<PAGE>   1









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

















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

                             SECOND QUARTER REPORT
                                      1996
<PAGE>   2
                        FIDUCIARY CAPITAL PARTNERS, L.P.
-------------------------------------------------------------------------------
                              MESSAGE TO INVESTORS
Dear Investor:

     The Fund's net asset value per Unit was $16.70 at June 30, 1996. This net
asset value is down slightly from the net asset values of $16.79 at December
31, 1995 and $16.80 at March 31, 1996.

     At June 30, 1996, the Fund held portfolio investments in eight companies.
These portfolio investments represented approximately 70.6% of the Fund's net
assets. The Fund's remaining assets were invested in high quality, 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.

INVESTMENT UPDATE

     During January 1996, the Fund invested $3,855,398 in Atlas Environmental,
Inc. ("Atlas"). The investment consists of $3,934,080 of 13.5% Senior
Subordinated Secured Notes due January 19, 2003, with warrants to acquire
407,659 shares of common stock. The warrants have an exercise price of $8.00
per share. The Atlas common stock is currently traded over the counter on a
limited basis with quotations provided via the OTC Bulletin Board under the
symbol "ATEV".

     The companies which Atlas acquired with the proceeds of the Fund's
subordinated debt investment have not performed as well as expected, and as a
consequence, Atlas has defaulted on certain financial covenants in its
agreements with its senior lender and with the Fund. The senior lender, the
Bank of New York, has reacted to the covenant defaults by limiting Atlas'
availability under its revolving credit facility and by instructing Atlas not
to pay the interest on the Fund's subordinated debt that was payable on July
19, 1996 in the amount of $134,250. In accordance with the intercreditor
agreement between the Fund and the Bank of New York, the bank can block
payments to the Fund for up to 180 days. During August 1996, the company
entered into a letter of intent, under the terms of which some of the company's
businesses would be sold. The sale is scheduled to close by September 30, 1996
and, if consummated, would provide the cash to pay
                                     


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

<PAGE>   3

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

the Fund's interest. As a result, the Fund accrued the interest due on the
subordinated debt as of June 30, 1996.

CASH DISTRIBUTIONS

     The distribution for the second quarter of 1996 was paid on August 15,
1996 in an amount equal to $.30 per Unit, or an annualized rate equal to 6.0%
of contributed capital. This distribution consisted entirely of current and
accumulated net investment income. We expect the remaining 1996 distributions
to be made at the same 6.0% rate or greater.

     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 will impact the amount of the Fund's quarterly
distributions for subsequent years because all proceeds from future
dispositions or maturities of investments will be distributed to investors,
except to the extent the cash is needed to fund the annual repurchase offer or
to fund any additional follow-on investments that the Fund may make in existing
portfolio companies.

PERIODIC UNIT REPURCHASE POLICY

     Pursuant to the terms of the periodic unit repurchase policy that was
adopted by the Fund's investors during 1993, the Fund annually offers to
repurchase from investors, up to 7.5% of its outstanding Units for an amount
equal to the current net asset value per Unit, net of a fee (not to exceed 2%)
to be retained by the Fund to offset expenses incurred in 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 next opportunity to have the Fund repurchase your Units will occur
during the fourth quarter of 1996. The repurchase offer will be mailed to
investors on October 7, 1996, and the deadline for tendering Units for
repurchase will be October 31, 1996. The repurchase price will

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

<PAGE>   4

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

be based on the net asset value per Unit on November 14, 1996 and payment for
tendered Units will be made on November 21, 1996.


                                * * * * * * * *


     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 22, 1996


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

<PAGE>   5

                        FIDUCIARY CAPITAL PARTNERS, L.P.
-------------------------------------------------------------------------------
                            SCHEDULE OF INVESTMENTS

<TABLE>
<CAPTION>
JUNE 30, 1996 (UNAUDITED)
--------------------------------------------------------------------------------------------------
PRINCIPAL
AMOUNT/                                           INVESTMENT     AMORTIZED             % OF TOTAL
SHARES          INVESTMENT                           DATE          COST        VALUE   INVESTMENTS
--------------------------------------------------------------------------------------------------
<S>             <C>                                <C>            <C>        <C>              <C> 
MANAGED COMPANIES:
182,453.91 sh.  Neodata Corporation,
                10.00% Class A Convertible         12/27/90 &
                Preferred Stock - Series 2*        09/30/92       $ 337,945  $       1
10,607.78 sh.   Neodata Corporation,               12/27/90 &
                Common Stock*                      09/30/92               1          1
--------------------------------------------------------------------------------------------------
                                                                    337,946          2        0.0%
--------------------------------------------------------------------------------------------------
27,944 sh.      KEMET Corporation,
                Common Stock(1)*                   07/11/91           9,905    562,373
--------------------------------------------------------------------------------------------------
                                                                      9,905    562,373        2.4
--------------------------------------------------------------------------------------------------
75,856 sh.      Amity Leather Products Co.,
                Warrants to Purchase Class
                B Common Stock*                    07/30/92         104,091    817,355
27,392 sh.      Amity Leather Products Co.,
                Class A Common Stock*              07/30/92         273,920    295,151
--------------------------------------------------------------------------------------------------
                                                                    378,011  1,112,506        4.7
--------------------------------------------------------------------------------------------------
$6,087,185      Elgin National Industries, Inc.,
                13.00% Senior Subordinated
                Notes due 9/01/01(2)               09/24/93       5,966,905  5,966,905
7,119.71 sh.    ENI Holding Corp.,
                10.00% Preferred Stock
                due 12/31/01                       09/24/93         711,971    908,949
489.27 sh.      ENI Holding Corp.,
                Class B Common Stock*              09/24/93          48,927     48,927
510.83 sh.      ENI Holding Corp.,
                Warrants to Purchase Class
                B Common Stock*                    09/24/93          51,078     51,078
--------------------------------------------------------------------------------------------------
                                                                  6,778,881  6,975,859       29.7
--------------------------------------------------------------------------------------------------
260,400 sh.     LMC Operating Corp., 7.00%
                Cumulative Redeemable
                Preferred Stock*                   06/10/94       2,596,621  2,596,621
27.28 sh.       LMC Operating Corp.,
                Common Stock*                      02/09/96         545,599      4,799
52.08 sh.       LMCCredit Corp.,
                Common Stock*                      02/09/96               1          1
--------------------------------------------------------------------------------------------------
                                                                  3,142,221  2,601,421       11.1
--------------------------------------------------------------------------------------------------
42,404 sh.      MTI Holdings II, Inc.,             07/06/94 &
                Common Stock*                      12/28/94         287,930     38,164
--------------------------------------------------------------------------------------------------
                                                                    287,930     38,164        0.2
--------------------------------------------------------------------------------------------------
</TABLE>

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


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

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


<TABLE>
<CAPTION>
JUNE 30, 1996 (UNAUDITED)

----------------------------------------------------------------------------------------------
PRINCIPAL
AMOUNT/                                   INVESTMENT     AMORTIZED                 % OF TOTAL
SHARES       INVESTMENT                      DATE          COST         VALUE     INVESTMENTS
----------------------------------------------------------------------------------------------
<S>          <C>                           <C>           <C>            <C>             <C>
$1,460,000   R.B.M. Precision Metal
             Products, Inc., 13.00%
             Senior Subordinated
             Secured Notes due
             5/24/02(3)                    05/24/95      1,362,908      1,362,908
497.639 sh.  R.B.M. Precision Metal
             Products, Inc., Warrants
             to Purchase Common
             Stock*                        05/24/ 95        82,955         82,955
----------------------------------------------------------------------------------------------
                                                         1,445,863      1,445,863       6.1
----------------------------------------------------------------------------------------------
$3,934,080   Atlas Environmental, Inc.,
             13.50% Senior Subordinated
             Secured Notes due
             1/19/03(4)                    01/25/96      3,823,599      3,823,599
407,659 sh.  Atlas Environmental, Inc.,
             Warrants to Purchase
             Common Stock(5)*              01/25/96         40,766         40,766
----------------------------------------------------------------------------------------------
                                                         3,864,365      3,864,365      16.4
----------------------------------------------------------------------------------------------
   Total Investments in Managed
      Companies (70.6% of net assets)                   16,245,122     16,600,553      70.6
TEMPORARY INVESTMENTS:
$3,450,000   Cargill, Inc.,
             5.06% Notes due 07/03/96      06/19/96      3,449,030      3,449,030
$3,450,000   International Business
             Machines Corporation,
             5.10% Notes due 07/03/96      06/19/96      3,449,023      3,449,023
----------------------------------------------------------------------------------------------
   Total  Temporary Investments  (29.4% of net assets)   6,898,053      6,898,053      29.4
----------------------------------------------------------------------------------------------
Total Investments (100.0% of net assets)               $23,143,175    $23,498,606     100.0%
==============================================================================================
</TABLE>

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

(2)  The notes will amortize in eight equal quarterly installements of $760,898
     commencing on 11/30/99.

(3)  The notes will amortize in three equal annual installements of $486,667
     commencing on 5/24/00.

(4)  The notes will amortize in five equal annual installments of $786,816
     commencing on 1/19/99. (Note 5)

(5)  The Atlas Environmental, Inc. common stock trades over the counter on a
     limited basis with quotations provided via the OTC Bulletin Board. The
     warrants have an exercise price of $8.00 per share. 

 *   Non-income producing security. 


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

                        --------------------------------
                                      FIVE
<PAGE>   7

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

<TABLE>
<CAPTION>
JUNE 30, 1996 AND DECEMBER 31, 1995 (UNAUDITED)
-------------------------------------------------------------------------------
                                                    1996             1995
-------------------------------------------------------------------------------
<S>                                             <C>                <C>
ASSETS:
    Investments:
    Portfolio investments, at value:
       Managed companies (amortized cost -
         $16,245,122 and $16,677,145,
          respectively)                         $ 16,600,553       $ 13,401,816
Temporary investments, at amortized cost           6,898,053         10,396,792
-------------------------------------------------------------------------------
       Total investments                          23,498,606         23,798,608
  Cash and cash equivalents                          321,123            200,969
Accrued interest
receivable (Note 5)                                  196,567            140,490
  Other assets                                         2,695              3,206
-------------------------------------------------------------------------------
    Total assets                                $ 24,018,991       $ 24,143,273
-------------------------------------------------------------------------------
LIABILITIES:
  Payable to affiliates (Notes 2, 3 and 4)      $     48,340       $     60,372
  Accounts payable and accrued liabilities            47,855             33,177
  Distributions payable to partners                  426,438            426,438
-------------------------------------------------------------------------------
    Total liabilities                                522,633            519,987
-------------------------------------------------------------------------------

CONTINGENCIES (NOTE 6)

NET ASSETS:
  Managing General Partner                            (4,994)            (3,725)
  Limited Partners (equivalent to $16.70
    and $16.79, respectively, per limited
    partnership unit based on 1,407,244
    units outstanding)                            23,501,352         23,627,011
-------------------------------------------------------------------------------
       Net assets                                 23,496,358         23,623,286
-------------------------------------------------------------------------------
         Total liabilities and net assets       $ 24,018,991       $ 24,143,273
===============================================================================

</TABLE>





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


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

<PAGE>   8

                        FIDUCIARY CAPITAL PARTNERS, L.P.
-------------------------------------------------------------------------------
                      STATEMENTS OF OPERATIONS (UNAUDITED)

<TABLE>
<CAPTION>
                                        FOR THE THREE MONTHS      FOR THE SIX MONTHS
                                           ENDED JUNE 30,           ENDED JUNE 30,
----------------------------------------------------------------------------------------
                                          1996        1995         1996        1995
----------------------------------------------------------------------------------------
<S>                                      <C>       <C>           <C>          <C>       
INVESTMENT INCOME:
   Income:
    Interest                             $496,579  $  728,420    $  980,223   $1,433,175
----------------------------------------------------------------------------------------
      Total investment income             496,579     728,420       980,223    1,433,175
----------------------------------------------------------------------------------------
  Expenses:
    Investment advisory fees (Note 2)      41,888      58,353        90,610      116,706
    Professional fees                      35,092      15,153        81,624       32,441
    Fund administration fees (Note 3)      35,842      35,842        71,685       71,685
    Administrative expenses (Note 3)       20,277      20,277        40,553       40,553
    Independent General Partner fees
      and expenses (Note 4)                13,625      14,084        31,943       32,946
    Other expenses                         14,449       9,377        29,205       17,901
    Amortization                                -       2,790             -        5,580
----------------------------------------------------------------------------------------
      Total expenses                      161,173     155,876       345,620      317,812
----------------------------------------------------------------------------------------
NET INVESTMENT INCOME                     335,406     572,544       634,603    1,115,363
----------------------------------------------------------------------------------------
REALIZED AND UNREALIZED
  GAIN (LOSS) ON INVESTMENTS:
    Net realized gain (loss)
      on investments                            -   2,080,925    (3,539,416)   2,399,777
    Net change in unrealized
      (loss) gain on investments          (52,061)   (772,676)    3,630,760     (727,238)
----------------------------------------------------------------------------------------
        Net (loss) gain on investments    (52,061)  1,308,249        91,344    1,672,539
----------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS
  RESULTING FROM OPERATIONS              $283,345  $1,880,793    $  725,947   $2,787,902
========================================================================================
</TABLE>








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

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

<PAGE>   9

                        FIDUCIARY CAPITAL PARTNERS, L.P.
-------------------------------------------------------------------------------
                            STATEMENTS OF CASH FLOWS


<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND 1995 (UNAUDITED)
------------------------------------------------------------------------------------------
                                                                 1996              1995
------------------------------------------------------------------------------------------
<S>                                                          <C>               <C>        
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net increase in net assets resulting from operations      $   725,947       $ 2,787,902
   Adjustments to reconcile net increase
      in net assets resulting from operations
      to net cash provided by operating activities:
        Accreted discount on portfolio investments               (27,106)          (42,649)
        Amortization                                                --               5,580
        Change in assets and liabilities:
           Accrued interest receivable                           (56,077)         (150,923)
           Other assets                                              511             1,327
           Payable to affiliates                                 (12,032)           (1,662)
           Accounts payable and accrued liabilities               14,678            (9,379)
           Prepaid interest income                                  --             (60,146)
        Net realized loss (gain) on investments                3,539,416        (2,399,777)
Net change in unrealized (gain) loss
           on investments                                     (3,630,760)          727,238
------------------------------------------------------------------------------------------
              Net cash provided by operating activities          554,577           857,511
------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
   Purchase of portfolio investments                          (4,400,998)       (1,564,946)
   Proceeds from dispositions of portfolio investments         1,320,711         4,082,154
   Sale (purchase) of temporary investments, net               3,498,739        (2,260,284)
------------------------------------------------------------------------------------------
     Net cash provided by investing activities                   418,452           256,924
------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
   Cash distributions paid to partners                          (852,875)       (1,156,780)      
------------------------------------------------------------------------------------------
Net cash  used in financing activities                          (852,875)       (1,156,780)
------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS             120,154           (42,345)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD                 200,969           171,999
------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD                   $   321,123       $   129,654
==========================================================================================
</TABLE>





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

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


<PAGE>   10

                        FIDUCIARY CAPITAL PARTNERS, L.P.
-------------------------------------------------------------------------------
                      STATEMENTS OF CHANGES IN NET ASSETS

<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND FOR
THE YEAR ENDED DECEMBER 31, 1995 (UNAUDITED)
---------------------------------------------------------------------------------------
                                                                 1996          1995
---------------------------------------------------------------------------------------
<S>                                                         <C>            <C>   
Increase in net assets resulting from operations:
   Net investment income                                    $    634,603   $  2,037,186
   Net realized (loss) gain on investments                    (3,539,416)     4,588,421
   Net change in unrealized gain (loss) on investments         3,630,760     (7,180,010)
---------------------------------------------------------------------------------------
     Net increase (decrease) in net assets resulting
       from operations                                           725,947       (554,403)
Repurchase of limited partnership units                                -     (2,354,597)
Distributions to partners from net investment income            (852,875)    (1,814,573)
---------------------------------------------------------------------------------------
   Total decrease in net assets                                 (126,928)    (4,723,573)
Net assets:
   Beginning of period                                        23,623,286     28,346,859
---------------------------------------------------------------------------------------
   End of period (including undistributed
     net investment income of $4,341
     and $222,613, respectively)                             $23,496,358    $23,623,286
---------------------------------------------------------------------------------------
</TABLE>

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


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

                        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,
                                                    1996         1995         1996       1995
------------------------------------------------------------------------------------------------
<S>                                               <C>         <C>          <C>         <C>      
PER UNIT DATA:
   Investment income                              $     .35   $     .47    $     .69   $     .93
   Expenses                                            (.11)       (.10)        (.24)       (.21)
------------------------------------------------------------------------------------------------
     Net investment income                              .24         .37          .45         .72
   Net realized gain (loss) on investments                -        1.35        (2.49)       1.56
   Net change in unrealized (loss) gain
     on investments                                    (.04)       (.50)        2.55        (.47)
   Distributions declared to partners                  (.30)       (.30)        (.60)       (.60)
------------------------------------------------------------------------------------------------
     Net (decrease) increase in net asset value        (.10)        .92         (.09)       1.21
       Net asset value:
         Beginning of period                          16.80       18.84        16.79       18.55
------------------------------------------------------------------------------------------------
         End of period                               $16.70   $   19.76       $16.70   $   19.76
------------------------------------------------------------------------------------------------
RATIOS (ANNUALIZED):
   Ratio of expenses to average net assets             2.74%       2.11%        2.93%       2.18%
   Ratio of net investment income to
     average net assets                                5.69%       7.76%        5.38%       7.66%
Number of limited partnership units at
   end of period                                  1,407,244   1,526,949    1,407,244   1,526,949
</TABLE>





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

                                      TEN

<PAGE>   12

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

JUNE 30, 1996 (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 the Fund, necessary to fairly present the financial position
of the Fund as of June 30, 1996 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, 1995.

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
$90,610 were paid by the Fund for the six months ended June 30, 1996.

3.   FUND ADMINISTRATION FEES

     As compensation for its services as fund administrator, FCM receives a
monthly fee at the annual rate of .45% of net proceeds available for
investment, as defined in the Partnership Agreement. Fund administration fees
of $71,685 were paid by the Fund for the six months ended June 30, 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 $40,553 for the six months ended
June 30, 1996.

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, 1996 totaled $31,943.




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


<PAGE>   13

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

5.   PORTFOLIO INVESTMENTS

     The companies which Atlas Environmental, Inc. ("Atlas") acquired with the
proceeds of the Fund's subordinated debt investment have not performed as well
as expected, and as a consequence, Atlas has defaulted on certain financial
covenants in its agreements with its senior lender and with the Fund. The
senior lender, the Bank of New York, has reacted to the covenant defaults by
limiting Atlas' availability under its revolving credit facility and by
instructing Atlas not to pay the interest on the Fund's subordinated debt that
was payable on July 19, 1996 in the amount of $134,250. In accordance with the
intercreditor agreement between the Fund and the Bank of New York, the bank can
block payments to the Fund for up to 180 days. During August 1996, the company
entered into a letter of intent, under the terms of which some of the company's
businesses would be sold for cash. This sale, if consummated, would provide
cash to pay the Fund's interest. As a result, the Fund accrued the interest due
on the subordinated debt as of June 30, 1996.

6.   CONTINGENCIES

     FCM was named as a defendant in a class action lawsuit brought in March
1995 against PaineWebber Incorporated ("PaineWebber") and a number of its
affiliates concerning the sale of 70 different limited partnerships and other
direct investment programs. During May 1995, the Court entered an order
certifying the class and dismissing the class action against FCM without
prejudice.

     During January 1996, PaineWebber signed a memorandum of understanding with
the plaintiffs in the class action outlining the terms under which the parties
agreed to settle the case. Pursuant to that memorandum of understanding,
PaineWebber irrevocably deposited $125 million into an escrow fund under the
supervision of the United States District Court for the Southern District of
New York to be used to resolve the litigation. On July 17, 1996, PaineWebber
and the class plaintiffs submitted a definitive settlement agreement, which has
been preliminarily approved by the Court. The agreement provides for the
complete resolution of the class action litigation, including releases in favor
of the Fund and FCM, and the allocation of the $125 million settlement fund
among investors in the various partnerships at issue in the case. As part of
the settlement, PaineWebber also agreed to provide class members with certain
financial guarantees relating to some of the partnerships, including the Fund.
The details of the settlement are described in a notice mailed directly to
class members at the direction of the Court. A final hearing on the fairness of
the proposed settlement has been scheduled for October 25, 1996.

     A similar, though smaller, suit was filed against PaineWebber and various
affiliated entities (not including FCM) during February 1996 in a California
state court.

     FCM believes that this litigation will be resolved without any material
adverse effect on the Fund's financial condition.



                        --------------------------------
                                     TWELVE
<PAGE>   14

                        FIDUCIARY CAPITAL PARTNERS, L.P.
-------------------------------------------------------------------------------
                    MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                       FINANCIAL CONDITION AND RESULTS OF
                                   OPERATIONS



LIQUIDITY AND CAPITAL RESOURCES

     As of June 30, 1996, the Fund held portfolio investments in eight Managed
Companies, with an aggregate cost of approximately $16.2 million. These
portfolio investments, which were made from net offering proceeds and the
reinvestment of proceeds from the sale of other portfolio investments,
represent approximately 70.6% 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, 1996, 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.

     During January 1996, the Fund invested $3,855,398 in Atlas Environmental,
Inc. ("Atlas"). The investment consists of $3,934,080 of 13.5% Senior
Subordinated Secured Notes due January 19, 2003, with warrants to acquire
407,659 shares of common stock. The warrants have an exercise price of $8.00
per share. The Atlas common stock is currently traded over the counter on a
limited basis with quotations provided via the OTC Bulletin Board under the
symbol "ATEV".

     The companies which Atlas acquired with the proceeds of the Fund's
subordinated debt investment have not performed as well as expected, and as a
consequence, Atlas has defaulted on certain financial covenants in its
agreements with its senior lender and with the Fund. The senior lender, the
Bank of New York, has reacted to the covenant defaults by limiting Atlas'
availability under its revolving credit facility and by instructing Atlas not
to pay the interest on the Fund's subordinated debt that was payable on July
19, 1996 in the amount of $134,250. In accordance with the intercreditor
agreement between the Fund and the Bank of New York, the bank can block
payments to the Fund for up to 180 days. During August 1996, the company
entered into a letter of intent, under the terms of which some of the company's
businesses would be sold for cash. This sale, if consummated, would provide
cash to pay the Fund's interest. As a result, the Fund accrued the interest due
on the subordinated debt as of June 30, 1996.

     During February 1996, the Fund sold its Huntington Holdings, Inc.
("Huntington") warrants. As discussed below, the Fund received $1,320,711 of
proceeds from this transaction. These proceeds have been reserved by the
Managing General Partner to partially fund either the Fund's 1996 repurchase
offer or any additional follow-on investments

                        --------------------------------
                                    THIRTEEN

<PAGE>   15

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

that the Fund may make in existing portfolio companies.

     During June 1994, the Fund invested $2,551,920 in LMC Operating Corp.
("LMC"). The investment consisted of $2,604,000 of 13.00% Senior Subordinated
Notes due May 31, 1999 with warrants to acquire common stock.

     While LMC has experienced significant operating difficulties since the
Fund acquired its LMC investment during 1994, it is now progressing quite
satisfactorily under the guidance of its new management team. The major
accomplishment has been the re-engineering and modernization of the product
line. Initial responses from customers and other industry sources have been
positive. LMC is optimistic about the prospects for sales of its "utility"
models and are hopeful about fleet grooming sales.

     LMC is also trying to diversify its product line to reduce the seasonality
of its business and increase the utilization of its manufacturing facility. It
is concentrating on vehicles with low ground pressure in order to utilize the
engineering and manufacturing expertise gained from snow grooming equipment.
The projects currently underway are a joint venture with AEBI, a Swiss company
that manufactures grooming equipment utilized on golf courses and highways, and
the internal development of a tracked utility vehicle designed for use by
landscape and other contractors. Both projects are progressing satisfactorily.

     These projects may necessitate additional follow-on investments by the
Fund. We are also exploring other possible acquisitions, including one which
would result in a reverse merger into a small public company and a public
listing for LMC shares. Any such merger or acquisition may also require
additional Fund investment. The Fund currently owns 27% of LMC and our
affiliate, Fiduciary Capital Pension Partners, owns 23%.

     Pursuant to the terms of the Fund's periodic unit repurchase policy that
was adopted by the Fund's Limited Partners during 1993, the Fund will annually
offer to purchase from its Limited Partners up to 7.5% of its outstanding Units
for an amount equal to the current net asset value per Unit, net of a fee (not
to exceed 2%) to be retained by the Fund to offset expenses incurred in
connection with the repurchase offer. If the number of tendered Units in any
year exceeds 7.5% of the outstanding Units, the Fund's General Partners may
vote to repurchase up to an additional 2% of the outstanding Units. The 1996
repurchase offer will be mailed to the Limited Partners during October 1996.
The actual redemption of tendered Units will occur on November 21, 1996.

     Accrued interest receivable increased $56,077 from $140,490 at December
31, 1995 to $196,567 at June 30, 1996. This increase resulted primarily from
the accrual of interest due on the Atlas notes that were acquired during
January 1996. This increase was partially offset by a decrease, to zero, in the
accrued interest receivable attributable to the Fund's Canadian's investment.




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

<PAGE>   16

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

     During the six months ended June 30, 1996, the Fund paid cash
distributions pertaining to the fourth quarter of 1995 and the first quarter of
1996, each in the amount of $426,438. The distribution for the second quarter
of 1996 will be paid on August 15, 1996. These quarterly distributions are
equal to $.30 per Unit and represent an annualized rate equal to 6.0% of
contributed capital.

     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, except to fund commitments made prior to December 31,
1995. This will impact the amount of the Fund's quarterly distributions for
1996 and subsequent years because all proceeds from dispositions or maturities
of investments will be distributed to investors, except to the extent the cash
is needed to fund the annual repurchase offer or to fund any follow-on
investments that the Fund may make in existing portfolio companies.

     As of December 31, 1995, the Fund had committed to make three new
portfolio investments. In addition, the Fund had agreed in principle to the
financial restructuring of LMC. As discussed above, one of the committed
investments, Atlas, was acquired during January 1996 and the LMC financial
restructuring was consummated during February 1996. The other two committed
investments have been abandoned. The portion of the Fund's available capital
that was reserved for these abandoned investments is now reserved to fund
either the Fund's 1996 repurchase offer or any additional follow-on investments
that the Fund may make in existing portfolio companies.

     FCM was named as a defendant in a class action lawsuit brought in March
1995 against PaineWebber and a number of it affiliates concerning the sale of
70 different limited partnerships and other direct investment programs. During
May 1995, the Court entered an order certifying the class and dismissing the
class action against FCM without prejudice.

     During January 1996, PaineWebber signed a memorandum of understanding with
the plaintiffs in the class action outlining the terms under which the parties
agreed to settle the case. Pursuant to that memorandum of understanding,
PaineWebber irrevocably deposited $125 million into an escrow fund under the
supervision of the United States District Court for the Southern District of
New York to be used to resolve the litigation. On July 17, 1996, PaineWebber
and the class plaintiffs submitted a definitive settlement agreement, which has
been preliminarily approved by the Court. The agreement provides for the
complete resolution of the class action litigation, including releases in favor
of the Fund and FCM, and the allocation of the $125 million settlement fund
among investors in the various partnerships at issue in the case. As part of
the settlement, PaineWebber also agreed to provide class members with certain
financial guarantees relating to some of the partnerships, including the Fund.
The details of the settlement are described in a notice mailed directly to
class members at the direction of the Court. A final hearing on the fairness of
the proposed settlement has been scheduled for October 25, 1996.



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

<PAGE>   17

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

     A similar, though smaller, suit was filed against PaineWebber and various
affiliated entities (not including FCM) during February 1996 in a California
state court.

     FCM believes that this litigation will be resolved without any material
adverse effect on the Fund's financial condition.

RESULTS OF OPERATIONS

                         INVESTMENT INCOME AND EXPENSES

     The Fund's net investment income was $335,406 for the three months ended
June 30, 1996 as compared to net investment income of $572,544 for the
corresponding period of the prior year. Net investment income per limited
partnership unit decreased from $.37 to $.24 and the ratio of net investment
income to average net assets decreased from 7.76% to 5.69% for the three months
ended June 30, 1996 as compared to the corresponding period of the prior year.

     The Fund's net investment income was $634,603 for the six months ended
June 30, 1996 as compared to net investment income of $1,115,363 for the
corresponding period of the prior year. Net investment income per limited
partnership unit decreased from $.72 to $.45 and the ratio of net investment
income to average net assets decreased from 7.66% to 5.38% for the six months
ended June 30, 1996 as compared to the corresponding period of the prior year.

     Net investment income for both the three and six month periods ended June
30, 1996 decreased primarily as a result of decreases in investment income.

     Investment income decreased $231,841 and $452,952, or 31.8% and 31.6%, for
the three and six month periods ended June 30, 1996, respectively, as compared
to the corresponding periods of the prior year. These decreases resulted
primarily from the conversion of the Fund's LMC debt securities into
non-dividend paying equity securities and the Canadian's bankruptcy. (Both of
these items are discussed elsewhere in this Report.) The Fund's total
investments also decreased as a result of the Fund's repurchase of 7.84% of its
Units during the fourth quarter of 1995.

     Total expenses increased $5,297 and $27,808, or 3.4% and 8.7%, for the
three and six month periods ended June 30, 1996, respectively, as compared to
the corresponding periods of the prior year. These increases resulted primarily
from increases in professional fees and other expenses. These increases were
primarily the result of legal fees and other costs incurred in connection with
Canadian's bankruptcy proceedings. The increases in professional fees and other
expenses were partially offset by decreases in investment advisory fees and
amortization expense. The investment advisory fees decreased as a result of the
repurchase of Units by the Fund during the fourth quarter of 1995 and the
realization during February 1996 of the loss on the Fund's Canadian's
investment. 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

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

<PAGE>   18

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

Agreement), which is the base with respect to which the investment advisory
fees are calculated. The Fund amortized its organization costs over a five year
period beginning with the inception of the Fund in 1990. Therefore, these costs
became fully amortized during 1995.

                    NET REALIZED GAIN (LOSS) ON INVESTMENTS

     Canadian's was a women's specialty retailer, which had 53 stores on the
East Coast, including stores in the New York City and Philadelphia metropolitan
areas. As widely reported in the business press, retailers almost universally
experienced extremely disappointing sales during the 1995 holiday season.
Women's specialty retailers were especially hard hit. This situation was
exacerbated by severe winter weather which hampered store operations from
Boston to Washington, D.C. As a result, a number of apparel retailers filed for
bankruptcy.

     Canadian's did not escape the retailing downturn and experienced
significant operating problems. These problems culminated in Canadian's filing
for Chapter 11 bankruptcy protection on February 21, 1996 and ceasing all
operations during March 1996. As discussed in the Fund's previous filings,
Canadian's had embarked on a significant cost cutting program during the fall
of 1995, which included closing marginal stores and reducing general and
administrative costs. However, these measures were not sufficient to offset the
negative impact of the unusually bad holiday season.

     As a result of these developments, it became evident that the Fund will
not recover any of its Canadian's investment. Accordingly, the Fund recognized
the $4,756,316 loss on its Canadian's investment as a realized loss during the
three months ended March 31, 1996. This loss recognition did not significantly
affect the Fund's total net gain (loss) on investments for the six months ended
June 30, 1996 because all but $5 of the loss was recorded as an unrealized loss
during 1995.

     During December 1995, Huntington entered into a letter of intent, under
the terms of which all Huntington stock would be sold for cash. The sale was
consummated during February 1996. The Fund's share of the actual sales proceeds
totaled $1,511,364, of which $1,320,711 was received during February 1996. The
balance is being held in escrow to fund various transaction expenses and
potential 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. While the escrow amount must be
maintained for a two year period, certain of the sellers' representations will
survive for longer periods of time, which could result in the Fund being
required to reimburse the purchaser for certain costs and expenses after the
escrow is released. The Fund valued the Huntington warrants at December 31,
1995 at an amount approximately equal to 75% of the ultimate sales proceeds
(not including the Fund's share of the escrow) due to the inherent uncertainty
that existed at that time as to whether the sale would actually be consummated.





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


<PAGE>   19

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

     The Fund recognized a realized gain of $1,216,901 from this transaction
during February 1996. The Fund has not assigned any value to its $190,653 share
of the escrow because it is uncertain how much, if any, of the escrowed funds
will ultimately be received by the Fund. Additional gain will be recognized if
the Fund actually receives a distribution of any of the escrowed funds.

                   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, 1995, the Fund had recorded $2,609,492 of unrealized
gain and $5,884,821 of unrealized loss on investments. Therefore, as of
December 31, 1995, the Fund had recorded a total net unrealized loss on
investments of $3,275,329.

     The net increase in unrealized gain (loss) of investments during the three
and six month periods ended June 30, 1996 and the cumulative net unrealized
gain on investments as of June 30, 1996, consisted of the following components:





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

<PAGE>   20

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


<TABLE>
<CAPTION>
                                         Unrealized Gain (Loss) Recorded
----------------------------------------------------------------------------------------
                                       During the Three   During the Six
                                        Months Ended       Months Ended        As of
     Portfolio Company                  June 30, 1996      June 30, 1996   June 30, 1996
----------------------------------------------------------------------------------------
<S>                                      <C>               <C>               <C>  
Unrealized net loss recorded during
   prior periods with respect to
   investments disposed of during
   the period                            $      --         $ 3,841,121       $    --
Neodata                                         --                --          (337,944)
KEMET                                        (69,860)         (108,283)        552,468
Amity                                           --            (137,677)        734,495
Elgin / ENI                                   17,799            35,599         196,978
LMC                                             --                --          (540,800)
MTI II                                          --                --          (249,766)
----------------------------------------------------------------------------------------
                                         $   (52,061)      $ 3,630,760       $ 355,431
----------------------------------------------------------------------------------------
</TABLE>

     The Neodata Corporation ("Neodata") stock was written down to a negligible
amount during 1995. The Partnership has consistently valued this investment
based upon a multiple of Neodata's cash flow. Because Neodata's long-term debt
presently provides for the accrual, rather than current payment, of interest,
the company's debt has grown to a level which exceeds the Fund's valuation.

     KEMET completed an IPO of its common stock during 1992. The stock, which
trades on the NASDAQ National Market System, closed at $20.125 (an average of
the closing bid and ask prices) on June 30, 1996. This price is down from the
closing prices of $34.125 on December 31, 1995 and $22.625 on March 31, 1996.
Based on the $20.125 closing trading price of the common stock, the 27,944
shares of common stock that the Fund held at June 30, 1996 had a market value
of $562,373.

     The Amity warrants and common stock were written down in value at March
31, 1996 to bring Amity's valuation more in line with the valuation of other
comparable companies in its industry.

     The ENI Holding Corp. preferred stock is being written up in value
quarterly to reflect the amount of the cumulative 10% preferential dividend
that has accrued with respect to the preferred stock.

     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 operational difficulties and the fact that the Fund





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

<PAGE>   21

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

now owns equity securities rather than debt securities, the Fund wrote its LMC
investment down by $540,800 during 1995.

     The MTI II common stock was written down in value during 1994 based upon
an independent third party valuation of the company that was obtained by MTI
II's management.

     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