<PAGE>   1
                                                                    EXHIBIT 19.1

                        FIDUCIARY CAPITAL PARTNERS, L.P.
--------------------------------------------------------------------------------










                           ---------------------------
                                  ANNUAL REPORT
                                      1998

<PAGE>   2

                                    CONTENTS

 Fund Profile and Financial Highlights                       One


 Message to Investors                                        Two


 Schedules of Realized Gains and Losses                      Six


 Profiles of Portfolio Companies                             Seven


 Schedule of Investments                                     Eight


 Balance Sheets                                              Ten


 Statements of Operations                                    Eleven


 Statements of Cash Flows                                    Twelve


 Statements of Changes in Net Assets                         Thirteen


 Selected Per Unit Data and Ratios                           Fourteen


 Notes to Financial Statements                               Fifteen


 Report of Independent Public Accountants                    Twenty


 Management's Discussion and Analysis of Financial
 Condition and Results of Operations                         Twenty-One



<PAGE>   3

                        FIDUCIARY CAPITAL PARTNERS, L.P.
--------------------------------------------------------------------------------

                                  FUND PROFILE


Fiduciary Capital Partners, L.P. (the "Fund") is a Delaware limited partnership
that commenced operations on August 14, 1990. The Fund elected to operate as a
business development company under the Investment Company Act of 1940. The
investment objective of the Fund was to provide current income and capital
appreciation by investing primarily in subordinated debt and related equity
securities issued as the mezzanine financing of privately structured, friendly
leveraged buyouts, leveraged acquisitions and leveraged recapitalizations.

The Fund's investment period ended on December 31, 1995. Although the Fund is
permitted to make additional investments in existing portfolio companies, the
Fund is no longer permitted to acquire investments in new portfolio companies.
Since mid-1997, the Fund has liquidated a significant percentage of its
investments and has distributed a significant portion of the related proceeds to
its partners.

The General Partners are presently considering a number of alternative actions
through which the Fund could be liquidated. Once a plan of liquidation is
adopted, the General Partners will follow requisite regulatory procedures
required to liquidate the Fund. These procedures are expected to include
requesting Limited Partner approval of the liquidation plan through a proxy
solicitation.

                              FINANCIAL HIGHLIGHTS


<TABLE>
<CAPTION>
                                                                             AS OF DECEMBER 31
                                                                         OR YEAR ENDED DECEMBER 31
                                                     1998          1997           1996           1995          1994
                                               ------------------------------------------------------------------------
                                                                (IN THOUSANDS, EXCEPT PER UNIT AMOUNTS)
-----------------------------------------------------------------------------------------------------------------------
<S>                                            <C>            <C>            <C>            <C>            <C>
 Total Investment Income                       $        743   $      1,647   $      1,600   $      2,669   $      2,802
 Net Investment Income                                  108          1,017            952          2,037          2,127
 Net Realized and Unrealized
     (Loss) Gain on Investments                      (1,089)          (314)        (1,358)        (2,592)         1,824
 Cash Distributions Declared to Partners              3,235          3,707          1,673          1,815          2,995
 Cash Utilized to Repurchase Units                      894          1,364          1,719          2,355          2,949
 Total Assets                                        11,254         17,195         20,751         24,143         29,188
 Net Assets                                          10,347         15,457         19,825         23,623         28,347
 Value of Investments                                10,281         16,788         20,357         23,799         27,729

Per Unit of Limited Partnership Interest:
 Net Investment Income(1)                               .08            .78            .68           1.33           1.26
 Net Realized and Unrealized
     (Loss) Gain on Investments(1)                     (.80)          (.25)          (.96)         (1.70)          1.08
 Cash Distributions Declared to Partners(2)            2.70           2.90           1.20           1.20           1.80
 Net Asset Value                                       9.51          12.91          15.28          16.79          18.55
</TABLE>

(1)      Calculated using the weighted average number of Units outstanding
         during the years ended December 31, 1998, 1997, 1996, 1995 and 1994 of
         1,190,993, 1,288,211, 1,395,138, 1,513,503 and 1,669,129, respectively.

(2)      Distribution amounts are reflected during the year in which the cash
         for the distribution was generated. A portion of the actual cash
         distributions are paid subsequent to such year.


                              --------------------
                                       ONE

<PAGE>   4

                        FIDUCIARY CAPITAL PARTNERS, L.P.
--------------------------------------------------------------------------------

                              MESSAGE TO INVESTORS



Dear Investor:

We are pleased to provide a summary of the recent activities of Fiduciary
Capital Partners, L.P. This Annual Report includes the Fund's audited financial
statements for the year ended December 31, 1998. Unaudited interim financial
statements for the first quarter of 1999 are also enclosed along with this
Annual Report.

HIGHLIGHTS

         o Distributions for 1998 totaled between $2.73 and $2.60 per Unit
depending upon the closing in which the particular Units were issued. These
distributions represent an amount equal to approximately 13% of contributed
capital.

         o The Fund's net asset value per Unit was $9.51 at December 31, 1998
and $9.18 at March 31, 1999 as compared to $12.91 at December 31, 1997. These
decreases in the net asset value resulted primarily from distributions of
proceeds realized from the sale of investments.

         o The Fund redeemed 7.65% of its outstanding Units during November 1998
pursuant to its annual repurchase offer.

CUMULATIVE DISTRIBUTIONS AND NET ASSET VALUE PER UNIT

                                    [GRAPH]

CASH DISTRIBUTIONS

During 1998, the Fund declared quarterly cash distributions to investors, which
were paid out of current net investment income (4.0%), net realized gain on
investments (53.9%) and a return of capital (42.1%).

The per Unit distribution rate for the first quarter of 1998 varied between
$1.00 and $1.13 depending upon the closing in which the particular Units were
issued. This disproportionate cash distribution resulted from the Units being
issued on different dates during 1990, and thus being entitled to differing
Preferred Return amounts, as defined in the Fund's Partnership Agreement. These
disproportionate distribution rates eliminated the remaining Preferred Return
amounts, leaving all Units on an equal basis going forward. The per Unit
distribution rates for the second, third and fourth quarters of 1998 were $1.00,
$.30 and $.30, respectively.

The cash distribution for the first quarter of 1999 was paid during May 1999 at
a rate of $.30 per Unit. The distribution for the second quarter of 1999, which
is payable during August 1999, will also be paid at a rate of $.30 per Unit.
Following the payment of the distribution for the second quarter of 1999,
cumulative cash distributions paid to investors since the Fund's inception
during 1990 will total between $16.02 and $15.70 on a per Unit ($20.00 cost)
basis, depending upon the closing in which the particular Units were issued.

The Fund's ability to continue to pay quarterly distributions is uncertain at
this time. The distribution question will be addressed on a quarterly basis, and
will involve the consideration of a number of issues, including the 1999
repurchase offer, the sale of KEMET shares, and the resumption of RBM interest
payments as discussed below. A significant portion of the 1999 distributions is
expected to constitute a return of capital.

PORTFOLIO ACTIVITY

                                 LMC Corporation

During early 1998, LMC Corporation ("LMC") determined that it needed $6 million
to fund the development of its new product (the TrackMaster), finance the
downpayment on and move to a new facility, purchase capital equipment needed to
modernize the company's production operations and to provide working capital. In
order to raise this capital, LMC offered to its three existing shareholders the
right to purchase 12 million additional common shares at a price of $.50 per
share. The Fund was offered 4,977,900 shares and purchased all of such shares
for a total consideration of $2,488,950. As a result of purchasing these
additional shares, the Fund now owns approximately 50% of LMC's common stock.
Fiduciary Capital Pension Partners, L.P., an affiliated fund ("FCPP"), also
purchased the shares it was offered. The two funds now control approximately 91%
of LMC's common stock.

LMC's third shareholder, Paul Wallace, had until November 1, 1998 to exercise
the right to purchase 3,000,000 shares for $1.5 million. He did not exercise
this right. The Fund and FCPP subsequently decided to lend an additional $1.5
million to LMC, thus enabling LMC to complete its capitalization plan.


                           -------------------------
                                       TWO


<PAGE>   5
                        FIDUCIARY CAPITAL PARTNERS, L.P.
--------------------------------------------------------------------------------

                        MESSAGE TO INVESTORS (CONTINUED)

In September 1998, LMC purchased a 158,000 square foot office and manufacturing
facility in Brigham City, Utah from Thiokol Chemical for an aggregate purchase
price of $1,760,000. LMC has since moved its operations to this facility. LMC's
previous facility, which consisted of eleven separate buildings in Logan, Utah,
was outdated and inefficient. this new facility allows lmc to house its
operations in one building and is expected to significantly reduce manufacturing
costs. As part of the new facility, LMC installed a state of the art paint
facility, which has improved product quality and is expected to generate
additional revenues from contract painting for other manufacturers. As part of
the move, LMC acquired other new capital equipment, which is also expected to
create significant operating efficiencies. The monthly costs associated with
buying this building are less than the amounts LMC was previously expending on
lease payments and further economies are being obtained through subleasing of
excess office and manufacturing space.

During October 1998, Caterpillar Inc. ("Caterpillar") acquired a major stake in
A.S.V., Inc. ("ASV"), the leader in the skid loader market, and has the option
to ultimately take control of ASV for a purchase price based on a valuation in
excess of $200 million. LMC introduced its skid loader, the TrackMaster, in
1998. While Caterpillar will be a strong competitor, we believe that its
acquisition of ASV validates LMC's strategy and concept that there is a very
large market for this new product. We believe that LMC has a superior machine
and that LMC will be successful in capturing a significant share of this market.

                      R.B.M. Precision Metal Products, Inc.

R.B.M. Precision Metal Products, Inc. ("RBM") had a record year for fiscal 1998,
with sales of approximately $30 million and EBITDA of approximately $2.7
million. However, these sales were achieved primarily through one contract with
Digital Equipment Corporation ("DEC"). During August 1998, RBM notified the Fund
that anticipated sales to DEC and other large customers were expected to decline
significantly in its upcoming fiscal year. Of particular concern were sales to
DEC, which was acquired by Compaq Computer Corp. As a result of the expected
decline in sales, RBM began the process of restructuring its debt, including the
subordinated debt held by the Fund. The Fund received the quarterly interest
payment that was due from RBM on August 24, 1998. The interest payment that was
due during November 1998 was deferred and subsequently converted to equity
pursuant to the restructuring described below.

During December 1998, RBM and its lenders completed a restructuring under which
a new senior lender, Norwest Business Credit, replaced Bank of America. As part
of this restructuring, RBM's principal shareholder contributed additional equity
to the company and the subordinated lenders, including the Fund, agreed to
accept shares of RBM's common stock as payment for the next three quarterly
interest payments beginning with the payment that was due during November 1998.
As a consequence, the Fund's ownership of RBM, on a fully-diluted basis,
increased from 6.6% to 8.1%, assuming exercise of its warrants. The
restructuring was designed to provide RBM with a period of time in which to
secure additional customers and return to a more stable financial position under
which RBM could meet its interest obligations to its creditors, including the
Fund.

As a result of these developments, the Fund stopped accruing interest on its RBM
subordinated debt effective August 24, 1998. In addition, the Fund recorded
aggregate writedowns of $753,634 relating to RBM during 1998. We expect cash
interest payments to resume with the August, 1999 quarterly payment.

                 Atlas Environmental, Inc. / WasteMasters, Inc.

On June 3, 1998, the Fund exchanged its Atlas Environmental, Inc. ("Atlas")
(which was in bankruptcy proceedings) subordinated notes and warrants for
989,414 shares of common stock of WasteMasters, Inc. ("WMI"), an Atlanta,
Georgia based waste management company. Pursuant to the terms of the agreement,
the Fund is prohibited from selling its WMI common stock for 24 months. In
addition, the Fund granted the entity acquiring the Fund's Atlas securities a
call on the Fund's WMI common stock during the 24 month lock up period and right
of first refusal thereafter. The call price is $11.25 per share.

The WMI common stock, which trades on the OTC Market System ("WASTE"), closed at
$1.78 (an average of the closing bid and ask prices) on June 3, 1998. Based on
these prices, the Fund's WMI common stock had a trading value of $1,761,157 on
the date of the exchange (June 3, 1998). However due to a number of factors,
including the speculative nature of the WMI stock, the two year lock up period
and the relative size of the Fund's stock position versus the daily trading
volume, FCM decided to carry the WMI stock at the same $1 nominal value that the
Atlas securities were previously carried by the Fund. The WMI stock has recently
traded near its 52-week low of $0.025 per share.



                        --------------------------------
                                      THREE


<PAGE>   6

                        FIDUCIARY CAPITAL PARTNERS, L.P.
--------------------------------------------------------------------------------

                        MESSAGE TO INVESTORS (CONTINUED)

The Fund recorded a realized loss of $2,560,453 on the exchange, which was equal
to the amount of the loss that the Fund claimed for income tax purposes from the
disposition of the Atlas securities. The $1,321,794 balance of the unrealized
loss previously recorded by the Fund with respect to the Atlas securities
continues to be carried by the Fund as an unrealized loss.

                           AR Accessories Group, Inc.

The Fund owned an equity position in AR Accessories Group, Inc. ("ARA") since
1992. This equity position was acquired in connection with a subordinated debt
investment, which ARA prepaid during 1994.

ARA filed for bankruptcy protection during March 1998. ARA's assets were
liquidated at auction during May 1998, with the proceeds from the sale
satisfying only a portion of ARA's debt. As a result, the $378,011 cost of the
Fund's equity investment in ARA was written off as a realized loss during May
1998.

                             Mobile Technology, Inc.

On June 1, 1998, the Fund received $191,469 from the sale of its equity position
in Mobile Technology, Inc. The Fund recorded a realized loss of $96,461 as a
result of this sale.

INVESTMENT PERFORMANCE

The following analysis reflects only the Fund's investments that have gone full
cycle, i.e., the investments that have been sold and with respect to which the
Fund has recorded a realized gain or loss. Thus, investments that the Fund still
owns, such as LMC, RBM and WMI, are not included.

As reflected in the following graph and the schedules on page six of this Annual
Report, the Fund invested a total of $50.6 million in subordinated debt
investments and received total realized proceeds of $57.6 million, including
interest income, fees and prepayment penalties. In the aggregate, these debt
investments yielded a return on investment of 1.1 to 1 and an annualized
internal rate of return of 7.60%. The Fund also invested $3.7 million in equity
securities, from which it realized total proceeds of $13.3 million. In the
aggregate, these equity investments yielded a return on investment of 3.6 to 1
and an internal rate of return of 33.19%. Please note that prior performance is
not necessarily indicative of future results.

                                    [CHART]

<TABLE>
<CAPTION>
                         Total
                      -----------
<S>                   <C>
Note Inv.             $50,551,703
Note Proceeds         $57,586,690
Equity Inv.           $ 3,711,852
Equity Proceeds       $13,260,664
</TABLE>

We are actively attempting to realize the greatest possible returns from the
Fund's four remaining investments.

NET UNREALIZED GAIN (LOSS) ON PORTFOLIO INVESTMENTS

The cumulative net unrealized gain (loss) on investments held by the Fund at
March 31, 1999 and December 31, 1998, consisted of the following components:

<TABLE>
<CAPTION>
                       NET UNREALIZED GAIN (LOSS) RECORDED AS OF
                       -----------------------------------------
                       MARCH 31, 1999          DECEMBER 31, 1998
                       ---------------         -----------------
<S>                    <C>                     <C>
KEMET                  $       310,578         $         309,704
LMC                           (858,080)                 (858,080)
RBM                           (753,634)                 (753,634)
WMI                         (1,321,794)               (1,321,794)
                       ---------------         -----------------
                       $    (2,622,930)        $      (2,623,804)
                       ===============         =================
</TABLE>

PERIODIC UNIT REPURCHASE POLICY

Pursuant to the terms of the Fund's periodic unit repurchase policy, the Fund
has annually offered to purchase from investors, up to 7.5% of its outstanding
Units for an amount equal to the current net asset value per Unit, net of a 2%
fee, which was 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. During November
1998, 91,870 Units (7.65% of the outstanding Units) were redeemed at a net asset
value per Unit of $9.73 ($9.54, net of the 2% fee).




                         -----------------------------
                                      FOUR


<PAGE>   7

                        FIDUCIARY CAPITAL PARTNERS, L.P.
--------------------------------------------------------------------------------

                        MESSAGE TO INVESTORS (CONTINUED)

In the letter that accompanied the 1998 repurchase offer, we indicated that we
believed that the 1998 repurchase offer would be the Fund's last repurchase
offer. However, at the July 28, 1999 meeting of the General Partners it was
determined that the Fund will proceed with the 1999 repurchase offer, which will
be completed in November, 1999.

POSSIBLE LIQUIDATION PLANS

The General Partners are presently considering a number of alternative actions
through which the Fund could be liquidated during 1999 or 2000. An overall plan
of liquidation was adopted at a meeting of the General Partners held in January,
1999. The General Partners will follow the requisite regulatory procedures
required to liquidate the Fund. These procedures are expected to include
requesting an exemptive order from the Securities and Exchange Commission (the
OSECO), which will permit the Fund to act as an operating company instead of an
SEC registered investment company. Once this order is obtained, the Fund will
finalize its liquidation plan and prepare a proxy statement setting forth the
details of the plan as well as the changes required in the Fund's Partnership
Agreement. Late in the fourth quarter of 1999 or early in 2000, the Limited
Partners will be requested to approve the implementation of the liquidation plan
and the Partnership Agreement changes. As currently contemplated, Fund investors
would become direct shareholders of LMC as a result of the liquidation plan, if
all approvals are received.

                               * * * * * * * * * *

If you have any questions concerning 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

July 29, 1999


                         -----------------------------

                                      FIVE
<PAGE>   8
                        FIDUCIARY CAPITAL PARTNERS, L.P.
--------------------------------------------------------------------------------

                                DEBT INVESTMENTS
                         REALIZED GAINS AND LOSSES(1)
                                  (unaudited)

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------
                                                                                                   INTERNAL
                             YEAR OF          YEAR OF                                 GAIN(3)       RATE OF
PORTFOLIO COMPANY(2)        INVESTMENT       REPAYMENT      COST      PROCEEDS(3)     (LOSS)        RETURN
--------------------        -----------     -----------  -----------  -----------   -----------   -----------

<S>                         <C>             <C>          <C>          <C>           <C>           <C>
Carr-Gottstein Foods Co.           1990            1993  $ 2,940,260  $ 4,998,722   $ 2,058,462         23.56%
Midwest Dental Products
   Corporation                     1990            1992    5,478,467    7,946,060     2,467,593         22.63
Neodata Corporation                1990            1993    2,684,449    3,877,613     1,193,164         17.11
KEMET Corporation                  1991            1993    4,014,737    5,494,046     1,479,309         17.63
Mobile Technology, Inc.            1991            1998    3,777,475    1,030,215    (2,747,260)          N/A
Huntington Holdings, Inc.          1992            1994    5,292,479    7,480,171     2,187,692         20.07
AR Accessories Group, Inc.         1992            1994    5,478,467    6,686,926     1,208,459         11.74
ENI Holding Corp.                  1993            1997    5,914,363    9,477,926     3,563,563         13.91
KB Alloys, Inc.                    1993            1995    3,489,783    5,185,069     1,695,286         18.32
KEMET Corporation                  1993(4)         1993    2,054,425    2,186,222       131,797         26.41
Protection One, Inc.               1993            1995      985,660    1,338,165       352,505         22.11
Canadian's Holdings, Inc.          1994            1996    2,876,392      367,216    (2,509,176)          N/A
Canadian's Holdings, Inc.          1995(4)         1996    1,750,113       62,294    (1,687,819)          N/A
Atlas Environmental, Inc.          1996            1998    3,814,633    1,456,045    (2,358,588)          N/A
                                                         -----------  -----------   -----------   -----------
     Totals                                              $50,551,703  $57,586,690   $ 7,034,987          7.60%
                                                         ===========  ===========   ===========   ===========
</TABLE>


                               EQUITY INVESTMENTS
                          REALIZED GAINS AND LOSSES(1)
                                  (unaudited)

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------
                                                                                                   INTERNAL
                             YEAR OF          YEAR OF                                  GAIN         RATE OF
PORTFOLIO COMPANY(2)        INVESTMENT      REALIZATION     COST        PROCEEDS      (LOSS)        RETURN
--------------------        -----------     -----------  -----------  -----------   -----------   -----------

<S>                         <C>             <C>          <C>          <C>           <C>           <C>

Carr-Gottstein Foods Co.           1990            1995  $   894,666  $ 1,450,374   $   555,708          9.78%
Neodata Corporation                1990            1997       41,089    1,118,393     1,077,304         52.07
KEMET Corporation                  1991       1994/1995       70,616    4,547,055     4,476,439        112.37
Mobile Technology, Inc.            1991            1992      440,586           --      (440,586)          N/A
Huntington Holdings, Inc.          1992       1996/1998      103,811    1,478,483     1,374,672         70.10
Neodata Corporation                1992(4)         1997      296,858      309,103        12,245          0.81
AR Accessories Group, Inc.         1992            1998      273,920           --      (273,920)          N/A
ENI Holding Corp.                  1993            1997      811,976    3,327,051     2,515,075         34.60
KEMET Corporation                  1993(4)         1994      600,443      883,564       283,121         41.10
Protection One, Inc.               1993            1995       97,340      146,641        49,301         21.02
Canadian's Holdings, Inc.          1994            1996       39,782           --       (39,782)          N/A
Atlas Environmental, Inc.          1996            1998       40,765           --       (40,765)          N/A
                                                         -----------  -----------   -----------   -----------
     Totals                                              $ 3,711,852  $13,260,664   $ 9,548,812         33.19%
                                                         ===========  ===========   ===========   ===========
</TABLE>

(1)      Note that prior performance is not necessarily indicative of future
         results.
(2)      Includes investment in subsidiaries, if applicable.
(3)      Includes interest income, fees and prepayment penalties.
(4)      Represents a follow-on investment in an existing portfolio company.


                         -----------------------------
                                       SIX

<PAGE>   9

                        FIDUCIARY CAPITAL PARTNERS, L.P.
--------------------------------------------------------------------------------

                        PROFILES OF PORTFOLIO COMPANIES

            VALUE OF 1998 YEAR-END INVESTMENTS BY PORTFOLIO COMPANY

                                     [GRAPH]

<TABLE>
<CAPTION>
PORTFOLIO
 COMPANY                   PERCENTAGE
----------                 ----------
<S>                        <C>
KEMET                          3.1%
LMC                           65.0%
RBM                            7.1%
Temporary Investment          24.8%
</TABLE>

KEMET CORPORATION ("KEMET") KEMET, headquartered in Greenville, South Carolina,
is a leading manufacturer and distributor of both solid tantalum and monolithic
ceramic capacitors used as components in circuit boards. The KEMET stock is
listed on the NASDAQ National Market System.

LMC Corporation ("LMC") LMC, headquartered in Brigham City, Utah, is a leading
U.S. manufacturer of low ground pressure track vehicles. These vehicles are used
primarily for construction, landscaping and infrastructure development. Primary
purchasers of these vehicles include private contractors, ski resorts, utility
companies and various governmental agencies for use on construction sites and/or
environmentally sensitive locations.

R.B.M. Precision Metal Products, Inc. ("RBM") RBM, headquartered in Colorado
Springs, Colorado, is a manufacturer of precision sheet metal enclosures,
chassis and assemblies for business machines.

WasteMasters, Inc. ("WMI") WMI, headquartered in Atlanta, Georgia, is a waste
management company. The WMI stock is traded on the OTC Market System.



                         -----------------------------
                                      SEVEN

<PAGE>   10
                        FIDUCIARY CAPITAL PARTNERS, L.P.
--------------------------------------------------------------------------------

                             SCHEDULE OF INVESTMENTS


<TABLE>
<CAPTION>
DECEMBER 31, 1998
-----------------------------------------------------------------------------------------------------------
  PRINCIPAL
   AMOUNT/                                     INVESTMENT      AMORTIZED                      % OF TOTAL
   SHARES                INVESTMENT               DATE            COST           VALUE        INVESTMENTS
-----------------------------------------------------------------------------------------------------------

<S>                  <C>                       <C>             <C>            <C>             <C>
MANAGED COMPANIES:

27,944 sh.           KEMET Corporation,
                     Common Stock(1)*           07/11/91       $   9,905       $ 319,609
                                                               ---------       ---------       ------
                                                                   9,905         319,609          3.1%
                                                               ---------       ---------       ------

$1,912,400           LMC Corporation, 12.00%
                     Senior Subordinated        11/01/96
                     Revolving Notes             through
                     due 10/31/00 (Note 5)      12/29/98       1,912,400       1,912,400

260,400 sh.          LMC Operating Corp., 7.00%
                     Cumulative Redeemable
                     Preferred Stock*           06/10/94       2,596,621       2,596,621

5,523,500 sh.        LMC Corporation,           02/09/96
                     Common Stock*               through
                                                08/05/98       3,034,549       2,176,469

52.08 sh.            LMC Credit Corp.,
                     Common Stock*              02/09/96               1               1
                                                               ---------       ---------       ------
                                                               7,543,571       6,685,491         65.0
                                                               ---------       ---------       ------

$1,460,000           R.B.M. Precision Metal
                     Products, Inc., 13.00%
                     Senior Subordinated
                     Secured Notes due
                     5/24/02(2)*                05/24/95       1,400,680         730,000

11,060.6 sh.         R.B.M. Precision Metal
                     Products, Inc., Warrants
                     to Purchase Common Stock*  05/24/95          82,955               1

14.392 sh.           R.B.M. Precision Metal
                     Products, Inc., Common
                     Stock*                     12/09/98               1               1
                                                               ---------       ---------       ------
                                                               1,483,636         730,002          7.1
                                                               ---------       ---------       ------
      Total Investments in Managed Companies
        (74.8% of net assets)                                  9,037,112       7,735,102         75.2
                                                               ---------       ---------       ------

NON-MANAGED COMPANY:

989,414 sh.          WasteMasters, Inc.,
                     Common Stock (3)*          06/03/98       1,321,795               1
                                                               ---------       ---------       ------
      Total Investment in Non-Managed Company
        (0.0% of net assets)                                   1,321,795               1          0.0
                                                               ---------       ---------       ------
</TABLE>


              The accompanying notes to financial statements are an
                         integral part of this schedule.
                          -----------------------------
                                      EIGHT

<PAGE>   11

                        FIDUCIARY CAPITAL PARTNERS, L.P.
--------------------------------------------------------------------------------

                       SCHEDULE OF INVESTMENTS (CONTINUED)

<TABLE>
<CAPTION>
DECEMBER 31, 1998
-------------------------------------------------------------------------------------------------------------
  PRINCIPAL
   AMOUNT/                                          INVESTMENT       AMORTIZED                   % OF TOTAL
   SHARES        INVESTMENT                            DATE             COST          VALUE      INVESTMENTS
-------------------------------------------------------------------------------------------------------------

<S>              <C>                                <C>             <C>            <C>           <C>
TEMPORARY INVESTMENTS:

$2,550,000       Ford Motor Credit Corporation,
                 5.27% Notes due 1/11/99             12/28/98         2,546,274      2,546,274
                                                                    -----------    -----------     --------
     Total Temporary Investments (24.6% of net assets)                2,546,274      2,546,274         24.8
                                                                    -----------    -----------     --------
     Total Investments (99.4% of net assets)                        $12,905,181    $10,281,377        100.0%
                                                                    ===========    ===========     ========
</TABLE>

(1)      The KEMET Corporation common stock trades on the NASDAQ National Market
         System.
(2)      The notes will amortize in three equal annual installments of $486,667
         commencing on May 24, 2000.
(3)      The WasteMasters, Inc. common stock, which trades on the NASDAQ Small
         Cap Market System, is subject to a 24 month lock up period, a call
         option and a right of first refusal.
*        Non-income producing security.



              The accompanying notes to financial statements are an
                         integral part of this schedule.
                          -----------------------------
                                      NINE

<PAGE>   12
                        FIDUCIARY CAPITAL PARTNERS, L.P.
--------------------------------------------------------------------------------

                                 BALANCE SHEETS


<TABLE>
<CAPTION>
DECEMBER 31, 1998 AND 1997
-------------------------------------------------------------------------------------------------------------
                                                                                  1998            1997
-------------------------------------------------------------------------------------------------------------
<S>                                                                        <C>              <C>
ASSETS:

 Investments (Notes 2, 10, 11 and 12)

   Portfolio investments, at fair value:

       Managed companies (amortized cost -
         $9,037,112 and $11,138,061, respectively)                         $     7,735,102  $     6,594,804

       Non-managed company (amortized cost-
         $1,321,795)                                                                     1               --

   Temporary investments, at amortized cost                                      2,546,274       10,193,557
                                                                           ---------------  ---------------
       Total investments                                                        10,281,377       16,788,361

   Cash and cash equivalents (Note 2)                                              837,202          263,694

     Accrued interest receivable (Note 12)                                         103,233           76,821

     Other assets                                                                   31,859           66,060
                                                                           ---------------  ---------------
       Total assets                                                        $    11,253,671  $    17,194,936
                                                                           ===============  ===============
LIABILITIES:

   Due to affiliates (Notes 6, 7, 8 and 9)                                 $        31,197  $        39,123

   Accounts payable and accrued liabilities                                        539,360          484,837

   Distributions payable to partners (Note 3)                                      336,271        1,213,701
                                                                           ---------------  ---------------
       Total liabilities                                                           906,828        1,737,661
                                                                           ---------------  ---------------

COMMITMENTS AND CONTINGENCIES (NOTE 13)

NET ASSETS (NOTES 3 AND 4):

   Managing General Partner                                                      (207,011)          (54,555)

   Limited Partners (equivalent to $9.51
       and $12.91, respectively, per limited
       partnership unit based on 1,109,694
       and 1,201,564 units outstanding) (Note 5)                               10,553,854        15,511,830
                                                                           ---------------  ---------------
          Total net assets                                                     10,346,843        15,457,275
                                                                           ---------------  ---------------
              Total liabilities and net assets                             $   11,253,671   $    17,194,936
                                                                           ==============   ===============
</TABLE>




              The accompanying notes to financial statements are an
                  integral part of these financial statements.
                          -----------------------------
                                       TEN


<PAGE>   13

                        FIDUCIARY CAPITAL PARTNERS, L.P.
--------------------------------------------------------------------------------

                            STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
FOR EACH OF THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996

-------------------------------------------------------------------------------------------------------------------
                                                                      1998             1997             1996
-------------------------------------------------------------------------------------------------------------------

<S>                                                           <C>               <C>               <C>
INVESTMENT INCOME:

  Income:

     Interest                                                 $       728,803   $     1,329,751   $     1,569,923

     Dividend                                                              --           292,981                --

     Other income                                                      14,215            24,064            30,564
                                                              ---------------   ---------------   ---------------
       Total investment income                                        743,018         1,646,796         1,600,487
                                                              ---------------   ---------------   ---------------
   Expenses:

     Professional fees                                                164,127           169,499           159,165

     Fund administration fees (Note 7)                                143,370           143,370           143,370

     Investment advisory fees (Note 6)                                119,733           141,646           160,179

     Administrative expenses (Note 7)                                  81,105            81,105            81,105

     Independent General Partner fees
       and expenses (Note 8)                                           61,231            55,219            55,990

     Other expenses                                                    65,671            39,264            48,771
                                                              ---------------   ---------------   ---------------
       Total expenses                                                 635,237           630,103           648,580
                                                              ---------------   ---------------   ---------------
NET INVESTMENT INCOME                                                 107,781         1,016,693           951,907
                                                              ---------------   ---------------   ---------------

REALIZED AND UNREALIZED
   GAIN (LOSS) ON INVESTMENTS:

     Net realized (loss) gain on investments (Note 10)             (3,008,930)        3,545,258        (3,948,869)

     Net change in unrealized loss
       on investments (Note 11)                                     1,919,453        (3,859,138)        2,591,211
                                                              ---------------   ---------------   ---------------
         Net loss on investments                                   (1,089,477)         (313,880)       (1,357,658)
                                                              ---------------   ---------------   ---------------
NET (DECREASE) INCREASE IN NET
   ASSETS RESULTING FROM OPERATIONS                           $      (981,696)  $       702,813   $      (405,751)
                                                              ===============   ===============   ===============
</TABLE>


              The accompanying notes to financial statements are an
                         integral part of this schedule.
                          -----------------------------
                                     ELEVEN


<PAGE>   14

                        FIDUCIARY CAPITAL PARTNERS, L.P.
--------------------------------------------------------------------------------

                            STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
FOR EACH OF THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996

--------------------------------------------------------------------------------------------------------------
                                                                 1998             1997              1996
--------------------------------------------------------------------------------------------------------------

<S>                                                      <C>               <C>               <C>
CASH FLOWS FROM OPERATING ACTIVITIES:

  Net (decrease) increase in net assets
     resulting from operations                           $      (981,696)  $       702,813   $      (405,751)

  Adjustments to reconcile net (decrease) increase
     in net assets resulting from operations to
     net cash provided by operating activities:

       Accreted discount on portfolio investments                (12,929)          (39,028)          (42,587)

       Change in assets and liabilities:
         Accrued interest receivable                             (26,412)           36,988            26,681
         Other assets                                             34,201           (58,412)           (4,442)
         Due to affiliates                                        (7,926)          (13,532)           (7,717)
         Accounts payable and accrued liabilities                  2,997           (20,670)           17,195

       Net realized loss (gain) on investments                 3,008,930        (3,545,258)        3,948,869

       Net change in unrealized loss
         on investments                                       (1,919,453)        3,859,138        (2,591,211)
                                                         ---------------   ---------------   ---------------
            Net cash provided by operating activities             97,712           922,039           941,037
                                                         ---------------   ---------------   ---------------

CASH FLOWS FROM INVESTING ACTIVITIES:

  Purchase of portfolio investments                           (3,531,710)       (1,005,376)       (5,384,518)

  Proceeds from dispositions of portfolio investments          1,366,389        10,721,487         1,340,631

  Sale (purchase) of temporary investments, net                7,647,283        (6,396,301)        6,599,536
                                                         ---------------   ---------------   ---------------
    Net cash provided by investing activities                  5,481,962         3,319,810         2,555,649
                                                         ---------------   ---------------   ---------------

CASH FLOWS FROM FINANCING ACTIVITIES:

  Cash distributions paid to partners                         (4,112,271)       (2,887,058)       (1,705,750)

  Repurchase of limited partnership units                       (893,895)       (1,363,640)       (1,719,362)
                                                         ---------------   ---------------   ---------------
    Net cash used in financing activities                     (5,006,166)       (4,250,698)       (3,425,112)
                                                         ---------------   ---------------   ---------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS             573,508            (8,849)           71,574

CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR                   263,694           272,543           200,969
                                                         ---------------   ---------------   ---------------
CASH AND CASH EQUIVALENTS AT END OF YEAR                         837,202   $       263,694   $       272,543
                                                         ===============   ===============   ===============
NONCASH INVESTING AND FINANCING ACTIVITIES:
   Investments exchanged for other investments           $     1,639,200   $            --   $            --
                                                         ===============   ===============   ===============
</TABLE>


              The accompanying notes to financial statements are an
                         integral part of this schedule.
                          -----------------------------
                                     TWELVE


<PAGE>   15

                        FIDUCIARY CAPITAL PARTNERS, L.P.
--------------------------------------------------------------------------------

                       STATEMENTS OF CHANGES IN NET ASSETS

<TABLE>
<CAPTION>
FOR EACH OF THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
----------------------------------------------------------------------------------------------------------------------------
                                                                         1998              1997               1996
----------------------------------------------------------------------------------------------------------------------------
<S>                                                                <C>               <C>               <C>
(Decrease) increase in net assets resulting from operations:

   Net investment income                                           $       107,781   $     1,016,693   $       951,907

   Net realized (loss) gain on investments                              (3,008,930)        3,545,258        (3,948,869)

   Net change in unrealized loss on investments                          1,919,453        (3,859,138)        2,591,211
                                                                   ---------------   ---------------   ---------------
      Net (decrease) increase in net assets
        resulting from operations                                         (981,696)          702,813          (405,751)

Repurchase of limited partnership units (Note 5)                          (893,895)       (1,363,640)       (1,719,362)

Distributions to partners from -

   Net investment income                                                  (129,001)       (1,016,693)       (1,174,520)

   Realized gain on investments                                         (1,742,647)       (1,905,894)         (498,482)

   Return of capital                                                    (1,363,193)         (784,482)               --
                                                                   ---------------   ---------------   ---------------
      Total decrease in net assets                                      (5,110,432)       (4,367,896)       (3,798,115)

Net assets:

   Beginning of year                                                    15,457,275        19,825,171        23,623,286
                                                                   ---------------   ---------------   ---------------
   End of year (including no undistributed net
      investment income)                                           $    10,346,843   $    15,457,275   $    19,825,171
                                                                   ===============   ===============   ---------------
</TABLE>




              The accompanying notes to financial statements are an
                         integral part of this schedule.
                          -----------------------------
                                    THIRTEEN


<PAGE>   16

                        FIDUCIARY CAPITAL PARTNERS, L.P.
--------------------------------------------------------------------------------

                        SELECTED PER UNIT DATA AND RATIOS


<TABLE>
<CAPTION>
FOR EACH OF THE YEARS ENDED DECEMBER 31, 1998, 1997, 1996, 1995 AND 1994
----------------------------------------------------------------------------------------------------------------------------------
                                                      1998              1997            1996             1995             1994
----------------------------------------------------------------------------------------------------------------------------------
<S>                                              <C>              <C>              <C>              <C>              <C>
PER UNIT DATA:

  Investment income(1)                           $         .54    $        1.26    $        1.14    $        1.74    $        1.66

  Expenses(1)                                             (.46)            (.48)            (.46)            (.41)            (.40)
                                                 -------------    -------------    -------------    -------------    -------------
     Net investment income(1)                              .08              .78              .68             1.33             1.26

  Net realized (loss) gain on investments(1)             (2.20)            2.72            (2.80)            3.00            (1.50)

  Net change in unrealized loss
    on investments(1)                                     1.40            (2.97)            1.84            (4.70)            2.58

  Effect of unit repurchases on
     net asset value                                       .02               --             (.03)            (.19)             .03

  Distributions declared to partners                     (2.70)           (2.90)           (1.20)           (1.20)           (1.80)
                                                 -------------    -------------    -------------    -------------    -------------
     Net (decrease) increase in net asset value          (3.40)           (2.37)           (1.51)           (1.76)             .57

       Net asset value:

          Beginning of year                              12.91            15.28            16.79            18.55            17.98
                                                 -------------    -------------    -------------    -------------    -------------
          End of year                            $        9.51    $       12.91    $       15.28    $       16.79    $       18.55
                                                 =============    =============    =============    =============    =============

RATIOS:

  Ratio of expenses to average net assets                 4.92%            3.53%            2.85%            2.23%            2.24%

  Ratio of net investment income to
    average net assets                                    0.84%            5.69%            4.19%            7.19%            7.06%

Number of limited partnership units
  at end of year                                     1,109,694        1,201,564        1,299,176        1,407,244        1,526,949
</TABLE>

------------

(1)      Calculated using the weighted average number of limited partnership
         units outstanding during the years ended December 31, 1998, 1997, 1996,
         1995 and 1994 of 1,190,993, 1,288,211, 1,395,138, 1,513,503 and
         1,669,129, respectively.




              The accompanying notes to financial statements are an
                         integral part of this schedule.
                          -----------------------------
                                    FOURTEEN


<PAGE>   17

                        FIDUCIARY CAPITAL PARTNERS, L.P.
--------------------------------------------------------------------------------
                          NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 1998 AND 1997

1.       ORGANIZATION AND PURPOSE

Fiduciary Capital Partners, L.P. (the "Fund"), a Delaware limited partnership,
was formed on October 20, 1988 to operate as a business development company
under the Investment Company Act of 1940. The Fund's operations commenced on
August 14, 1990.

FCM Fiduciary Capital Management Company ("FCM"), the Managing General Partner
of, and the investment adviser to, the Fund, is responsible, subject to the
supervision of the Independent General Partners, for overseeing and monitoring
the Fund's investments.

The investment objective of the Fund is to provide current income and capital
appreciation by investing primarily in subordinated debt and related equity
securities issued as the mezzanine financing of privately structured, friendly
leveraged buyouts, leveraged acquisitions and leveraged recapitalizations. These
investments are referred to herein as "portfolio investments". Managed companies
are those to which significant managerial assistance is offered.

As set forth in the Partnership Agreement, the Fund's investment period ended on
December 31, 1995. Although the Fund is permitted to make additional investments
in existing portfolio companies, the Fund is no longer permitted to acquire
investments in new portfolio companies. A number of alternative actions through
which the Fund could be liquidated during 1999 or 2000 are currently being
considered. Once a specific plan of liquidation is developed, the requisite
regulatory procedures required to liquidate the Fund will be followed. These
procedures are expected to include requesting Limited Partner approval of the
liquidation plan through a proxy solicitation.

A separate fund, Fiduciary Capital Pension Partners, L.P. ("FCPP"), was also
formed on October 20, 1988 for tax-exempt investors with investment objectives,
policies and restrictions similar to those of the Fund. While the Fund and FCPP
have co-invested in each of the portfolio investments, each fund is accounted
for separately. Each fund's participation in the portfolio investments is in
proportion to the amount of capital that each fund had available for investment
at the time each investment was acquired. Certain expenses are allocated between
the funds based on the amount of each fund's total capital. The accompanying
financial statements include only the activities of the Fund.

2.       SIGNIFICANT ACCOUNTING POLICIES

Use of Estimates The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

Accounting Method The Fund maintains its accounting records, prepares financial
statements and files its tax returns using the accrual method of accounting.

Realized and Unrealized Gain or Loss on Investments Realized gains and losses
are recorded upon disposition of investments and are calculated based upon the
difference between the proceeds and the cost basis determined using the specific
identification method. All other changes in the valuation of investments, as
determined by FCM, are included as changes in the unrealized appreciation or
depreciation of investments in the Fund's Statements of Operations.

Valuation of Investments FCM values the Fund's investments on a weekly basis
utilizing a variety of methods. For securities that are publicly traded and for
which market quotations are available, valuations are set by the closing sales,
or an average of the closing bid and ask prices, as of the valuation date. The
Fund discounts these closing market prices between 5% and 20% to reflect lack of
liquidity if the Fund's securities are subject to legal or contractual trading
restrictions, or to reflect the potential market impact which could result from
the sale of the securities, if the Fund and FCPP combined own a material
percentage of the outstanding securities. The amount of the discount varies
based upon the type of restriction, the time remaining on the restriction and
the size of the holding.

Fair value for securities that are not fully traded in any liquid public markets
or that are privately held are determined pursuant to valuation policies and
procedures which have been approved by the Independent General Partners and
subject to their supervision. There is a range of values that are reasonable for
such investments at any particular time. Each such investment is valued
initially based upon its original cost to the Fund ("cost method"). Debt
securities with attached warrants for the purchase of common stock are initially
recorded at a discount from face value equal to the estimated relative value of
the warrants at date of investment. The discount is amortized to income as an
adjustment to yield from the debt securities. Face value less unamortized
discount represents the "amortized cost" of the debt securities.

The cost method is used until significant developments affecting the portfolio
company provide a basis for use of an appraisal valuation. Appraisal valuations
are based upon such factors as the


                         -----------------------------
                                    FIFTEEN


<PAGE>   18

                        FIDUCIARY CAPITAL PARTNERS, L.P.
--------------------------------------------------------------------------------

                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)



portfolio company's earnings, cash flow and net worth, the market prices for
similar securities of comparable companies and an assessment of the portfolio
company's future financial prospects. In a case of unsuccessful operations, the
appraisal may be based upon liquidation value. Appraisal valuations are
necessarily subjective. The Fund also may use, when available, third-party
transactions in a portfolio company's securities as the basis of valuation
("private market method"). The private market method is used only with respect
to completed transactions or firm offers made by sophisticated, independent
investors.

Temporary investments with maturities of less than 60 days are stated at
amortized cost, which approximates market value. Under this method, temporary
investments are valued at cost when purchased and thereafter a constant
proportionate amortization of any discount or premium is recorded until maturity
of the investment.

Cash and Cash Equivalents The Fund considers investments in money market funds
to be cash equivalents.

Interest Receivable on Notes Notes are placed on non-accrual status in the event
of a default (after any applicable grace period expires) or if FCM determines
that there is no reasonable expectation of collecting the interest.

Income Taxes No provision for income taxes has been made in the financial
statements because taxes on Fund income are the responsibility of the individual
partners rather than the Fund.

Investment Transactions The Fund records portfolio investment transactions on
the date on which it obtains an enforceable right to demand the securities or
payment thereof and records temporary investment transactions on the trade date.
Realized gains and losses on investments are determined on the basis of specific
identification for both accounting and tax purposes.

3.       ALLOCATIONS OF PROFITS, LOSSES AND CASH DISTRIBUTIONS

Pursuant to the Partnership Agreement, all income derived from temporary
investments will be distributed and allocated 99% to the Limited Partners and 1%
to FCM. Net investment income will, in general, be distributed and allocated:
(i) 99% to the Limited Partners and 1% to FCM until the Limited Partners have
received a cumulative non-compounded preferred return of 9% per annum on their
capital contributions to the Fund, then (ii) 70% to the Limited Partners and 30%
to FCM until FCM has received 10% of all current and prior distributions and
allocations, and thereafter, (iii) 90% to the Limited Partners and 10% to FCM.

Proceeds from capital transactions will, in general, be distributed and
allocated: (i) 99% to the Limited Partners and 1% to FCM until the Limited
Partners have received a cumulative, non-compounded preferred return of 9% per
annum on their capital contributions to the Fund from net investment income,
capital transactions, or both, then (ii) 100% to the Limited Partners until they
have received a return of their capital contributions to the Fund, and
thereafter, (iii) 80% to the Limited Partners and 20% to FCM.

Prior to 1998, cash distributions and earnings of the Fund were allocated 99% to
the Limited Partners and 1% to FCM. Pursuant to the terms of the Fund's
Partnership Agreement, the Fund's 1998 loss was allocated approximately 87% to
the Limited Partners and approximately 13% to FCM, and the portion of the 1998
cash distributions that exceeded the partners' cumulative preferred return
amounts was allocated 100% to the Limited Partners.

4.       CAPITAL CONTRIBUTIONS

Upon formation of the Fund, FCM contributed $4,000 for its general partner
interest in the Fund. Units of limited partnership interest ("Units") were then
sold in a public offering. The Fund held three closings between August 14, 1990
and October 18, 1990, receiving gross offering proceeds of $36,102,000.
Commissions and other offering costs were charged against proceeds resulting in
net capital contributions from Limited Partners of $31,860,015.

5.       PERIODIC UNIT REPURCHASE PLAN

The Fund's Limited Partners adopted a periodic unit repurchase plan during 1993.
Pursuant to the terms of the repurchase policy, the Fund has annually offered to
repurchase from its Limited Partners, up to 7.5% of its outstanding Units for an
amount equal to the current net asset value per Unit, net of a fee (not to
exceed 2%) to be retained by the Fund to offset expenses incurred in connection
with the repurchase offer. If the number of tendered Units in any year exceeds
7.5% of the outstanding Units, the Fund's General Partners may vote to
repurchase up to an additional 2% of the outstanding Units. If Units in excess
if this amount are tendered, Units are purchased on a pro-rated basis, after
giving priority to investors owning less than 100 Units.

It is currently anticipated that the Fund will not have sufficient liquidity to
fund a repurchase offer during 1999. If the Fund does not have sufficient
liquidity, the General Partners have the authority to forego the repurchase
offer under the terms of the Fund's repurchase policy. In addition, the
termination of the annual repurchase offer is expected to be included in any
plan of liquidation that is submitted to the Limited Partners for their approval
(Note 1).




                         -----------------------------
                                    SIXTEEN

<PAGE>   19

                        FIDUCIARY CAPITAL PARTNERS, L.P.
--------------------------------------------------------------------------------

                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)

Repurchases of Units since the adoption of the plan are summarized as follows:

<TABLE>
<CAPTION>
                          UNITS REPURCHASED       NET ASSET VALUE PER UNIT
                      ------------------------    ------------------------
                                 PERCENTAGE
    DATE OF                     OF OUTSTANDING                  NET OF THE
REPURCHASE OFFER       NUMBER       UNITS          GROSS          2% FEE
-----------------     --------  --------------    -------       ----------
<S>                   <C>       <C>               <C>           <C>
 November 1993         117,979       6.54%        $ 18.35       $    17.98
 November 1994         160,172       9.49%          18.41            18.04
 November 1995         119,705       7.84%          19.67            19.28
 November 1996         108,068       7.68%          15.91            15.59
 November 1997          97,612       7.51%          13.97            13.69
 November 1998          91,870       7.65%           9.73             9.54
</TABLE>

6.       INVESTMENT ADVISORY FEES

As compensation for its services as investment adviser, FCM receives a
subordinated monthly fee at the annual rate of 1% of the Fund's available
capital, as defined in the Partnership Agreement, net of certain fees received
directly by FCM from the Fund's portfolio companies. Investment advisory fees of
$119,733, $141,646 and $160,179 were incurred by the Fund for 1998, 1997 and
1996, respectively.

7.       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 $143,370 were
incurred each year by the Fund during 1998, 1997 and 1996. FCM is also
reimbursed, subject to various limitations, for administrative expenses incurred
in providing accounting and investor services to the Fund. The Fund reimbursed
FCM for administrative expenses of $81,105 each year during 1998, 1997 and 1996.

8.       INDEPENDENT GENERAL PARTNER FEES AND EXPENSES

As compensation for services rendered to the Fund, each of the Independent
General Partners receives from the Fund and FCPP, an annual fee of $30,000,
payable monthly in arrears, together with all out-of-pocket expenses. Each
fund's allocation of these fees and expenses is based on the relative number of
outstanding Units. Fees and expenses of $61,231, $55,219 and $55,990 were
incurred by the Fund for 1998, 1997 and 1996, respectively.

9.       OTHER RELATED PARTY TRANSACTIONS

FCM and its affiliates are entitled to reimbursement of direct expenses paid on
behalf of the Fund. Such reimbursements amounted to $231,913, $311,347 and
$226,061 during 1998, 1997 and 1996, respectively.

10.      PORTFOLIO INVESTMENTS

The Fund's portfolio investments consist primarily of high-yield private
placement securities issued as the mezzanine financing of privately structured,
friendly leveraged buyouts, leveraged acquisitions and leveraged
recapitalizations, and are generally linked with an equity participation. The
risk of loss upon default by an issuer is greater than with investment grade
securities because high-yield securities are generally unsecured and are usually
subordinated to other creditors of the issuer. Also, these issuers usually have
higher levels of indebtedness and are more sensitive to adverse economic
conditions than investment grade issuers. Most of these securities are subject
to resale restrictions and generally there is no quoted market for such
securities.

Although the Fund cannot eliminate the risks associated with its investments in
these high-yield securities, it has established risk management procedures. The
Fund subjects each prospective investment to rigorous analysis, and makes only
those investments that are recommended by FCM and that meet the Fund's
investment guidelines or that have otherwise been approved by the Independent
General Partners. The Fund also has procedures in place to continually monitor
its portfolio companies.

As of December 31, 1998, the Fund held portfolio investments in three Managed
Companies, with an aggregate cost of approximately $9.0 million, and one
portfolio investment in a Non-Managed Company, with a cost of approximately $1.3
million. During the year ended December 31, 1998, the Fund acquired additional
follow-on investments in LMC Corporation ("LMC") at a net aggregate cost of
approximately $2.4 million.

During 1998, the Fund (i) sold all of its Mobile Technology, Inc. stock and
warrants, (ii) received final distributions from the escrow account that was
established during 1996 in connection with the sale of its Huntington Holdings,
Inc. stock, and (iii) wrote off the cost of its equity investment in AR
Accessories Group, Inc. ("ARA") (formerly known as Amity Leather Products Co.)
as a realized loss following ARA's bankruptcy liquidation. The Fund received
$268,989 in proceeds from these three transactions, resulting in aggregate net
realized losses of $396,952.

During June 1998, the Fund exchanged its Atlas Environmental, Inc. ("Atlas")
subordinated notes (which were in default) and warrants for 989,414 shares of
common stock in WasteMasters, Inc. ("WMI"). Pursuant to the terms of the
exchange agreement, the Fund is prohibited from selling its WMI common stock for
24 months. In addition, the Fund granted the entity acquiring the Fund's Atlas
securities a call on the Fund's WMI common stock during the 24 month lock up
period and a right to first refusal thereafter. The call price is $11.25 per
share.


                         -----------------------------
                                    SEVENTEEN


<PAGE>   20
                        FIDUCIARY CAPITAL PARTNERS, L.P.
--------------------------------------------------------------------------------

                    NOTES TO FINANCIAL STATEMENTS (Continued)


The WMI common stock, which trades on the NASDAQ Small Cap Market System closed
at $1.78 (an average of the closing bid and ask prices) on the date of the
exchange. However, due to a number of factors, including the speculative nature
of the WMI stock, the two year lock up period and the relative size of the
fund's stock position versus the daily trading volume, the fund is carrying the
WMI stock at the same nominal value ($1) that the Atlas securities had
previously been carried by the fund. The 52-week low for the WMI common stock is
$0.28 per share and the price as of December 31, 1998 was $0.32.

The Fund recorded a realized loss of $2,560,453 on the exchange, which is equal
to the amount of the loss that the Fund expects to claim for income tax purposes
from the disposition of the Atlas securities. the $1,321,794 balance of the
unrealized loss previously recorded by the Fund with respect to the Atlas
securities continues to be carried by the Fund as an unrealized loss.

The Fund has pledged the common stock it owns in LMC Credit Corp. as collateral
for the corporation's debt. None of the Fund's other portfolio investments are
pledged or otherwise encumbered.

11.      UNREALIZED GAIN (LOSS) ON INVESTMENTS

As of December 31, 1997, the Fund had recorded net unrealized loss on
investments of $4,543,257. During 1998, the Fund recorded $2,295,487 of
unrealized loss on investments. In addition, the Fund disposed of investments
during 1998 with respect to which the Fund had recorded $4,214,940 of net
unrealized loss during prior years. Therefore, at December 31, 1998, the Fund
had recorded net unrealized loss on investments of $2,623,804.

12.      NON-ACCRUAL STATUS OF INVESTMENTS

In accordance with the Fund's accounting policies, the Fund stopped accruing
interest on the Atlas Senior Subordinated Secured Notes effective April 20, 1996
and the R.B.M. Precision Metal Products, Inc. ("RBM") Senior Subordinated
Secured Notes effective August 25, 1998.

During 1998, the Atlas Senior Subordinated Secured Notes were exchanged for WMI
common stock. Thus, as of December 31, 1998, the Fund's only debt investment on
non-accrual status was the RBM Senior Subordinated Secured Notes.

13.      COMMITMENTS AND CONTINGENCIES

LMC Commitment    LMC is entitled to draw down a total of $1,967,040 pursuant to
the terms of the Senior Subordinated Revolving Notes held by the Fund. As of
December 31, 1998, LMC had drawn down $1,912,400. The remaining $54,640 was
drawn down during January 1999.

Litigation    The Fund has accrued approximately $507,000 for certain known
potential liabilities related to a former investment of the Fund. In addition,
the Fund may be exposed to other asserted or unasserted legal claims encountered
in the course of its activities, past and present. Other than those amounts for
which the Fund has specifically accrued, management does not believe the
ultimate resolution of these matters will have a material adverse impact on the
operating results, financial position or cash flows of the Fund.

14.      RECONCILIATION TO INCOME TAX METHOD OF ACCOUNTING

The following is a reconciliation of the net increase in net assets resulting
from operations in the accompanying financial statements to the taxable income
reported for federal income tax purposes:

<TABLE>
<CAPTION>
                                    1998           1997           1996
                                ------------   ------------   ------------
<S>                             <C>            <C>            <C>
 Net (decrease) increase
   in net assets resulting
   from operations per
   financial statements           $ (981,696)  $    702,813   $   (405,751)
 Increase (decrease)
   resulting from:
     Unrealized loss
       on investments             (1,919,453)     3,859,139     (2,591,211)
     Realized gains and
       losses on
       investments                (3,540,468)       (90,867)       590,620
     Fee income, net of
       amortization                       --        (57,426)       (22,781)
     Interest income                 150,888             --             --
     Other                           (12,936)       (26,214)       (23,708)
                                ------------   ------------   ------------
 Taxable (loss) income
   per federal income
   tax return                   $ (6,303,665)  $  4,387,445   $ (2,452,831)
                                ============   ============   ============
</TABLE>



                         -----------------------------
                                    EIGHTEEN

<PAGE>   21

                        FIDUCIARY CAPITAL PARTNERS, L.P.
--------------------------------------------------------------------------------

                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)

The following is a reconciliation of the amount of the Fund's net assets as
shown in the accompanying financial statements and the tax bases of the Fund's
net assets:

<TABLE>
<CAPTION>
                                    1998           1997          1996
                                ------------  ------------  ------------
<S>                             <C>           <C>           <C>
Net assets per
  financial statements          $ 10,346,843  $ 15,457,275  $ 19,825,171
  Realized gains and
    losses on investments            506,660     4,047,128     4,137,995
  Syndication, organization
    and start-up costs, net        3,243,217     3,352,335     3,363,008
  Unrealized loss on
    investments                    2,623,804     4,543,257       684,118
  Distributions payable              336,271     1,213,701       393,690
  Additional stock basis             150,888            --            --
  Fee income, net of
    amortization                          --            --        57,426
  Accrued expenses                    23,000        23,000        25,950
                                ------------  ------------  ------------
  Tax bases of net assets       $ 17,230,683  $ 28,636,696  $ 28,487,358
                                ============  ============  ============
</TABLE>


                         -----------------------------
                                    NINETEEN


<PAGE>   22

                       FIDUCIARY CAPITAL PARTNERS, L.P.:
--------------------------------------------------------------------------------

                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Partners of
Fiduciary Capital Partners, L.P.:

We have audited the accompanying balance sheets of Fiduciary Capital Partners,
L.P. (a Delaware limited partnership) as of December 31, 1998 and 1997,
including the schedule of investments as of December 31, 1998, and the related
statements of operations, cash flows and changes in net assets for each of the
three years in the period ended December 31, 1998 and the selected per unit data
and ratios for the five years then ended. These financial statements and per
unit data and ratios are the responsibility of the partnership's managing
general partner. Our responsibility is to express an opinion on these financial
statements and per unit data and ratios based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and per unit data
and ratios are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1998 and 1997, by correspondence with the custodian. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.

In our opinion, the financial statements and selected per unit data and ratios
referred to above present fairly, in all material respects, the financial
position of Fiduciary Capital Partners, L.P. as of December 31, 1998 and 1997,
and the results of its operations, its cash flows and the changes in its net
assets for each of the three years in the period ended December 31, 1998, and
the selected per unit data and ratios for the five years then ended, in
conformity with generally accepted accounting principles.

As discussed in Note 2, the financial statements include investment securities
valued at $7,415,493 at December 31, 1998 (71.7% of net assets) and $6,055,136
at December 31, 1997 (39.2% of net assets) whose values have been estimated by
the managing general partner in the absence of readily ascertainable market
values. However, because of the inherent uncertainty of valuation, the managing
general partner's estimate of values may differ significantly from the values
that would have been used had a ready market existed for the securities and the
differences could be material.


                           /s/ Arthur Andersen LLP


Denver, Colorado
February 5, 1999.



                         -----------------------------
                                     TWENTY

<PAGE>   23
                       FIDUCIARY CAPITAL PARTNERS, L.P.:
--------------------------------------------------------------------------------

                MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                       CONDITION AND RESULTS OF OPERATIONS



The following discussion should be read in conjunction with the Fund's audited
Financial Statements and the Notes thereto. This Report contains, in addition to
historical information forward-looking statements that include risks and other
uncertainties. The Fund's actual results may differ materially from those
anticipated in these forward-looking statements. While the Fund can not always
predict what factors would cause actual results to differ materially from those
indicated by the forward-looking statements, factors that might cause such a
difference include general economic and business conditions, effects of
competition and the year 2000 issue on the business of the portfolio companies
and other factors discussed elsewhere in this Report. Readers are urged to
consider statements that include the terms "believes", "expects", "plans",
"anticipates", "intends" or the like to be uncertain and forward-looking. The
Fund undertakes no obligation to release publicly any revisions to these
forward-looking statements to reflect events or circumstances after the date
hereof or to reflect the occurrence of anticipated or unanticipated events.

Liquidity and Capital Resources

During 1990, the Fund completed a public offering of its Units. Net offering
proceeds available to the Fund, after deducting commissions and other offering
costs, totaled $31,860,015.

The Fund's Limited Partners adopted a periodic unit repurchase plan during 1993.
Pursuant to the terms of the repurchase policy, the Fund has annually offered to
purchase from its Limited Partners, up to 7.5% of its outstanding Units for an
amount equal to the current net asset value per Unit, net of a fee (not to
exceed 2%) to be retained by the Fund to offset expenses incurred in connection
with the repurchase offer. If the number of tendered Units in any year exceeds
7.5% of the outstanding Units, the Fund's General Partners may vote to purchase
up to an additional 2% of the outstanding Units.

Repurchases of Units since the adoption of the plan are summarized as follows:

<TABLE>
<CAPTION>
                                UNITS REPURCHASED         NET ASSET VALUE PER UNIT
                            -------------------------     -----------------------
                                         PERCENTAGE
    DATE OF                            OF OUTSTANDING                  NET OF THE
 REPURCHASE OFFER            NUMBER         UNITS          GROSS         2% FEE
 ----------------           -------    --------------     -------      ----------
<S>                         <C>        <C>                <C>           <C>
 November 1993              117,979         6.54%          $18.35        $17.98
 November 1994              160,172         9.49%           18.41         18.04
 November 1995              119,705         7.84%           19.67         19.28
 November 1996              108,068         7.68%           15.91         15.59
 November 1997               97,612         7.51%           13.97         13.69
 November 1998               91,870         7.65%            9.73          9.54
</TABLE>

The Fund's investment period ended on December 31, 1995. Although the Fund has
been permitted to make additional investments in existing portfolio companies
since 1995, the Fund is no longer permitted to acquire investments in new
portfolio companies. Consequently, the Fund has been in a liquidation mode.
Since the middle of 1997, the Fund has liquidated a significant percentage of
its investments and has distributed approximately $5.03 per Unit to the Limited
Partners, with the cash coming primarily from the liquidation of these
investments. The Fund presently has only four remaining investments in portfolio
companies, which are expected to generate only limited amounts of interest
income for the Fund during 1999 and future years.

As a result of these developments, the Fund is not expected to have sufficient
liquidity to continue to (i) fund quarterly cash distributions, (ii) fund the
annual repurchase offers, and (iii) pay its operating expenses. Accordingly, the
General Partners are presently considering a number of alternative actions
through which the Fund could be liquidated during 1999 or 2000. Once a specific
plan of liquidation is developed, the General Partners will follow the requisite
regulatory procedures required to liquidate the Fund. The procedures are
expected to include requesting Limited Partner approval of the liquidation plan
through a proxy solicitation.

It is currently anticipated that the Fund will not have sufficient liquidity to
fund a repurchase offer during 1999. If the Fund does not have sufficient
liquidity, the General Partners have the authority to forego the repurchase
offer under the terms of the Fund's repurchase policy. In addition, the
termination of the annual repurchase offer is expected to be included in any
plan of liquidation that is submitted to the Limited Partners for their
approval.

As of December 31, 1998, the Fund held portfolio investments in three Managed
Companies, with an aggregate cost of approximately $9.0 million, and one
investment in a Non-Managed Company, with a cost of approximately $1.3 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 74.8% of the Fund's net assets. When acquired, these portfolio
investments generally consisted of high-yield subordinated debt, linked with an
equity participation or a comparable participation feature. 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 IPOs of their stock. The Fund has sold the stock it held in these
three companies, except for a portion of its KEMET stock.

As of December 31, 1998, the Fund's remaining assets were invested in short-term
commercial paper. These funds are avail-



                         -----------------------------
                                   TWENTY-ONE

<PAGE>   24

                       FIDUCIARY CAPITAL PARTNERS, L.P.:
--------------------------------------------------------------------------------

                MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                 CONDITION AND RESULTS OF OPERATIONS (CONTINUED)


able to fund the annual repurchase offer, to fund follow-on investments in
existing portfolio companies, to pay Fund expenses and for distribution to the
partners.

During 1998, the Fund sold its MTI stock and warrants and received final
distributions from the escrow account that was established during 1996 in
connection with the sale of the Fund's Huntington stock. In total, the Fund
received $268,989 in proceeds from these transactions.

Accrued interest receivable increased $26,412 from $76,821 at December 31, 1997
to $103,233 at December 31, 1998. This increase resulted primarily from the fact
that the quarterly interest payment that was due on the LMC notes on October 1,
1998 was not received by the Fund until January 1999. The impact of the past due
status of this LMC interest payment was partially offset by the Fund's decision
to stop accruing interest on the RBM notes effective during August 1998.

Other assets decreased $34,201 from $66,060 at December 31, 1997 to $31,859 at
December 31, 1998. This decrease resulted primarily from the collection of a
receivable from LMC for legal fees that the Fund advanced on behalf of LMC
during 1997.

Accounts payable and accrued liabilities increased $54,523 from $484,837 at
December 31, 1997 to $539,360 at December 31, 1998. This increase resulted
primarily from an increase in the Fund's litigation related reserve during 1998.
This reserve represents $506,660, or approximately 94%, of the total accounts
payable and accrued liabilities at December 31, 1998.

Distributions payable to partners decreased $877,430, from $1,213,701 at
December 31, 1997 to $336,271 at December 31, 1998. This decrease resulted from
both a decrease in the quarterly distribution rate from $1.00 per Unit for the
fourth quarter of 1997 to $.30 per Unit for the fourth quarter of 1998 and from
a 7.65% decrease in the number of outstanding Units as a result of the
repurchase of Units by the Fund during November 1998.

During 1998, the Fund declared quarterly cash distributions to its partners in
the aggregate amount of $3,234,841, which were paid during the months of May,
August and November 1998 and February 1999. The per Unit distribution rate for
the first quarter of 1998 varied between $1.00 and $1.13 depending upon the
closing in which the particular Units were issued. This disproportionate cash
distribution resulted from the Units being issued on different days during 1990,
and thus being entitled to differing Preferred Return amounts, as defined in the
Fund's Partnership Agreement. The disproportionate rates eliminated the
remaining Preferred Return amounts, leaving all Units on an equal basis going
forward. The per Unit distribution rates were $1.00, $.30 and $.30 for all Units
for the second, third and fourth quarters of 1998, respectively. In the
aggregate, the 1998 distributions were paid out of current net investment income
(4.0%), realized gains on investments (53.9%) and a return of capital (42.1%).

The Fund currently expects 1999 distributions to continue at a rate of $.30 per
Unit per quarter for all Limited Partners, subject to discontinuance pursuant to
a plan of liquidation, if one is approved.

The Fund has accrued approximately $507,000 for certain known potential
liabilities related to a former investment of the Fund. In addition, the Fund
may be exposed to other asserted or unasserted legal claims encountered in the
course of its activities, past and present. Other than those amounts for which
the Fund has specifically accrued, management does not believe the ultimate
resolution of these matters will have a material impact on the operating
results, financial position or cash flows of the Fund.


RESULTS OF OPERATIONS

                         INVESTMENT INCOME AND EXPENSES

The Fund's investment income consists primarily of interest income earned from
the various debt investments held by the Fund. The Fund also received dividend
income during 1997 from the ENI Holding Corp. ("ENI") preferred stock, which was
sold during 1997. Major expenses include professional fees, fund administration
fees, investment advisory fees and administrative expenses.

                              1998 COMPARED TO 1997

The Fund's net investment income was $107,781 for the year ended December 31,
1998 on total investment income of $743,018 as compared to net investment income
of $1,016,693 on total investment income of $1,646,796 for the prior year. Net
investment income per limited partnership unit decreased from $.78 to $.08 and
the ratio of net investment income to average net assets decreased from 5.69% to
0.84% for the year ended December 31, 1998 in comparison to the prior year.

Net investment income for the year ended December 31, 1998 decreased primarily
as a result of a decrease in investment income in comparison to the prior year.

Investment income decreased $903,778, or 54.9%, for the year ended December 31,
1998 in comparison to the prior year. This decrease resulted primarily from (i)
the prepayment of the Fund's Elgin National Industries, Inc. ("Elgin")
subordinated debt investment during November 1997, (ii) the disposition of the
ENI pre-


                         -----------------------------
                                   TWENTY-TWO


<PAGE>   25

                        FIDUCIARY CAPITAL PARTNERS, L.P.
--------------------------------------------------------------------------------

                MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                 CONDITION AND RESULTS OF OPERATIONS (Continued)

ferred stock during November 1997, and (iii) the decision to stop accruing
interest on the Fund's RBM subordinated debt investment effective during August
1998. The combined negative impact of these items was partially offset by
increases in the amount of interest income earned on temporary investments and
the various LMC debt investments.

Total expenses increased $5,134, or 0.8%, for the year ended December 31, 1998
in comparison to the prior year. This increase resulted primarily from increases
in other expenses and Independent General Partner fees and expenses. These
increases were substantially offset by a decrease in investment advisory fees
and, to a lesser extent, by a small decrease in professional fees.

Other expenses increased during 1998 primarily as a result of insurance expense
associated with a new liability insurance policy for the Fund's general partners
that was initially purchased during September 1997.

Independent General Partner fees and expenses increased during 1998 primarily
because one of the Fund's three Independent General Partners resigned during the
fourth quarter of 1996 and was not replaced until the third quarter of 1997.

Investment advisory fees decreased during 1998 primarily as a result of (i) the
repurchase of Units during November 1997 and 1998, (ii) the payment of quarterly
cash distributions during 1998 that exceeded the Limited Partners' Preferred
Return (as defined in the Fund's Partnership Agreement) and (iii) losses
realized by the Fund during the second quarter of 1998 with respect to the MTI,
Atlas and ARA investments. All three of these items decreased the amount of the
Fund's available capital (as defined in the Fund's Partnership Agreement), which
is the base with respect to which the investment advisory fees are calculated.

                              1997 Compared to 1996

The Fund's net investment income was $1,016,693 for the year ended December 31,
1997 on total investment income of $1,646,796 as compared to net investment
income of $951,907 on total investment income of $1,600,487 for the prior year.
Net investment income per limited partnership unit increased from $.68 to $.78,
and the ratio of net investment income to average net assets increased from
4.19% to 5.69% for the year ended December 31, 1997 in comparison to the prior
year.

Net investment income for the year ended December 31, 1997 increased 6.8% as a
result of a small increase in investment income and a small decrease in total
expenses. Net investment income per limited partnership unit increased 14.7%.
The percentage increase in net investment income per limited partnership unit
exceeded the percentage increase in net investment income because of a decrease
in the weighted average number of limited partnership units outstanding, which
resulted from the repurchase of Units by the Fund during both November 1996 and
1997.

Investment income increased $46,309, or 2.9%, for the year ended December 31,
1997 in comparison to the prior year. This increase resulted primarily from the
receipt of the accumulated preferred stock dividends that were paid on the ENI
preferred stock at the time of its disposition. The positive impact of the ENI
dividend income was significantly offset by a decrease in interest income. A
number of factors contributed to the decline in interest income, including (i)
the decision to stop accruing interest on the Fund's Atlas subordinated debt
investment effective April 1996, (ii) the prepayment of the Fund's Elgin
subordinated debt investment during November 1997, and (iii) reduced amounts of
temporary investments as a result of the Fund utilizing a portion of its cash
reserves to fund the LMC follow-on investment and to repurchase Units during
both November 1996 and 1997. The negative effect of these items was partially
offset by the increase in interest income earned on the LMC follow-on
investment.

Total expenses decreased $18,477, or 2.8%, for the year ended December 31, 1997
in comparison to the prior year. This decrease resulted primarily from decreases
in investment advisory fees and other expenses. These decreases were partially
offset by an increase in professional fees.

The investment advisory fees paid to FCM decreased during 1997, primarily as a
result of the direct receipt by FCM of consulting fees from LMC, one of the
Fund's portfolio companies during the first quarter of 1997 and as a result of
the repurchase of Units during November 1996 and 1997. Pursuant to the terms of
the Fund's investment advisory agreement with FCM, the investment advisory fees
payable to FCM by the Fund are reduced by the amount of any fees that FCM
receives directly from any of the Fund's portfolio companies. The repurchase of
Units 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 during 1997 primarily as a result of consulting fees
and expenses paid during 1996 in connection with the Canadian's bankruptcy
proceedings.

Professional fees increased during 1997 primarily because of fees incurred in
connection with the Fund's analysis of a proposal pursuant to which its Units
would have been exchanged for shares in a newly formed Delaware Business Trust.
FCM decided not to pursue this proposal.


                         -----------------------------
                                  TWENTY-THREE

<PAGE>   26

                        FIDUCIARY CAPITAL PARTNERS, L.P.
--------------------------------------------------------------------------------

                MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                 CONDITION AND RESULTS OF OPERATIONS (CONTINUED)


                     NET REALIZED GAIN (LOSS) ON INVESTMENTS

The Fund realized net losses of $3,948,869 during the year ended December 31,
1996, net gains of $3,545,258 during the year ended December 31, 1997 and net
losses of $3,008,930 during the year ended December 31, 1998.

During 1996, the Fund realized a gain from the sale of the Fund's Huntington
investment and realized a loss on the Fund's Canadian's investment. The net
realized gain for 1997 resulted from gains on the Fund's Neodata Corporation,
Elgin, ENI and Huntington investments, including a prepayment premium, and an
additional realized loss on the Fund's Canadian's investment.

The Fund owned an equity position in ARA (formerly known as Amity Leather
Products Co.) since 1992. This equity position was acquired in connection with a
subordinated debt investment, which ARA prepaid during 1994.

ARA reported significantly reduced earnings and cash flows from operations
during 1997. During February 1998, ARA hired a crisis manager to assist it in
addressing continuing significant declines in the company's sales and profits.
The hiring of this crisis manager was precipitated by ARA's lenders, which
notified ARA of defaults under its credit lines and demanded that ARA repay
overadvances that were made during 1997. The Fund was notified that ARA was
considering a number of options for solving these problems, including a possible
bankruptcy filing and the sale of the company, or certain of its operations.

ARA filed for bankruptcy protection during March 1998. ARA's assets were
liquidated at auction during May 1998, with the proceeds from the sale
satisfying only a portion of ARA's debt. The $378,011 cost of the Fund's equity
investment in ARA was written off as a realized loss during May 1998.

During June 1998, the Fund received $191,469 from the sale of its MTI common
stock and warrants. The Fund recorded a realized loss of $96,461 from this sale.

The Fund's Huntington stock was sold for cash during February 1996. The Fund's
share of the sales proceeds totaled $1,511,364, of which $1,320,711 was received
during February 1996. The balance of the sales proceeds was held in escrow to
pay various transaction expenses, to fund contingent purchase price adjustments
and as collateral for potential claims of the buyer with respect to
representations made by the selling shareholders, including the Fund. An
agreement was reached with the buyer with regard to purchase price adjustments
and other claims and the escrow accounts were liquidated during 1998. The Fund
received distributions from the escrow accounts of $19,920, $81,429, $76,343 and
$1,177 during September 1996, May 1997, June 1998 and August 1998, respectively.
The Fund recognized realized gains of $1,236,821, $81,429 and $77,520 from this
transaction during 1996, 1997 and 1998, respectively. The selling shareholders,
including the Fund, could be required under certain of the seller's
representations to reimburse the buyer for certain costs and expenses, even
though the escrow accounts have been liquidated.

The companies that Atlas acquired during 1996 with the proceeds of the Fund's
subordinated debt investment did not perform as well as expected. As a result,
Atlas defaulted on certain financial covenants in its agreements with its senior
lender and with the Fund. The senior lender, the Bank of New York, reacted to
the covenant defaults by limiting Atlas' availability under its revolving credit
facility and by instructing Atlas not to pay the quarterly interest payments
that were due on the Fund's subordinated debt, beginning in July 1996.

During August 1996, Atlas entered into a letter of intent, under the terms of
which some of the company's businesses would be sold for cash. During November
1996, the purchaser notified Atlas that it wanted to renegotiate the terms of
the transaction, including a reduction in the purchase price. Atlas management
was unable to reach a revised agreement with the purchaser and Atlas remained in
default on its debt. On January 17, 1997, Atlas filed for Chapter 11 bankruptcy
protection.

As a result of these developments, the Fund stopped accruing interest on its
Atlas investment during April 1996 and recorded writedowns of $1,180,224 and
$2,702,022 during 1996 and 1997, respectively, in the carrying value of the
investment. The remaining carrying value of the Fund's Atlas investment as of
December 31, 1997 was $2.

On June 3, 1998, the Fund exchanged its Atlas subordinated notes and warrants
for 989,414 shares of common stock of WMI, an Atlanta, Georgia based waste
management company. Pursuant to the terms of the agreement, the Fund is
prohibited from selling its WMI common stock for 24 months. In addition, the
Fund granted the entity acquiring the Fund's Atlas securities a call on the
Fund's WMI common stock during the 24 month lock up period and a right of first
refusal thereafter. The call price is $11.25 per share.

The WMI common stock, which trades on the NASDAQ Small Cap Market System
("WAST"), closed at $1.78 and $0.33 (an average of the closing bid and ask
prices) on June 3, 1998 and December 31, 1998, respectively. Based on these
prices, the



                         -----------------------------
                                   TWENTY-FOUR


<PAGE>   27
                        FIDUCIARY CAPITAL PARTNERS, L.P.
--------------------------------------------------------------------------------

                MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                 CONDITION AND RESULTS OF OPERATIONS (Continued)

Fund's WMI had trading values of $1,761,157 on the date of the exchange (June 3,
1998) and $326,507 on December 31, 1998. However, due to a number of factors,
including the speculative nature of the WMI stock, the two year lock up period
and the relative size of the Fund's stock position versus the daily trading
volume, FCM has decided to carry the WMI stock at the same nominal value that
the Atlas securities were previously carried by the Fund. The 52-week low for
the WMI common stock is $0.16 per share.

The Fund recorded a realized loss of $2,560,453 on the exchange, which is equal
to the amount of the loss which the Fund claimed for income tax purposes from
the disposition of the Atlas securities. The $1,321,794 balance of the
unrealized loss previously recorded by the Fund with respect to the Atlas
securities continues to be carried by the Fund as an unrealized loss.

The Fund incurred approximately $50,000 of realized losses during the year ended
December 31, 1998 as a result of adjustments relating to certain previously held
investments.

                    NET UNREALIZED GAIN (LOSS) ON INVESTMENTS

FCM values the Fund's portfolio investments on a weekly basis utilizing a
variety of methods. For securities that are publicly traded and for which market
quotations are available, valuations are set by the closing sales, or an average
of the closing bid and ask prices, as of the valuation date.

Fair value for securities that are not traded in any liquid public markets or
that are privately held are determined pursuant to valuation policies and
procedures that have been approved by the Independent General Partners and
subject to their supervision. There is a range of values that are reasonable for
such investments at any particular time. Each such investment is valued
initially based upon its original cost to the Fund ("cost method"). The cost
method is used until significant developments affecting the portfolio company
provide a basis for use of an appraisal valuation. Appraisal valuations are
based upon such factors as the portfolio company's earnings, cash flow and net
worth, the market prices for similar securities of comparable companies and an
assessment of the portfolio company's future financial prospects. In a case of
unsuccessful operations, the appraisal may be based upon liquidation value.
Appraisal valuations are necessarily subjective. The Fund also may use, when
available, third-party transactions in a portfolio company's securities as the
basis of valuation ("private market method"). The private market method will be
used only with respect to completed transactions or firm offers made by
sophisticated, independent investors.

Prior to 1996, the Fund had recorded cumulative net unrealized loss on
investments of $3,275,329. During 1996, the Fund recorded $94,187 of unrealized
gain and $1,344,097 of unrealized loss on investments. In addition, the Fund
disposed of investments during 1996 with respect to which the Fund had recorded
$3,841,121 of net unrealized loss during prior years. Therefore, at December 31,
1996, the Fund had net unrealized loss on investments of $684,118.

During 1997, the Fund recorded $11,869 of unrealized gain and $3,976,377 of
unrealized loss on investments. In addition, the Fund disposed of investments
during 1997 with respect to which the Fund had recorded $105,369 of net
unrealized loss during prior years. Therefore, at December 31, 1997, the Fund
had net unrealized loss on investments of $4,543,257.

The net decrease in unrealized loss on investments during 1998 and the
cumulative net unrealized loss on investments at December 31, 1998, consisted of
the following components:

<TABLE>
<CAPTION>
                                       NET CHANGES      NET UNREALIZED
                                      IN UNREALIZED       GAIN (LOSS)
                                       GAIN (LOSS)      RECORDED AS OF
PORTFOLIO INVESTMENT                   DURING 1998     DECEMBER 31, 1998
                                     ----------------  -----------------
<S>                                  <C>               <C>
Unrealized net loss recorded
   during prior years with
   respect to investments
   disposed of during 1998           $     4,214,940   $             --
KEMET                                       (220,059)           309,704
LMC                                               --           (858,080)
RBM                                         (753,634)          (753,634)
WMI                                       (1,321,794)        (1,321,794)
                                     ----------------  -----------------
                                     $    (1,919,453)  $     (2,623,804)
                                     ================  =================
</TABLE>

KEMET completed an IPO of its common stock during 1992. The stock, which trades
on the NASDAQ National Market System, closed at $11.4375 (an average of the
closing bid and ask prices) on December 31, 1998. This price is down from the
closing price of $19.3125 on December 31, 1997. Based on the $11.4375 closing
trading price of the common stock, the 27,944 shares of common stock that the
Fund held at December 31, 1998 had a market value of $319,609.

LMC experienced significant operating problems after the Fund acquired its LMC
investment during 1994 and the Fund was involved in a restructuring of its LMC
investment during 1995. In the restructuring, the Fund's existing LMC
subordinated debt and warrants were converted into preferred stock and the Fund
purchased $545,600 of new common stock.
As a result of LMC's


                         -----------------------------
                                  TWENTY-FIVE


<PAGE>   28

                        FIDUCIARY CAPITAL PARTNERS, L.P.
--------------------------------------------------------------------------------

                MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                 CONDITION AND RESULTS OF OPERATIONS (CONTINUED)


operational difficulties and the fact that the Fund's investment was converted
from debt securities to equity securities, the Fund wrote its LMC investment
down by $540,800 during 1995.

LMC has a defined contribution plan (the "Plan"), which was closed during 1995.
The current and previous trustees of the Plan failed to assure that the Plan was
properly funded. In order to rectify this problem, LMC has made demands on the
current and previous trustees of the Plan and the previous controlling
shareholders that these parties make the necessary payments to the Plan. LMC has
filed suit against the current trustee, whose wholly-owned company currently
owns approximately 9% of LMC's common stock, and expects to prevail in this
litigation, although there can be no assurance that this will be the case.

The Internal Revenue Service ("IRS") performed an audit on the Plan during 1998,
in which it reviewed certain of the years with respect to which the Plan was not
properly funded. At the conclusion of their audit, the IRS notified LMC that it
had determined the underfunding for the years reviewed to be $243,385. The IRS
also imposed a penalty of $12,362, which LMC has paid. LMC is currently in
discussions with the IRS concerning how and when the $243,385 assessment, and
the related interest, must be paid. If LMC is required to make the payments
prior to resolution of the litigation with the current trustee of the Plan, it
will have a negative impact on LMC's working capital availability. In addition,
it is possible that additional assessments could be made in the future for
underfundings of the Plan with respect to earlier years.

As a result of this matter and its potential impact on LMC, the Fund recorded an
additional $317,280 write down in the value of its LMC investment during 1997.
On a cumulative basis, as of December 31, 1998, the Fund's LMC investment has
been written down in value by $858,080. The Fund and LMC's other stockholders
made follow-on investments in LMC during 1996, 1997 and 1998 in order to provide
LMC with working capital required to fund significant continuing operating
losses, develop a new product, finance the downpayment on and move to a new
facility and to purchase capital equipment needed to modernize the company's
production operations.

RBM had a record year for fiscal 1998, with sales of approximately $30 million
and EBITDA of approximately $2.7 million. However, these sales were achieved
primarily through one contract with Digital Equipment Corporation ("DEC").
During August 1998, RBM notified the Fund that anticipated sales to DEC and
other large customers were expected to decline significantly in the upcoming
year. Of particular concern were sales to DEC, which has been acquired by Compaq
Computer Corp. As a result of the expected decline in sales, RBM began the
process of restructuring its debt, including the subordinated debt held by the
Fund. The Fund received the quarterly interest payment that was due from RBM on
August 24, 1998. The interest payment that was due during November 1998 was
deferred and subsequently converted to equity pursuant to the restructuring
described below.

During December 1998, RBM and its lenders completed a restructuring under which
a new senior lender, Norwest Business Credit, replaced Bank of America. As part
of this transaction, RBM's equity sponsor contributed additional equity to the
company and the subordinated lenders, including the Fund, agreed to accept
shares of RBM's common stock as payment for the next three quarterly interest
payments beginning with the payment that was due during November 1998. As a
consequence, the Fund's ownership of RBM, on a fully-diluted basis, increased
from 6.6% to 8.1%, assuming exercise of its warrants. The restructuring was
designed to provide RBM with a period of time in which to secure additional
customers and return to a more stable financial position under which RBM could
meet its interest obligations to its creditors, including the Fund. Cash
receipts from interest income to the Fund are expected to decrease as a result
of the restructuring.

As a result of these developments, the Fund stopped accruing interest on its RBM
subordinated debt effective August 24, 1998. In addition, the Fund recorded
aggregate writedowns of $753,634 relating to RBM during the year ended December
31, 1998.

See "Net Realized Gain (Loss) on Investments" for a discussion of the unrealized
loss on the Fund's WMI stock investment.

FCM continually monitors both the Fund's portfolio companies and the markets,
and continually evaluates the decision to hold or sell its traded securities.

READINESS FOR YEAR 2000

FCM has completed a review of the accounting and other information systems that
are currently being utilized by FCM and the Fund with regard to Year 2000
issues. This review involved both actual tests of parts of the information
systems that were conducted by third party consultants and representations
received from various software vendors. FCM believes that all of these systems
are Year 2000 compliant. All of the costs associated with this review were paid
by FCM.

FCM also corresponded with appropriate third parties, such as the Fund's
custodian and transfer agent, concerning whether their information systems are
Year 2000 compliant. These third parties have represented that their information
systems are either currently Year 2000 compliant or that they have identified
the scope of



                         -----------------------------
                                   TWENTY-SIX


<PAGE>   29
                        FIDUCIARY CAPITAL PARTNERS, L.P.
--------------------------------------------------------------------------------

                MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                 CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

required upgrades or changes to their information systems that are needed and
that they have a plan in place to complete these upgrades on a timely basis.

As a result of the above discussion review, Year 2000 issues are not expected to
have any material adverse effects on the Fund's results of operations or
financial condition.

INFLATION AND CHANGING PRICES

Inflation has had no material impact on the operations or financial condition of
the Fund from inception through December 31, 1998. However, inflation and
changing prices, in addition to other factors, may effect the value and the
eventual selling price of the Fund's remaining investments.



                         -----------------------------
                                  TWENTY-SEVEN


<PAGE>   30

                        FIDUCIARY CAPITAL PARTNERS, L.P.
--------------------------------------------------------------------------------

                                FUND INFORMATION


FIDUCIARY CAPITAL PARTNERS, L.P.
410 17th Street, Suite 400
Denver, Colorado 80202
(800) 866-7607


MANAGING GENERAL PARTNER
FCM Fiduciary Capital Management Company


AUDITORS
Arthur Andersen LLP
Denver, Colorado


LEGAL COUNSEL
Dorsey & Whitney LLP
Denver, Colorado


TRANSFER AGENT
GEMISYS Corporation
Englewood, Colorado


A copy of the Annual Report on
Form 10-K, as filed with the
Securities and Exchange Commission,
will be furnished without charge to
Limited Partners upon request. A copy
can also be obtained from the SEC's
EDGAR Database on the World Wide
Web at: http://www.sec.gov/edgarhp.htm.


                         -----------------------------
                                  TWENTY-EIGHT
<PAGE>   31


                        FIDUCIARY CAPITAL PARTNERS, L.P.
                 ----------------------------------------------












                           ---------------------------
                              FIRST QUARTER REPORT
                                      1999


<PAGE>   32



                        FIDUCIARY CAPITAL PARTNERS, L.P.


                             SCHEDULE OF INVESTMENTS



March 31, 1999 (unaudited)

<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT/                                 INVESTMENT    AMORTIZED              % OF TOTAL
SHARES           INVESTMENT                DATE         COST       VALUE    INVESTMENTS
-------          ----------             ----------   ---------- ----------  -----------
<S>           <C>                       <C>          <C>        <C>         <C>

Managed Companies:


27,944 sh.    KEMET Corporation,
              Common Stock(1)*           07/11/91    $    9,905 $  320,483
                                         --------    ---------- ----------      ----
                                                          9,905    320,483       3.1%
                                         --------    ---------- ----------      ----
$1,967,040    LMC Corporation, 12.00%
              Senior Subordinated        11/01/96
              Revolving Notes             through
              due 10/31/00               01/13/99     1,967,040  1,967,040
$453,200      LMC Corporation, 12.00%
              Senior Subordinated        2/11/99
              Revolving Notes            through
              due 10/1/99 (Note 5)       03/01/99       453,200    453,200
260,400 sh.   LMC~Corporation, 7.00%
              Cumulative Redeemable
              Preferred Stock*           06/10/94     2,596,621  2,596,621
5,523,500 sh. LMC~Corporation,           02/09/96
              Common Stock*              through
                                         08/05/98     3,034,549  2,176,469
52.08 sh.     LMC~Credit Corp.,
              Common Stock*              02/09/96             1          1
                                         --------    ---------- ----------      ----
                                                      8,051,411  7,193,331      69.9
                                         --------    ---------- ----------      ----
$1,460,000    R.B.M. Precision Metal
              Products, Inc., 13.00%
              Senior Subordinated
              Secured Notes due
              5/24/02(2)                 05/24/95     1,400,680    730,000
14,265.6 sh.  R.B.M. Precision Metal
              Products, Inc., Warrants to
              Purchase Common Stock*     05/24/95        82,955          1
14,392 sh.    R.B.M. Precision Metal
              Products, Inc., Common
              Stock*                     12/09/98             1          1

                                                      1,483,636    730,002       7.1
                                         --------    ---------- ----------      ----
   Total Investments in Managed
     Companies (82.7% of net assets)                  9,544,952  8,243,816      80.1
                                         --------    ---------- ----------      ----

 The accompanying notes to financial statements are an integral part of this schedule.
</TABLE>


                                   ----------

                                       ONE

<PAGE>   33

                        FIDUCIARY CAPITAL PARTNERS, L.P.

                       SCHEDULE OF INVESTMENTS (Continued)


MARCH 31, 1999 (UNAUDITED)

<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT/                               INVESTMENT   AMORTIZED                 % OF TOTAL
SHARES       INVESTMENT                  DATE        COST           VALUE   INVESTMENTS
---------    ----------               ----------   ---------        -----   -----------
<S>          <C>                       <C>         <C>            <C>       <C>
NON-MANAGED COMPANY:

989,414 sh.  WasteMasters, Inc.,
             Common Stock(3)*          06/03/98    1,321,795              1
                                       --------  -----------    -----------   -----
   Total Investment in
     Non-Managed Company
     (0.0% of net assets)                          1,321,795              1     0.0
                                                 -----------    -----------   -----
TEMPORARY INVESTMENTS:

$2,050,000   American Express
             Credit Corp., 4.61%
             Notes due 4/5/99          03/22/99    2,048,952      2,048,952
                                       --------  -----------    -----------   -----
   Total Temporary Investments
     (20.5% of net assets)                         2,048,952      2,048,952    19.9
                                                 -----------    -----------   -----
   Total Investments (103.2% of net assets)      $12,915,699    $10,292,769   100.0%
                                                 -----------    -----------   -----
(1)  The KEMET Corporation common stock trades on the NASDAQ National Market
     System.
(2)  The notes will amortize in three equal annual installments of $486,667
     commencing on May 24, 2000.
(3)  The WasteMasters, Inc. common stock, which trades on the NASDAQ Small Cap
     System, is subject to a 24 month lock up period, a call option and a right
     of first refusal.
*    Non-income producing security.



 The accompanying notes to financial statements are an integral part of this schedule.
</TABLE>

                              --------------------

                                       TWO


<PAGE>   34

                        FIDUCIARY CAPITAL PARTNERS, L.P.

                                 BALANCE SHEETS


MARCH 31, 1999 AND DECEMBER 31, 1998 (UNAUDITED)

<TABLE>
<CAPTION>
                                                        1999                 1998
                                                    ------------         ------------
<S>                                                 <C>                  <C>
ASSETS:
  Investments:
    Portfolio investments, at value:
      Managed companies (amortized cost-
        $9,544,952 and $9,037,112,
        respectively)                               $  8,243,816         $  7,735,102
    Non-managed company (amortized cost-
      $1,321,795)                                              1                    1
    Temporary investments, at amortized cost           2,048,952            2,546,274
                                                    ------------         ------------
       Total investments                              10,292,769           10,281,377
  Cash and cash equivalents                              512,042              837,202
  Accrued interest receivable                             67,475              103,233
  Other assets                                            15,251               31,859
                                                    ------------         ------------
    Total assets                                    $ 10,887,537         $ 11,253,671
                                                    ============         ============

LIABILITIES:
  Payable to affiliates (Notes 2, 3 and 4)          $     42,116         $     31,197
  Accounts payable and accrued liabilities               535,888              539,360
  Distributions payable to partners                      336,271              336,271
                                                    ------------         ------------
    Total liabilities                                    914,275              906,828
                                                    ============         ============

COMMITMENTS AND CONTINGENCIES (NOTE 5)

NET ASSETS:
  Managing General Partner                              (210,746)            (207,011)
 Limited Partners (equivalent to $9.18
  and $9.51, respectively, per limited
  partnership unit based on 1,109,694
  units outstanding)                                  10,184,008           10,553,854
                                                    ------------         ------------
    Net assets                                         9,973,262           10,346,843
                                                    ------------         ------------
       Total liabilities and net assets             $ 10,887,537         $ 11,253,671
                                                    ============         ============



 The accompanying notes to financial statements are an integral part of these financial statements.
</TABLE>

                               -----------------

                                      THREE


<PAGE>   35

                        FIDUCIARY CAPITAL PARTNERS, L.P.

                            STATEMENTS OF OPERATIONS


FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND 1998 (UNAUDITED)

<TABLE>
<CAPTION>
                                                  1999              1998
                                               ---------         ---------
<S>                                            <C>               <C>
INVESTMENT INCOME:

  Income:

     Interest                                  $  99,690         $ 245,939
                                               ---------         ---------
       Total investment income                    99,690           245,939
                                               =========         =========
  Expenses:
    Fund administration fees (Note 3)             35,843            35,843
    Independent General Partner fees
       and expenses (Note 4)                      24,943            21,277
     Investment advisory fees (Note 2)            24,275            35,765
     Administrative expenses (Note 3)             20,276            20,276
     Professional fees                            13,113            88,479
     Other expenses                               19,424            15,108
                                               ---------         ---------
       Total expenses                            137,874           216,748
                                               ---------         ---------
NET INVESTMENT (LOSS) INCOME                     (38,184)           29,191
                                               =========         =========
REALIZED AND UNREALIZED
  LOSS ON INVESTMENTS:
     Net realized loss on investments               --             (12,881)
     Net change in unrealized loss
       on investments                                874          (184,807)
                                               ---------         ---------
         Net gain (loss) on investments              874          (197,688)
                                               ---------         ---------
NET DECREASE IN NET ASSETS
  RESULTING FROM OPERATIONS                    $ (37,310)        $(168,497)
                                               =========         =========


 The accompanying notes to financial statements are an integral part of these financial statements.
</TABLE>


                               ------------------

                                      FOUR


<PAGE>   36


                        FIDUCIARY CAPITAL PARTNERS, L.P.

                            STATEMENTS OF CASH FLOWS


FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND 1998 (UNAUDITED)

<TABLE>
<CAPTION>
                                                                   1999                 1998
                                                                -----------         -----------
<S>                                                             <C>                 <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net decrease in net assets
     resulting from operations                                  $   (37,310)        $  (168,497)
   Adjustments to reconcile net decrease in net
     assets resulting from operations to net
     cash provided by operating activities:
        Accreted discount on portfolio investments                     --                (4,700)
        Change in assets and liabilities:
           Accrued interest receivable                               35,758              (4,472)
           Other assets                                              16,608               4,944
           Payable to affiliates                                     10,919              36,765
           Accounts payable and accrued liabilities                  (3,472)             32,848
Net realized loss on investments                                       --                12,881
Net change in unrealized loss
           on investments                                              (874)            184,807
                                                                -----------         -----------
              Net cash provided by operating activities              21,629              94,576
                                                                -----------         -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
   Purchase of portfolio investments                               (507,840)           (551,000)
   Sale of temporary investments, net                               497,322           1,709,902
                                                                -----------         -----------
     Net cash (used in) provided by investing activities            (10,518)          1,158,902
                                                                -----------         -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
   Cash distributions paid to partners                             (336,271)         (1,213,701)
                                                                -----------         -----------
     Net cash used in financing activities                         (336,271)         (1,213,701)
                                                                -----------         -----------
Net (Decrease) Increase in Cash and Cash Equivalents               (325,160)             39,777
Cash and Cash Equivalents at Beginning of Period                    837,202             263,694
                                                                -----------         -----------
Cash and Cash Equivalents at End of Period                      $   512,042         $   303,471
                                                                ===========         ===========


The accompanying notes to financial statements are an integral part of these financial statements.
</TABLE>

                               -----------------


                                      FIVE



<PAGE>   37



                        FIDUCIARY CAPITAL PARTNERS, L.P.


                       STATEMENTS OF CHANGES IN NET ASSETS


For the three months ended March 31, 1999 and for
the year ended December 31, 1998 (unaudited)

<TABLE>
<CAPTION>
                                                                   1999                 1998
                                                               ------------         ------------
<S>                                                            <C>                  <C>
Increase in net assets resulting from operations:
   Net investment (loss) income                                $    (38,184)        $    107,781
   Net realized loss on investments                                    --             (3,008,930)
   Net change in unrealized loss on investments                         874            1,919,453
                                                               ------------         ------------
     Net decrease in net assets
       resulting from operations                                    (37,310)            (981,696)
Repurchase of limited partnership units                                --               (893,895)
Distributions to partners from-
   Net investment income                                               --               (129,001)
   Realized gain on investments                                        --             (1,742,647)
   Return of capital                                               (336,271)          (1,363,193)
                                                               ------------         ------------
     Total decrease in net assets                                  (373,581)          (5,110,432)
Net assets:
   Beginning of period                                           10,346,843           15,457,275
                                                               ------------         ------------
   End of period (including no undistributed
     net investment income)                                    $  9,973,262         $ 10,346,843
                                                               ============         ============

The accompanying notes to financial statements are an integral part of these financial statements.
</TABLE>


                              -------------------

                                       SIX

<PAGE>   38


                        FIDUCIARY CAPITAL PARTNERS, L.P.


                       SELECTED PER UNIT DATA AND RATIOS
                                  (unaudited)


For the three months ended March 31, 1999 and 1998 (unaudited)

<TABLE>
<CAPTION>
                                                     1999                   1998
                                                -------------          -------------
<S>                                             <C>                    <C>
Per Unit Data:
   Investment income                            $         .09          $         .20
   Expenses                                              (.12)                  (.18)
                                                -------------          -------------
     Net investment (loss) income                        (.03)                   .02
   Net realized loss on
      investments                                        --                     (.01)
   Net change in unrealized
     loss on investments                                 --                     (.15)
   Distributions declared to partners                    (.30)                 (1.09)
                                                -------------          -------------
     Net decrease in net asset value                     (.33)                 (1.23)
       Net asset value:
         Beginning of period                             9.51                  12.91
                                                -------------          -------------
         End of period                          $        9.18          $       11.68
                                                =============          =============
Ratios (annualized):
   Ratio of expenses to average
     net assets                                          5.43%                  5.89%
   Ratio of net investment (loss) income
     to average net assets                              (1.50)%                 0.79%
Number of limited partnership
   units at end of period                           1,109,694              1,201,564


The accompanying notes to financial statements are an integral part of these selected per unit data and ratios.
</TABLE>




                               ------------------

                                      SEVEN


<PAGE>   39

                        FIDUCIARY CAPITAL PARTNERS, L.P.

                          NOTES TO FINANCIAL STATEMENTS

March 31, 1999 (unaudited)

1.   General

The accompanying unaudited interim financial statements include all adjustments
(consisting solely of normal recurring adjustments) which are, in the opinion of
FCM Fiduciary Capital Management Company ("FCM"), the Managing General Partner
of Fiduciary Capital Partners, L.P. (the "Fund"), necessary to fairly present
the financial position of the Fund as of March 31, 1999 and the results of its
operations, changes in net assets and its cash flows for the period then ended.

These financial statements should be read in conjunction with the Significant
Accounting Policies and other Notes to Financial Statements included in the
Fund's annual audited financial statements for the year ended December 31, 1998.


2.   Investment Advisory Fees

As compensation for its services as investment adviser, FCM receives a
subordinated monthly fee at the annual rate of 1% of the Fund's available
capital, as defined in the Partnership Agreement. Investment advisory fees of
$24,275 were paid by the Fund for the three months ended March 31, 1999.


3.   Fund Administration Fees

As compensation for its services as fund administrator, FCM receives a monthly
fee at the annual rate of 0.45% of net proceeds available for investment, as
defined in the Partnership Agreement. Fund administration fees of $35,843 were
paid by the Fund for the three months ended March 31, 1999. FCM is also
reimbursed, subject to various limitations, for administrative expenses incurred
in providing accounting and investor services to the Fund. The Fund reimbursed
FCM for administrative expenses of $20,276 for the three months ended March 31,
1999.


4.   Independent General Partner Fees and Expenses

As compensation for services rendered to the Fund, each of the Independent
General Partners receives from the Fund and Fiduciary Capital 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 three months ended
March 31, 1999 totaled $24,943.


                               ------------------

                                      EIGHT


<PAGE>   40

                        FIDUCIARY CAPITAL PARTNERS, L.P.


                    NOTES TO FINANCIAL STATEMENTS (Continued)



5.   Commitments and Contingencies

LMC Commitment LMC is entitled to draw down a total of $849,750 pursuant to the
terms of the Senior Subordinated Revolving Notes due October 1, 1999, which are
held by the Fund. As of March 31, 1999, LMC had drawn down $453,200. An
additional $67,980 was drawn down during May 1999.





                               -----------------

                                      NINE


<PAGE>   41
                        FIDUCIARY CAPITAL PARTNERS, L.P.


                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                       FINANCIAL CONDITION AND RESULTS OF
                                   OPERATIONS


The following discussion should be read in conjunction with the Fund's unaudited
Financial Statements and the Notes thereto. This report contains, in addition to
historical information, forward-looking statements that include risks and other
uncertainties. The Fund's actual results may differ materially from those
anticipated in these forward-looking statements. While the Fund can not always
predict what factors would cause actual results to differ materially from those
indicated by the forward-looking statements, factors that might cause such a
difference include general economic and business conditions, competition and
other factors discussed elsewhere in this report. Readers are urged to consider
statements that include the terms "believes", "expects", "plans", "anticipates",
"intends" or the like to be uncertain and forward-looking. The Fund undertakes
no obligation to release publicly any revisions to these forward-looking
statements to reflect events or circumstances after the date hereof or to
reflect the occurrence of anticipated or unanticipated events.

Liquidity and Capital Resources

As of March 31, 1999, the Fund held portfolio investments in three Managed
Companies and one Non-Managed Company, with an aggregate original cost of
approximately $10.9 million. The value of these portfolio investments, which
were made from net offering proceeds and the reinvestment of proceeds from the
sale of other portfolio investments, represents approximately 82.7% of the
Fund's net assets. When acquired, these portfolio investments generally
consisted of high-yield subordinated debt, linked with an equity participation
or a comparable participation feature in middle market companies. These
securities were typically issued in private placement transactions and were
subject to certain restrictions on transfer or sale, thereby limiting their
liquidity. A number of the portfolio companies have prepaid their subordinated
debt that the Fund held. In addition, three of the portfolio companies have
successfully completed initial public offerings ("IPOs") of their stock. The
Fund has sold the stock it held in these three companies, except for a portion
of its KEMET Corporation ("KEMET") stock.

As of March 31, 1999, the Fund's remaining assets were invested in short-term
commercial paper. These funds are available to fund the annual repurchase offer,
to fund follow-on investments in existing portfolio companies, to pay Fund
expenses and for distribution to the partners.

The Fund's investment period ended on December 31, 1995. Although the Fund has
been permitted to make additional investments in existing portfolio companies
since 1995, the Fund is no longer permitted to acquire investments in new
portfolio companies. Consequently, the Fund has been in a liquidation mode.
Since the middle of 1997, the Fund has liquidated a significant percentage of
its investments and has distributed approximately $5.33 per Unit to the Limited
Partners, with the cash coming


                               ------------------

                                       TEN

<PAGE>   42

                        FIDUCIARY CAPITAL PARTNERS, L.P.
--------------------------------------------------------------------------------


primarily from the liquidation of these investments. The Fund presently has only
four remaining investments in portfolio companies, which are expected to
generate only limited amounts of interest income for the Fund during 1999 and
future years.

Pursuant to the terms of the Fund's periodic unit repurchase policy, the Fund
has annually offered to purchase from its Limited Partners, up to 7.5% of its
outstanding Units for an amount equal to the current net asset value per Unit,
net of a fee (not to exceed 2%) to be retained by the Fund to offset expenses
incurred in connection with the repurchase offer. If the number of tendered
Units in any year exceeds 7.5% of the outstanding Units, the Fund's General
Partners may vote to repurchase up to an additional 2% of the outstanding Units.

As a result of the liquidation of a major portion of the Fund's investments, the
Fund is not expected to have sufficient liquidity to continue to (i) fund
quarterly cash distributions, (ii) fund the annual repurchase offer, and (iii)
pay its operating expenses. Accordingly, the General Partners are presently
considering a number of alternative actions through which the Fund could be
liquidated during 1999 or 2000. Once a plan of liquidation is adopted, the
General Partners will follow the requisite regulatory procedures required to
liquidate the Fund. These procedures are expected to include requesting Limited
Partner approval of the liquidation plan through a proxy solicitation, which
should commence in July.

During February 1999, the Fund agreed to purchase $849,750 of LMC's Senior
Subordinated Revolving Notes due October 1, 1999. $453,200 of this investment
was funded during February and March 1999.

Accrued interest receivable decreased $35,758 from $103,233 at December 31, 1998
to $67,475 at March 31, 1999. This decrease resulted primarily from the fact
that the quarterly interest payment that was due on the LMC Corporation ("LMC")
notes on October 1, 1998 was not received by the Fund until January 1999. The
impact of the past due status of this LMC interest payment at December 31, 1998
was partially offset by interest income earned during the three months ended
March 31, 1999 on the LMC follow-on investments that were acquired during 1998
and 1999.

Other assets decreased $16,608 from $31,859 at December 31, 1998 to $15,251 at
March 31, 1999. This decrease resulted from decreases in both prepaid insurance
and deposits.

During the three months ended March 31, 1999, the Fund paid a cash distribution
pertaining to the fourth quarter of 1998, in the amount of $336,271, or $0.30
per Unit. The distribution for the first quarter of 1999 will be paid on May 14,
1999 at a rate of $0.30 per Unit for all Limited Partners. The Fund currently
expects to make a $0.30 per Unit distribution for the second quarter on or about
August 13, 1999. The Fund's ability to continue to pay quarterly distributions
after the second quarter of 1999 is uncertain at this time. The distribution
question will be addressed on a quarterly basis, and will involve the
consideration of a number of issues, including the status of the proposed


                              -------------------

                                     ELEVEN

<PAGE>   43


                        FIDUCIARY CAPITAL PARTNERS, L.P.
--------------------------------------------------------------------------------
proxy vote. A significant portion of the 1999 distributions are expected to
constitute a return of capital.


RESULTS OF OPERATIONS

                         Investment Income and Expenses

The Fund's net investment loss was $(38,184) for the three months ended March
31, 1999 as compared to net investment income of $29,191 for the corresponding
period of the prior year. Net investment income (loss) per limited partnership
unit decreased from $.02 to $(.03) and the ratio of net investment income (loss)
to average net assets decreased from 0.79% to (1.50)% for the three months ended
March 31, 1999 as compared to the corresponding period of the prior year.

Net investment income (loss) for the three months ended March 31, 1999 decreased
primarily as a result of a decrease in investment income as compared to the
corresponding period of the prior year. The impact of the decrease in investment
income was partially offset by a decrease in total expenses.

Investment income decreased $146,249, or 59.5%, for the three months ended March
31, 1999, as compared to the corresponding period of the prior year. This
decrease resulted primarily from the decision to stop accruing interest on the
Fund's RBM Precision Metal Products, Inc. ("RBM") subordinated debt investment
effective during August 1998 and a decrease in the amount of the Fund's
temporary investments. The amount of the Fund's temporary investments decreased
because of (i) the significant cash distributions made by the Fund during 1998,
(ii) purchases of additional LMC follow-on investments, and (iii) the Fund's
repurchase of 7.65% of its Units during the fourth quarter of 1998. The negative
effect of these items was partially offset by an increase in interest income
earned on the LMC follow-on investments that were acquired during 1998 and 1999.

Total expenses decreased $78,874, or 36.4%, for the three months ended March 31,
1999, as compared to the corresponding period of the prior year. This decrease
resulted primarily from decreases in professional fees and investment advisory
fees. These decreases were partially offset by smaller increases in Independent
General Partner fees and expenses and other expenses.

Professional fees decreased during the three months ended March 31, 1999 as
compared to the corresponding period of the prior year, primarily because of
fees incurred during the prior year in connection with LMC related litigation.

The investment advisory fees decreased during the three months ended March 31,
1999, as compared to the corresponding period of the prior year, primarily as a
result of (i) the repurchase of Units during the fourth quarter of 1998, (ii)
the payment of quarterly cash distributions during 1998 that exceeded the
Limited Partners' Preferred Returns (as


                              -------------------

                                     TWELVE

<PAGE>   44


                        FIDUCIARY CAPITAL PARTNERS, L.P.
-------------------------------------------------------------------------------

defined in the Fund's Partnership Agreement), and (iii) losses realized by the
Fund during the second quarter of 1998 with respect to the Mobile Technology,
Inc., Atlas Environmental, Inc. ("Atlas") and AR Accessories Group, Inc.
portfolio investments. All three of these items decreased the amount of the
Fund's available capital (as defined in the Partnership Agreement), which is the
base with respect to which the investment advisory fees are calculated.

                    NET UNREALIZED GAIN (LOSS) ON INVESTMENTS

FCM values the Fund's portfolio investments on a weekly basis utilizing a
variety of methods. For securities that are publicly traded and for which market
quotations are available, valuations are set by the closing sales or an average
of the closing bid and ask prices, as of the valuation date.

Fair value for securities that are not traded in any liquid public markets or
that are privately held are determined pursuant to valuation policies and
procedures that have been approved by the Independent General Partners and
subject to their supervision. There is a range of values that are reasonable for
such investments at any particular time. Each such investment is valued
initially based upon its original cost to the Fund ("cost method"). The cost
method is used until significant developments affecting the portfolio company
provide a basis for use of an appraisal valuation. Appraisal valuations are
based upon such factors as the portfolio company's earnings, cash flow and net
worth, the market prices for similar securities of comparable companies and an
assessment of the portfolio company's future financial prospects. In a case of
unsuccessful operations, the appraisal may be based upon liquidation value.
Appraisal valuations are necessarily subjective. The Fund also may use, when
available, third-party transactions in a portfolio company's securities as the
basis of valuation ("private market method"). The private market method is used
only with respect to completed transactions or firm offers made by
sophisticated, independent investors.

As of December 31, 1998, the Fund had recorded $309,704 of unrealized gain and
$2,933,508 of unrealized loss on investments. Therefore, as of December 31,
1998, the Fund had recorded a total net unrealized loss on investments of
$2,623,804.

The decrease in unrealized loss on investments during the three months ended
March 31, 1999 and the cumulative net unrealized loss on investments as of March
31, 1999 consisted of the following components:


                              -------------------

                                    THIRTEEN

<PAGE>   45

                        FIDUCIARY CAPITAL PARTNERS, L.P.
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                      Net Changes in
                                  Unrealized Gain (Loss)        Net Unrealized
                                     During the Three             Gain (Loss)
                                       Months Ended             Recorded As of
     Portfolio Company                March 31, 1999            March 31, 1999
     -----------------            ----------------------      -----------------
<S>                               <C>                         <C>
KEMET                                        $874               $    310,578
LMC                                             -                   (858,080)
RBM                                             -                   (753,634)
WMI                                             -                 (1,321,794)
                                             ----               ------------
                                             $874               $ (2,622,930)
                                             ====               ============
</TABLE>

KEMET completed an IPO of its common stock during 1992. The stock, which trades
on the NASDAQ National Market System, closed at $11.46875 (an average of the
closing bid and ask prices) on March 31, 1999. This price is up slightly from
the closing price of $11.4375 on December 31, 1998. Based on the $11.46875
closing trading price of the common stock, the 27,944 shares of common stock
that the Fund held at March 31, 1999, had a market value of $320,483.

LMC experienced significant operating problems after the Fund acquired its LMC
investment during 1994 and the Fund was involved in a restructuring of its LMC
investment during 1995. In the restructuring, the Fund's then existing LMC
subordinated debt and warrants were converted into preferred stock and the Fund
purchased $545,600 of new common stock. As a result of LMC's operational
difficulties and the fact that the Fund's investment was converted from debt
securities to equity securities, the Fund wrote its LMC investment down by
$540,800 during 1995.

LMC has a defined contribution plan (the "Plan"), which was closed during 1995.
The current and previous trustees of the Plan failed to assure that the Plan was
properly funded. In order to rectify this problem, LMC has made demands on the
current and previous trustees of the Plan and the previous controlling
shareholders that these parties make the necessary payments to the Plan. LMC has
filed suit against the current trustee, whose wholly-owned company currently
owns approximately 9% of LMC's common stock, and expects to prevail in this
litigation, although there can be no assurance that this will be the case.

The Internal Revenue Service ("IRS") performed an audit on the Plan during 1998,
in which it reviewed certain of the years with respect to which the Plan was not
properly funded. At the conclusion of their audit, the IRS notified LMC that it
had determined the underfunding for the years reviewed to be $243,385. The IRS
also imposed a penalty of $12,362, which LMC has paid. LMC is currently in
discussions with the IRS concerning how and when the $243,385 assessment, and
the related interest, must be paid. If LMC is required to make the payments
prior to resolution of the litigation with the current trustee of the Plan, it
will have a negative impact on LMC's working capital availability. In addition,
it is possible that additional assessments could be made in the future for


                               -----------------

                                    FOURTEEN

<PAGE>   46

                        FIDUCIARY CAPITAL PARTNERS, L.P.
--------------------------------------------------------------------------------

underfundings of the Plan with respect to earlier years.

As a result of this matter and its potential impact on LMC, the Fund recorded an
additional $317,280 write down in the value of its LMC investment during 1997.
On a cumulative basis, as of March 31, 1999, the Fund's LMC investment has been
written down in value by $858,080. The Fund and LMC's other stockholders made
follow-on investments in LMC during 1996, 1997, 1998 and 1999 in order to
provide LMC with working capital required to fund significant continuing
operating losses, develop a new product, finance the downpayment on and move to
a new facility and to purchase capital equipment needed to modernize the
company's production operations.

RBM had a record year for fiscal 1998, with sales of approximately $30 million
and EBITDA of approximately $2.7 million. However, these sales were achieved
primarily through one contract with Digital Equipment Corporation ("DEC").
During August 1998, RBM notified the Fund that anticipated sales to DEC and
other large customers were expected to decline significantly in the upcoming
year. Of particular concern were sales to DEC, which has been acquired by Compaq
Computer Corp. As a result of the expected decline in sales, RBM began the
process of restructuring its debt, including the subordinated debt held by the
Fund. The Fund received the quarterly interest payment that was due from RBM on
August 24, 1998. The interest payment that was due during November 1998 was
deferred and subsequently converted to equity pursuant to the restructuring
described below.

During December 1998, RBM and its lenders completed a restructuring under which
a new senior lender, Norwest Business Credit, replaced Bank of America. As part
of this transaction, RBM's equity sponsor contributed additional equity to the
company and the subordinated lenders, including the Fund, agreed to accept
shares of RBM's common stock as payment for the next three quarterly interest
payments beginning with the payment that was due during November 1998. As a
consequence, the Fund's ownership of RBM, on a fully-diluted basis, increased
from 6.6% to 8.1%, assuming exercise of its warrants. The restructuring was
designed to provide RBM with a period of time in which to secure additional
customers and return to a more stable financial position under which RBM could
meet its interest obligations to its creditors, including the Fund.

As a result of these developments, the Fund stopped accruing interest on its RBM
subordinated debt effective August 24, 1998. In addition, the Fund recorded
aggregate writedowns of $753,634 relating to RBM during the year ended December
31, 1998.

During June 1998, the Fund exchanged its Atlas (which was in bankruptcy
proceedings) subordinated notes and warrants for 989,414 shares of common stock
of WasteMasters, Inc. ("WMI"), an Atlanta, Georgia based waste management
company. Pursuant to the terms of the agreement, the Fund is prohibited from
selling its WMI common stock for 24 months. In addition, the Fund granted the
entity acquiring the Fund's Atlas securities a call on the Fund's WMI common
stock during the 24 month lock up period and a right of first refusal
thereafter. The call price is $11.25 per share.


                               -----------------

                                    FIFTEEN

<PAGE>   47


                        FIDUCIARY CAPITAL PARTNERS, L.P.
--------------------------------------------------------------------------------

The WMI common stock, which trades on the NASDAQ Small Cap Market System
("WASTE"), closed at $1.78 and $0.36 (an average of the closing bid and ask
prices) on June 3, 1998 and March 31, 1999, respectively. Based on these prices,
the Fund's WMI common stock had trading values of $1,761,157 on the date of the
exchange (June 3, 1998) and $359,189 on March 31, 1999. However, due to a number
of factors, including the speculative nature of the WMI stock, the two year lock
up period and the relative size of the Fund's stock position versus the daily
trading volume, FCM has decided to carry the WMI stock at the same nominal value
that the Atlas securities were previously carried by the Fund. The 52-week low
for the WMI common stock is $0.12 per share.

The Fund recorded a realized loss of $2,560,453 on the exchange, which was equal
to the amount of the loss which the Fund claimed for income tax purposes from
the disposition of the Atlas securities. The $1,321,794 balance of the
unrealized loss previously recorded by the Fund with respect to the Atlas
securities continues to be carried by the Fund as an unrealized loss.

FCM continually monitors both the Fund's portfolio companies and the markets,
and continually evaluates the decision to hold or sell its traded securities.


                            READINESS FOR YEAR 2000

FCM has completed a review of the accounting and other information systems that
are currently being utilized by FCM and the Fund with regard to Year 2000
issues. This review involved both actual tests of parts of the information
systems that were conducted by third party consultants and representations
received from various software vendors. FCM believes that all of these systems
are Year 2000 compliant. All of the costs associated with this review were paid
by FCM.

FCM also corresponded with appropriate third parties, such as the Fund's
custodian and transfer agent, concerning whether their information systems are
Year 2000 compliant. These third parties have represented that their information
systems are either currently Year 2000 compliant or that they have identified
the scope of required upgrades or changes to their information systems that are
needed and that they have a plan in place to complete these upgrades on a timely
basis.

As a result of the above discussed review, Year 2000 issues are not expected to
have any material adverse effects on the Fund's results of operations or
financial condition.


                               ------------------

                                     SIXTEEN
<PAGE>   48





                        FIDUCIARY CAPITAL PARTNERS, L.P.
      --------------------------------------------------------------------














                             ----------------------
                             SECOND QUARTER REPORT
                                      1999



<PAGE>   49


                        FIDUCIARY CAPITAL PARTNERS, L.P.
        ----------------------------------------------------------------
                              MESSAGE TO INVESTORS

Dear Investor:

As of June 30, 1999, the Fund's net asset value per Unit was $9.01 and the Fund
held portfolio investments in four companies, which represented approximately
88.9% of the Fund's net assets. The Fund's remaining liquid assets were invested
in short-term commercial paper. These funds are available to fund the annual
Repurchase Offer, to fund follow-on investments in existing portfolio companies,
to pay Fund expenses and for distribution to investors.

CASH DISTRIBUTIONS

The cash distribution for the second quarter of 1999 was paid on August 13, 1999
at a rate of $.30 per Unit. Cumulative cash distributions paid to investors
since the Fund's inception during 1990 now total between $16.02 and $15.70 on a
per Unit ($20.00 cost) basis, depending upon the closing in which the particular
Units were issued.

The distribution for the third quarter of 1999 will be paid on November 15, 1999
at a rate of $.30 per Unit. All investors will receive this distribution if they
are record holders as of September 30, 1999, whether or not their Units are
tendered for repurchase in the 1999 Repurchase Offer (see below).

The Fund's ability to continue to pay quarterly distributions after the third
quarter of 1999 is uncertain at this time. The distribution question will be
addressed on a quarterly basis, and will involve the consideration of a number
of issues, including the status of the proposed proxy vote (discussed below). A
significant portion of the 1999 distributions will constitute a return of
capital.

PORTFOLIO UPDATE

KEMET Corporation ("KEMET") The Fund is in the process of liquidating its
remaining KEMET common stock investment. This process, which involves the
writing of covered call options, began during May 1999 and is expected to be
completed during October 1999. In the aggregate, during this six month period
the Fund is expected to generate approximately $513,000 of net cash proceeds
from the liquidation of its remaining KEMET common stock. This will bring the
total proceeds from the sale of KEMET common shares to approximately $5,944,000
versus our investment of approximately $681,000.


                               -----------------
                                       ONE

<PAGE>   50


                        FIDUCIARY CAPITAL PARTNERS, L.P.
        ----------------------------------------------------------------

R.B.M. Precision Metal Products, Inc. ("RBM") During 1998, RBM achieved record
sales volume due primarily to a single large contract with Digital Equipment
Corporation. This contract was only partially continued in 1999 and as a result,
sales have declined dramatically and the Company has experienced losses for the
last three quarters.

During December 1998, RBM and its lenders completed a restructuring under which
a new senior lender, Norwest Business Credit, replaced Bank of America. As part
of this restructuring, RBM's principal shareholder contributed additional equity
to the company and the subordinated lenders, including the Fund, agreed to
accept shares of RBM's common stock as payment for the next three quarterly
interest payments beginning with the payment that was due during November 1998
and ending with the payment that would have been due during May 1999. As a
consequence, the Fund's ownership of RBM, on a fully-diluted basis, increased
from 6.6% to 8.1%, assuming exercise of its warrants, which have a nominal
exercise price. The restructuring was designed to provide RBM with a period of
time in which to secure additional customers and return to a more stable
financial position under which RBM could meet its interest obligations to its
creditors, including the Fund.

The Fund did not assign any value to the RBM common stock that was received in
lieu of the payment of the three quarterly interest payments. As a result, the
Fund did not record any interest income with respect to the RBM subordinated
debt for the nine month period beginning August 25, 1998 and ending May 24,
1999, and it established a valuation reserve of approximately 50% against the
subordinated debt it holds.

RBM agreed to resume making the quarterly interest payments in cash commencing
with the quarterly interest payment due on August 24, 1999 (which was recently
received by the Fund). As a result, the Fund has resumed accrual of interest
income with respect to the RBM subordinated debt. Principal of the debt is
scheduled to be repaid in three equal annual installments of $486,667 commencing
on May 24, 2000. Currently, the Fund has a valuation reserve of approximately
50% against the principal amount of this debt, and intends to maintain this
reserve at least until RBM attains profitable operations.

LMC Corporation ("LMC") During February 1999, the Fund agreed to purchase a
total of $849,750 of Senior Subordinated Revolving Notes due October 1, 1999
(the "Notes") from LMC. As of June 30, 1999, the Fund had advanced a total of
$620,317 pursuant to the terms of these Notes, and the remaining $229,433 has
subsequently been advanced.


                               -----------------
                                       TWO

<PAGE>   51
                        FIDUCIARY CAPITAL PARTNERS, L.P.
        ----------------------------------------------------------------

During August 1999, the Fund agreed to accept shares of a new class of LMC
preferred stock in exchange for (i) the Notes, (ii) the accrued interest due on
the Notes, and (iii) the quarterly interest payment that was due on July 1, 1999
with respect to the LMC Senior Subordinated Revolving Notes due October 31,
2000, which the Fund continues to hold.

LMC has completed its move to the new facility in Brigham City, Utah and is now
producing the TrackMaster 85(R) there. Sales of the TrackMaster have exceeded
current production levels and we are exploring methods of increasing production
and obtaining the additional required working capital. The Fund owns 5,523,500
shares of LMC common stock and is contemplating a distribution of all or a
portion of these shares to Fund investors, as discussed under the Possible
Liquidation Plans section below.

WasteMasters, Inc. ("WMI") WMI is traded on the OTC Market System and its symbol
is WASTE. The Fund owns 989,414 shares of WMI, which it carries at a $1 value on
its books. On August 17, 1999, the closing price was $.09 per share. The Fund is
contractually restricted in its ability to sell these shares and the shares are
not registered. As part of the Fund's liquidation, we anticipate disposing of
these shares.

INVESTMENT PERFORMANCE

The following analysis reflects only the Fund's investments that have gone full
cycle, i.e., the investments that have been sold and with respect to which the
Fund has recorded a realized gain or loss. Thus, investments that the Fund still
owns, such as LMC, RBM and WMI, are not included.

As reflected in the schedules on pages six and seven of this Quarterly Report,
the Fund invested a total of $50.6 million in subordinated debt investments and
received total realized proceeds of $57.6 million, including interest income,
fees and prepayment penalties. In the aggregate, these debt investments yielded
a return on investment of 1.1 to 1 and an annualized internal rate of return of
7.60%. The Fund also invested $3.7 million in equity securities, from which it
realized total proceeds of $13.3 million. In the aggregate, these equity
investments yielded a return on investment of 3.6 to 1 and an internal rate of
return of 33.12%. Please note that prior performance is not necessarily
indicative of future results.

We are actively attempting to realize the greatest possible returns from the
Fund's remaining investments.

                               -----------------
                                      THREE

<PAGE>   52

                        FIDUCIARY CAPITAL PARTNERS, L.P.
        ----------------------------------------------------------------

PERIODIC UNIT REPURCHASE POLICY

Pursuant to the terms of the Fund's periodic unit repurchase policy, the Fund
has annually offered to purchase from investors, up to 7.5% of its outstanding
Units for an amount equal to the current net asset value per Unit, net of a 2%
fee, which is retained by the Fund to offset expenses incurred in connection
with the Repurchase Offer. If the number of tendered Units in any year exceeds
7.5% of the outstanding Units, the Fund's General Partners may vote to
repurchase up to an additional 2% of the outstanding Units. If Units in excess
of this amount are tendered, Units are purchased on a prorated basis, after
giving priority to investors owning less than 100 Units.

In the letter that accompanied the 1998 Repurchase Offer, we indicated that we
believed that the 1998 Repurchase Offer would be the Fund's last Repurchase
Offer. However, at the July 28, 1999 meeting of the General Partners it was
determined that the Fund will proceed with the 1999 Repurchase Offer, which will
occur during the fourth quarter of 1999. The Repurchase Offer schedule provides
for a mailing to investors on October 5, 1999. The deadline for tendering Units
for repurchase will be October 29, 1999. The repurchase price will be based on
the net asset value per Unit on November 12, 1999 and payment for tendered Units
will be made on November 19, 1999.

POSSIBLE LIQUIDATION PLANS

The General Partners are presently considering a number of alternative actions
through which the Fund could be completely liquidated by the end of next year.
An overall plan of liquidation was adopted at a meeting of the General Partners
held in January 1999. The General Partners will follow the requisite regulatory
procedures required to liquidate the Fund. These procedures are expected to
include requesting an exemptive order from the Securities and Exchange
Commission (the "SEC"), which will permit the Fund to act as an operating
company instead of an SEC registered investment company. Once this order is
obtained, the Fund will finalize its liquidation plan and prepare a proxy
statement setting forth the details of the plan as well as the changes required
in the Fund's Partnership Agreement. Late in the fourth quarter of 1999 or early
in 2000, investors will be requested to approve the implementation plan and the
Partnership Agreement changes. As currently contemplated, Fund investors would
become direct shareholders of LMC as a result of the liquidation plan, if all
approvals are received.

                               -----------------
                                      FOUR

<PAGE>   53


                        FIDUCIARY CAPITAL PARTNERS, L.P.
        ----------------------------------------------------------------
                 *    *    *    *    *    *    *    *    *    *

If you have any questions concerning 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/ DUKE DEGRASSI

W. Duke DeGrassi, President
FCM Fiduciary Capital Management Company

August 25, 1999

                               -----------------
                                      FIVE

<PAGE>   54


                        FIDUCIARY CAPITAL PARTNERS, L.P.
        ----------------------------------------------------------------
                                DEBT INVESTMENTS
                         REALIZED GAINS AND LOSSES (1)
                                  (unaudited)

<TABLE>
<CAPTION>
                                                                                       INTERNAL
YEAR OF INVESTMENT /               YEAR OF                                   GAIN(3)    RATE OF
PORTFOLIO COMPANY(2)              REPAYMENT         COST     PROCEEDS(3)     (LOSS)      RETURN
--------------------              ---------         ----     -----------     ------      ------

<S>                                  <C>        <C>          <C>           <C>           <C>
      1990
Carr-Gottstein Foods Co.             1993       $ 2,940,260  $ 4,998,722   $2,058,462    23.56%
Midwest Dental Products
   Corporation                       1992         5,478,467    7,946,060    2,467,593    22.63
Neodata Corporation                  1993         2,684,449    3,877,613    1,193,164    17.11

      1991
KEMET Corporation                    1993         4,014,737    5,494,046    1,479,309    17.63
Mobile Technology, Inc.              1998         3,777,475    1,030,215   (2,747,260)     N/A

      1992
Huntington Holdings, Inc.            1994         5,292,479    7,480,171    2,187,692    20.07
AR Accessories Group, Inc.           1994         5,478,467    6,686,926    1,208,459    11.74

      1993
ENI Holding Corp.                    1997         5,914,363    9,477,926    3,563,563    13.91
KB Alloys, Inc.                      1995         3,489,783    5,185,069    1,695,286    18.32
KEMET Corporation(4)                 1993         2,054,425    2,186,222      131,797    26.41
Protection One, Inc.                 1995           985,660    1,338,165      352,505    22.11

      1994
Canadian's Holdings, Inc.            1996         2,876,392      367,216   (2,509,176)     N/A

      1995
Canadian's Holdings, Inc.(4)         1996         1,750,113       62,294   (1,687,819)     N/A

      1996
Atlas Environmental, Inc.            1998         3,814,633    1,456,045   (2,358,588)     N/A
                                                -----------  -----------   ----------
     Totals                                     $50,551,703  $57,586,690   $7,034,987     7.60%
                                                ===========  ===========   ==========     ====
</TABLE>

(1) Note that prior performance is not necessarily indicative of future results.

(2) Includes investment in subsidiaries, if applicable.

(3) Includes interest income, fees and prepayment penalties.

(4) Represents a follow-on investment in an existing portfolio company.

                               -----------------
                                       SIX

<PAGE>   55


                        FIDUCIARY CAPITAL PARTNERS, L.P.
        ----------------------------------------------------------------
                               EQUITY INVESTMENTS
                          REALIZED GAINS AND LOSSES (1)
                                   (unaudited)


<TABLE>
<CAPTION>
                                                                                                   INTERNAL
YEAR OF INVESTMENT /              YEAR OF                                           GAIN           RATE OF
PORTFOLIO COMPANY(2)            REALIZATION        COST            PROCEEDS        (LOSS)          RETURN
--------------------            -----------        ----            --------        ------          ------

<S>                                <C>          <C>              <C>             <C>               <C>
       1990
Carr-Gottstein Foods Co.           1995         $  894,666       $ 1,450,374     $   555,708         9.78%
Neodata Corporation                1997             41,089         1,118,393       1,077,304        52.07

       1991
KEMET Corporation                1994/1999          71,082         4,571,422       4,500,340       112.37
Mobile Technology, Inc.            1992            440,586                 -        (440,586)       N/A

       1992
Huntington Holdings, Inc.        1996/1998         103,811         1,478,483       1,374,672        70.10
Neodata Corporation(3)             1997            296,858           309,103          12,245         0.81
AR Accessories Group, Inc.         1998            273,920                 -        (273,920)        N/A

       1993
ENI Holding Corp.                  1997            811,976         3,327,051       2,515,075        34.60
KEMET Corporation(3)               1994            600,443           883,564         283,121        41.10
Protection One, Inc.               1995             97,340           146,641          49,301        21.02

       1994
Canadian's Holdings, Inc.          1996             39,782                 -         (39,782)        N/A

       1996
Atlas Environmental, Inc.          1998             40,765                 -         (40,765)        N/A
                                                ----------       -----------     -----------
     Totals                                     $3,712,318       $13,285,031     $ 9,572,713        33.12%
                                                ==========       ===========     ===========        =====
</TABLE>

(1) Note that prior performance is not necessarily indicative of future results.

(2) Includes investment in subsidiaries, if applicable.

(3) Represents a follow-on investment in an existing portfolio company.

                               -----------------
                                      SEVEN

<PAGE>   56
                        FIDUCIARY CAPITAL PARTNERS, L.P.
        ----------------------------------------------------------------
                             SCHEDULE OF INVESTMENTS

        JUNE 30, 1999 (UNAUDITED)
        ----------------------------------------------------------------

<TABLE>
<CAPTION>
PRINCIPAL
  AMOUNT/                                  INVESTMENT      AMORTIZED                    % OF TOTAL
  SHARES              INVESTMENT             DATE            COST            VALUE      INVESTMENTS
  ------              ----------             ----            ----            -----      -----------

<S>               <C>                        <C>         <C>             <C>               <C>
MANAGED COMPANIES:

    26,629 sh.    KEMET Corporation,
                  Common Stock(1)*           07/11/91    $     9,439     $   609,971
                                                           ---------       ---------       ----
                                                               9,439         609,971        5.9%
                                                           ---------       ---------       ----
$1,967,040        LMC Corporation, 12.00%
                  Senior Subordinated        11/01/96
                  Revolving Notes             through
                  due 10/31/00               01/13/99      1,967,040       1,967,040
$  620,317        LMC Corporation, 12.00%
                  Senior Subordinated        02/11/99
                  Revolving Notes             through
                  due 10/1/99 (Note 5)       05/25/99        620,317         620,317
   260,400 sh.    LMC Corporation, 7.00%
                  Cumulative Redeemable
                  Preferred Stock*           06/10/94      2,596,621       2,596,621
 5,523,500 sh.    LMC Corporation,           02/09/96
                  Common Stock*               through
                                             08/05/98      3,034,549       2,176,469
     52.08 sh.    LMC Credit Corp.,
                  Common Stock*              02/09/96              1               1
                                                           ---------       ---------       ----
                                                           8,218,528       7,360,448       70.8
                                                           ---------       ---------       ----
$1,460,000        R.B.M. Precision Metal
                  Products, Inc., 13.00%
                  Senior Subordinated
                  Secured Notes due
                  5/24/02(2)                 05/24/95      1,403,073         732,393
  14,265.6 sh.    R.B.M. Precision Metal
                  Products, Inc., Warrants to
                  Purchase Common Stock*     05/24/95         82,955               1
    14,392 sh.    R.B.M. Precision Metal
                  Products, Inc., Common
                  Stock*                     12/09/98              1               1
                                                           ---------       ---------       ----
                                                           1,486,029         732,395        7.0
                                                           ---------       ---------       ----
   Total Investments in Managed
     Companies (88.9% of net assets)                       9,713,996       8,702,814       83.7
                                                           ---------       ---------       ----
</TABLE>

              The accompanying notes to financial statements are an
                        integral part of this schedule.

                               -----------------
                                      EIGHT

<PAGE>   57


                        FIDUCIARY CAPITAL PARTNERS, L.P.
        ----------------------------------------------------------------
                       SCHEDULE OF INVESTMENTS (CONTINUED)

        JUNE 30, 1999 (UNAUDITED)
        ----------------------------------------------------------------

<TABLE>
<CAPTION>
  PRINCIPAL
   AMOUNT/                                     INVESTMENT     AMORTIZED                  % OF TOTAL
   SHARES           INVESTMENT                    DATE          COST          VALUE      INVESTMENTS
   ------           ----------                    ----          ----          -----      -----------

<S>                                             <C>          <C>            <C>             <C>
NON-MANAGED COMPANY:

   989,414 sh.  WasteMasters, Inc.,
                Common Stock(3)*                06/03/98       1,321,795              1
                                                             -----------    -----------     -----
   Total Investment in
     Non-Managed Company
     (0.0% of net assets)                                      1,321,795              1       0.0
                                                             -----------    -----------     -----

TEMPORARY INVESTMENTS:

$1,700,000      General Electric
                Capital Corp., 4.96%
                Notes due 7/13/99               06/29/99       1,697,195      1,697,195
                                                             -----------    -----------     -----
   Total Temporary Investments
     (17.3% of net assets)                                     1,697,195      1,697,195      16.3
                                                             -----------    -----------     -----
   Total Investments (106.2% of net assets)                  $12,732,986    $10,400,010     100.0%
                                                             ===========    ===========     =====
</TABLE>

(1) The KEMET Corporation common stock trades on the NASDAQ National Market
    System.

(2) The notes will amortize in three equal annual installments of $486,667
    commencing on May 24, 2000.

(3) The WasteMasters, Inc. common stock, which trades on the OTC Market System,
    is subject to a 24 month lock up period, a call option and a right of first
    refusal.

 *  Non-income producing security.


              The accompanying notes to financial statements are an
                        integral part of this schedule.

                               -----------------
                                      NINE

<PAGE>   58
                        FIDUCIARY CAPITAL PARTNERS, L.P.
        ----------------------------------------------------------------
                    SCHEDULE OF COVERED CALL OPTIONS WRITTEN

        JUNE 30, 1999 (UNAUDITED)
        ----------------------------------------------------------------

<TABLE>
<CAPTION>
   SHARES
 SUBJECT TO       COMMON STOCK           EXPIRATION DATE /
    CALL           INVESTMENT             EXERCISE PRICE            VALUE
 ---------        ------------           ----------------          --------

<S>            <C>                       <C>                       <C>
21,916 sh.     KEMET Corporation            July / $17.50          $120,538

 4,383 sh.     KEMET Corporation         October / $17.50            27,394
                                                                   --------
     Total (premiums received $24,773)                             $147,932
                                                                   ========
</TABLE>

              The accompanying notes to financial statements are an
                        integral part of this schedule.

                               -----------------
                                       TEN

<PAGE>   59


                        FIDUCIARY CAPITAL PARTNERS, L.P.
        ----------------------------------------------------------------
                                 BALANCE SHEETS

        JUNE 30, 1999 AND DECEMBER 31, 1998 (UNAUDITED)
        ----------------------------------------------------------------

<TABLE>
<CAPTION>
                                                          1999                 1998
                                                       -----------          -----------

<S>                                                   <C>                   <C>
ASSETS:
 Investments:
  Portfolio investments, at value:
   Managed companies (amortized cost -
    $9,713,996 and $9,037,112,
    respectively)                                     $  8,702,814          $ 7,735,102
  Non-managed company (amortized cost -
   $1,321,795)                                                   1                    1
  Temporary investments, at amortized cost               1,697,195            2,546,274
                                                       -----------          -----------
    Total investments                                   10,400,010           10,281,377
 Cash and cash equivalents                                 385,970              837,202
 Accrued interest receivable                                97,718              103,233
 Other assets                                                6,133               31,859
                                                       -----------          -----------
    Total assets                                       $10,889,831          $11,253,671
                                                       ===========          ===========

LIABILITIES:
  Covered call options written, at value
    (premiums received $24,773)                        $   147,932          $        --
  Payable to affiliates (Notes 2, 3 and 4)                  47,686               31,197
  Accounts payable and accrued liabilities                 568,839              539,360
  Distributions payable to partners                        336,271              336,271
                                                       -----------          -----------
    Total liabilities                                    1,100,728              906,828
                                                       -----------          -----------

COMMITMENTS AND CONTINGENCIES (NOTE 5)

Net Assets:
  Managing General Partner                                (212,588)            (207,011)
  Limited Partners (equivalent to $9.01
    and $9.51, respectively, per limited
    partnership unit based on 1,109,694
    units outstanding)                                  10,001,691           10,553,854
                                                       -----------          -----------
       Net assets                                        9,789,103           10,346,843
                                                       -----------          -----------
         Total liabilities and net assets              $10,889,831          $11,253,671
                                                       ===========          ===========
</TABLE>

              The accompanying notes to financial statements are an
                        integral part of this schedule.

                               -----------------
                                     ELEVEN

<PAGE>   60


                        FIDUCIARY CAPITAL PARTNERS, L.P.
        ----------------------------------------------------------------
                            STATEMENT OF OPERATIONS

        FOR THE THREE MONTHS ENDED JUNE 30, 1999 AND 1998 (UNAUDITED)
        ----------------------------------------------------------------

<TABLE>
<CAPTION>
                                                            1999             1998
                                                          --------       -----------

<S>                                                       <C>            <C>
Investment Income:
   Income:
     Interest                                             $126,697       $   214,948
                                                          --------       -----------
       Total investment income                             126,697           214,948
                                                          --------       -----------
   Expenses:
     Fund administration fees (Note 3)                      35,842            35,842
     Investment advisory fees (Note 2)                      24,275            32,986
     Administrative expenses (Note 3)                       20,277            20,277
     Professional fees                                      29,608            36,969
     Independent General Partner fees
       and expenses (Note 4)                                12,939            14,879
     Other expenses                                         12,284            18,930
                                                          --------       -----------
       Total expenses                                      135,225           159,883
                                                          --------       -----------
Net Investment (Loss) Income                                (8,528)           55,065
                                                          --------       -----------
Realized and Unrealized
   Gain (Loss) on Investments:
     Net realized loss on investments                       (6,155)       (2,971,463)
     Net change in unrealized loss
        on investments                                     166,795         2,905,923
                                                          --------       -----------
         Net gain (loss) on investments                    160,640           (65,540)
                                                          --------       -----------
Net Increase (Decrease) in Net Assets
   Resulting from Operations                              $152,112       $   (10,475)
                                                          ========       ===========
</TABLE>

              The accompanying notes to financial statements are an
                        integral part of this schedule.

                               -----------------
                                     TWELVE

<PAGE>   61


                        FIDUCIARY CAPITAL PARTNERS, L.P.
        ----------------------------------------------------------------
                            STATEMENTS OF OPERATIONS

        FOR THE SIX MONTHS ENDED JUNE 30, 1999 AND 1998 (UNAUDITED)
        ----------------------------------------------------------------

<TABLE>
<CAPTION>
                                                            1999            1998
                                                          --------       -----------

<S>                                                       <C>            <C>
INVESTMENT INCOME:
   INCOME:
     INTEREST                                             $226,387       $   460,887
                                                          --------       -----------
       Total investment income                             226,387           460,887
                                                          --------       -----------

   EXPENSES:
     Fund administration fees (Note 3)                      71,685            71,685
     Investment advisory fees (Note 2)                      48,550            68,751
     Administrative expenses (Note 3)                       40,553            40,553
     Professional fees                                      42,721           125,448
     Independent General Partner fees
       and expenses (Note 4)                                37,882            36,156
     Other expenses                                         31,708            34,038
                                                          --------       -----------
       Total expenses                                      273,099           376,631
                                                          --------       -----------
NET INVESTMENT (LOSS) INCOME                               (46,712)           84,256
                                                          --------       -----------

REALIZED AND UNREALIZED
   GAIN (LOSS) ON INVESTMENTS:
     Net realized loss on investments                       (6,155)       (2,984,344)
     Net change in unrealized loss
        on investments                                     167,669         2,721,116
                                                          --------       -----------
         Net gain (loss) on investments                    161,514          (263,228)
                                                          --------       -----------
NET INCREASE (DECREASE) IN NET ASSETS
   RESULTING FROM OPERATIONS                              $114,802       $  (178,972)
                                                          ========       ===========
</TABLE>

              The accompanying notes to financial statements are an
                        integral part of this schedule.

                               -----------------
                                    THIRTEEN
<PAGE>   62
                        FIDUCIARY CAPITAL PARTNERS, L.P.


                            STATEMENT OF CASH FLOWS





FOR THE SIX MONTHS ENDED JUNE 30, 1999 AND 1998 (UNAUDITED)

<TABLE>
<CAPTION>
                                                                         1999                 1998
                                                                      -----------         -----------
<S>                                                                   <C>                 <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net increase (decrease) in net assets
     resulting from operations                                        $   114,802         $  (178,972)
   Adjustments to reconcile net increase (decrease)
     in net assets resulting from operations to net
     cash (used in) provided by operating activities:
       Accreted discount on portfolio investments                          (2,393)             (9,577)
       Change in assets and liabilities:
        Accrued interest receivable                                         5,515               4,097
        Other assets                                                       25,726              60,524
        Payable to affiliates                                              16,489              (9,020)
        Accounts payable and accrued liabilities                             (577)             (1,663)
       Net realized loss on investments                                     6,155           2,984,344
       Net change in unrealized loss
        on investments                                                   (167,669)         (2,721,116)
                                                                      -----------         -----------
           Net cash (used in) provided by operating activities             (1,952)            128,617
                                                                      -----------         -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
   Purchase of portfolio investments                                     (674,957)         (1,985,300)
   Proceeds from dispositions of portfolio investments                     49,140             818,812
   Sale of temporary investments, net                                     849,079           4,055,494
                                                                      -----------         -----------
     Net cash provided by investing activities                            223,262           2,889,006
                                                                      -----------         -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
   Cash distributions paid to partners                                   (672,542)         (2,541,157)
                                                                      -----------         -----------
     Net cash used in financing activities                               (672,542)         (2,541,157)
                                                                      -----------         -----------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS                     (451,232)            476,466
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD                          837,202             263,694
                                                                      -----------         -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD                            $   385,970         $   740,160
                                                                      ===========         ===========
NONCASH INVESTING AND FINANCING ACTIVITIES:
   Investments exchanged for other investments                        $      --           $ 1,639,201
                                                                      ===========         ===========


The accompanying notes to financial statements are an integral part of these financial statements.
</TABLE>


                               -----------------

                                    FOURTEEN

<PAGE>   63
                        FIDUCIARY CAPITAL PARTNERS, L.P.


                      STATEMENTS OF CHANGES IN NET ASSETS


FOR THE SIX MONTHS ENDED JUNE 30, 1999 AND FOR
THE YEAR ENDED DECEMBER 31, 1998 (UNAUDITED)

<TABLE>
<CAPTION>
                                                             1999                 1998
                                                         ------------         ------------

<S>                                                      <C>                  <C>
Increase in net assets resulting from operations:
   Net investment income                                 $    (46,712)        $    107,781
   Net realized loss on investments                            (6,155)          (3,008,930)
   Net change in unrealized loss on investments               167,669            1,919,453
                                                         ------------         ------------
     Net increase (decrease) in net assets
       resulting from operations                              114,802             (981,696)
Repurchase of limited partnership units                          --               (893,895)
Distributions to partners from -
   Net investment income                                         --               (129,001)
   Realized gain on investments                                  --             (1,742,647)
   Return of capital                                         (672,542)          (1,363,193)
                                                         ------------         ------------
     Total decrease in net assets                            (557,740)          (5,110,432)
Net assets:
   Beginning of period                                     10,346,843           15,457,275
                                                         ------------         ------------
   End of period (including no undistributed
     net investment income)                              $  9,789,103         $ 10,346,843
                                                         ============         ============


The accompanying notes to financial statements are an integral part of these financial statements.
</TABLE>


                              --------------------

                                     FIFTEEN


<PAGE>   64
                        FIDUCIARY CAPITAL PARTNERS, L.P.


                       SELECTED PER UNIT DATA AND RATIOS
                                   (unaudited)


<TABLE>
<CAPTION>
                                                     FOR THE THREE MONTHS                      FOR THE SIX MONTHS
                                                         ENDED JUNE 30,                          ENDED JUNE 30,
                                               ---------------------------------       ---------------------------------
                                                   1999                1998                1999                 1998
                                               -------------       -------------       -------------       -------------
<S>                                            <C>                 <C>                 <C>                 <C>
PER UNIT DATA:
   Investment Income                           $         .11       $         .18       $         .20       $         .38
   Expenses                                             (.12)               (.13)               (.24)               (.31)
                                               -------------       -------------       -------------       -------------
     Net investment (loss) income                       (.01)                .05                (.04)                .07
   Net realized loss on investments                     (.01)              (2.45)               (.01)              (2.46)
   Net change in unrealized loss
     on investments                                      .15                2.39                 .15                2.24
   Distributions declared to partners                   (.30)              (1.00)               (.60)              (2.09)
                                               -------------       -------------       -------------       -------------
     Net Decrease in Net Asset Value                    (.17)              (1.01)               (.50)              (2.24)
       Net asset value:
         Beginning of period                            9.18               11.68                9.51               12.91
                                               -------------       -------------       -------------       -------------
         End of period                         $        9.01       $       10.67       $        9.01       $       10.67
                                               =============       =============       =============       =============
RATIOS (ANNUALIZED):
   Ratio of expenses to average net assets              5.47%               4.77%               5.49%               5.35%
   Ratio of net investment income to
    average net assets                                 (0.03)%              1.64%              (0.94)%              1.20%
Number of limited partnership units at
 end of period                                     1,109,694           1,201,564           1,109,694           1,201,564
</TABLE>


         The accompanying notes to financial statements are an integral
                part of these selected per unit data and ratios.


                              --------------------

                                    SIXTEEN

<PAGE>   65
                        FIDUCIARY CAPITAL PARTNERS, L.P.

                          NOTES TO FINANCIAL STATEMENTS

JUNE 30, 1999 (UNAUDITED)

1.   GENERAL

The accompanying unaudited interim financial statements include all adjustments
(consisting solely of normal recurring adjustments) which are, in the opinion of
FCM Fiduciary Capital Management Company ("FCM"), the Managing General Partner
of Fiduciary Capital Partners, L.P. (the "Fund"), necessary to fairly present
the financial position of the Fund as of June 30, 1999 and the results of its
operations, changes in net assets and its cash flows for the periods then ended.

These financial statements should be read in conjunction with the Significant
Accounting Policies and other Notes to Financial Statements included in the
Fund's annual audited financial statements for the year ended December 31, 1998.


2.   INVESTMENT ADVISORY FEES

As compensation for its services as investment adviser, FCM receives a
subordinated monthly fee at the annual rate of 1% of the Fund's available
capital, as defined in the Partnership Agreement. Investment advisory fees of
$48,550 were paid by the Fund for the six months ended June 30, 1999.


3.   FUND ADMINISTRATION FEES

As compensation for its services as fund administrator, FCM receives a monthly
fee at the annual rate of 0.45% of net proceeds available for investment, as
defined in the Partnership Agreement. Fund administration fees of $71,685 were
paid by the Fund for the six months ended June 30, 1999. FCM is also reimbursed,
subject to various limitations, for administrative expenses incurred in
providing accounting and investor services to the Fund. The Fund reimbursed FCM
for administrative expenses of $40,553 for the six months ended June 30, 1999.


4.   INDEPENDENT GENERAL PARTNER FEES AND EXPENSES

As compensation for services rendered to the Fund, each of the Independent
General Partners receives from the Fund and Fiduciary Capital 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 six months ended
June 30, 1999 totaled $37,882.


                              -------------------

                                    SEVENTEEN


<PAGE>   66

                        FIDUCIARY CAPITAL PARTNERS, L.P.

                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)

5.   COMMITMENTS AND CONTINGENCIES

LMC Commitment LMC Corporation ("LMC") is entitled to draw down a total of
$849,750 pursuant to the terms of the Senior Subordinated Revolving Notes due
October 1, 1999, which are held by the Fund. As of June 30, 1999, LMC had drawn
down $620,317.




                              -------------------

                                    EIGHTEEN


<PAGE>   67

                        FIDUCIARY CAPITAL PARTNERS, L.P.


                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                       FINANCIAL CONDITION AND RESULTS OF
                                   OPERATIONS


The following discussion should be read in conjunction with the Fund's unaudited
Financial Statements and the Notes thereto. This report contains, in addition to
historical information, forward-looking statements that include risks and other
uncertainties. The Fund's actual results may differ materially from those
anticipated in these forward-looking statements. While the Fund can not always
predict what factors would cause actual results to differ materially from those
indicated by the forward-looking statements, factors that might cause such a
difference include general economic and business conditions, competition and
other factors discussed elsewhere in this report. Readers are urged to consider
statements that include the terms "believes", "expects", "plans", "anticipates",
"intends" or the like to be uncertain and forward-looking. The Fund undertakes
no obligation to release publicly any revisions to these forward-looking
statements to reflect events or circumstances after the date hereof or to
reflect the occurrence of anticipated or unanticipated events.

LIQUIDITY AND CAPITAL RESOURCES

As of June 30, 1999, the Fund held portfolio investments in three Managed
Companies and one Non-Managed Company, with an aggregate original cost of
approximately $11.0 million. The value of these portfolio investments, which
were made from net offering proceeds and the reinvestment of proceeds from the
sale of other portfolio investments, represents approximately 88.9% of the
Fund's net assets.

When acquired, the Fund's portfolio investments generally consisted of
high-yield subordinated debt, linked with an equity participation or a
comparable participation feature in middle market companies. The securities were
typically issued in private placement transactions and were subject to certain
restrictions on transfer or sale, thereby limiting their liquidity. A number of
the portfolio companies have prepaid their subordinated debt that the Fund held.
In addition, three of the portfolio companies have successfully completed
initial public offerings ("IPOs") of their stock. The Fund has sold the stock it
held in these three companies, except for a portion of its KEMET Corporation
("KEMET") stock.

As of June 30, 1999, the Fund's remaining liquid assets were invested in
short-term commercial paper. These funds are available to fund the annual
repurchase offer, to fund follow-on investments in existing portfolio companies,
to pay Fund expenses and for distribution to the partners.

The Fund's investment period ended on December 31, 1995. Although the Fund has
been permitted to make additional investments in existing portfolio companies
since 1995, the Fund is no longer permitted to acquire investments in new
portfolio companies. Consequently, the Fund has been in a liquidation mode.
Since the middle of 1997, the


                               ------------------

                                    NINETEEN


<PAGE>   68

                        FIDUCIARY CAPITAL PARTNERS, L.P.

Fund has liquidated a significant percentage of its investments and has
distributed approximately $5.63 per Unit to the Limited Partners, with the cash
coming primarily from the liquidation of these investments. The Fund presently
has only four remaining investments in portfolio companies, which are expected
to generate only limited amounts of interest income for the Fund during 1999 and
future years.

Pursuant to the terms of the Fund's periodic unit repurchase policy, the Fund
has annually offered to purchase from its Limited Partners, up to 7.5% of its
outstanding Units for an amount equal to the current net asset value per Unit,
net of a fee (not to exceed 2%) to be retained by the Fund to offset expenses
incurred in connection with the repurchase offer. If the number of tendered
Units in any year exceeds 7.5% of the outstanding Units, the Fund's General
Partners may vote to repurchase up to an additional 2% of the outstanding Units.

The Fund previously indicated that it might be unable to fund a repurchase offer
during 1999 due to the lack of sufficient liquidity. However, during July 1999,
the General Partners determined that the Fund will proceed with the 1999
repurchase offer, which will be completed during the fourth quarter of 1999.

The General Partners are presently considering a number of alternative actions
through which the Fund could be liquidated during 1999 or 2000. An overall plan
of liquidation was adopted at a meeting of the General Partners held in January
1999. The General Partners will follow the requisite regulatory procedures
required to liquidate the Fund. These procedures are expected to include
requesting an exemptive order from the Securities and Exchange Commission (the
"SEC"), which will permit the Fund to act as an operating company instead of an
SEC registered investment company. Once this order is obtained, the Fund will
finalize its liquidation plan and prepare a proxy statement setting forth the
details of the plan as well as the changes required in the Fund's Partnership
Agreement. Late in the fourth quarter of 1999 or early in 2000, the Limited
Partners will be requested to approve the implementation of the liquidation plan
and the Partnership Agreement changes. As currently contemplated, Fund investors
would become direct shareholders of LMC as a result of the liquidation plan, if
all approvals are received.

During February 1999, the Fund agreed to purchase $849,750 of LMC's Senior
Subordinated Revolving Notes due October 1, 1999. As of June 30, 1999, $620,317
of this investment had been funded.

During April 1999, the Fund began writing covered call options with respect to
its shares of KEMET stock. During the three months ended June 30, 1999, the Fund
received $29,536 of premiums from the sale of the options and $19,604 from the
exercise of the options for 1,315 shares. At June 30, 1999, 26,299 options were
outstanding at a strike price of $17.50.

Accrued interest receivable decreased $5,515 from $103,233 at December 31, 1998
to $97,718 at June 30, 1999. This decrease resulted primarily from the fact that
the quar-


                              -------------------

                                     TWENTY


<PAGE>   69

                        FIDUCIARY CAPITAL PARTNERS, L.P.

terly interest payment that was due on the LMC Corporation ("LMC") notes on
October 1, 1998 was not received by the Fund until January 1999. The impact of
the past due status of this LMC interest payment at December 31, 1998 was
partially offset by interest income earned during the three months ended June
30, 1999 on the LMC follow-on investments that were acquired during 1998 and
1999 and by interest accrued on the R.B.M. Precision Metal Products, Inc.
("RBM") subordinated debt investment at June 30, 1999. (See discussion below
concerning interest payments due on the Fund's RBM subordinated debt
investment.)

Other assets decreased $25,726 from $31,859 at December 31, 1998 to $6,133 at
June 30, 1999. This decrease resulted from decreases in both prepaid insurance
and deposits.

During the six months ended June 30, 1999, the Fund paid cash distributions
pertaining to the fourth quarter of 1998 and the first quarter of 1999, each in
the amount of $336,271, or $0.30 per Unit. The distribution for the second
quarter of 1999 will be paid on August 13, 1999 at a rate of $0.30 per Unit. The
Fund's ability to continue to pay quarterly distributions after the second
quarter of 1999 is uncertain at this time. The distribution question will be
addressed on a quarterly basis, and will involve the consideration of a number
of issues. A significant portion of the 1999 distributions is expected to
constitute a return of capital.

RESULTS OF OPERATIONS

                         INVESTMENT INCOME AND EXPENSES

The Fund's net investment loss was $(8,528) for the three months ended June 30,
1999 as compared to net investment income of $55,065 for the corresponding
period of the prior year. Net investment income (loss) per limited partnership
unit decreased from $0.05 to $(0.01) and the ratio of net investment income
(loss) to average net assets decreased from 1.64% to (0.03)% for the three
months ended June 30, 1999 as compared to the corresponding period of the prior
year.

The Fund's net investment loss was $(46,712) for the six months ended June 30,
1999 as compared to net investment income of $84,256 for the corresponding
period of the prior year. Net investment income (loss) per limited partnership
unit decreased from $0.07 to $(0.04) and the ratio of net investment income
(loss) to average net assets decreased from 1.20% to (0.94)% for the six months
ended June 30, 1999 as compared to the corresponding period of the prior year.

Net investment income (loss) for the three and six month periods ended June 30,
1999 decreased primarily as a result of decreases in investment income as
compared to the corresponding periods of the prior year. The impact of the
decreases in investment income was partially offset by decreases in total
expenses.

Investment income decreased $88,251 and $234,500, or 41.1% and 50.9%, for the
three


                              -------------------

                                   TWENTY-ONE


<PAGE>   70

                        FIDUCIARY CAPITAL PARTNERS, L.P.

and six month periods ended June 30, 1999 as compared to the corresponding
periods of the prior year. These decreases resulted primarily from the decision
not to record interest on the Fund's RBM subordinated debt investment during the
period from August 25, 1998 through May 24, 1999 (see discussion below) and a
decrease in the amount of the Fund's temporary investments. The amount of the
Fund's temporary investments decreased because of (i) return of capital
distributions made by the Fund, (ii) purchases of additional LMC follow-on
investments, and (iii) the Fund's repurchase of 7.65% of its Units during the
fourth quarter of 1998. The negative effect of these items was partially offset
by an increase in interest income earned on the LMC follow-on investments that
were acquired during 1998 and 1999.

Total expenses decreased $24,658 and $103,532, or 15.4% and 27.5%, for the three
and six month periods ended June 30, 1999 as compared to the corresponding
periods of the prior year. These decreases resulted primarily from decreases in
professional fees and investment advisory fees.

Professional fees decreased during the three and six month periods ended June
30, 1999 as compared to the corresponding periods of the prior year, primarily
because of fees incurred during the prior year in connection with LMC related
litigation.

The investment advisory fees decreased during the three and six month periods
ended June 30, 1999 as compared to the corresponding periods of the prior year,
primarily as a result of (i) the repurchase of Units during the fourth quarter
of 1998, (ii) the payment of quarterly cash distributions during 1998 that
exceeded the Limited Partners' Preferred Returns (as defined in the Fund's
Partnership Agreement), and (iii) losses realized by the Fund during the second
quarter of 1998 with respect to the Mobile Technology, Inc., Atlas
Environmental, Inc. ("Atlas") and AR Accessories Group, Inc. portfolio
investments. All three of these items decreased the amount of the Fund's
available capital (as defined in the Partnership Agreement), which is the base
with respect to which the investment advisory fees are calculated.

                       REALIZED GAIN (LOSS) ON INVESTMENTS

On April 9, 1999, the Fund wrote covered call options (May / $15.00) with
respect to 5,479 shares of its KEMET stock, for which it received $4,763 of
premiums. The options for 1,315 of these shares were exercised on May 21, 1999
and the balance expired unexercised. The Fund recorded aggregate gains of
$23,901 from these transactions.

The Fund incurred approximately $30,000 of realized losses during the three
months ended June 30, 1999 as a result of adjustments relating to certain
previously held investments.

                    NET UNREALIZED GAIN (LOSS) ON INVESTMENTS

FCM values the Fund's portfolio investments on a weekly basis utilizing a
variety of



                              --------------------

                                   TWENTY-TWO


<PAGE>   71
                        FIDUCIARY CAPITAL PARTNERS, L.P.

methods. For securities that are publicly traded and for which market quotations
are available, valuations are set by the closing sales or an average of the
closing bid and ask prices, as of the valuation date.

Fair value for securities that are not traded in any liquid public markets or
that are privately held are determined pursuant to valuation policies and
procedures that have been approved by the Independent General Partners and
subject to their supervision. There is a range of values that are reasonable for
such investments at any particular time. Each such investment is valued
initially based upon its original cost to the Fund ("cost method"). The cost
method is used until significant developments affecting the portfolio company
provide a basis for use of an appraisal valuation. Appraisal valuations are
based upon such factors as the portfolio company's earnings, cash flow and net
worth, the market prices for similar securities of comparable companies and an
assessment of the portfolio company's future financial prospects. In a case of
unsuccessful operations, the appraisal may be based upon liquidation value.
Appraisal valuations are necessarily subjective. The Fund also may use, when
available, third-party transactions in a portfolio company's securities as the
basis of valuation ("private market method"). The private market method is used
only with respect to completed transactions or firm offers made by
sophisticated, independent investors.

As of December 31, 1998, the Fund had recorded $309,704 of unrealized gain and
$2,933,508 of unrealized loss on investments. Therefore, as of December 31,
1998, the Fund had recorded a total net unrealized loss on investments of
$2,623,804.

The decrease in unrealized loss on investments during the three and six month
periods ended June 30, 1999 and the cumulative net unrealized loss on
investments as of June 30, 1999 consisted of the following components:


<TABLE>
<CAPTION>
                                             Net Changes un
                                          Unrealized Gain (Loss)
                                     ---------------------------------   Net Unrealized
                                     During the Three   During the Six     Gain (Loss)
                                       Months Ended     Months Ended     Recorded As of
     Portfolio Company                 June 30, 1999    June 30, 1999     June 30, 1999
     -----------------               ----------------   --------------   --------------
<S>                                  <C>                <C>              <C>
Unrealized losses recorded during
     prior periods with respect to
     investments disposed of during
     the period                          $(14,574)      $  (14,574)      $           -
KEMET                                     181,369          182,243             477,373
LMC                                             -                -            (858,080)
RBM                                             -                -            (753,634)
WMI                                             -                -          (1,321,794)
                                         --------       ----------       -------------
                                         $166,795         $167,669       $  (2,456,135)
                                         ========       ==========       =============
</TABLE>

KEMET stock, which trades on the NASDAQ National Market System, closed at
$22.90625 (an average of the closing bid and ask prices) on June 30, 1999. This
price is up significantly from the closing prices of $11.46875 and $11.4375 on
March 31, 1999 and December 31, 1998, respectively. Based on the $22.90625
closing trading price of


                             ----------------------

                                  TWENTY-THREE


<PAGE>   72
                        FIDUCIARY CAPITAL PARTNERS, L.P.

the common stock, the 26,629 shares of common stock that the Fund held at June
30, 1999, had a market value of $609,971.

As of June 30, 1999, the Fund had written outstanding covered call options with
respect to 26,299 shares of KEMET stock. These options, for which the Fund
received $24,773 of premiums, had a market value of $147,932 as of June 30,
1999.

LMC experienced significant operating problems after the Fund acquired its LMC
investment during 1994 and the Fund was involved in a restructuring of its LMC
investment during 1995. In the restructuring, the Fund's then existing LMC
subordinated debt and warrants were converted into preferred stock and the Fund
purchased $545,600 of new common stock. As a result of LMC's operational
difficulties and the fact that the Fund's investment was converted from debt
securities to equity securities, the Fund wrote its LMC investment down by
$540,800 during 1995.

LMC has a defined contribution plan (the "Plan"), which was closed during 1995.
The current and previous trustees of the Plan failed to assure that the Plan was
properly funded. In order to rectify this problem, LMC made demands on the
current and previous trustees of the Plan and the previous controlling
shareholder that these parties make the necessary payments to the Plan. LMC has
filed suit against the current trustee and the former controlling shareholder,
whose wholly-owned company currently owns approximately 9% of LMC's common
stock, and expects to prevail in this litigation, although there can be no
assurance that this will be the case.

The Internal Revenue Service ("IRS") performed an audit on the Plan during 1998,
in which it reviewed certain of the years with respect to which the Plan was not
properly funded. At the conclusion of its audit, the IRS notified LMC that it
had determined the underfunding for the years reviewed to be $243,385, plus
interest on that amount. The IRS also imposed excise taxes and interest of
$16,823, which LMC has paid. LMC is currently in discussions with the IRS
concerning how and when the $243,385 underfunding, and the related excise taxes
and interest, must be paid. If LMC is required to make the payments prior to
resolution of the litigation with the current trustee of the Plan, it will have
a negative impact on LMC's working capital availability. In addition, it is
possible that additional assessments could be made in the future for
underfundings of the Plan with respect to earlier years.

As a result of this matter and its potential impact on LMC, the Fund recorded an
additional $317,280 write down in the value of its LMC investment during 1997.
On a cumulative basis, as of June 30, 1999, the Fund's LMC investment has been
written down in value by $858,080. The Fund and LMC's other stockholders made
follow-on investments in LMC during 1996, 1997, 1998 and 1999 in order to
provide LMC with working capital required to fund significant continuing
operating losses, develop a new product, finance the downpayment on and move to
a new facility and to purchase capital equipment needed to modernize the
company's production operations.



                              --------------------

                                   TWENTY-FOUR


<PAGE>   73
                        FIDUCIARY CAPITAL PARTNERS, L.P.

RBM had a record year for fiscal 1998, with sales of approximately $30 million
and EBITDA of approximately $2.7 million. However, these sales were achieved
primarily through one contract with Digital Equipment Corporation ("DEC").
During August 1998, RBM notified the Fund that anticipated sales to DEC and
other large customers were expected to decline significantly in the upcoming
year. Of particular concern were sales to DEC, which has been acquired by Compaq
Computer Corp. As a result of the expected decline in sales, RBM began the
process of restructuring its debt, including the subordinated debt held by the
Fund. The Fund received the quarterly interest payment that was due from RBM on
August 24, 1998. The interest payment that was due during November 1998 was
deferred and subsequently converted to equity pursuant to the restructuring
described below.

During December 1998, RBM and its lenders completed a restructuring under which
a new senior lender, Norwest Business Credit, replaced Bank of America. As part
of this transaction, RBM's equity sponsor contributed additional equity to the
company and the subordinated lenders, including the Fund, agreed to accept
shares of RBM's common stock as payment for the next three quarterly interest
payments beginning with the payment that was due during November 1998. As a
consequence, the Fund's ownership of RBM, on a fully-diluted basis, increased
from 6.6% to 8.1%, assuming exercise of its warrants. The restructuring was
designed to provide RBM with a period of time in which to secure additional
customers and return to a more stable financial position under which RBM could
meet its interest obligations to its creditors, including the Fund.

As a result of these developments, the Fund stopped accruing interest on its RBM
subordinated debt effective August 24, 1998. In addition, the Fund recorded
aggregate writedowns of $753,634 relating to RBM during the year ended December
31, 1998.

The Fund did not record any interest income as a result of the receipt of the
shares of RBM's common stock in payment of the interest due on its RBM
subordinated debt for the period from August 25, 1998 through May 24, 1999, and
no value was assigned to the stock. The Fund expects to receive the quarterly
interest payment due on August 24, 1999 in cash. As a result, the Fund has
accrued the interest due on the debt from the period from May 25, 1999 through
June 30, 1999 in the accompanying financial statements.

During June 1998, the Fund exchanged its Atlas Environmental, Inc. ("Atlas")
(which was in bankruptcy proceedings) subordinated notes and warrants for
989,414 shares of common stock of WasteMasters, Inc. ("WMI"), an Atlanta,
Georgia based waste management company. Pursuant to the terms of the agreement,
the Fund is prohibited from selling its WMI common stock for 24 months. In
addition, the Fund granted the entity acquiring the Fund's Atlas securities a
call on the Fund's WMI common stock during the 24 month lock up period and a
right of first refusal thereafter. The call price is $11.25 per share.

The WMI common stock, which trades on the OTC Market System ("WASTE"), closed at
$1.78 (an average of the closing bid and ask prices) on the date of the exchange
(June 3, 1998). Based on this price, the Fund's WMI had a trading value of
$1,761,157 on the


                             ----------------------

                                   TWENTY-FIVE


<PAGE>   74
                        FIDUCIARY CAPITAL PARTNERS, L.P.

date of the exchange. However, due to a number of factors, including the
speculative nature of the WMI stock, the two year lock up period and the
relative size of the Fund's stock position versus the daily trading volume, FCM
has decided to carry the WMI stock at the same $1 nominal value that the Atlas
securities were previously carried by the Fund. The WMI common stock has
recently traded near its 52-week low of $0.025 per share.

The Fund recorded a realized loss of $2,560,453 on the exchange, which was equal
to the amount of the loss which the Fund claimed for income tax purposes from
the disposition of the Atlas securities. The $1,321,794 balance of the
unrealized loss previously recorded by the Fund with respect to the Atlas
securities continues to be carried by the Fund as an unrealized loss.

FCM continually monitors both the Fund's portfolio companies and the markets,
and continually evaluates the decision to hold or sell its traded securities.

                             READINESS FOR YEAR 2000

FCM has completed a review of the accounting and other information systems that
are currently being utilized by FCM and the Fund with regard to Year 2000
issues. This review involved both actual tests of parts of the information
systems that were conducted by third party consultants and representations
received from various software vendors. FCM believes that all of these systems
are Year 2000 compliant. All of the costs associated with this review were paid
by FCM.

FCM also corresponded with appropriate third parties, such as the Fund's
custodian and transfer agent, concerning whether their information systems are
Year 2000 compliant. These third parties have represented that their information
systems are either currently Year 2000 compliant or that they have identified
the scope of required upgrades or changes to their information systems that are
needed and that they have a plan in place to complete these upgrades on a timely
basis.

As a result of the above discussed review, Year 2000 issues are not expected to
have any material adverse effects on the Fund's results of operations or
financial condition.




                             ----------------------

                                   TWENTY-SIX