<Page>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
Investment Company Act file number: 811-3896
FPA PERENNIAL FUND, INC.
(Exact name of registrant as specified in charter)
11400 WEST OLYMPIC BLVD., SUITE 1200, LOS ANGELES, CALIFORNIA 90064
(Address of principal executive offices)
J. RICHARD ATWOOD,
11400 WEST OLYMPIC BLVD., SUITE 1200, LOS ANGELES, CALIFORNIA 90064
(Name and address of agent for service)
Registrant's telephone number, including area code: 310-473-0225
Date of fiscal year end: DECEMBER 31
Date of reporting period: DECEMBER 31, 2004
Item 1. Report to Stockholders.
<Page>
FPA PERENNIAL FUND, INC.
ANNUAL REPORT
DECEMBER 31, 2004
[FPA FUND DISTRIBUTORS, INC. LOGO]
FPA FUND DISTRIBUTORS, INC.
11400 WEST OLYMPIC BOULEVARD, SUITE 1200
LOS ANGELES, CALIFORNIA 90064
42821
<Page>
LETTER TO SHAREHOLDERS
As we now approach the fifth anniversary of the stock market's March
2000 peak, it may be instructive to look at how investors have fared in the
subsequent years. Two observations stand out.
First, just as the speculative boom that led up to the market peak was
very uneven, with some stocks participating to a far greater degree than others,
the post-bubble market has also had its winners and losers. Generally, small and
non-tech stocks, which missed much of the 1990s' party, have done well,
especially relative to the negative performance for the market as a whole.
Second, although we are all familiar with long-term studies which show
that equity markets have delivered quite attractive returns over virtually all
long time periods, it turns out that purchasing shares of even the best
companies at bubble highs is unlikely to EVER deliver adequate rates of return.
For example, investors who purchased Microsoft, Intel, and Cisco, each large and
highly successful businesses, in March 2000, have now lost about two thirds of
their funds, or 20% annually over the subsequent five-year period. In other
words, they have suffered a substantial and permanent loss of capital.
Perennial has approached the market environment of the past five years
no differently than prior periods. We have striven to own high-quality
businesses, but have refused to overpay for them. Though this has produced past
periods of underperformance when overpriced stocks became even more overpriced,
on balance it has served the Perennial shareholder well.
The following table shows returns for one-, three-, and five-year
periods for the leading large- and small-cap averages, as well as for Perennial.
<Table>
<Caption>
VALUE
OF $1.00
INVESTED
2004 3 YEARS* 5 YEARS* 1/1/2000
---- -------- -------- --------
Nasdaq 8.6% 3.7% (11.8)% $ 0.53
S & P 500 10.9% 3.6% (2.3)% $ 0.89
Russell 2000 18.3% 11.5% 6.6% $ 1.38
Perennial 16.3% 12.8% 14.2% $ 1.94
</Table>
* Annualized Return
We were frankly surprised at how strongly the market performed in 2004,
especially after the large advance of 2003. Most indexes were up between 10% and
20%, with small-cap stocks repeating their leadership performance of 2003. The
Russell 2000, for example, is up about 75% over the past two years, and has
nearly doubled from its March 2003 lows.
Perennial's 16.3% gain in 2004 fell a bit short of the benchmark Russell
2500. Higher cash levels, driven by caution about stock valuations, was the
primary cause of the difference. The table below shows Perennial's returns for
each year since 2000, as well as those of the Russell 2500.
<Table>
<Caption>
FIVE
2000 2001 2002 2003 2004 YEARS*
---- ---- ---- ---- ---- ------
Perennial 10.2% 22.7% (10.6)% 37.9% 16.3% 14.2%
Russell 2500 4.3% 1.2% (17.8)% 45.5% 18.3% 8.4%
</Table>
* Annualized Return
We would like to discuss a recent addition to Perennial's portfolio.
Founded in 1917 as a pioneer in the development of all-wheel drive technology,
OSHKOSH TRUCK has spent most of its existence as a builder of military trucks.
Under new management, Oshkosh reinvented itself in the mid-1990s. Starting with
a business that was two thirds defense products, Oshkosh aggressively
diversified. With a series of acquisitions, it entered related specialty truck
areas, buying either the market leader, or more often, the strong number two
company in the industry. It improved manufacturing and invested in product
development and technology. Over time, almost all of these acquired businesses
have gained the number one share position as well as improved profitability.
Sales have increased from $400 million in 1996 to over $2 billion today.
As it expanded the scope of its business, Oshkosh took on large amounts
of debt, but its strong cash flow has enabled it to considerably reduce leverage
in recent years - from debt at 65% of capital five years ago to just 15% today.
Returns on capital have been excellent and trending upwards. Return on equity
over the past five years has averaged 20%.
1
<Page>
Oshkosh's largest business is defense, where it supplies medium and
heavy trucks to the U.S. and U.K. military. Though somewhat lumpy, with a small
number of very large contracts, it has the advantage of large backlogs and
long-lived procurements, as well as a continuing demand for parts and
reconditioning. Oshkosh is the market share leader, well ahead of rival Stewart
and Stevenson, with projected Year 2005 sales of about $1 billion, 35% of the
corporate total. Oshkosh's defense operations are currently especially busy
because of the severe wear on vehicles operating in Iraq and Afghanistan.
Oshkosh entered the fire-truck and emergency-vehicle business in 1996,
acquiring Pierce Manufacturing, the number two company in the industry, behind
Federal Signal's E-One. Current Pierce sales are about $700 million, or one
quarter of total Oshkosh revenues. It has grown to the leading market share
spot, with about 30% of the U.S. market, helped both by its own product
innovations and by missteps of E-One.
Oshkosh entered the cement mixer market in 1998 with its purchase of
McNeilus Companies. With a 65% share, McNeilus was already by far the market
leader, however, Oshkosh has further grown its share to about 75%. Current sales
are $550 million, or 20% of Oshkosh's total. It has recently introduced a
revolutionary new product - a cement truck with a plastic composite drum
replacing the usual steel drum. Because the drum is 2,000 pounds lighter, the
new trucks can carry an extra ton of cement, significantly reducing
transportation costs per unit delivered. Oshkosh has recently started to
aggressively market this exciting new product to its cement-mixer customers.
Oshkosh also makes refuse truck bodies, a business it entered by
acquisition in 1998 in the U.S. (McNeilus) and 2001 in Europe (Geesink Norba).
At the time it was a distant number two, with barely half the 32% market share
of leader Heil (owned by Dover). It has now completely closed that gap and is
tied for the number one spot with Heil, at about 25% each, having successfully
executed a strategy of focusing on the Big 3 private haulers. With total sales
of $400 million, refuse trucks represent 15% of Oshkosh revenues.
Oshkosh's most recent business is tow trucks and wreckers, which it
entered in June 2004, with the purchase of Jerr-Dan. With sales of $100 million,
Jerr-Dan is half the size of market leader Miller, but has some innovative
technology that Oshkosh plans to further develop.
We purchased most of our Oshkosh Truck position during the middle of
last year at about $50 per share, 16x year 2004 earnings. We believe that the
share price was under pressure because of some nagging concerns about the
business, including difficulty in recovering steel cost increases, a large U.K.
military truck contract not awarded to Oshkosh, and manufacturing issues at
Geesink Norba and with the new cement-truck drum.
After a recent strong December quarter earnings report, the Street
appears to be feeling better about most of these issues, and the stock is
trading at about $70 per share or 17-18x estimated 2005 earnings. We are
comfortable with our 2.5% position and hope to own Oshkosh Truck for many years.
Respectfully submitted,
/s/ Eric S. Ende
Eric S. Ende
President and Portfolio Manager
January 31, 2005
2
<Page>
HISTORICAL PERFORMANCE
CHANGE IN VALUE OF A $10,000 INVESTMENT IN FPA PERENNIAL FUND, INC. VS. RUSSELL
2500 INDEX AND LIPPER MID-CAP CORE FUND AVERAGE FROM JANUARY 1, 1995 TO DECEMBER
31, 2004
[CHART]
<Table>
<Caption>
FPA PERENNIAL FUND, INC. FPA PERENNIAL FUND, LIPPER MID-CAP CORE FUND
(NAV) - $44,661 INC. - $42,316 AVERAGE - $36,400 RUSSELL 2500 - $36,267
1994 $ 10,000 $ 9,475 $ 10,000 $ 10,000
1995 $ 11,727 $ 11,111 $ 13,300 $ 13,170
1996 $ 14,118 $ 13,377 $ 16,226 $ 15,676
1997 $ 17,549 $ 16,628 $ 20,283 $ 19,495
1998 $ 18,391 $ 17,426 $ 20,688 $ 19,569
1999 $ 23,046 $ 21,836 $ 26,067 $ 24,295
2000 $ 25,387 $ 24,055 $ 27,331 $ 25,332
2001 $ 31,158 $ 29,522 $ 27,974 $ 25,641
2002 $ 27,858 $ 26,396 $ 23,176 $ 21,077
2003 $ 38,414 $ 36,397 $ 31,501 $ 30,670
2004 $ 44,661 $ 42,316 $ 36,400 $ 36,267
</Table>
<Table>
<Caption>
AVERAGE ANNUAL TOTAL RETURN
YEARS ENDED DECEMBER 31, 2004
-----------------------------
FPA PERENNIAL FUND, INC. 1 YEAR 5 YEARS 10 YEARS
-------- --------- --------
At Net Asset Value 16.25% 14.15% 16.14%
With Maximum 5.25% Sales Charge 10.15% 12.92% 15.52%
</Table>
Past performance is not indicative of future performance. The Russell 2500 Index
consists of the 2,500 smallest companies in the Russell 3000 total
capitalization universe. This index is considered a measure of small to medium
capitalization stock performance. This index does not reflect any commissions or
fees which would be incurred by an investor purchasing the stocks it represents.
The Lipper Mid-Cap Core Fund Average provides an additional comparison of how
your Fund performed in relation to other mutual funds with similar objectives.
The Lipper data does not include sales charges. The performance shown for FPA
Perennial Fund, Inc., with an ending value of $42,316 reflects deduction of the
current maximum sales charge of 5.25% of the offering price. In addition, since
investors purchase shares of the Fund with varying sales charges depending
primarily on volume purchased, the Fund's performance at net asset value (NAV)
is also shown, as reflected by the ending value of $44,661. The performance of
the Fund and of the Averages is computed on a total return basis which includes
reinvestment of all distributions.
3
<Page>
PORTFOLIO SUMMARY
December 31, 2004
<Table>
COMMON STOCKS 79.8%
Producer Durable Goods 12.6%
Health Care 12.2%
Business Services & Supplies 11.7%
Energy 11.2%
Technology 10.1%
Retailing 9.6%
Financial 8.0%
Materials 3.4%
Transportation 1.0%
SHORT-TERM CORPORATE NOTES 19.8%
OTHER ASSETS AND LIABILITIES, NET 0.4%
-----
TOTAL NET ASSETS 100.0%
=====
</Table>
MAJOR PORTFOLIO CHANGES
Six Months Ended December 31, 2004
(Unaudited)
<Table>
<Caption>
SHARES
--------
NET PURCHASES
COMMON STOCKS
Bio-Rad Laboratories, Inc. 75,800
CarMax, Inc. 106,500
Charles River Laboratories International, Inc. 120,000
Cognex Corporation 152,500
Crane Co. 75,000
Diebold, Incorporated (1) 25,500
Engelhard Corporation 120,000
Arthur J. Gallagher & Co. 130,000
Health Management Associates, Inc. 132,500
Invitrogen Corporation (1) 82,500
Lincare Holdings Inc. 75,000
O'Reilly Automotive, Inc. 70,000
Plantronics, Inc. 79,800
Renal Care Group, Inc. 66,200
SanDisk Corporation 85,000
NET SALES
COMMON STOCKS
Advanced Fibre Communications, Inc. (2) 295,000
Black Box Corporation (2) 65,000
KEMET Corporation (2) 60,900
National Commerce Financial Corporation (2) 170,000
Ocular Sciences, Inc. (2) 135,000
TriQuint Semiconductor, Inc. (2) 209,691
</Table>
(1) Indicates new commitment to portfolio
(2) Indicates elimination from portfolio
4
<Page>
PORTFOLIO OF INVESTMENTS
December 31, 2004
<Table>
<Caption>
SHARES VALUE
--------------- ---------------
COMMON STOCKS
PRODUCER DURABLE GOODS -- 12.6%
Crane Co. 225,000 $ 6,489,000
Diebold, Incorporated 25,500 1,421,115
Graco Inc. 150,000 5,602,500
HNI Corporation 120,000 5,166,000
IDEX Corporation 105,000 4,252,500
Oshkosh Truck Corporation 80,000 5,470,400
Zebra Technologies Corporation (Class A)* 92,250 5,191,830
---------------
$ 33,593,345
---------------
HEALTH CARE -- 12.2%
Bio-Rad Laboratories, Inc.* 113,300 $ 6,500,021
Health Management Associates, Inc. 300,000 6,816,000
Lincare Holdings Inc.* 240,000 10,236,000
Renal Care Group, Inc.* 246,200 8,860,738
---------------
$ 32,412,759
---------------
BUSINESS SERVICES & SUPPLIES -- 11.7%
Charles River Laboratories International, Inc.* 165,000 $ 7,591,650
Invitrogen Corporation* 82,500 5,538,225
Landauer, Inc. 10,000 457,000
Manpower Inc. 90,000 4,347,000
Office Depot, Inc.* 275,000 4,774,000
ScanSource, Inc.* 137,500 8,547,000
---------------
$ 31,254,875
---------------
ENERGY -- 11.2%
Cal Dive International, Inc.* 287,500 $ 11,715,625
Noble Corporation* 230,000 11,440,200
Tidewater Inc. 185,000 6,587,850
---------------
$ 29,743,675
---------------
TECHNOLOGY -- 10.1%
Cognex Corporation 337,500 $ 9,416,250
Plantronics, Inc. 189,800 7,871,006
SanDisk Corporation* 385,000 9,613,450
---------------
$ 26,900,706
---------------
</Table>
5
<Page>
<Table>
<Caption>
SHARES OR
PRINCIPAL
AMOUNT VALUE
--------------- ---------------
RETAILING -- 9.6%
CEC Entertainment Inc.* 105,000 $ 4,196,850
CarMax, Inc.* 352,487 10,944,721
O'Reilly Automotive, Inc.* 230,000 10,361,500
---------------
$ 25,503,071
---------------
FINANCIAL -- 8.0%
Brown & Brown, Inc. 105,000 $ 4,572,750
Arthur J. Gallagher & Co. 220,000 7,150,000
North Fork Bancorporation, Inc. 330,000 9,520,500
---------------
$ 21,243,250
---------------
MATERIALS -- 3.4%
Engelhard Corporation 292,500 $ 8,970,975
---------------
TRANSPORTATION -- 1.0%
Heartland Express, Inc. 97,200 $ 2,184,084
Knight Transportation, Inc. 15,000 372,000
---------------
$ 2,556,084
---------------
TOTAL COMMON STOCKS -- 79.8% (Cost $146,401,066) $ 212,178,740
---------------
SHORT-TERM INVESTMENTS -- 19.8% (Cost $52,778,199)
Short-term Corporate Notes:
General Electric Capital Corporation -- 1.75% 1/03/05 $ 11,397,000 $ 11,395,892
Toyota Motor Credit Corporation -- 2.09% 1/04/05 10,000,000 9,998,259
Shell Finance (U.K.) P.L.C. -- 2.21% 1/06/05 7,000,000 6,997,851
AIG Funding, Inc. -- 2.31% 1/18/05 11,000,000 10,988,001
International Lease Finance Corporation -- 2.31% 1/25/05 6,733,000 6,722,631
General Electric Capital Services Corporation -- 2.28% 1/28/05 6,687,000 6,675,565
---------------
TOTAL SHORT TERM INVESTMENTS $ 52,778,199
---------------
TOTAL INVESTMENTS -- 99.6% (Cost $199,179,265) $ 264,956,939
Other assets less liabilities, net -- 0.4% 1,139,704
---------------
TOTAL NET ASSETS -- 100% $ 266,096,643
===============
</Table>
* Non-income producing security
See notes to financial statements.
6
<Page>
STATEMENT OF ASSETS AND LIABILITIES
December 31, 2004
<Table>
ASSETS
Investments at value:
Investment securities -- at market value
(identified cost $146,401,066) $ 212,178,740
Short-term investments -- at amortized cost
(maturities 60 day or less) 52,778,199 $ 264,956,939
---------------
Cash 128
Receivable for:
Capital stock sold $ 1,607,134
Dividends and accrued interest 61,194 1,668,328
--------------- ---------------
$ 266,625,395
LIABILITIES
Payable for:
Capital stock repurchased $ 327,770
Advisory fees and financial services 165,622
Accrued expenses 35,360 528,752
--------------- ---------------
NET ASSETS $ 266,096,643
===============
SUMMARY OF SHAREHOLDERS' EQUITY
Capital Stock -- par value $0.01 per share: authorized
25,000,000 shares; outstanding 8,546,172 shares $ 85,462
Additional Paid-in Capital 199,427,659
Accumulated net realized gain on investments 805,848
Unrealized appreciation of investments 65,777,674
---------------
NET ASSETS $ 266,096,643
===============
NET ASSET VALUE, REDEMPTION PRICE AND
MAXIMUM OFFERING PRICE PER SHARE
Net asset value and redemption price per share
(net assets divided by shares outstanding) $ 31.14
===============
Maximum offering price per share
(100/94.75 of per share net asset value) $ 32.87
===============
</Table>
See notes to financial statements.
7
<Page>
STATEMENT OF OPERATIONS
For the Year Ended December 31, 2004
<Table>
INVESTMENT INCOME
Interest $ 643,339
Dividends 1,255,605
---------------
$ 1,898,944
EXPENSES -- Note 3:
Advisory fees $ 1,391,135
Transfer agent fees and expenses 231,476
Financial services 206,329
Reports to shareholders 48,305
Registration fees 44,166
Custodian fees and expenses 36,365
Audit fees 28,500
Director's fees and expenses 19,235
Legal fees 12,495
Other expenses 21,456 2,039,462
--------------- ---------------
Net investment loss $ (140,518)
---------------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain on investments:
Proceeds from sales of investment securities (excluding
short-term investments with maturities of 60 days or less) $ 24,790,495
Cost of investment securities sold 20,954,891
---------------
Net realized gain on investments $ 3,835,604
Unrealized appreciation of investments:
Unrealized appreciation at beginning of year $ 35,923,528
Unrealized appreciation at end of year 65,777,674
---------------
Increase in unrealized appreciation of investments 29,854,146
---------------
Net realized and unrealized gain on investments $ 33,689,750
---------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 33,549,232
===============
</Table>
See notes to financial statements.
8
<Page>
STATEMENT OF CHANGES IN NET ASSETS
<Table>
<Caption>
FOR THE YEAR ENDED DECEMBER 31,
-------------------------------------------------------------------
2004 2003
-------------------------------- -------------------------------
INCREASE IN NET ASSETS
Operations:
Net investment loss $ (140,518) $ (398,396)
Net realized gain on investments 3,835,604 5,941,386
Net unrealized appreciation of investments 29,854,146 29,393,253
-------------- -------------
Increase in net assets resulting from operations $ 33,549,232 $ 34,936,243
Distributions to shareholders from net realized
capital gains (2,504,496) (5,800,940)
Capital Stock transactions:
Proceeds from Capital Stock sold $ 92,761,365 $ 68,468,149
Proceeds from shares issued to shareholders
upon reinvestment of dividends and
distributions 2,110,483 4,829,693
Cost of Capital Stock repurchased (28,699,958) 66,171,890 (25,331,757) 47,966,085
-------------- -------------- ------------- --------------
Total increase in net assets $ 97,216,626 $ 77,101,388
NET ASSETS
Beginning of year 168,880,017 91,778,629
-------------- --------------
End of year $ 266,096,643 $ 168,880,017
============== ==============
CHANGE IN CAPITAL STOCK OUTSTANDING
Shares of Capital Stock sold 3,233,619 2,726,602
Shares issued to shareholders upon
reinvestment of dividends and distributions 69,151 182,321
Shares of Capital Stock repurchased (1,000,516) (1,162,599)
-------------- --------------
Increase in Capital Stock outstanding 2,302,254 1,746,324
============== ==============
</Table>
See notes to financial statements.
9
<Page>
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR EACH SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH YEAR
<Table>
<Caption>
YEAR ENDED DECEMBER 31,
---------------------------------------------------------------------------
2004 2003 2002 2001 2000
----------- ----------- ----------- ----------- -----------
Per share operating performance:
Net asset value at beginning of period $ 27.05 $ 20.41 $ 23.15 $ 20.59 $ 20.45
----------- ----------- ----------- ----------- -----------
Income from investment operations:
Net investment income (loss) $ (0.02) $ (0.06) $ (0.04) $ (0.02) --*
Net realized and unrealized gain (loss) on
investment securities 4.41 7.77 (2.39) 4.65 $ 1.95
----------- ----------- ----------- ----------- -----------
Total from investment operations $ 4.39 $ 7.71 $ (2.43) $ 4.63 $ 1.95
----------- ----------- ----------- ----------- -----------
Less distributions from net realized capital gains $ (0.30) $ (1.07) $ (0.31) $ (2.07) $ (1.81)
----------- ----------- ----------- ----------- -----------
Net asset value at end of year $ 31.14 $ 27.05 $ 20.41 $ 23.15 $ 20.59
=========== =========== =========== =========== ===========
Total investment return** 16.25% 37.89% (10.59)% 22.73% 10.16%
Ratios/supplemental data:
Net assets at end of year (in thousands) $ 266,097 $ 168,880 $ 91,779 $ 51,975 $ 40,170
Ratio of expenses to average net assets 0.97% 1.05% 1.15% 1.24% 1.24%
Ratio of net investment income (loss) to average
net assets (0.07)% (0.36)% (0.25)% (0.11)% 0.02%
Portfolio turnover rate 16% 23% 6% 25% 16%
</Table>
* Rounds to less than $0.01 per share.
** Return is based on net asset value per share, adjusted for reinvestment of
distributions, and does not reflect deduction of the sales charge.
FEDERAL TAX STATUS OF DISTRIBUTIONS TO SHAREHOLDERS (UNAUDITED)
<Table>
<Caption>
PER SHARE ORDINARY INCOME LONG-TERM
PAYABLE DATE AMOUNT QUALIFYING NON-QUALIFYING CAPITAL GAIN
- ----------------- --------- ---------- -------------- ------------
December 23, 2004 $ 0.30 -- -- 100%
</Table>
Qualifying dividends refers to the amount of dividends which are designated as
qualifying for the 70% dividends received deduction applicable to corporate
shareholders.
A Form 1099 will be mailed to each shareholder in January 2005 setting forth
specific amounts to be included in their 2004 tax returns.
See notes to financial statements.
10
<Page>
NOTES TO FINANCIAL STATEMENTS
December 31, 2004
NOTE 1 -- SIGNIFICANT ACCOUNTING POLICIES
FPA Perennial Fund, Inc. (the "Fund") is registered under the Investment
Company Act of 1940 as a diversified, open-end, management investment company.
The Fund's primary investment objective is long-term growth of capital. Current
income is a secondary consideration. The following is a summary of significant
accounting policies consistently followed by the Fund in the preparation of its
financial statements.
A. Security Valuation
Securities listed or traded on a national securities exchange are
valued at the last sale price. Securities traded on the NASDAQ National
Market System are valued at the NASDAQ Official Closing Price. If there was
not a sale that day, these securities are valued at the last bid price.
Securities which are unlisted are valued at the most recent bid price.
Short-term investments with maturities of 60 days or less are valued at
amortized cost which approximates market value.
B. Federal Income Tax
No provision for federal income tax is required because the Fund has
elected to be taxed as a "regulated investment company" under the Internal
Revenue Code and intends to maintain this qualification and to distribute
each year to its shareholders, in accordance with the minimum distribution
requirements of the Code, all of its taxable net investment income and
taxable net realized gains on investments.
C. Securities Transactions and Related Investment Income
Securities transactions are accounted for on the date the securities
are purchased or sold. Dividend income and distributions to shareholders
are recorded on the ex-dividend date. Interest income and expenses are
recorded on an accrual basis.
D. Use of Estimates
The preparation of the financial statements in accordance with
accounting principles generally accepted in the United States requires
management to make estimates and assumptions that affect the amounts
reported. Actual results could differ from those estimates.
E. Reclassification of Capital Accounts
As of December 31, 2004, $140,518 of accumulated net losses were
reclassified to undistributed net realized gains on investments in order to
adjust for differences between income tax regulations and accounting
principles generally accepted in the United States.
NOTE 2 -- PURCHASES AND TAX DIFFERENCES
The cost of purchases of investment securities (excluding short-term
investments with maturities of 60 days or less) aggregated $85,163,702 for the
year ended December 31, 2004. Realized gains or losses are based on the specific
identification method.
All of the amounts reported in the financial statements at December 31,
2004 were the same for federal income tax and financial reporting purposes.
Gross unrealized appreciation for all investments at December 31, 2004 for
federal income tax and financial reporting purposes was $65,777,674.
The distribution paid on December 23, 2004 was characterized as long-term
capital gains for federal income tax purposes.
NOTE 3 -- ADVISORY FEES AND OTHER AFFILIATED TRANSACTIONS
Pursuant to an Investment Advisory Agreement, advisory fees were paid by
the Fund to First Pacific Advisors, Inc. (the "Adviser"). Under the terms of
this Agreement, the Fund pays the Adviser a monthly fee calculated at the annual
rate of 0.75% of the first $50 million of the Fund's average daily net assets
and 0.65% of the average daily net assets in excess of $50 million. In addition,
the Fund pays the Adviser an amount equal to 0.10% of the average daily net
assets for each fiscal year in reimbursement for the provision of financial
services to the Fund. The Agreement obligates the Adviser to reduce its fee to
the extent necessary to reimburse the Fund for any annual expenses (exclusive of
interest, taxes, the cost of any supplemental statistical and research
information, and extraordinary expenses such as litigation) in excess of 1 1/2%
of the first $30 million and 1% of the remaining average net assets of the Fund
for the year.
11
<Page>
For the year ended December 31, 2004, the Fund paid aggregate fees of
$19,000 to all Directors who are not affiliated persons of the Adviser. Legal
fees were for services rendered by O'Melveny & Myers LLP, counsel for the Fund.
A Director of the Fund is a retired partner of that firm. Certain officers of
the Fund are also officers of the Adviser and FPA Fund Distributors, Inc.
NOTE 4 -- REDEMPTION FEE
A redemption fee of 2% applies to redemptions within 90 days of purchase
for certain purchases made by persons eligible to purchase shares without an
initial sales charge. For the year ended December 31, 2004, the Fund collected
$7,505 in redemption fees. The impact of these fees is less than $0.01 per
share.
NOTE 5 -- DISTRIBUTOR
For the year ended December 31, 2004, FPA Fund Distributors, Inc.
("Distributor"), wholly owned subsidiary of the Adviser, received $114,779 in
net Fund share sales commissions after reallowance to other dealers. The
Distributor pays its own overhead and general administrative expenses, the cost
of supplemental sales literature, promotion and advertising.
REPORT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
TO THE SHAREHOLDERS AND
BOARD OF DIRECTORS OF FPA PERENNIAL FUND, INC.
We have audited the accompanying statement of assets and liabilities of FPA
Perennial Fund, Inc. (the "Fund"), including the portfolio of investments, as of
December 31, 2004 and the related statement of operations for the year then
ended, and the statements of changes in net assets for each of the two years in
the period then ended, and the financial highlights for each of the three years
in the period then ended. These financial statements and financial highlights
are the responsibility of the Fund's management. Our responsibility is to
express an opinion on these financial statements and financial highlights based
on our audits. The financial highlights of FPA Perennial Fund, Inc. for each of
the two years in the period ended December 31, 2001 were audited by other
auditors whose report, dated February 1, 2002, expressed an unqualified opinion
on those financial highlights.
We conducted our audits in accordance with standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. An audit
includes consideration of internal control over financial reporting as a basis
for designing audit procedures that are appropriate in the circumstances, but
not for the purpose of expressing an opinion on the effectiveness of the Fund's
internal control over financial reporting. Accordingly, we express no such
opinion. An audit also includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. Our procedures
included confirmation of securities owned as of December 31, 2004, by
correspondence with the custodian. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of FPA
Perennial Fund, Inc. as of December 31, 2004, the results of its operations for
the year then ended and the changes in its net assets for each of the two years
in the period then ended, and the financial highlights for each of the three
years in the period then ended in conformity with accounting principles
generally accepted in the United States of America.
/s/ Deloitte & Touche LLP
Los Angeles, California
February 4, 2005
12
<Page>
SHAREHOLDER EXPENSE EXAMPLE
December 31, 2004
(unaudited)
FUND EXPENSES
As a shareholder of the Fund, you incur two types of costs: (1) transaction
costs, and (2) ongoing costs, including advisory and administrative fees;
shareholder service fees; and other Fund expenses. The Example is intended to
help you understand your ongoing costs (in dollars) of investing in the Fund and
to compare these costs with the ongoing costs of investing in other mutual
funds. The Example is based on an investment of $1,000 invested at the beginning
of the year and held for the entire year.
ACTUAL EXPENSES
The information in the table under the heading "Actual Performance"
provides information about actual account values and actual expenses. You may
use the information in this column, together with the amount you invested, to
estimate the expenses that you paid over the period. Simply divide your account
value by $1,000 (for example, an $8,600 account value divided by $1,000= 8.6),
then multiply the result by the number in the first column in the row entitled
"Expenses Paid During Period" to estimate the expenses you paid on your account
during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The information in the table under the heading "Hypothetical Performance
(5% return before expenses)" provides information about hypothetical account
values and hypothetical expenses based on the Fund's actual expense ratio and an
assumed rate of return of 5% per year before expenses, which is not the Fund's
actual return. The hypothetical account values and expenses may not be used to
estimate the actual ending account balance or expenses you paid for the period.
You may use this information to compare the ongoing costs of investing in the
Fund and other funds. To do so, compare this 5% hypothetical example with the 5%
hypothetical examples that appear in the shareholder reports of other funds.
Please note that the expenses shown in the table are meant to highlight
your ongoing costs only and do not reflect any transactional costs. Therefore,
the information under the heading "Hypothetical Performance (5% return before
expenses)" is useful in comparing ongoing costs only, and will not help you
determine the relative total costs of owning different funds. In addition, if
these transactional costs were included, your costs would have been higher.
<Table>
<Caption>
HYPOTHETICAL
PERFORMANCE
(5% RETURN
ACTUAL BEFORE
PERFORMANCE EXPENSES)
----------- ------------
Beginning Account Value
June 30, 2004 $ 1,000.00 $ 1,000.00
Ending Account Value
December 31, 2004 $ 1,083.23 $ 1,020.32
Expenses Paid During
Period* $ 4.82 $ 4.68
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 0.92%,
multiplied by the average account value over the period and prorated for
the six-months ended December 31, 2004 (184/366 days).
13
<Page>
DIRECTOR AND OFFICER INFORMATION
(unaudited)
<Table>
<Caption>
PORTFOLIOS IN
FUND COMPLEX
POSITION(S) TERM OF OFFICE AND PRINCIPAL OCCUPATION(S) OVERSEEN BY OTHER
NAME, AGE & ADDRESS WITH COMPANY YEARS SERVED DURING THE PAST 5 YEARS DIRECTOR DIRECTORSHIPS
- ------------------------------ ------------------- ------------------- ----------------------- ------------- -------------
Willard H. Altman, Jr. - (69)* Director+ Years Served: 7 Retired. Formerly, 6
11400 W. Olympic Blvd. until 1995, Partner of
Suite 1200 Ernst & Young LLP, a
Los Angeles, CA 90064 public accounting firm.
John P. Endicott - (86)* Director+ Years Served: 22 Independent Management 1
11400 W. Olympic Blvd. Consultant.
Suite 1200
Los Angeles, CA 90064
Leonard Mautner - (87)* Director+ Years Served: 22 President, Leonard 2
11400 W. Olympic Blvd. Mautner Associates;
Suite 1200 General Partner,
Los Angeles, CA 90064 Goodman & Mautner Ltd.
Lawrence J. Sheehan - (72) Director+ Years Served: 14 Retired. Formerly 5
11400 W. Olympic Blvd. Partner (1969 to 1994)
Suite 1200 and of counsel employee
Los Angeles, CA 90064 (1994 to 2002) of the
law firm of O'Melveny &
Myers LLP, legal
counsel to the Company.
Eric S. Ende - (60) Director+, Years Served: 5 Senior Vice President 3
11400 W. Olympic Blvd. President & of the Adviser.
Suite 1200 Portfolio Manager
Los Angeles, CA 90064
Steven R. Geist - (51) Executive Vice Years Served: 9 Vice President of the
11400 W. Olympic Blvd. President & Adviser.
Suite 1200 Portfolio Manager
Los Angeles, CA 90064
J. Richard Atwood - (44) Treasurer Years Served: 8 Principal and Chief First Pacific
11400 W. Olympic Blvd. Operating Officer of Advisors, Inc.
Suite 1200 the Adviser. President and FPA Fund
Los Angeles, CA 90064 of FPA Fund Distributors,
Distributors, Inc. Inc.
Sherry Sasaki - (50) Secretary Years Served: 22 Assistant Vice
11400 W. Olympic Blvd. President and Secretary
Suite 1200 of the Adviser and of
Los Angeles, CA 90064 FPA Fund Distributors,
Inc.
Christopher H. Thomas - (47) Assistant Years Served: 10 Vice President and FPA Fund
11400 W. Olympic Blvd. Treasurer Controller of the Distributors,
Suite 1200 Adviser and of FPA Fund Inc.
Los Angeles, CA 90064 Distributors, Inc.
</Table>
+ Directors serve until their resignation, removal or retirement.
* Audit Commitee Member
14
<Page>
FPA PERENNIAL FUND, INC.
INVESTMENT ADVISER
First Pacific Advisors, Inc.
11400 West Olympic Boulevard, Suite 1200
Los Angeles, CA 90064
SHAREHOLDER SERVICE AGENT
Boston Financial Data Services, Inc.
P.O. Box 8115
Boston, Massachusetts 02266-8115
(800) 638-3060
(617) 483-5000
CUSTODIAN & TRANSFER AGENT
State Street Bank and Trust Company
Boston, Massachusetts
DISTRIBUTOR
FPA Fund Distributors, Inc.
11400 West Olympic Boulevard, Suite 1200
Los Angeles, California 90064
COUNSEL
O'Melveny & Myers LLP
Los Angeles, California
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Deloitte & Touche LLP
Los Angeles, California
TICKER SYMBOL: FPPFX
CUSIP: 302548102
This report has been prepared for the information of shareholders of FPA
Perennial Fund, Inc., and is not authorized for distribution to prospective
investors unless preceded or accompanied by an effective prospectus.
The Fund's complete proxy voting record for the 12 months ended June 30, 2004 is
available without charge, upon request, by calling (800) 982-4372 and on the
SEC's website at www.sec.gov.
The Fund's schedule of portfolio holdings, filed the first and third quarter on
Form N-Q with the SEC, is available on the SEC's website at www.sec.gov. Form
N-Q is available at the SEC's Public Reference Room in Washington, D.C., and
information on the operations of the Public Reference Room may be obtained by
calling 1-202-942-8090. To obtain information on Form N-Q from the Fund,
shareholders can call 1-800-982-4372.
<Page>
Item 2. Code of Ethics.
(a) The registrant has adopted a code of ethics that applies to
the registrant's senior executive and financial officers. Upon
request, any person may obtain a copy of this code of ethics,
without charge, by calling (800) 982-4372. A copy of the code
of ethics is filed as an exhibit to this Form N-CSR.
(b) During the period covered by this report, there were not any
amendments to the provisions of the code of ethics adopted in
2(a) above.
(c) During the period covered by this report, there were not any
implicit or explicit waivers to the provisions of the code of
ethics adopted in 2(a).
Item 3. The registrant's board of directors has determined that Willard H.
Altman, Jr., a member of the registrant's audit committee and board of
directors, is an "audit committee financial expert" and is
"independent," as those terms are defined in this Item. This
designation will not increase the designee's duties, obligations or
liability as compared to his duties, obligations and liability as a
member of the audit committee and of the board of directors.
Item 4. Principal Accountant Fees and Services.
<Table>
<Caption>
2003 2004
(a) Audit Fees $ 22,000 $ 27,380
(b) Audit Related Fees -0- -0-
(c) Tax Fees $ 5,000 $ 5,765
(d) All Other Fees -0- -0-
</Table>
(e)(1) Disclose the audit committee's pre-approval policies and
procedures described in paragraph (c)(7) of Rule 2-01 of
Regulation S-X. The audit committee shall pre-approve all
audit and permissible non-audit services that the committee
considers compatible with maintaining the independent
auditors' independence. The pre-approval requirement will
extend to all non-audit services provided to the registrant,
the adviser, and any entity controlling, controlled by, or
under common control with the adviser that provides ongoing
services to the registrant, if the engagement relates directly
to the operations and financial reporting of the registrant;
provided, however, that an engagement of the registrant's
independent auditors to perform attest services for the
registrant, the adviser or its affiliates required by
generally accepted auditing standards to complete the
examination of the registrant's financial statements (such as
an examination conducted in accordance with Statement on
Auditing Standards Number 70 issued by the American Institute
of Certified Public Accountants), will be deem pre-approved
if: (i) the registrant's independent auditors inform the audit
committee of the engagement, (ii) the
<Page>
registrant's independent auditors advise the audit committee
at least annually that the performance of this engagement will
not impair the independent auditor's independence with respect
to the registrant, and (iii) the audit committee receives a
copy of the independent auditor's report prepared in
connection with such services. The committee may delegate to
one or more committee members the authority to review and
pre-approve audit and permissible non-audit services. Actions
taken under any such delegation will be reported to the full
committee at its next meeting.
(e)(2) Disclose the percentage of services described in each of
paragraphs (b) - (d) of this Item that were approved by the
audit committee pursuant to paragraph (c)(7)(i)(C) of Rule
2-01 of Regulation S-X. 100% of the services provided to the
registrant described in paragraphs (b) - (d) of this Item were
pre-approved by the audit committee pursuant to paragraphs
(e)(1) of this Item. There were no services provided to the
investment adviser or any entity controlling, controlled by or
under common control with the adviser described in paragraphs
(b) - (d) of this Item that were required to be pre-approved
by the audit committee.
(f) If greater than 50%, disclose the percentage of hours expended
on the principal accountant's engagement to audit the
registrant's financial statements for the most recent fiscal
year that were attributed to work performed by persons other
than the principal accountant's full-time, permanent
employees. All services performed on the engagement to audit
the registrant's financial statements for the most recent
fiscal year end were performed by the principal accountant's
full-time, permanent employees.
(g) Disclose the aggregate non-audit fees billed by the
registrant's accountant for services rendered to the
registrant, and rendered to the registrant's investment
adviser (not including any sub-adviser whose role is primarily
portfolio management and is subcontracted with or overseen by
another investment adviser), and any entity controlling,
controlled by, or under common control with the adviser that
provides ongoing services to the registrant for each of the
last two fiscal years of the registrant. None.
(h) Disclose whether the registrant's audit committee of the board
of director has considered whether the provision of non-audit
services that were rendered to the registrant's investment
adviser (not including any sub-adviser whose role is primarily
portfolio management and is subcontracted with or overseen by
another investment adviser), and any entity controlling,
controlled by, or under common control with the investment
adviser that provides ongoing services to the registrant that
were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule
2-01 of Regulation S-X is
<Page>
compatible with maintaining the principal accountant's
independence. Not Applicable.
Item 5. Audit Committee of Listed Registrants. Not Applicable.
Item 6. Schedule of Investments. Not Applicable. The schedule of investments
is included as part of the report to stockholders filed under Item 1
of this Form.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies. Not Applicable.
Item 8. Portfolio Managers of Closed-End Management Investment Companies.
Not Applicable.
Item 9. Purchases of Equity Securities by Closed-End Management Investment
Companies. Not Applicable.
Item 10. Submission of Matters to a Vote of Security Holders. There has been no
material change to the procedures by which shareholders may recommend
nominees to the registrant's board of directors.
Item 11. Controls and Procedures.
(a) The Principal Executive Officer and Principal Financial
Officer of the registrant have concluded that the registrant's
disclosure controls and procedures (as defined in Rule
30a-3(c) under the Investment Company Act of 1940) are
effective based on their evaluation of the disclosure controls
and procedures as of a date within 90 days of the filing date
of this report.
(b) There have been no significant changes in the registrant's
internal controls over financial reporting (as defined in Rule
30a-3(d) under the Investment Company Act of 1940) that
occurred during the registrant's last fiscal half-year (the
registrant's second fiscal half- year in the case of an annual
report) that has materially affected, or is reasonably likely
to materially affect, the registrant's internal controls over
financial reporting.
Item 12. Exhibits.
(a)(1) Code of ethics as applies to the registrant's officers and
directors, as required to be disclosed under Item 2 of Form
N-CSR. Attached hereto as Ex.99.CODE.ETH.
(a)(2) Separate certification for the registrant's principal
executive officer and principal financial officer, as required
by Rule 30a-2(a) under the Investment Company Act of 1940.
Attached hereto.
(a)(3) Not Applicable
<Page>
(b) Separate certification for the registrant's principal
executive officer and principal financial officer, as required
by Rule 30a-2(b) under the Investment Company Act of 1940.
Attached hereto.
SIGNATURES
Pursuant to the Securities Exchange Act of 1934 and the Investment Company Act
of 1940, the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
FPA PERENNIAL FUND, INC.
By: /s/ ERIC S. ENDE
------------------------------
Eric S. Ende, President
Date: March 7, 2005
Pursuant to the Securities Exchange Act of 1934 and the Investment Company Act
of 1940, the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
FPA PERENNIAL FUND, INC.
By: /s/ J. RICHARD ATWOOD
------------------------------
J. Richard Atwood, Treasurer
Date: March 7, 2005