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001 A000000 FIRST CAROLINA INVESTORS, INC.
001 B000000 811-8942
001 C000000 7048461066
002 A000000 5224 PROVIDENCE COUNTRY CLUB DRIVE
002 B000000 CHARLOTTE
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<PAGE> PAGE 2
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<PAGE> PAGE 7
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SIGNATURE JAMES E. TRAYNOR
TITLE CHIEF FIN'L OFFICER
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE 6/30/97
CONSOLIDATED FINANCIAL STATEMENTS CONTAINED IN THE REPORT TO STOCKHOLDERS AND
FORM N-SAR AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH REPORTS AND THE
12/31/96 ANNUAL REPORT TO STOCKHOLDERS AND THE 12/31/96 FORM N-SAR.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<INVESTMENTS-AT-COST> 12,424,136
<INVESTMENTS-AT-VALUE> 79,093,875
<RECEIVABLES> 359,660
<ASSETS-OTHER> 11,338,000
<OTHER-ITEMS-ASSETS> 5,190,209
<TOTAL-ASSETS> 95,981,744
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 31,293,662
<TOTAL-LIABILITIES> 31,293,662
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 1,084,516
<SHARES-COMMON-PRIOR> 1,094,822
<ACCUMULATED-NII-CURRENT> (84,939)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 1,545,874
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 41,017,106
<NET-ASSETS> 64,577,603
<DIVIDEND-INCOME> 405,763
<INTEREST-INCOME> 8,014
<OTHER-INCOME> 714,351
<EXPENSES-NET> 686,646
<NET-INVESTMENT-INCOME> 441,482
<REALIZED-GAINS-CURRENT> 1,032,755
<APPREC-INCREASE-CURRENT> 5,905,579
<NET-CHANGE-FROM-OPS> 7,379,816
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 526,421
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 11,900
<SHARES-REINVESTED> 1,594<F1>
<NET-CHANGE-IN-ASSETS> 6,286,854
<ACCUMULATED-NII-PRIOR> 907,207
<ACCUMULATED-GAINS-PRIOR> 513,119
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 615,482
<AVERAGE-NET-ASSETS> 60,829,190
<PER-SHARE-NAV-BEGIN> 53.24
<PER-SHARE-NII> .41
<PER-SHARE-GAIN-APPREC> 6.37
<PER-SHARE-DIVIDEND> .48
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> (.01)<F2>
<PER-SHARE-NAV-END> 59.55
<EXPENSE-RATIO> 1.13
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<FN>
<F1>THE 1594 SHARES REINVESTED REPRESENT THE NET CHANGE IN ADDITIONAL SHARES
ATTRIBUTABLE TO STOCK OPTIONS.
<F2>THE .01 PER SHARE RETURN OF CAPITAL INDICATED ABOVE REPRESENTS SHARE
TRANSACTIONS AND NOT A RETURN OF CAPITAL.
</FN>
</TABLE>
<PAGE>
FIRST CAROLINA INVESTORS, INC.
REPORT TO STOCKHOLDERS
June 30, 1997
<PAGE>
FIRST CAROLINA INVESTORS, INC. & SUBSIDIARIES
Consolidated Statements of Assets and Liabilities
June 30, 1997 and 1996
(Unaudited)
<TABLE>
<CAPTION>
Assets 1997 1996
---- ----
<S> <C> <C>
Investments in securities, at value
(cost of $12,424,136 in 1997 and $14,620,939 in 1996) $79,093,875 64,486,250
Cash, including short term
investments of $1,932,507 in 1997 2,669,192 329,849
Mortgage loans, secured by real estate 196,807 215,708
Real estate 10,888,000 8,499,000
Investment in joint venture 450,000 600,000
Accrued dividend and interest receivable 162,853 143,459
Other assets 2,521,017 2,207,839
----------- ----------
Total assets 95,981,744 76,482,105
----------- ----------
Liabilities
Note payable to bank -- 250,000
Accounts payable and accrued liabilities 2,952,863 3,263,242
Federal and state income taxes payable 355,321 184,951
Deferred income taxes payable 27,985,478 20,467,060
----------- ----------
Total liabilities 31,293,662 24,165,253
----------- ----------
Deferred Income 110,479 99,718
----------- ----------
Net Assets $64,577,603 52,217,134
=========== ==========
Net assets per share (3,500,000 no par value common
shares authorized, 1,506,542 shares issued,
1,084,516 and 1,095,919 shares outstanding in
1997 and 1996, respectively) $ 59.55 47.65
=========== ==========
</TABLE>
The Consolidated Financial Statements should be read in conjunction with the
1996 Annual Report.
1
<PAGE>
FIRST CAROLINA INVESTORS, INC. & SUBSIDIARIES
Consolidated Statements of Operations
For the six months ended June 30, 1997 and 1996
(Unaudited)
<TABLE>
<CAPTION>
INCOME
1997 1996
---------- ---------
<S> <C> <C>
Dividends $ 405,763 377,250
Interest on mortgage loans 8,014 10,016
Gain on sale of real estate 397,061 627,523
Equity in earnings of
joint venture 142,336 100,412
Other 174,954 148,411
---------- ---------
Total income 1,128,128 1,263,612
---------- ---------
EXPENSES
General and administrative 321,668 320,534
Professional fees 46,330 44,610
Sales and marketing 51,307 105,438
Interest -- 2,289
Other 93,341 100,082
---------- ---------
Total expenses 512,646 572,953
---------- ---------
Earnings before income taxes and realized
and unrealized appreciation on investments 615,482 690,659
Provision for income taxes (174,000) (224,000)
---------- ---------
Net income before realized and unrealized
appreciation on investments 441,482 466,659
Gain realized on investments in other companies
(net of income tax provision of $661,000 in 1997 and
and $1,000 in 1996) 1,032,755 1,640
Change in unrealized appreciation of investments
for the period, net of deferred taxes 5,905,579 3,865,787
---------- ---------
Net increase in net assets resulting
from operations $7,379,816 4,334,086
========== =========
</TABLE>
The Consolidated Financial Statements should be read in conjunction with the
1996 Annual Report.
2
<PAGE>
FIRST CAROLINA INVESTORS, INC. & SUBSIDIARIES
Consolidated Statements of Changes in Net Assets
For the six months ended June 30, 1997 and 1996
(Unaudited)
<TABLE>
<CAPTION>
1997 1996
------------ ----------
<S> <C> <C>
Increase in net assets from operations
Investment income, net $ 441,482 466,659
Realized gain on investments, net 1,032,755 1,640
Change in unrealized appreciation, net 5,905,579 3,865,787
------------ ----------
Net increase in net assets resulting
from operations 7,379,816 4,334,086
Distributions to shareholders of $.50 per share
In 1997 and $.20 per share in 1996
from investment income, net (526,421) (213,904)
Treasury shares purchased (566,541) (208,593)
------------ ----------
Total increase 6,286,854 3,911,589
Net assets
Beginning of year 58,290,749 48,305,545
------------ ----------
as of June 30 $ 64,577,603 52,217,134
============ ==========
</TABLE>
The Consolidated Financial Statements should be read in conjunction with the
1996 Annual Report.
3
<PAGE>
FIRST CAROLINA INVESTORS, INC. & SUBSIDIARIES
INVESTMENTS IN SECURITIES
JUNE 30, 1997 AND 1996
(Unaudited)
<TABLE>
<CAPTION>
1997 1996
---------------------- ----------------------
No. Shares Value No. Shares Value
---------- ----- ---------- -----
<S> <C> <C> <C> <C>
Common Stocks - 100%
Banking and insurance -
89% in 1997 and 79% in 1996
First Empire State Corporation 200,000 $67,400,000 200,000 $48,200,000
Merchants Group, Inc. 135,000 2,767,500 135,000 2,598,750
Shipbuilding -
4% in 1997 and 8% in 1996
Todd Shipyards Corporation 700,000 2,887,500 700,000 5,250,000
Manufacturing -
1% in 1997 and 6% in 1996
American Precision Industries, Inc. 46,600 902,875 300,000 3,712,500
Transportation and chemical
6% in 1997 and 7% in 1996
Oglebay Norton Company 80,000 3,550,000 80,000 3,660,000
Exolon-ESK Co. 52,000 1,586,000 42,600 1,065,000
----------- -----------
Total - 100% (cost $12,424,136 in 1997
and $14,620,939 in 1996) $79,093,875 $64,486,250
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE>
FIRST CAROLINA INVESTORS, INC., & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1997 and 1996
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 on 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. Financial
information for periods prior to January 3, 1995 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>
(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. The venture owns 9
lots at a cost of $415,772 at June 30, 1997 and owned 16 lots at a cost
of $567,599 at June 30, 1996.
(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 Statements of Assets and
Liabilities.
(G) Management's use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principals requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities, revenues and expenses; and disclosure of contingent assets
and liabilities at the date of the financial statements. Actual results
may differ from these estimates.
(H) Other
The Company follows the industry practice of recording security
transactions on the trade date. Dividend income is recognized on the
ex-dividend date. Interest income is recognized on the accrual basis.
2. Investment Transactions
Purchases and sales of investment securities were $265,651 and
$3,573,603 respectively in 1997 and $604,878 and $21,897 respectively
in 1996. The net gain on sale of investments in other companies was
$1,032,755 in 1997 and $1,640 in 1996.
The gross unrealized gain on investments in other companies totaled
$67,251,275 and $49,865,311 for the 6 months ended June 30, 1997 and
1996, respectively. Gross unrealized losses were $581,536 at June 30,
1997. There were no unrealized losses at June 30, 1996.
6
<PAGE>
3. Mortgage loans
The Company's investments in mortgage loans as of June 30, 1997 and
1996 are as follows:
<TABLE>
<CAPTION>
1997 1996
---- ----
Interest Maturity Outstanding Interest Maturity Outstanding
Rate Date Balance Rate Date Balance
---- ---- ------- ---- ---- -------
<S> <C> <C> <C> <C> <C> <C>
Permanent first
mortgage loans on
condominiums 16% 12/2002 $ 81,707 16% 12/2002 $106,358
Junior mortgage loans
secured by residential lots 8% 12/98 115,100 8% 12/97 109,350
-------- --------
$196,807 $215,708
======== ========
</TABLE>
4. Real Estate
The estimated fair value of real estate owned at June 30, 1997 and
1996, respectively is $10,888,000 and $8,499,000. It consists of 324
acres of land held for investment for both periods and 26 developed
lots at June 30, 1997 and 41 developed lots at June 30, 1996. The
aggregate cost for Federal income tax purposes is approximately
$4,500,000 and $5,200,000 at June 30, 1997 and 1996 respectively. Land
held for investment is considered non-income producing.
5. Other Assets
The components of other assets at June 30, 1997 and 1996 are as
follows:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Deferred compensation, funded $1,693,632 1,637,986
Sales center 511,033 492,080
Model home 304,595 --
Miscellaneous 11,757 77,773
---------- =========
$2,521,017 2,207,839
========== =========
</TABLE>
The deferred compensation includes $1,510,000 and $1,400,000 at June
1997 and 1996 respectively, that is owed to affiliated persons pursuant
to a deferred compensation plan. The balance of deferred compensation
is owed to 2 former directors. The deferred compensation has accrued
over thirteen years.
6. Line of credit
At June 30, 1997 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, 1997, there was no
outstanding balance and at June 30, 1996, there was an outstanding
balance of $250,000.
7
<PAGE>
Additional information relating to bank debt is as follows:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Weighted average interest rate of indebtedness
outstanding during the year -- 8.25%
Maximum amount of indebtedness outstanding
at any month end during the year -- 250,000
-------
Approximate average aggregate indebtedness
outstanding during the period -- 82,000
-------
</TABLE>
For the six months ended June 30, 1997, there was no bank indebtedness.
7. Accounts payable and accrued liabilities
The components of accounts payable and accrued liabilities at June 30,
1997 and 1996 are as follows:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Trade accounts payable $ 823,191 1,373,748
Deferred compensation (note 5) 1,693,632 1,637,986
Dividends payable 262,741 106,712
Miscellaneous accruals and payable 160,017 92,759
Cash held in escrow 13,282 52,037
---------- ---------
$2,952,863 3,263,242
========== =========
</TABLE>
8. Net assets per share
Net assets per share are based on the number of shares of common stock
and common stock equivalents outstanding, after deducting treasury
stock 1,084,516 and 1,095,919 at June 30, 1997 and 1996, respectively.
The computation assumes that outstanding stock options were exercised
and the proceeds used to purchase common stock resulting in the
issuance of an additional 33,544 shares of common stock at June 30,
1997 and 29,597 shares at June 30, 1996.
At June 30, 1997 accumulated undistributed net investment income, is
$822,268; accumulated and undistributed net realized gains on
investment transactions are $1,545,874 and the net unrealized
appreciation in value of investments is $41,017,106.
9. Share repurchase program
At June 30, 1997 the Company has repurchased 455,580 shares as treasury
shares at a cost of $9,018,566. During 1997 through June 30, the
Company has repurchased 11,900 shares at an average cost of $47.61 per
share on the Boston Stock Exchange, the exchange on which the Company's
shares are traded. Said repurchase price represents a weighted average
discount of 14.8% per share relative to net asset value. At the May 21,
1997 Board of Directors meeting, the directors authorized the
continuation of the share repurchase program.
8
<PAGE>
10. Distribution to Stockholders
Two dividends of $0.25 and $0.10 per share were declared during the six
months ended June 30, 1997 and 1996, respectively. The dividends are
taxable to stockholders as ordinary income.
11. 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, 1997 and 1996 directors' fees totaled
$29,200 and $29,400, respectively.
Aggregate renumeration paid to or set aside for all officers during the
six month periods was $102,000 for 1997 and 1996.
The Company paid brokerage fees of $10,175 and $2,565 to Trubee,
Collins & Co., Inc. for the six months ended June 30, 1997 and 1996,
respectively. Mr. Baird, Chairman of the Company, is an employee of
Trubee, Collins & Co., Inc.
12. 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. All options are fully vested and exercisable but no options have
been exercised.
13. Commitments and Contingencies
At June 30, 1997 the Company has approximately $500,000 of undisbursed
contractual commitments in connection with real estate development. In
order to protect its investments, the Company may be required to
furnish amounts in excess of its current contractual investments or
commitments. The future development of the Company's land holdings may
require substantial expenditures.
The Company is involved in various actions legal arising in the
ordinary course of business. In the opinion of management, the ultimate
disposition of these matters will not have a material adverse effect on
the Company's financial position, results of operations, or liquidity.
14. Subsequent Event
On August 19, 1997 the Company sold 85 acres of its 300 acre tract in
Union County, N.C. at a gross sale price of $2,550,000. The Company
entered into a contract, with the same purchaser, for the sale of an
additional 108 acres. The terms of this contract do not qualify as a
sale pursuant to Statement of Accounting Standards No. 66, Accounting
for Sales of Real Estate. The land subject to the contract will be
classified as land under contract.
9
<PAGE>
Computation of Net Asset Value per Share
Primary and Fully Diluted
For the Six Months Ended June 30, 1997 and 1996 (Unaudited)
<TABLE>
<CAPTION>
Primary 1997 1996
- ------- ---- ----
<S> <C> <C>
Net Assets $64,577,603 52,217,134
=========== ==========
Shares Outstanding 1,050,962 1,066,322
=========== ==========
Net Asset Value per Share $ 61.45 48.97
=========== ==========
Fully Diluted
- -------------
Options 45,000 45,000
Exercise Price of $12.75
Market Price of $50.13 in 1997 and $37.25 in 1996 (11,446) (15,403)
----------- ----------
Additional Shares Attributable to Stock Options 33,554 29,597
Shares Outstanding 1,050,962 1,066,322
----------- ----------
1,084,516 1,095,919
=========== ==========
Net Asset Value per Share $ 59.55 47.65
=========== ==========
</TABLE>
Annual Meeting Summary
On May 21, 1997 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 928,885 1425
Bruce C. Baird 928,885 1425
Theodore E. Dann, Jr. 928,883 1427
Patrick W. E. Hodgson 928,885 1425
H. Thomas Webb III 928,885 1425
</TABLE>
To ratify the appointment of KPMG Peat Marwick LLP the votes were as follows:
<TABLE>
<CAPTION>
For Against Abstain
--- ------- -------
<S> <C> <C>
929,483 27 800
</TABLE>
Selected Per Share Data and Ratios
For the six months ended June 30, 1997 and 1996
<TABLE>
<CAPTION>
Per Share Data and Ratios *
- ---------------------------
1997 1996
---- ----
<S> <C> <C>
Investment income $ 1.04 1.15
Expenses (including income taxes) (.63) (.73)
------ -----
Investment income, net .41 .42
Distributions from investment income, net (.48) (.20)
Net realized and unrealized gain on securities 6.37 3.52
Share transactions .01 (.02)
------ -----
Net increase in net asset value 6.31 3.72
Net asset value:
Beginning of year 53.24 43.93
------ -----
End of period $59.55 47.65
====== =====
</TABLE>
10
<PAGE>
Selected Per Share Data and Ratios (Cont.)
For the Six Months Ended June 30, 1997 and 1996
<TABLE>
<CAPTION>
Ratios 1997 1996
---- ----
<S> <C> <C>
Ratio of expenses to average net assets 1.13% 1.56%
Ratio of investment income, net to
average net assets 0.73% 0.92%
Portfolio turnover 0.04% 0.04%
</TABLE>
*Per Share data is based upon the average number of shares outstanding for the 6
month periods. The computation assumes that outstanding stock options were
exercised and the proceeds used to purchase common stock.
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 & Monteith
First Union Center, Suite 2500
Charlotte, NC 28282
Auditors
KPMG Peat Marwick LLP
2800 Two First Union Center
Charlotte, NC 28282
11
