1
Fiduciary Capital Pension Partners, L.P.
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---------------------------------
SECOND QUARTER REPORT
1995
2
FIDUCIARY CAPITAL PENSION PARTNERS, L.P.
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MESSAGE TO INVESTORS
Dear Investor:
The Fund's net asset value per Unit was $19.65 at June 30, 1995. This net
asset value is up from the net asset values of $18.47 at December 31, 1994 and
$18.76 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 75.3% 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 $917,000 of 12.00% Senior
Subordinated Notes that were held by the Fund. The Fund received $962,850 of
proceeds, including a prepayment premium. The Fund continues to hold 15,405
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 37,080 shares at an average net sales
price of approximately $43.93. An additional 7,913 shares were sold during
July 1995 at an average net sales price of approximately $67.47. The Fund has
22,830 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 $1.26
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 $1,290,000 of 13.00% Senior Subordinated
--------------------
ONE
3
FIDUCIARY CAPITAL PENSION PARTNERS, L.P.
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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 $130,000 of floating rate Promissory Notes, with
warrants to acquire common stock, which together were purchased at a discounted
price of $117,000. 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 PENSION 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 000-000-0000.
Sincerely,
/s/ XXXX XXXXXX
Xxxx Xxxxxx, Chairman
FCM Fiduciary Capital Management Company
/s/ X. XXXX DEGRASSI
X. Xxxx XxXxxxxx, President
FCM Fiduciary Capital Management Company
August 22, 1995
--------------------
THREE
5
FIDUCIARY CAPITAL PENSION PARTNERS, L.P.
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SCHEDULE OF INVESTMENTS
JUNE 30, 1995 (UNAUDITED)
--------------------------------------------------------------------------------
PRINCIPAL
AMOUNT/ INVESTMENT AMORTIZED % OF TOTAL
SHARES INVESTMENT DATE COST VALUE INVESTMENTS
------------------------------------------------------------------------------------------------------------------------------------
MANAGED COMPANIES:
147,678 sh. Xxxx-Xxxxxxxxx Foods Co.,
Class B Common Stock(1)* 10/23/90 $ 738,394 $ 894,375
------------------------------------------------------------------------------------------------------------------------------------
738,394 894,375 3.6%
------------------------------------------------------------------------------------------------------------------------------------
150,584.1 sh. Neodata Corporation,
10.00% Class A Convertible 12/27/90 &
Preferred Stock - Series 2* 09/30/92 278,916 2
8,754.89 sh. Neodata Corporation, 12/27/90 &
Common Stock* 09/30/92 1 1
------------------------------------------------------------------------------------------------------------------------------------
278,917 3 0.0
------------------------------------------------------------------------------------------------------------------------------------
30,743 sh. KEMET Corporation,
Common Stock(2)* 07/11/91 21,787 1,617,850
------------------------------------------------------------------------------------------------------------------------------------
21,787 1,617,850 6.4
------------------------------------------------------------------------------------------------------------------------------------
267.9 sh. Huntington Holdings, Inc.,
Warrants to Purchase
Common Stock(3)* 01/31/92 85,678 606,449
------------------------------------------------------------------------------------------------------------------------------------
85,678 606,449 2.4
------------------------------------------------------------------------------------------------------------------------------------
62,606 sh. Amity Leather Products Co.,
Warrants to Purchase Class B
Common Stock* 07/30/92 85,909 758,067
22,608 sh. Amity Leather Products Co.,
Class A Common Stock* 07/30/92 226,080 273,750
------------------------------------------------------------------------------------------------------------------------------------
311,989 1,031,817 4.1
------------------------------------------------------------------------------------------------------------------------------------
$2,938,997 KB Alloys, Inc.,
20.00% Senior Subordinated
Term Notes due 6/30/01(4) 05/28/93 2,889,674 2,889,674
-----------------------------------------------------------------------------------------------------------------------------------
2,889,674 2,889,674 11.5
------------------------------------------------------------------------------------------------------------------------------------
$5,023,926 Elgin National Industries, Inc.,
13.00% Senior Subordinated
Notes due 9/01/01(5) 09/24/93 4,907,085 4,907,085
5,876.1 sh. ENI Holding Corp.,
10.00% Preferred Stock
due 12/31/01 09/24/93 587,610 691,421
403.81 sh. ENI Holding Corp.,
Class B Common Stock* 09/24/93 40,381 40,381
421.6 sh. ENI Holding Corp.,
Warrants to Purchase Class B
Common Stock* 09/24/93 42,156 42,156
------------------------------------------------------------------------------------------------------------------------------------
5,577,232 5,681,043 22.5
------------------------------------------------------------------------------------------------------------------------------------
The accompanying notes to financial statements are an integral part of this
schedule.
--------------------
FOUR
6
FIDUCIARY CAPITAL PENSION PARTNERS, L.P.
--------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED)
JUNE 30, 1995 (UNAUDITED)
--------------------------------------------------------------------------------
PRINCIPAL
AMOUNT/ INVESTMENT AMORTIZED % OF TOTAL
SHARES INVESTMENT DATE COST VALUE INVESTMENTS
------------------------------------------------------------------------------------------------------------------------------------
15,405.6 sh. Protection One, Inc.,
Warrants to Purchase
Common Stock(6)* 11/03/93 82,420 93,396
------------------------------------------------------------------------------------------------------------------------------------
82,420 93,396 0.4
------------------------------------------------------------------------------------------------------------------------------------
$2,396,000 LMCOperating Corp.,
13.00% Senior Secured
Subordinated Term Notes
due 5/31/99(7) 06/10/94 2,268,861 2,268,861
16.054 sh. LMCOperating Corp.,
Warrants to Purchase
Common Stock* 06/10/94 107,820 107,820
15.973 sh. LMCCredit Corp.,
Warrants to Purchase
Common Stock* 06/10/94 1 1
------------------------------------------------------------------------------------------------------------------------------------
2,376,682 2,376,682 9.4
------------------------------------------------------------------------------------------------------------------------------------
$2,392,000 Canadian's Corp.,
13.50% Subordinated 09/09/94 &
Notes due 9/01/02(8) 12/29/94 2,296,463 2,296,463
$291,000 Canadian's Holdings, Inc.,
12.00% Exchangeable
Redeemable Debentures 09/09/94 &
due 8/31/04(9) 12/29/84 279,034 279,034
$130,000 Canadian's Corp.,
Promissory Notes
due 6/30/96(10) 05/08/95 117,911 117,911
232,987 sh. Canadian's Corp.,
Warrants to Purchase 09/09/94 &
Common Stock* 12/29/94 34,171 34,171
26,966 sh. Canadina's Corp.,
Warrants to Purchase
Common Stock(11)* 05/08/95 650 650
------------------------------------------------------------------------------------------------------------------------------------
2,728,229 2,728,229 10.8
------------------------------------------------------------------------------------------------------------------------------------
$1,290,000 R.B.M. Precision Metal
Products, Inc., 13.00%
Senior Subordinated
Secured Notes due
5/24/02(12) 05/24/95 1,191,743 1,191,743
439.694 sh. R.B.M. Precision Metal
Products, Inc., Warrants
to Purchase Common Stock* 05/24/95 73,295 73,295
------------------------------------------------------------------------------------------------------------------------------------
1,265,038 1,265,038 5.0
------------------------------------------------------------------------------------------------------------------------------------
The accompanying notes to financial statements are an integral part of this
schedule.
--------------------
FIVE
7
FIDUCIARY CAPITAL PENSION PARTNERS, L.P.
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SCHEDULE OF INVESTMENTS (CONTINUED)
JUNE 30, 1995 (UNAUDITED)
--------------------------------------------------------------------------------
PRINCIPAL
AMOUNT/ INVESTMENT AMORTIZED % OF TOTAL
SHARES INVESTMENT DATE COST VALUE INVESTMENTS
------------------------------------------------------------------------------------------------------------------------------------
34,996 sh. MTIHoldings II, Inc., 07/06/94 &
Common Stock* 12/28/94 237,627 31,496
------------------------------------------------------------------------------------------------------------------------------------
237,627 31,496 0.1
------------------------------------------------------------------------------------------------------------------------------------
Total Investments in Managed
Companies (75.3% of net assets) 16,593,667 19,216,052 76.2
------------------------------------------------------------------------------------------------------------------------------------
TEMPORARY INVESTMENTS:
$2,218,000 Ford Motor Credit
Corporation, 5.761%
Notes due 7/13/95 06/29/95 2,213,808 2,213,808
$3,782,000 Xxxxxx Xxxxxx Companies,
Inc., 5.772% Notes
due 7/13/95 06/29/95 3,774,839 3,774,839
------------------------------------------------------------------------------------------------------------------------------------
Total Temporary Inve(23.5%sof net assets) 5,988,647 5,988,647 23.8
------------------------------------------------------------------------------------------------------------------------------------
Total Investments (98.8% of net assets) $22,582,314 $25,204,699 100.0%
====================================================================================================================================
(1) The Xxxx-Xxxxxxxxx Foods Company common stock trades on the New York Stock
Exchange. The Fund and Fiduciary Capital Partners, L.P. ("FCP") combined
own a material percentage of the outstanding shares. To reflect the
resultant lack of liquidity, the Fund valued the shares at a 5% discount
to the public market price.
(2) The KEMET Corporation common stock trades on the NASDAQ National Market
System. (Note 6)
(3) Pursuant to the terms of the Fund's agreement with Huntington Holdings,
Inc., under certain circumstances the number of shares issuable upon
exercise of the warrants held by the Fund will increase periodically.
The first such increase occurred on February 1, 1993 when the Fund
received the right to an additional 29.6 shares.
(4) The notes will amortize in eight equal quarterly installments of $367,375
commencing on 6/30/99. The current payment of 7.0% of the interest may be
deferred at the borrower's option. During any period in which the payment
of interest is deferred, the interest rate on the notes increases from
20.00% to 21.00%.
(5) The notes will amortize in eight equal quarterly installments of $627,991
commencing on 11/30/99.
(6) The Protection One, Inc. common stock trades on the NASDAQ National Market
System.
(7) The notes will amortize as follows: $30,017 on 9/01/97, $30,992 on
12/01/97, $32,000 on 3/01/98, $33,040 on 6/01/98, $34,114 on 9/01/98,
$35,222 on 12/01/98, $36,367 on 3/01/99 and $2,164,248 on 5/31/99.
(8) The notes will amortize in twelve equal quarterly installments of $199,333
commencing on 12/01/99. The notes also bear contingent additional
interest to be computed under a specified formula.
(9) The debentures are convertible into 119,262 shares of Canadian's Corp.
common stock. The debentures also bear contingent additional interest to
be computed under a specified formula.
(10) The notes bear interest equal to the prime rate, plus 5%.
(11) The warrants have an exercise price of $2.44 per share.
(12) The notes will amortize in three equal annual installments of $430,000
commencing on 5/24/00.
* Non-income producing security.
The accompanying notes to financial statements are an integral part of this
schedule.
--------------------
SIX
8
FIDUCIARY CAPITAL PENSION PARTNERS, L.P.
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BALANCE SHEETS
JUNE 30, 1995 AND DECEMBER 31, 1994 (UNAUDITED)
--------------------------------------------------------------------------------
1995 1994
------------------------------------------------------------------------------------------------------------------------------------
ASSETS:
Investments (Note 6)
Portfolio investments, at value:
Managed companies (amortized cost -
$16,593,667 and $16,052,631,
respectively) $19,216,052 $19,274,598
Temporary investments, at amortized cost 5,988,647 4,179,590
------------------------------------------------------------------------------------------------------------------------------------
Total investments 25,204,699 23,454,188
Cash and cash equivalents 125,367 173,095
Accrued interest receivable 647,713 521,794
Other assets, including receivables from
sale of investments 5,084 544,921
------------------------------------------------------------------------------------------------------------------------------------
Total assets $25,982,863 $24,693,998
------------------------------------------------------------------------------------------------------------------------------------
LIABILITIES:
Payable to affiliates (Notes 2, 3 and 4) $ 44,545 $ 44,384
Accounts payable and accrued liabilities 25,196 33,542
Prepaid interest income - 52,635
Distributions payable to partners 393,030 589,545
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Total liabilities 462,771 720,106
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NET ASSETS:
Managing General Partner 31,578 16,116
Limited Partners (equivalent to $19.65
and $18.47, respectively, per limited
partnership unit based on 1,296,999
units outstanding) 25,488,514 23,957,776
------------------------------------------------------------------------------------------------------------------------------------
Net assets 25,520,092 23,973,892
------------------------------------------------------------------------------------------------------------------------------------
Total liabilities and net assets $25,982,863 $24,693,998
====================================================================================================================================
The accompanying notes to financial statements are an integral part of these
financial statements.
--------------------
SEVEN
9
FIDUCIARY CAPITAL PENSION 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 $ 619,678 $ 558,999 $1,218,743 $1,129,702
------------------------------------------------------------------------------------------------------------------------------------
Total investment income 619,678 558,999 1,218,743 1,129,702
------------------------------------------------------------------------------------------------------------------------------------
Expenses:
Investment advisory fees (Note 2) 49,756 63,009 99,513 125,561
Fund administration fees (Note 3) 29,582 29,582 59,164 59,164
Independent General Partner fees
and expenses (Note 4) 11,964 12,280 27,988 27,567
Administrative expenses (Note 3) 17,224 17,190 34,448 34,380
Professional fees 13,695 10,374 28,156 21,316
Amortization 2,625 2,625 5,250 5,250
Other expenses 10,340 12,961 16,236 25,240
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Total expenses 135,186 148,021 270,755 298,478
------------------------------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME 484,492 410,978 947,988 831,224
------------------------------------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Net realized gain on investments 1,720,694 - 1,983,859 496,463
Net decrease in unrealized
appreciation of investments (637,675) (49,443) (599,587) (58,423)
------------------------------------------------------------------------------------------------------------------------------------
Net gain (loss) on investments 1,083,019 (49,443) 1,384,272 438,040
------------------------------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $1,567,511 $361,535 $2,332,260 $1,269,264
====================================================================================================================================
The accompanying notes to financial statements are an integral part of these
financial statements.
--------------------
EIGHT
10
FIDUCIARY CAPITAL PENSION 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 $ 2,332,260 $1,269,264
Adjustments to reconcile net increase
in net assets resulting from operations
to net cash provided by operating activities:
Accreted discount on portfolio investments (37,254) (15,741)
Amortization 5,250 5,250
Change in assets and liabilities:
Accrued interest receivable (125,919) (77,237)
Other assets 2,135 3,101
Payable to affiliates 1,107 28,367
Accounts payable and accrued liabilities (8,346) 11,621
Prepaid interest income (52,635) -
Net realized gain on investments (1,983,859) (496,463)
Net decrease in unrealized appreciation
of investments 599,587 58,423
------------------------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 732,326 786,585
------------------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of portfolio investments (1,382,146) (2,348,079)
Proceeds from dispositions of portfolio investments 3,393,724 5,274,396
(Purchase) sale of temporary investments, net (1,809,057) (2,365,989)
------------------------------------------------------------------------------------------------------------------------------------
Net cash provided by investing activities 202,521 560,328
------------------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions paid to partners (982,575) (1,298,136)
------------------------------------------------------------------------------------------------------------------------------------
Net cash used in financing activities (982,575) (1,298,136)
------------------------------------------------------------------------------------------------------------------------------------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (47,728) 48,777
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 173,095 792,425
------------------------------------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 125,367 $ 841,202
====================================================================================================================================
The accompanying notes to financial statements are an integral part of these
financial statements.
--------------------
NINE
11
FIDUCIARY CAPITAL PENSION PARTNERS, L.P.
--------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND FOR
THE YEAR ENDED DECEMBER 31, 1994 (UNAUDITED)
------------------------------------------------------------------------------------------------------------------------------------
1995 1994
------------------------------------------------------------------------------------------------------------------------------------
Increase in net assets resulting from operations:
Net investment income $ 947,988 $ 1,758,135
Net realized gain (loss) on investments 1,983,859 (2,089,653)
Net (decrease) increase in unrealized
appreciation of investments (599,587) 3,594,544
------------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 2,332,260 3,263,026
Repurchase of limited partnership units - (2,402,951)
Distributions to partners from -
Net investment income (786,060) (1,758,135)
Realized gain on investments - (778,614)
------------------------------------------------------------------------------------------------------------------------------------
Total increase (decrease) in net assets 1,546,200 (1,676,674)
Net assets:
Beginning of period 23,973,892 25,650,566
------------------------------------------------------------------------------------------------------------------------------------
End of period (including undistributed
net investment income of $161,928
and $0, respectively) $ 25,520,092 $ 23,973,892
====================================================================================================================================
The accompanying notes to financial statements are an integral part of these
financial statements.
--------------------
TEN
12
FIDUCIARY CAPITAL PENSION PARTNERS, L.P.
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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 $ .38 $ .93 $ .78
Expenses (.10) (.10) (.21) (.20)
------------------------------------------------------------------------------------------------------------------------------------
Net investment income .37 .28 .72 .58
Net realized gain on investments 1.31 - 1.52 .34
Net decrease in unrealized appreciation
of investments (.49) (.03) (.46) (.04)
Distributions declared to partners (.30) (.45) (.60) (.90)
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net
asset value .89 (.20) 1.18 (.02)
Net asset value:
Beginning of period 18.76 18.14 18.47 17.96
------------------------------------------------------------------------------------------------------------------------------------
End of period $ 19.65 $ 17.94 $ 19.65 $ 17.94
====================================================================================================================================
RATIOS (ANNUALIZED):
Ratio of expenses to average net assets 2.17% 2.30% 2.20% 2.32%
Ratio of net investment income to
average net assets 7.77% 6.38% 7.70% 6.46%
Number of limited partnership units at
end of period 1,296,999 11,296,999 1,427,950
The accompanying notes to financial statements are an integral part
of these selected per unit data and ratios.
--------------------
ELEVEN
13
FIDUCIARY CAPITAL PENSION PARTNERS, L.P.
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1995 (UNAUDITED)
1. GENERAL
The accompanying unaudited interim financial statements include all
adjustments (consisting solely of normal recurring adjustments) which are, in
the opinion of the Managing General Partner, necessary to fairly present the
financial position of the Fund as of June 30, 1995 and the results of its
operations, changes in net assets and its cash flows for the periods then
ended.
These financial statements should be read in conjunction with the
Significant Accounting Policies and other Notes to Financial Statements
included in the Fund's annual audited financial statements for the year ended
December 31, 1994.
2. INVESTMENT ADVISORY FEES
As compensation for its services as investment adviser, FCM Fiduciary
Capital Management Company ("FCM") receives a subordinated monthly fee at the
annual rate of 1% of the Fund's available capital, as defined in the
Partnership Agreement. Investment advisory fees of $99,513 were paid by the
Fund for the six months ended June 30, 1995.
3. FUND ADMINISTRATION FEES
As compensation for its services as fund administrator, FCM receives a
monthly fee at the annual rate of .45% of net proceeds available for
investment, as defined in the Partnership Agreement. Fund administration fees
of $59,164 were paid by the Fund for the six months ended June 30, 1995. FCM
is also reimbursed, subject to various limitations, for administrative expenses
incurred in providing accounting and investor services to the Fund. The Fund
reimbursed FCM for administrative expenses of $34,448 for the six months ended
June 30, 1995.
4. INDEPENDENT GENERAL PARTNER FEES AND EXPENSES
As compensation for services rendered to the Fund, each of the Independent
General Partners receives from the Fund and FCP an annual fee of $30,000,
payable monthly in arrears, together with all out-of-pocket expenses. Each
Fund's allocation of these fees and expenses is based on the relative number of
outstanding Units. Fees and expenses paid by the Fund for the six months ended
June 30, 1995 totaled $27,988.
--------------------
TWELVE
14
FIDUCIARY CAPITAL PENSION 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 7,913 shares of KEMET Corporation common
stock. The Fund received $533,924 of sales proceeds, resulting in a realized
gain of $528,316.
--------------------
THIRTEEN
15
FIDUCIARY CAPITAL PENSION 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 $16.6 million. These
portfolio investments, which were made from net offering proceeds and the
reinvestment of proceeds from the sale of other portfolio investments,
represent approximately 75.3% of the Fund's net assets. When acquired, these
portfolio investments generally consisted of high-yield subordinated debt,
linked with an equity participation or a comparable participation feature in
middle market companies. These securities were typically issued in private
placement transactions and were subject to certain restrictions on transfer or
sale, thereby limiting their liquidity. A number of the portfolio companies
have prepaid their subordinated debt that the Fund held. In addition, three of
the portfolio companies have successfully completed initial public offerings
("IPOs") of their stock. The Fund continues to hold all of the equity
components of its original investments, except for a substantial portion of its
KEMET Corporation ("KEMET") stock.
As of June 30, 1995, the Fund's remaining assets were invested in
short-term commercial paper. These funds are available for investment, for
distribution to the partners or to fund the annual repurchase offer.
The Fund sold a portion of its KEMET common stock during the six months
ended June 30, 1995. In addition, the Fund's subordinated debt investment in
Protection One was prepaid during the six months ended June 30, 1995. In the
aggregate, the Fund received $2,861,272 of proceeds, including applicable
prepayment premiums, from these transactions.
On July 25, 1995, the Fund received $533,924 of sales proceeds from the
sale of 7,913 shares of KEMET common stock.
A portion of the proceeds representing gains from these transactions were
used by the Fund to fund a portion of the cost of the follow-on investments in
Canadian's Corp., which were acquired on December 29, 1994 and May 8, 1995 (see
following discussion). The remaining portion of the gains from these
transactions have been reserved by the Managing General Partner to partially
fund either the 1995 repurchase offer or any additional follow-on investments
that the Fund may make in existing portfolio companies during 1995.
On May 8, 1995, the Fund made a follow-on investment in Canadian's Corp. at
a cost of $117,000. The investment consists of $130,000 of floating rate
Promissory Notes, with warrants to acquire common stock.
--------------------
FOURTEEN
16
FIDUCIARY CAPITAL PENSION 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 $1.26
million. The investment consists of $1,290,000 of 13.00% Senior Subordinated
Secured Notes due May 24, 2002, with warrants to acquire common stock.
The Fund expects to reinvest all available funds, including the principal
amount of any future prepayments received, in additional portfolio investments.
The Partnership Agreement provides that the Fund's investment period will end
on December 31, 1995. Although the Fund is permitted to make additional
investments in existing portfolio companies after 1995, the Fund will no longer
be permitted to acquire investments in new portfolio companies.
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 $125,919 from $521,794 at December
31, 1994 to $647,713 at June 30, 1995. This increase resulted primarily from a
$118,213 increase in the deferred portion of the interest receivable from KB
Alloys, Inc. ("KB Alloys") with respect to the Fund's investment in $2,938,997
principal amount of 20.00% Senior Subordinated Term Notes due June 30, 2001.
KB Alloys is required to pay 13.00% interest currently, while the remaining
7.00% of the interest may be deferred at KB Alloys' option. During any period
in which the payment of interest is deferred, the interest rate on the notes
increases from 20.00% to 21.00%. To date, KB Xxxxxx has elected to defer
payment of the interest. At June 30, 1995, the cumulative amount of deferred
interest totaled $500,038. The Fund's agreement with KB Alloys requires KB
Alloys to pay all accumulated deferred interest in excess of $452,153 no later
than August 28, 1998, and the amount of deferred interest cannot exceed
$452,153 at any time thereafter. The amount of accrued interest receivable
with respect to other portfolio investments also increased slightly during the
six months ended June 30, 1995.
Other assets decreased $539,837, from $544,921 at December 31, 1994 to
$5,084 at June 30, 1995. The balance at December 31, 1994 included a $532,452
receivable from the sale of KEMET common stock during December 1994. This
amount was received by the Fund during January 1995.
Prepaid interest income decreased from $52,635 at December 31, 1994 to zero
at June 30, 1995. This prepaid interest income was related to the Canadian's
13.50% Subordinated Notes, which required interest to be paid quarterly, in
advance, to the Fund.
--------------------
FIFTEEN
17
FIDUCIARY CAPITAL PENSION 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 $196,515, from $589,545 at
December 31, 1994 to $393,030 at June 30, 1995. This decrease corresponds to
the percentage decrease in the quarterly distribution rate from $.45 per Unit
to $.30 per Unit (as discussed in the following paragraphs).
During the six months ended June 30, 1995, the Fund paid cash distributions
pertaining to the fourth quarter of 1994 and the first quarter of 1995, in the
amounts of $589,545 and $393,030, respectively. These quarterly distributions
were equal to $.45 and $.30 per Unit, respectively, and represented an
annualized rate equal to 9.0% and 6.0%, respectively, of contributed capital.
As discussed in previous reports, the quarterly distributions for 1995 are
being paid at a reduced rate. The distribution for the second quarter of 1995
will be paid on August 14, 1995 in an amount equal to $.30 per Unit, or an
annualized rate equal to 6.0% of contributed capital. This distribution
consists entirely of net investment income earned during the three months ended
June 30, 1995.
It is expected that the remaining 1995 distributions will be made at the
same 6.0% rate. In the past, the Fund realized gains from its investments that
provided additional sources of cash for distributions. Although there can be
no assurances, the Fund may realize similar gains in 1995 that could in turn
result in a higher distribution rate for 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 PENSION PARTNERS, L.P.
--------------------------------------------------------------------------------
RESULTS OF OPERATIONS
INVESTMENT INCOME AND EXPENSES
The Fund's net investment income was $484,492 for the three months ended
June 30, 1995 as compared to net investment income of $410,978 for the
corresponding period of the prior year. Net investment income per limited
partnership unit increased from $.28 to $.37 and the ratio of net investment
income to average net assets increased from 6.38% to 7.77% for the three months
ended June 30, 1995 as compared to the corresponding period of the prior year.
The Fund's net investment income was $947,988 for the six months ended June
30, 1995 as compared to net investment income of $831,224 for the corresponding
period of the prior year. Net investment income per limited partnership unit
increased from $.58 to $.72 and the ratio of net investment income to average
net assets increased from 6.46% to 7.70% for the six months ended June 30, 1995
as compared to the corresponding period of the prior year.
Net investment income for both the three and six month periods ended June
30, 1995 increased as a result of slight increases in investment income and
slight decreases in total expenses.
Investment income increased $60,679 and $89,041, or 10.9% and 7.9%, for the
three and six month periods ended June 30, 1995, respectively, as compared to
the corresponding periods of the prior year. These increases were primarily
the result of higher interest rates on the Fund's temporary investments and to
a lesser extent on the Fund's higher-yielding subordinated debt investments.
The positive effect of the higher interest rates was partially offset by a
decrease in the amount of the Fund's average net assets.
The Fund had average net assets of approximately $24.6 million during the
six months ended June 30, 1995 as compared to approximately $25.7 million
during the corresponding period of the prior year. This 4.5% decrease in
average net assets occurred primarily as a result of the Fund's repurchase of
9.17% of its Units during the fourth quarter of 1994. The negative effect of
the repurchase of Units was partially offset by gains achieved with respect to
the Fund's investments (primarily the KEMET common stock).
Total expenses decreased $12,835 and $27,723, or 8.7% and 9.3%, for the
three and six month periods ended June 30, 1995, respectively, as compared to
the corresponding periods of the prior year. These decreases resulted
primarily from decreases in investment advisory fees and other expenses. The
investment advisory fees decreased as a result of the repurchase of Units by
the Fund during the fourth quarter of 1994 and the realization during July 1994
of the loss on the Fund's Mobile Technology, Inc. ("MTI") investment. Both the
repurchase of Units and the realization of the MTI loss decreased the amount of
the Fund's available capital (as defined in the Partnership Agreement), which
is the base with respect to which the investment advisory fees are calculated.
Other expenses
--------------------
SEVENTEEN
19
FIDUCIARY CAPITAL PENSION PARTNERS, L.P.
--------------------------------------------------------------------------------
decreased primarily as a result of a decrease in consulting fees. These
decreases were partially offset by an increase in professional fees.
NET REALIZED GAIN ON INVESTMENTS
On February 28, 1995, the Fund sold 8,705 shares of KEMET common
stock. The Fund received $269,333 of sales proceeds, resulting in a realized
gain of $263,165.
During April and May 1995, the Fund sold an additional 37,080 shares
of KEMET common stock. The Fund received $1,629,089 of sales proceeds,
resulting in realized gain of $1,602,802.
On May 17, 1995, Protection One prepaid its $917,000 of 12.00% Senior
Subordinated Notes that were carried by the Fund at an amortized cost of
$844,958. The Fund received $962,850 of proceeds, including a prepayment
premium, resulting in a realized gain of $117,892.
NET UNREALIZED APPRECIATION OF INVESTMENTS
FCM values the Fund's portfolio investments on a weekly basis
utilizing a variety of methods. For securities that are publicly traded and
for which market quotations are available, valuations are set by the closing
sales, or an average of the closing bid and ask prices, as of the valuation
date.
Fair value for securities that are not traded in any liquid public
markets or that are privately held are determined pursuant to valuation
policies and procedures that have been approved by the Independent General
Partners and subject to their supervision. There is a range of values that are
reasonable for such investments at any particular time. Each such investment
is valued initially based upon its original cost to the Fund ("cost method").
The cost method is used until significant developments affecting the portfolio
company provide a basis for use of an appraisal valuation. Appraisal
valuations are based upon such factors as the portfolio company's earnings,
cash flow and net worth, the market prices for similar securities of comparable
companies and an assessment of the portfolio company's future financial
prospects. In a case of unsuccessful operations, the appraisal may be based
upon liquidation value. Appraisal valuations are necessarily subjective. The
Fund also may use, when available, third-party transactions in a portfolio
company's securities as the basis of valuation ("private market method"). The
private market method is used only with respect to completed transactions or
firm offers made by sophisticated, independent investors.
As of December 31, 1994, the Fund had recorded $3,629,064 of
unrealized appreciation and $(407,097) of unrealized depreciation of
investments. Therefore, as of December 31, 1994, the Fund had recorded a total
net unrealized appreciation of investments of $3,221,967.
--------------------
EIGHTEEN
20
FIDUCIARY CAPITAL PENSION PARTNERS, L.P.
--------------------------------------------------------------------------------
The net increase in unrealized appreciation of investments during the three
and six month periods ended June 30, 1995 and the cumulative net unrealized
appreciation of investments as of June 30, 1995, consisted of the following
components:
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
or investments disposed
of during the period $ (1,290,292) $ (1,245,240) $ -
Xxxx-Xxxxxxxxx 52,610 (17,537) 155,981
Neodata - (268,395) (278,914)
KEMET 526,286 759,932 1,596,063
Huntington 44,589 44,589 520,771
Amity - 72,307 719,828
Elgin / ENI 14,690 29,704 103,811
Proctection One 14,442 25,053 10,976
MTI - - (206,131)
------------------------------------------------------------------------------------------------------------------------------------
$ (637,675) $ (599,587) $2,622,385
====================================================================================================================================
Xxxx-Xxxxxxxxx Foods Company completed an IPO of its common stock on July
1, 1993. The stock, which trades on the New York Stock Exchange, closed at
$6.375 on June 30, 1995. This price compares to closing prices of $6.50 on
December 31, 1994 and $6.00 on March 31, 1995. Based on the $6.375 closing
trading price of the common stock, the Fund's 147,678 shares ofcommon stock
would have a market value of $941,447. However, the Fund's valuation
guidelines require the stock to be valued at a 5% discount to the public market
price to reflect the potential market impact that could result from the sale of
the material number of shares owned by the Funds.
The Neodata Corporation ("Neodata") stock was written down at March 31,
1995. The Partnership has consistently valued this investment based upon a
multiple of Neodata's cash flow. Because Neodata's long-term debt presently
provides for the accrual, rather than current payment, of interest, the
Company's debt has grown to a level which now exceeds the Partnership's
valuation.
KEMET completed an IPO of its common stock on October 21, 1992. The stock,
which trades on the NASDAQ National Market System, closed at $52.625 (an
average of the closing bid and ask prices) on June 30, 1995. This price is up
from the closing prices of $29.375 on December 31, 1994 and $37.375 on March
31, 1995. The Fund held 30,743 shares of KEMET common stock at June 30, 1995.
Based on the $52.625 closing trading
--------------------
NINETEEN
21
FIDUCIARY CAPITAL PENSION PARTNERS, L.P.
--------------------------------------------------------------------------------
price of the common stock, the Fund's stock had a market value of $1,617,850 at
June 30, 1995.
During June 1995, the Fund received an unsolicited offer from a third party
to purchase the Huntington Holdings, Inc. ("Huntington") warrants which are
held by the Fund. Although the Fund decided not to sell the warrants, the
warrants were written up in value at June 30, 1995 based upon the offer price.
The Amity warrants and common stock were written up in value at March 31,
1995 to bring Xxxxx'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
15,405.6 shares of Protection One common stock at a nominal exercise price.
Based on the $6.0625 closing trading price of the common stock, the Fund's
warrants had a market value of $93,396 at June 30, 1995.
FCM continually monitors both the Fund's portfolio companies and the
markets, and continually evaluates the decision to hold or sell its traded
securities.
--------------------
TWENTY
