<PAGE>   1
                    FIDUCIARY CAPITAL PENSION PARTNERS, L.P.
                    ----------------------------------------



                             ---------------------
                             SECOND QUARTER REPORT
                                      1998

<PAGE>   2

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

Dear Investor:

The Fund's net asset value per Unit was $10.40 at June 30, 1998. The Fund held
portfolio investments in four companies, which represented approximately 62.0%
of the Fund's net assets. 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 investors.

CASH DISTRIBUTIONS

The distribution for the second quarter of 1998 was paid on August 14, 1998 in
an amount equal to $1.00 per Unit. Cumulative cash distributions paid to
investors since the Fund's inception during 1990 total between $14.82 and $14.49
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 1998 will be paid on November 13, 1998
in the amount of $.30 per Unit. All investors will receive this distribution if
they are record holders as of September 30, 1998, whether or not Units are
tendered for repurchase in the 1998 Periodic Repurchase Offer (see below).

A significant portion of the Fund's 1998 distributions will constitute a return
of capital.

INVESTMENT UPDATE

LMC Corporation ("LMC") In early 1998, 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.
Accordingly, the Company offered to its existing shareholders the right to
purchase 12 million 


                                ----------------
                                       ONE
<PAGE>   3

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

additional common shares at a price of $.50 per share. The Fund was offered
4,022,100 shares and has purchased all of such shares for a total consideration
of $2,011,050. As a result of purchasing these additional shares, the Fund now
owns approximately 41% of the Company's common stock and in conjunction with
Fiduciary Capital Partners, L.P., an affiliated fund ("FCP"), owns approximately
91% of the Company. The other LMC shareholder has until November 1, 1998 to
exercise the right to purchase 3,000,000 shares for $1.5 million. If this
shareholder does not exercise this right, the Fund and FCP will then have the
right to purchase these additional shares.

In early September, the Company will purchase a building in Brigham City, Utah
and will move its operations to this facility over the next two months. The
existing facility, which consists of eleven separate buildings in Logan, Utah,
is outdated and inefficient. The new facility will allow the Company to house
its operations in one building and is expected to significantly reduce the
Company's manufacturing costs. Additionally, the monthly costs associated with
buying this building will be less than the Company is currently expending on
lease payments. As part of the move, the Company is acquiring new capital
equipment which will also provide significant operating efficiencies.

LMC's new product, the TrackMaster, was introduced into the market in the Spring
of 1998 and has received very favorable market acceptance. The TrackMaster is a
low ground pressure tracked vehicle that appears to have significant utility in
a wide variety of applications. Through July, the Company had been successful in
signing eight dealers with 27 sales locations to sell the TrackMaster.
Approximately 25 of the new machines have been sold. Sales of this machine have
been somewhat slowed by certain design and performance problems, a situation
which is normal for the introduction of a new product. LMC's management has been
very proactive in addressing the problems, all of which have been corrected or
are presently being corrected. The Company expects to sell 120 of these machines
in the fiscal year starting October 1, 1998.

FCM believes that with the new product, the new plant and new capital equipment,
LMC will achieve profitability within the next year or so.


                                ----------------
                                       TWO
<PAGE>   4

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

Atlas Environmental, Inc. ("Atlas") On June 3, 1998, the Fund exchanged its
Atlas subordinated notes (which were in default) and warrants for 821,376 shares
of WasteMasters, Inc. ("WMI") common stock. WMI is an Atlanta, Georgia based
waste management company that has recently announced an aggressive acquisition
program.

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 of first refusal
thereafter, both of which are priced at $11.25 per share.

The WMI common stock, which trades on the NASDAQ Small Cap Market System
("WAST"), closed at $1.78 and $2.01 (an average of the closing bid and ask
prices) on June 3, 1998 (the date of the exchange) and June 30, 1998,
respectively. 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, the Fund is carrying the WMI stock at the same
nominal value that the Atlas securities had previously been carried by the Fund,
which was a total of $2. The 52 week low for the WMI common stock is $0.25 per
share and the current price (August 31, 1998) is $0.875.

The Fund recorded a realized loss of $2,125,574 on the exchange, which is equal
to the amount of the loss that the Fund expects to claim for income tax purposes
from the disposition of the Atlas securities. The $1,097,306 balance of the
unrealized loss previously recorded by the Fund with respect to the Atlas
securities continues to be carried by the Fund as an unrealized loss.

AR Accessories Group, Inc. ("ARA") 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.


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

<PAGE>   5

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

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 $311,989 cost of the
Fund's equity investment in ARA was written off as a realized loss during May
1998.

Mobile Technology, Inc. ("MTI") On June 1, 1998, the Fund received $158,043 from
the sale of its MTI common equity. This amount represents approximately 95% of
the sales proceeds that MTI expected the selling shareholders to receive from
the sale. The remaining 5%, or approximately $8,000, is being held in escrow
pending the resolution of a dispute over whether the sellers or the buyer should
receive the benefit of warrant exercise proceeds. The Fund recorded a realized
loss of $79,584 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 R.B.M. Precision Metal Products, LMC and WMI, are not included.

As reflected in the following graph and the schedules on pages seven and eight
of this Quarterly Report, the Fund invested a total of $41.9 million in
subordinated debt investments and received total proceeds of $47.6 million,
including interest income, and fees and prepayment penalties, if applicable. In
the aggregate, these debt investments yielded a return on investment of 1.1 to 1
and an annualized internal rate of return of 7.40%. The Fund also invested $3.1
million in equity securities, from which it received total proceeds of $10.9
million. In the aggregate, these equity investments yielded a return on
investment of 3.6 to 1 and an annualized internal rate of return of 33.09%. Note
that prior performance is not necessarily indicative of future results.


                                ----------------
                                      FOUR
<PAGE>   6

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

<TABLE>
<S>                 <C>        
NOTE INV.           $41,932,830
NOTE PROCEEDS       $47,580,830
EQUITY INV.         $ 3,067,766
EQUITY PROCEEDS.    $10,947,710
</TABLE>


The Fund has four remaining investments, which we anticipate will be liquidated
over the next two to three years. We are actively attempting to realize the
greatest possible returns from these remaining investments.


PERIODIC UNIT REPURCHASE POLICY

The Fund's investors adopted a periodic unit repurchase plan during 1993.
Pursuant to the terms of the repurchase policy, the Fund will annually offer to
repurchase from investors, up to 7.5% of its outstanding Units for an amount
equal to the current net asset value per Unit, net of a fee (not to exceed 2%)
to be retained by the Fund to offset expenses incurred in 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.


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

<PAGE>   7

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

The next opportunity to have the Fund repurchase your Units will occur during
the fourth quarter of 1998. The repurchase offer schedule provides for a mailing
to investors on October 5, 1998. The deadline for tendering Units for repurchase
will be October 30, 1998. The repurchase price will be based on the net asset
value per Unit on November 13, 1998 and payment for tendered Units will be made
on November 20, 1998.

                      *    *    *    *    *    *    *    *

If you have any questions regarding your investment in the Fund, please call us
at 800-866-7607.

Sincerely,



Paul Bagley, Chairman
FCM Fiduciary Capital Management Company



W. Duke DeGrassi, President
FCM Fiduciary Capital Management Company

August 31, 1998


                                ----------------
                                       SIX
<PAGE>   8

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


                                DEBT INVESTMENTS
                          REALIZED GAINS AND LOSSES (1)
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------
                                                                                          Internal
Year of Investment /                Year of                                  Gain(1)       Rate of
Portfolio Company(2)               Repayment     Cost       Proceeds(1)      (Loss)        Return
--------------------------------------------------------------------------------------------------
<S>                                  <C>     <C>            <C>            <C>             <C>   
       1990
Carr-Gottstein Foods Co.             1993    $ 2,426,680    $ 4,125,587    $ 1,698,907     23.56%
Midwest Dental Products
   Corporation                       1992      4,521,533      6,558,107      2,036,574     22.63
Neodata Corporation                  1993      2,215,553      3,200,305        984,752     17.11

       1991
KEMET Corporation                    1993      3,313,477      4,534,392      1,220,915     17.63
Mobile Technology, Inc.              1998      3,117,525        850,225     (2,267,300)     N/A

       1992
Huntington Holdings, Inc.            1994      4,368,034      6,173,665      1,805,631     20.07
AR Accessories Group, Inc.           1994      4,521,533      5,518,907        997,374     11.74

       1993
ENI Holding Corp.                    1997      4,881,293      7,822,395      2,941,102     13.91
KB Alloys, Inc.                      1995      2,880,217      4,279,396      1,399,179     18.32
KEMET Corporation                    1993      1,695,575      1,804,351        108,776     26.41
Protection One, Inc.                 1995        834,580      1,133,054        298,474     22.11

       1994
Canadian's Holdings, Inc.            1996      2,516,176        319,782     (2,196,394)     N/A

       1995
Canadian's Holdings, Inc.            1996      1,473,895         51,908     (1,421,987)     N/A

       1996
Atlas Environmental, Inc.            1998      3,166,759      1,208,756     (1,958,003)     N/A
                                     ----    -----------    -----------    -----------     ------
  Totals                                     $41,932,830    $47,580,830    $ 5,648,000       7.40%
                                             ===========    ===========    ===========     ======
</TABLE>

(1)  Includes interest income, and fees and prepayment penalties, if applicable.
     Note that prior performance is not necessarily indicative of future
     results.
(2)  Includes investment in subsidiaries, if applicable.


                                ----------------
                                      SEVEN
<PAGE>   9

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

                               EQUITY INVESTMENTS
                          REALIZED GAINS AND LOSSES(1)

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------
                                                                                          Internal
Year of Investment /                Year of                                   Gain         Rate of
Portfolio Company(2)              Realization    Cost       Proceeds         (Loss)        Return
--------------------------------------------------------------------------------------------------
<S>                                  <C>     <C>            <C>            <C>             <C>   

       1990
Carr-Gottstein Foods Co.             1995    $   738,394    $ 1,197,018    $   458,624       9.78%
Neodata Corporation                  1997         33,912        923,039        889,127      52.07

       1991
KEMET Corporation                  1994/1995      58,283      3,753,147      3,694,864     112.37
Mobile Technology, Inc.              1992        363,630             --       (363,630)     N/A

       1992
Huntington Holdings, Inc.          1996/1998      85,677      1,220,088      1,134,411      70.09
Neodata Corporation                  1997        245,006        255,112         10,106       0.81
AR Accessories Group, Inc.           1998        226,080             --       (226,080)     N/A

       1993
ENI Holding Corp.                    1997        670,147      2,745,910      2,075,763      34.60
KEMET Corporation                    1994        495,554        729,233        233,679      41.10
Protection One, Inc.                 1995         82,420        124,163         41,743      21.02

       1994
Canadian's Holdings, Inc.            1996         34,821             --        (34,821)     N/A

       1996
Atlas Environmental, Inc.            1998         33,842             --        (33,842)     N/A
                                     ----    -----------    -----------    -----------     ------
     Totals                                  $ 3,067,766    $10,947,710    $ 7,879,944      33.09%
                                             ===========    ===========    ===========     ======
</TABLE>


(1) Note that prior performance is not necessarily indicative of future results.
(2) Includes investment in subsidiaries, if applicable.


                                ----------------
                                      EIGHT
<PAGE>   10

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

                             SCHEDULE OF INVESTMENTS

JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------
PRINCIPAL
AMOUNT/                                 INVESTMENT     AMORTIZED                % OF TOTAL
SHARES            INVESTMENT               DATE          COST          VALUE     INVESTMENTS
--------------------------------------------------------------------------------------------
<S>           <C>                        <C>          <C>           <C>           <C>
MANAGED COMPANIES:

23,056 sh.    KEMET Corporation,
              Common Stock(1)*           07/11/91     $     8,170   $  303,331
--------------------------------------------------------------------------------------------
                                                            8,170      303,331      2.7%
--------------------------------------------------------------------------------------------
$1,462,860    LMC Corporation, 12.00%
              Senior Subordinated        11/01/96
              Revolving Notes            through
              due 10/31/00 (Note 5)      06/22/98       1,462,860    1,462,860

239,600 sh.   LMC Corporation, 7.00%
              Cumulative Redeemable
              Preferred Stock*           06/10/94       2,389,210    2,389,210

3,176,000 sh. LMC Corporation,           02/09/96 &
              Common Stock*              05/05/98       1,815,199    1,073,279

49.72sh.      LMC Credit Corp.,
              Common Stock*              02/09/96               1            1
--------------------------------------------------------------------------------------------
                                                        5,667,270    4,925,350       43.3
--------------------------------------------------------------------------------------------
$1,290,000    R.B.M. Precision Metal
              Products, Inc., 13.00%
              Senior Subordinated
              Secured Notes due
              5/24/02(2)                 05/24/95       1,234,625    1,234,625

9,772.7 sh.   R.B.M. Precision Metal
              Products, Inc., Warrants 
              TO Purchase Common Stock*  05/24/95          73,295      73,295
--------------------------------------------------------------------------------------------
                                                        1,307,920    1,307,920       11.5
--------------------------------------------------------------------------------------------
   Total Investments in Managed
     Companies (62.0% of net assets)                    6,983,360    6,536,601       57.5

NON-MANAGED COMPANY:

821,376 sh.   WasteMasters, Inc.,
              Common Stock(3)*           06/03/98     1,097,307          1
--------------------------------------------------------------------------------------------
   Total Investment in Non-Managed
     Company (0.0% of net assets)                     1,097,307          1        0.0
--------------------------------------------------------------------------------------------
</TABLE>


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


                                ----------------
                                      NINE
<PAGE>   11

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

                      SCHEDULE OF INVESTMENTS (CONTINUED)


JUNE 30, 1998 (UNAUDITED)

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

$2,425,000   General Motors Accept.
             Corp., 5.39% Notes
             due 7/14/98               06/30/98        2,420,289      2,420,289
$2,425,000   General Electric
             Capital Corp., 5.38%
             Notes due 7/14/98         06/30/98        2,420,297      2,420,297
---------------------------------------------------------------------------------------------
   Total Temporary Investments (45.9% of net assets)   4,840,586      4,840,586      42.5
---------------------------------------------------------------------------------------------
   Total Investments (107.9% of net assets)          $12,921,253    $11,377,188     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 $430,000
     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.


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

<PAGE>   12

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

                                 BALANCE SHEETS


JUNE 30, 1998 AND DECEMBER 31, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
                                                    1998             1997
                                                ------------     ------------
<S>                                             <C>              <C>
ASSETS:
  Investments:
    Portfolio investments, at value:
       Managed companies (amortized cost -
         $6,983,360 and $9,556,695,
          respectively)                         $  6,536,601     $  5,754,426
                                                ------------     ------------
    Non-managed company (amortized cost -
         $1,097,307)                                       1               --
    Temporary investments, at amortized cost       4,840,586        8,194,820
                                                ------------     ------------
       Total investments                          11,377,188       13,949,246
  Cash and cash equivalents                          616,005          276,108
          Accrued interest
receivable                                            64,420           67,964
  Other assets                                         5,536           58,926
                                                ------------     ------------
    Total assets                                $ 12,063,149     $ 14,352,244
                                                ============     ============
LIABILITIES:
  Payable to affiliates (Notes 2, 3 and 4)      $     54,721     $     33,796
  Accounts payable and accrued liabilities           443,957          424,137
  Distributions payable to partners                1,024,761        1,030,446
                                                ------------     ------------
    Total liabilities                              1,523,439        1,488,379
                                                ------------     ------------

COMMITMENTS AND CONTINGENCIES (NOTE 5)

NET ASSETS:
  Managing General Partner                           (66,223)         (49,360)
  Limited Partners (equivalent to $10.40
    and $12.66, respectively, per limited
    partnership unit based on 1,020,142
    units outstanding)                            10,605,933       12,913,225
                                                ------------     ------------
       Net assets                                 10,539,710       12,863,865
                                                ------------     ------------
         Total liabilities and net assets       $ 12,063,149     $ 14,352,244
                                                ============     ============
</TABLE>



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


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

<PAGE>   13

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

                            STATEMENTS OF OPERATIONS


FOR THE THREE MONTHS ENDED JUNE 30, 1998 AND 1997 (UNAUDITED)

<TABLE>
<CAPTION>
                                                    1998            1997
                                                -----------     -----------
<S>                                             <C>             <C>
INVESTMENT INCOME:
   Income:
     Interest                                   $   177,677     $   283,290
                                                -----------     -----------
       Total investment income                      177,677         283,290
                                                -----------     -----------
   Expenses:
     Professional fees                               31,918          20,018
     Investment advisory fees (Note 2)               28,092          37,449
     Fund administration fees (Note 3)               29,582          29,582
     Administrative expenses (Note 3)                17,224          17,224
     Independent General Partner fees
       and expenses (Note 4)                         12,654           9,374
     Other expenses                                  14,744           9,524
                                                -----------     -----------
       Total expenses                               134,214         123,171
                                                -----------     -----------
NET INVESTMENT INCOME                                43,463         160,119
                                                -----------     -----------
REALIZED AND UNREALIZED
   GAIN (LOSS) ON INVESTMENTS:
     Net realized (loss) gain on investments     (2,465,264)         67,198
     Net change in unrealized loss
        on investments                            2,410,718        (328,893)
                                                -----------     -----------
         Net loss on investments                    (54,546)       (261,695)
                                                -----------     -----------
NET DECREASE IN NET ASSETS
   RESULTING FROM OPERATIONS                    $   (11,083)    $  (101,576)
                                                ===========     ===========
</TABLE>



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


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

<PAGE>   14

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

                            STATEMENTS OF OPERATIONS


FOR THE SIX MONTHS ENDED JUNE 30, 1998 AND 1997 (UNAUDITED)

<TABLE>
<CAPTION>
                                                    1998            1997
                                                -----------     -----------
<S>                                             <C>             <C>  
INVESTMENT INCOME:
   Income:
     Interest                                   $   381,785     $   561,495
                                                -----------     -----------
       Total investment income                      381,785         561,495
                                                -----------     -----------
   Expenses:
     Professional fees                              108,073          64,463
     Investment advisory fees (Note 2)               58,480          56,753
     Fund administration fees (Note 3)               59,164          59,164
     Administrative expenses (Note 3)                34,448          34,448
     Independent General Partner fees
       and expenses (Note 4)                         30,749          21,000
     Other expenses                                  32,943          16,010
                                                -----------     -----------
       Total expenses                               323,857         251,838
                                                -----------     -----------
NET INVESTMENT INCOME                                57,928         309,657
                                                -----------     -----------
REALIZED AND UNREALIZED
   GAIN (LOSS) ON INVESTMENTS:
     Net realized (loss) gain on investments     (2,476,383)         67,198
     Net change in unrealized loss
        on investments                            2,258,204      (1,116,931)
                                                -----------     -----------
         Net loss on investments                   (218,179)     (1,049,733)
                                                -----------     -----------
NET DECREASE IN NET ASSETS
   RESULTING FROM OPERATIONS                    $  (160,251)    $  (740,076)
                                                ===========     ===========
</TABLE>


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



                                ----------------
                                    THIRTEEN
<PAGE>   15

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

                            STATEMENTS OF CASH FLOWS


FOR THE SIX MONTHS ENDED JUNE 30, 1998 AND 1997 (UNAUDITED)
<TABLE>
<CAPTION>
                                                               1998           1997
                                                           -----------     -----------
<S>                                                        <C>             <C> 
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net decrease in net assets
     resulting from operations                             $  (160,251)    $  (740,076)
   Adjustments to reconcile net decrease in net
     assets resulting from operations to net
      cash provided by operating activities:
        Accreted discount on portfolio investments              (8,462)        (17,702)
        Change in assets and liabilities:
           Accrued interest receivable                           3,544         (12,411)
           Other assets                                         53,390         (31,295)
           Payable to affiliates                                20,925           6,709
           Accounts payable and accrued liabilities             (2,418)          7,467
Net realized loss (gain) on investments                      2,476,383         (67,198)
Net change in unrealized loss
           on investments                                   (2,258,204)      1,116,931
                                                           -----------     -----------
              Net cash provided by operating activities        124,907         262,425
                                                           -----------     -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
   Purchase of portfolio investments                        (1,639,700)       (460,404)
   Proceeds from dispositions of portfolio investments         670,045          67,198
   Sale of temporary investments, net                        3,354,234         798,095
                                                           -----------     -----------
     Net cash provided by investing activities               2,384,579         404,889
                                                           -----------     -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
   Cash distributions paid to partners                      (2,169,589)       (669,624)
                                                           -----------     -----------
     Net cash used in financing activities                  (2,169,589)       (669,624)
                                                           -----------     -----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS           339,897          (2,310)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD               276,108         234,305
                                                           -----------     -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD                 $   616,005     $   231,995
                                                           -----------     -----------
NONCASH INVESTING AND FINANCING ACTIVITIES:
   Investments exchanged for other investments             $ 1,360,801     $        --
                                                           ===========     ===========
</TABLE>


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


                                ----------------
                                    FOURTEEN

<PAGE>   16

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

                       STATEMENTS OF CHANGES IN NET ASSETS


FOR THE SIX MONTHS ENDED JUNE 30, 1998 AND FOR
THE YEAR ENDED DECEMBER 31, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
                                                         1998              1997
                                                     ------------     ------------
<S>                                                  <C>              <C>         
Increase in net assets resulting from operations:
   Net investment income                             $     57,928     $    831,359
   Net realized (loss) gain on investments             (2,476,383)       2,925,017
   Net change in unrealized loss on investments         2,258,204       (3,218,969)
                                                     ------------     ------------
     Net (decrease) increase in net assets
       resulting from operations                         (160,251)         537,407
Repurchase of limited partnership units                        --       (1,162,618)
Distributions to partners from -
   Net investment income                                  (57,928)        (831,359)
   Realized gain on investments                        (1,401,316)      (1,608,939)
   Return of capital                                     (704,660)        (710,627)
                                                     ------------     ------------
     Total decrease in net assets                      (2,324,155)      (3,776,136)
Net assets:
   Beginning of period                                 12,863,865       16,640,001
                                                     ------------     ------------
   End of period (including no undistributed
     net investment income)                          $ 10,539,710     $ 12,863,865
                                                     ============     ============
</TABLE>


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




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

<PAGE>   17

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

                        SELECTED PER UNIT DATA AND RATIOS
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                FOR THE THREE MONTHS        FOR THE SIX MONTHS
                                                    ENDED JUNE 30,             ENDED JUNE 30,
                                              -----------------------    ------------------------
                                                  1998        1997          1998          1997
                                              ----------   ----------    ----------    ----------
<S>                                           <C>          <C>           <C>           <C>
PER UNIT DATA:
  Investment income                           $     .17    $      .25    $      .37    $      .50
  Expenses                                         (.13)         (.11)         (.31)         (.22)
                                              ----------   ----------    ----------    ----------
    Net investment income                           .04           .14           .06           .28
    Net realized (loss) gain on investments       (2.39)          .06         (2.40)          .06
    Net change in unrealized loss
     on investments                                2.34          (.29)         2.18         (1.00)
    Distributions declared to partners            (1.00)         (.30)        (2.10)         (.60)
                                              ----------   ----------    ----------    ----------
     Net decrease in net asset value              (1.01)         (.39)        (2.26)        (1.26)
      Net asset value:
       Beginning of period                        11.41         14.21         12.66         15.08
                                              ----------   ----------    ----------    ----------
       End of period                          $   10.40    $    13.82    $    10.40    $    13.82
                                              =========    ==========    ==========    ==========
RATIOS (ANNUALIZED):
  Ratio of expenses to average net assets          4.86%         3.19%         5.56%         3.18%
  Ratio of net investment income to
   average net assets                              1.57%         4.14%         0.99%         3.91%
Number of limited partnership units at
  end of period                                1,020,142    1,104,881     1,020,142     1,104,881
</TABLE>


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



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

<PAGE>   18

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

                          NOTES TO FINANCIAL STATEMENTS

JUNE 30, 1998 (UNAUDITED)

1.   GENERAL

The accompanying unaudited interim financial statements include all adjustments
(consisting solely of normal recurring adjustments) which are, in the opinion of
FCM Fiduciary Capital Management Company ("FCM"), the Managing General Partner
of Fiduciary Capital Pension Partners, L.P. (the "Fund"), necessary to fairly
present the financial position of the Fund as of June 30, 1998 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, 1997.

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
$58,480 were paid by the Fund for the six months ended June 30, 1998.

3.   FUND ADMINISTRATION FEES

As compensation for its services as fund administrator, FCM receives a monthly
fee at the annual rate of .45% of net proceeds available for investment, as
defined in the Partnership Agreement. Fund administration fees of $59,164 were
paid by the Fund for the six months ended June 30, 1998. FCM is also reimbursed,
subject to various limitations, for administrative expenses incurred in
providing accounting and investor services to the Fund. The Fund reimbursed FCM
for administrative expenses of $34,448 for the six months ended June 30, 1998.

4.   INDEPENDENT GENERAL PARTNER FEES AND EXPENSES

As compensation for services rendered to the Fund, each of the Independent
General Partners receives from the Fund and Fiduciary Capital Partners, L.P., an
affiliated fund, (collectively, the "Funds") an annual fee of $30,000, payable
monthly in arrears, together with all out-of-pocket expenses. Each Fund's
allocation of these fees and expenses is based on the relative number of
outstanding Units. Fees and expenses paid by the Fund for the six months ended
June 30, 1998 totaled $30,749.


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

<PAGE>   19

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

                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)

5.   COMMITMENTS AND CONTINGENCIES

LMC Commitments LMC Corporation (formerly, LMC Operating Corp.) ("LMC") is
entitled to draw down a total of $1,632,960 pursuant to the terms of the Senior
Subordinated Revolving Notes held by the Fund. At June 30, 1998, LMC had only
drawn down $1,462,860. The remaining $170,100 was drawn down on July 14, 1998.

On August 4, 1998, the Fund purchased an additional 1,300,500 shares of LMC
common stock for $650,250.

LMC Litigation On January 27, 1998, LMC Holding Co. ("LMC Holding"), which held
approximately 50% of the issued and outstanding common stock of LMC on that
date, commenced an action against the Fund, FCP and each of Paul Bagley, the
Chairman of the Board and Chief Executive Officer of FCM, W. Duke DeGrassi, the
President of FCM, and Donald R. Jackson, the Senior Vice President, Treasurer,
Chief Financial Officer and Compliance Officer of FCM (collectively, the
"Individual Defendants"), in their capacities as officers of FCM, in the First
Judicial District Court in and for Cache County, State of Utah, entitled LMC
Holding Co. v. Fiduciary Capital Partners, L.P., et al., Civil No. 98-0100077
(the "LMC Action"). LMC Holding is controlled by Paul Wallace, a director of LMC
and the trustee of its discontinued pension plan. FCM believes that the LMC
Action was commenced in response to an action filed by LMC against Mr. Wallace
to recover for a significant underfunding of LMC's discontinued pension plan.
The Fund, FCP and the Individual Defendants entered into a settlement agreement
with LMC Holding, effective April 20, 1998. As part of the settlement, the Fund
and FCP have been able to increase their percentage ownership of LMC in exchange
for additional capital contributions. The LMC Action was subsequently dismissed
with prejudice. FCM believes that the additional investment by the Fund and FCP
will allow LMC to implement a business plan designed to restore it to
profitability within the next few years. LMC continues to pursue its legal
action against Mr. Wallace with respect to the underfunding of its discontinued
pension plan.


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

<PAGE>   20

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


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

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

LIQUIDITY AND CAPITAL RESOURCES

As of June 30, 1998, the Fund held portfolio investments in three Managed
Companies and one Non-Managed Company, with an aggregate cost of approximately
$8.1 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 57.5% 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 June 30, 1998, the Fund's remaining assets were invested in short-term
commercial paper. These funds are available to fund follow-on investments, for
distribution to the partners or to fund the annual repurchase offer.

Pursuant to the terms of the Fund's periodic unit repurchase policy, the Fund
will annually offer to purchase from its Limited Partners up to 7.5% of its
outstanding Units for an amount equal to the current net asset value per Unit,
net of a fee (not to exceed 2%) to be retained by the Fund to offset expenses
incurred in connection with the repurchase offer. If the number of tendered
Units in any year exceeds 7.5% of the outstanding Units, the Fund's General
Partners may vote to repurchase up to an additional 2% of the outstanding Units.
The 1998 repurchase offer will be mailed to the Limited Partners during October
1998. The actual redemption of tendered Units will occur on November 20, 1998.


                                ----------------
                                    NINETEEN
<PAGE>   21

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

During February 1998, the Fund agreed to purchase $449,000 of LMC's Senior
Subordinated Revolving Notes due August 20, 1998. This investment was funded
during February and March 1998.

During April 1998, the Fund agreed to restructure and increase its aggregate
investment in LMC. In the restructuring, $1,360,800 of the Fund's LMC Senior
Subordinated Revolving Notes due October 31, 2000 were converted into additional
LMC common stock. LMC was allowed to again draw down the $1,360,800 under the
terms of the Revolving Note agreement to fund working capital requirements and
to retire the $449,000 of LMC Senior Subordinated Revolving Notes due August 20,
1998, as described in the preceding paragraph. As a result of the restructuring,
the Fund's percentage ownership of LMC's common stock increased from
approximately 23% to approximately 40%.

During August 1998, the Fund purchased an additional 1,300,500 shares of LMC
common stock for $650,250. As a result of this stock purchase, the Fund's
percentage ownership of LMC's common stock increased from approximately 40% to
approximately 41%.

During June 1998, the Fund sold all of its Mobile Technology, Inc. ("MTI") stock
and warrants and received a distribution from the escrow account that was
established during 1996 in connection with the sale of the Fund's Huntington
Holdings, Inc. ("Huntington") stock. In total, the Fund received $221,044 in
proceeds from these two transactions.

Other assets decreased $53,390 from $58,926 at December 31, 1997 to $5,536 at
June 30, 1998. This decrease resulted primarily from the collection of a
receivable from LMC for legal fees that the Fund advanced on behalf of LMC and a
decrease in prepaid insurance.

During the six months ended June 30, 1998, the Fund paid cash distributions
pertaining to the fourth quarter of 1997 and the first quarter of 1998, in the
amounts of $1,030,446 and $1,139,143, respectively. The distribution for the
fourth quarter of 1997 was equal to $1.00 per Unit for all Limited Partners. 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 distribution for the second quarter of 1998 will be paid on August 14, 1998
at a rate of $1.00 per Unit for all Limited Partners. The Fund currently expects
the distribution for the third and fourth quarters of 1998, which are payable
during November 1998 and February 1999, to be made at a reduced rate of $.30 per
Unit for all Limited Partners. A significant portion of the distributions made
in 1998 will constitute a return of capital.


                                ----------------
                                     TWENTY
<PAGE>   22

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


The Fund's investment period ended on December 31, 1995. Although the Fund is
permitted to make additional investments in existing portfolio companies after
1995, the Fund is no longer permitted to acquire investments in new portfolio
companies. This impacts the amount of the Fund's quarterly distributions because
all proceeds from dispositions or maturities of investments are distributed to
investors, except to the extent the cash is needed to fund the annual repurchase
offer or to fund any follow-on investments in existing portfolio companies. The
increase in the quarterly distribution rate during 1997 and 1998 represents a
distribution of the proceeds from dispositions or maturities of investments
during 1997 and 1998.


RESULTS OF OPERATIONS

                         INVESTMENT INCOME AND EXPENSES

The Fund's net investment income was $43,463 for the three months ended June 30,
1998 as compared to net investment income of $160,119 for the corresponding
period of the prior year. Net investment income per limited partnership unit
decreased from $.14 to $.04 and the ratio of net investment income to average
net assets decreased from 4.14% to 1.57% for the three months ended June 30,
1998 as compared to the corresponding period of the prior year.

The Fund's net investment income was $57,928 for the six months ended June 30,
1998 as compared to net investment income of $309,657 for the corresponding
period of the prior year. Net investment income per limited partnership unit
decreased from $.28 to $.06 and the ratio of net investment income to average
net assets decreased from 3.91% to 0.99% for the six months ended June 30, 1998
as compared to the corresponding period of the prior year.

Net investment income for both the three and six month periods ended June 30,
1998 decreased as a result of both a decrease in investment income and an
increase in total expenses.

Investment income decreased $105,613 and $179,710, or 37.3% and 32.0%, for the
three and six month periods ended June 30, 1998, as compared to the
corresponding periods of the prior year. These decreases resulted primarily from
the prepayment of the Fund's Elgin National Industries Inc. subordinated debt
investment during November 1997. The Fund's total investments also decreased as
a result of the Fund's repurchase of 7.51% of its Units during the fourth
quarter of 1997. The negative effect of these items was partially offset by
increases in interest income earned on temporary investments and on the LMC
follow-on investments that were acquired during 1997 and 1998.

Total expenses increased $11,043 and $72,019, or 9.0% and 28.6%, for the three
and six month periods ended June 30, 1998 as compared to the corresponding
periods of the prior year. These increases resulted primarily from increases in
professional fees, Independent General Partner fees and expenses and other
expenses.




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

<PAGE>   23

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


Independent General Partner fees and expenses increased because one of the
Fund's three Independent General Partners resigned during the fourth quarter of
1996 and was not replaced until July 1997. The increase in professional fees was
primarily the result of legal fees incurred during 1998 in connection with the
LMC litigation. Other expenses increased 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.

The investment advisory fees paid to FCM increased during the first quarter of
1998 as compared to the corresponding period of the prior year as a result of
the direct receipt by FCM of consulting fees from LMC during the first quarter
of 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 effect of the decrease (to zero) in the amount of LMC consulting
fees received by FCM during 1998 was partially offset by the effect of the
repurchase of Units by the Fund during the fourth quarter of 1997 and the
realization of additional losses with respect to the Fund's investment in
Canadian's Holdings, Inc. and its subsidiary ("Canadian's"). Both the repurchase
of Units and the realization of the Canadian's loss decreased the amount of the
Fund's available capital (as defined in the Partnership Agreement), which is the
base with respect to which the investment advisory fees are calculated.

The investment advisory fees decreased $9,357, or 25.0%, during the second
quarter as compared to the corresponding period of the prior year. The
comparative reversal from the first quarter resulted primarily from (i) the fact
that FCM received no consulting fees from LMC during the second quarter of 1997,
and (ii) the losses realized by the Fund during the second quarter of 1998 with
respect to the MTI, Atlas Environmental, Inc. ("Atlas") and AR Accessories
Group, Inc. ("ARA") portfolio investments. As noted above, realized losses
decrease the amount of the Fund's available capital (as defined in the
Partnership Agreement), which is the base with respect to which the investment
advisory fees are calculated.


                     NET REALIZED GAIN (LOSS) ON INVESTMENTS

The Fund 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





                                ----------------
                                   TWENTY-TWO
<PAGE>   24

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



was precipitated by ARA's lenders, who 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 $311,989 cost of the Fund's equity
investment in ARA was written off as a realized loss during May 1998.

On June 1, 1998, the Fund received $158,043 from the sale of its MTI common
stock and warrants. This amount represents approximately 95% of the sales
proceeds that the company expected the sellers to receive from the sale. The
remaining 5%, or approximately $8,000, is being held in escrow pending the
resolution of a dispute over whether the sellers or the buyer should receive the
benefit of warrant exercise proceeds. The Fund recorded a realized loss of
$79,584 from this sale. The Fund will record a reduction of the realized loss
if, and when, it actually receives a distribution of any of the escrowed funds.

The Fund's Huntington stock was sold for cash during February 1996. The Fund's
share of the sales proceeds totaled $1,247,229, of which $1,089,896 was received
during February 1996. The balance of the sales proceeds were 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 recently reached with the buyer with regard to purchase price
adjustments and other claims. The Fund received additional distributions of
$16,439, $67,198 and $63,001 during September 1996, May 1997 and June 1998,
respectively. The Fund's share of the remaining escrow balance is approximately
$1,000. The Fund recognized realized gains of $1,020,657, $67,198 and $63,001
from this transaction during 1996, 1997 and 1998, respectively.

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. On November 5,
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.



                                ----------------
                                  TWENTY-THREE
<PAGE>   25

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


As a result of these developments, the Fund stopped accruing interest on its
Atlas investment during April 1996 and recorded writedowns of $979,776 and
$2,243,103 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 821,376 shares of WasteMasters, Inc. ("WMI") common sock. WMI is an Atlanta,
Georgia based waste management company that has recently announced an aggressive
acquisition program.

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 of first refusal
thereafter, both of which are priced at $11.25 per share.

The WMI common stock, which trades on the NASDAQ Small Cap Market System
("WAST") closed at $1.78 and $2.01 (an average of the closing bid and ask
prices) on June 3, 1998 and June 30, 1998, respectively. Based on these prices,
the Fund's WMI had trading values of $1,462,049 on the date of the exchange
(June 3, 1998) and $1,650,966 on June 30, 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, FCM decided to carry
the WMI stock at the same nominal value that the Atlas securities had previously
been carried by the Fund. The 52 week low for the WMI common stock is $0.25 per
share and the current price (August 12, 1998) is $1.125.

The Fund recorded a realized loss of $2,125,574 on the exchange, which is equal
to the amount of the loss which the Fund expects to claim for income tax
purposes from the disposition of the Atlas securities. The balance of the
unrealized loss previously recorded by the Fund with respect to the Atlas
securities continues to be carried by the Fund as an unrealized loss.

The Fund is continuing to accrue an interest reserve with respect to the
potential Canadian's sales tax at a 12% annualized rate, or $11,119 and $22,238,
respectively for the three and six month periods ended June 30, 1998. These
amounts are recorded as realized losses in the Fund's Statements of Operations.

                    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.




                                ----------------
                                   TWENTY-FOUR
<PAGE>   26

                    FIDUCIARY CAPITAL PENSION PARTNERS, L.P.
                    ----------------------------------------
                     
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, 1997, the Fund had recorded $437,099 of unrealized gain and
$4,239,368 of unrealized loss on investments. Therefore, as of December 31,
1997, the Fund had recorded a total net unrealized loss on investments of
$3,802,269.

The net increase in unrealized loss on investments during the three and six
month periods ended June 30, 1998 and the cumulative net unrealized loss on
investments as of June 30, 1998 consisted of the following components:

<TABLE>
<CAPTION>
                                           Unrealized Gain (Loss) Recorded
--------------------------------------------------------------------------------------
                                     During the Three    During the Six
                                      Months Ended      Months Ended           As of
     Portfolio Company                 June 30, 1998     June 30, 1998   June 30, 1998
--------------------------------------------------------------------------------------
<S>                                   <C>               <C>              <C>
Unrealized losses recorded during
   prior periods with respect to
   investments disposed of during
   the period                         $ 3,630,508        $ 3,497,448      $        --
KEMET                                    (122,484)          (141,938)          295,161
LMC                                            --                 --          (741,920)
WMI                                    (1,097,306)        (1,097,306)       (1,097,306)
                                      -----------        -----------      ------------
                                      $ 2,410,718        $ 2,258,204      $ (1,544,065)
                                      ===========        ===========      ============
</TABLE>

KEMET completed an IPO of its common stock during 1992. The stock, which trades
on the NASDAQ National Market System, closed at $13.15625 (an average of the
closing bid and ask prices) on June 30, 1998. This price is down from the
closing prices of $18.46875 and $19.3125 on March 31, 1998 and December 31,
1997, respectively. Based on the $13.15625 closing trading price of the common
stock, the 23,056 shares of common stock that the Fund held at June 30, 1998 had
a market value of $303,331.


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

<PAGE>   27

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

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.


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