Item 1. Business The Company
DCS Capital Corporation (the "Corporation") was incorporated in November 1982 under Delaware law. The Corporation was organized to assist DCS Capital Partnership (the "Partnership") in raising funds in connection with the Partnership's contractual obligation to finance approximately 76% of the construction and start-up costs, and certain deferred costs, of an ethylene plant designed and constructed by Dow Chemical Canada Inc. near Joffre, Alberta, Canada, for Novacor Chemicals Ltd. The ethylene plant was completed in 1984 at a cost of approximately S337 million and is designed to produce 1.5 billion pounds per year of polymer grade ethylene using ethane as feedstock.
The Corporation's only business is to arrange financing for the Partnership through the issuance of debt securities to obtain funds for lending to the Partnership and to refinance prior borrowings. The interest cost charged to the Partnership is an amount that equals the interest cost incurred by the Corporation on its borrowings. In addition, the Partnership reimburses the Corporation for all its other costs. For this reason, the Corporation's revenues are always equal to its expenses.
See also Notes 1 and 2 to the financial statements included elsewhere in this Annual Report for a further discussion of the business of the Corporation and the Partnership.
Item 2.


Item 2. Properties The Corporation has no plants or other physical properties.
Item 3.
Item 3. Legal Proceedings There are no claims or other legal proceedings against the Corporation.
Item 4.
Item 4. Submission of Matters to a Vote of Security Holders Omitted pursuant to General Instruction J of Form 10-K.
PART II
Item 5.
Item 5. Market for the Registrant's Common Stock and Related Stockholder Matters The common stock of the Corporation is wholly owned by the Partnership and does not trade in any securities market. The Corporation does not pay dividends and does not intend to pay dividends in the foreseeable future.
Item 6.
Item 6. Selected Financial Data Omitted pursuant to General Instruction J of Form 10-K.
Item 7.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operation
The Corporation's only business has been to issue debt securities and either loan the proceeds to the Partnership or use the proceeds to refinance commercial paper notes issued by the Corporation. On February 15, 1984, the Corporation issued $150,000,000 of 12.20% Series A Notes due 1994 and on October 15, 1984, issued $100,000,000 of 12.375% Series B Notes due 1996. The proceeds of these debt issues were used to repay maturing commercial paper notes and make loans to the Partnership. During 1992, the Corporation redeemed $21,615,000 of the outstanding principal amounts of the 12.375% Series B notes, which was funded through short-term borrowings from a Bank. A $3,197,940 extraordinary loss on early redemption resulted from this transaction. During 1991 the Corporation redeemed all of the outstanding principal amounts of the 12.2% Series A notes, and borrowed $70,000,000 from Swiss Bank Corporation, New York. The corporation borrowed and repaid $80,000,000 under a bridge loan used to provide financing between the redemption of the Series A notes and the receipt of proceeds from the Swiss Bank Corporation note. Novacor Chemicals Ltd. continued repaying its loans from DCS Capital Partnership, which in turn made long-term debt and demand note payments to DCS Capital Corporation.
Administrative expenses decreased by approximatley $308,000 and $240,000 in 1993 and 1992, respectively, from the 1991 administrative expense due primarily to debt issuance costs on the bridge loan and Swiss Bank note.
The Corporation believes that it has ample liquidity for its business. In addition, the terms of its agreement with the Partnership and the Partnership's relationship with its general partners as described in Note 1 to the financial statements included elsewhere in this Annual Report assure that the Corporation's fixed charge coverage ratio will be maintained at 1.0.
Item 8.

Item 8. Financial Statements and Supplementary Data
(a) Index to financial statements presented elsewhere in this Annual Report:
Independent Auditors' Report Balance Sheets, December 31, 1993 and 1992 Statements of Income and Expenses for the Years Ended December 31, 1993, 1992, and 1991 Statements of Cash Flows for the Years Ended December 31, 1993, 1992 and 1991 Notes to Financial Statements
(b) Selected Quarterly Financial Data - Unaudited (in thousands):
1993 1st Qtr 2nd Qtr 3rdQtr 4th Qtr Year Interest on Partnership advances $2,820 $2,855 $2,831 $2,767 $11,273
Interest expense $2,820 $2,855 $2,831 $2,767 $11,273
1992 1st Qtr 2nd Qtr 3rdQtr 4th Otr Year Interest on Partnership advances $3,827 $3,230 $2,989 $2,910 $12,956
Reimbursement for early debt redemption(*) $ 0 $3,198 $ 0 $ 0 $3,198
Interest expense $3,827 $3,230 $2,989 $2,910 $12,956
Extraordinary loss on early debt redemption(*) $ 0 $3,198 $ 0 $ 0 $3,198
(*) See note 4 to the financial statements. No dividends were paid and the Corporation's common stock does not trade in any securities market.
Note - other supplementary data is omitted because it is not applicable.
Item 9.
Item 9. Changes In and Disagreements with Accountants on Accounting and Financial Disclosure
There have been no reported disagreements on any matter of accounting principles, procedures or financial disclosures in 1993 with the independent auditors.
PART III
Item 10.


Item 10. Directors and Executive Officers of the Registrant Omitted pursuant to the provisions of General Instruction J of Form 10-K.
Item 11.
Item 11. Executive Compensation Omitted pursuant to the provisions of General Instruction J of Form 10-K.
Item 12.
Item 12. Security Ownership of Certain Beneficial Owners and Management Omitted pursuant to the provisions of General Instruction J of Form 10-K.
Item 13.
Item 13. Certain Relationships and Related Transactions Omitted pursuant to the provisions of General Instruction J of Form 10-K.
PART IV
Item 14.
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.
(a) The following documents are filed as part of this report:
1. Financial statements and independent auditors' report: See Item 8 of this Annual Report.
2. Financial statement schedules: Schedules are omitted because of the absence of the conditions under which they are required or because the information called for is included in the financial statements.
3. Exhibits - See the Exhibit Index on page 16 of this Annual Report.
The Corporation will provide a copy of any exhibit upon receipt of a written request for the particular exhibit or exhibits desired and upon receipt of payment of an amount equal to a charge of twenty-five cents for each exhibit page, with a minimum charge of two dollars per request. All requests should be addressed to the Secretary of the Corporation at the address of the Corporation's principal executive offices.
(b) Reports on Form 8-K
No reports on Form 8-K were filed for the three months ended December 31, 1993.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this annual report to be signed on its behalf by the undersigned, thereunto duly authorized, on the 16th day of March, 1994.
DCS CAPITAL CORPORATION
By J. P. Reinhard J. P. Reinhard, President
Pursuant to the requirements of the Securities Exchange Act of 1934, this annual report has been signed by the following persons in the capacities and on the dates indicated.
Signatures Title Date
R. C. Bass Director
C. L. Williams Director
B. Taylorson Director
J. P. Reinhard President (Principal Financial Officer, Principal Accounting Officer)
INDEPENDENT AUDITORS' REPORT
DCS Capital Corporation:
We have audited the accompanying balance sheets of DCS Capital Corporation as of December 31, 1993 and 1992, and the related statements of income and expenses, and cash flows for each of the three years in the period ended December 31, 1993. These financial statements are the responsibility of the Corporation's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. 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, such financial statements present fairly, in all material respects, the financial position of DCS Capital Corporation at December 31, 1993 and 1992 and the results of its operations and its cash flows for each of the three years in the period ended December 31, 1993 in conformity with generally accepted accounting principles.
Deloitte & Touche
DELOITTE & TOUCHE Midland, Michigan
March 7, 1994
DCS CAPITAL CORPORATION
BALANCE SHEETS
December 31, 1993 1992 ASSETS
CURRENT ASSETS: Cash $300 $300 Receivables from DCS Capital Partership Current (Note 2) 46,387,812 45,608,007 Total Current Assets 46,388,112 45,608,307
Receivables from DCS Capital Partership Long-term (Note 2) 95,022,269 108,999,799 TOTAL ASSETS $141,410,381 $154,608,106
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES: Accounts Payable $3,500 $ 0 Notes Payable (Note 3) 30,388,000 29,520,000 Long-term debt due within one year (Note 4) 14,000,000 14,000,000 Accrued Interest 1,996,312 2,088,007 Total Current Liabilities 46,387,812 45,608,007
LONG-TERM DEBT (Note 4) 95,022,269 108,999,799
STOCKHOLDER'S EQUITY: Common stock ($1 par value; authorized, issued and outstanding, 300 shares) (Note 1) 300 300
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY 141,410,381 154,608,106
See notes to financial statements.
DCS CAPITAL CORPORATION
STATEMENTS OF INCOME AND EXPENSES
Year Ended Year Ended Year Ended December 31 December 31 December 31 1993 1992 1991 INTEREST AND OTHER INCOME: Interest earned on advances to DCS Capital Partnership (Note 1) 11,273,404 12,955,574 17,208,990 Reimbursement for early debt redemption 3,197,940 Administrative service fees from DCS Capital Partnership 140,636 208,899 449,033 TOTAL INCOME $11,414,040 $16,362,413 $17,658,023
INTEREST AND OTHER EXPENSES: Interest on short-term debt $1,060,018 $861,240 $3,030,632 Interest on long-term debt 10,213,386 12,094,334 14,178,358 Administrative expenses (Note 5) 140,636 208,899 449,033 Total Expenses before extraordinary loss 11,414,040 13,164,473 17,658,023
Extraordinary loss on early redemption of debt (Note 4) 0 3,197,940 0 TOTAL EXPENSES $11,414,040 $16,362,413 $17,658,023
See notes to financial statements.
DCS CAPITAL CORPORATION
STATEMENTS OF CASH FLOWS
Year Ended Year Ended Year Ended December 31 December 31 December 31 1993 1992 1991 Net Income $ 0 $ 0 $ 0
Cash Flows from Operating Activities:
Amortization of Discount on Notes 22,470 24,245 29,567 Decrease (Increase) in Accounts Receivable (779,805) (21,861,883) 3,143,427 Increase (Decrease) in Accounts Payable 3,500 0 (13,840) Decrease in Accrued Interest (91,695) (1,108,117) (3,029,587)
Net Cash Provided/(Used) in Operations (845,530) (22,945,755) 129,567
Cash Flows from Financing Activities: Proceeds of Bank of America Notes 407,108,000 324,355,000 124,626,000 Repayment of Bank of America Notes (406,240,000) (301,385,000) (131,226,000) Proceeds from bridge loan 0 0 80,000,000 Repayment of bridge loan 0 0 (80,000,000) Proceeds from long-term debt 0 0 70,000,000 Repayment of long-term debt (14,000,000) (38,812,940) (77,082,000) Discount on Notes Repaid 0 32,228 0 Loss on Early Redemption 0 3,197,940 0
Net Cash Used by Financing Activities (13,132,000) (12,612,772) (13,682,000)
Cash Flows from Investing Activities: Decrease in Long-term Receivables 13,977,530 35,558,528 13,552,433
Net Change in Cash 0 0 0 Cash at Beginning of Year 300 300 300
Cash at End of Year $ 300 $ 300 $ 300
See notes to financial statements.
DCS CAPITAL CORPORATION
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION
DCS Capital Corporation (the "Corporation") is a Delaware corporation wholly owned by DCS Capital Partnership (the "Partnership"), a Delaware partnership, the general partners of which are Dofinco Inc., Prentiss Glycol Company and Scotlene, Inc. The general partners are wholly owned subsidiaries of The Dow Chemical Company ("Dow"), Union Carbide Chemicals and Plastics Company, Inc., and Shell Canada Limited, respectively. The Corporation was incorporated on November 22, 1982, and was organized to assist the Partnership in raising fund to finance approximately 76 percent of the construction and start-up costs and certain deferred costs of an ethylene plant near Joffre, Alberta, Canada for Novacor Chemicals Ltd. ("Novacor"), an unrelated party.
The Corporation's only business is to arrange financing for the Partnership through the issuance of debt securities to obtain funds for lending to the Partnership and to refinance prior borrowings. The interest cost charged to the Partnership is an amount that equals the interest cost incurred by the Corporation on its borrowings. In addition, the Partnership reimburses the Corporation for its administrative expenses as further discussed in Note 5 below. The Partnership in turn is reimbursed for its net expenses by Novacor.
2. RECEIVABLES FROM DCS CAPITAL PARTNERSHIP
Receivables from the Partnership represent the net proceeds from the Corporation's borrowings that have been loaned to the Partnership, related accrued interest and other amounts for reimbursement of expenses. Advances and accrued interest thereon are evidenced by Partnership notes that are due at the same times and in the same amounts as principal, earned discount, interest and premium, if any, on the Corporation's borrowings. The Partnership notes bear interest at a variable interest rate based on the aggregate interest and amortization of discount on the Corporation's borrowings, which was approximately 7.87 percent at December 31, 1993 and 8.03 percent at December 31, 1992 and 9.86 at December 31, 1991. The Partnership notes are secured by certain rights of the Partnership under a Cash Deficiency Agreement among the partners and the Partnership. In addition, the performance of each partner pursuant to the Cash Deficiency Agreement has been guaranteed by each Partner's respective parent company (see Note 1). The Partnership notes are pledged as security for repayment of the Corporation's borrowings.
The summarized financial statements of the Partnership are as follows:
BALANCE SHEET
December 31 December 31 1993 1992 Assets: Cash and Time Deposits $ 783 $ 3,1921 Due from Novacor Chemicals, Ltd.: Note receivable 140,512,391 153,789,153 Accrued interest 923,134 815,761 Investment in DCS Capital Corporation 300 300
Total $141,436,608 $154,608,406
Liabilities and Partners' Capital: Accounts Payable 25,927 Payable to DCS Capital Corporation: Notes and accrued interest $ 141,410,081 $154,607,806 Total liabilities 141,436,008 154,607,806 Partners' Capital 600 600
Total $ 141,436,608 $154,608,406
STATEMENTS OF INCOME AND EXPENSE
Year Ended Year Ended Year Ended December 31 December 31 December 31 1993 1992 1991 Interest Income: Interest on Time Deposits $ 0 $ 0 $ 8,700 Interest on loans to Novacor Chemicals Company Ltd. 11,427,708 16,369,133 17,662,208
TOTAL INCOME $11,427,708 $16,369,133 $17,670,908
Expenses: Reimbursement for Loss on early debt redemption by DCS Capital Corporation $ 0 $ 3,197,940 $ 0 Interest on advances from DCS Capital Corporation 11,273,404 12,955,574 17,208,990 Administrative expenses: Paid to DCS Capital Corp. 140,636 208,899 449,033 Paid to others 13,668 6,720 12,885
TOTAL EXPENSES $11,427,708 $16,369,133 $17,670,908
3. NOTES PAYABLE
During 1993, 1992 and 1991, the Corporation borrowed and repaid several short- term bank loans. The outstanding balances were $30,388,000, $29,520,000, and $6,550,000 at December 31, 1993, 1992 and 1991, respectively. The interest rates on outstanding loans were 3.56%, 3.75% and 5.09% at December 31, 1993, 199 and 1991, respectively. The maximum amount of short-term notes payable outstanding at any month-end during the year was $34,300,000, $36,325,000, and $82,640,000 for 1993, 1992 and 1991, respectively. The month-end average amount outstanding during the year was $29,195,200, $22,755,833, and $33,742,844 for 1993, 1992 and 1991, respectively. The weighted average interest rate during the year was 3.46%, 4.08%, and 7.01% for 1993, 1992 and 1991 respectively.
4. LONG-TERM DEBT
Long-term debt is comprised of the following:
December 31 December 31 1993 1992 12.375% Series B Notes, due in 1996 67,085,000 67,085,000 Swiss Bank Corp., N.Y. 28,000,000 42,000,000
95,085,000 109,085,000
Less unamortized debt discount (62,731) (85,201)
Total $95,022,269 $108,999,799
The notes are secured by related Partnership notes receivable which are in turn secured by the Cash Deficiency Agreement referred to in Note 2 above. The long term debt of the Corporation had a fair value of approximately $14.0 million and $8.8 million more than the book value at December 31, 1993 and December 31, 1992, respectively, based upon current market rates on those dates.
During 1991 the Corporation entered into a new long-term variable rate borrowing of $70,000,000 from Swiss Bank Corporation, N.Y. in order to redeem the 12.20% Series A notes. This long-term borrowing is payable in semi-annual installments of $7,000,000 due April and October. The interest rate at December 31, 1993 and 1992 was 3.75% and 3.5% respectively.
During 1992 the Corporation redeemed $21,615,000 of the outstanding principal amounts of the 12.375% Series B notes, which was funded through short-term borrowings from a Bank. A $3,197,940 extraordinary loss on early redemption resulted from this transaction.
5. RELATED PARTY TRANSACTIONS
The Corporation and the Partnership have no salaried employees and their officers are employees of Dow. Dow performs management services for both and is reimbursed for actual cash expenditures, including an allocation of general overhead and administrative expenses, none of which are material to the Corporation.
6. CASH FLOW
Prior years statement of cash flows have been restated to conform with current year presentations. Additionally, the cash payments for interest for the years ended December 31, 1993, 1992 and 1991 were $11,365,099; $14,063,691 and $20,238,577, respectively.
EXHIBIT INDEX
3.1 Certificate of Incorporation of the Corporation (incorporated by reference to Registration Statement No. 2-85622, Exhibit 3.1)
3.2 By-laws of the Corporation (incorporated by reference to Registration Statement No. 2-85622, Exhibit 3.2)
4.1 Form of Series B Notes (incorporated by reference to Registration Statement No. 2-93612, Exhibit A to Exhibit 4.3)
4.2 Indenture dated as of February 15, 1984 between the Corporation and The Royal Bank and Trust Company, trustee (the "Trustee")(incorporated by reference to Registration Statement No. 2-85622,Exhibit 4.2)
4.3 Form of Supplement No. 2 to Indenture (incorporated by reference to Registration Statement No. 2-93612, Exhibit 4.3)
4.4 Form of Partnership Note of the Partnership (incorporated by reference to Registration Statement No. 2-85622, exhibit A to Exhibit 4.9)
4.5 Cash Deficiency Agreement dated as of March 1, 1983, among Dofinco, Inc., Pretiss Glycol Company and Scotlene, Inc. (the "Partners") and the Partnership (incorporated by reference to Registration Statement No. 2-85622, Exhibit 4.5)
4.6 Guarantee Agreement dated as of March 1, 1983, between Dow and the Partnership (incorporated by reference to Registration Statement No. 2-85622, Exhibit 4.6)
4.7 Guarantee Agreement dated as of March 1, 1983, between Union Carbide Corporation and the Partnership (incorporated by reference to Registration Statement No. 2-85622, Exhibit 4.7)
4.8 Guarantee Agreement dated as of March 1, 1983, between Shell Canada Limited and the Partnership (incorporated by reference to Registration Statement No. 2-85622, Exhibit 4.8)
4.9 Financing Agreement dated as of February 15, 1984 between the Corporation and the Partnership (incorporated by reference to Registration Statement No. 2-85622, Exhibit 4.9)
4.10 Form of Consent Assignment and Agreement among the Partners, the Partnership and the Trustee (incorporated by reference to Registration Statement No. 2-85622, Exhibit 4.9)
4.11 Partnership Agreement dated as of February 9, 1983, among the Partners (incorporated by reference to Registration Statement No. 2-85622, Exhibit 4.11)
26 Form T-l Statement of of Eligibility and Qualification under the Trust Indenture Act of 1939 of the Trustee (incorporated by reference to Registration Statement No. 2-93612, Exhibit 26)