nvcsr
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF
REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number: 811-8942
First Carolina Investors, Inc
(Exact name of registrant as specified in charter)
9347A Founders Street
Fort Mill, South Carolina 29708
(Address of principal executive offices)
Brent D. Baird
First Carolina Investors, Inc.
9347A Founders Street
Fort Mill, South Carolina 29708
(Name and address of agent for service)
Registrants telephone number, including area code: 803-802-0890
Date of fiscal year end: December 31, 2010
Date of reporting period: December 31, 2010
Form N-CSR is to be used by management investment companies to file reports with the
Commission not later than 10 days after the transmission to stockholders of any report that is
required to be transmitted to stockholders under Rule 30e-1 under the Investment
Company Act of 1940 (17 CFR 270.30e-l). The Commission may use the information
provided on Form N-CSR in its regulatory, disclosure review, inspection, and policymaking roles. A
registrant is required to disclose the information specified by Form N-CSR, and the Commission will
make this information public. A registrant is not
required to respond to the collection of information contained in Form N-CSR unless the
Form displays a currently valid Office of Management and Budget (OMB) control number. Please
direct comments concerning the accuracy of the information collection burden estimate and any
suggestions for reducing the burden to Secretary, Securities and Exchange Commission, 450 Fifth
Street NW, Washington, DC 20549-0609. The OMB has reviewed this collection of information under
the clearance requirements of 44
U.S.C. ss. 3507.
Item 1. |
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Report to Stockholders. |
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The Registrants Report to Shareholders at December 31, 2010 is
furnished within the filing of this Form N-CSR. |
FIRST CAROLINA INVESTORS,
INC.
2010
ANNUAL REPORT
Company Profile
FIRST CAROLINA INVESTORS, INC.
Description of Business
First Carolina Investors, Inc. (the Company) was
organized
December 2, 1971. The
Company is a non-diversified, closed-end management
investment company under The Investment Company Act of 1940.
FORM N-SAR
A copy of the Companys December 31, 2010 report on
Securities and Exchange
Commission Form N-SAR will be furnished without charge to
shareholders upon written
request directed to the Assistant
Secretary, First Carolina
Investors, Inc., P.O. Box 1827,
Fort Mill, SC 29716.
Table of Contents
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Managements Discussion and Analysis of Financial
Conditions and Results of Operations
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1
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Managements Report
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3
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Report of Independent Registered Public Accounting Firm
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4
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Financial Statements
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5
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Notes to Financial Statements
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9
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Financial Highlights
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15
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Quarterly Stock Prices (OTC Bulletin Board) and Dividends Paid
Per Share
2010
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Quarter
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First
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Second
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Third
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Fourth
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High Bid
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$
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8.90
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10.00
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18.00
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15.00
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Low Bid
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$
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6.50
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7.40
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9.30
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9.10
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Cash Dividends
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$
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0.50
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0.50
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0.50
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0.50
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2009
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Quarter
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First
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Second
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Third
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Fourth
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High Bid
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$
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5.00
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11.00
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8.35
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10.00
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Low Bid
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$
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4.00
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4.00
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4.21
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6.55
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Cash Dividends
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$
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0.50
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0.50
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0.50
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0.50
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There were approximately 243 record holders of Shares of Common
Stock at December 31, 2010.
This stock is not actively traded.
Managements Discussion and Analysis of Financial
Conditions and Results of Operations
FIRST CAROLINA INVESTORS, INC.
RESULTS OF
OPERATIONS AND FINANCIAL CONDITION
First Carolina Investors, Inc. (the Company) was
organized December 2, 1971 as a South Carolina
unincorporated business trust. On July 1, 1987 the Company
incorporated by merging into a wholly owned subsidiary (First
Carolina Investors, Inc.) established solely for this purpose.
The Company was incorporated November 24, 1986 under the
laws of the State of Delaware.
From the inception of operations through and until
December 31, 1975 the Company operated as a real estate
investment trust (REIT) as defined in the Internal
Revenue Code. Subsequently the Company 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
Companys primary business through the end of 1994. On
January 3, 1995 the Company, pursuant to the requirements
of The Investment Company Act of 1940, filed notification of
registration.
The Company is a closed-end, non-diversified management
investment company. As a closed-end, non-diversified management
investment company, the Company values assets and liabilities at
estimated fair value.
On November 17, 2010 the Company filed a Form 8-K
with the United States Securities and Exchange Commission
regarding secondary market transactions in the Companys
stock.
On February 24, 2011, the Company filed a Form 8-K
with the United States Securities and Exchange Commission
regarding a Board request to management to contact outside
counsel to prepare for the Boards consideration a proposal
exploring the options of winding down and liquidating the
Company. Such proposal would be subject to approval by the Board
and the Companys shareholders before any final action
would be taken. The Board did not set a schedule for
consideration of any such proposal.
2010 Operations
Compared to 2009
The net asset value of the Company as a result of operations
increased by $672,884 or $.76 per share during 2010 as compared
to $271,940 or $.31 share during 2009.
In 2010, there were no purchases and no sales of investments. In
2009, the Company sold Finova Group, Inc. resulting in an after
tax realized loss of $622,426. Also sold were the Federal Home
Loan Mortgage Corporation, Series L, Series M and
Series B resulting in an after tax loss of $2,414,147. In
2009, Seaco, Ltd. was sold by the Company for an after tax
realized loss of $1,154,245. In 2009, the Company sold Abitibi
Consolidated, Inc. resulting in $1,101,168 as an after tax loss.
Investment income, after income tax benefit was $560,392 for
2010. Investment income, after income tax benefit was $91,360
for 2009. The net loss realized on investments in securities,
net benefit of income taxes, was $0 in 2010 and $(6,497,798) in
2009. The net change in unrealized appreciation of investments
was $112,492 in 2010. The net change in unrealized appreciation
of investments was $6,678,378 in 2009. These components combined
to produce a net increase in net assets resulting from
operations of $672,884 in 2010 as compared to $271,940 in 2009.
At year end net asset value per share was $6.68 in 2010 and
$7.92 in 2009. The 2010 and 2009 year-end net asset value was
reduced by dividend payments of $2.00, respectively. See
Note 8 of Notes to Financial Statements.
Dividend income increased during 2010 to $12,978 as compared to
$12,050 in 2009. For additional information, including a
detailed list of dividends paid see Note 2 of Notes to
Financial Statements. At the end of 2010 and 2009 three of the
Companys investees did not pay dividends and are therefore
considered non-income producing.
Interest income for 2010 was $81,998 as compared to $75,431 for
2009. During 2010 interest income reported from fixed income
securities was $78,795 as compared to $74,696 for 2009. Interest
income received from money market fund investments was $290 in
2010 compared to $735 in 2009. The majority of the decrease in
the money market investment was due to the payment of the
dividend of $2.00 per share.
General and administrative expense increased in 2010 to $125,732
as compared to $114,620 during 2009. For both years personnel
costs were a large component.
1
The Director fees included an annual retainer fee of $5,000 in
2010 and 2009, respectively. The Chairman of the Audit Committee
received a retainer fee of $2,500 in 2010 and 2009. The Director
fees during 2010 and 2009 totaled $86,700, respectively.
Professional fees increased in 2010 to $203,821 as compared to
$175,453 in 2009, primarily as a result of increased legal
services and fees. Professional fees included audit, tax, legal,
and Company Compliance Officer fees.
Other expenses decreased in 2010 to $50,553 as compared to
$51,653 during 2009. Other expenses include registrar and
transfer agent fees and printing fees.
Internal and
External Sources of Liquidity
The two major components of the Companys source of
liquidity are investments in securities and cash (including
short term investments).
Investments in
Securities
While investments consist mainly of marketable securities, they
are considered mid to long-term investments.
Real
Estate
It is our present policy not to make additional investments in
land development.
Cash, including
short term investments
At December 31, 2010 and 2009, the Company held net cash
and short term investments consisting of a money market mutual
fund of $3,700,167 and $1,595,669, respectively, which is highly
liquid and accordingly is the Companys best source of
liquidity.
Commitments for
Capital Expenditures
The Company has no contractual commitments to purchase
additional equity securities.
The Companys stock repurchase program had been in effect
since 1980. As of December, 2003 the Company discontinued
repurchasing shares.
Critical
Accounting Policy
Our accounting and reporting policies are in accordance with
accounting principles generally accepted in the United States of
America, and they conform to general practices within the
industry. The application of these principles involves judgments
and the use of estimates based on assumptions that involved
uncertainty at the time of estimation. We have identified the
policy for valuing investments in securities that are privately
held issuers or for which market quotations are not readily
available as a critical accounting policy. Securities for which
market quotations are not readily available are valued at fair
value as determined by the Pricing Committee of the Board of
Directors. The Pricing Committee may consider, if available,
financial statements such as balance sheets and statements of
operations; business and strategic plans; evaluations of major
assets; quality of management; legal, contractual or market
restrictions or limitations on sale of securities; and other
factors which the Pricing Committee deems relevant.
Summary
During 2010 the net asset value of the Company as a result of
operations increased by $672,884 as compared to an increase of
$271,940 for 2009. At December 31, 2010 net assets per
share were $6.68. This is a decrease of $1.24 per share from the
December 31, 2009 net assets per share of $7.92 and also
reflects the payment of dividends of $2.00 per share in 2010.
2
Managements Report
FIRST CAROLINA INVESTORS, INC.
The management of First Carolina Investors, Inc. is responsible
for the preparation, integrity and objectivity of the financial
statements and other information in the accompanying Annual
Report. These financial statements have been prepared in
accordance with accounting principles generally accepted in the
United States of America and necessarily include some estimates
which are based upon managements judgment.
Management is also responsible for establishing and maintaining
a system of internal controls to provide reasonable assurance
that assets are safeguarded, transactions are properly executed
and financial records are adequate and reliable for the
preparation of financial statements.
The system of internal controls, while restricted due to having
only one employee, provides for certain divisions of
responsibilities. Management monitors the system for compliance
and performs analytical reviews for reasonableness. Management
believes that, as of December 31, 2010, the Companys
system of internal controls is adequate to accomplish the
objectives discussed herein.
The Audit Committee of the Board of Directors meets periodically
with management and the independent registered public
accountants to review matters relating to the quality of
financial reporting, internal accounting control and the results
of the annual independent audit. The independent registered
public accountants have direct and unlimited access to the Audit
Committee with or without management present.
The accompanying financial statements have been audited by KPMG
LLP, independent registered public accountants, in accordance
with the standards of the Public Company Accounting Oversight
Board (United States). Their audit includes consideration of the
Companys system of internal controls in order to establish
a basis for reliance thereon in determining the nature, extent
and timing of auditing procedures required to support their
opinion on the financial statements.
Brent D. Baird
President
3
Report of Independent Registered Public Accounting Firm
FIRST CAROLINA INVESTORS, INC.
The Directors and Shareholders
First Carolina Investors, Inc.
We have audited the accompanying statements of assets and
liabilities, including the schedule of investments, of First
Carolina Investors, Inc. as of December 31, 2010 and 2009
and the related statements of operations and the statements of
changes in net assets for each of the years in the two-year
period then ended, and the financial highlights for each of the
years in the five-year period then ended. These financial
statements and financial highlights are the responsibility of
the Companys management. Our responsibility is to express
an opinion on these financial statements and financial
highlights based on our audits.
We conducted our audits in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. Our
procedures included confirmation of securities owned as of
December 31, 2010 and 2009, by correspondence with the
custodian and other appropriate audit procedures. An audit also
includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial
highlights referred to above present fairly, in all material
respects, the financial position of First Carolina Investors,
Inc. as of December 31, 2010 and 2009 and the results of
its operations and the changes in its net assets for each of the
years in the two-year period then ended, and the financial
highlights for each of the years in the five-year period then
ended, in conformity with U.S. generally accepted accounting
principles.
Charlotte, North Carolina
February 25, 2011
4
FIRST CAROLINA INVESTORS, INC.
Statements of Assets and
Liabilities
December 31, 2010 and 2009
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2010
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2009
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Assets
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Investments in securities, at fair value (note 2) (cost of
$3,895,832 in 2010 and 2009)
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$
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2,636,919
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$
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2,466,475
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Short term money market investments
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3,700,167
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1,595,669
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Cash
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7,930
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26,797
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Accrued dividend and interest receivable
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19,732
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19,714
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Federal and state income tax receivables (note 5)
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3,029,093
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Other assets (note 3)
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9,605
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10,994
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Total assets
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6,374,353
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7,148,742
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Liabilities
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Accounts payable and accrued liabilities (note 4)
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131,449
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90,864
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Deferred income tax payable (note 5)
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|
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95,137
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|
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|
37,186
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Federal and state income taxes payable (note 5)
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229,529
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Total liabilities
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456,115
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128,050
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Net Assets
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$
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5,918,238
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$
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7,020,692
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Analysis of Net Assets:
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Net capital paid in on shares of capital stock
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8,391,763
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8,391,763
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Undistributed net investment income and realized gain (loss)
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(1,642,642
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)
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(427,695
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)
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Net unrealized appreciation (depreciation) of investments
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|
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(830,883
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)
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|
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(943,376
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)
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|
|
|
|
|
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Net Assets
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$
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5,918,238
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$
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7,020,692
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Net assets per share (3,500,000 no par value common shares
authorized, 886,679 shares issued, 886,579 shares outstanding,
in 2010 and 2009, respectively) (note 6)
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$
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6.68
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$
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7.92
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|
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See accompanying Notes to
Financial Statements.
5
FIRST CAROLINA INVESTORS, INC.
Statements of Operations
For the years ended December 31,
2010 and 2009
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2010
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2009
|
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INCOME
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Dividends
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$
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12,978
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$
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12,050
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Interest
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81,998
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|
|
|
75,431
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Other
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|
34,243
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|
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|
200
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|
|
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Total income
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129,219
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|
|
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87,681
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EXPENSES
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General and administrative
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125,732
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|
|
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114,620
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Director fees and expenses
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|
89,334
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88,582
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Professional fees
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203,821
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175,453
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State and local taxes
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|
26,325
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|
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26,325
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Other
|
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50,553
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51,653
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|
|
|
|
|
|
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Total expenses
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495,765
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456,633
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|
|
|
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Loss before income taxes and realized and unrealized
depreciation on investments
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|
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(366,546
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)
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|
|
(368,952
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)
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Provision for income tax benefit (note 5)
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|
|
926,938
|
|
|
|
460,312
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|
|
|
|
|
|
|
|
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Investment income, net
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|
|
560,392
|
|
|
|
91,360
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Net loss realized on investments in securities, after income tax
benefit of $0 in 2010 and $(3,498,815) in 2009
|
|
|
|
|
|
|
(6,497,798
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)
|
Net change in unrealized appreciation of investments for the
period, after deferred tax expense of $57,951 in 2010 and
$3,618,040 in 2009
|
|
|
112,492
|
|
|
|
6,678,378
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in net assets resulting from operations
|
|
$
|
672,884
|
|
|
$
|
271,940
|
|
|
|
|
|
|
|
|
|
|
See accompanying Notes to
Financial Statements.
6
FIRST CAROLINA INVESTORS, INC.
Statements of Changes in Net Assets
For the years ended December 31, 2010 and 2009
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|
|
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
Increase (decrease) in net assets from operations
|
|
|
|
|
|
|
|
|
Investment income, net of taxes
|
|
$
|
560,392
|
|
|
$
|
91,360
|
|
Realized loss on investments, net of taxes
|
|
|
|
|
|
|
(6,497,798
|
)
|
Change in unrealized appreciation net of taxes
|
|
|
112,492
|
|
|
|
6,678,378
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in net assets resulting from operations
|
|
|
672,884
|
|
|
|
271,940
|
|
Distributions to shareholders of $2.00 per share in 2010 and
2009 from investment income, net (note 8)
|
|
|
(1,775,338
|
)
|
|
|
(1,773,358
|
)
|
|
|
|
|
|
|
|
|
|
Total decrease
|
|
|
(1,102,454
|
)
|
|
|
(1,501,418
|
)
|
Net assets
|
|
|
|
|
|
|
|
|
Beginning of year
|
|
|
7,020,692
|
|
|
|
8,522,110
|
|
|
|
|
|
|
|
|
|
|
End of year (undistributed net investment income and realized
gain (loss) of $(1,642,642) in 2010 and $(427,695) in 2009)
|
|
$
|
5,918,238
|
|
|
$
|
7,020,692
|
|
|
|
|
|
|
|
|
|
|
See accompanying Notes to Financial Statements.
7
FIRST CAROLINA INVESTORS, INC.
Schedule of Investments
December 31, 2010 and 2009
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2010
|
|
|
2009
|
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|
|
Principal
|
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|
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Principal
|
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|
|
|
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Amount
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|
Fair
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Amount
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Fair
|
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or Shares
|
|
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Value
|
|
|
or Shares
|
|
|
Value
|
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|
|
Common and Preferred Securities - 31.5% in 2010 and 24.7% in 2009
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|
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Financial Services
8.2% in 2010 and 18.4% in 2009
|
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|
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|
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**, *
|
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Federal Home Loan Mortgage Corp. Series L
|
|
|
73,647
|
|
|
|
66,282
|
|
|
|
73,647
|
|
|
|
103,842
|
|
**, *
|
|
Federal Home Loan Mortgage Corp. Series M
|
|
|
625
|
|
|
|
531
|
|
|
|
625
|
|
|
|
831
|
|
**, *
|
|
Federal Home Loan Mortgage Corp.
|
|
|
5,000
|
|
|
|
1,250
|
|
|
|
5,000
|
|
|
|
7,700
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diversified
91.8% in 2010 and 81.6% in 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ravensource Fund
|
|
|
74,000
|
|
|
|
763,347
|
|
|
|
74,000
|
|
|
|
497,639
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Common and Preferred Securities (cost of $2,018,626 in
2010 and 2009)
|
|
|
|
|
|
|
831,410
|
|
|
|
|
|
|
|
610,012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed Income Securities
68.5% in 2010 and 75.3% in 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury Note 4.50% due 2011
|
|
$
|
1,751,000
|
|
|
|
1,805,509
|
|
|
$
|
1,751,000
|
|
|
|
1,856,463
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Fixed Income Securities (cost of $1,877,206 in 2010 and
2009)
|
|
|
|
|
|
|
1,805,509
|
|
|
|
|
|
|
|
1,856,463
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total - 100% (cost of $3,895,832 in 2010 and 2009)
|
|
|
|
|
|
$
|
2,636,919
|
|
|
|
|
|
|
$
|
2,466,475
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short term money market investments
|
|
|
|
|
|
$
|
3,700,167
|
|
|
|
|
|
|
$
|
1,595,669
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
**
|
|
Non-Income Producing Securities in 2010.
|
*
|
|
Non-Income Producing Securities in 2009.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying Notes to
Financial Statements.
|
8
FIRST CAROLINA INVESTORS, INC.
Notes to Financial Statements
December 31, 2010
(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) Investments in Securities
The Company records security transactions based on the trade
date. 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. Securities of
privately-held issuers or for which market quotations are not
readily available are valued at fair value as determined in good
faith by the Companys Pricing Committee of the Board of
Directors. In determining fair value, the Pricing Committee of
the Board of Directors may consider, if available, financial
statements; business and strategic plans; evaluations of major
assets; quality of management; legal, contractual or market
restrictions or limitations on sale of the securities; and other
factors which the directors deem relevant. Realized gains and
losses are determined based on the average cost of the
securities sold.
Interest income is recognized on the accrual basis. Dividend
income is recognized on the ex-dividend date. Discounts and
premiums on debentures are amortized to cost over the life of
the debentures.
Effective January 1, 2008, the Company adopted FASB ASC
820-10, Fair Value Measurements and Disclosures
(SFAS 157, Fair Value Measurements)
which is presented in footnote 2.
(c) Income taxes
The Company is subject to federal and state corporate income
taxes. The Company accounts for deferred income taxes using the
asset and liability method. Deferred tax assets and liabilities
are recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases
and operating loss and tax credit carryforwards. Deferred tax
assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those
temporary differences are expected to be realized or settled.
The effect on deferred tax assets and liabilities of a change in
tax rates is recognized in income in the period that includes
the enactment date.
(d) Distributions to Shareholders
Dividends payable to shareholders are recorded on the
declaration date.
(e) Managements use of estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements, and the
reported amounts of increase and decrease in net assets from
operations during the reporting period. Actual results may
differ from these estimates.
(f) Reclassifications
Certain amounts in 2009 were reclassified to conform with
presentation in 2010. These reclassifications had no effect on
the Companys previously reported results of operations.
9
(2) Investments
in securities
The Companys investments in common stocks and debentures,
which are stated at fair value, are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2010
|
|
|
|
Principal
|
|
|
|
|
|
|
|
|
Gross
|
|
|
Gross
|
|
|
|
|
|
|
|
|
|
Amount or
|
|
|
Fair Value
|
|
|
|
|
|
Unrealized
|
|
|
Unrealized
|
|
|
|
|
|
|
|
|
|
Number
|
|
|
as a % of
|
|
|
|
|
|
Holding
|
|
|
Holding
|
|
|
Fair
|
|
|
Dividend
|
|
|
|
of Shares
|
|
|
Net Assets
|
|
|
Cost
|
|
|
Gains
|
|
|
Losses
|
|
|
Value
|
|
|
Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common and Preferred Securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal Home Loan Mortgage Corporation Series L
|
|
|
73,647
|
|
|
|
1.1
|
%
|
|
|
1,651,108
|
|
|
|
|
|
|
|
(1,584,826
|
)
|
|
|
66,282
|
|
|
|
|
|
Federal Home Loan Mortgage Corporation Series M
|
|
|
625
|
|
|
|
0.0
|
%
|
|
|
5,880
|
|
|
|
|
|
|
|
(5,349
|
)
|
|
|
531
|
|
|
|
|
|
Federal Home Loan Mortgage Corporation
|
|
|
5,000
|
|
|
|
0.0
|
%
|
|
|
6,300
|
|
|
|
|
|
|
|
(5,050
|
)
|
|
|
1,250
|
|
|
|
|
|
Ravensource Fund
|
|
|
74,000
|
|
|
|
12.9
|
%
|
|
|
355,338
|
|
|
|
408,009
|
|
|
|
|
|
|
|
763,347
|
|
|
|
12,978
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed Income Securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury Note 4.50% due 2011
|
|
$
|
1,751,000
|
|
|
|
30.5
|
%
|
|
|
1,877,206
|
|
|
|
|
|
|
|
(71,697
|
)
|
|
|
1,805,509
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,895,832
|
|
|
|
408,009
|
|
|
|
(1,666,922
|
)
|
|
|
2,636,919
|
|
|
|
12,978
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2009
|
|
|
|
Principal
|
|
|
|
|
|
|
|
|
Gross
|
|
|
Gross
|
|
|
|
|
|
|
|
|
|
Amount or
|
|
|
Fair Value
|
|
|
|
|
|
Unrealized
|
|
|
Unrealized
|
|
|
|
|
|
|
|
|
|
Number
|
|
|
as a % of
|
|
|
|
|
|
Holding
|
|
|
Holding
|
|
|
Fair
|
|
|
Dividend
|
|
|
|
of Shares
|
|
|
Net Assets
|
|
|
Cost
|
|
|
Gains
|
|
|
Losses
|
|
|
Value
|
|
|
Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common and Preferred Securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal Home Loan Mortgage Corporation Series L
|
|
|
73,647
|
|
|
|
1.5
|
%
|
|
|
1,651,108
|
|
|
|
|
|
|
|
(1,547,266
|
)
|
|
|
103,842
|
|
|
|
|
|
Federal Home Loan Mortgage Corporation Series M
|
|
|
625
|
|
|
|
0.0
|
%
|
|
|
5,880
|
|
|
|
|
|
|
|
(5,049
|
)
|
|
|
831
|
|
|
|
|
|
Federal Home Loan Mortgage Corporation
|
|
|
5,000
|
|
|
|
0.1
|
%
|
|
|
6,300
|
|
|
|
1,400
|
|
|
|
|
|
|
|
7,700
|
|
|
|
|
|
Ravensource Fund
|
|
|
74,000
|
|
|
|
7.1
|
%
|
|
|
355,338
|
|
|
|
142,301
|
|
|
|
|
|
|
|
497,639
|
|
|
|
12,050
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed Income Securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury Note 4.50% due 2011
|
|
$
|
1,751,000
|
|
|
|
26.4
|
%
|
|
|
1,877,206
|
|
|
|
|
|
|
|
(20,743
|
)
|
|
|
1,856,463
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
3,895,832
|
|
|
|
143,701
|
|
|
|
(1,573,058
|
)
|
|
|
2,466,475
|
|
|
|
12,050
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
During 2010, no purchases and sales of investment securities
occurred. Cost of purchases and proceeds from sales of
investment securities were $0 and $569,610 during 2009. The net
loss on sale of investment securities was $9,996,613 for 2009.
Net gains and losses are computed using the average cost method.
The U.S. federal income tax basis of the Companys
investments at December 31, 2010, was $2,357,103, and net
unrealized depreciation for U.S. federal income tax
purposes was $123,142 (gross unrealized appreciation $0; gross
unrealized depreciation $123,142). The difference between tax
basis and the book basis of undistributed income is primarily
due to computing gains and losses on investments using the
specific identification method for tax and average cost for book
purposes.
Effective January 1, 2008, the Company adopted FASB ASC
820-10, Fair Value Measurements and Disclosures
(SFAS 157, Fair Value Measurements).
This new accounting statement defines fair value, establishes a
framework for measuring fair value in generally accepted
accounting principles and expands disclosures about fair value
measurements. The three levels of the fair value hierarchy are
as follows:
Level 1 quoted prices in active markets for
identical investments
Level 2 other significant observable inputs
(including quoted prices for similar investments, interest
rates, prepayment speeds, credit risk, etc.)
Level 3 significant unobservable inputs (including
the Companys own assumption in determining the fair value
of investments)
The inputs or methodology used in valuing securities are not
necessarily an indication of the risk associated with investing
in those securities.
10
The following is a summary of the inputs used as of
December 31, 2010 and 2009 in valuing the Companys
investments at fair value:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments
|
|
|
|
|
|
in
|
|
|
|
|
|
Securities
|
|
|
|
|
|
2010
|
|
|
2009
|
|
Level 1:
|
|
Quoted Prices
|
|
$
|
2,636,919
|
|
|
$
|
2,466,475
|
|
Level 2:
|
|
Other Significant Observable Inputs
|
|
|
|
|
|
|
|
|
Level 3:
|
|
Significant Unobservable Inputs
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
$
|
2,636,919
|
|
|
$
|
2,466,475
|
|
|
|
|
|
|
|
|
|
|
|
|
(3) Other
assets
The components of other assets at December 31, 2010 and
2009 are as follows:
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
Miscellaneous
|
|
$
|
9,605
|
|
|
$
|
10,994
|
|
|
|
|
|
|
|
|
|
|
(4) Accounts
payable and accrued liabilities
The components of accounts payable and accrued liabilities at
December 31, 2010 and 2009 are as follows:
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
Trade accounts payable
|
|
$
|
22,524
|
|
|
$
|
3,335
|
|
Miscellaneous accruals and payables
|
|
|
108,925
|
|
|
|
87,529
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
131,449
|
|
|
$
|
90,864
|
|
|
|
|
|
|
|
|
|
|
(5) Income
taxes
Total income tax expense (benefit) for the years ended
December 31, 2010 and 2009 are allocated as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
|
Earnings (loss)
|
|
|
Income Tax
|
|
|
Earnings (loss)
|
|
|
Income Tax
|
|
|
|
before
|
|
|
Expense
|
|
|
before
|
|
|
Expense
|
|
|
|
Income Tax
|
|
|
(Benefit)
|
|
|
Income Tax
|
|
|
(Benefit)
|
|
|
Investment income
|
|
$
|
(366,546
|
)
|
|
$
|
(926,938
|
)
|
|
$
|
(368,952
|
)
|
|
$
|
(460,312
|
)
|
Gain realized on investments in securities
|
|
|
|
|
|
|
|
|
|
|
(9,996,613
|
)
|
|
|
(3,498,815
|
)
|
Change in unrealized appreciation of investments
|
|
|
170,444
|
|
|
|
57,951
|
|
|
|
10,296,418
|
|
|
|
3,618,040
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(196,102
|
)
|
|
$
|
(868,987
|
)
|
|
$
|
(69,147
|
)
|
|
$
|
(341,087
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11
The components of federal and state income tax expense (benefit)
from continuing operations are summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
Current:
|
|
|
|
|
|
|
|
|
Federal
|
|
$
|
477,510
|
|
|
$
|
(3,841,640
|
)
|
State
|
|
|
(1,404,448
|
)
|
|
|
(442,927
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
(926,938
|
)
|
|
|
(4,284,567
|
)
|
Deferred:
|
|
|
|
|
|
|
|
|
Federal
|
|
|
57,951
|
|
|
|
3,943,480
|
|
State
|
|
|
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
57,951
|
|
|
|
3,943,480
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(868,987
|
)
|
|
$
|
(341,087
|
)
|
|
|
|
|
|
|
|
|
|
In 2010 income tax expense (benefit) for the years presented was
different than the amounts computed by applying the statutory
federal income tax rate to earnings before income taxes. Income
tax expense (benefit) for 2010 and 2009 was $(868,987) for an
effective tax rate of (443.2)% compared to $(341,087) for an
effective rate of (493.3%). The overall state tax benefit in
2010 was primarily attributable to a reduction in previously
accrued taxes due to reduced risk on certain tax contingencies.
The sources of these differences and the tax effects of each are
as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
%
|
|
|
2009
|
|
|
%
|
|
|
Income tax expense (benefit) at federal rate
|
|
$
|
(66,675
|
)
|
|
|
(34.0
|
)
|
|
$
|
(24,201
|
)
|
|
|
(35.0
|
)
|
State income tax net of federal tax expense (benefit)
|
|
|
(936,319
|
)
|
|
|
(477.5
|
)
|
|
|
(274,605
|
)
|
|
|
(397.1
|
)
|
Change in state valuation allowance
|
|
|
9,382
|
|
|
|
4.8
|
|
|
|
(13,298
|
)
|
|
|
(19.2
|
)
|
Dividend exclusion
|
|
|
|
|
|
|
|
|
|
|
(2,952
|
)
|
|
|
(4.3
|
)
|
Rate differential
|
|
|
|
|
|
|
|
|
|
|
(21,004
|
)
|
|
|
(30.4
|
)
|
Change in federal valuation allowance
|
|
|
127,722
|
|
|
|
65.1
|
|
|
|
|
|
|
|
|
|
Franchise tax adjustment
|
|
|
(3,143
|
)
|
|
|
(1.6
|
)
|
|
|
(1,719
|
)
|
|
|
(2.4
|
)
|
Meals and entertainment
|
|
|
47
|
|
|
|
|
|
|
|
50
|
|
|
|
|
|
Other
|
|
|
(1
|
)
|
|
|
|
|
|
|
(3,358
|
)
|
|
|
(4.9
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for income tax expense (benefit)
|
|
$
|
(868,987
|
)
|
|
|
(443.2
|
)
|
|
$
|
(341,087
|
)
|
|
|
(493.3
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The tax effects of temporary differences that give rise to
significant portions of the deferred tax assets and deferred tax
liabilities at December 31, 2010 and 2009 are presented
below:
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
Deferred tax assets:
|
|
|
|
|
|
|
|
|
Investment in securities, principally due to net unrealized
losses on securities
|
|
$
|
469,575
|
|
|
$
|
533,150
|
|
Federal/State loss carryforwards
|
|
|
520,824
|
|
|
|
378,096
|
|
|
|
|
|
|
|
|
|
|
Total gross deferred tax assets
|
|
|
990,399
|
|
|
|
911,246
|
|
|
|
|
|
|
|
|
|
|
Valuation allowance
|
|
|
(511,590
|
)
|
|
|
(374,486
|
)
|
|
|
|
|
|
|
|
|
|
Net deferred tax assets
|
|
|
478,809
|
|
|
|
536,760
|
|
|
|
|
|
|
|
|
|
|
Deferred tax liabilities:
|
|
|
|
|
|
|
|
|
Other basis differences in securities
|
|
|
(573,946
|
)
|
|
|
(573,946
|
)
|
|
|
|
|
|
|
|
|
|
Total gross deferred tax liabilities
|
|
$
|
(573,946
|
)
|
|
$
|
(573,946
|
)
|
|
|
|
|
|
|
|
|
|
Net deferred tax asset (liability)
|
|
$
|
(95,137
|
)
|
|
$
|
(37,186
|
)
|
|
|
|
|
|
|
|
|
|
The calculation of deferred tax assets and liabilities at the
end of each year is based on tax laws and rates enacted for
future years.
The valuation allowance for deferred tax assets was $511,590 as
of December 31, 2010 and $374,486 as of December 31,
2009. The total valuation allowance relative to federal net
operating loss carryforwards, state capital loss carryforwards
and state net deferred assets increased $137,104 during 2010. In
assessing the
12
realizability of deferred tax assets, management considers
whether it is more likely than not that some portion or all of
the deferred tax assets will not be realized. The ultimate
realization of deferred tax assets is dependent upon the
generation of future taxable income during the periods in which
those temporary differences become deductible. Management
considers the scheduled reversal of deferred tax liabilities,
projected future taxable income, and tax planning strategies in
making this assessment. In order to fully realize the deferred
tax asset, the Company will need to generate future taxable
income prior to the expiration of the deferred tax assets
governed by the tax code. Based upon the level of historical
taxable income and projections for future taxable income over
the periods in which the deferred tax assets are deductible,
management believes it is not more likely than not the Company
will realize the benefits of these deductible differences, net
of the existing valuation allowances at December 31, 2010.
In June 2006, the FASB issued FASB ASC 740-10, Income
Taxes (FIN 48, Accounting for Uncertainty in Income
Taxes-an interpretation of FASB Statement No. 109). The
interpretation addresses the determination of whether tax
benefits claimed or expected to be claimed on a tax return
should be recorded in the financial statements. Pursuant to FASB
ASC 740-10, a corporation may recognize the tax benefit
from an uncertain tax position only if it is more likely that
not that the tax position will be sustained on examination by
the taxing authorities, based on the technical merits of the
position. FASB ASC 740-10 requires the tax benefits
recognized in the financial statements to be measured based on
the largest benefit that has a greater than fifty percent
likelihood to be realized upon ultimate settlement. FASB
ASC 740-10 also provides guidance regarding derecognition
of tax benefits, interest and penalties related to tax
deficiencies, and requires additional income tax disclosures.
The Company adopted the provisions of FASB ASC 740-10 as of
January 1, 2007.
As a result of the implementation of FASB ASC 740-10 by the
Company, the amount of unrecognized tax benefits as of
January 1, 2010 was $1,301,000. As a result of various
uncertain tax positions of the Company, the amount of
unrecognized tax benefits as of December 31, 2010 was
$260,000, of which $260,000 would impact the Companys
effective tax rate, if recognized. While it is possible that the
unrecognized tax benefit could change significantly during the
next year, it is reasonably possible that the Company will
recognize approximately $260,000 of unrecognized tax benefits as
a result of the expiration of the relevant statute of
limitations. A reconciliation of the change in the gross
unrecognized tax benefit balance from January 1, 2010 to
December 31, 2010 is as follows:
|
|
|
|
|
Beginning Balance 1/1/2010
|
|
$
|
1,301,000
|
|
Decreases as a result of positions taken during a prior period
|
|
$
|
0
|
|
Increases as a result of positions taken during the current
period
|
|
$
|
0
|
|
Reductions as a result of a lapse of the applicable statute of
limitations
|
|
$
|
(1,041,000
|
)
|
|
|
|
|
|
Ending Balance 12/31/2010
|
|
$
|
260,000
|
|
|
|
|
|
|
Consistent with prior reporting periods, the Company recognizes
interest accrued in connection with unrecognized tax benefits,
net of related tax benefits, and penalties in income tax expense
in consolidated statements of income. As of January 1,
2010, the Company had accrued approximately $321,000 for the
payment of interest and penalties. As of December 31, 2010,
the Company had accrued approximately $61,000 for the payment of
interest and penalties.
Federal and state income tax returns of the Company for 2007 and
subsequent years are subject to examination by the Internal
Revenue Service and various other taxing authorities.
The Companys 2009, 2006, and 2004 federal tax returns are
currently under examination by the Internal Revenue Service.
(6) 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, 886,579 shares are outstanding at
December 31, 2010 and 2009.
(7) Share
repurchase program
During 2010 and 2009 no shares were repurchased.
As of December 31, 2010 the Company had repurchased 639,302
shares as treasury shares at a cost of $22,498,467. At
December 31, 2010 a total of 639,202 treasury shares were
cancelled and retired.
13
(8) Distributions
to Shareholders
Four dividends totaling $1,775,338 per share were declared
during the twelve months ended December 31, 2010 and 2009,
respectively. The dividends are taxable to stockholders as
dividend income.
The Companys directors have adopted a dividend policy to
reflect the Companys intention to distribute to
shareholders as dividends not less than all undistributed
personal holding company income of the Company as defined in the
Internal Revenue Code. In the Companys case, the sources
of such income are primarily dividends, interest received, and
gains on sales of securities. Dividends are paid quarterly and
in the fourth quarter, if necessary, an adjusting dividend is
paid to effect a distribution of all undistributed personal
holding company income for the fiscal year.
(9) Related
Party Transactions
Each Director received fees of $2,000 per Board meeting attended
and $1,600 per Audit Committee meeting attended. Each Director
received an additional $5,000 annual retainer fee. The Chairman
of the Audit Committee received an additional $2,500 annual
retainer fee. For the twelve months ended December 31, 2010
and 2009 directors fees totaled $86,700, respectively.
The Company paid brokerage fees of $0 and $750 for the year
ended December 31, 2010 and 2009, respectively. The Company
has executed securities transactions through the brokerage firm
of Trubee, Collins and Co., Inc., of which Brent D. Baird,
President of the Company, is a registered person. Trubee,
Collins & Co., Inc. received brokerage fees of $0 and $750
during the year ended December 31, 2010 and 2009,
respectively.
14
Financial Highlights
For the Years Ended December 31
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial Highlights*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment income
|
|
$
|
.14
|
|
|
$
|
.10
|
|
|
$
|
.46
|
|
|
$
|
1.39
|
|
|
$
|
2.94
|
|
Expenses (including income taxes)
|
|
|
.49
|
|
|
|
.01
|
|
|
|
.06
|
|
|
|
(1.07
|
)
|
|
|
(.58
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment income - net
|
|
|
.63
|
|
|
|
.11
|
|
|
|
.52
|
|
|
|
.32
|
|
|
|
2.36
|
|
Net realized and unrealized gain (loss) on real estate and
investments
|
|
|
.13
|
|
|
|
.20
|
|
|
|
(5.60
|
)
|
|
|
(2.04
|
)
|
|
|
2.66
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total from investment operations
|
|
|
.76
|
|
|
|
.31
|
|
|
|
(5.08
|
)
|
|
|
(1.72
|
)
|
|
|
5.02
|
|
Distributions from investment income - net
|
|
|
(2.00
|
)
|
|
|
(2.00
|
)
|
|
|
(2.00
|
)
|
|
|
(15.50
|
)
|
|
|
(16.50
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (decrease) in net asset value
|
|
|
(1.24
|
)
|
|
|
(1.69
|
)
|
|
|
(7.08
|
)
|
|
|
(17.22
|
)
|
|
|
(11.48
|
)
|
Net asset value:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning of year
|
|
|
7.92
|
|
|
|
9.61
|
|
|
|
16.69
|
|
|
|
33.91
|
|
|
|
45.39
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
End of year
|
|
$
|
6.68
|
|
|
$
|
7.92
|
|
|
$
|
9.61
|
|
|
$
|
16.69
|
|
|
$
|
33.91
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Market value end of year
|
|
$
|
9.50
|
|
|
$
|
7.30
|
|
|
$
|
4.60
|
|
|
$
|
14.60
|
|
|
$
|
28.00
|
|
Total Net Assets
|
|
$
|
5,918,238
|
|
|
$
|
7,020,692
|
|
|
$
|
8,522,110
|
|
|
$
|
14,792,579
|
|
|
$
|
30,065,610
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratios
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratio of expenses including income tax expense (benefit) to
average net assets
|
|
|
7.10
|
%
|
|
|
.05
|
%
|
|
|
.49
|
%
|
|
|
3.27
|
%
|
|
|
1.25
|
%
|
Ratio of expenses net of income tax expense (benefit) to average
net assets
|
|
|
8.17
|
%
|
|
|
6.00
|
%
|
|
|
4.56
|
%
|
|
|
1.81
|
%
|
|
|
1.26
|
%
|
Ratio of investment income - net to average net assets
|
|
|
9.23
|
%
|
|
|
1.20
|
%
|
|
|
3.86
|
%
|
|
|
.97
|
%
|
|
|
5.16
|
%
|
Portfolio turnover
|
|
|
|
%
|
|
|
21.3
|
%
|
|
|
32.63
|
%
|
|
|
8.13
|
%
|
|
|
10.73
|
%
|
Total return based on market price
|
|
|
61.08
|
%
|
|
|
129.74
|
%
|
|
|
(60.68
|
)%
|
|
|
(22.41
|
)%
|
|
|
17.84
|
%
|
Average Shares Outstanding
|
|
|
886,579
|
|
|
|
886,579
|
|
|
|
886,579
|
|
|
|
886,579
|
|
|
|
886,579
|
|
|
|
* |
Per share data is based upon the average number of shares
outstanding for the year.
|
Computation of Net Asset Value per Share
For the Years Ended December 31, 2010 and 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
|
|
|
2009
|
|
|
Net Assets
|
|
|
|
|
|
$
|
5,918,238
|
|
|
|
|
|
|
$
|
7,020,692
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares Outstanding
|
|
|
|
|
|
|
886,579
|
|
|
|
|
|
|
|
886,579
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Assets Value per Share
|
|
|
|
|
|
$
|
6.68
|
|
|
|
|
|
|
$
|
7.92
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15
First Carolina Investors, Inc.
Directors
Bruce C. Baird
President of
Belmont Contracting Co., Inc.
Patrick W.E. Hodgson
President of Cinnamon Investments Ltd.
Theodore E. Dann, Jr.
President and CEO of
ACH Foam Technologies, LLC
James E. Traynor
President of
Clear Springs Development Co., LLC
H. Thomas Webb III
Real Estate Consultant
Officers:
H. Thomas Webb III
Chairman
Brent D. Baird
President
Bruce C. Baird
Vice President, Secretary
Cynthia Raby
Assistant Secretary
Member of the Audit Committee
Member of the Pricing Committee
Registrar, Transfer and Disbursing Agent
Continental Stock Transfer and Trust Company
17 Battery Place
New York, NY 10004
Independent Registered Public Accounting Firm
KPMG LLP
550 South Tryon Street
Charlotte, NC 28202
|
Item 2. |
|
Code of Ethics. |
|
|
|
The Registrant adopted its Code of Ethics on October 17, 2002 and amended
the reporting requirements set forth in the Code of Ethics on September 19,
2003 that applies to the Registrants principal executive officer, its directors,
and all individuals performing principal financial functions on behalf of the
Registrant. The Registrant has not amended the Code of Ethics as described in
the Form N-CSR during the year ended December 31, 2010. The
Registrant has not granted any waiver, including an implicit waiver, from a provision
of the Code of Ethics as described in Form N-CSR during the year
ended December 31, 2010. A copy of the Registrants Code of Ethics may be
obtained, free of charge, by contacting First Carolina Investors, Inc. in writing
and requesting the same. The address is P. O. Box 1827, Fort Mill, SC 29716. |
|
Item 3. |
|
Audit Committee Financial Expert. |
|
|
|
The Registrants Audit Committee does not have a financial expert.
The Audit Committee is composed of three directors possessing vast
business experience and diverse financial backgrounds. In the opinion of the
Board of Directors and the Audit Committee, no one Audit Committee
member can be designated an expert to cover all possible matters to be
considered, but collectively, and with the assistance of outside experts, the
Audit Committee feels it can address the Registrants concerns effectively. |
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Item 4. |
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Principal Accountant Fees and Services. |
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(a) |
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Audit Fees. |
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The aggregate KPMG LLP fees billed for 2010 and 2009 were $71,600
respectively, for professional services rendered for audit of the Registrants
financial statements, review of N-SAR and filing of N-17f-2 reports
for the fiscal year ended December 31, 2010 and 2009. |
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(b) |
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Audit Related Fees. |
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There were no audit related fees billed by KPMG LLP. |
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(c) |
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Tax Fees. |
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The aggregate KPMG LLP fees billed for 2010 and 2009 were $44,538
and $42,035 respectively, for professional services rendered to the
Registrant for federal and state tax return preparation and research. |
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(d) |
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All Other Fees. |
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There were no other fees billed by KPMG LLP. |
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(e)(1) |
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Pursuant to Rule 2-10(c) (7) Regulation S-X, the Registrants
Audit Committee has adopted pre-approval policies and procedures.
The policies and procedures provide that audit, tax, audit-related fees
and all other fees be proposed and pre-approved with the Audit
Committee prior to the services being provided. The Audit
Committee carefully considers the independence of the accountants
and auditors and the reasonableness of the fees quoted in relation to
the services anticipated. A copy of the pre-approval policy adopted
by the Audit Committee will be forwarded upon written request
to First Carolina Investors, Inc. at P. O. Box 1827, Fort Mill, South
Carolina 29716. |
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(2) |
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The Registrants Audit Committee pre-approved 100% of the
services described in item 4(a)through (d) at a meeting dated
December 7, 2010 for the 2010 fees and at a meeting dated
December 4, 2009 for the 2009 fees. |
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(f) |
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All work was performed by KPMG LLP full-time, permanent employees. |
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(g) |
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All fees paid to KPMG LLP in 2010 and 2009 have been disclosed. |
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(h) |
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All fees and services provided by KPMG LLP set forth in this Report
were pre-approved by the Audit Committee. |
Item 5. |
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Audit Committee of Listed Registrants. |
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Pursuant to Rule 10A-3 of the Securities Exchange Act of 1934, Registrant has
established a separately-designated standing Audit Committee consisting of
James E. Traynor (Chairman), Theodore E. Dann, Jr., and Patrick W. E.
Hodgson. |
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Item 6. |
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Schedule of Investments. |
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The schedule of investments is included as a part of the 2010 Annual
Report of First Carolina Investors, Inc. filed under Item 1 on this
Form N-CSR. |
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Item 7. |
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Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies. |
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The following Proxy Voting Policy, originally adopted on May 21, 2003 and
restated on March 23, 2005 at a meeting of the Board of Directors
of First Carolina Investors, Inc., is hereby stated as follows: |
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The Proxy Voting Policy of First Carolina Investors, Inc. (the Fund) will
be procedurally for the President to vote according to managements |
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recommendations in the received proxies, provided the vote is in the best
interest of the Fund, and to send a copy to the Assistant Secretary for filing
in the business records at the Funds headquarters. If the President believes
it is not in the Funds best interests to vote in accordance with managements
recommendations on a proxy received, he will prepare a memorandum
disclosing such reasons for disagreeing with managements
recommendations which will be kept in the business records at the Funds
headquarters. In the event of a conflict of interest, the President will contact
the Pricing Committee and the full Board of Directors of the Fund to discuss
the issues. Copies of all proxies received and voted on will be available for all
Directors and Officers to review at any time. |
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Item 8. |
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Portfolio Managers of Closed-End Management Investment Companies. |
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As of the date of this Report, Brent D. Baird, President, and portfolio
manager, is primarily responsible for the day-to-day management
of the Registrants entire portfolio for 2010. Mr. Brent D. Baird
has been primarily responsible for the Registrants investment portfolio
during the past five years. Mr. Brent D. Baird does not provide day-
to-day management for any other listed portfolio. No compensation
is received by Mr. Brent D. Baird. As a shareholder of Registrant,
Mr. Brent D. Baird owns more than $500,000 in shares. |
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Item 9. |
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Purchases of Equity Securities by Closed-End Management Investment
Company and Affiliated Purchasers. |
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The Registrant has not repurchased its equity shares since December 17, 2003. |
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Item 10. |
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Submission of Matters to a Vote of Security Holders. |
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There have been no material changes to the procedures disclosed in the
Registrants filings in which shareholders may recommend nominees
to the Registrants Board of Directors. |
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Item 11. |
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Controls and Procedures. |
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The Registrants principal executive officer has concluded that the Registrants
disclosure controls and procedures (as defined in Rule 30a-3(c) under
the Investment Company Act of 1940 (17 CFR 270.30a-3(c))) are adequate and
satisfactory based on their evaluations of these controls and procedures at
December 31, 2010. No significant changes in the internal controls or in other
factors that could significantly affect these controls subsequent to the date of
their evaluation, including any corrective actions with regard to significant
deficiencies and material weaknesses, has been deemed necessary. |
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Item 12. |
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Exhibits |
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(a)(1) |
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Certification pursuant to Rule 30a-2(a) under the Investment Company
Act of 1940 (17CFR 270.30a-2(a)) attached as EX.99.302CERT. |
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(b) |
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Certification pursuant to Rule 30a-2(b) under the Investment Company
Act of 1940 (17CFR 270.30a-2(b)) attached as EX99.906CERT. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment
Company Act of 1940, the Registrant has duly caused this Report to be signed on its
behalf by the undersigned, thereunto duly authorized.
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(Registrant) FIRST CAROLINA INVESTORS, INC. |
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By:
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/s/ Brent D. Baird |
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Brent D. Baird, Chief Executive Officer |
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Date: February 28, 2011 |
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment
Company Act of 1940, this Report has been signed below by the following persons on
behalf of the Registrant and in the capacities and on the dates indicated.
By:
Date:
The Company has no designated Chief Financial Officer at this time.