various limitations, for administrative expenses incurred
in providing accounting and investor services to the Fund. The Fund reimbursed
FCM for administrative expenses of $51,671 for the nine months ended September
30, 1999.
4. INDEPENDENT GENERAL PARTNER FEES AND EXPENSES
As compensation for services rendered to the Fund, each of the Independent
General Partners receives from the Fund and Fiduciary Capital Partners, L.P., an
affiliated fund, (collectively, the "Funds") an annual fee of $30,000, payable
monthly in arrears, together with all out-of-pocket expenses. Each Fund's
allocation of these fees and expenses is based on the relative number of
outstanding Units. Fees and expenses paid by the Fund for the nine months ended
September 30, 1999 totaled $43,062.
===============================
SEVENTEEN
<PAGE> 19
FIDUCIARY CAPITAL PENSION PARTNERS, L.P.
================================================================================
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The following discussion should be read in conjunction with the Fund's unaudited
Financial Statements and the Notes thereto. This report contains, in addition to
historical information, forward-looking statements that include risks and other
uncertainties. The Fund's actual results may differ materially from those
anticipated in these forward-looking statements. While the Fund can not always
predict what factors would cause actual results to differ materially from those
indicated by the forward-looking statements, factors that might cause such a
difference include general economic and business conditions, competition and
other factors discussed elsewhere in this report. Readers are urged to consider
statements that include the terms "believes", "expects", "plans", "anticipates",
"intends" or the like to be uncertain and forward-looking. The Fund undertakes
no obligation to release publicly any revisions to these forward-looking
statements to reflect events or circumstances after the date hereof or to
reflect the occurrence of anticipated or unanticipated events.
LIQUIDITY AND CAPITAL RESOURCES
As of September 30, 1999, the Fund held portfolio investments in three Managed
Companies and one Non-Managed Company, with an aggregate original cost of
approximately $9.6 million. The value of these portfolio investments, which were
made from net offering proceeds and the reinvestment of proceeds from the sale
of other portfolio investments, represents approximately 93.2% of the Fund's net
assets.
When acquired, the Fund's portfolio investments generally consisted of
high-yield subordinated debt, linked with an equity participation or a
comparable participation feature in middle market companies. The 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 September 30, 1999, the Fund's remaining liquid assets were invested in
short-term commercial paper. These funds are available to fund the annual
repurchase offer, to fund follow-on investments in existing portfolio companies,
to pay Fund expenses and for distribution to the partners.
The Fund's investment period ended on December 31, 1995. Although the Fund has
been permitted to make additional investments in existing portfolio companies
since 1995, the Fund is no longer permitted to acquire investments in new
portfolio companies. Consequently, the Fund has been in a liquidation mode.
Since the middle of 1997, the
===============================
EIGHTEEN
<PAGE> 20
FIDUCIARY CAPITAL PENSION PARTNERS, L.P.
================================================================================
Fund has liquidated a significant percentage of its investments and has
distributed approximately $5.93 per Unit to the Limited Partners, with the cash
coming primarily from the liquidation of these investments. The Fund presently
has only four remaining investments in portfolio companies, which are expected
to generate only limited amounts of interest income for the Fund during 1999 and
future years.
Pursuant to the terms of the Fund's periodic unit repurchase policy, the Fund
has annually offered 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 1999 repurchase offer was mailed to the Limited Partners during October
1999. The actual redemption of Units will occur on November 19, 1999.
The General Partners are presently considering a number of alternative actions
through which the Fund could be liquidated by the end of next year. An overall
plan of liquidation was adopted at a meeting of the General Partners held in
January 1999. The General Partners will follow the requisite regulatory
procedures required to liquidate the Fund. These procedures are expected to
include requesting an exemptive order from the Securities and Exchange
Commission (the "SEC"), which will permit the Fund to act as an operating
company instead of an SEC registered investment company. Once this order is
obtained, the Fund will finalize its liquidation plan and prepare a proxy
statement setting forth the details of the plan as well as the changes required
in the Fund's Partnership Agreement. Early in 2000, the Limited Partners will be
requested to approve the implementation of the liquidation plan and the
Partnership Agreement changes. As currently contemplated, Fund investors would
become direct shareholders of LMC as a result of the liquidation plan, if all
approvals are received.
During February 1999, the Fund agreed to purchase $650,250 of LMC's Senior
Subordinated Revolving Notes due October 1, 1999. During August 1999, the Fund
exchanged these Notes and a receivable for $69,360 of accrued interest for LMC
Class B preferred stock having a par value of $719,610.
During April 1999, the Fund began writing covered call options with respect to
its shares of KEMET stock. During the nine months ended September 30, 1999, the
Fund received $24,372 of premiums from the sale of the options and $330,152 from
the exercise of the options for 19,169 shares. At September 30, 1999, 3,617
options were outstanding at a strike price of $17.50. The Fund also received
$6,552 of sales proceeds from the sale of 270 shares of KEMET stock during July
1999.
Accrued interest receivable decreased $67,341 from $85,556 at December 31, 1998
to $18,215 at September 30, 1999. The $85,556 of accrued interest receivable at
December 31, 1998 consisted primarily of interest due on the LMC Corporation
("LMC") notes and the $18,215 of accrued interest receivable at September 30,
1999 consisted primarily of
===============================
NINETEEN
<PAGE> 21
FIDUCIARY CAPITAL PENSION PARTNERS, L.P.
================================================================================
interest due on the R.B.M. Precision Metal Products,Inc. ("RBM") notes. Both
receivable amounts also included a small receivable for interest earned on money
market investments. The Fund had placed the RBM notes on non-accrual status at
December 31, 1998. During the nine months ended September 30,1999,the Fund again
began accruing interest on the RBM notes, but placed the LMC notes on
non-accrual status. (See below for discussions concerning the Fund's LMC and RBM
investments.)
During the nine months ended September 30, 1999, the Fund paid cash
distributions pertaining to the fourth quarter of 1998 and the first and second
quarters of 1999, each in the amount of $284,950, or $0.30 per Unit. The
distribution for the third quarter of 1999 will be paid on November 15, 1999 at
a rate of $0.30 per Unit. All of the 1999 distributions constitute a return of
capital.
The 1999 repurchase offer and the distribution for the third quarter of 1999
will utilize a substantial portion of the Fund's remaining cash. As a result,
the General Partners presently anticipate that the Fund will suspend quarterly
cash distributions, commencing with the distribution for the fourth quarter of
1999, which would otherwise be payable during February 2000.
RESULTS OF OPERATIONS
INVESTMENT INCOME AND EXPENSES
The Fund's net investment loss was $(126,984) for the three months ended
September 30, 1999 as compared to net investment income of $27,657 for the
corresponding period of the prior year. Net investment income (loss) per limited
partnership unit decreased from $0.03 to $(0.14) and the ratio of net investment
income (loss) to average net assets decreased from 1.08% to (7.90)% for the
three months ended September 30, 1999 as compared to the corresponding period of
the prior year.
The Fund's net investment loss was $(180,511) for the nine months ended
September 30, 1999 as compared to net investment income of $85,585 for the
corresponding period of the prior year. Net investment income (loss) per limited
partnership unit decreased from $0.08 to $(0.19) and the ratio of net investment
income (loss) to average net assets decreased from 1.02% to (3.27)% for the nine
months ended September 30, 1999 as compared to the corresponding period of the
prior year.
Net investment income (loss) for the three months ended September 30, 1999
decreased both as a result of a decrease in investment income and an increase in
total expenses as compared to the corresponding period of the prior year.
Net investment income (loss) for the nine months ended September 30,1999
decreased as a result of a decrease in investment income as compared to the
corresponding period of the prior year. The impact of the decrease in investment
income was partially offset by a
===============================
TWENTY
<PAGE> 22
FIDUCIARY CAPITAL PENSION PARTNERS, L.P.
================================================================================
small decrease in total expenses.
Investment income decreased $77,186 and $278,051, or 51.4% and 52.3%, for the
three and nine month periods ended September 30, 1999 as compared to the
corresponding periods of the prior year. These decreases resulted primarily from
the decisions not to record interest on the Fund's RBM notes during the period
from August 25, 1998 through May 24, 1999 and the Fund's LMC notes during the
period from July 1, 1999 through September 30, 1999 (see discussions below) and
a decrease in the amount of the Fund's temporary investments. The amount of the
Fund's temporary investments decreased because of (i) return of capital
distributions made by the Fund,(ii) purchases of additional LMC follow-on
investments, and (iii) the Fund's repurchase of 7.82% of its Units during the
fourth quarter of 1998. The negative effect of these items was partially offset
by an increase in interest income earned on the LMC follow-on investments that
were acquired during 1998 and 1999.
Total expenses increased $77,455, or 63.2%, for the three months ended September
30, 1999 as compared to the corresponding period of the prior year. This
increase resulted primarily from an increase in professional fees. This increase
was partially offset by decreases in investment advisory fees and other
expenses.
Total expenses decreased $11,955, or 2.7%, for the nine months ended September
30, 1999 as compared to the corresponding period of the prior year. This
decrease resulted primarily from decreases in investment advisory fees and other
expenses. These decreases were partially offset by an increase in professional
fees.
Professional fees increased significantly during the three months ended
September 30, 1999 as compared to the corresponding period of the prior year.
However, professional fees increased by a significantly smaller amount during
the nine months ended September 30, 1999 as compared to the corresponding period
of the prior year due to the fact that professional fees recorded during the six
months ended June 30, 1999 had decreased significantly from the corresponding
period of the prior year. Both of these variances resulted primarily from legal
fees incurred during both 1998 and 1999 in connection with LMC related
litigation.
The investment advisory fees decreased during the three and nine month periods
ended September 30,1999 as compared to the corresponding periods of the prior
year,primarily as a result of (i) the repurchase of Units during the fourth
quarter of 1998,(ii) the payment of quarterly cash distributions during 1998
that exceeded the Limited Partners' Preferred Returns (as defined in the Fund's
Partnership Agreement), and (iii) losses realized by the Fund during the second
quarter of 1998 with respect to the Mobile Technology,Inc.,Atlas Environmental,
Inc. ("Atlas") and AR Accessories Group, Inc. portfolio investments. All three
of these items 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.
================================
TWENTY-ONE
<PAGE> 23
FIDUCIARY CAPITAL PENSION PARTNERS, L.P.
================================================================================
REALIZED GAIN (LOSS) ON INVESTMENTS
During April 1999, the Fund wrote covered call options (May/$15.00) with respect
to 4,521 shares of its KEMET stock,for which it received $3,932 of premiums. The
options for 1,085 of these shares were exercised during May 1999 and the balance
expired unexercised. The Fund recorded aggregate realized gains of $19,722 from
these transactions during May 1999.
During April 1999, the Fund wrote covered call options (July/$17.50) with
respect to 18,084 shares of its KEMET stock, for which it received $15,926 of
premiums. These options were exercised during July 1999. The Company also sold
270 shares of KEMET stock during July 1999. The Fund recorded aggregate gains of
$329,952 from these transactions during July 1999.
The Fund incurred approximately $26,000 of realized losses during the nine
months ended September 30, 1999 as a result of adjustments relating to certain
previously held investments.
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, 1998, the Fund had recorded $255,533 of unrealized gain and
$2,505,107 of unrealized loss on investments. Therefore, as of December 31,
1998, the Fund had recorded a total net unrealized loss on investments of
$2,249,574.
===============================
TWENTY-TWO
<PAGE> 24
FIDUCIARY CAPITAL PENSION PARTNERS, L.P.
================================================================================
The increase in unrealized loss on investments during the three and nine month
periods ended September 30, 1999 and the cumulative net unrealized loss on
investments as of September 30, 1999 consisted of the following components:
<TABLE>
<CAPTION>
Net Changes in
Unrealized Gain (Loss)
------------------------------------------- Net Unrealized
During the Three During the Nine Gain (Loss)
Months Ended Months Ended Recorded as of
Portfolio Company September 30, 1999 September 30, 1999 September 30, 1999
----------------- ------------------ ------------------ ------------------
<S> <C> <C> <C>
Unrealized losses recorded
during prior periods with
respect to investments
disposed of during the
period $ (330,383) $ (215,445) $ --
KEMET 2,488 25,879 65,967
LMC (2,681,930) (2,681,930) (3,423,850)
RBM -- -- (665,881)
WMI -- -- (1,097,306)
----------- ----------- -----------
$(3,009,825) $(2,871,496) $(5,121,070)
=========== =========== ===========
</TABLE>
KEMET stock, which trades on the NASDAQ National Market System, closed at
$31.96875 (an average of the closing bid and ask prices) on September 30, 1999.
This price is up significantly from the closing prices of $22.90625 and $11.4375
on June 30, 1999 and December 31,1998,respectively. Based on the $31.96875
closing trading price of the common stock, the 3,617 shares of common stock that
the Fund held at September 30, 1999, had a market value of $115,631.
As of September 30, 1999, the Fund had written outstanding covered call options
with respect to 3,617 shares of KEMET stock. These options, for which the Fund
received $4,514 of premiums, had a market value of $52,896 as of September 30,
1999.
LMC has successfully reoriented its business away from fleet snow grooming to
the production of light construction vehicles, known as the TrackMaster 85.
Unfortunately, production and moving delays, combined with CIT's unilateral
reductions in loan availability under the company's CIT facility, have
eliminated the working capital necessary for continued vehicle production.
FCM is assessing various options and alternatives including refinancing options,
sales of certain assets, and sale of the company. FCM is also considering the
establishment of TrackMaster as a separate subsidiary and refinancing that
business directly.
All matters relative to LMC's defined contribution pension plan (the
"Plan"),including the attendant litigation have been settled. Mr. Wallace, the
former controlling shareholder of LMC and the Plan trustee, contributed $750,000
to pay the assessed underfunding. He received Class A preferred stock in return
for this contribution. The company gave Mr.
===============================
TWENTY-THREE
<PAGE> 25
FIDUCIARY CAPITAL PENSION PARTNERS, L.P.
================================================================================
Wallace a full release from all claims related to this matter and has received
letters from both the I.R.S. and the Department of Labor indicating that they
have "accepted" LMC's actions to date. While this does not mean that future
action is precluded, management believes it to be unlikely.
Simultaneous with the above settlement, the Fund converted its revolving notes
that were due October 1,1999,plus all accrued interest due from LMC,into Class B
preferred stock. Due to the working capital shortage referred to above, the Fund
is no longer accruing interest on the LMC Senior Subordinated Revolving Notes
due October 31, 2000, which it still holds. This situation will continue
indefinitely, unless and until, a refinancing is accomplished. As a further
result of these circumstances, the Fund has created additional reserves against
the carrying values of the Fund's LMC notes and preferred stock. At September
30, 1999, the Fund recorded a writedown of $2,681,930. Thus, at September
30,1999,the Fund's total LMC investment had a net carrying value of
$3,783,380,versus its cost of $7,207,230.
RBM resumed quarterly interest payments on the notes held by the Fund as of the
second quarter of 1999. At September 30, 1999, RBM held $852,000 of cash and
their line of credit had a zero outstanding balance. RBM appears to have managed
their balance sheet well and their September report states that "RBM still
expects to meet or exceed covenant requirements for the fourth quarter and year
end".
For the eleven months ended September 30, 1999, RBM's revenues were $10.4
million versus a budget of $11 million. Losses continue, but are more favorable
than budgeted. For the year to date, RBM's loss was $1.28 million (pretax)
versus a budgeted loss for the period of $1.77 million. Obviously, this can not
continue for long and RBM's management is trying to rebuild revenues. They
expect October to exceed budget, but only by $100,000, at a $1.3 million level
versus a budget of $1.2 million.
RBM continues to experience high turnover. In the last quarter, the CEO, the
CFO/VP of Finance and the Human Resources Manager have all resigned. The equity
sponsor and majority holder, 13I Investments ("13I"), has taken over direct
management of the company and the CEO of 13I has moved to Colorado Springs in
order to take full time responsibility for the management of RBM.
FCM continues to press for repayment of the Fund's note, or a sale of the
company, without success. To date, RBM has been unsuccessful in refinancing the
Fund's note.
During June 1998,the Fund exchanged its Atlas Environmental,Inc. ("Atlas")
(which was in bankruptcy proceedings) subordinated notes and warrants for
821,376 shares of common stock of WasteMasters, Inc. ("WMI"), an Atlanta Georgia
based waste management company. Pursuant to the terms of the agreement, the Fund
is prohibited from selling its WMI common stock for 24 months. In addition, the
Fund granted the entity acquiring the Fund's Atlas securities a call on the
Fund's WMI common stock during the 24 month lock up period and a right of first
refusal thereafter. The call price is
===============================
TWENTY-FOUR
<PAGE> 26
FIDUCIARY CAPITAL PENSION PARTNERS, L.P.
================================================================================
$11.25 per share.
The WMI common stock, which trades on the OTC Bulletin Board System ("WASTE"),
closed at $1.78 (an average of the closing bid and ask prices) on the date of
the exchange (June 3, 1998). Based on this price, the Fund's WMI had a trading
value of $1,462,049 on the date of the exchange. However, due to a number of
factors, including the speculative nature of the WMI stock, the two year lock up
period and the relative size of the Fund's stock position versus the daily
trading volume, FCM has decided to carry the WMI stock at the same $1 nominal
value that the Atlas securities were previously carried by the Fund. The WMI
common stock has recently traded near its 52-week low of $0.025 per share.
The Fund recorded a realized loss of $2,125,574 on the exchange, which was equal
to the amount of the loss which the Fund claimed for income tax purposes from
the disposition of the Atlas securities. The $1,097,306 balance of the
unrealized loss previously recorded by the Fund with respect to the Atlas
securities continues to be carried by the Fund as an unrealized loss.
READINESS FOR YEAR 2000
FCM has completed a review of the accounting and other information systems that
are currently being utilized by FCM and the Fund with regard to Year 2000
issues. This review involved both actual tests of parts of the information
systems that were conducted by third party consultants and representations
received from various software vendors. FCM believes that all of these systems
are Year 2000 compliant. All of the costs associated with this review were paid
by FCM.
FCM also corresponded with appropriate third parties, such as the Fund's
custodian and transfer agent, concerning whether their information systems are
Year 2000 compliant. These third parties have represented that their information
systems are either currently Year 2000 compliant or that they have identified
the scope of required upgrades or changes to their information systems that are
needed and that they have a plan in place to complete these upgrades on a timely
basis.
As a result of the above discussed review,Year 2000 issues are not expected to
have any material adverse effects on the Fund's results of operations or
financial condition.
===============================
TWENTY-FIVE
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM 10-K FOR THE
YEAR ENDED DECEMBER 31, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<INVESTMENTS-AT-COST> 10,045,511
<INVESTMENTS-AT-VALUE> 1,301,898
<RECEIVABLES> 19,126
<ASSETS-OTHER> 20,834
<OTHER-ITEMS-ASSETS> 130,566
<TOTAL-ASSETS> 1,472,424
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 785,005
<TOTAL-LIABILITIES> 785,005
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 869,796
<SHARES-COMMON-PRIOR> 940,336
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 687,419
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 314,326
<OTHER-INCOME> 1,412
<EXPENSES-NET> 595,095
<NET-INVESTMENT-INCOME> (279,357)
<REALIZED-GAINS-CURRENT> 410,023
<APPREC-INCREASE-CURRENT> (6,494,039)
<NET-CHANGE-FROM-OPS> (6,363,373)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 1,118,426
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 70,540
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (7,778,772)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 82,162
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 595,095
<AVERAGE-NET-ASSETS> 6,031,034
<PER-SHARE-NAV-BEGIN> 9.19
<PER-SHARE-NII> (.30)
<PER-SHARE-GAIN-APPREC> (6.71)
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 1.20
<PER-SHARE-NAV-END> 0.98
<EXPENSE-RATIO> 9.87
</TABLE>
