<PAGE> 1
FIRST CAROLINA INVESTORS, INC. & SUBSIDIARIES
Consolidated Statement of Assets and Liabilities
June 30, 1995
(Unaudited)
<TABLE>
<S> <C>
Assets
Investments in securities, at value
(cost of $13,447,695) $46,516,499
Cash, including short term investments
of $558,000 815,426
Mortgage loans, secured by real estate, at value 992,209
Real estate, at value 8,244,000
Investment in joint venture, at value 582,500
Accrued interest receivable 7,665
Other assets 2,229,458
-----------
Total assets 59,387,757
-----------
Liabilities
Accounts payable and accrued liabilities 3,353,678
Federal and state income taxes payable 294,272
Deferred income taxes payable 13,874,306
-----------
Total liabilities 17,522,256
-----------
Deferred income 78,727
-----------
Net Assets
Net assets (equivalent to $38.76 per share based
on 1,078,022 shares outstanding, net of
treasury shares) $41,786,774
===========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 2
FIRST CAROLINA INVESTORS, INC. & SUBSIDIARIES
INVESTMENTS IN SECURITIES
JUNE 30, 1995
(Unaudited)
<TABLE>
<CAPTION>
No. Shares Value
---------- -----
<S> <C> <C>
Common Stocks - 100%
Banking and insurance - 79%
First Empire State Corporation 200,000 $34,300,000
Merchants Group, Inc. 130,000 2,356,250
Shipbuilding - 9%
Todd Shipyards Corporation 700,000 4,200,000
Manufacturing - 5%
American Precision Industries, Inc. 205,000 2,152,500
Transportation and natural resources - 6%
Oglebay Norton Company 80,000 2,740,000
Other - .9% 767,749
-----------
Total - 100% (cost $13,447,695) $46,516,499
===========
</TABLE>
See accompanying notes to consolidated financial statements.
2
<PAGE> 3
FIRST CAROLINA INVESTORS, INC. & SUBSIDIARIES
Consolidated Statement of Operations
For the six months ended June 30, 1995
(Unaudited)
<TABLE>
<S> <C>
INCOME:
Interest on mortgage loans $ 49,337
Gain on sale of real estate 1,358,625
Equity in earnings of
joint ventures 33,717
Other 512,672
----------
Total income 1,954,351
----------
EXPENSES:
Interest 1,214
General and administrative 619,282
Professional fees 42,960
Sales and marketing 190,463
Other 158,539
----------
Total expenses 1,012,458
----------
Earnings before income taxes and realized
and unrealized appreciation on investments 941,893
Provision for income taxes (350,000)
----------
Net income before realized and unrealized
appreciation on investments 591,893
Gain realized on investments in other companies
(net of income tax provision of $120,000) 195,910
Change in unrealized appreciation of
investments for the period 3,642,324
----------
Net increase in net assets resulting
from operations $4,430,127
==========
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE> 4
FIRST CAROLINA INVESTORS, INC. & SUBSIDIARIES
Consolidated Statement of Changes in Net Assets
For the six months ended June 30, 1995
(Unaudited)
<TABLE>
<S> <C>
Increase in net assets from operations
Investment income, net $ 591,893
Realized gain on investments 195,910
Change in unrealized appreciation 3,642,324
-----------
Net increase in net assets resulting
from operations 4,430,127
Distributions to shareholders
Dividends of $0.20 per share (215,950)
Treasury shares purchased (414,618)
-----------
Total increase 3,799,559
Net assets
Beginning of year 37,987,215
-----------
At June 30, 1995 $41,786,774
===========
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE> 5
FIRST CAROLINA INVESTORS, INC., & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1995
1. Summary of significant accounting policies, financial statement
presentation and organization.
(A) 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 First Carolina Investors, Inc. registered as a
non-diversified, closed-end management investment company under the
Investment Company Act of 1940.
(B) Principles of consolidation and financial statement
presentation
The accompanying consolidated financial statements include First
Carolina Investors, Inc. and its subsidiaries (the Company), all of
which are wholly-owned. In consolidation, all significant
intercompany accounts and transactions have been eliminated.
The Company became an investment company on January 3, 1995, and
accordingly has prepared its consolidated financial statements on a
fair value basis. Prior to this time the Company prepared its
consolidated financial statements on a historical cost basis.
Consequently the Company has not presented comparative consolidated
financial statements as of June 30, 1995. Prior period information is
available by referring to quarterly filings on Form 10-Q, annual
filing on Form 10-KSB and reports to stockholders.
(C) Security valuation
Investments in securities traded on a national securities exchange (or
reported on the NASDAQ national market) are stated at the last
reported sales price on the day of valuation; other securities traded
in the over-the-counter market and listed securities for which no
sale was reported on that date are stated at the last quoted bid
price.
(D) Real estate
The Board of Directors and management of the Company value its real
property investments at estimated fair value. 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 Company
and other market comparables.
The Company accounts for sales of real estate in accordance with
Statement of Financial Accounting Standards No. 66, Accounting for
Sales of Real Estate.
5
<PAGE> 6
(E) Investment in joint venture
The Company has an interest in a joint venture which is engaged in the
development and sale of real estate. The Board of Directors and
management have used both fair market comparables in the existing
subdivision developed by the venture and discounted net cash flows in
valuing its investment at its estimated fair value. At June 30, 1995
the venture owned 13 developed lots at a cost of $776,718.
(F) Income taxes
The Company is subject to Federal and state corporate income taxes.
The Company files a consolidated Federal income tax return. The
Company accounts for income taxes in accordance with the provisions of
Statement of Financial Accounting Standards No. 109, Accounting for
Income Taxes.
Deferred income taxes payable have been increased to reflect the
estimated Federal and state income tax liabilities on unrealized gains
in real estate, investments in other companies and investment in joint
venture in the accompanying Consolidated Statement of Assets and
Liabilities.
(G) Other
The Company follows the industry practice of recording security
transactions on the trade date. Interest income is recognized on the
accrual basis. Dividend income is recognized on the ex-dividend date.
Dividend income for the six months ended June 30, 1995 totals $310,538
and is included in other income.
2. Investment Transactions
Purchases and sales of investment securities were $3,731,202 and
$632,894 respectively, for common stocks. The net gain on sale of
investments in other companies for the six months ended June 30, 1995
was $195,910. This gain is the result of the sale of the Company's
holding in a financial institution.
At June 30, 1995, the gross unrealized gains on investments in other
companies totaled $33,068,805. There were no unrealized losses.
6
<PAGE> 7
3. Mortgage loans
The Company's investments in mortgage loans as of June 30, 1995 are as
follows:
<TABLE>
<CAPTION>
Interest Maturity Outstanding
Rate Date Balance
---- ---- -------
<S> <C> <C> <C>
Intermediate first
mortgage loan on
undeveloped land 9.5% 9/96 $800,000
Permanent first
mortgage loans on
condominiums net of
discount of $10,543 16% 12/2002 108,459
Junior mortgage loans
secured by residential lots 8% 6/96 83,750
--------
$992,209
========
</TABLE>
4. Real Estate
At June 30, 1995 the Company owned land held for investment, land held
for development and finished lots at costs of $3,414,475, $154,510 and
$671,949 respectively.
5. Line of credit
At June 30, 1995 the Company had a $5,000,000 line of credit with a
bank. The credit line, which is unsecured, is payable on demand and
is subject to a quarterly review by the bank. Borrowings under this
credit line bear interest at the prime rate. At June 30, 1995 there
was no outstanding balance. For the six months ended June 30, 1995
the average outstanding balance under the line of credit was $29,000.
6. Accounts payable and accrued liabilities
Accounts payable and accrued liabilities includes $1,239,000 owed to
affiliated persons pursuant to a deferred compensation plan. The
deferred compensation has accrued over eleven years.
7
<PAGE> 8
7. Share Transactions
At June 30, 1995, 3,500,000 shares of common stock without par value
were authorized, of which 1,506,542 shares had been issued and 428,520
shares have been reacquired as treasury shares, resulting in 1,078,022
shares remaining outstanding. During the six months ended June 30,
1995, 15,526 treasury shares were purchased at a cost of $424,618.
8. Distribution to Stockholders
A dividend of $0.10 per share was declared on both January 17, 1995
and May 16, 1995.The dividends were paid on April 17, 1995 and July
13, 1995 and totaled $108,174 and $107,776 respectively. The
dividends are taxable to stockholders as ordinary income.
9. Renumeration
Each Director, except the President of the Company, receives fees of
$2,500 per directors' meeting attended and $100 per audit committee
meeting attended. The Chairman also receives a $1,500 monthly fee.
For the six months ended June 30, 1995, directors' fees totaled
$34,700.
Aggregate renumeration paid to or set aside for all officers during
this six month period was $352,000.
During 1995 the Company paid brokerage fees of $22,360 to Trubee
Collins & Co., Inc. Mr. Baird, Chairman of the Company, is an
employee of Trubee Collins & Company.
10. Stock option plan
During 1987 options for 45,000 shares of common stock were awarded to
certain employees. These options are exercisable at the rate of 20%
per year beginning July 1, 1988 at a price of $12.75 per share which
was equal to the market price at the date of the adoption of the
amended plan. At June 30, 1995, all the options are fully vested and
exercisable but no options have been exercised.
11. Commitments and Contingencies
The Company has $650,000 of undisbursed contractual commitments in
connection with land under development. In order to protect its
investments, the Company may be required to furnish amounts in excess
of its current investments or commitments. The future development of
the Company's land holdings may require substantial expenditures.
The Company is not a party to any significant litigation.
8
<PAGE> 9
Annual Meeting Summary
On May 16, 1995 the annual stockholders meeting was held in Buffalo, New York.
At the meeting, five directors were elected to serve a one year term. In
addition, the appointment of the Company's independent public accountants was
ratified. The votes were as follows:
<TABLE>
<CAPTION>
Directors Name For Withheld
-------------- --- --------
<S> <C> <C>
Brent D. Baird 986,402 425
Bruce C. Baird 986,602 225
Theodore E. Dann, Jr. 986,600 227
Patrick W.E. Hodgson 986,602 225
H. Thomas Webb III 986,602 225
</TABLE>
To ratify the appointment of KPMG Peat Marwick LLP the votes were as follows:
<TABLE>
<CAPTION>
For Against Abstain
--- ------- -------
<S> <C> <C>
985,102 0 1,725
</TABLE>
<TABLE>
<CAPTION>
Selected Per Share Data and Ratios
For the six months ended June 30, 1995
<S> <C>
Per Share Data and Ratios *
- ---------------------------
Investment income $ 1.80
Expenses (including income taxes) (1.25)
------
Investment income - net 0.55
Distributions from investment
income - net (0.20)
Net realized and unrealized
gain on securities 3.53
Treasury shares purchased (0.38)
------
Net increase/decrease in
net asset value 3.50
Net asset value:
Beginning of year 34.95
------
End of year $38.45
======
Ratios
Ratio of expenses to average
net assets 3.42%
Ratio of investment income - net
to average net assets 1.48%
</TABLE>
*Per share data is based upon 1,086,783 shares which is the average number of
shares outstanding for the six months ended June 30, 1995.
<PAGE> 10
Directors
- ---------
Brent D. Baird *
Private Investor
Bruce C. Baird
President
Belmont Management Co., Inc.
Patrick W.E. Hodgson *+
Chairman & CEO
Todd Shipyards Corporation
Theodore E. Dann, Jr. +
Secretary Treasurer & General Counsel
Ferro Alloys Services, Inc.
H. Thomas Webb III *
President
First Carolina Investors, Inc.
* Member of Executive Committee
+ Member of the Audit Committee
Officers:
- ---------
Brent D. Baird
Chairman
H. Thomas Webb III
President
James E. Traynor
Vice President, Secretary & Treasurer
Karen K. Sides
Assistant Secretary
Registrar, Transfer and Disbursing Agent
- ----------------------------------------
Continental Stock Transfer and Trust company
2 Broadway
New York, NY 10004
General Counsel
- ---------------
Waggoner, Hamrick, Hasty & Montieth
First Union Center, Suite 2500
Charlotte, NC 28282
Auditors
- --------
KPMG Peat Marwick LLP
2800 Two First Union Center
Charlotte, NC 28282
