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001 B000000 811-8942
001 C000000 7043730501
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014 B000002 8-28886
015 A000001 FIRST UNION NATIONAL BANK OF N.C.
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<PAGE> PAGE 2
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<PAGE> PAGE 3
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<PAGE> PAGE 4
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<PAGE> PAGE 5
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<PAGE> PAGE 6
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<PAGE> PAGE 7
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<PAGE> PAGE 8
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SIGNATURE CYNTHIA RABY
TITLE ASSISTANT SECRETARY
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE 1998
CONSOLIDATED FINANCIAL STATEMENTS CONTAINED IN THE 1998 ANNUAL REPORT AND FORM
NSAR OF FIRST CAROLINA INVESTORS, INC. AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH 1998 ANNUAL REPORT OF STOCKHOLDERS AND FORM NSAR.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<INVESTMENTS-AT-COST> 29,022,745
<INVESTMENTS-AT-VALUE> 106,821,883
<RECEIVABLES> 92,391
<ASSETS-OTHER> 2,500,000
<OTHER-ITEMS-ASSETS> 13,132,795
<TOTAL-ASSETS> 122,547,069
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 37,064,071
<TOTAL-LIABILITIES> 37,064,071
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 999,581
<SHARES-COMMON-PRIOR> 1,015,166
<ACCUMULATED-NII-CURRENT> 436,572
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 4,242,979
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 43,254,303
<NET-ASSETS> 85,482,998
<DIVIDEND-INCOME> 414,970
<INTEREST-INCOME> 57,198
<OTHER-INCOME> 1,212,386
<EXPENSES-NET> 761,251
<NET-INVESTMENT-INCOME> 923,303
<REALIZED-GAINS-CURRENT> 6,320,380
<APPREC-INCREASE-CURRENT> (976,666)
<NET-CHANGE-FROM-OPS> 6,267,017
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 486,731
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 15,700
<SHARES-REINVESTED> 115<F2>
<NET-CHANGE-IN-ASSETS> 4,687,679
<ACCUMULATED-NII-PRIOR> 3,806,407
<ACCUMULATED-GAINS-PRIOR> 16,565,750
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 761,251
<AVERAGE-NET-ASSETS> 94,344,949
<PER-SHARE-NAV-BEGIN> 79.59
<PER-SHARE-NII> .92
<PER-SHARE-GAIN-APPREC> 5.29
<PER-SHARE-DIVIDEND> (.48)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> .20<F1>
<PER-SHARE-NAV-END> 85.52
<EXPENSE-RATIO> 0.81
<FN>
<F1>THE $0.20 PER SHARE RETURN OF CAPITAL INDICATED ABOVE REPRESENTS SHARE
TRANSACTIONS AND NOT A RETURN OF CAPITAL OR OTHER DISTRIBUTION.
<F2>THE 115 SHARES REINVESTED REPRESENTS THE NET CHANGE IN ADDITIONAL SHARES
ATTRIBUTABLE TO STOCK OPTIONS.
</FN>
</TABLE>
<PAGE>
FIRST CAROLINA INVESTORS, INC.
REPORT TO SHAREHOLDERS
JUNE 30, 1999
<PAGE>
FIRST CAROLINA INVESTORS, INC. & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES
JUNE 30, 1999 AND 1998
(UNAUDITED)
<TABLE>
<CAPTION>
1999 1998
------------ ------------
<S> <C> <C>
ASSETS
Investments in securities, at value (cost of $29,022,745 in
1999 and $15,861,656 in 1998)............................. $106,821,883 $125,931,488
Cash, including short term investments of $8,428,363 in 1999
and $1,714,039 in 1998.................................... 10,921,603 1,883,983
Mortgage loans, secured by real estate...................... 54,250 99,081
Real estate................................................. 2,250,000 4,439,000
Investment in joint venture................................. 250,000 250,000
Amounts due from sale of security........................... -- 5,304,506
Accrued dividend and interest receivable.................... 38,141 168,172
Other assets................................................ 2,211,192 2,673,003
------------ ------------
Total assets...................................... $122,547,069 $140,749,233
------------ ------------
LIABILITIES
Accounts payable and accrued liabilities.................... $ 3,315,867 $ 3,391,817
Federal and state income taxes payable...................... 2,767,264 1,931,773
Deferred income taxes payable............................... 30,980,940 42,975,680
------------ ------------
Total liabilities................................. 37,064,071 48,299,270
------------ ------------
Deferred Income............................................. -- 119,500
------------ ------------
Net Assets.................................................. $ 85,482,998 $ 92,330,463
============ ============
Net assets per share (3,500,000 no par value common shares
authorized, 1,004,981 shares issued, 999,581 and 1,073,366
shares outstanding in 1999 and 1998 respectively)......... $ 85.52 $ 86.02
============ ============
</TABLE>
The Consolidated Financial Statements should be read in conjunction with the
1998 Annual Report.
1
<PAGE>
FIRST CAROLINA INVESTORS, INC. & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR SIX MONTHS ENDED JUNE 30, 1999 AND 1998
(UNAUDITED)
<TABLE>
<CAPTION>
1999 1998
---------- -----------
<S> <C> <C>
INCOME
Dividends................................................... $ 414,970 $ 483,100
Interest on mortgage loans.................................. 57,198 202,857
Gain on sale of real estate................................. 941,593 153,316
Equity in earnings of joint venture......................... (3,312) 156,990
Other....................................................... 274,105 137,790
---------- -----------
Total income...................................... 1,684,554 1,134,053
---------- -----------
EXPENSES
General and administrative.................................. 194,491 161,128
Professional fees........................................... 37,405 27,793
Sales and marketing......................................... -- 4,370
Other....................................................... 74,355 68,415
---------- -----------
Total expenses.................................... 306,251 261,706
---------- -----------
Earnings before income taxes and realized and unrealized
appreciation on investments............................... 1,378,303 872,347
Provision for income taxes.................................. (455,000) (256,000)
---------- -----------
Net income before realized and unrealized appreciation on
investments............................................... 923,303 616,347
Gain realized on investments in other companies (net of
income tax provision of $4,535,000 in 1999 and $2,069,000
in 1998).................................................. 6,320,380 3,235,506
Change in unrealized appreciation (depreciation) of
investments for the period, net of deferred taxes......... (976,666) 8,490,680
---------- -----------
Net increase in net assets resulting from
operations...................................... $6,267,017 $12,342,533
========== ===========
</TABLE>
The Consolidated Financial Statements should be read in conjunction with the
1998 Annual Report.
2
<PAGE>
FIRST CAROLINA INVESTORS, INC. & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS
FOR THE SIX MONTHS ENDED JUNE 30, 1999 AND 1998
(UNAUDITED)
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
Increase in net assets from operations
Investment income, net.................................... $ 923,303 $ 616,347
Realized gain on investments, net......................... 6,320,380 3,235,506
Change in unrealized appreciation, net.................... (976,666) 8,490,680
----------- -----------
Net increase in net assets resulting from operations... 6,267,017 12,342,533
Distributions to shareholders of $.50 per share
In 1999 and in 1998 from investment income, net........... (486,731) (518,731)
Treasury shares purchased................................... (1,092,607) (243,428)
----------- -----------
Total increase............................................ 4,687,679 11,580,374
Net assets
Beginning of period....................................... 80,795,319 80,750,089
----------- -----------
End of period............................................. $85,482,998 $92,330,463
=========== ===========
</TABLE>
The Consolidated Financial Statements should be read in conjunction with the
1998 Annual Report.
3
<PAGE>
FIRST CAROLINA INVESTORS, INC. & SUBSIDIARIES
INVESTMENTS IN SECURITIES
JUNE 30, 1999 AND 1998
(UNAUDITED)
<TABLE>
<CAPTION>
1999 1998
------------------------- -------------------------
COMMON STOCKS -- 100% NO. SHARES VALUE NO. SHARES VALUE
- --------------------- ---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Financial Services -- 69.8% in 1999 and
86.1% in 1998
M & T Bank Corporation.................. 130,000 $ 71,500,000 190,000 $105,260,000
Merchants Group, Inc.................... 135,000 3,020,625 135,000 3,189,375
Manufacturing -- 12.7% in 1999 and 5% in
1998
Acme Electric Corporation............... 941,000 5,116,688 -- --
Exolon -- ESK Co........................ 64,700 1,164,600 64,200 2,407,500
Marine Transport Corporation............ 700,000 2,493,750 -- --
Todd Shipyards Corporation.............. 700,000 4,812,500 700,000 3,893,750
Services -- 7.6% in 1999 and 3.9% in 1998
Barrister Information Systems Corp...... 1,757,910 5,273,730 1,598,100 1,797,862
Ecology & Environment, Inc.............. 425,000 2,868,750 306,300 3,063,000
Diversified -- 9.9% in 1999 and 5% in 1998
Bell Industries, Inc.................... 592,700 2,630,106 -- --
First Union Real Estate Equity &
Mortgage Investments................. 1,000,000 4,500,000 -- --
Oglebay Norton Company.................. 98,000 2,180,500 160,000 6,320,000
Tandycrafts, Inc........................ 347,761 1,260,634 -- --
------------ ------------
Total -- 100% (cost of $29,022,745 in 1999
and $15,861,656 in 1998)................ $106,821,883 $125,931,487
============ ============
</TABLE>
The Consolidated Financial Statements should be read in conjunction with the
1998 Annual Report.
4
<PAGE>
FIRST CAROLINA INVESTORS, INC., & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1999 AND 1998
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.
(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, 1999 and 1998 respectively, the venture owned 7 lots at
a cost of $293,236.
(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.
5
<PAGE>
FIRST CAROLINA INVESTORS, INC., & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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 $8,892,700 and
$12,242,158 respectively for the six month period ended June 30, 1999 and
$2,686,581 and $5,304,506 respectively in 1998. The net gain on sale of
investments in other companies was $6,320,380 in 1999 and $3,235,506 in 1998.
The gross unrealized gain on investments in other companies totaled
$79,250,263 and $110,362,897 for the six months ended June 30, 1999 and 1998,
respectively. Gross unrealized losses were $1,451,127 and $293,066 at June 30,
1999 and 1998.
3. MORTGAGE LOANS
The Company's investments in mortgage loans as of June 30, 1999 and 1998
are as follows:
<TABLE>
<CAPTION>
1999 1998
--------------------------------- ---------------------------------
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 $54,250 16% 12/2002 $79,581
Junior mortgage loans secured
by residential lots........ -- -- -- 8 12/98 19,500
------- -------
$54,250 $99,081
======= =======
</TABLE>
4. REAL ESTATE
The estimated fair value of real estate owned at June 30, 1999 and 1998,
respectively is $2,250,000 and $4,439,000. It consists of 35 acres of land held
for investment and 4 developed lots at June 30, 1999 and 140 acres with 5
developed lots at June 30, 1998. The aggregate cost for Federal income tax
purposes is approximately $1,400,000 at June 30, 1999 and $2,600,000 1998
respectively. Land held for investment is considered non-income producing.
6
<PAGE>
FIRST CAROLINA INVESTORS, INC., & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
5. OTHER ASSETS
The components of other assets at June 30, 1999 and 1998 are as follows:
<TABLE>
<CAPTION>
1999 1998
---------- ----------
<S> <C> <C>
Deferred compensation, funded............................... $2,191,947 $1,967,359
Sales center................................................ -- 561,759
Miscellaneous............................................... 19,245 143,885
---------- ----------
$2,211,192 $2,673,003
========== ==========
</TABLE>
The deferred compensation includes $2,191,000 and $1,724,000 at June 1999
and 1998 respectively, that is owed to affiliated persons pursuant to a deferred
compensation plan. The deferred compensation has accrued over fifteen years.
Contributions are no longer being made to the plan.
6. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
The components of accounts payable and accrued liabilities at June 30, 1999
and 1998 are as follows:
<TABLE>
<CAPTION>
1999 1998
---------- ----------
<S> <C> <C>
Trade accounts payable...................................... $ 717,905 $ 911,850
Deferred compensation (note 5).............................. 2,191,947 1,967,359
Dividends payable........................................... 242,015 259,315
Miscellaneous accruals and payable.......................... 155,915 242,555
Cash held in escrow......................................... 8,085 10,738
---------- ----------
$3,315,867 $3,391,817
========== ==========
</TABLE>
7. 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 999,581 and
1,073,366 at June 30, 1999 and 1998, 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 39,919 shares of common
stock at June 30, 1999 and 36,804 shares at June 30, 1998.
At June 30, 1999, accumulated undistributed net investment income is
$4,242,979; accumulated and undistributed net realized gains on investment
transactions are $22,886,130 and the net unrealized appreciation in value of
investments is $43,254,303.
8. SHARE REPURCHASE PROGRAM
At June 30, 1999 the Company has repurchased 543,880 shares as treasury
shares at a cost of $15,095,611. At June 30, 1999, 538,480 treasury shares were
cancelled and retired. During 1999 through June 30, the Company has repurchased
15,700 shares at an average cost of $69.59 per share on the Boston Stock
Exchange, the exchange on which the Company's shares are traded. At the May 26,
1999 Board of Directors meeting, the directors authorized the continuation of
the share repurchase program.
9. DISTRIBUTION TO STOCKHOLDERS
Two dividends of $0.25 each per share were declared during the six months
ended June 30, 1999 and 1998, respectively. The dividends are taxable to
stockholders as ordinary income.
7
<PAGE>
FIRST CAROLINA INVESTORS, INC., & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
10. REMUNERATION
Each Director receives fees of $2,500 per directors' meeting attended and
$100 per audit committee meeting attended. The Chairman also receives a $1,500
monthly salary. For the six months ended June 30, 1999 and 1998 directors' fees
totaled $30,300 and $25,200, respectively.
Aggregate remuneration paid during the six month periods was $109,761 for
1999 and $395,169 for 1998.
The Company paid brokerage fees of $82,510 and $8,995 for the six months
ended June 30, 1999 and 1998, respectively. Trubee, Collins & Co., Inc. received
$8,415 and $8,995 during the six months ended June 30, 1999 and 1998,
respectively. Mr. Baird, Chairman of the Company, is an employee of Trubee,
Collins & Co., Inc.
11. 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.
12. COMMITMENTS AND CONTINGENCIES
At June 30, 1999 the Company has approximately $250,000 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 additional expenditures.
The Company is not involved in any legal actions.
8
<PAGE>
FIRST CAROLINA INVESTORS, INC., & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
COMPUTATION OF NET ASSET VALUE PER SHARE
PRIMARY AND FULLY DILUTED
FOR THE SIX MONTHS ENDED JUNE 30, 1999 AND 1998
(UNAUDITED)
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
Primary
Net Assets.................................................. $85,482,998 $92,330,463
=========== ===========
Shares Outstanding.......................................... 962,662 1,036,562
=========== ===========
Net Asset Value per Share................................... $ 88.80 $ 89.07
=========== ===========
Fully Diluted
Options..................................................... 45,000 45,000
Exercise Price of $12.75
Market Price of $73.00 in 1999 and $70.00 in 1998........... $ (8,081) $ (8,196)
----------- -----------
Additional Shares Attributable to Stock Options............. 36,919 36,804
Shares Outstanding.......................................... 962,662 1,036,562
----------- -----------
999,581 1,073,366
Net Asset Value per Share................................... $ 85.52 $ 86.02
=========== ===========
</TABLE>
Annual Meeting Summary
On May 26, 1999 the annual stockholders meeting was held in Buffalo, New
York. At the meeting, six directors were elected to serve a one year term. The
votes were as follows:
<TABLE>
<CAPTION>
DIRECTORS NAME FOR WITHHELD
-------------- ------- --------
<S> <C> <C>
Brent D. Baird.............................................. 819,240 25
Bruce C. Baird.............................................. 819,140 125
Theodore E. Dann, Jr........................................ 819,238 27
Patrick W. E. Hodgson....................................... 819,240 25
James E. Traynor............................................ 819,236 29
H. Thomas Webb III.......................................... 819,240 25
</TABLE>
9
<PAGE>
FIRST CAROLINA INVESTORS, INC., & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
SELECTED PER SHARE DATA AND RATIOS
FOR THE SIX MONTHS ENDED JUNE 30, 1999 AND 1998
(UNAUDITED)
Per Share Data and Ratios*
<TABLE>
<CAPTION>
1999 1998
------ ------
<S> <C> <C>
Investment income........................................... $ 1.67 $ 1.06
Expenses (including income taxes)......................... (.75) (.48)
------ ------
Investment income, net.................................... .92 .58
Distributions from investment income, net................. (.48) (.48)
------ ------
Net realized and unrealized gain on securities............ 5.29 10.79
Share transactions.......................................... .20 .06
------ ------
Net increase in net asset value............................. 5.93 10.95
Net asset value:
Beginning of year......................................... 79.59 75.07
------ ------
End of period............................................. $85.52 $86.02
====== ======
Ratios
Ratio of expenses to average net assets................... 0.81% 0.64%
Ratio of investment income, net, to average net assets.... 1.79 1.39
Portfolio turnover........................................ 9.11 2.44
</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.
10
<PAGE>
DIRECTORS
Brent D. Baird*
Private Investor
Bruce C. Baird
President
Belmont Contracting Co., Inc.
Patrick W.E. Hodgson*+
President of Cinnamon Investments Ltd. and
Chairman of Todd Shipyards Corporation
Theodore E. Dann, Jr.+
President
Buffalo Technologies Corporation
James E. Traynor+
President
Clear Springs Development Co., LLC
H. Thomas Webb III*
Senior Vice-President
Crescent Resources, Inc.
OFFICERS
Brent D. Baird
Chairman
H. Thomas Webb III
President
Bruce C. Baird
Vice President, Secretary & Treasurer
Cynthia Raby
Assistant Secretary
REGISTRAR, TRANSFER AND DISBURSING AGENT
Continental Stock Transfer and Trust Company
2 Broadway
New York, NY 10004
* Member of Executive Committee
+ Member of the Audit Committee
11
