10-K405 1 d85587ke10-k405.txt FORM 10-K FOR FISCAL YEAR END DECEMBER 31, 2000 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, 2000 ------------------------------------------------------- OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to -------------- ---------------------------------- Commission file number 0-17737 ---------------------------------------------------------- Fiduciary Capital Partners, L.P. --------------------------------- (Exact name of registrant as specified in its charter) Delaware 86-0653600 -------------------------------------------------------------------------------- (State of organization) (I.R.S. Employer Identification No.) 1530 16th Street, Suite 200 Denver, Colorado 80202-1306 ----------------------------- -------------------------- (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. 2 Fiduciary Capital Partners, L.P. Annual Report on Form 10-K for the Fiscal Year Ended December 31, 2000 Table of Contents
Page Part I Item 1 Business........................................................................................ 1 Item 2 Properties...................................................................................... 5 Item 3 Legal Proceedings............................................................................... 5 Item 4 Submission of Matters to a Vote of Security Holders......................................................................... 5 Part II Item 5 Market for Registrant's Common Equity and Related Stockholder Matters............................................................. 6 Item 6 Selected Financial Data......................................................................... 6 Item 7 Management's Discussion and Analysis of Financial Condition and Results of Operations .................................................................. 7 Item 8 Financial Statements and Supplementary Data......................................................................... F-1 Item 9 Changes in and Disagreements with Accountants on Accounting and Financial Disclosure........................................................................15 Part III Item 10 Directors and Executive Officers of the Registrant ..........................................................................16 Item 11 Executive Compensation..........................................................................19 Item 12 Security Ownership of Certain Beneficial Owners and Management ...........................................................19 Item 13 Certain Relationships and Related Transactions .......................................................................20 Part IV Item 14 Exhibits, Financial Statement Schedules and Reports on Form 8-K.....................................................................21
3 PART I Item 1. Business General Fiduciary Capital 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 UBS PaineWebber Inc. ("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 Pension Partners, L.P., a Delaware limited partnership ("FCPP") was also formed on October 20, 1988 for tax-exempt investors with investment objectives, policies and restrictions similar to those of the Fund. The Fund and FCPP 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, FCPP (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, 36,102 Units representing an aggregate purchase price of $36,102,000 and 29,796 Units representing an aggregate purchase price of $29,796,000 were received by the Fund and FCPP, 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 1,805,100 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 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:
Units Repurchased Net Asset Value per Unit ----------------------------------- --------------------------- Percentage Date of of Outstanding Net of the Repurchase Offer Number Units Gross 2% Fee ---------------- -------- ----------------- --------- ---------- November 1993 117,979 6.54% $18.35 $17.98 November 1994 160,172 9.49% 18.41 18.04 November 1995 119,705 7.84% 19.67 19.28 November 1996 108,068 7.68% 15.91 15.59 November 1997 97,612 7.51% 13.97 13.69 November 1998 91,870 7.65% 9.73 9.54 November 1999 83,421 7.52% 4.60 4.51 November 2000 95,548 9.31% 0.67 0.66
As provided for in the Fund's Second Amended and Restated Agreement of Limited Partnership (the "Partnership Agreement"), the Fund's term expired, and the dissolution of the Fund was effective, as of December 31, 2000. The General Partners are proceeding with the liquidation and distribution of the Fund's assets in accordance with a plan of liquidation that was adopted by the General Partners on March 2, 2001. It is currently anticipated that the liquidation of the Fund will be completed prior to December 31, 2001 and that additional distributions to Limited Partners during 2001 will total between $1.25 and $1.75 per Unit. 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, 2000, the Fund held portfolio investments in two Managed Companies, with an aggregate cost of approximately $3.5 million, and two Non-Managed Companies, with an aggregate cost of approximately $1.5 million. Managed Companies are those to which significant managerial assistance is offered. During 2000, the Fund purchased (i) $166,917 of Niigata Engineering Co., Ltd. ("Niigata") receivables from LMC Corporation ("LMC") at a cost of $151,235 and (ii) $41,404 of LMC Promissory Notes due August 7, 2000. (For further discussion, see section below, "Follow-On Investments in 2000".) During December 2000, RBM and the Fund began negotiating a transaction in which RBM would prepay the RBM notes held by the Fund and purchase the RBM common stock and warrants held by the Fund. In this transaction, which was consummated on April 5, 2001, RBM (i) prepaid the $1,460,000 of RBM notes held by the Fund at par, plus accrued interest, and (ii) purchased the RBM stock and warrants held by the Fund for $53,091. Follow-On Investments in 2000 LMC Corporation and Niigata Engineering Co., Ltd. The Company LMC, headquartered in Brigham City, Utah, was a manufacturer of low ground pressure track equipment used for construction, infrastructure development and landscaping. The primary purchasers of this 2 5 equipment included 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 LMC'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. Substantially all of LMC's employees were terminated during December 1999 and January 2000. While LMC held discussions with several potential purchasers of its business, in whole or in part, no meaningful offers were received. LMC did consummate a consignment joint venture arrangement with respect to its spare parts business during March 2000. LMC received a notice of default, dated April 6, 2000, from CIT with respect to its revolving line of credit. On April 28, 2000, LMC filed for Chapter 11 bankruptcy protection. On November 9, 2000, CIT repossessed LMC's assets that had been pledged as collateral on the line of credit (all of LMC's assets except for its real property). On January 17, 2001, CIT conducted a foreclosure sale of the repossessed assets. The proceeds of the foreclosure sale totaled less than the amount of LMC's indebtedness to CIT. LMC is currently attempting to sell its real property. All proceeds realized from the sale would be payable to LMC's creditors, including the Fund. The Fund wrote its LMC investment down by $540,800 and $317,280 during 1995 and 1997, respectively. As a result of the above discussed developments, the Fund created additional reserves of $7,402,297 and $314,602 against the carrying values of the Fund's LMC investment during the years ended December 31, 1999 and 2000, respectively. As of December 31, 2000, the Fund wrote the cost of all of its LMC equity investments off as realized losses. There is a possibility that the Fund could recover a small portion of its investment in LMC debt during 2001 out of proceeds derived from the sale of LMC's real property. History of Investment During June 1994, the Fund invested $2,551,920 in LMC. The investment consisted of $2,604,000 of 13.00% Senior Subordinated Notes due May 31, 1999 along 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 $545,600 of new common stock. As a result of the restructuring, the Fund increased its ownership of LMC's common stock from approximately 13% to approximately 27%. During November 1996, the Fund purchased $1,967,040 of LMC's 12% Senior Subordinated Revolving Notes due October 31, 2000. During February and March 1998, the Fund purchased $551,000 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, $1,639,200 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 $1,639,200. LMC periodically made draw downs under the terms of the Revolving Note agreement to fund working capital requirements and to retire the $551,000 of LMC Senior Subordinated Revolving Notes due August 20, 1998. As a result of this second restructuring, the Fund's percentage ownership of LMC's common stock increased from approximately 27% to approximately 48%. During August 1998, the Fund purchased an additional 1,699,500 shares of LMC common stock for $849,750. As a result of this stock purchase, the Fund's percentage ownership of LMC's common stock increased from approximately 48% to approximately 50%. 3 6 During February 1999, the Fund agreed to purchase $849,750 of LMC's Senior Subordinated Revolving Notes due October 1, 1999. During August 1999, the Fund exchanged these notes and a receivable for $85,620 of accrued interest for LMC Class B preferred stock having a par value of $935,370. During December 1999, the Fund purchased $117,460 of Niigata receivables from LMC at a cost of $92,767. An additional $166,917 of Niigata receivables were purchased during January 2000 at a cost of $151,235. These various receivables were payable on specified dates between May 21, 2000 and May 21, 2002. In an effort to preserve value and facilitate the possible sale of LMC's business, the Fund agreed during February 2000 to advance up to $111,502 to LMC. $41,404 of these advances were structured as the purchase of promissory notes, and additional advances totaling $58,183 were expensed by the Fund. Remaining amounts to be advanced, as of December 31, 2000, totaled $11,915. Other Portfolio Investments R.B.M. Precision Metal Products, Inc. RBM, headquartered in Colorado Springs, Colorado, is a manufacturer of precision sheet metal enclosures, chassis and assemblies for business machines. During May 1995, the Fund invested $1,430,800 in RBM. The investment consisted of $1,460,000 of 13.00% Senior Subordinated Secured Notes due May 24, 2002, with warrants to acquire common stock. During 1998 and 1999, the Fund accepted shares of RBM common stock as payment for three quarterly interest payments. During December 2000, RBM and the Fund began negotiating a transaction in which RBM would prepay the RBM notes held by the Fund and purchase the RBM common stock and warrants held by the Fund. In this transaction, which was consummated on April 5, 2001, RBM (i) prepaid the $1,460,000 of RBM notes held by the Fund at par, plus accrued interest, and (ii) purchased the RBM stock and warrants held by the Fund for $53,091. WasteMasters, Inc. ("WasteMasters") and Atlas Environmental, Inc. ("Atlas") During January 1996, the Fund invested $3,855,398 in Atlas. The investment consisted of $3,934,080 of 13.5% Senior Subordinated Secured Notes due January 19, 2003, with warrants to acquire common stock. 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 989,414 shares of common stock in WasteMasters, a waste management company headquartered in El Reno, Oklahoma. The Fund's WasteMasters stock, which was acquired from Nikko Trading of America Corporation ("Nikko"), was subject to a 24-month lock-up period through May 2000. Upon expiration of the lock-up period, the Fund requested that WasteMasters issue the Fund a new stock certificate without the restrictive legend that existed on the Fund's original certificate, so the stock could be sold. WasteMasters refused to comply with this request because of a court order during March 2000 that authorized the cancellation of all WasteMasters stock that had been issued to Nikko, including the shares that Nikko had previously transferred to the Fund. At this time, the Fund is uncertain as to how, or when, these issues regarding the ownership and transferability of its WasteMasters stock will be resolved. The Fund has retained counsel and WasteMasters' attorneys are considering the Fund's request to be treated as a bona fide purchaser of the shares from Nikko. Others are in 4 7 the same position as the Fund and have requested similar treatment. WasteMasters' attorneys have indicated that they will not be in a position to make a determination as to the Fund's position as a bona fide purchaser until other ongoing litigation is resolved. There can be no assurance that a conclusion favorable to the Fund will be achieved, or that a determination will be made prior to the final liquidation of the Fund. The WasteMasters 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 WasteMasters stock, the two-year lock-up period and the relative size of the Fund's stock position, FCM recorded the WasteMasters stock at the same nominal value that the Atlas securities had previously been carried by the Fund. The Fund recorded a realized loss of $2,560,453 on the exchange, which was 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 WasteMasters common stock is $0.02 per share and the current bid price (April 5, 2001) is $0.055 per share. Competition The Fund's investment period ended on December 31, 1995, and the Fund is being liquidated. 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". 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, 2000. 5 8 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 General Partners have permanently suspended the recognition of any transfers of Units that are not consummated and approved by the Fund prior to April 15, 2001, due to (i) the limited amount of time remaining prior to the final liquidation of the Fund, (ii) the low remaining net asset value per Unit, and (iii) the valuation uncertainties associated with the liquidation of the Fund's remaining assets. 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. If, as presently anticipated, the liquidation of the Fund is not completed prior to October 2001, the Fund will make a repurchase offer during 2001. If the plan of liquidation is proceeding as anticipated, the net asset value per Unit at the time of the Repurchase Offer is anticipated to be a nominal amount. Repurchases of Units since the adoption of the plan are summarized in Item 1 of this Report, "Business". As of April 5, 2001, the number of Limited Partners of record was approximately 1,350. The Fund made no distributions to its partners with respect to 2000. The Fund made the following distributions to its partners with respect to 1999, all of which represented a return of capital:
Quarter During Total Amount of Which Distributed Amount of Distribution Cash was Generated Distribution(1) Per $20 Unit Payment Date ------------------ --------------- ------------ ---------------------- 1st Quarter 1999 $336,271 $0.30 May 14, 1999 2nd Quarter 1999 336,271 0.30 August 13, 1999 3rd Quarter 1999 336,271 0.30 November 15, 1999 4th Quarter 1999 310,992 0.30 February 15, 2000
-------------------- (1) Includes distributions to the Managing General Partner. It is currently anticipated that the liquidation of the Fund will be completed prior to December 31, 2001 and that additional distributions to Limited Partners during 2001 will total between $1.25 and $1.75 per Unit. The cash available for distribution will be derived primarily from proceeds that were realized from the Fund's RBM investments during April 2001. A portion of the RBM proceeds will be used to fund the 2001 Repurchase Offer and to pay expenses incurred by the Fund during, and subsequent to, the liquidation of the Fund. 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. 6 9
As of or for the Year Ended December 31 ------------------------------------------------------------------ 2000 1999 1998 1997 1996 -------- -------- --------- -------- -------- (in thousands, except per Unit amounts) Total Investment Income $ 249 $ 393 $ 743 $ 1,647 $ 1,600 Net Investment (Loss) Income (263) (326) 108 1,017 952 Net Realized and Unrealized Gain (Loss) on Investments 953 (7,219) (1,089) (314) (1,358) Cash Distributions Declared to Partners - 1,320 3,235 3,707 1,673 Cash Utilized to Repurchase Units 64 384 894 1,364 1,719 Total Assets 1,848 2,025 11,254 17,195 20,751 Net Assets 1,725 1,098 10,347 15,457 19,825 Value of Investments 1,670 1,761 10,281 16,788 20,357 Per Unit of Limited Partnership Interest: Net Investment (Loss) Income(1) (0.25) (0.30) 0.08 0.78 0.68 Net Realized and Unrealized Gain (Loss) on Investments(1) 0.92 (6.56) (0.80) (0.25) (0.96) Cash Distributions Declared to Partners(2) - 1.20 2.70 2.90 1.20 Net Asset Value 2.04 1.26 9.51 12.91 15.28
--------------- (1) Calculated using the weighted average number of Units outstanding during the years ended December 31, 2000, 1999, 1998, 1997 and 1996 of 1,015,831, 1,100,323, 1,190,993, 1,288,211 and 1,395,138, respectively. (2) Distribution amounts are reflected during the year 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 Operations 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 and the effects of competition 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 $31,860,015. 7 10 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 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 as follows:
Units Repurchased Net Asset Value per Unit ----------------------------------- ---------------------------- Percentage Date of of Outstanding Net of the Repurchase Offer Number Units Gross 2% Fee ---------------- -------- ----------------- --------- -------- November 1993 117,979 6.54% $18.35 $17.98 November 1994 160,172 9.49% 18.41 18.04 November 1995 119,705 7.84% 19.67 19.28 November 1996 108,068 7.68% 15.91 15.59 November 1997 97,612 7.51% 13.97 13.69 November 1998 91,870 7.65% 9.73 9.54 November 1999 83,421 7.52% 4.60 4.51 November 2000 95,548 9.31% 0.67 0.66
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 1995. As provided for in the Partnership Agreement, the Fund's term expired, and the dissolution of the Fund was effective, as of December 31, 2000. The General Partners are proceeding with the liquidation and distribution of the Fund's assets in accordance with a plan of liquidation that was adopted by the General Partners on March 2, 2001. It is currently anticipated that the liquidation of the Fund will be completed prior to December 31, 2001 and that additional distributions to Limited Partners during 2001 will total between $1.25 and $1.75 per Unit. As of December 31, 2000, the Fund held portfolio investments in two Managed Companies, with an aggregate cost of approximately $3.5 million, and two Non-Managed Companies, with an aggregate cost of approximately $1.5 million. These portfolio investments, which were made through the reinvestment of proceeds from the sale of other portfolio investments, represented approximately 96.8% of the Fund's net assets as of December 31, 2000. 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. During December 2000, RBM and the Fund began negotiating a transaction in which RBM would prepay the RBM notes held by the Fund and purchase the RBM common stock and warrants held by the Fund. In this transaction, which was consummated on April 5, 2001, RBM (i) prepaid the $1,460,000 of RBM notes held by the Fund at par, plus accrued interest, and (ii) purchased the RBM stock and warrants held by the Fund for $53,091. As of December 31, 2000, the Fund's remaining liquid assets were invested in money market funds. These funds, along with the cash proceeds received during April 2001 from the RBM transaction, are available to fund the 2001 repurchase offer, to pay Fund expenses and for distribution to the partners. The Fund does not anticipate making any additional follow-on investments in existing portfolio companies. 8 11 Due to affiliates decreased $28,951 from $33,048 at December 31, 1999 to $4,097 at December 31, 2000. This decrease resulted primarily from a reduction in the amount of reimbursements due FCM for expenses incurred on behalf of the Fund and, as discussed below, the fact that no investment advisory fees were payable to FCM for 2000. Accounts payable and accrued liabilities decreased $463,409 from $582,598 at December 31, 1999 to $119,189 at December 31, 2000. This decrease resulted primarily from the reversal of amounts that had previously been accrued for certain known potential liabilities related to former investments of the Fund (see discussion below). These reserves represented approximately $517,000, or 89%, of the total accounts payable and accrued liabilities at December 31, 1999. The impact of the reversal of these reserves was partially offset by the accrual, as of December 31, 2000, of $91,172 of estimated expenses that are expected to be incurred in winding up the activities of the Fund subsequent to final liquidation. Distributions payable to partners decreased from $310,992 at December 31, 1999 to zero at December 31, 2000. This decrease resulted from a decrease in the per Unit distribution rate from $0.30 for the three months ended December 31, 1999 to zero for the three months ended December 31, 2000. As discussed above, the dissolution of the Fund was effective as of December 31, 2000 and the General Partners are proceeding with the liquidation and distribution of the Fund's assets in accordance with a plan of liquidation that was adopted by the General Partners on March 2, 2001. It is currently anticipated that the liquidation of the Fund will be completed prior to December 31, 2001 and that additional distributions to Limited Partners during 2001 will total between $1.25 and $1.75 per Unit. As of December 31, 1999, the Fund had accrued approximately $517,000 for certain known potential liabilities related to two former investments of the Fund. The accruals were reversed as of December 31, 2000 because the applicable statutes of limitation had expired with respect to a portion of the potential liabilities and because FCM and its partners agreed to indemnify the Fund with respect to any remaining potential liabilities associated with these two former investments. The Fund may be exposed to other unasserted legal claims encountered in the course of its activities, past and present. Management does not believe that any such possible claims would 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 fund administration fees, liquidation expenses, administrative expenses and professional fees and other expenses related to the Fund's portfolio investments. 2000 Compared to 1999 The Fund's net investment loss was $262,883 for the year ended December 31, 2000 on total investment income of $249,731 as compared to a net investment loss of $326,228 on total investment income of $393,499 for the prior year. Net investment loss per limited partnership unit decreased from $0.30 to $0.25 and the ratio of net investment loss to average net assets increased from 4.37% to 24.66% for the year ended December 31, 2000 in comparison to the prior year. The ratio of net investment loss to average net assets increased even though the net investment loss decreased, both in the aggregate and on a per Unit basis, due to a significant decrease in the Fund's average net assets for the year ended December 31, 2000 in comparison to the prior year. 9 12 Net investment loss for the year ended December 31, 2000 decreased primarily as a result of a decrease in total expenses in comparison to the prior year. The favorable impact of the decrease in total expenses was partially offset by a smaller decrease in investment income. Investment income decreased $143,768, or 36.5%, for the year ended December 31, 2000 in comparison to the prior year. This decrease resulted primarily from the decision to stop accruing interest on the Fund's LMC debt investments effective July 31, 1999 and a decrease in the amount of the Fund's temporary and money market investments. The amount of the temporary and money market investments decreased because of (i) cash distributions made by the Fund during 1999 that constituted a return of capital, (ii) purchases of additional LMC follow-on investments (including the Niigata receivables), and (iii) the Fund's repurchase of Units during the fourth quarters of 1999 and 2000. The negative effect of these items was partially offset by interest income earned on the Niigata receivables and an increase in the interest income earned on the RBM subordinated debt investment. As discussed below, the Fund did not record any interest income on the RBM notes during the period from August 25, 1998 through May 24, 1999. Total expenses decreased $207,113, or 28.8%, for the year ended December 31, 2000 in comparison to the prior year. This decrease resulted primarily from decreases in professional and investment advisory fees. Independent General Partner fees and expenses also decreased, although by a smaller amount. These decreases were partially offset by increases in other expenses incurred in connection with the Fund's LMC investments and the accrual of estimated expenses that are expected to be incurred in winding up the activities of the Fund subsequent to final liquidation. Professional fees decreased because prior year legal fees included a significant amount of fees incurred in connection with LMC related litigation. The Fund's obligation to pay the monthly investment advisory fees to FCM is subject to the Fund satisfying applicable subordination provisions as set forth in the Partnership Agreement. The investment advisory fees were not paid during 2000 due to the failure of the Fund to satisfy these subordination provisions. During March 2001, in connection with the adoption of the plan of liquidation for the Fund, FCM permanently waived its rights to receive any future investment advisory fees from the Fund, retroactive to January 1, 2000. As a result, the Fund did not record the investment advisory fees for 2000 as an expense. 1999 Compared to 1998 The Fund's net investment loss was $326,228 for the year ended December 31, 1999 on total investment income of $393,499 as compared to net investment income of $107,781 on total investment income of $743,018 for the prior year. Net investment income (loss) per limited partnership unit decreased from $0.08 to $(0.30) and the ratio of net investment income (loss) to average net assets decreased from 0.84% to (4.37)% 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 $349,519, or 47.0%, 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. 10 13 Total expenses increased $84,490, or 13.3%, 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. Professional fees increased primarily as a result of increases in legal fees incurred in connection with LMC related litigation. 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. Net Realized Gain (Loss) on Investments The Fund realized net losses of $6,049,513 during the year ended December 31, 2000, net gains of $493,358 during the year ended December 31, 1999 and net losses of $3,008,930 during the year ended December 31, 1998. During 2000, the Fund wrote off the cost of its LMC equity investments, resulting in realized losses of $6,566,538. These losses were partially offset by approximately $517,000 of realized gains resulting from the reversal of previously established accruals for certain known potential liabilities related to two former investments of the Fund, as discussed above. The net realized gains for 1999 resulted from gains from the sale of the Fund's remaining KEMET Corporation common stock, net of losses resulting from adjustments relating to certain previously held investments. 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 Holdings, Inc. investment. 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. 11 14 Prior to 1998, the Fund had recorded cumulative net unrealized loss on investments of $4,543,257. During 1998, the Fund recorded $2,295,487 of unrealized loss on investments. In addition, the Fund disposed of investments during 1998 with respect to which the Fund had recorded $4,214,940 of net unrealized loss during prior years. Therefore, at December 31, 1998, the Fund had net unrealized loss on investments of $2,623,804. During 1999, the Fund recorded $7,402,297 of unrealized losses on investments. In addition, the Fund disposed of investments during 1999 with respect to which the Fund had recorded $309,704 of net unrealized gains during prior years. Therefore, at December 31, 1999, the Fund had net unrealized losses on investments totaling $10,335,805. The net increase in unrealized losses on investments during 2000 and the cumulative net unrealized losses on investments at December 31, 2000, consisted of the following components:
Net Changes Net Unrealized in Unrealized Gain (Loss) Gain (Loss) Recorded as of Portfolio Investment During 2000 December 31, 2000 --------------------------------------- ---------------- ----------------- Unrealized losses recorded during prior years with respect to LMC equity investments that were written off during 2000 $6,566,537 $ - LMC (314,602) (2,008,442) RBM 751,058 (2,576) WasteMasters - (1,321,794) ---------------- --------- $7,002,993 $(3,332,812) ========= =========
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 LMC's revolving line of credit with CIT, forced a cessation of production of equipment and severely curtailed LMC's ability to fulfill orders for spare parts. Substantially all of LMC's employees were terminated during December 1999 and January 2000. While LMC held discussions with several potential purchasers of its business, in whole or in part, no meaningful offers were received. LMC did consummate a consignment joint venture with respect to its spare parts business during March 2000. LMC received a notice of default, dated April 6, 2000, from CIT with respect to its revolving line of credit. On April 28, 2000, LMC filed for Chapter 11 bankruptcy protection. On November 9, 2000, CIT repossessed LMC's assets that had been pledged as collateral on the line of credit (all of LMC's assets except for its real property). On January 17, 2001, CIT conducted a foreclosure sale of the repossessed assets. The proceeds of the foreclosure sale totaled less than the amount of LMC's indebtedness to CIT. LMC is currently attempting to sell its real property. All proceeds realized from the sale would be payable to LMC's creditors, including the Fund. The Fund wrote its LMC investment down by $540,800 and $317,280 during 1995 and 1997, respectively. As a result of the above discussed developments, the Fund created additional reserves of $7,402,297 and $314,602 against the carrying values of the Fund's LMC investment during the years ended December 31, 1999 and 2000, respectively. As of December 31, 2000, the Fund wrote the cost of all of its LMC equity investments off as realized losses. There is a possibility that the Fund could recover a small portion of its investment in LMC debt during 2001 out of proceeds derived from the sale of LMC's real property. During the fourth quarter of 1998, RBM encountered financial difficulties resulting primarily from significant declines in sales to Digital Equipment Corporation ("DEC"), which occurred as a result of DEC being acquired by Compaq Computer Corp. As a result of these financial difficulties, RBM restructured its debt. As part of 12 15 this restructuring, RBM's 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 6.6% to 8.1%, 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 recorded aggregate writedowns of $753,634 relating to RBM during the year ended December 31, 1998. In addition, 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. RBM resumed paying the quarterly interest payments in cash, commencing with the quarterly interest payment due on August 24, 1999. During December 2000, RBM and the Fund began negotiating a transaction in which RBM would prepay the RBM notes held by the Fund and purchase the RBM common stock and warrants held by the Fund. In this transaction, which was consummated on April 5, 2001, RBM (i) prepaid the $1,460,000 of RBM notes held by the Fund at par, plus accrued interest, and (ii) purchased the RBM stock and warrants held by the Fund for $53,091. The Fund recorded unrealized gains of $751,058 with respect to its various RBM portfolio investments as of December 31, 2000, in order to adjust the carrying value of the investments to amounts equal to the proceeds received from RBM during April 2001. During June 1998, the Fund exchanged its Atlas subordinated notes and warrants for 989,414 shares of common stock in WasteMasters, a waste management company headquartered in El Reno, Oklahoma. The Fund's WasteMasters stock, which was acquired from Nikko Trading of America Corporation ("Nikko"), was subject to a 24-month lock-up period through May 2000. Upon expiration of the lock-up period, the Fund requested that WasteMasters issue the Fund a new stock certificate without the restrictive legend that existed on the Fund's original certificate, so the stock could be sold. WasteMasters refused to comply with this request because of a court order during March 2000 that authorized the cancellation of all WasteMasters stock that had been issued to Nikko, including the shares that Nikko had previously transferred to the Fund. At this time, the Fund is uncertain as to how, or when, these issues regarding the ownership and transferability of its WasteMasters stock will be resolved. The Fund has retained counsel and WasteMasters' attorneys are considering the Fund's request to be treated as a bona fide purchaser of the shares from Nikko. Others are in the same position as the Fund and have requested similar treatment. WasteMasters' attorneys have indicated that they will not be in a position to make a determination as to the Fund's position as a bona fide purchaser until other ongoing litigation is resolved. There can be no assurance that a conclusion favorable to the Fund will be achieved, or that a determination will be made prior to the final liquidation of the Fund. The WasteMasters 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 WasteMasters stock, the two-year lock-up period and the relative size of the Fund's stock position, FCM recorded the WasteMasters stock at the same nominal value that the Atlas securities had previously been carried by the Fund. The Fund recorded a realized loss of $2,560,453 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 WasteMasters common stock is $0.02 per share and the current bid price (April 5, 2001) is $0.055 per share. 13 16 Inflation and Changing Prices Inflation has had no material impact on the operations or financial condition of the Fund from inception through December 31, 2000. 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. 14 17 Item 8. Financial Statements and Supplementary Data FIDUCIARY CAPITAL PARTNERS, L.P.
List of Financial Statements Page ---------------------------- ---- Report of Independent Public Accountants F-2 Schedule of Investments - December 31, 2000 F-3 Balance Sheets - December 31, 2000 and 1999 F-5 Statements of Operations for each of the years ended December 31, 2000, 1999 and 1998 F-6 Statements of Cash Flows for each of the years ended December 31, 2000, 1999 and 1998 F-7 Statements of Changes in Net Assets for each of the years ended December 31, 2000, 1999 and 1998 F-8 Selected Per Unit Data and Ratios for each of the years ended December 31, 2000, 1999, 1998, 1997 and 1996 F-9 Notes to Financial Statements F-10
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 18 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Partners of Fiduciary Capital Partners, L.P.: We have audited the accompanying balance sheets of Fiduciary Capital Partners, L.P. (a Delaware limited partnership) as of December 31, 2000 and 1999, including the schedule of investments as of December 31, 2000, 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, 2000 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, 2000 and 1999, 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. As discussed in Note 2, the financial statements include investment securities valued at $1,670,362 at December 31, 2000 (96.9% of net assets) and $1,111,012 at December 31, 1999 (101.1% 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. In our opinion, the financial statements and selected per unit data and ratios referred to above present fairly, in all material respects, the financial position of Fiduciary Capital Partners, L.P. as of December 31, 2000 and 1999, 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, 2000, 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. /s/ Arthur Andersen LLP Denver, Colorado April 24, 2001. F-2 19 FIDUCIARY CAPITAL PARTNERS, L.P. SCHEDULE OF INVESTMENTS DECEMBER 31, 2000
------------------------------------------------------------------------------------------------------------------------------------ Principal Amount/ Investment Amortized % of Total Shares Investment Date Cost Value Investments ------------------------------------------------------------------------------------------------------------------------------------ MANAGED COMPANIES: $1,967,040 LMC Corporation, 12.00% Senior Subordinated 11/01/96 Revolving Notes through due 10/31/00(1) 01/13/99 $ 1,967,040 $ 1 $41,404 LMC Corporation, 12.00% 02/07/00 Promissory Notes due through 8/7/00(2) 04/11/00 41,404 1 ------------------------------------------------------------------------------------------------------------------------------------ 2,008,444 2 0.0% ------------------------------------------------------------------------------------------------------------------------------------ $1,460,000 R.B.M. Precision Metal Products, Inc., 13.00% Senior Subordinated Secured Notes due 5/24/02(3) 05/24/95 1,432,711 1,460,000 14,265.6 sh. R.B.M. Precision Metal Products, Inc., Warrants to Purchase Common Stock(3)* 05/24/95 82,955 26,479 14,392 sh. R.B.M. Precision Metal Products, Inc., Common Stock(3)* 12/09/98 1 26,612 ------------------------------------------------------------------------------------------------------------------------------------ 1,515,667 1,513,091 90.6 ------------------------------------------------------------------------------------------------------------------------------------ Total Investments in Managed Companies (87.7% of net assets) 3,524,111 1,513,093 90.6 ------------------------------------------------------------------------------------------------------------------------------------ NON-MANAGED COMPANIES: $173,099 Niigata Engineering 12/01/99 Co., Ltd., through Receivables(4) 01/03/00 157,268 157,268 ------------------------------------------------------------------------------------------------------------------------------------ 157,268 157,268 9.4 ------------------------------------------------------------------------------------------------------------------------------------ 989,414 sh. WasteMasters, Inc., Common Stock(5)* 06/03/98 1,321,795 1 ------------------------------------------------------------------------------------------------------------------------------------ 1,321,795 1 0.0 ------------------------------------------------------------------------------------------------------------------------------------ Total Investment in Non-Managed Companies (9.1% of net assets) 1,479,063 157,269 9.4 ------------------------------------------------------------------------------------------------------------------------------------ Total Investments (96.8% of net assets) $5,003,174 $1,670,362 100.0% ====================================================================================================================================
The accompanying notes to financial statements are an integral part of this schedule. F-3 20 FIDUCIARY CAPITAL PARTNERS, L.P. SCHEDULE OF INVESTMENTS (CONTINUED) DECEMBER 31, 2000 (1) The accrual of interest on the notes was discontinued by the Fund effective July 1, 1999. (2) The Fund has not accrued any interest on these notes. (3) On April 5, 2001, R.B.M. Precision Metal Products, Inc. ("RBM") prepaid these notes at face value, plus accrued interest, and purchased the common stock and warrants for $53,091. (4) These are non-interest-bearing receivables, which were purchased from LMC Corporation ("LMC") at a discount. Payments are due on May 21, 2001 and November 21, 2001 each in the amount of $55,639 and on May 21, 2002 in the amount of $61,821. (5) See Note 13 regarding significant issues concerning the ownership and transferability of this stock. * Non-income producing security. The accompanying notes to financial statements are an integral part of this schedule. F-4 21 FIDUCIARY CAPITAL PARTNERS, L.P. BALANCE SHEETS - DECEMBER 31, 2000 AND 1999
2000 1999 ------------- ------------- ASSETS: Investments: Portfolio investments, at fair value: Managed companies (amortized cost - $3,524,111 and $10,031,554, respectively) $ 1,513,093 $ 1,017,543 Non-managed companies (amortized cost - $1,479,063 and $1,415,263, respectively) 157,269 93,469 Temporary investments, at amortized cost - 649,689 ------------- ------------- Total investments 1,670,362 1,760,701 Cash and cash equivalents 132,885 218,111 Accrued interest receivable 20,765 21,924 Other assets 24,285 24,333 ------------- ------------- Total assets $ 1,848,297 $ 2,025,069 ============= ============= LIABILITIES: Due to affiliates $ 4,097 $ 33,048 Accounts payable and accrued liabilities 119,189 582,598 Distributions payable to partners - 310,992 ------------- ------------- Total liabilities 123,286 926,638 ------------- ------------- COMMITMENTS AND CONTINGENCIES NET ASSETS: Managing General Partner (178,084) (196,777) Limited Partners (equivalent to $2.04 and $1.26, respectively, per limited partnership unit based on 930,725 and 1,026,273 units outstanding) 1,903,095 1,295,208 ------------- ------------- Total net assets 1,725,011 1,098,431 ------------- ------------- Total liabilities and net assets $ 1,848,297 $ 2,025,069 ============= =============
The accompanying notes to financial statements are an integral part of these financial statements. F-5 22 FIDUCIARY CAPITAL PARTNERS, L.P. STATEMENTS OF OPERATIONS FOR EACH OF THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
2000 1999 1998 ------------ ------------ ----------- INVESTMENT INCOME: Income: Interest $ 249,731 $ 389,419 $ 728,803 Other income - 4,080 14,215 ------------ ------------ ----------- Total investment income 249,731 393,499 743,018 ------------ ------------ ----------- Expenses: Fund administration fees 143,370 143,370 143,370 Liquidation expenses 91,172 - - Administrative expenses 81,105 81,105 81,105 Independent General Partner fees and expenses 50,420 63,330 61,231 Professional fees 19,952 268,469 164,127 Other 126,595 67,291 65,671 Investment advisory fees - 96,162 119,733 ------------ ------------ ----------- Total expenses 512,614 719,727 635,237 ------------ ------------ ----------- NET INVESTMENT (LOSS) INCOME (262,883) (326,228) 107,781 REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS: Net realized (loss) gain on investments (6,049,513) 493,358 (3,008,930) Net change in unrealized gain (loss) on investments 7,002,993 (7,712,001) 1,919,453 ------------ ------------ ----------- Net gain (loss) on investments 953,480 (7,218,643) (1,089,477) ------------ ------------ ----------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 690,597 $ (7,544,871) $ (981,696) ============ ============ ===========
The accompanying notes to financial statements are an integral part of these financial statements. F-6 23 FIDUCIARY CAPITAL PARTNERS, L.P. STATEMENTS OF CASH FLOWS FOR EACH OF THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
2000 1999 1998 ----------- --------------- ------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net increase (decrease) in net assets resulting from operations $ 690,597 $ (7,544,871) $ (981,696) Adjustments to reconcile net increase (decrease) in net assets resulting from operations to net cash (used in) provided by operating activities: Accreted discount on portfolio investments (41,538) (15,038) (12,929) Interest income received in stock - (85,620) - Change in assets and liabilities: Accrued interest receivable 1,159 81,309 (26,412) Other assets 48 7,526 34,201 Due to affiliates (28,951) 1,851 (7,926) Accounts payable and accrued liabilities 53,620 32,869 2,997 Net realized loss (gain) on investments 6,049,513 (493,358) 3,008,930 Net change in unrealized loss on investments (7,002,993) 7,712,001 (1,919,453) ------------ --------------- ------------- Net cash (used in) provided by operating activities (278,545) (303,331) 97,712 ------------ --------------- ------------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of portfolio investments (192,639) (997,157) (3,531,710) Proceeds from dispositions of portfolio investments 111,278 513,632 1,366,389 Sale (purchase) of temporary investments, net 649,689 1,896,585 7,647,283 ------------ --------------- ------------- Net cash provided by investing activities 568,328 1,413,060 5,481,962 ------------ --------------- ------------- CASH FLOWS FROM FINANCING ACTIVITIES: Cash distributions paid to partners (310,992) (1,345,084) (4,112,271) Repurchase of limited partnership units (64,017) (383,736) (893,895) ------------ --------------- ------------- Net cash used in financing activities (375,009) (1,728,820) (5,006,166) ------------ --------------- ------------- NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (85,226) (619,091) 573,508 CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 218,111 837,202 263,694 ------------ --------------- ------------- CASH AND CASH EQUIVALENTS AT END OF YEAR $ 132,885 $ 218,111 $ 837,202 ============ =============== ============= NONCASH INVESTING AND FINANCING ACTIVITIES: Investments exchanged for other investments $ - $ - $ 1,639,200 ============ =============== =============
The accompanying notes to financial statements are an integral part of these financial statements. F-7 24 FIDUCIARY CAPITAL PARTNERS, L.P. STATEMENTS OF CHANGES IN NET ASSETS FOR EACH OF THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
2000 1999 1998 ------------ ------------ ------------ Increase (decrease) in net assets resulting from operations: Net investment (loss) income $ (262,883) $ (326,228) $ 107,781 Net realized (loss) gain on investments (6,049,513) 493,358 (3,008,930) Net change in unrealized loss on investments 7,002,993 (7,712,001) 1,919,453 ------------ ------------ ------------ Net increase (decrease) in net assets resulting from operations 690,597 (7,544,871) (981,696) Repurchase of limited partnership units (64,017) (383,736) (893,895) Distributions to partners from - Net investment income - - (129,001) Realized gain on investments - - (1,742,647) Return of capital - (1,319,805) (1,363,193) ------------ ------------ ------------ Total increase (decrease) in net assets 626,580 (9,248,412) (5,110,432) Net assets: Beginning of year 1,098,431 10,346,843 15,457,275 ------------ ------------ ------------ End of year (including no undistributed net investment income) $ 1,725,011 $ 1,098,431 $ 10,346,843 ============ ============ ============
The accompanying notes to financial statements are an integral part of these financial statements. F-8 25 FIDUCIARY CAPITAL PARTNERS, L.P. SELECTED PER UNIT DATA AND RATIOS FOR EACH OF THE YEARS ENDED DECEMBER 31, 2000, 1999, 1998, 1997 AND 1996
2000 1999 1998 1997 1996 -------- ------ ------- ------- ------- Per Unit Data: Investment income(1) $0.24 $0.36 $ 0.54 $ 1.26 $ 1.14 Expenses(1) (0.49) (0.66) (0.46) (0.48) (0.46) -------- ------ ------- ------- ------- Net investment (loss) income(1) (0.25) (0.30) 0.08 0.78 0.68 Net realized (loss) gain on investments(1) (5.79) 0.45 (2.20) 2.72 (2.80) Net change in unrealized loss on investments(1) 6.71 (7.01) 1.40 (2.97) 1.84 Effect of unit repurchases on net asset value 0.11 (0.19) 0.02 - (0.03) Distributions declared to partners - (1.20) (2.70) (2.90) (1.20) -------- ------ ------- ------- ------- Net increase (decrease) in net asset value 0.78 (8.25) (3.40) (2.37) (1.51) Net asset value: Beginning of year 1.26 9.51 12.91 15.28 16.79 -------- ------ ------- ------- ------- End of year $2.04 $1.26 $ 9.51 $12.91 $15.28 ======== ====== ======= ======= ======= Ratios: Ratio of expenses to average net assets 48.10% 9.65% 4.92% 3.53% 2.85% Ratio of net investment (loss) income to average net assets (24.66)% (4.37)% 0.84% 5.69% 4.19% Number of limited partnership units at end of year 930,725 1,026,273 1,109,694 1,201,564 1,299,176
-------------------------------- (1) Calculated using the weighted average number of limited partnership units outstanding during the years ended December 31, 2000, 1999, 1998, 1997 and 1996 of 1,015,831, 1,100,323, 1,190,993, 1,288,211 and 1,395,138, respectively. The accompanying notes to financial statements are an integral part of these selected per unit data and ratios. F-9 26 FIDUCIARY CAPITAL PARTNERS, L.P. NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2000 AND 1999 1. ORGANIZATION AND PURPOSE Fiduciary Capital Partners, L.P. (the "Fund"), a Delaware limited partnership, was formed on October 20, 1988 to operate as a business development company under the Investment Company Act of 1940. The Fund's operations commenced on August 14, 1990. FCM Fiduciary Capital Management Company ("FCM"), the Managing General Partner of, and the investment adviser to, the Fund, is responsible, subject to the supervision of the Independent General Partners, for overseeing and monitoring the Fund's investments. The investment objective of the Fund 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 provided for in the Fund's Second Amended and Restated Agreement of Limited Partnership (the "Partnership Agreement"), the Fund's term expired, and the dissolution of the Fund was effective, as of December 31, 2000. The General Partners are proceeding with the liquidation and distribution of the Fund's assets in accordance with a plan of liquidation that was adopted by the General Partners on March 2, 2001. It is currently anticipated that the liquidation of the Fund will be completed prior to December 31, 2001. A separate fund, Fiduciary Capital Pension Partners, L.P. ("FCPP"), was also formed on October 20, 1988 for tax-exempt investors with investment objectives, policies and restrictions similar to those of the Fund. While the Fund and FCPP have co-invested in each of the portfolio investments, each fund is accounted for separately. Each fund's participation in the portfolio investments is in proportion to the amount of capital that each fund had available for investment at the time each investment was acquired. Certain expenses are allocated between the funds based on the amount of each fund's total capital. The accompanying financial statements include only the activities of the Fund. 2. SIGNIFICANT ACCOUNTING POLICIES 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 27 FIDUCIARY CAPITAL PARTNERS, L.P. NOTES TO FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 2000 AND 1999 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 FCPP combined own a material percentage of the outstanding securities. The amount of the discount varies based upon the type of restriction, the time remaining on the restriction and the size of the holding. Fair value for securities that are not 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. 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. F-11 28 FIDUCIARY CAPITAL PARTNERS, L.P. NOTES TO FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 2000 AND 1999 Liquidation Expenses The dissolution of the Fund was effective as of December 31, 2000 and it is anticipated that the liquidation of the Fund will be completed prior to December 31, 2001. Therefore, as of December 31, 2000 the Fund accrued an estimate of the expenses that are expected to be incurred subsequent to the final liquidation in winding up the Fund's activities. 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. 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 contributions 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. The Fund's 1998 loss was allocated approximately 87% to the Limited Partners and approximately 13% to FCM, and the portion of the 1998 cash distributions that exceeded the partners' cumulative preferred return amounts 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. The Fund's 2000 income was allocated approximately 97% to the Limited Partners and approximately 3% to FCM. The Fund did not pay any 2000 cash distributions. 4. CAPITAL CONTRIBUTIONS Upon formation of the Fund, FCM contributed $4,000 for its general partner interest in the Fund. Units of limited partnership interest ("Units") were then sold in a public offering. The Fund held three closings between August 14, 1990 and October 18, 1990, receiving gross offering proceeds of $36,102,000. Commissions and other offering costs were charged against proceeds resulting in net capital contributions from Limited Partners of $31,860,015. 5. PERIODIC UNIT REPURCHASE PLAN The Fund's Limited Partners adopted a periodic unit repurchase plan 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 F-12 29 FIDUCIARY CAPITAL PARTNERS, L.P. NOTES TO FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 2000 AND 1999 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 General Partners may vote to repurchase up to an additional 2% of the outstanding Units. If Units in excess if this amount are tendered, Units are purchased on a pro-rated 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:
Units Repurchased Net Asset Value per Unit ----------------------------------- ---------------------------- Percentage Date of of Outstanding Net of the Repurchase Offer Number Units Gross 2% Fee ---------------- -------- ----------------- --------- ---------- November 1993 117,979 6.54% $18.35 $17.98 November 1994 160,172 9.49% 18.41 18.04 November 1995 119,705 7.84% 19.67 19.28 November 1996 108,068 7.68% 15.91 15.59 November 1997 97,612 7.51% 13.97 13.69 November 1998 91,870 7.65% 9.73 9.54 November 1999 83,421 7.52% 4.60 4.51 November 2000 95,548 9.31% 0.67 0.66
6. INVESTMENT ADVISORY FEES As compensation for its services as investment adviser, FCM is entitled to receive a subordinated monthly investment advisory fee equal, on an annual basis, to 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 $96,162, and $119,733 were incurred by the Fund for 1999 and 1998, respectively. The investment advisory fees for 2000, in the amount of $81,329, were not paid during 2000 due to the failure of the Fund to satisfy the applicable subordination provisions. During March 2001, in connection with the adoption of the plan of liquidation for the Fund, FCM permanently waived its rights to receive any future investment advisory fees from the Fund, retroactive to January 1, 2000. As a result, the Fund did not record the investment advisory fees for 2000 as an expense. 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 $143,370 were incurred each year by the Fund during 2000, 1999 and 1998. 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 $81,105 each year during 2000, 1999 and 1998. F-13 30 FIDUCIARY CAPITAL PARTNERS, L.P. NOTES TO FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 2000 AND 1999 8. INDEPENDENT GENERAL PARTNER FEES AND EXPENSES As compensation for services rendered to the Fund, each of the Independent General Partners receives from the Fund and FCPP, an annual fee of $30,000, payable monthly in arrears, together with all out-of-pocket expenses. Each fund's allocation of these fees and expenses is based on the relative number of outstanding Units. Fees and expenses of $50,420, $63,330 and $61,231 were incurred by the Fund for 2000, 1999 and 1998, 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 $241,347, $304,344 and $231,913 during 2000, 1999 and 1998, respectively. 10. PORTFOLIO INVESTMENTS The Fund's portfolio investments consist primarily of high-yield private placement securities issued as the mezzanine financing of privately structured, friendly leveraged buyouts, leveraged acquisitions and leveraged recapitalizations, and are generally linked with an equity participation. The risk of loss upon default by an issuer is greater than with investment grade securities because high-yield securities are generally unsecured and are usually subordinated to other creditors of the issuer. Also, these issuers usually have higher levels of indebtedness and are more sensitive to adverse economic conditions than investment grade issuers. Most of these securities are subject to resale restrictions and generally there is no quoted market for such securities. Although the Fund cannot eliminate the risks associated with its investments in these high-yield securities, it has established risk management procedures. The Fund 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, 2000, the Fund held portfolio investments in two Managed Companies, with an aggregate cost of approximately $3.5 million, and two Non-Managed Companies, with an aggregate cost of approximately $1.5 million. During the year ended December 31, 2000, the Fund acquired additional follow-on investments in Niigata Engineering Co., Ltd. and LMC Corporation ("LMC") at a cost of $192,639. During 2000, the Fund wrote off its equity investments in LMC, which filed for Chapter 11 bankruptcy protection during 2000. In addition, the Fund reversed amounts that had previously been accrued for certain known potential liabilities related to former investments of the Fund. In total, the Fund recorded net realized losses of $6,049,513 during 2000. None of the Fund's portfolio investments are pledged or otherwise encumbered. F-14 31 FIDUCIARY CAPITAL PARTNERS, L.P. NOTES TO FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 2000 AND 1999 11. UNREALIZED GAIN (LOSS) ON INVESTMENTS As of December 31, 1999, the Fund had recorded net unrealized losses on investments totaling $10,335,805. During 2000, the Fund recorded $314,602 of additional unrealized loss and $751,058 of unrealized gain on investments. In addition, the Fund disposed of investments during 2000 with respect to which the Fund had recorded $6,566,537 of unrealized loss during prior years. Therefore, as of December 31, 2000, the Fund had recorded net unrealized losses on investments totaling $3,332,812. 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 and has not recorded any interest on the LMC Promissory Notes that were acquired during 2000. In addition, the Fund did not record interest income with respect to the 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 due with respect to this nine-month period and the stock was valued at $1 by the Fund at the time of its receipt. 13. COMMITMENTS AND CONTINGENCIES WasteMasters, Inc. ("WasteMasters") The Fund acquired its WasteMasters stock, which trades on the OTC Bulletin Board System, from Nikko Trading of America Corporation ("Nikko") on June 3, 1998. The stock was subject to a 24-month lock-up period through May 2000. Upon expiration of the lock-up period, the Fund requested that WasteMasters issue the Fund a new stock certificate without the restrictive legend that existed on the Fund's original certificate, so that the stock could be sold. WasteMasters refused to comply with this request because of a court order during March 2000 that authorized the cancellation of all WasteMasters stock that had been issued to Nikko, including the shares that Nikko had previously transferred to the Fund. At this time, the Fund is uncertain as to how, or when, these issues regarding the ownership and transferability of its WasteMasters stock will be resolved. The Fund has retained counsel and WasteMasters' attorneys are considering the Fund's request to be treated as a bona fide purchaser of the shares from Nikko. Others are in the same position as the Fund and have requested similar treatment. WasteMasters' attorneys have indicated that they will not be in a position to make a determination as to the Fund's position as a bona fide purchaser until other ongoing litigation is resolved. There can be no assurance that a conclusion favorable to the Fund will be achieved, or that a determination will be made prior to the final liquidation of the Fund. F-15 32 FIDUCIARY CAPITAL PARTNERS, L.P. NOTES TO FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 2000 AND 1999 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:
2000 1999 1998 ----------- ----------- ----------- Net increase (decrease) in net assets resulting from operations per financial statements $ 690,597 $(7,544,871) $ (981,696) Increase (decrease) resulting from: Change in unrealized loss on investments (7,002,990) 7,712,001 (1,919,453) Realized gains and losses on investments (517,029) 10,369 (3,540,468) Interest income - 8,704 150,888 Other 65,723 22,414 (12,936) ----------- ----------- ----------- Taxable income (loss) per federal income tax return $(6,763,699) $ 208,617 $(6,303,665) ============ ============ ===========
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:
2000 1999 1998 ---------- ------------- ------------- Net assets per financial statements $1,725,011 $ 1,098,431 $10,346,843 Unrealized loss on investments 3,332,812 10,335,805 2,623,804 Syndication, organization and start-up costs, net 707,086 2,869,139 3,243,217 Realized gains and losses on investments - 517,029 506,660 Distributions payable - 310,992 336,271 Additional stock and note basis 159,592 159,592 150,888 Accrued expenses 111,740 47,975 23,000 ---------- ------------- ------------- Tax bases of net assets $6,036,241 $15,338,963 $17,230,683 ========== ============= =============
F-16 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 2000 or 1999. 15 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 is 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 is also a director of Logistical Supply Corporation, International Film Investors and Hamilton Lane Advisors. 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. 16 35 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, which provide asset management and investment banking services to third parties, which 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 is a director of LMC Corporation. Mr. DeGrassi received a Bachelor of Business Administration in accounting from the University of Texas at Austin in 1969. 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, which provide accounting, 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. Mr. Jackson serves as a director of LMC Corporation and Consolidated Capital of North America, Inc. Mr. Jackson received a Bachelor of Science degree in accounting in 1971 from the University of Denver and is a Certified Public Accountant. 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 17 36 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 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 32, 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. 18 37 C. Phillip Siegel Phillip Siegel, age 57, joined Loeb Partners in March 2001 as a Managing Director in Corporate Finance. From December 1999 until February 2001, Mr. Siegel was 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. 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 2000. Item 11. Executive Compensation No compensation was paid by the Fund to the officers and directors of the General Partners during 2000. 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 2000. 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 1530 16th Street, Suite 200 Denver, Colorado 80202-1306 (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 31, 2001. One officer of FCM Fiduciary Capital Management Company and FCM Fiduciary Capital Corporation owned 650 Units as of March 31, 2001. (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. 19 38 Item 13. Certain Relationships and Related Transactions The Fund may co-invest in portfolio investments with FCPP 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", 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 2000. Investment Advisory Fees As compensation for its services as investment adviser, FCM is entitled to receive a subordinated monthly fee, equal on an annual basis, to 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. The investment advisory fees for 2000, in the amount of $81,329, were not paid during 2000 due to the failure of the Fund to satisfy the applicable subordination provisions. During March 2001, in connection with the adoption of the plan of liquidation for the Fund, FCM permanently waived its rights to receive any future investment advisory fees from the Fund, retroactive to January 1, 2000. As a result, the Fund did not record the investment advisory fees for 2000 as an expense. 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 2000, FCM earned fund administration fees of $143,370. The Fund also reimbursed FCM for $81,105 of administrative expenses incurred in providing accounting and investor services to the Fund during 2000. Independent General Partner Fees and Expenses As compensation for services rendered to the Fund, each of the Independent General Partners receives from the Fund and FCPP an annual fee of $30,000, payable monthly in arrears, together with all out-of-pocket expenses. Each fund's allocation of these fees and expenses is based on the relative number of outstanding Units. Fees and expenses of $50,420 were incurred by the Fund during 2000. Accountable Expenses FCM and its affiliates are entitled to reimbursement of direct expenses paid on behalf of the Fund. During 2000, such reimbursements amounted to $241,347. Partnership Interest FCM was allocated $18,693 of the Fund's net investment income and net gain (loss) on investments for 2000. 20 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. The Partnership did file a report on Form 8-K on March 26, 2001 to report (i) the dissolution of the Partnership, (ii) the adoption of a plan of liquidation by the General Partners, and (iii) the General Partners' decision to permanently suspend the recognition of transfers of Units that are not consummated and approved prior to April 15, 2001. (c) Exhibits required to be filed. Exhibit No. Description 3.1 (a) Fourth Amended and Restated Certificate of Limited Partnership of Fiduciary Capital 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 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 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 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 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 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. 21 40 Exhibit No. Description (c) Second Amendment to Custody Agreement of Fiduciary Capital 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 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 Partners, L.P., FCM Fiduciary Capital Management Company and GEMISYS Corporation. Filed as Exhibit 10.5 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1999.* 11.1 Statement of Computation of Net Investment Income per Limited Partnership Unit. 20.1 Report Furnished to Securities Holders. 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. 22 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 24, 2001 FIDUCIARY CAPITAL 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 -------------------------------------------- 23 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 24, 2001. 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. Signature Title /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 fcp16 24 43 Exhibit Index
Exhibit No. Description Page ----------- ----------- ---- 3.1 (a) Fourth Amended and Restated Certificate of Limited Partnership of Fiduciary Capital Partners, L.P., dated as of January 29, 1990. (Incorporated by Reference.) * (b) Second Amended and Restated Agreement of Limited Partnership of Fiduciary Capital 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 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 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 Partners, L.P. and M&I First National Bank. (Incorporated by Reference.) * (b) Amendment to Custody Agreement of Fiduciary Capital Partners, L.P., dated as of October 13, 1992. (Incorporated by Reference.) * (c) Second Amendment to Custody Agreement of Fiduciary Capital 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 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 Partners, L.P., FCM Fiduciary Capital Management Company and GEMISYS Corporation. (Incorporated by Reference.) * 11.1 Statement of Computation of Net Investment Income per Limited Partnership Unit. 20.1 Report Furnished to Securities Holders. 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). (Incorporated by Reference.) *
------------------- * See Item 14(c) for statement of location of exhibits incorporated by reference. E-1