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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM N-2
(Check Appropriate Box or Boxes)
REGISTRATION STATEMENT UNDER THE INVESTMENT
COMPANY ACT OF 1940
Amendment No. ____
First Carolina Investors, Inc.
------------------------------
(Exact Name of Registrant as Specified in Charter)
5224 Providence Country Club Drive, Charlotte, NC 28277
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(Address of Principal Executive Offices [Number, Street, City, State, Zip Code])
704-846-1066
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(Registrant's Telephone Number, Including Area Code)
H. Thomas Webb III, P. O. Box 33607, Charlotte, NC 28233
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(Name and Address of Agent for Service)
If any securities being registered on this form will be offered on a
delayed or continuous basis in reliance on Rule 415 under the Securities Act of
1933, other than securities offered in connection with a dividend reinvestment
plan, check the following box. [ ]
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PART A
INFORMATION REQUIRED IN A PROSPECTUS
Items 1-7. Not Applicable
Item 8.
(1) General Description of the Registrant
First Carolina Investors, Inc. (the "Registrant") was organized
December 2, 1971 as a South Carolina unincorporated business trust. On July 1,
1987 the Registrant incorporated by merging into a wholly-owned subsidiary
(First Carolina Investors, Inc.) established solely for this purpose. The
Registrant was incorporated November 24, 1986 under the laws of the state of
Delaware.
From the inception of operations through December 31, 1975 the
Registrant operated as a real estate investment trust ("REIT") as defined in
the Internal Revenue Code. Subsequently the Registrant became active in land
development through both direct ownership and joint ventures as well as
investments in equity securities of financial and other entities. Real estate
activities continued to be the Registrant's primary business activity through
the end of 1994. On January 3, 1995 the Registrant, pursuant to the
requirements of the Investment Company Act of 1940 (the "Act"), filed
notification of registration.
The Registrant is a closed-end, non-diversified management company.
(2) Investment Objectives and Policies
At December 31, 1994, immediately prior to registration under
the Act, Registrant (including its subsidiaries) owned real estate and
interests in real estate having an aggregate value exceeding 23% of its total
assets. Registrant intends to complete the development and sale of that
portion of the real estate which it is currently developing and offering for
sale and intends to sell all other presently owned real estate, either by sale
of developed or partially developed parcels or by sale prior to development.
The timing of the real estate sales will depend upon the availability of
purchasers' offering prices and other purchase terms which Registrant's
management deems to be acceptable. Upon the consummation of a substantial
portion of these sales, Registrant will cease to have 23% of its total assets
invested in real estate. Registrant may purchase other real estate from time
to time, but it does not intend to concentrate its investments in real estate
after the current dispositions.
At January 3, 1995, (the date of registration under the Act),
Registrant owned 200,000 shares of common stock of First Empire State
Corporation ("First Empire") a publicly-owned bank holding company. At the
$136 per share closing price of these shares on the American Stock Exchange on
December 30, 1994, the last trading day of 1994, Registrant's holding of First
Empire common stock constituted 51.29% of Registrant's total assets.
Registrant has no present intention to sell any of its shares of First Empire
common stock (but it does not preclude the sale of any asset which it owns,
including First Empire stock, if Registrant's management deems such a sale to
be in Registrant's interest). Because the total cost of Registrant's holding
of First Empire common stock is $3,180,000 as compared to the valuation of
$27,200,000 at January 3, 1995, Registrant would incur substantial capital
gains taxes in the event of a sale or transfer other than a sale or transfer
which qualifies for nonrecognition of gain or loss under the relevant
provisions of the Internal Revenue Code.
Primarily because of its retention of First Empire stock,
Registrant has a policy of concentration of its investments in the securities
of companies in the financial services industry, which Registrant defines to
include banking, savings and thrift institutions, insurance companies
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including property and casualty, life, and surety and reinsurance companies,
and mortgage lending and servicing companies.
(For purposes of this item and Item 17, "concentration" is defined to
be 25 percent or more of the value of Registrant's total assets invested or
proposed to be invested in a particular industry or industries.)
The objectives described in the following three paragraphs may
be changed by Registrant's Board of Directors without a vote of the holders of
a majority of Registrant's securities.
The objectives of Registrant are to make investments,
primarily long term, for the purposes of realizing gains through an increase in
the value of the security or other acquired property. Registrant expects to
achieve its objectives primarily through the acquisition of equity securities,
although it does not preclude the acquisition of debt securities, real property
or other tangible property as an investment if it identifies an investment
opportunity in those types of properties. Registrant does not anticipate
making investments in a large number of companies which are widely diversified
for the purpose of spreading risk. Instead, Registrant anticipates that it
will invest in a relatively small number of non-diversified portfolio
companies. Respecting some of such investments, Registrant may be represented
through one or more of its officers, directors or agents, on the board of
directors of the investee. As to two existing investments, directors of
Registrant occupy more than one seat on the board of the investee and serve as
officers of the investee.
Registrant may determine, before or after its initial purchase
of an issuer's securities, to seek control of the management of the issuer (if
not prohibited by law from doing so) or to effect or influence the issuer's
policies.
Registrant will not primarily trade in securities on a
short-term basis, although it does not preclude divesting an asset after a
short period of ownership (e.g., within a year of acquisition), if it believes
divestiture to be an appropriate investment decision; and it may invest in
cash-equivalent securities on a short-term basis as set forth in the next
succeeding paragraph. Registrant may acquire (1) securities in
privately-negotiated transactions; (2) securities which are registered under
the Securities Exchange Act of 1934 (the "1934 Act") and (3) securities of
issuers which are privately held and which have never been registered.
Registrant may acquire securities which constitute restricted securities under
the Securities Act of 1933 (the "1933 Act") and which cannot be sold by
Registrant to the public except pursuant to registration under the 1933 Act or
to an exemption from registration.
From time to time as it seeks to identify appropriate
portfolio investments, Registrant may invest in short-term securities deemed
equivalent to cash, such as bank-issued certificates of deposit, commercial
paper, bankers' acceptances or other money market instruments.
Registrant does not intend to employ risk arbitrage or to
trade in reverse repurchase agreements, forward delivery contracts, currency
transactions, options on futures contracts and options or derivative
securities. Registrant may acquire options to acquire securities or other
property as a vehicle for long-term investment, but not for the purpose of
options trading. Registrant retains the freedom to acquire foreign securities,
although it has not currently identified any foreign security as a prospective
investment.
(3) Risk Factors
a. Non-diversification of Investments. Registrant's
current investments are highly concentrated in two specific areas of
investment: its holdings of real estate and mortgages on real estate in and
around Charlotte, North Carolina constitute 94% of the total value of its real
estate holdings
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and 21.9% of its total assets at January 3, 1995. [All values in this Section
(3) of Item 8 are stated as at January 3, 1995]. While Registrant intends to
sell the Charlotte-area real estate in a reasonable and orderly manner (see
Investment Objectives and Policies, above, in this item), its ability to sell
its parcels, particularly undeveloped parcels, on terms which it deems
reasonable will be affected by the vitality of the Charlotte-area real estate
market, including the economy and population growth in that area and the
availability of financing at favorable interest rates to developers, builders
and home buyers. While the Charlotte-area has generally experienced economic
and population growth in the last 20 years, from time to time in that 20 year
period real estate has experienced cycles of low demand in one or more segments
of the market.
Registrant's investment in the stock of First Empire, valued
at $27,200,000, constitutes 76.84% of the total value of Registrant's non-real
estate portfolio assets and 51.29% of total assets. Substantial changes in the
value of First Empire stock or in its dividend distribution policies will have
a direct comparable effect on Registrant's net asset value and cash receipts.
If Registrant were to sell its First Empire stock at the stated valuation in a
taxable sale (Registrant has no present plan to do so), it would, under current
law, be liable for capital gains taxes of approximately $9,375,000.
b. Small Company Investments. Registrant's investments
in portfolio securities other than First Empire stock are in companies which
can be generally described as small capitalization companies. A number of
these investments have not experienced stable earnings and generally fall
within categories frequently described as "speculative" or "turnaround
situations." The securities of these companies, although publicly traded, do
not have large trading volume or the ability to absorb large block offerings
without adversely affecting market price. If Registrant were to decide to sell
its investment in a company with a thin trading market, Registrant might need
to sell over a period of time or suffer a substantial price discount to effect
a prompt sale.
c. Registrant's Stock is Thinly Traded. Registrant's
stock is thinly traded. At January 3, 1995, Registrant had 1,093,548 shares
outstanding, of which only 427,894 shares were owned by persons other than its
officers and directors, members of their families and family related holders
such as family trusts. The Registrant's shares were listed on the Boston Stock
Exchange on March 23, 1994; from that date through the end of that year only
7700 shares traded on that exchange (although some additional shares were
purchased by Registrant in direct negotiations with sellers). Consequently, a
shareholder seeking to sell Registrant's shares may experience an illiquid
market.
d. Discount from Net Asset Value. Registrant is a
closed-end investment company. Shares of such companies generally sell at
discounts from their net asset value.
(4) Other Policies.
As stated above in this item, Registrant may invest in
restricted securities and in companies the shares of which have not been issued
to the public. Registrant reserves the freedom of action to participate in the
management of a portfolio company. Certain fundamental policies of Registrant
are enumerated in Item 17(2).
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(5) Share Price Data
The Registrant's shares of common stock are listed on the
Boston Stock Exchange, Inc. under the symbol FCI. Information regarding the
shares follows:
<TABLE>
<CAPTION>
QUARTER
---------------------------------------------------------
1994 First Second Third Fourth
---- ------ ------ ------ ------
<S> <C> <C> <C> <C>
High Bid $25.50 $26.50 $28.00 $28.00
Low Bid 25.00 25.00 26.50 27.00
1993
----
High Bid $22.50 $23.50 $24.00 $24.50
Low Bid 21.00 22.50 23.50 24.00
</TABLE>
The stock prices reflect inter-dealer prices without retail mark-up,
mark-down or commission and may not necessarily represent actual transactions.
Net asset value per share, for the periods above, is not available
since the Registrant was not an investment company during this time.
Closed-end investment company shares frequently trade at a discount from net
asset value.
(6) Share Repurchases by Registrant. Registrant's Board of
Directors has adopted a policy of purchasing Registrant's shares from time to
time on the Boston Stock Exchange, the market on which Registrant's shares are
listed. This policy will be examined by the Board of Directors semi-annually
and each renewal will be disclosed by letter or report addressed to
shareholders. Registrant has no present intention to purchase its shares by
tender offer.
Registrant will pay for these purchases out of available cash
including borrowed funds. Registrant does not intend to incur indebtedness for
this purpose exceeding 3% of its total assets. Any such indebtedness will not
be incurred by issuance of senior securities as defined in the Act, and such
borrowings will not violate the provisions of the Act which generally require
that, after issuance of senior securities representing indebtedness, such
senior securities will have an asset coverage of 300%. Any such borrowing will
not cause a material leveraging of Registrant's capital structure. Purchases
will be made subject to availability of sufficient funds, in management's
judgment, to accomplish its foreseeable investment objectives, at prices which
management deems appropriate but not, in any event, above the current net asset
value of the shares.
Registrant does not anticipate that its purchase of its shares will
have a material affect on its expense ratios, portfolio turnover or achievement
of its investment objectives. Of the 1,093,548 shares of Registrant
outstanding at January 3, 1995, only 427,894 shares were owned by persons other
than officers and directors of the Registrant, members of their families and
family-related holders such as family trusts. The public trading float in
Registrant's shares is relatively small, and on many trading days no
transactions are effected in Registrant's shares on the Boston Stock Exchange.
Item 9. Management.
The Board of Directors of the Registrant is charged with, among other
things, establishing broad operational and investment criteria of the
Registrant, approving the sale of investments, approving new investments and
establishing executive compensation.
The Registrant does not utilize an outside investment advisor or
portfolio manager. The duties are performed by the directors and management of
the Registrant.
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The custodian for investment securities is First Union National Bank
of North Carolina.
The transfer agent and dividend paying agent of the Registrant is
Continental Stock Transfer & Trust Company.
The following table shows the stock ownership as of January 3, 1995 of
the stockholders who are known to the Registrant to be the beneficial owners of
more than 25 percent of the Registrant's outstanding shares of common stock.
<TABLE>
<CAPTION>
Amount and Nature Percent of
Name of Beneficial Owner of Beneficial Ownership Ownership
- ------------------------ ----------------------- ---------
<S> <C> <C>
Brent D. Baird, 576,942 (1) 52.8%
Bruce C. Baird
and 19 others
</TABLE>
(1) Messrs. Brent D. Baird and Bruce C. Baird disclaim beneficial
ownership or interest in all but 245,252 and 149,632 respectively, of
such shares. These shares are held in family trusts or custodianships
and by their wives, relatives, entities owned and controlled by the
Baird family and business associates.
Item 10. Capital Stock, Long-Term Debt and Other Securities.
As of January 4, 1995 Registrant has issued 1,506,542 shares of common
stock, no par value, less 413,894 shares of treasury stock for an aggregate of
1,092,648 shares issued and outstanding.
Registrant has no predetermined times and minimum rates with respect
to payment of dividends. Because Registrant is not, and foreseeably will not
be, qualified as a regulated investment company under the Internal Revenue
Code, it is not required to pay a specified portion of its taxable income as
dividends to maintain tax qualification.
Item 11. Not applicable.
Item 12. Legal Proceedings.
From time to time the Registrant is involved in legal proceedings
which are considered ordinary, routine and incidental to its business. The
Registrant is not a party to any significant litigation.
Item 13. Table of Contents of the Statement of Additional Information.
See Item 15 of the Statement of Additional Information attached hereto
and herein incorporated by reference.
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PART B
INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION
First Carolina Investors, Inc.
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(Name of Registrant)
January 3, 1995
---------------
(Date)
THE ACCOMPANYING STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS.
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Item 15. Table of Contents - Statement of Additional Information
<TABLE>
<CAPTION>
Description Page
- ----------- ----
<S> <C>
General Information and History 9
Investment Objectives and Policies 9
Management 10
Control Persons and Principal Holders of Securities 12
Investment Advisory and Other Services 12
Brokerage Allocation and Other Practices 12
Tax Status 14
Financial Statements 15
</TABLE>
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Item 16. General Information and History.
See Item 8 of Part A attached hereto and herein incorporated by
reference.
Item 17.
(1) Investment Objectives and Policies.
Registrant intends to invest in securities of issuers which it
evaluates as presenting reasonable opportunities for growth in value over a
period of time, normally exceeding one year. Except for its holdings of real
estate and real estate mortgages which it acquired pursuant to its primary
activity prior to 1995 as an owner and developer of real estate, Registrant's
investment portfolio currently consists entirely of securities of issuers which
are registered under the 1934 Act. As stated more fully in Item 8, Investment
Objectives and Policies, Registrant reserves the freedom of action to acquire
securities which constitute restricted securities with respect to the 1933 Act
and may acquire real estate assets or debt securities. After giving effect to
the anticipated sale of the real estate which Registrant currently owns,
Registrant will not concentrate its investments in real estate. Registrant
intends to sell its currently-owned real estate as developed lots or
undeveloped parcels; and Registrant retains the freedom to dispose of some or
all of its undeveloped real estate when it believes that market factors
(including population growth, infrastructure development in the area where the
real estate is located and the availability of financing for prospective
buyers) are favorable, and Registrant retains the freedom to dispose of real
estate pursuant to an arrangement under which Registrant may retain a security
interest to secure buyer obligations or an economic interest in the subsequent
development of the property. Registrant may sell its currently-held real
estate mortgages or retain them until paid in full by the respective
mortgagors.
Subject to the policy of concentration set forth in
Item 8 and in paragraph 2(e) of this Item 17 and to the limitations set forth
in the Act, Registrant has no policy with respect to concentration or total
avoidance of investment in any particular industry or group of industries.
(2) Fundamental Policies of Registrant.
Registrant has the following fundamental policies with respect
to the following activities:
a. Issuance of senior securities: Registrant
does not presently intend to issue senior securities.
b. Short sales, purchases on margin and the
writing of put and call options: Registrant does not presently intend to sell
securities short, purchase securities on margin or write put and call options.
c. The borrowing of money: Registrant retains
the freedom to borrow money in connection with the operation of its business
and its investment needs in principal amounts not to exceed in the aggregate
50% of its total assets immediately after any such borrowing.
d. The underwriting of securities of other
issuers: Registrant will not underwrite securities of any issuer, except that
it may purchase portfolio securities under circumstances in which Registrant
might be deemed upon sale to be an "underwriter" as that term is defined in the
1933 Act.
e. The concentration of investments in a
particular industry or group of industries: As stated in Item 8, Registrant's
investments are, and will continue to be, concentrated in the securities of
companies in the financial services industry, which Registrant defines to
include banking, savings and thrift institutions, insurance companies
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including property and casualty, life, surety and reinsurance companies, and
mortgage lending and servicing companies. If Registrant were to sell or
otherwise cease to own its present investment in securities of First Empire
without acquiring securities of another financial services company or
companies, Registrant may then need to reconsider its policy of concentration
of investments in the financial services industry.
f. The purchase or sale of real estate and real
estate mortgage loans: Registrant reserves the freedom of action to acquire
real estate and real estate mortgage loans. However, as stated above in this
item, Registrant's present intention is to proceed with the orderly development
and sale, as market conditions permit, of its present real estate properties
and sale or retirement of its present real estate mortgage loans. Any new
acquisitions of real estate and real estate mortgage loans will be less than 25
percent of Registrant's total assets.
g. Purchase or sale of commodities or commodity
contracts including futures contracts: Registrant does not presently intend to
purchase or sell commodities or commodity contracts including futures
contracts.
h. The making of loans: Registrant will not
make loans to any person (except a subsidiary) except mortgage loans and loans
made in connection with, or to carry out a plan of, investment in securities of
the borrower or an investment in real property.
i. Any other policy that the Registrant deems
fundamental: None.
Item 18. Management.
The following is a listing of the Registrant's Directors and Officers:
<TABLE>
<CAPTION>
Positions Held with Principal Occupations
Name and Address Registrant During past 5 years
---------------- ---------------- -------------------
<S> <C> <C>
Brent D. Baird* Chairman & Director From 1970 through January 1984, Mr.
One M&T Plaza Baird was a partner and from
Buffalo, NY February 1, 1984 until January 1,
1992 was a limited partner of
Trubee, Collins and Co., Buffalo,
NY, a member firm of the New York
Stock Exchange, Inc. Mr. Baird is
currently a private investor. Mr.
Baird is a Director of Oglebay
Norton Company, First Empire State
Corporation, Todd Shipyards
Corporation, Exolon-ESK Company,
and Merchants Group, Inc.
Bruce C. Baird* Director Since 1975 Mr. Baird has been
215 Broadway President and owner of Belmont
Buffalo, NY Management Co., Inc. a real estate
development and management company.
Patrick W.E. Hodgson Director Mr. Hodgson has been Chairman of
248 Pall Mall Street the Board and CEO of Todd Shipyards
London, Ontario, Canada Corporation since February 1993;
President of Cinnamon Investments
Ltd. since 1981; and Chairman of
the Board of Scott's Hospitality
Ltd. since 1994. Mr. Hodgson is
also a director of First Empire
State Corporation and Exolon-ESK
Company.
</TABLE>
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<TABLE>
<CAPTION>
Positions Held with Principal Occupations
Name and Address Registrant During past 5 years
---------------- ---------------- -------------------
<S> <C> <C>
Theodore E. Dann, Jr. Director Since 1985 Mr. Dann has been
Suite 463 Director, Vice President,
Carborundum Center Secretary/Treasurer and General
Niagara Falls, NY Counsel for Ferro Alloy Services,
Inc. Mr. Dann is also Chairman of
the Board of Exolon-ESK Company.
He is also currently serving as
Chief Executive Officer of Buffalo
Technologies Corporation.
H. Thomas Webb III* President & Director Mr. Webb is and has been President
P.O. Box 33607 and a Director of Registrant since
Charlotte, NC June 30, 1979.
James E. Traynor* Vice President, Secretary & Mr. Traynor, a Certified Public
P.O. Box 33607 Treasurer Accountant, has served as Vice
Charlotte, NC President, Secretary and Treasurer
since joining Registrant on
June 30, 1979. Prior to this time,
he served as Financial Vice
President and Treasurer of
Northwestern Mortgage Corporation.
</TABLE>
*The persons indicated by an asterisk are interested persons within
the definition of Section 2(a)(19) of the Act.
The following table sets forth for the year ended December 31, 1994
all remuneration that the Registrant paid to, or set aside for, each officer,
director or other affiliated persons whose remuneration exceeded $60,000 and
for all officers and directors as a group:
<TABLE>
<CAPTION>
Capacities in Retirement Benefits
Which Remuneration Accrued During Last
Name of Person was Received Salary Deferred Compensation Fiscal Year
-------------- ------------ ------ --------------------- -----------
<S> <C> <C> <C> <C>
($) ($)(1) ($)(2)
H. Thomas Webb III Director $365,344 $120,000 $22,500
and President
James E. Traynor Vice President $191,441 $ 54,350 $21,150
Sec. & Tres.
All Directors and $556,785 $174,350 $43,650
officers as a group
</TABLE>
(1) The Registrant has a non-qualified Deferred Compensation Plan pursuant
to which directors and officers of the Registrant, as designated by the Board
of Directors, may elect to defer the payment of certain amounts of their fees
or salary. At present 2 persons are participating.
(2) The Registrant has a pension plan for all full time employees,
including officers. The plan is a Simplified Employee Pension (SEP) as defined
in the Internal Revenue Code. Under the SEP, the Registrant may make annual
contributions not to exceed the lesser of $22,500 or 15 percent of eligible
employees' total compensation.
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Item 19. Control Persons and Principal Holders of Securities.
The following table shows the ownership as of January 3, 1995 of the
shareholders who are known to the Registrant to be beneficial owners of more
than 5 percent of the Registrant's shares of common stock.
<TABLE>
<CAPTION>
Name and Address Amount and Nature Percent of
of Beneficial Owner of Beneficial Ownership Ownership
- ------------------- ----------------------- ---------
<S> <C> <C>
Brent D. Baird, (1)(2) 576,942 52.8%
Bruce C. Baird
and 19 others
1350 One M&T Plaza
Buffalo, NY 14203
American Securities (3) 63,330 5.8
Corporation
112 E. 42nd Street
New York, NY 10168
All Directors and (4) 665,654 60.9
Officers of the
Registrant as a
Group (6 persons)
</TABLE>
(1) Messrs. Brent D. Baird and Bruce C. Baird disclaim beneficial
ownership or interest in all but 245,252 and 149,632 respectively, of such
shares. These shares are held in family trusts or custodianships and by their
wives, relatives, entities owned and controlled by the Baird family and
business associates.
(2) Constitutes a control person or group as defined in the rules and
regulations of the Act.
(3) American Securities Corporation is an investment banking firm.
(4) Includes options to acquire 45,000 shares held by an officer/director
and an officer.
Item 20. Investment Advisory and Other Services.
Sections 1 through 5 are not applicable.
The Registrant's custodian is First Union National Bank of N.C.
Capital Management Group, Securities Services NC 1162, 401 South Tryon St.,
Charlotte, NC 28288-1162.
The Registrant's independent public accountant is KPMG Peat Marwick
LLP, Suite 2800, Two First Union Center, Charlotte, NC 28202-9947: KPMG Peat
Marwick LLP conducts an audit of the financial statements of the Registrant and
also provides tax services and advice.
Item 21. Brokerage Allocation and Other Practices.
(1) Purchases and sales of portfolio securities by Registrant will
be effected through securities brokerage firms which are members of a national
securities exchange. Registrant may instruct the broker to execute
transactions at current market prices or at prices not to exceed a particular
price (for purchases) or not below a particular price (for sales); the
instructions for each transaction will be determined by Registrant based upon
its assessment of the market activity in the portfolio security. Registrant's
policy is to pay brokerage commissions and mark-ups on principal transactions
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which it believes do not exceed the usual and customary broker's commission.
During the three most recent fiscal years, Registrant paid the following
brokerage commissions:
<TABLE>
<CAPTION>
Year ended December 31: Amount of Commissions
------------------------ ---------------------
<S> <C>
1994 $ 1,990.00
1993 18,415.00
1992 150.00
</TABLE>
The differences between the level of commissions paid in 1994 as
compared to 1993 and 1992 are a result of the differences in the cost of
portfolio investment purchases in those years and, with respect to 1992, are
affected by a substantial portfolio investment which was made by private
purchase from the seller without the use of a broker or payment of commissions.
The 1994 purchases amounted to $310,414; the 1993 purchases, to $3,510,177; and
1992 purchases, $19,531 through a broker and $720,000 by a private purchase.
No portfolio sales were made in those years.
(2) a. Registrant has effected securities transactions
through the brokerage firm of Trubee, Collins & Co., Inc. ("Trubee, Collins")
of which Brent D. Baird, Chairman of the Board and an affiliated person of
Registrant, is an employee and was an employee during Registrant's last three
fiscal years. The total commissions paid by Registrant to Trubee, Collins in
Registrant's last three fiscal years were as follows:
<TABLE>
<CAPTION>
Year ended December 31: Amount of Commissions
------------------------ ---------------------
<S> <C>
1994 $ 1,990.00
1993 15,943.00
1992 150.00
</TABLE>
In 1994, the commissions received by Trubee, Collins from
Registrant equalled 0.645 percent of the total transaction prices net of
commissions. Registrant intends to continue to use Trubee, Collins as a
broker, subject to the provisions of Paragraph 3 of this Item 21, below.
Heretofore, Brent D. Baird has received from Trubee, Collins approximately
one-third of the total commission paid to Trubee, Collins on any brokerage
transaction originated through Mr. Baird. Effective April 1, 1995, Mr. Baird
will forego this one-third share of the commission on transactions for
Registrant. Registrant anticipates that this action by Mr. Baird will cause a
reduction in the commission costs of transactions placed through Trubee,
Collins. Mr. Baird may continue to share in commissions on transactions
handled by Trubee, Collins for customers other than Registrant and, as an
employee of Trubee, Collins, may continue to receive other compensation from
Trubee, Collins.
b. During Registrant's last fiscal year, Registrant paid
to Trubee, Collins 100% of its aggregate brokerage commissions and effected
through Trubee, Collins 100% of its aggregate dollar amount of transactions
involving the payment of commissions.
(3) The primary responsibility for selecting brokers for any
particular transaction shall be exercised by Registrant's Chairman of the
Board. (Selection of brokers for Registrant's purchase of its own shares is
currently made by the President.) As stated above in this item, Registrant's
Chairman of the Board is an employee of Trubee, Collins, a brokerage firm which
executes securities transactions for Registrant.
a. Brokers will be selected to effect securities
transactions for the Registrant on the basis of
efficient execution of transactions as instructed by
Registrant, the relative brokerage commissions, fees
or other remuneration (collectively "commissions")
and, in the case of certain thinly-traded securities,
a familiarity with the particular trading patterns in
those securities. Another factor to be
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<PAGE> 14
considered by Registrant is the greater convenience
to its Chairman and the immediate front-line
supervision which he exercises over the transaction
timing and pricing if Trubee, Collins is used; if the
Trubee, Collins commissions do not exceed the usual
and customary brokers' commission, this factor will
be very significant unless another broker can provide
special services in locating buyers or sellers.
Research services are usually not a factor in the
selection of brokers because Registrant relies upon
the knowledge of its own officers and directors with
respect to the industries and the companies which
they identify as potential areas for investment.
b. Persons acting on behalf of Registrant with respect
to transactions in portfolio securities are
authorized to pay a brokerage commission in excess of
that which another broker might have charged for the
same transaction if the broker provides efficient
execution and/or makes a special effort to locate
buyers or sellers not clearly available and if the
commission generally paid to the broker is reasonable
or fair compared to the usual and customary brokerage
commission.
c. With respect to securities transactions executed by
brokers who are members of a national securities
exchange and pursuant to Rule 17e-1 under the Act,
the Board of Directors of Registrant, including a
majority of the directors who are not interested
persons of Registrant, has adopted procedures which
are reasonably designed to provide that the
commissions paid to the broker are reasonable and
fair compared to the commissions generally received
by other brokers in connection with comparable
transactions involving similar securities purchased
or sold on a securities exchange during a comparable
period of time. On a quarterly basis, the Board of
Directors will review Registrant's security
transactions for the previous quarter and determine
whether the transactions were effected in compliance
with the procedures. The Board of Directors will
compare the commissions paid by Registrant for the
quarter with (1) commission schedules for comparable
transactions published by two brokerage firms which
did not act as brokers for Registrant in that period,
which comparison firms shall be major national or
regional brokerage firms, and (2) evidence of the
commissions charged by Registrant's broker to other
customers for comparable transactions. "Comparable
transactions" means transactions in similar
securities in the same or similar exchange markets
during a comparable period of time. The Board of
Directors, including a majority of the directors who
are not interested persons of Registrant, may from
time to time make and approve such changes in the
policy as the board deems necessary and in the
interests of Registrant.
d. Not applicable.
e. Not applicable.
Item 22. Tax Status.
The Registrant is subject to Federal and state corporate income taxes.
The Registrant does not currently and may never qualify as a regulated
investment company as defined by the Internal Revenue Code.
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<PAGE> 15
Item 23. Financial Statements.
FIRST CAROLINA INVESTORS, INC. & SUBSIDIARIES
Consolidated Statement of Assets and Liabilities
As of the Opening of Business January 3, 1995
<TABLE>
<S> <C>
Assets
Investments in securities at value
(cost of $10,349,387) $35,398,875
Cash, including short term investments
of $2,780,070 3,090,027
Mortgage loans, secured by real estate 1,020,200
Real estate 10,686,000
Investments in joint venture 625,000
Accrued interest receivable 17,222
Other Assets 2,193,584
-----------
Total assets 53,030,908
-----------
Liabilities
Accounts payable and accrued liabilities 2,944,068
Federal and State income taxes payable 448,983
Deferred income taxes payable 11,532,346
-----------
Total liabilities 14,925,397
-----------
Deferred income 118,296
-----------
Net Assets
Net assets (equivalent to $34.74 per share
based on 1,093,548 shares outstanding,
net of treasury shares) $37,987,215
===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
15
<PAGE> 16
FIRST CAROLINA INVESTORS, INC. & SUBSIDIARIES
Notes to Consolidated Statement of Assets and Liabilities
As of the Opening of Business January 3, 1995
1) Organization
First Carolina Investors, Inc. was organized December 2, 1971 and
subsequently incorporated in the state of Delaware July 1, 1987. On January 3,
1995 the Registrant, pursuant to the requirements of the Investment Company Act
of 1940, filed notification of registration.
2) Financial statement presentation
As a closed-end, non-diversified management investment company, the
Registrant values assets and liabilities at estimated fair value. The
significant changes from the December 31, 1994 balance sheet included in the
1994 annual report Form 10-K, herein incorporated by reference, and the
accompanying Consolidated Statement of Assets and Liabilities are as follows:
Real estate - The Board of Directors and managment of Registrant value
its real property investments at estimated fair values. Procedures utilized to
determine the estimated fair value include appraisals by an independent
appraiser, estimated net cash flows, utilization of fair market comparables in
existing subdivisions developed by the Registrant and other market comparables.
Investment in joint venture - The Registrant has agreed, subject to
regulatory approval, to sell its interest to its venture partner. The Board of
Directors and management have used this negotiated price in valuing its
investment in joint ventures at its estimated fair value.
Deferred income taxes payable have been increased to reflect the
estimated Federal and state income tax liabilities on unrealized gains in real
estate and investment in joint venture included in the accompanying
Consolidated Statement of Assets and Liabilities.
3) Additional information
The notes to financial statements included in the 1994 annual report
to stockholders should be read in conjunction with the Consolidated Statement
of Assets and Liabilities.
16
<PAGE> 17
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(1) Financial statements.
Consolidated Balance Sheet as of the Opening of Business of
January 3, 1995 (See Item 23 of Part B).
(2) Exhibits.
A listing of the exhibits to this Form N-2 is set forth below.
<TABLE>
<CAPTION>
Description Location
----------- --------
<S> <C> <C>
(1) Certificate of Incorporation and Bylaws Filed March 30, 1987 as Exhibits C and D to Form S-4
(No. 33-12199) and herein incorporated by reference
(2) First Carolina Investors, Inc. Filed March 18, 1988 as Exhibit A to Deferred
Compensation Plan 1987 Annual Report Form 10-K and
herein incorporated by reference
(3) EX-99.2J Custodian Agreement Filed herewith
(4) Indemnification Contract of the Corporation Filed March 30, 1987 as Exhibit 3.3 to Form S-4 (No.
33-12199) and herein incorporated by reference
(5) Option and Grant Agreement Filed July 31, 1987 as Exhibit A to Form 10-Q and
herein incorporated by reference
(6) Amendment to Option and Grant Agreement Filed March 18, 1988 as Exhibit B to 1987 Annual
Report Form 10-K and herein incorporated by reference
(7) EX-99.2N Auditor's Consent Filed herewith
</TABLE>
Item 25 & 26. Not applicable
Item 27. Persons Controlled by or Under Common Control with Registrant.
There are six wholly-owned subsidiaries of Registrant. They are First
Carolina Investors of Mecklenburg, Inc., New Carolinas Realty Corporation, FCI
Realty and Management, Inc., First Mecklenburg Investors, Inc., Providence
Country Club Realty, Inc. and FCI of Delaware, Inc.
Item 28. Number of Holders of Securities.
As of January 3, 1995 there were approximately 643 record holders of
shares of common stock of the Registrant.
Item 29. Indemnification.
Article VII of the Registrant's Certificate of Incorporation provides
that no director of the corporation shall have any personal liability to the
corporation or its shareholders for monetary damages for breach of fiduciary
duty as a director; provided, however, the liability of any director for breach
of the director's duty of loyalty to the corporation or its shareholders for
any acts or omissions not in good faith or which involve intentional misconduct
or a knowing violation of the law or for any transaction from which the
director derived an improper personal benefit shall be governed by the Delaware
General Corporation Law.
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<PAGE> 18
Article VI of the Registrant's Bylaws (the "Bylaws") further provides
that to the fullest extent permitted by the Delaware General Corporation Law as
the same exists or may hereafter be amended (only to the extent, however, that
any such amendment permits the Registrant to provide broader indemnification
rights than permitted prior to such amendment) but in all cases subject to the
limitations of the Bylaws, the Registrant shall indemnify, defend and hold
harmless any person who was or is a party or is threatened to be made a party
to or is otherwise involved in any proceeding, by reason of the fact that such
person is or was an Agent (as defined below), against all expenses, liability
and loss reasonably incurred or suffered by such person in connection with such
proceeding; provided, however, that such person acted in good faith and in a
manner that person reasonably believed to be in or not opposed to the best
interests of the Registrant and with respect to any criminal proceeding had no
reasonable cause to believe the conduct of that person was unlawful.
An "Agent" is defined by the Bylaws to include (i) any person who is
or was a director or officer of the Registrant, or is or was serving at the
request of the Registrant as a director or officer of another corporation or of
a partnership, joint venture, trust or other enterprise, including an employee
benefit plan, or (ii) any employee or agent of the Registrant (or of any such
other corporation, partnership, joint venture, trust or other enterprise) to
whom the Board of Directors, in its sole discretion, elects to extend, in whole
or in part, the benefits provided under Article VI of the Bylaws.
The Registrant is authorized to advance expenses incurred by an Agent
defending a proceeding prior to the final disposition of such proceeding upon
delivery to the Registrant of an undertaking, by or on behalf of such Agent, to
repay all amounts so advanced if it should be determined ultimately that such
Agent is not entitled to be indemnified pursuant to the Bylaws. Certain Agents
of the Registrant have written agreements with the Registrant which require
among other things, that the Registrant shall indemnify the Agent for all
expenses reasonably incurred in connection with a proceeding arising by reason
of the fact that he or she is or was an Agent of the Registrant.
The Registrant shall not be liable to indemnify an Agent for any
amounts paid in settlement of any proceeding effected without the Registrant's
written consent, and the Registrant shall not settle the proceeding in any
manner which would impose any penalty or limitation on the Agent without the
Agent's written consent. However, neither the Registrant nor Agent will
unreasonably withhold its consent to any proposed settlement and, if settled
with such written consent, or if there is a final judgment or decree for the
plaintiff in connection with the proceeding by a court of competent
jurisdiction, the Registrant shall indemnify and hold harmless the Agent from
and against any and all losses, costs, expenses and liabilities by reason of
such settlement or judgment.
Under the Delaware General Corporation Law, a corporation is empowered
to indemnify an Agent if such Agent acted in good faith and in a manner the
Agent reasonably believed to be in or not opposed to the corporation's best
interests and, in the case of a criminal proceeding, the Agent had no
reasonable cause to believe his or her conduct was unlawful. The determination
as to whether an Agent is entitled to indemnification must be made (i) by a
majority vote of the disinterested directors, even though less than a quorum,
or (ii) if there are no disinterested directors or at the direction of such
directors, by independent legal counsel in a written opinion, or (iii) by the
stockholders.
Insofar as indemnification for liability arising under the 1933 Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the 1933 Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
18
<PAGE> 19
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the securities
being registered, the Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
Item 30. Not applicable
Item 31. Location of Accounts and Records.
The name and address of the person maintaining physical possession of
each account, books and other documents is as follows:
James E. Traynor
5224 Providence Country Club Drive
Charlotte, North Carolina 28277
Item 32 and 33. Not applicable
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and/or the
Investment Company Act of 1940, the Registrant has duly caused this
registration statement to be signed on its behalf by the undersigned thereunto
duly authorized in the City of Charlotte and State of North Carolina on the
28th day of March 1995.
First Carolina Investors, Inc.
------------------------------
Registrant
By: /s/ H. Thomas Webb III
-----------------------------
H. Thomas Webb III
President
162099
19
<PAGE> 20
EXHIBIT INDEX
99.2J Custodian Agreement
99.2N Auditor's Consent
<PAGE> 1
Exhibit 99.2J
CUSTODIAN AGREEMENT
First Union National Bank of North Carolina
Capital Management Group
Charlotte, North Carolina January 25, 1995
Gentlemen:
You are hereby authorized and requested to open and maintain a Custodian
Account for me, and to hold therein all cash, stocks, bonds, securities and
other property from time to time deposited with or collected by you for such
account, subject to the following instructions and other instructions as may
from time to time be furnished in writing by me or my attorney-in-fact.
Instructions:
1. You shall be under no duty whatsoever in regard to the merit or
soundness or any investment, nor to render any investment advice or
review whatever. You will take no action with regard to any sales,
investments, exchanges, conversions, or other changes in the property
except upon written direction from me, my attorney-in-fact, or signed
by (see item 12 below)
2. N/A
3. All stock certificates and other registered securities shall be
registered in the name of First Carolina Investors, Inc.
4. Any proxies received shall be forwarded to First Carolina Investors,
Inc. and not voted by Custodian.
5. N/A
6. Regarding the North Carolina Intangibles Tax:
[x] I do not desire for you to prepare, file and pay the N.C.
Intangibles Tax on my account, as I will assume this responsibility.
Regarding the preparation of an annual tax letter showing, in summary
form, for income tax purposes, all income, deductible expense, gains
and losses on the purchase and sale of stocks, bonds, securities and
other property held in my account.
[x] I do not desire the annual tax letter.
7. An accounting showing all income and principal transactions, including
a listing of assets held in my account, shall be furnished to me
annually.
8. N/A
9. You shall be liable only for losses caused by gross negligent actions
or actual wrong-doing; and in the performance of your duties you shall
not be governed by rules applying to trusts and similar fiduciary
relationships. It is understood and agreed that you shall be under no
duty to take any action other than herein specified with respect to
any securities or other property at any time deposited hereunder
unless specifically agreed to by you in writing or to appear in or
defend any suit with respect thereto unless requested by the
undersigned in writing and indemnified to your satisfaction.
1
<PAGE> 2
10. You may, in your discretion, follow and rely on any instructions
given orally, by telephone, telegraph, cable or radio that you
believe to be genuine. You shall endeavor to obtain written
confirmation of such instructions.
11. N/A
12. Special Instructions: Authorization for transactions must be made by
any two of the following: Brent D. Baird, H. Thomas Webb III, James
E. Traynor or Karen K. Sides.
13. This agreement may be terminated by either party by giving thirty
days notice in writing to the other party or by my death, provided that
termination by reason of my death shall be effective only upon the receipt of
actual knowledge thereof by one of your responsible officials and shall not
affect the validity of any prior actions. Your authority hereunder shall not
terminate in the event of my disability.
14. Upon termination or upon receipt of an instruction from me, or my
attorney-in-fact, withdrawing certain assets, the property to which such
termination or instruction pertains shall be delivered to me or any authorized
representative in a reasonable time; and you shall be entitled to receive
compensation with respect to such property on the basis outlined above,
prorated to the date on which you mike final delivery.
Agreed upon quarterly fee of $750.00 plus $10.50 per delivery or
withdrawal of stock certificates.
Yours very truly,
First Carolina Investors, Inc.
/s/James E. Traynor, V.P.
56-1005066
---------------------------------------
(Social Security Number or Federal EIN)
P.O. Box 33607
Charlotte, NC 28233-3607
Accepted: January 27, 1995
First Union National Bank of North Carolina
By: Deborah L. Elliott
Title: AVP & Trust Officer
2
<PAGE> 1
Exhibit 99.2N
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors
First Carolina Investors, Inc.
We consent to the incorporation by reference in the Registration Statement
under the Investment Company Act of 1940 of First Carolina Investors, Inc. on
Form N-2 of our report dated February 24, 1995, relating the consolidated
balance sheets of First Carolina Investors, Inc. and subsidiaries as of
December 31, 1994 and 1993, and the related consolidated statements of
operations, stockholders' equity and cash flows for the years then ended, which
report appears in the December 31, 1994 Annual Report to Stockholders. Our
report refers to a change in method of accounting for Investments in 1993.
KPMG Peat Marwick LLP
Charlotte, North Carolina
April 3, 1995
