{.TX}1-14
<PAGE>
CHESAPEAKE INVESTORS, INC.
ANNUAL REPORT 1997
<PAGE>
Dear Shareholder:
The financial report, contained herein, shows results for the fiscal
year ended September 30, 1997. Net investment income totalled $801,265 or
$.21 per share compared to $827,321 or $.22 per share for the previous
year. The net asset value increased to $4.22 per share from $4.18 per
share as of September 30, 1997.
It is the Company's intent to provide as high a level of income as
possible, consistent with sound investment policies. The market is
constantly monitored to achieve the objectives of a high level of income
and the preservation of net asset value.
Sincerely,
Albert W. Turner, Warren W. Pearce, Jr.,
Chairman of the Board President
November 20, 1997
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<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Shareholders and Board of Directors of
Chesapeake Investors, Inc.
We have audited the accompanying statement of assets and liabilities of
Chesapeake Investors, Inc., including the schedule of investments in securities,
as of September 30, 1997, the related statement of operations for the year then
ended, the statements of changes in net assets for each of the two years in the
period then ended, and the selected per share data and ratios for each of the
five years in the period then ended. These financial statements, schedule, and
selected per share data and ratios are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements, schedule, and selected per share data and rations 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, schedule, and
selected per share data and ratios 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 September 30, 1997 by correspondence with the
custodian. 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, schedule, and selected per
share data and ratios referred to above present fairly, in all material
respects, the financial position of Chesapeake Investors, Inc. as of September
30, 1997, the results of its operations for the year then ended, the changes in
its net assets for each of the two years in the period then ended, and the
selected per share data and ratios for each of the five years in the period then
ended, in conformity with generally accepted accounting principles.
STOY, MALONE & COMPANY,P.C.
Bethesda, Maryland
November 20, 1997
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<PAGE>
CHESAPEAKE INVESTORS, INC.
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
<S>
<C>
ASSETS:
Investments in Long-Term Securities, at Value
(Amortized Cost $14,269,744) $15,518,500
Investments in Short-Term Securities
(at cost which approximates market) 205,810
Accrued Interest Receivable 278,181
------------
Total Assets
16,002,491
------------
LIABILITIES:
Accounts Payable and Accrued Expenses 17,476
- ------------
Total Liabilities 17,476
------------
NET ASSETS:
Net Assets (Equivalent to $4.22 per share based on
3,783,960 shares of capital stock outstanding) $15,985,015
============
</TABLE>
See Notes to Financial Statements
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<PAGE>
CHESAPEAKE INVESTORS, INC.
SCHEDULE OF INVESTMENTS IN SECURITIES
SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
Face Amortized
Rating* Amount Cost
Value
------ ------------- -------------
--------------
<S>
<C> <C> <C> <C>
Investments in Long-Term
Securities:
Arizona:
Salt River Project,
Arizona - Series C Revenue
5.5%, due 1/1/28 . . . . . AA $ 700,000 $ 686,080
$ 704,703
Maricopa County
Arizona School District
5.5%, due 7/1/05 . . . . AAA 650,000 665,997
689,914
------------- -------------
--------------
Total Arizona . . . . 1,350,000 1,352,077
1,394,617
------------- -------------
--------------
Arkansas:
Jefferson County, Arkansas
Single Family Mortgage
7.25%, due 12/1/10 . . . . Aaa 365,000 327,040
421,290
Little Rock, Arkansas
Single Family Mortgage,
7.3%:
due 9/1/00 . . . . . . AAA 25,000 24,567
27,199
due 9/1/01 . . . . . . AAA 25,000 24,443
27,801
due 9/1/02 . . . . . . AAA 30,000 29,193
33,994
due 9/1/03 . . . . . . AAA 35,000 33,911
40,376
due 9/1/04 . . . . . . AAA 35,000 33,774
40,950
due 9/1/05 . . . . . . AAA 40,000 38,454
47,450
due 9/1/06 . . . . . . AAA 35,000 33,530
42,049
due 9/1/07 . . . . . . AAA 45,000 42,969
54,668
due 9/1/08 . . . . . . AAA 50,000 47,597
61,242
due 9/1/09 . . . . . . AAA 50,000 47,461
61,555
due 9/1/10 . . . . . . AAA 30,000 28,400
37,092
------------- -------------
--------------
Total Arkansas . . 765,000 711,339
895,666
------------- -------------
--------------
</TABLE>
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<PAGE>
CHESAPEAKE INVESTORS, INC.
SCHEDULE OF INVESTMENTS IN SECURITIES (CONTINUED)
SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
Face Amortized
Rating* Amount Cost
Value
------ ------------- -------------
--------------
<C> <C> <C> <C>
<S>
California:
Los Angeles, California
Electric Revenue
5.875%, due 9/1/30 . . . . AA 300,000 277,265
306,656
------------- -------------
--------------
District of Columbia:
Georgetown University
Revenue Bond
7.4%, due 4/1/18 . . . . . AA- 750,000 732,171
785,859
------------- -------------
--------------
Florida:
City of Gainesville, Florida,
Utility System Revenue,
9.125%, due 10/1/05 . . . AAA 500,000 500,000
644,219
Florida State Board
of Education - Cap Outlay
7.25%, due 6/1/23 . . . . AA 200,000 198,836
218,361
------------- -------------
--------------
Total Florida . . . . 700,000 698,836
862,580
------------- -------------
--------------
Georgia:
Municipal Electric Authority
6%, due 1/1/05 . . . . . . AAA 700,000 734,947
762,015
------------- -------------
--------------
Illinois:
Chicago, Illinois
UTGO Public Library
6.60%, due 1/1/04 . . . . AAA 700,000 716,664
770,218
Chicago, Illinois
School Finance Authority
5%, due 6/1/09 . . . . . . AAA 650,000 616,265
653,148
------------- -------------
--------------
Total Illinois . . . 1,350,000 1,332,929
1,423,366
------------- -------------
--------------
</TABLE>
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PAGE>
CHESAPEAKE INVESTORS, INC.
SCHEDULE OF INVESTMENTS IN SECURITIES (CONTINUED)
SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
Face Amortized
Rating* Amount Cost
Value
------ ------------- -------------
--------------
<C> <C> <C> <C>
<S>
Louisiana:
Shreveport, Louisiana,
Single Family Mortgage,
6.75%, due 9/1/10 . . . . Aaa 405,000 350,940
462,649
------------- -------------
--------------
Massachusetts:
Massachusetts State Utility
Government Bond,
7.625%, due 6/1/08 . . . . Aaa 500,000 553,192
567,109
------------- -------------
--------------
Minnesota:
Southern Minnesota Municipal
Power Agency, Serial A
5.7%, due 1/1/05 . . . . . A+ 650,000 666,931
694,281
------------- -------------
--------------
New York:
New York State
Local Revenue
5.375%, due 4/1/16 . . . . A+ 200,000 186,810
200,562
New York State
Local Revenue
5.125%, due 4/1/10 . . . . AAA 400,000 391,965
408,875
Triborough Bridge and
Tunnel Authority -
New York Rev Series
7.875%, due 1/1/18 . . . . AAA 400,000 402,363
410,000
------------- -------------
--------------
Total New York . . . 1,000,000 981,138
1,019,437
------------- -------------
--------------
</TABLE>
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<PAGE>
CHESAPEAKE INVESTORS, INC.
SCHEDULE OF INVESTMENTS IN SECURITIES (CONTINUED)
SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
Face Amortized
Rating* Amount Cost
Value
------ ------------- -------------
--------------
<C> <C> <C> <C>
<S>
North Carolina:
North Carolina Municipal
Power Agency
7.25%, due 1/1/07 . . . . A 400,000 432,752
461,812
Charlotte, NC Utility
General Obligation
5.5%, due 7/1/07 . . . . . AAA 500,000 519,032
530,547
------------- -------------
--------------
Total North Carolina 900,000 951,784
992,359
------------- -------------
--------------
Oklahoma:
Oklahoma State Turnpike
Authority
Turnpike Revenue
6.125%, due 1/1/20 . . . . A+ 360,000 355,933
376,650
------------- -------------
--------------
Pennsylvania:
Allegheny County, Pennsylvania
Hospital Development Authority
6.0%, due 11/1/23 . . . . AAA 700,000 672,050
726,140
Commonwealth of Pennsylvania
Utility Government Obligation
6.3%, due 11/1/02 . . . . AAA 700,000 714,169
763,765
Pennsylvania State Higher
Educational Facility
Authority
7.15%, due 6/15/15 . . . . AAA 500,000 503,588
539,453
Pennsylvania Intergovernmental
Coop Authority Special
Tax Revenue
7%, due 6/15/04 . . . . . AAA 500,000 517,869
571,641
------------- -------------
--------------
Total Pennsylvania 2,400,000 2,407,676
2,600,999
------------- -------------
--------------
</TABLE>
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<PAGE>
CHESAPEAKE INVESTORS, INC.
SCHEDULE OF INVESTMENTS IN SECURITIES (CONTINUED)
SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
Face Amortized
Rating* Amount Cost
Value
------ ------------- -------------
--------------
<C> <C> <C> <C>
<S>
Texas:
Cypress-Fairbanks, Texas
Independent School District
5.5%, due 2/15/10 . . . . AAA 700,000 700,000
718,922
Texas Water Development
Board Revenue
5.5%, due 7/15/10 . . . . AAA 750,000 752,560
793,242
------------- -------------
--------------
Total Texas . . . . . 1,450,000 1,452,560
1,512,164
------------- -------------
--------------
Utah:
Salt Lake City, Utah
Hospital Revenue
8.125%, due 5/15/15 . . . AAA 700,000 710,026
862,093
------------- -------------
--------------
Total Investments in
Long-Term
Securities . . . $ 14,280,000 $ 14,269,744
$ 15,518,500
============= =============
===============
* Ratings - Standard & Poor's or Moody's
Unaudited
<CAPTION>
Face
Amount
Cost
-------------
-------------
<S>
Investments in Short-Term Securities:
State Street Global Advisor
Tax Free Money Market Fund, 2.91% . . . . . $ 205,810
$ 205,810
Total Investments -------------
-------------
in Short-Term Securities . . . . . $ 205,810
$ 205,810
=============
=============
</TABLE>
See Notes to Financial Statements
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PAGE>
CHESAPEAKE INVESTORS, INC.
STATEMENT OF OPERATIONS
YEAR ENDED SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
<C>
<S>
INVESTMENT INCOME:
Interest Income $ 914,416
-------------
EXPENSES:
Investment Advisory Fee 54,157
Custodian Fees 8,401
Transfer Agent and Dividend
Disbursing Agent Fees 11,182
Legal and Auditing Services 13,488
Administrative Services 18,000
Compensation of Directors not
Members of the Investment Adviser's Organization 3,500
Printing Costs 2,862
Miscellaneous 1,561
-------------
Total Expenses 113,151
-------------
Net Investment Income 801,265
-------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Realized Loss From Investment
Transactions (Excluding Short-Term Securities):
Proceeds from Sales 605,818
Cost of Investments Sold 608,329
-------------
Net Realized Loss on Investments (2,511)
-------------
Unrealized Gain on Investments:
Unrealized Appreciation of Investments
at Beginning of Year 996,256
Unrealized Appreciation of Investments
at End of Year 1,248,756
-------------
Net Unrealized Gain on Investments 252,500
-------------
Net Realized and Unrealized Gain on
Investments 249,989
-------------
Net Increase in Net Assets Resulting
from Operations $ 1,051,254
=============
</TABLE>
See Notes to Financial Statements
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<PAGE>
CHESAPEAKE INVESTORS, INC.
STATEMENTS OF CHANGES IN NET ASSETS
YEARS ENDED SEPTEMBER 30, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
------------- -------------
<C> <C>
<S>
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net Investment Income $ 801,265 $ 827,321
Net Realized Gain (Loss) on
Investments (2,511) 158,742
Net Unrealized Gain (Loss)
on Investments 252,500 (96,118)
------------- -------------
Net Increase in Net Assets
Resulting from Operations 1,051,254 889,945
Dividends to Shareholders from:
Net Investment Income
($.19 and $.23 per share, respectively) (730,476) (870,738)
Net Realized Gain on Investments
($.04 and $.01 per share, respectively) (158,742) (56,326)
------------- -------------
Total Increase (Decrease)
in Net Assets 162,036 (37,119)
------------- -------------
NET ASSETS:
Beginning of Year 15,822,979 15,860,098
------------- -------------
End of Year (Including Undistributed
Net Investment Income of $820,800
and $750,011, respectively, and
Undistributed Net Realized Gains
of $158,742 at September 30, 1996) $ 15,985,015 $ 15,822,979
============= =============
</TABLE>
See Notes to Financial Statements
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<PAGE>
CHESAPEAKE INVESTORS, INC.
NOTES TO FINANCIAL STATEMENTS
(1) - SIGNIFICANT ACCOUNTING POLICIES
Chesapeake Investors, Inc. (the "Company") is registered under the
Investment Company Act of 1940, as amended, as a diversified closed-end
management investment company and invests solely in municipal obligations.
The following is a summary of significant accounting policies consistently
followed by the Company in the preparation of its financial statements.
The policies are in conformity with generally accepted accounting
principles.
A. Investment Security Valuation - Securities are valued at the mean
between the latest bid and asked prices. Any securities for which market
quotations are not readily available are appraised at fair value as
determined in good faith under methods or procedures authorized by the
Board of Directors.
B. Federal Income Taxes - The Company intends to comply with the provisions
of the Internal Revenue Code available to investment companies and to
distribute to shareholders annually all of its net investment income.
Accordingly, no provision for Federal income tax is necessary. The
Company, based on provisions of the Internal Revenue Code, expects to
distribute income from capital gains to its shareholders. Accordingly,
such gains will be taxable to the shareholders. The character of
dividends from net investment income or net realized gains on investments
may differ from their ultimate characterization for Federal income tax
purposes due to generally accepted accounting principles and tax
differences in the character of income and expense recognition.
C. Other - The Company follows industry practice and records security
transactions on the trade date. Interest income is recorded on the
accrual basis. Bond premiums and discounts are amortized to income
ratably over the total number of months from date of purchase to date of
maturity of the bonds. Certain securities have optional or mandatory
tender features which give them a shorter effective maturity date.
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<PAGE>
(2) - CAPITAL STOCK
At September 30, 1997, there were 6,000,000 shares of $.50 par value
capital stock authorized. Shares issued and outstanding at September 30, 1997
totalled 3,783,960.
(3) - PURCHASES AND SALES OF SECURITIES
Sales and maturities of securities during fiscal year 1997, other than
short-term securities, aggregated $605,818.
Purchases of long-term securities during the six month period ended
March 31, 1997 aggregated $391,536.
For Federal income tax purposes, the identified cost of investments
owned, excluding short-term securities, at September 30, 1997, was
$14,094,971. Gross unrealized gains totalled $1,423,529 for Federal income
tax purposes at September 30, 1997.
(4) - INVESTMENT ADVISORY FEE AND TRANSACTIONS WITH AFFILIATES
Federated Investment Counseling, Inc. is the investment adviser to the
Company. The advisory contract provides for an annual fee equal to .35 of
1% of the weighted average managed assets of the Company. The investment
advisory fee for fiscal year 1997 totalled $54,157.
For fiscal year 1997, fees of $18,000 for administrative services were
paid to Carrollton Enterprises. The Chairman of the Board is the owner of
firm.
(5) - DIVIDENDS
During fiscal year 1997, the Company distributed dividends of $889,218
to its shareholders. On October 7,1997, the company declared a $.0575 per
share dividend payable November 4, 1997, to shareholders of record
October 21, 1997.
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<PAGE>
CHESAPEAKE INVESTORS, INC.
SUPPLEMENTARY INFORMATION
SELECTED PER SHARE DATA AND RATIOS
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
------------------------------------------------------------------------------
1997 1996 1995
1994 1993
------------- -------------
- ------------- ------------- -------------
<C> <C> <C>
<C> <C>
<S>
PER SHARE DATA:*
Investment Income $ .24 $ .25 $ .29
$ .32 $ .33
Expenses .03 .03 .03
.03 .03
------------- ------------- -------------
------------- -------------
Net Investment Income .21 .22 .26
.29 .30
Dividends from:
Net Investment Income (.19) (.23) (.28)
(.27) (.30)
Net Realized Gain
on Investments (.04) (.01) -
(.03) -
Net Realized and Unreal-
ized Gain (Loss) on
Investments .06 .01 .05
(.32) .08
------------- ------------- -------------
------------- -------------
Net Increase (Decrease)
in Net Asset Value .04 (.01) .03
(.33) .08
Net Asset Value:
Beginning of Year 4.18 4.19 4.16
4.49 4.41
------------- ------------- -------------
------------- -------------
End of Year $ 4.22 $ 4.18 $ 4.19
$ 4.16 $ 4.49
============= ============= =============
============= =============
RATIOS:
Ratio of Expenses to
Average Net Assets .72% .72% .74%
.74% .70%
Ratio of Net Investment
Income to Average Net
Assets 5.07% 5.22% 6.18%
6.81% 6.82%
</TABLE>
*Selected data for a share of capital stock outstanding throughout the year.
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<PAGE>
DIRECTORS INVESTMENT ADVISER
Albert W. Turner Federated Investment
Herndon G. Kilby Counseling, Inc.
Warren W. Pearce, Jr. Pittsburgh, Pennsylvania
John F. Ryon
Wilbert N. Sales
CUSTODIAN
State Street Bank
and Trust Company
North Quincy, Massachusetts
OFFICERS TRANSFER AGENT
Albert W. Turner, Registrar and Transfer Company
Chairman of the Board Cranford, New Jersey
Warren W. Pearce, Jr.,
President
Herndon G. Kilby, INDEPENDENT AUDITORS
Secretary-Treasurer
Stoy, Malone & Company,P.C.
OFFICES Bethesda, Maryland
11785 Beltsville Drive
Beltsville, Maryland
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