-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, O6/WeDp3hds95sLVt9OhC1QCvup063b+maMDUahJU4kbLLzpkIt0qjWKsQKJRt9r +ubNnaAkNxKT984YV6CVRg== 0000950134-95-002972.txt : 19951120 0000950134-95-002972.hdr.sgml : 19951120 ACCESSION NUMBER: 0000950134-95-002972 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19950930 FILED AS OF DATE: 19951114 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: FIDUCIARY CAPITAL PARTNERS L P CENTRAL INDEX KEY: 0000841687 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 860653600 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 814-00067 FILM NUMBER: 95593060 BUSINESS ADDRESS: STREET 1: 410 17TH STREET STREET 2: STE 400 CITY: DENVER STATE: CO ZIP: 80202 BUSINESS PHONE: 303-446-59 MAIL ADDRESS: STREET 1: 410 17TH ST. STE 400 STREET 2: 410 17TH ST. STE 400 CITY: DENVER STATE: CO ZIP: 80202 10-Q 1 FORM 10-Q 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 1995 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ___________________ to________________________ 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.) 410 17th Street Suite 400 Denver, Colorado 80202 (Address of principal (Zip Code) executive offices) Registrant's telephone number, including area code (800) 866-7607 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No . --- --- 2 Fiduciary Capital Partners, L.P. Quarterly Report on Form 10-Q for the Quarter Ended September 30, 1995 Table of Contents
Page ---- Part I. FINANCIAL INFORMATION Item 1. Financial Statements (unaudited) 3 Schedule of Investments - September 30, 1995 3 Balance Sheets - September 30, 1995 and December 31, 1994 6 Statements of Operations for the three months ended September 30, 1995 and 1994 7 Statements of Operations for the nine months ended September 30, 1995 and 1994 8 Statements of Cash Flows for the nine months ended September 30, 1995 and 1994 9 Statements of Changes in Net Assets for the nine months ended September 30, 1995 and for the year ended December 31, 1994 10 Selected Per Unit Data and Ratios 11 Notes to Financial Statements 12 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 14 Part II. OTHER INFORMATION Item 1. Legal Proceedings 21 Item 6. Exhibits and Reports on Form 8-K 21
2 3 Part I. FINANCIAL INFORMATION Item 1. Financial Statements FIDUCIARY CAPITAL PARTNERS, L.P. SCHEDULE OF INVESTMENTS SEPTEMBER 30, 1995 (unaudited)
- ----------------------------------------------------------------------------------------------------------------- Principal Amount/ Investment Amortized % of Total Shares Investment Date Cost Value Investments - ----------------------------------------------------------------------------------------------------------------- MANAGED COMPANIES: 178,934 sh. Carr-Gottstein Foods Co., Class B Common Stock(1)* 10/23/90 $ 894,666 $1,019,924 - ----------------------------------------------------------------------------------------------------------------- 894,666 1,019,924 3.4% - ----------------------------------------------------------------------------------------------------------------- 182,453.91 sh. Neodata Corporation, 10.00% Class A Convertible 12/27/90 & Preferred Stock - Series 2* 09/30/92 337,945 2 10,607.78 sh. Neodata Corporation, 12/27/90 & Common Stock* 09/30/92 1 1 - ----------------------------------------------------------------------------------------------------------------- 337,946 3 0.0 - ----------------------------------------------------------------------------------------------------------------- 55,340 sh. KEMET Corporation, Common Stock(2)* 07/11/91 19,614 1,888,477 - ----------------------------------------------------------------------------------------------------------------- 19,614 1,888,477 6.3 - ----------------------------------------------------------------------------------------------------------------- 358.2 sh. Huntington Holdings, Inc., Warrants to Purchase Common Stock(3)* 01/31/92 103,811 810,855 - ----------------------------------------------------------------------------------------------------------------- 103,811 810,855 2.7 - ----------------------------------------------------------------------------------------------------------------- 75,856 sh. Amity Leather Products Co., Warrants to Purchase Class B Common Stock* 07/30/92 104,091 918,506 27,392 sh. Amity Leather Products Co., Class A Common Stock* 07/30/92 273,920 331,677 - ----------------------------------------------------------------------------------------------------------------- 378,011 1,250,183 4.2 - ----------------------------------------------------------------------------------------------------------------- $3,561,003 KB Alloys, Inc., 20.00% Senior Subordinated Term Notes due 6/30/01(4) 05/28/93 3,503,059 3,503,059 - ----------------------------------------------------------------------------------------------------------------- 3,503,059 3,503,059 11.6 - ----------------------------------------------------------------------------------------------------------------- $6,087,185 Elgin National Industries, Inc., 13.00% Senior Subordinated Notes due 9/01/01(5) 09/24/93 5,950,669 5,950,669 7,119.71 sh. ENI Holding Corp., 10.00% Preferred Stock due 12/31/01 09/24/93 711,971 855,551 489.27 sh. ENI Holding Corp., Class B Common Stock* 09/24/93 48,927 48,927 510.83 sh. ENI Holding Corp., Warrants to Purchase Class B Common Stock* 09/24/93 51,078 51,078 - ----------------------------------------------------------------------------------------------------------------- 6,762,645 6,906,225 22.9 - ----------------------------------------------------------------------------------------------------------------- 18,194 sh. Protection One, Inc., Common Stock(6)* 11/03/93 100,370 164,883 - ----------------------------------------------------------------------------------------------------------------- 100,370 164,883 0.6 - -----------------------------------------------------------------------------------------------------------------
The accompanying notes to financial statements are an integral part of this schedule. 3 4 FIDUCIARY CAPITAL PARTNERS, L.P. SCHEDULE OF INVESTMENTS (CONTINUED) SEPTEMBER 30, 1995 (unaudited)
- ---------------------------------------------------------------------------------------------------------------- Principal Amount/ Investment Amortized % of Total Shares Investment Date Cost Value Investments - ---------------------------------------------------------------------------------------------------------------- $2,604,000 LMC Operating Corp., 13.00% Senior Secured Subordinated Term Notes due 5/31/99(7) 06/10/94 2,473,894 2,473,894 17.447 sh. LMC Operating Corp., Warrants to Purchase Common Stock* 06/10/94 117,180 117,180 17.36 sh. LMC Credit Corp., Warrants to Purchase Common Stock* 06/10/94 1 1 - ---------------------------------------------------------------------------------------------------------------- 2,591,075 2,591,075 8.6 - ---------------------------------------------------------------------------------------------------------------- 42,404 sh. MTI Holdings II, Inc., 07/06/94 & Common Stock* 12/28/94 287,930 38,164 - ---------------------------------------------------------------------------------------------------------------- 287,930 38,164 0.1 - ---------------------------------------------------------------------------------------------------------------- $2,733,000 Canadian's Corp., 13.50% Subordinated 09/09/94 & Notes due 09/01/02(8) 12/29/94 2,627,368 2,627,368 $334,000 Canadian's Holdings, Inc., 12.00% Exchangeable Redeemable Debentures 09/09/94 & due 8/31/04(9)* 12/29/94 320,321 1 $147,778 Canadian's Corp., Promissory Notes due 01/31/97(10) 05/08/95 137,164 137,164 1,392,336 sh. Canadian's Holdngs, Inc., Common Stock* 09/22/95 39,782 2 $1,630,834 Canadian's Corp., Colateralized Loan Guarantee earning interest at 13.75% due 08/31/04 09/22/95 1,630,834 1,630,834 - ---------------------------------------------------------------------------------------------------------------- 4,755,469 4,395,369 14.6 - ---------------------------------------------------------------------------------------------------------------- $1,460,000 R.B.M. Precision Metal Products, Inc., 13.00% Senior Subordinated Secured Notes due 5/24/02(11) 05/24/95 1,351,167 1,351,167 497.639 sh. R.B.M. Precision Metal Products, Inc., Warrants to Purchase Common Stock* 05/24/95 82,955 82,955 - ---------------------------------------------------------------------------------------------------------------- 1,434,122 1,434,122 4.8 - ---------------------------------------------------------------------------------------------------------------- Total Investments in Managed Companies (78.3% of net assets) 21,168,718 24,002,339 79.8 - ----------------------------------------------------------------------------------------------------------------
The accompanying notes to financial statements are an integral part of this schedule. 4 5 FIDUCIARY CAPITAL PARTNERS, L.P. SCHEDULE OF INVESTMENTS (CONTINUED) SEPTEMBER 30, 1995 (unaudited)
Principal Amount/ Investment Amortized % of Total Shares Investment Date Cost Value Investments - ---------------------------------------------------------------------------------------------------------------- TEMPORARY INVESTMENTS: $2,700,000 Ford Motor Credit Corporation, 5.562% Notes due 10/03/95 09/26/95 2,699,178 2,699,178 $3,400,000 Household Finance Corp., 5.558% Notes due 10/10/95 09/26/95 3,395,350 3,395,350 - ---------------------------------------------------------------------------------------------------------------- Total Temporary Investments (19.9% of net assets) 6,094,528 6,094,528 20.2 - ---------------------------------------------------------------------------------------------------------------- Total Investments (98.2% of net assets) $27,263,246 $30,096,867 100.0% ================================================================================================================
(1) The Carr-Gottstein Foods Company common stock trades on the New York Stock Exchange. The Fund and Fiduciary Capital Pension Partners, L.P. ("FCPP") combined own a material percentage of the outstanding shares. To reflect the resultant lack of liquidity, the Fund valued the shares at a 5% discount to the public market price. (2) The KEMET Corporation common stock trades on the NASDAQ National Market System. (Note 7) (3) Pursuant to the terms of the Fund's agreement with Huntington Holdings, Inc., under certain circumstances the number of shares issuable upon exercise of the warrants held by the Fund will increase periodically. The most recent such increase occurred on August 1, 1995 when the Fund received the right to an additional 33.6 shares. (4) The notes will amortize in eight equal quarterly installments of $445,125 commencing on 6/30/99. The current payment of 7.0% of the interest may be deferred at the borrower's option. During any period in which the payment of interest is deferred, the interest rate on the notes increases from 20.00% to 21.00%. (5) The notes will amortize in eight equal quarterly installments of $760,898 commencing on 11/30/99. (6) The Protection One, Inc. common stock trades on the NASDAQ National Market System. (Note 7) (7) The notes will amortize as follows: $32,623 on 9/01/97, $33,683 on 12/01/97, $34,777 on 3/01/98, $35,908 on 6/01/98, $37,075 on 9/01/98, $38,280 on 12/01/98, $39,524 on 3/01/99 and $2,352,130 on 5/31/99. (8) The notes will amortize in twelve equal quarterly installments of $227,750 commencing on 12/01/99. The notes also bear contingent additional interest to be computed under a specified formula. (9) The debentures are convertible into 25,326 shares of Canadian's Holdings, Inc. common stock. The accrual of interest on the debentures was discontinued by the Fund effective April 1, 1995. (Note 6) (10) The notes bear interest equal to the prime rate, plus 5%. (11) The notes will amortize in three equal annual installments of $486,667 commencing on 5/24/00. * Non-income producing security. The accompanying notes to financial statements are an integral part of this schedule. 5 6 FIDUCIARY CAPITAL PARTNERS, L.P. BALANCE SHEETS SEPTEMBER 30, 1995 AND DECEMBER 31, 1994 (unaudited)
ASSETS: 1995 1994 ---- ---- Investments (Notes 6 and 7) Portfolio investments, at value: Managed companies (amortized cost - $21,168,718 and $18,948,391, respectively) $24,002,339 $22,853,071 Temporary investments, at amortized cost 6,094,528 4,876,188 ----------- ----------- Total investments 30,096,867 27,729,259 Cash and cash equivalents 239,238 171,999 Accrued interest receivable (Note 6) 840,908 627,846 Other assets, including receivables from sale of investments 4,592 659,011 ----------- ----------- Total assets $31,181,605 $29,188,115 =========== =========== LIABILITIES: Payable to affiliates (Notes 2, 3 and 4) $ 55,687 $ 52,354 Accounts payable and accrued liabilities 27,420 34,688 Prepaid interest income -- 60,146 Distributions payable to partners 462,712 694,068 ----------- ----------- Total liabilities 545,819 841,256 ----------- ----------- CONTINGENCIES (Note 5) NET ASSETS: Managing General Partner 42,855 19,965 Limited Partners (equivalent to $20.04 and $18.55, respectively, per limited partnership unit based on 1,526,949 units outstanding) 30,592,931 28,326,894 ----------- ----------- Net assets 30,635,786 28,346,859 ----------- ----------- Total liabilities and net assets $31,181,605 $29,188,115 =========== ===========
The accompanying notes to financial statements are an integral part of these financial statements. 6 7 FIDUCIARY CAPITAL PARTNERS, L.P. STATEMENTS OF OPERATIONS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994 (unaudited)
1995 1994 ---- ---- INVESTMENT INCOME: Income: Interest $ 747,069 $ 686,189 ----------- ----------- Total investment income 747,069 686,189 ----------- ----------- Expenses: Investment advisory fees (Note 2) 58,354 65,010 Fund administration fees (Note 3) 35,843 35,844 Independent General Partner fees and expenses (Note 4) 12,452 12,589 Administrative expenses (Note 3) 20,275 20,310 Professional fees 16,507 12,676 Amortization 2,790 2,790 Other expenses 7,945 15,235 ----------- ----------- Total expenses 154,166 164,454 ----------- ----------- NET INVESTMENT INCOME 592,903 521,735 ----------- ----------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS: Net realized gain (loss) on investments 640,078 (3,763,492) Net (decrease) increase in unrealized appreciation of investments (343,821) 4,511,790 ----------- ----------- Net gain on investments 296,257 748,298 ----------- ----------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 889,160 $ 1,270,033 =========== ===========
The accompanying notes to financial statements are an integral part of these financial statements. 7 8 FIDUCIARY CAPITAL PARTNERS, L.P. STATEMENTS OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994 (unaudited)
1995 1994 ---- ---- INVESTMENT INCOME: Income: Interest $ 2,180,244 $ 2,039,401 ----------- ----------- Total investment income 2,180,244 2,039,401 ----------- ----------- Expenses: Investment advisory fees (Note 2) 175,060 213,370 Fund administration fees (Note 3) 107,528 107,529 Independent General Partner fees and expenses (Note 4) 45,398 45,149 Administrative expenses (Note 3) 60,828 60,930 Professional fees 48,948 38,768 Amortization 8,370 8,370 Other expenses 25,846 43,284 ----------- ----------- Total expenses 471,978 517,400 ----------- ----------- NET INVESTMENT INCOME 1,708,266 1,522,001 ----------- ----------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS: Net realized gain (loss) on investments 3,039,855 (3,162,025) Net (decrease) increase in unrealized appreciation of investments (1,071,059) 4,441,190 ----------- ----------- Net gain on investments 1,968,796 1,279,165 ----------- ----------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 3,677,062 $ 2,801,166 =========== ===========
The accompanying notes to financial statements are an integral part of these financial statements. 8 9 FIDUCIARY CAPITAL PARTNERS, L.P. STATEMENTS OF CASH FLOWS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994 (unaudited)
1995 1994 ---- ---- CASH FLOWS FROM OPERATING ACTIVITIES: Net increase in net assets resulting from operations $ 3,677,062 $ 2,801,166 Adjustments to reconcile net increase in net assets resulting from operations to net cash provided by operating activities: Accreted discount on portfolio investments (66,686) (32,386) Amortization 8,370 8,370 Change in assets and liabilities: Accrued interest receivable (213,062) (208,380) Other assets 901 8,582 Payable to affiliates 4,479 24,517 Accounts payable and accrued liabilities (7,268) 2,055 Prepaid interest income (60,146) 42,914 Net realized (gain) loss on investments (3,039,855) 3,162,025 Net decrease (increase) in unrealized appreciation of investments 1,071,059 (4,441,190) ------------ ------------ Net cash provided by operating activities 1,374,854 1,367,673 ------------ ------------ CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of portfolio investments (3,198,810) (4,628,920) Proceeds from dispositions of portfolio investments 4,729,027 11,978,610 (Purchase) sale of temporary investments, net (1,218,340) (6,463,530) ------------ ------------ Net cash provided by investing activities 311,877 886,160 ------------ ------------ CASH FLOWS FROM FINANCING ACTIVITIES: Cash distributions paid to partners (1,619,492) (2,300,619) ------------ ------------ Net cash used in financing activities (1,619,492) (2,300,619) ------------ ------------ NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 67,239 (46,786) CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 171,999 317,279 ------------ ------------ CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 239,238 $ 270,493 ============ ============ NONCASH INVESTING AND FINANCING ACTIVITIES: Investments exchanged for other investments $ -- $ 287,625
The accompanying notes to financial statements are an integral part of these financial statements. 9 10 FIDUCIARY CAPITAL PARTNERS, L.P. STATEMENTS OF CHANGES IN NET ASSETS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 AND FOR THE YEAR ENDED DECEMBER 31, 1994 (unaudited)
1995 1994 ---- ---- Increase in net assets resulting from operations: Net investment income $ 1,708,266 $ 2,126,889 Net realized gain (loss) on investments 3,039,855 (2,532,109) Net (decrease) increase in unrealized appreciation of investments (1,071,059) 4,356,233 ------------ ------------ Net increase in net assets resulting from operations 3,677,062 3,951,013 Repurchase of limited partnership units -- (2,948,767) Distributions to partners from - Net investment income (1,388,135) (2,126,889) Realized gain on investments -- (867,798) ------------ ------------ Total increase (decrease) in net assets 2,288,927 (1,992,441) Net assets: Beginning of period 28,346,859 30,339,300 ------------ ------------ End of period (including undistributed net investment income of $320,131 and $0, respectively) $ 30,635,786 $ 28,346,859 ============ ============
The accompanying notes to financial statements are an integral part of these financial statements. 10 11 FIDUCIARY CAPITAL PARTNERS, L.P. SELECTED PER UNIT DATA AND RATIOS (unaudited)
For the Three Months For the Nine Months Ended September 30, Ended September 30, ---------------------- --------------------- 1995 1994 1995 1994 ---- ---- ---- ---- Per Unit Data: Investment income $ .48 $ .40 $ 1.41 $ 1.20 Expenses (.10) (.10) (.30) (.31) ------ ------ ------ ------ Net investment income .38 .30 1.11 .89 Net realized gain (loss) on investments .42 (2.21) 1.97 (1.86) Net (decrease) increase in unrealized appreciation of investments (.22) 2.65 (.69) 2.61 Distributions declared to partners (.30) (.45) (.90) (1.35) ------ ------ ------ ------ Net increase in net asset value .28 .29 1.49 .29 Net asset value: Beginning of period 19.76 17.98 18.55 17.98 ------ ------ ------ ------ End of period $20.04 $18.27 $20.04 $18.27 ====== ====== ====== ====== Ratios (annualized): Ratio of expenses to average net assets 2.03% 2.15% 2.13% 2.26% Ratio of net investment income to average net assets 7.80% 6.82% 7.72% 6.64% Number of limited partnership units at end of period 1,526,949 1,687,121 1,526,949 1,687,121
The accompanying notes to financial statements are an integral part of these selected per unit data and ratios. 11 12 FIDUCIARY CAPITAL PARTNERS, L.P. NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 1995 (unaudited) 1. GENERAL The accompanying unaudited interim financial statements include all adjustments (consisting solely of normal recurring adjustments) which are, in the opinion of the Managing General Partner, necessary to fairly present the financial position of the Fund as of September 30, 1995 and the results of its operations, changes in net assets and its cash flows for the periods then ended. These financial statements should be read in conjunction with the Significant Accounting Policies and other Notes to Financial Statements included in the Fund's annual audited financial statements for the year ended December 31, 1994. 2. INVESTMENT ADVISORY FEES As compensation for its services as investment adviser, FCM Fiduciary Capital Management Company ("FCM") receives a subordinated monthly fee at the annual rate of 1% of the Fund's available capital, as defined in the Partnership Agreement. Investment advisory fees of $175,060 were paid by the Fund for the nine months ended September 30, 1995. 3. FUND ADMINISTRATION FEES As compensation for its services as fund administrator, FCM receives a monthly fee at the annual rate of .45% of net proceeds available for investment, as defined in the Partnership Agreement. Fund administration fees of $107,528 were paid by the Fund for the nine months ended September 30, 1995. FCM is also reimbursed, subject to various limitations, for administrative expenses incurred in providing accounting and investor services to the Fund. The Fund reimbursed FCM for administrative expenses of $60,828 for the nine months ended September 30, 1995. 4. INDEPENDENT GENERAL PARTNER FEES AND EXPENSES As compensation for services rendered to the Fund, each of the Independent General Partners receives from the Fund and Fiduciary Capital Pension Partners, L.P., an affiliated fund, (collectively, the "Funds") an annual fee of $30,000, payable monthly in arrears, together with all out-of-pocket expenses. Each Fund's allocation of these fees and expenses is based on the relative number of outstanding Units. Fees and expenses paid by the Fund for the nine months ended September 30, 1995 totaled $45,398. 5. CONTINGENCIES FCM, the Managing General Partner of the Fund, had been named as a defendant in a class action lawsuit brought in March 1995 against PaineWebber Incorporated and a number of its affiliates. During May 1995, the Court entered an order certifying the class and dismissing the class action against FCM without prejudice. FCM believes that this litigation will be resolved without any material adverse effect on the Fund's financial condition. 12 13 FIDUCIARY CAPITAL PARTNERS, L.P. NOTES TO FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 1995 (unaudited) 6. NON-ACCRUAL STATUS OF INVESTMENTS In accordance with the Fund's accounting policies, the Fund stopped accruing interest on the Canadian's Holdings, Inc. Exchangeable Redeemable Debentures effective April 1, 1995. 7. SUBSEQUENT EVENTS On October 13, 1995, Carr-Gottstein Foods Co. ("Carr-Gottstein") announced an offer to purchase up to 7,500,000 shares (approximately 49%) of its outstanding common stock at a purchase price of $11.00 per share. The offer, which is subject to various contingencies, will expire on November 15, 1995. If more than 7,500,000 shares are tendered, the tendered shares will generally be purchased on a pro rata basis. The Fund has tendered all of its shares. However, it is likely that the number of shares actually purchased will be pro rated. On November 6, 1995, the Fund sold 27,396 shares of KEMET Corporation common stock. The Fund received $956,326 of sales proceeds, resulting in a realized gain of $946,617. During November 1995, the Fund sold all of its Protection One, Inc. common stock. The Fund received $146,589 of sales proceeds, resulting in a realized gain of $46,219. 13 14 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations LIQUIDITY AND CAPITAL RESOURCES As of September 30, 1995, the Fund held portfolio investments in twelve Managed Companies, with an aggregate cost of approximately $21.2 million. These portfolio investments, which were made from net offering proceeds and the reinvestment of proceeds from the sale of other portfolio investments, represent approximately 78.3% of the Fund's net assets. When acquired, these portfolio investments generally consisted of high-yield subordinated debt, linked with an equity participation or a comparable participation feature in middle market companies. These securities were typically issued in private placement transactions and were subject to certain restrictions on transfer or sale, thereby limiting their liquidity. A number of the portfolio companies have prepaid their subordinated debt that the Fund held. In addition, three of the portfolio companies have successfully completed initial public offerings ("IPOs") of their stock. The Fund continues to hold all of the equity components of its original investments, except for a substantial portion of its KEMET Corporation ("KEMET") stock and its Protection One, Inc. stock. As of September 30, 1995, the Fund's remaining assets were invested in short-term commercial paper. These funds are available for investment, for distribution to the partners or to fund the annual repurchase offer. The Fund sold a portion of its KEMET common stock during the nine months ended September 30, 1995. In addition, the Fund's subordinated debt investment in Protection One was prepaid during the nine months ended September 30, 1995. In the aggregate, the Fund received $4,083,879 of proceeds, including applicable prepayment premiums, from these transactions. On November 6, 1995, the Fund received $956,326 of sales proceeds from the sale of 27,396 shares of KEMET common stock. During November 1995, the Fund received $146,589 of sales proceeds from the sale of all of its Protection One, Inc. common stock. A portion of the proceeds representing gains from these transactions were used by the Fund to fund a portion of the cost of the follow-on investments in Canadian's Corp. ("Canadian's"), which were acquired on December 29, 1994, May 8, 1995 and September 22, 1995 (see following discussion). The remaining portion of the gains from these transactions have been reserved by the Managing General Partner to partially fund either the 1995 repurchase offer or any additional follow-on investments that the Fund may make in existing portfolio companies during 1995. On October 13, 1995, Carr-Gottstein announced an offer to purchase up to 7,500,000 shares (approximately 49%) of its outstanding common stock at a purchase price of $11.00 per share. The offer, which is subject to various contingencies, will expire on November 15, 1995. If more than 7,500,000 shares are tendered, the tendered shares will generally be purchased on a pro rata basis. The Fund has tendered all of its shares. However, it is likely that the number of shares actually purchased will be pro rated. The Fund made its initial investment in Canadian's during September 1994 as part of a financing used to settle Canadian's liabilities and allow the company to emerge from bankruptcy. A follow-on investment was made during December 1994 in order to finance the acquisition of store leases and certain fixed assets of The Ormonds Shops ("Ormonds"). The company expected to be able to fund certain costs relating to conversion of the Ormonds stores to the Canadian's format out of operating cash flow. Unfortunately, the retail market, and particularly women's specialty retailing, has suffered a prolonged and worsening 14 15 downturn which has continued throughout 1995. As a consequence, the company has not generated sufficient cash flow to fund its operations, let alone fund the capital expenditures relating to the Ormonds acquisition. During May 1995, the Fund made a follow-on investment in Canadian's at a cost of $133,000. The investment consisted of $147,778 of floating rate Promissory Notes, with warrants to acquire common stock. The Fund and certain of Canadian's equity investors provided a loan to the company in order to finance unanticipated cash shortfalls arising from operations which were below expectations. By August 1995, the company was facing a significant working capital shortage and requested the Funds and its other investors to make an additional investment in the company. The company's major equity owners and the Funds agreed to provide the requested funding. The Funds insisted that the new investment rank senior to previous loans made to the company by all parties other than the company's revolving line of credit lender. In order to accomplish this level of seniority, the new financing was structured as a collateralized guarantee that would support an overadvance under the company's revolving line of credit. This new investment of $1,630,834 carries an interest rate of 13.75% and is due on August 31, 2004. In consideration of the new financing, the Funds and the other parties which participated now own approximately 92.5% of Canadian's Holdings, Inc. ("Canadian's Holdings") common stock, which in turn owns 96.5% of the company's common stock. All holders of the company's warrants, including the Fund, surrendered their warrants in exchange for common stock of Canadian's Holdings. The Fund's ownership of the company has increased from approximately 9% to approximately 22% . The Canadian's Holdings Exchangeable Redeemable Debentures are secured by preferred stock issued by the company and the company has elected not to pay dividends on the preferred stock. Therefore, Canadian's Holdings is unable to pay interest on the debentures and is in default. The holders of these debentures, other than the Funds (which hold a portion of the debentures), were unable to participate in the latest financing. As a result, holders of the debentures were diluted to an ownership percentage of approximately 3.1%. This dilution reduced the Fund's interest in Canadian's Holdings that is held through the debentures to less than 1%. Officers of FCM are providing the company with managerial assistance in order to identify areas where the company can save money and reduce costs. Under consideration are steps such as closing unprofitable or marginally profitable stores and staff reductions. The company is also considering various proposals designed to raise additional equity capital. With a lower cost structure and possibly additional capital, the company is hopeful that its market strategy will be successful if the overall environment improves. One May 24, 1995, the Fund acquired a new portfolio investment in R.B.M. Precision Metal Products, Inc. ("RBM") at a cost of approximately $1.43 million. The investment consists of $1,460,000 of 13.00% Senior Subordinated Secured Notes due May 24, 2002, with warrants to acquire common stock. The Fund anticipates being able to reinvest all available funds, including the principal amount of any future prepayments received, in additional portfolio investments. The Partnership Agreement provides that the Fund's investment period will end on December 31, 1995. Although the Fund is permitted to make additional investments in existing portfolio companies after 1995, the Fund will no longer be permitted to acquire investments in new portfolio companies. Pursuant to the terms of the Fund's periodic unit repurchase policy that was adopted by the Fund's Limited Partners during 1993, the Fund will annually offer to purchase from its Limited Partners up to 7.5% of its outstanding Units for an amount equal to the current net asset value per Unit, net of a fee (not to exceed 2%) to be retained by the 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 15 16 repurchase up to an additional 2% of the outstanding Units. The 1995 repurchase offer was mailed to the Limited Partners on October 6, 1995. Limited Partners tendered 341,692 Units for repurchase. The Fund anticipates repurchasing approximately 35% of the tendered Units, or approximately 119,705 Units, at the Fund's net asset value per Unit as of November 14, 1995. The actual redemption of tendered Units will occur on November 21, 1995. Accrued interest receivable increased $213,062 from $627,846 at December 31, 1994 to $840,908 at September 30, 1995. This increase resulted primarily from a $216,034 increase in the deferred portion of the interest receivable from KB Alloys, Inc. ("KB Alloys") with respect to the Fund's investment in $3,561,003 principal amount of 20.00% Senior Subordinated Term Notes due June 30, 2001. KB Alloys is required to pay 13.00% interestcurrently, while the remaining 7.00% of the interest may be deferred at KB Alloys' option. During any period in which the payment of interest is deferred, the interest rate on the notes increases from 20.00% to 21.00%. To date, KB Alloys has elected to defer payment of the interest. At September 30, 1995, the cumulative amount of deferred interest totaled $678,668. The Fund's agreement with KB Alloys requires KB Alloys to pay all accumulated deferred interest in excess of $547,847 no later than August 28, 1998, and the amount of deferred interest cannot exceed $547,847 at any time thereafter. The amount of accrued interest receivable with respect to other portfolio investments decreased slightly during the nine months ended September 30, 1995. Other assets decreased $654,419, from $659,011 at December 31, 1994 to $4,592 at September 30, 1995. The balance at December 31, 1994 included a $645,148 receivable from the sale of KEMET common stock during December 1994. This amount was received by the Fund during January 1995. Prepaid interest income decreased from $60,146 at December 31, 1994 to zero at September 30, 1995. This prepaid interest income was related to the Canadian's 13.50% Subordinated Notes, which required interest to be paid quarterly, in advance, to the Fund. Effective June 1, 1995, the notes were amended to provide for the interest to be paid monthly, in advance, on the first day of each month. Distributions payable to partners decreased $231,356, from $694,068 at December 31, 1994 to $462,712 at September 30, 1995. This decrease corresponds to the percentage decrease in the quarterly distribution rate from $.45 per Unit to $.30 per Unit (as discussed in the following paragraphs). During the nine months ended September 30, 1995, the Fund paid cash distributions pertaining to the fourth quarter of 1994 and the first and second quarters of 1995, in the amounts of $694,068, $462,712 and $462,712, respectively. These quarterly distributions were equal to $.45, $.30 and $.30 per Unit, respectively, and represented annualized rates equal to 9.0%, 6.0% and 6.0%, respectively, of contributed capital. As discussed in previous reports, the quarterly distributions for 1995 are being paid at a reduced rate. The distribution for the third quarter of 1995 will be paid on November 14, 1995 in an amount equal to $.30 per Unit, or an annualized rate equal to 6.0% of contributed capital. This distribution consists entirely of net investment income earned during the three months ended September 30, 1995. It is expected that the distribution for the fourth quarter of 1995 will also be made at the same 6.0% rate. In the past, the Fund realized gains from its investments that provided additional sources of cash for distributions. Although there can be no assurances, the Fund may realize similar gains during the fourth quarter of 1995 that could in turn result in a higher distribution rate for the quarter. Gains can also be utilized to fund the annual repurchase offer or to fund any follow-on investments that the Fund may make in existing portfolio companies. The Fund's investment period will end on December 31, 1995. Although the Fund is permitted to make additional investments in existing portfolio companies after 1995, the Fund 16 17 will no longer be permitted to acquire investments in new portfolio companies. This will impact the amount of the Fund's quarterly distributions for 1996 and subsequent years because all proceeds from dispositions or maturities of investments after December 31, 1995 will be distributed to investors, except to the extent the cash is needed to fund the annual repurchase offer or to fund any follow-on investments that the Fund may make in existing portfolio companies. FCM, the Managing General Partner of the Fund, had been named as a defendant in a class action lawsuit brought in March 1995 against PaineWebber Incorporated and a number of its affiliates. During May 1995, the Court entered an order certifying the class and dismissing the class action against FCM without prejudice. FCM believes that this litigation will be resolved without any material adverse effect on the Fund's financial condition. RESULTS OF OPERATIONS Investment Income and Expenses The Fund's net investment income was $592,903 for the three months ended September 30, 1995 as compared to net investment income of $521,735 for the corresponding period of the prior year. Net investment income per limited partnership unit increased from $.30 to $.38 and the ratio of net investment income to average net assets increased from 6.82% to 7.80% for the three months ended September 30, 1995 as compared to the corresponding period of the prior year. The Fund's net investment income was $1,708,266 for the nine months ended September 30, 1995 as compared to net investment income of $1,522,001 for the corresponding period of the prior year. Net investment income per limited partnership unit increased from $.89 to $1.11 and the ratio of net investment income to average net assets increased from 6.64% to 7.72% for the nine months ended September 30, 1995 as compared to the corresponding period of the prior year. Net investment income for both the three and nine month periods ended September 30, 1995 increased as a result of slight increases in investment income and slight decreases in total expenses. Investment income increased $60,880 and $140,843, or 8.9% and 6.9%, for the three and nine month periods ended September 30, 1995, respectively, as compared to the corresponding periods of the prior year. These increases were primarily the result of higher interest rates on both the Fund's temporary investments and the Fund's higher-yielding subordinated debt investments. The positive effect of the higher interest rates was partially offset by a decrease in the amount of the Fund's average net assets. The Fund had average net assets of approximately $29.5 million during the nine months ended September 30, 1995 as compared to approximately $30.5 million during the corresponding period of the prior year. This 3.3% decrease in average net assets occurred primarily as a result of the Fund's repurchase of 9.49% of its Units during the fourth quarter of 1994. The negative effect of the repurchase of Units was partially offset by gains achieved with respect to the Fund's investments (primarily the KEMET common stock). Total expenses decreased $10,288 and $45,422, or 6.3% and 8.8%, for the three and nine month periods ended September 30, 1995, respectively, as compared to thecorresponding periods of the prior year. These decreases resulted primarily from decreases in investment advisory fees and other expenses. The investment advisory fees decreased as a result of the repurchase of Units by the Fund during the fourth quarter of 1994 and the realization during July 1994 of the loss on the Fund's Mobile Technology, Inc. 17 18 ("MTI") investment. Both the repurchase of Units and the realization of the MTI loss decreased the amount of the Fund's available capital (as defined in the Partnership Agreement), which is the base with respect to which the investment advisory fees are calculated. Other expenses decreased primarily as a result of a decrease in consulting fees. These decreases were partially offset by an increase in professional fees. Net Realized Gain on Investments On February 28, 1995, the Fund sold 10,547 shares of KEMET common stock. The Fund received $326,324 of sales proceeds, resulting in a realized gain of $318,852. During April and May 1995, the Fund sold an additional 44,920 shares of KEMET common stock. The Fund received $1,973,532 of sales proceeds, resulting in realized gains of $1,941,692. On May 17, 1995, Protection One prepaid its $1,083,000 of 12.00% Senior Subordinated Notes that were carried by the Fund at an amortized cost of $997,917. The Fund received $1,137,150 of proceeds, including a prepayment premium, resulting in a realized gain of $139,233. On July 25, 1995, the Fund sold 9,587 shares of KEMET common stock. The Fund received $646,873 of sales proceeds, resulting in a realized gain of $640,078. Net Unrealized Appreciation of Investments FCM values the Fund's portfolio investments on a weekly basis utilizing a variety of methods. For securities that are publicly traded and for which market quotations are available, valuations are set by the closing sales, or an average of the closing bid and ask prices, as of the valuation date. Fair value for securities that are not traded in any liquid public markets or that are privately held are determined pursuant to valuation policies and procedures that have been approved by the Independent General Partners and subject to their supervision. There is a range of values that are reasonable for such investments at any particular time. Each such investment is valued initially based upon its original cost to the Fund ("cost method"). The cost method is used until significant developments affecting the portfolio company provide a basis for use of an appraisal valuation. Appraisal valuations are based upon such factors as the portfolio company's earnings, cash flow and net worth, the market prices for similar securities of comparable companies and an assessment of the portfolio company's future financial prospects. In a case of unsuccessful operations, the appraisal may be based upon liquidation value. Appraisal valuations are necessarily subjective. The Fund also may use, when available, third-party transactions in a portfolio company's securities as the basis of valuation ("private market method"). The private market method is used only with respect to completed transactions or firm offers made by sophisticated, independent investors. As of December 31, 1994, the Fund had recorded $4,397,511 of unrealized appreciation and $(492,831) of unrealized depreciation of investments. Therefore, as of December 31, 1994, the Fund had recorded a total net unrealized appreciation of investments of $3,904,680. The net increase in unrealized appreciation of investments during the three and nine month periods ended September 30, 1995 and the cumulative net unrealized appreciation of investments as of September 30, 1995, consisted of the following components: 18 19
Unrealized Appreciation (Depreciation) Recorded ----------------------------------------------- During the Three During the Nine Months Ended Months Ended As of Portfolio Company September 30, 1995 September 30, 1995 September 30, 1995 - ------------------------------------ ------------------ ------------------ ------------------ Unrealized net appreciation recorded during prior periods with respect to investments disposed of during the period $(497,720) $(1,769,303) $ - Carr-Gottstein (63,745) (84,993) 125,258 Neodata - (325,199) (337,943) KEMET 432,342 1,116,309 1,868,863 Huntington 76,054 130,082 707,044 Amity - 87,610 872,172 Elgin / ENI 17,799 53,397 143,580 Protection One 51,549 81,138 64,513 MTI - - (249,766) Canadian's Holdings (360,100) (360,100) (360,100) --------- ----------- ---------- $(343,821) $(1,071,059) $2,833,621 ========= =========== ==========
Carr-Gottstein Foods Company completed an IPO of its common stock on July 1, 1993. The stock, which trades on the New York Stock Exchange, closed at $6.00 on September 30, 1995. This price compares to closing prices of $6.50 on December 31, 1994 and $6.375 on June 30, 1995. Based on the $6.00 closing trading price of the common stock, the Fund's 178,934 shares of common stock would have a market value of $1,073,604. However, the Fund's valuation guidelines require the stock to be valued at a 5% discount to the public market price to reflect the potential market impact that could result from the sale of the material number of shares owned by the Funds. The Neodata Corporation ("Neodata") stock was written down at March 31, 1995. The Partnership has consistently valued this investment based upon a multiple of Neodata's cash flow. Because Neodata's long-term debt presently provides for the accrual, rather than current payment, of interest, the Company's debt has grown to a level which now exceeds the Partnership's valuation. KEMET completed an IPO of its common stock on October 21, 1992. KEMET declared a two-for-one stock split effective September 20, 1995. The stock, which trades on the NASDAQ National Market System, closed at $34.125 (an average of the closing bid and ask prices) on September 30, 1995. This price is up from the closing prices (as restated for the two-for-one stock split) of $14.6875 on December 31, 1994 and $26.3125 on June 30, 1995. Based on the $34.125 closing trading price of the common stock, the 55,340 shares of common stock that the Fund held at September 30, 1995 had a market value of $1,888,477. During June 1995, the Fund received an unsolicited offer from a third party to purchase the Huntington Holdings, Inc. ("Huntington") warrants which are held by the Fund. Although the Fund decided not to sell the warrants, the warrants were written up in value at June 30, 1995 based upon the offer price. During August 1995, the Fund received the right to an additional 33.6 shares of Huntington stock, in accordance with the terms of the Fund's warrant agreement with Huntington. The warrants were written up in value at September 30, 1995 in consideration of the receipt of these additional warrants. The Amity warrants and common stock were written up in value at March 31, 1995 to bring Amity's valuation more in line with the valuation of other comparable companies in its industry. The ENI Holding Corp. preferred stock is being written up in value quarterly to reflect the amount of the cumulative 10% preferential dividend that has accrued with respect to the preferred stock. 19 20 Protection One, Inc. ("Protection One") completed an IPO of its common stock on September 29, 1994. The stock, which trades on the NASDAQ National Market System, closed at $9.0625 (an average of the closing bid and ask prices) on September 30, 1995. This price compares to closing prices of $4.875 on December 31, 1994 and $6.0625 on June 30, 1995. Based on the $9.0625 closing trading price of the common stock, the Fund's 18,194 shares of common stock had a market value of $164,883 at September 30, 1995. The current status of Canadian's operations and the Fund's investments in Canadian's and Canadian's Holdings are discussed above. As a result of the uncertainties currently surrounding the retail industry in general, and Canadian's in particular, the Fund wrote the Canadian's Holdings debentures and common stock down in value to a negligible amount during the third quarter of 1995. The debentures, which in essence represent ownership of Canadian's preferred stock, are in default and were significantly diluted in connection with the most recent financing. FCM continually monitors both the Fund's portfolio companies and the markets, and continually evaluates the decision to hold or sell its traded securities. 20 21 Part II. OTHER INFORMATION Item 1. Legal Proceedings As previously reported, FCM, the Managing General Partner of the Fund, had been named as a defendant in a class action lawsuit against PaineWebber Incorporated ("PaineWebber") and a number of its affiliates relating to PaineWebber's direct investment offerings, including the offering of the Units. Plaintiffs in the lawsuit allege, among other things, that the defendants violated federal securities laws and committed common law fraud in the marketing of direct investments. On May 30, 1995, the United States District Court for the Southern District of New York entered an order certifying the class and dismissing the class action against FCM without prejudice. PaineWebber and Mezzanine Capital Corporation, a minority general partner of FCM and an affiliate of PaineWebber, remain as defendants. The Fund was not named as a defendant in the lawsuit; however, pursuant to certain contractual arrangements between FCM and PaineWebber in connection with the offering of the Units, the Fund may be required to indemnify PaineWebber and its affiliates for their costs and liability in connection with any class action claims relating to the Fund. FCM believes that the Fund's exposure in respect of the indemnity will not have any material adverse effect on the Fund's financial condition. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits and Reports to be filed:
Exhibit No. Description ----------- ----------- 11.1 Statement of Computation of Net Investment Income Per Limited Partnership Unit. 19.1 Reports Furnished to Securities Holders. 27.1 Financial Data Schedule.
(b) The Registrant did not file any reports on Form 8-K during the third quarter of the fiscal year ending December 31, 1995. 21 22 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Fiduciary Capital Partners, L.P. (Registrant) By: FCM Fiduciary Capital Management Company Managing General Partner Date: November 14, 1995 By: /s/ Donald R. Jackson --------------------- Donald R. Jackson Chief Financial Officer 22 23 EXHIBIT INDEX
Exhibit No. Description Page - ----------- ----------- ---- 11.1 Statement of Computation of Net Investment Income Per Limited Partnership Unit. 19.1 Reports Furnished to Securities Holders. 27.1 Financial Data Schedule.
E-1 EX-11.1 2 COMPUTATION OF NET INVESTMENT INCOME 1 EXHIBIT 11.1 FIDUCIARY CAPITAL PARTNERS, L.P. STATEMENT OF COMPUTATION OF NET INVESTMENT INCOME PER LIMITED PARTNERSHIP UNIT
For the Three Months For the Nine Months Ended September 30, Ended September 30, -------------------- ------------------- 1995 1994 1995 1994 ---- ---- ---- ---- Net Investment Income $ 592,903 $ 521,735 $1,708,266 $1,522,001 Percentage Allocable to Limited Partners 99% 99% 99% 99% ---------- ---------- ---------- ---------- Net Investment Income Allocable to Limited Partners $ 586,974 $ 516,518 $1,691,183 $1,506,781 ========== ========== ========== ========== Weighted Average Number of Limited Partnership Units Outstanding 1,526,949 1,687,121 1,526,949 1,687,121 ========== ========== ========== ========== Net Investment Income Per Limited Partnership Unit $ .38 $ .30 $ 1.11 $ .89 ========== ========== ========== ==========
EX-19.1 3 REPORT 1 FIDUCIARY CAPITAL PARTNERS, L.P. - -------------------------------------------------------------------------------- ----------------------------- SECOND QUARTER REPORT 1995 2 FIDUCIARY CAPITAL PARTNERS, L.P. - -------------------------------------------------------------------------------- MESSAGE TO INVESTORS Dear Investor: The Fund's net asset value per Unit was $19.76 at June 30, 1995. This net asset value is up from the net asset values of $18.55 at December 31, 1994 and $18.84 at March 31, 1995. These increases resulted primarily from gains attributable to the Fund's investments in KEMET Corporation ("KEMET") and Protection One, Inc. ("Protection One"). At June 30, 1995, the Fund held portfolio investments in twelve companies. These portfolio investments represented approximately 75.1% of the Fund's net assets. The Fund's remaining assets were invested in high-quality, short-term commercial paper. These funds are available for investment, for distribution to the partners or to fund the annual repurchase offer. INVESTMENT UPDATE During May 1995, Protection One prepaid its $1,083,000 of 12.00% Senior Subordinated Notes that were held by the Fund. The Fund received $1,137,150 of proceeds, including a prepayment premium. The Fund continues to hold 18,194 shares of Protection One common stock, which were received during July 1995 when the Fund exercised the Protection One warrants it previously held. The Fund continues to periodically sell shares of KEMET common stock. During April and May 1995, the Fund sold 44,920 shares at an average net sales price of approximately $43.93. An additional 9,587 shares were sold during July 1995 at an average net sales price of approximately $67.47. The Fund has 27,670 shares of KEMET stock remaining as of August 22, 1995. During May 1995, the Fund acquired a new portfolio investment in R.B.M. Precision Metal Products, Inc. ("RBM") at a cost of approximately $1.43 million. RBM, headquartered in Colorado Springs, Colorado, is a manufacturer of precision sheet metal enclosures, chassis and assemblies for business machines. Its principal customer is Hewlett Packard. This new investment consists of $1,460,000 of 13.00% Senior Subordinated ONE 3 FIDUCIARY CAPITAL PARTNERS, L.P. - -------------------------------------------------------------------------------- Secured Notes due May 24, 2002, with warrants to acquire common stock. During May 1995, the Fund made a follow-on investment in Canadian's Corp. The investment consists of $147,778 of floating rate Promissory Notes, with warrants to acquire common stock, which together were purchased at a discounted price of $133,000. The Fund and certain of Canadian's equity investors provided a loan to the company in order to finance unanticipated cash shortfalls arising from operations which were below expectations. CASH DISTRIBUTIONS The Fund made its cash distribution for the second quarter of 1995 on August 14, 1995. This distribution - amounting to $.30 per Unit - was equal to an annualized rate of 6% of contributed capital. This distribution consisted entirely of net investment income earned during the second quarter. We expect the remaining 1995 distributions to be made at the same 6% rate. The Fund's investment period will end on December 31, 1995. Although the Fund is permitted to make additional investments in existing portfolio companies after 1995, the Fund will no longer be permitted to acquire investments in new portfolio companies. This will impact the amount of the Fund's quarterly distributions for 1996 and subsequent years because all proceeds from dispositions or maturities of investments after December 31, 1995 will be distributed to investors, except to the extent the cash is needed to fund the annual repurchase offer or to fund any follow-on investments that the Fund may make in existing portfolio companies. PERIODIC UNIT REPURCHASE POLICY Pursuant to the terms of the periodic unit repurchase policy that was adopted by the Fund's investors during 1993, the Fund annually offers to repurchase from investors, up to 7.5% of its outstanding Units for an amount equal to the current net asset value per Unit, net of a fee (not to exceed 2%) to be retained by the Fund to offset expenses incurred in con- TWO 4 FIDUCIARY CAPITAL PARTNERS, L.P. - -------------------------------------------------------------------------------- nection with the repurchase offer. If the number of tendered Units in any year exceeds 7.5% of the outstanding Units, the Fund's General Partners may vote to repurchase up to an additional 2% of the outstanding Units. The next opportunity to have the Fund repurchase your Units will occur during the fourth quarter of 1995. The repurchase offer will be mailed to investors on October 6, 1995, and the deadline for tendering Units for repurchase will be October 31, 1995. The repurchase price will be based on the net asset value per Unit on November 14, 1995 and payment for tendered Units will be made on November 21, 1995. * * * * * * * * We are currently reviewing several investment opportunities for the Fund. We are confident that we will be able to identify sufficient attractive investment opportunities to fully invest the remaining funds that are available for reinvestment prior to December 31, 1995. If you have any questions regarding your investment in the Fund, please call us at 800-866-7607. Sincerely, /s/ Paul Bagley - --------------- Paul Bagley, Chairman FCM Fiduciary Capital Management Company /s/ W. Duke DeGrassi - -------------------- W. Duke DeGrassi, President FCM Fiduciary Capital Management Company August 22, 1995 THREE 5 FIDUCIARY CAPITAL PARTNERS, L.P. - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS
JUNE 30, 1995 (UNAUDITED) - ---------------------------------------------------------------------------------------------------------------- PRINCIPAL AMOUNT/ INVESTMENT AMORTIZED % OF TOTAL SHARES INVESTMENT DATE COST VALUE INVESTMENTS MANAGED COMPANIES: 178,934 sh. Carr-Gottstein Foods Co., Class B Common Stock(1)* 10/23/90 $ 894,666 $1,083,669 - ---------------------------------------------------------------------------------------------------------------- 894,666 1,083,669 3.6% - ---------------------------------------------------------------------------------------------------------------- 182,453.9 sh. Neodata Corporation, 10.00% Class A Convertible 12/27/90 & Preferred Stock - Series 2* 09/30/92 337,945 2 10,607.78 sh. Neodata Corporation, 12/27/90 & Common Stock* 09/30/92 1 1 - ---------------------------------------------------------------------------------------------------------------- 337,946 3 0.0 - ---------------------------------------------------------------------------------------------------------------- 37,257 sh. KEMET Corporation, Common Stock(2)* 07/11/91 26,409 1,960,650 - ---------------------------------------------------------------------------------------------------------------- 26,409 1,960,650 6.6 - ---------------------------------------------------------------------------------------------------------------- 324.6 sh. Huntington Holdings, Inc., Warrants to Purchase Common Stock(3)* 01/31/92 103,811 734,801 - ---------------------------------------------------------------------------------------------------------------- 103,811 734,801 2.5 - ---------------------------------------------------------------------------------------------------------------- 75,856 sh. Amity Leather Products Co., Warrants to Purchase Class B Common Stock* 07/30/92 104,091 918,506 27,392 sh. Amity Leather Products Co., Class A Common Stock* 07/30/92 273,920 331,677 - ---------------------------------------------------------------------------------------------------------------- 378,011 1,250,183 4.2 - ---------------------------------------------------------------------------------------------------------------- $3,561,003 KB Alloys, Inc., 20.00% Senior Subordinated Term Notes due 6/30/01(4) 05/28/93 3,501,120 3,501,120 - ---------------------------------------------------------------------------------------------------------------- 3,501,120 3,501,120 11.7 - ---------------------------------------------------------------------------------------------------------------- $6,087,185 Elgin National Industries, Inc., 13.00% Senior Subordinated Notes due 9/01/01(5) 09/24/93 5,945,613 5,945,613 7,119.71 sh. ENI Holding Corp., 10.00% Preferred Stock due 12/31/01 09/24/93 711,971 837,752 489.27 sh. ENI Holding Corp., Class B Common Stock* 09/24/93 48,927 48,927 510.83 sh. ENI Holding Corp., Warrants to Purchase Class B Common Stock* 09/24/93 51,078 51,078 - ---------------------------------------------------------------------------------------------------------------- 6,757,589 6,883,370 23.1 - ----------------------------------------------------------------------------------------------------------------
The accompanying notes to financial statements are an integral part of this schedule. FOUR 6 FIDUCIARY CAPITAL PARTNERS, L.P. - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS (CONTINUED)
JUNE 30, 1995 (UNAUDITED) - ---------------------------------------------------------------------------------------------------------------- PRINCIPAL AMOUNT/ INVESTMENT AMORTIZED % OF TOTAL SHARES INVESTMENT DATE COST VALUE INVESTMENTS - ---------------------------------------------------------------------------------------------------------------- 18,194.4 sh. Protection One, Inc., Warrants to Purchase Common Stock(6)* 11/03/93 97,340 110,304 - ---------------------------------------------------------------------------------------------------------------- 97,340 110,304 0.4 - ---------------------------------------------------------------------------------------------------------------- $2,604,000 LMCOperating Corp., 13.00% Senior Secured Subordinated Term Notes due 5/31/99(7) 06/10/94 2,465,824 2,465,824 17.447 sh. LMCOperating Corp., Warrants to Purchase Common Stock* 06/10/94 117,180 117,180 17.36 sh. LMCCredit Corp., Warrants to Purchase Common Stock* 06/10/94 1 1 - ---------------------------------------------------------------------------------------------------------------- 2,583,005 2,583,005 8.7 - ---------------------------------------------------------------------------------------------------------------- $2,733,000 Canadian's Corp., 13.50% Subordinated 09/09/94 & Notes due 9/01/02(8) 12/29/94 2,623,897 2,623,897 $334,000 Canadian's Holdings, Inc., 12.00% Exchangeable Redeemable Debentures 09/09/94 & due 8/31/04(9) 12/29/84 320,321 320,321 $147,778 Canadian's Corp., Promissory Notes due 6/30/96(10) 05/08/95 134,035 134,035 266,201 sh. Canadian's Corp., Warrants to Purchase 09/09/94 & Common Stock* 12/29/94 39,043 39,043 30,653 sh. Canadina's Corp., Warrants to Purchase Common Stock(11)* 05/08/95 739 739 - ---------------------------------------------------------------------------------------------------------------- 3,118,035 3,118,035 10.4 - ---------------------------------------------------------------------------------------------------------------- $1,460,000 R.B.M. Precision Metal Products, Inc., 13.00% Senior Subordinated Secured Notes due 5/24/02(12) 05/24/95 1,348,794 1,348,794 497.639 sh. R.B.M. Precision Metal Products, Inc., Warrants to Purchase Common Stock* 05/24/95 82,955 82,955 - ---------------------------------------------------------------------------------------------------------------- 1,431,749 1,431,749 4.8 - ----------------------------------------------------------------------------------------------------------------
The accompanying notes to financial statements are an integral part of this schedule. FIVE 7 FIDUCIARY CAPITAL PARTNERS, L.P. - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS (CONTINUED)
JUNE 30, 1995 (UNAUDITED) - ---------------------------------------------------------------------------------------------------------------- PRINCIPAL AMOUNT/ INVESTMENT AMORTIZED % OF TOTAL SHARES INVESTMENT DATE COST VALUE INVESTMENTS - ---------------------------------------------------------------------------------------------------------------- 42,404 sh. MTI Holdings II, Inc., 07/06/94 & Common Stock* 12/28/94 287,930 38,164 - ---------------------------------------------------------------------------------------------------------------- 287,930 38,164 0.1 - ---------------------------------------------------------------------------------------------------------------- Total Investments in Managed Companies (75.1% of net assets) 19,517,611 22,695,053 76.1 - ---------------------------------------------------------------------------------------------------------------- TEMPORARY INVESTMENTS: $2,605,0000 Ford Motor Credit Corporation, 5.761% Notes due 7/13/95 06/29/95 2,600,077 2,600,077 $4,545,000 Philip Morris Companies, Inc., 5.772% Notes due 7/13/95 06/29/95 4,536,395 4,536,395 - ---------------------------------------------------------------------------------------------------------------- Total Temporary Investments (23.6% of net assets) 7,136,472 7,136,472 23.9 - ---------------------------------------------------------------------------------------------------------------- Total Investments (98.7% of net assets) $26,654,083 $29,831,525 100.0% - ----------------------------------------------------------------------------------------------------------------
1) The Carr-Gottstein Foods Company common stock trades on the New York Stock Exchange. The Fund and Fiduciary Capital Pension Partners, L.P. ("FCPP") combined own a material percentage of the outstanding shares. To reflect the resultant lack of liquidity, the Fund valued the shares at a 5% discount to the public market price. (2) The KEMET Corporation common stock trades on the NASDAQ National Market System. (Note 6) (3) Pursuant to the terms of the Fund's agreement with Huntington Holdings, Inc., under certain circumstances the number of shares issuable upon exercise of the warrants held by the Fund will increase periodically. The first such increase occurred on February 1, 1993 when the Fund received the right to an additional 35.9 shares. (4) The notes will amortize in eight equal quarterly installments of $445,125 commencing on 6/30/99. The current payment of 7.0% of the interest may be deferred at the borrower's option. During any period in which the payment of interest is deferred, the interest rate on the notes increases from 20.00% to 21.00%. (5) The notes will amortize in eight equal quarterly installments of $760,898 commencing on 11/30/99. (6) The Protection One, Inc. common stock trades on the NASDAQ National Market System. (7) The notes will amortize as follows: $32,623 on 9/01/97, $33,683 on 12/01/97, $34,777 on 3/01/98, $35,908 on 6/01/98, $37,075 on 9/01/98, $38,280 on 12/01/98, $39,524 on 3/01/99 and $2,352,130 on 5/31/99. (8) The notes will amortize in twelve equal quarterly installments of $227,750 commencing on 12/01/99. The notes also bear contingent additional interest to be computed under a specified formula. (9) The debentures are convertible into 136,885 shares of Canadian's Corp. common stock. The debentures also bear contingent additional interest to be computed under a specified formula. (10) The notes bear interest equal to the prime rate, plus 5%. (11) The warrants have an exercise price of $2.44 per share. (12) The notes will amortize in three equal annual installments of $486,667 commencing on 5/24/00. * Non-income producing security. The accompanying notes to financial statements are an integral part of this schedule. SIX 8 FIDUCIARY CAPITAL PARTNERS, L.P. - -------------------------------------------------------------------------------- BALANCE SHEETS JUNE 30, 1995 AND DECEMBER 31, 1994 (UNAUDITED)
- -------------------------------------------------------------------------------- 1995 1994 - -------------------------------------------------------------------------------- ASSETS: Investments (Note 6) Portfolio investments, at value: Managed companies (amortized cost - $19,517,611 and $18,948,391, respectively) $22,695,053 $22,853,071 Temporary investments, at amortized cost 7,136,472 4,876,188 - -------------------------------------------------------------------------------- Total investments 29,831,525 27,729,259 Cash and cash equivalents 129,654 171,999 Accrued interest receivable 778,769 627,846 Other assets, including receivables from sale of investments 6,956 659,011 - -------------------------------------------------------------------------------- Total assets $30,746,904 $29,188,115 - -------------------------------------------------------------------------------- LIABILITIES: Payable to affiliates (Notes 2, 3 and 4) $ 49,546 $ 52,354 Accounts payable and accrued liabilities 25,309 34,688 Prepaid interest income -- 60,146 Distributions payable to partners 462,712 694,068 - -------------------------------------------------------------------------------- Total liabilities 537,567 841,256 - -------------------------------------------------------------------------------- NET ASSETS: Managing General Partner 38,590 19,965 Limited Partners (equivalent to $19.76 and $18.55, respectively, per limited partnership unit based on 1,526,949 units outstanding) 30,170,747 28,326,894 - -------------------------------------------------------------------------------- Net assets 30,209,337 28,346,859 Total liabilities and net assets $30,746,904 $29,188,115 - --------------------------------------------------------------------------------
The accompanying notes to financial statements are an integral part of these financial statements. SEVEN 9 FIDUCIARY CAPITAL PARTNERS, L.P. - -------------------------------------------------------------------------------- STATEMENTS OF OPERATIONS (UNAUDITED)
FOR THE THREE MONTHS FOR THE SIX MONTHS ENDED JUNE 30, ENDED JUNE 30, - --------------------------------------------------------------------------------------------------- 1995 1994 1995 1994 - --------------------------------------------------------------------------------------------------- INVESTMENT INCOME: Income: Interest $ 728,420 $ 668,021 $ 1,433,175 $ 1,353,212 - --------------------------------------------------------------------------------------------------- Total investment income 728,420 668,021 1,433,175 1,353,212 Expenses: Investment advisory fees (Note 2) 58,353 74,444 116,706 148,360 Fund administration fees (Note 3) 35,842 35,842 71,685 71,685 Independent General Partner fees and expenses (Note 4) 14,084 14,563 32,946 32,560 Administrative expenses (Note 3) 20,277 20,310 40,553 40,620 Professional fees 15,153 12,775 32,441 26,092 Amortization 2,790 2,790 5,580 5,580 Other expenses 9,377 14,012 17,901 28,049 - --------------------------------------------------------------------------------------------------- Total expenses 155,876 174,736 317,812 352,946 - --------------------------------------------------------------------------------------------------- NET INVESTMENT INCOME 572,544 493,285 1,115,363 1,000,266 - --------------------------------------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS: Net realized gain on investments 2,080,925 -- 2,399,777 601,467 Net decrease in unrealized appreciation of investments (772,676) (59,811) (727,238) (70,600) - --------------------------------------------------------------------------------------------------- Net gain (loss) on investments 1,308,249 (59,811) 1,672,539 530,867 - --------------------------------------------------------------------------------------------------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 1,880,793 $ 433,474 $ 2,787,902 $ 1,531,133 - ---------------------------------------------------------------------------------------------------
The accompanying notes to financial statements are an integral part of these financial statements. EIGHT 10 FIDUCIARY CAPITAL PARTNERS, L.P. - -------------------------------------------------------------------------------- STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND 1994 (UNAUDITED)
1995 1994 - --------------------------------------------------------------------------------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net increase in net assets resulting from operations $ 2,787,902 $ 1,531,133 Adjustments to reconcile net increase in net assets resulting from operations to net cash provided by operating activities: Accreted discount on portfolio investments (42,649) (18,817) Amortization 5,580 5,580 Change in assets and liabilities: Accrued interest receivable (150,923) (92,698) Other assets 1,327 847 Payable to affiliates (1,662) 22,742 Accounts payable and accrued liabilities (9,379) 12,127 Prepaid interest income (60,146) -- Net realized gain on investments (2,399,777) (601,467) Net decrease in unrealized appreciation of investments 727,238 70,600 - --------------------------------------------------------------------------------------- Net cash provided by operating activities 857,511 930,047 - --------------------------------------------------------------------------------------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of portfolio investments (1,564,946) (2,551,921) Proceeds from dispositions of portfolio investments 4,082,154 6,390,603 (Purchase) sale of temporary investments, net (2,260,284) (2,627,649) - --------------------------------------------------------------------------------------- Net cash provided by investing activities 256,924 1,211,033 - --------------------------------------------------------------------------------------- CASH FLOWS FROM FINANCING ACTIVITIES: Cash distributions paid to partners (1,156,780) (1,533,746) - --------------------------------------------------------------------------------------- Net cash used in financing activities (1,156,780) (1,533,746) - --------------------------------------------------------------------------------------- NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (42,345) 607,334 CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 171,999 317,279 - --------------------------------------------------------------------------------------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 129,654 $ 924,613 - ---------------------------------------------------------------------------------------
The accompanying notes to financial statements are an integral part of these financial statements. NINE 11 FIDUCIARY CAPITAL PARTNERS, L.P. - -------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND FOR THE YEAR ENDED DECEMBER 31, 1994 (UNAUDITED)
- ----------------------------------------------------------------------------------------------- 1995 1994 - ----------------------------------------------------------------------------------------------- Increase in net assets resulting from operations: Net investment income $ 1,115,363 $ 2,126,889 Net realized gain (loss) on investments 2,399,777 (2,532,109) Net (decrease) increase in unrealized appreciation of investments (727,238) 4,356,233 - ----------------------------------------------------------------------------------------------- Net increase in net assets resulting from operations 2,787,902 3,951,013 Repurchase of limited partnership units -- (2,948,767) Distributions to partners from - Net investment income (925,424) (2,126,889) Realized gain on investments -- (867,798) - ----------------------------------------------------------------------------------------------- Total increase (decrease) in net assets 1,862,478 (1,992,441) Net assets: Beginning of period 28,346,859 30,339,300 - ----------------------------------------------------------------------------------------------- End of period (including undistributed net investment income of $189,940 and $0, respectively) $ 30,209,337 $ 28,346,859 - -----------------------------------------------------------------------------------------------
The accompanying notes to financial statements are an integral part of these financial statements. TEN 12 FIDUCIARY CAPITAL PARTNERS, L.P. - -------------------------------------------------------------------------------- SELECTED PER UNIT DATA AND RATIOS (UNAUDITED)
FOR THE THREE MONTHS FOR THE SIX MONTHS ENDED JUNE 30, ENDED JUNE 30, - ------------------------------------------------------------------------------------------------------------------ 1995 1994 1995 1994 - ------------------------------------------------------------------------------------------------------------------ PER UNIT DATA: Investment income $ .47 $ .39 $ .93 $ .80 Expenses (.10) (.10) (.21) (.21) - ------------------------------------------------------------------------------------------------------------------ Net investment income .37 .29 .72 .59 Net realized gain on investments 1.35 -- 1.56 .35 Net decrease in unrealized appreciation of investments (.50) (.03) (.47) (.04) Distributions declared to partners (.30) (.45) (.60) (.90) - ------------------------------------------------------------------------------------------------------------------ Net increase (decrease) in net asset value .92 (.19) 1.21 -- Net asset value: Beginning of period 18.84 18.17 18.55 17.98 - ------------------------------------------------------------------------------------------------------------------ End of period $ 19.76 $ 17.98 $ 19.76 $ 17.98 - ------------------------------------------------------------------------------------------------------------------ RATIOS (ANNUALIZED): Ratio of expenses to average net assets 2.11% 2.29% 2.18% 2.32% Ratio of net investment income to average net assets 7.76% 6.47% 7.66% 6.57% Number of limited partnership units at end of period 1,526,949 1,687,121 1,526,949 1,687,121
The accompanying notes to financial statements are an integral part of these selected per unit data and ratios. ELEVEN 13 FIDUCIARY CAPITAL PARTNERS, L.P. - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS JUNE 30, 1995 (UNAUDITED) 1. GENERAL The accompanying unaudited interim financial statements include all adjustments (consisting solely of normal recurring adjustments) which are, in the opinion of the Managing General Partner, necessary to fairly present the financial position of the Fund as of June 30, 1995 and the results of its operations, changes in net assets and its cash flows for the periods then ended. These financial statements should be read in conjunction with the Significant Accounting Policies and other Notes to Financial Statements included in the Fund's annual audited financial statements for the year ended December 31, 1994. 2. INVESTMENT ADVISORY FEES As compensation for its services as investment adviser, FCM Fiduciary Capital Management Company ("FCM") receives a subordinated monthly fee at the annual rate of 1% of the Fund's available capital, as defined in the Partnership Agreement. Investment advisory fees of $116,706 were paid by the Fund for the six months ended June 30, 1995. 3. FUND ADMINISTRATION FEES As compensation for its services as fund administrator, FCM receives a monthly fee at the annual rate of .45% of net proceeds available for investment, as defined in the Partnership Agreement. Fund administration fees of $71,685 were paid by the Fund for the six months ended June 30, 1995. FCM is also reimbursed, subject to various limitations, for administrative expenses incurred in providing accounting and investor services to the Fund. The Fund reimbursed FCM for administrative expenses of $40,553 for the six months ended June 30, 1995. 4. INDEPENDENT GENERAL PARTNER FEES AND EXPENSES As compensation for services rendered to the Fund, each of the Independent General Partners receives from the Fund and 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 paid by the Fund for the six months ended June 30, 1995 totaled $32,946. TWELVE 14 FIDUCIARY CAPITAL PARTNERS, L.P. - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) 5. CONTINGENCIES FCM, the Managing General Partner of the Fund, had been named as a defendant in a class action lawsuit brought in March 1995 against PaineWebber Incorporated and a number of its affiliates. During May 1995, the Court entered an order certifying the class and dismissing the class action against FCM without prejudice. FCM believes that this litigation will be resolved without any material adverse effect on the Fund's financial condition. 6. SUBSEQUENT EVENT On July 25, 1995, the Fund sold 9,587 shares of KEMET Corporation common stock. The Fund received $646,876 of sales proceeds, resulting in a realized gain of $640,081. THIRTEEN 15 FIDUCIARY CAPITAL PARTNERS, L.P. - -------------------------------------------------------------------------------- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS LIQUIDITY AND CAPITAL RESOURCES As of June 30, 1995, the Fund held portfolio investments in twelve Managed Companies, with an aggregate cost of approximately $19.5 million. These portfolio investments, which were made from net offering proceeds and the reinvestment of proceeds from the sale of other portfolio investments, represent approximately 75.1% of the Fund's net assets. When acquired, these portfolio investments generally consisted of high-yield subordinated debt, linked with an equity participation or a comparable participation feature in middle market companies. These securities were typically issued in private placement transactions and were subject to certain restrictions on transfer or sale, thereby limiting their liquidity. A number of the portfolio companies have prepaid their subordinated debt that the Fund held. In addition, three of the portfolio companies have successfully completed initial public offerings ("IPOs") of their stock. The Fund continues to hold all of the equity components of its original investments, except for a substantial portion of its KEMET Corporation ("KEMET") stock. As of June 30, 1995, the Fund's remaining assets were invested in short-term commercial paper. These funds are available for investment, for distribution to the partners or to fund the annual repurchase offer. The Fund sold a portion of its KEMET common stock during the six months ended June 30, 1995. In addition, the Fund's subordinated debt investment in Protection One was prepaid during the six months ended June 30, 1995. In the aggregate, the Fund received $3,437,006 of proceeds, including applicable prepayment premiums, from these transactions. On July 25, 1995, the Fund received $646,876 of sales proceeds from the sale of 9,587 shares of KEMET common stock. A portion of the proceeds representing gains from these transactions were used by the Fund to fund a portion of the cost of the follow-on investments in Canadian's Corp., which were acquired on December 29, 1994 and May 8, 1995 (see following discussion). The remaining portion of the gains from these transactions have been reserved by the Managing General Partner to partially fund either the 1995 repurchase offer or any additional follow-on investments that the Fund may make in existing portfolio companies during 1995. On May 8, 1995, the Fund made a follow-on investment in Canadian's Corp. at a cost of $133,000. The investment consists of $147,778 of floating rate Promissory Notes, with warrants to acquire common stock. FOURTEEN 16 FIDUCIARY CAPITAL PARTNERS, L.P. - -------------------------------------------------------------------------------- On May 24, 1995, the Fund acquired a new portfolio investment in R.B.M. Precision Metal Products, Inc. ("RBM") at a cost of approximately $1.43 million. The investment consists of $1,460,000 of 13.00% Senior Subordinated Secured Notes due May 24, 2002, with warrants to acquire common stock. The Fund expects to reinvest all available funds, including the principal amount of any future prepayments received, in additional portfolio investments. The Partnership Agreement provides that the Fund's investment period will end on December 31, 1995. Although the Fund is permitted to make additional investments in existing portfolio companies after 1995, the Fund will no longer be permitted to acquire investments in new portfolio companies. Pursuant to the terms of the Fund's periodic unit repurchase policy that was adopted by the Fund's Limited Partners during 1993, the Fund will annually offer to purchase from its Limited Partners up to 7.5% of its outstanding Units for an amount equal to the current net asset value per Unit, net of a fee (not to exceed 2%) to be retained by the Fund to offset expenses incurred in connection with the repurchase offer. If the number of tendered Units in any year exceeds 7.5% of the outstanding Units, the Fund's General Partners may vote to repurchase up to an additional 2% of the outstanding Units. The 1995 repurchase offer will be mailed to the Limited Partners during October 1995. The actual redemption of tendered Units will occur on November 21, 1995. Accrued interest receivable increased $150,923 from $627,846 at December 31, 1994 to $778,769 at June 30, 1995. This increase resulted primarily from a $143,231 increase in the deferred portion of the interest receivable from KB Alloys, Inc. ("KB Alloys") with respect to the Fund's investment in $3,561,003 principal amount of 20.00% Senior Subordinated Term Notes due June 30, 2001. KB Alloys is required to pay 13.00% interest currently, while the remaining 7.00% of the interest may be deferred at KB Alloys' option. During any period in which the payment of interest is deferred, the interest rate on the notes increases from 20.00% to 21.00%. To date, KB Alloys has elected to defer payment of the interest. At June 30, 1995, the cumulative amount of deferred interest totaled $605,865. The Fund's agreement with KB Alloys requires KB Alloys to pay all accumulated deferred interest in excess of $547,847 no later than August 28, 1998, and the amount of deferred interest cannot exceed $547,847 at any time thereafter. The amount of accrued interest receivable with respect to other portfolio investments also increased slightly during the six months ended June 30, 1995. Other assets decreased $652,055, from $659,011 at December 31, 1994 to $6,956 at June 30, 1995. The balance at December 31, 1994 included a $645,148 receivable from the sale of KEMET common stock during December 1994. This amount was received by the Fund during January 1995. Prepaid interest income decreased from $60,146 at December 31, 1994 to zero at June 30, 1995. This prepaid interest income was related to the Canadian's 13.50% Subordinated Notes, which required interest to be paid quarterly, in advance, to the Fund. FIFTEEN 17 FIDUCIARY CAPITAL PARTNERS, L.P. - -------------------------------------------------------------------------------- Effective June 1, 1995, the notes were amended to provide for the interest to be paid monthly, in advance, on the first day of each month. Distributions payable to partners decreased $231,356, from $694,068 at December 31, 1994 to $462,712 at June 30, 1995. This decrease corresponds to the percentage decrease in the quarterly distribution rate from $.45 per Unit to $.30 per Unit (as discussed in the following paragraphs). During the six months ended June 30, 1995, the Fund paid cash distributions pertaining to the fourth quarter of 1994 and the first quarter of 1995, in the amounts of $694,068 and $462,712, respectively. These quarterly distributions were equal to $.45 and $.30 per Unit, respectively, and represented an annualized rate equal to 9.0% and 6.0%, respectively, of contributed capital. As discussed in previous reports, the quarterly distributions for 1995 are being paid at a reduced rate. The distribution for the second quarter of 1995 will be paid on August 14, 1995 in an amount equal to $.30 per Unit, or an annualized rate equal to 6.0% of contributed capital. This distribution consists entirely of net investment income earned during the three months ended June 30, 1995. It is expected that the remaining 1995 distributions will be made at the same 6.0% rate. In the past, the Fund realized gains from its investments that provided additional sources of cash for distributions. Although there can be no assurances, the Fund may realize similar gains in 1995 that could in turn result in a higher distribution rate for subsequent quarters. Gains can also be utilized to fund the annual repurchase offer or to fund any follow-on investments that the Fund may make in existing portfolio companies. The Fund's investment period will end on December 31, 1995. Although the Fund is permitted to make additional investments in existing portfolio companies after 1995, the Fund will no longer be permitted to acquire investments in new portfolio companies. This will impact the amount of the Fund's quarterly distributions for 1996 and subsequent years because all proceeds from dispositions or maturities of investments after December 31, 1995 will be distributed to investors, except to the extent the cash is needed to fund the annual repurchase offer or to fund any follow-on investments that the Fund may make in existing portfolio companies FCM, the Managing General Partner of the Fund, had been named as a defendant in a class action lawsuit brought in March 1995 against PaineWebber Incorporated and a number of its affiliates. During May 1995, the Court entered an order certifying the class and dismissing the class action against FCM without prejudice. FCM believes that this litigation will be resolved without any material adverse effect on the Fund's financial condition. SIXTEEN 18 FIDUCIARY CAPITAL PARTNERS, L.P. - -------------------------------------------------------------------------------- RESULTS OF OPERATIONS INVESTMENT INCOME AND EXPENSES The Fund's net investment income was $572,544 for the three months ended June 30, 1995 as compared to net investment income of $493,285 for the corresponding period of the prior year. Net investment income per limited partnership unit increased from $.29 to $.37 and the ratio of net investment income to average net assets increased from 6.47% to 7.76% for the three months ended June 30, 1995 as compared to the corresponding period of the prior year. The Fund's net investment income was $1,115,363 for the six months ended June 30, 1995 as compared to net investment income of $1,000,266 for the corresponding period of the prior year. Net investment income per limited partnership unit increased from $.59 to $.72 and the ratio of net investment income to average net assets increased from 6.57% to 7.66% for the six months ended June 30, 1995 as compared to the corresponding period of the prior year. Net investment income for both the three and six month periods ended June 30, 1995 increased as a result of slight increases in investment income and slight decreases in total expenses. Investment income increased $60,399 and $79,963, or 9.0% and 5.9%, for the three and six month periods ended June 30, 1995, respectively, as compared to the corresponding periods of the prior year. These increases were primarily the result of higher interest rates on the Fund's temporary investments and to a lesser extent on the Fund's higher-yielding subordinated debt investments. The positive effect of the higher interest rates was partially offset by a decrease in the amount of the Fund's average net assets. The Fund had average net assets of approximately $29.1 million during the six months ended June 30, 1995 as compared to approximately $30.4 million during the corresponding period of the prior year. This 4.3% decrease in average net assets occurred primarily as a result of the Fund's repurchase of 9.49% of its Units during the fourth quarter of 1994. The negative effect of the repurchase of Units was partially offset by gains achieved with respect to the Fund's investments (primarily the KEMET common stock). Total expenses decreased $18,860 and $35,134, or 10.8% and 10.0%, for the three and six month periods ended June 30, 1995, respectively, as compared to the corresponding periods of the prior year. These decreases resulted primarily from decreases in investment advisory fees and other expenses. The investment advisory fees decreased as a result of the repurchase of Units by the Fund during the fourth quarter of 1994 and the realization during July 1994 of the loss on the Fund's Mobile Technology, Inc. ("MTI") investment. Both the repurchase of Units and the realization of the MTI loss decreased the amount of the Fund's available capital (as defined in the Partnership Agreement), which is the base with respect to which the investment advisory fees are calculated. Other SEVENTEEN 19 FIDUCIARY CAPITAL PARTNERS, L.P. - -------------------------------------------------------------------------------- expenses decreased primarily as a result of a decrease in consulting fees. These decreases were partially offset by an increase in professional fees. NET REALIZED GAIN ON INVESTMENTS On February 28, 1995, the Fund sold 10,547 shares of KEMET common stock. The Fund received $326,324 of sales proceeds, resulting in a realized gain of $318,852. During April and May 1995, the Fund sold an additional 44,920 shares of KEMET common stock. The Fund received $1,973,532 of sales proceeds, resulting in realized gains of $1,941,692. On May 17, 1995, Protection One prepaid its $1,083,000 of 12.00% Senior Subordinated Notes that were carried by the Fund at an amortized cost of $997,917. The Fund received $1,137,150 of proceeds, including a prepayment premium, resulting in a realized gain of $139,233. NET UNREALIZED APPRECIATION OF INVESTMENTS FCM values the Fund's portfolio investments on a weekly basis utilizing a variety of methods. For securities that are publicly traded and for which market quotations are available, valuations are set by the closing sales, or an average of the closing bid and ask prices, as of the valuation date. Fair value for securities that are not traded in any liquid public markets or that are privately held are determined pursuant to valuation policies and procedures that have been approved by the Independent General Partners and subject to their supervision. There is a range of values that are reasonable for such investments at any particular time. Each such investment is valued initially based upon its original cost to the Fund ("cost method"). The cost method is used until significant developments affecting the portfolio company provide a basis for use of an appraisal valuation. Appraisal valuations are based upon such factors as the portfolio company's earnings, cash flow and net worth, the market prices for similar securities of comparable companies and an assessment of the portfolio company's future financial prospects. In a case of unsuccessful operations, the appraisal may be based upon liquidation value. Appraisal valuations are necessarily subjective. The Fund also may use, when available, third-party transactions in a portfolio company's securities as the basis of valuation ("private market method"). The private market method is used only with respect to completed transactions or firm offers made by sophisticated, independent investors. As of December 31, 1994, the Fund had recorded $4,397,511 of unrealized appreciation and $(492,831) of unrealized depreciation of investments. Therefore, as of December 31, 1994, the Fund had recorded a total net unrealized appreciation of investments of $3,904,680. The net increase in unrealized appreciation of investments during the three and six EIGHTEEN 20 FIDUCIARY CAPITAL PARTNERS, L.P. - -------------------------------------------------------------------------------- month periods ended June 30, 1995 and the cumulative net unrealized appreciation of investments as of June 30, 1995, consisted of the following components:
Unrealized Appreciation (Depreciation) Recorded - --------------------------------------------------------------------------------- During the Three During the Six Months Ended Months Ended As of Portfolio Company June 30 , 1995 June 30, 1995 June 30, 1995 - --------------------------------------------------------------------------------- Unrealized appreciation recorded in prior periods for investments disposed of during the period $(1,563,100) $(1,508,561) $ -- Carr-Gottstein 63,745 (21,248) 189,003 Neodata -- (325,199) (337,943) KEMET 637,793 920,945 1,934,241 Huntington 54,028 54,028 630,990 Amity -- 87,610 872,172 Elgin / ENI 17,800 35,598 125,781 Protection One 17,058 29,589 12,964 MTI -- -- (249,766) - --------------------------------------------------------------------------------- $ (772,676) $ (727,238) $ 3,177,442 - ---------------------------------------------------------------------------------
Carr-Gottstein Foods Company completed an IPO of its common stock on July 1, 1993. The stock, which trades on the New York Stock Exchange, closed at $6.375 on June 30, 1995. This price compares to closing prices of $6.50 on December 31, 1994 and $6.00 on March 31, 1995. Based on the $6.375 closing trading price of the common stock, the Fund's 178,934 shares of common stock would have a market value of $1,140,704. However, the Fund's valuation guidelines require the stock to be valued at a 5% discount to the public market price to reflect the potential market impact that could result from the sale of the material number of shares owned by the Funds. The Neodata Corporation ("Neodata") stock was written down at March 31, 1995. The Partnership has consistently valued this investment based upon a multiple of Neodata's cash flow. Because Neodata's long-term debt presently provides for the accrual, rather than current payment, of interest, the Company's debt has grown to a level which now exceeds the Partnership's valuation. KEMET completed an IPO of its common stock on October 21, 1992. The stock, which trades on the NASDAQ National Market System, closed at $52.625 (an average of the closing bid and ask prices) on June 30, 1995. This price is up from the closing prices of $29.375 on December 31, 1994 and $37.375 on March 31, 1995. The Fund held 37,257 shares of KEMET common stock at June 30, 1995. Based on the $52.625 closing trading price of the common stock, the Fund's stock had a market value of $1,960,650 at June 30, 1995. NINETEEN 21 FIDUCIARY CAPITAL PARTNERS, L.P. - -------------------------------------------------------------------------------- During June 1995, the Fund received an unsolicited offer from a third party to purchase the Huntington Holdings, Inc. ("Huntington") warrants which are held by the Fund. Although the Fund decided not to sell the warrants, the warrants were written up in value at June 30, 1995 based upon the offer price. The Amity warrants and common stock were written up in value at March 31, 1995 to bring Amity's valuation more in line with the valuation of other comparable companies in its industry. The ENI Holding Corp. preferred stock is being written up in value quarterly to reflect the amount of the cumulative 10% preferential dividend that has accrued with respect to the preferred stock. Protection One, Inc. ("Protection One") completed an IPO of its common stock on September 29, 1994. The stock, which trades on the NASDAQ National Market System, closed at $6.0625 (an average of the closing bid and ask prices) on March 31, 1995. This price compares to closing prices of $4.875 on December 31, 1994 and $5.125 on March 31, 1995. The Fund holds warrants to acquire 18,194.4 shares of Protection One common stock at a nominal exercise price. Based on the $6.0625 closing trading price of the common stock, the Fund's warrants had a market value of $110,304 at June 30, 1995. FCM continually monitors both the Fund's portfolio companies and the markets, and continually evaluates the decision to hold or sell its traded securities. TWENTY EX-27 4 FINANCIAL DATA SCHEDULE
6 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 9-MOS DEC-31-1995 JAN-01-1995 SEP-30-1995 27,263,246 30,096,867 840,908 4,592 239,238 31,181,605 0 0 545,819 545,819 0 0 1,526,949 1,526,949 320,131 0 0 0 2,833,621 30,635,786 0 2,180,244 0 471,978 1,708,266 3,039,855 (1,071,059) 3,677,062 0 1,388,135 0 0 0 0 0 2,288,927 0 0 0 0 175,060 0 471,978 30,422,562 18.55 1.11 1.28 .90 0 0 20.04 2.13 0 0
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