<PAGE>
CHESAPEAKE INVESTORS, INC.
SEMI-ANNUAL REPORT
TO SHAREHOLDERS
MARCH 31, 1997
<PAGE>
Dear Shareholder:
The financial report, contained herein, shows results for the six month
period ended March 31, 1997. Net investment income totalled $388,577 or
$.10 per share compared to $412,384 or $.11 per share for the six month
period ended March 31, 1996. The net asset value as of March 31, 1997 was
$4.12 per share compared with $4.18 per share on September 30, 1996.
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
May 16, 1997
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<PAGE>
CHESAPEAKE INVESTORS, INC.
STATEMENT OF ASSETS AND LIABILITIES
MARCH 31, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
<S> <C>
ASSETS:
Investments in Long-Term Securities, at Value
(Amortized Cost $14,275,916) $15,136,479
Investments in Short-Term Securities
(at cost which approximates market) 190,104
Accrued Interest Receivable 272,272
------------
Total Assets 15,598,855
------------
LIABILITIES:
Accounts Payable and Accrued Expenses:
Other 17,476
------------
Total Liabilities 17,476
------------
NET ASSETS:
Net Assets (Equivalent to $4.12 per share based on
3,783,960 shares of capital stock outstanding) $15,581,379
============
</TABLE>
See Notes to Financial Statements
- 2 -
<PAGE>
CHESAPEAKE INVESTORS, INC.
SCHEDULE OF INVESTMENTS IN SECURITIES
MARCH 31, 1997
(UNAUDITED)
<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 $ 685,850 $ 663,250
Maricopa County
Arizona School District
5.5%, due 7/1/05 . . . . . . AAA 650,000 667,029 667,674
-------------- -------------- --------------
Total Arizona . . . . . 1,350,000 1,352,879 1,330,924
-------------- -------------- --------------
Arkansas:
Jefferson County, Arkansas
Single Family Mortgage
7.25%, due 12/1/10 . . . . . . Aaa 365,000 325,598 417,812
Little Rock, Arkansas
Single Family Mortgage,
7.3%:
due 9/1/00 . . . . . . . . AAA 25,000 24,493 28,633
due 9/1/01 . . . . . . . . AAA 25,000 24,371 28,633
due 9/1/02 . . . . . . . . AAA 30,000 29,111 34,360
due 9/1/03 . . . . . . . . AAA 35,000 33,819 40,086
due 9/1/04 . . . . . . . . AAA 35,000 33,685 40,086
due 9/1/05 . . . . . . . . AAA 40,000 38,357 45,813
due 9/1/06 . . . . . . . . AAA 35,000 33,447 40,086
due 9/1/07 . . . . . . . . AAA 45,000 42,867 51,539
due 9/1/08 . . . . . . . . AAA 50,000 47,487 57,266
due 9/1/09 . . . . . . . . AAA 50,000 47,355 57,266
due 9/1/10 . . . . . . . . AAA 30,000 28,338 34,360
-------------- -------------- --------------
Total Arkansas . . . 765,000 708,928 875,940
-------------- -------------- --------------
</TABLE>
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<PAGE>
CHESAPEAKE INVESTORS, INC.
SCHEDULE OF INVESTMENTS IN SECURITIES (CONTINUED)
MARCH 31, 1997
(UNAUDITED)
<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 300,000 276,920 292,266
-------------- -------------- --------------
District of Columbia:
Georgetown University
Revenue Bond
7.4%, due 4/1/18 . . . . . . . AA- 750,000 731,736 785,273
-------------- -------------- --------------
Florida:
City of Gainesville, Florida,
Utility System Revenue,
9.125%, due 10/1/05 . . . . . AAA 500,000 500,000 637,420
Florida State Board
of Education - Cap Outlay
7.25%, due 6/1/23 . . . . . . AA 200,000 198,814 218,090
-------------- -------------- --------------
Total Florida . . . . . 700,000 698,814 855,510
-------------- -------------- --------------
Georgia:
Municipal Electric Authority
6%, due 1/1/05 . . . . . . . . AAA 700,000 737,357 740,796
-------------- -------------- --------------
Illinois:
Chicago, Illinois
UTGO Public Library
6.60%, due 1/1/04 . . . . . . AAA 700,000 717,997 757,421
Chicago, Illinois
School Finance Authority
5%, due 6/1/09 . . . . . . . . AAA 650,000 614,819 621,361
-------------- -------------- --------------
Total Illinois . . . . 1,350,000 1,332,816 1,378,782
-------------- -------------- --------------
</TABLE>
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<PAGE>
CHESAPEAKE INVESTORS, INC.
SCHEDULE OF INVESTMENTS IN SECURITIES (CONTINUED)
MARCH 31, 1997
(UNAUDITED)
<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 405,000 348,847 448,918
-------------- -------------- --------------
Massachusetts:
Massachusetts State Utility
Government Bond,
7.625%, due 6/1/08 . . . . . . A+ 500,000 555,686 560,780
-------------- -------------- --------------
Minnesota:
Southern Minnesota Municipal
Power Agency, Serial A
5.7%, due 1/1/05 . . . . . . . A+ 650,000 668,099 673,868
-------------- -------------- --------------
New York:
New York State
Local Revenue
5.375%, due 4/1/16 . . . . . . A+ 200,000 186,454 189,626
New York State
Local Revenue
5.125%, due 4/1/10 . . . . . . AAA 400,000 391,643 388,752
Triborough Bridge and
Tunnel Authority -
New York Rev Series
7.875%, due 1/1/18 . . . . . . AAA 400,000 402,421 417,252
-------------- -------------- --------------
Total New York . . . . 1,000,000 980,518 995,630
-------------- -------------- --------------
</TABLE>
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<PAGE>
CHESAPEAKE INVESTORS, INC.
SCHEDULE OF INVESTMENTS IN SECURITIES (CONTINUED)
MARCH 31, 1997
(UNAUDITED)
<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- 400,000 434,522 448,688
Charlotte, NC Utility
General Obligation
5.5%, due 7/1/07 . . . . . . . AAA 500,000 520,008 517,420
-------------- -------------- --------------
Total North Carolina . 900,000 954,530 966,108
-------------- -------------- --------------
Oklahoma:
Oklahoma State Turnpike
Authority
Turnpike Revenue
6.125%, due 1/1/20 . . . . . . A+ 360,000 355,842 367,427
-------------- -------------- --------------
Pennsylvania:
Allegheny County, Pennsylvania
Hospital Development Authority
6.0%, due 11/1/23 . . . . . . AAA 700,000 671,514 708,421
Commonwealth of Pennsylvania
Utility Government Obligation
6.3%, due 11/1/02 . . . . . . AAA 700,000 715,563 750,862
Pennsylvania State Higher
Educational Facility
Authority
7.15%, due 6/15/15 . . . . . . AAA 500,000 503,689 535,860
Pennsylvania Intergovernmental
Coop Authority Special
Tax Revenue
7%, due 6/15/04 . . . . . . . AAA 500,000 519,209 558,595
-------------- -------------- --------------
Total Pennsylvania . . 2,400,000 2,409,975 2,553,738
-------------- -------------- --------------
</TABLE>
- 6 -
<PAGE>
CHESAPEAKE INVESTORS, INC.
SCHEDULE OF INVESTMENTS IN SECURITIES (CONTINUED)
MARCH 31, 1997
(UNAUDITED)
<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 700,000 700,000 700,987
Texas Water Development
Board Revenue
5.5%, due 7/15/10 . . . . . . AAA 750,000 752,660 762,420
-------------- -------------- --------------
Total Texas . . . . . . 1,450,000 1,452,660 1,463,407
-------------- -------------- --------------
Utah:
Salt Lake City, Utah
Hospital Revenue
8.125%, due 5/15/15 . . . . . AAA 700,000 710,309 847,112
-------------- -------------- --------------
Total Investments in
Long-Term
Securities . . . . $ 14,280,000 $ 14,275,916 $ 15,136,479
============== ============== ==============
* Ratings - Standard & Poor's or Moody's
Unaudited
<CAPTION>
Face
Amount Cost
-------------- --------------
<S>
Investments in Short-Term Securities:
Seven Seas Series
Tax Free Money Market Fund, 2.62% . . . . . . . .$ 190,104 $ 190,104
Total Investments -------------- --------------
in Short-Term Securities . . . . . . . .$ 190,104 $ 190,104
============== ==============
</TABLE>
See Notes to Financial Statements
- 7 -
<PAGE>
CHESAPEAKE INVESTORS, INC.
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED
MARCH 31, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
<S> <C>
INVESTMENT INCOME:
Interest Income $ 454,331
--------------
EXPENSES:
Investment Advisory Fee 27,224
Custodian Fees 5,100
Transfer Agent and Dividend
Disbursing Agent Fees 5,912
Legal and Auditing Services 13,488
Administrative Services 9,000
Compensation of Directors not
Members of the Investment Adviser's Organization 2,500
Printing Costs 1,759
Miscellaneous 771
--------------
Total Expenses 65,754
--------------
Net Investment Income 388,577
--------------
REALIZED AND UNREALIZED LOSS ON INVESTMENTS:
Realized Loss From Investment
Transactions (Excluding Short-Term Securities):
Proceeds from Sales 605,818
Cost of Investments Sold 608,394
--------------
Net Realized Loss on Investments (2,576)
--------------
Unrealized Loss on Investments:
Unrealized Appreciation of Investments
at Beginning of Period 996,256
Unrealized Appreciation of Investments
at End of Period 860,562
--------------
Net Unrealized Loss on Investments (135,694)
--------------
Net Realized and Unrealized Loss on
Investments (138,270)
--------------
Net Increase in Net Assets Resulting
from Operations $ 250,307
==============
</TABLE>
See Notes to Financial Statements
- 8 -
<PAGE>
CHESAPEAKE INVESTORS, INC.
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE SIX MONTHS ENDED MARCH 31, 1997 AND
FOR THE YEAR ENDED SEPTEMBER 30, 1996
<TABLE>
<CAPTION>
Six Month Period Year Ended
Ended March 31, September 30,
1997 1996
(Unaudited) (Audited)
-------------- --------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net Investment Income $ 388,577 $ 827,321
Net Realized Gain (Loss) on
Investments (2,576) 158,742
Net Unrealized Loss
on Investments (135,694) (96,118)
-------------- --------------
Net Increase in Net Assets
Resulting from Operations 250,307 889,945
Dividends to Shareholders from:
Net Investment Income (333,165) (870,738)
Net Realized Gain on Investments (158,742) (56,326)
-------------- --------------
Total Increase (Decrease)
in Net Assets (241,600) (37,119)
-------------- --------------
NET ASSETS:
Beginning of Period 15,822,979 15,860,098
-------------- --------------
End of Period (Including Undistributed
Net Investment Income of $805,423
and $770,223, respectively, and
Undistributed Net Realized Gains
of $158,742 at September 30, 1996) $ 15,581,379 $ 15,822,979
============== ==============
</TABLE>
See Notes to Financial Statements
- 9 -
<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 - Investment security transactions are accounted for on the date
the securities are purchased or sold. 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.
- 10 -
<PAGE>
(2) - CAPITAL STOCK
At March 31, 1997, there were 6,000,000 shares of $.50 par value
capital stock authorized. Shares issued and outstanding at March 31, 1997
totalled 3,783,960.
(3) - PURCHASES AND SALES OF SECURITIES
Sales and maturities of securities during the six month period ended
March 31, 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 March 31, 1997, was
$14,109,431. Gross unrealized gains totalled $1,029,636 and gross
unrealized losses totalled $26,246 for Federal income tax purposes at
March 31, 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 the six month period ended March 31, 1997 totalled
$27,224.
For the six month period ended March 31,1997, fees of $9,000 for
administrative services were paid to Carrollton Enterprises. The Chairman
of the Board is the owner of that firm.
(5) - DIVIDENDS
During the six month period ended March 31, 1997, the Company
distributed dividends of $491,907 to its shareholders. On March 13, 1997,
the Company declared a $.05 per share dividend payable April 10, 1997, to
shareholders of record March 27, 1997.
- 11 -
<PAGE>
CHESAPEAKE INVESTORS, INC.
SUPPLEMENTARY INFORMATION
SELECTED PER SHARE DATA AND RATIOS
<TABLE>
<CAPTION>
Six Months Fiscal Fiscal Fiscal Fiscal
March 31, Year Year Year Year
1997 1996 1995 1994 1993
-------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA:*
Investment Income $ .12 $ .25 $ .29 $ .32 $ .33
Expenses .02 .03 .03 .03 .03
-------------- -------------- -------------- -------------- --------------
Net Investment Income .10 .22 .26 .29 .30
Dividends from:
Net Investment Income (.09) (.23) (.28) (.27) (.30)
Net Realized Gain
on Investments (.04) (.01) - (.03) -
Net Realized and Unreal-
ized Gain (Loss) on
Investments (.04) .01 .05 (.32) .08
-------------- -------------- -------------- -------------- --------------
Net Increase (Decrease)
in Net Asset Value (.06) (.01) .03 (.33) .08
Net Asset Value:
Beginning of Period 4.18 4.19 4.16 4.49 4.41
-------------- -------------- -------------- -------------- --------------
End of Period $ 4.12 $ 4.18 $ 4.19 $ 4.16 $ 4.49
============== ============== ============== ============== ==============
RATIOS:
Ratio of Expenses to
Average Net Assets .42% .72% .74% .74% .70%
Ratio of Net Investment
Income to Average Net
Assets 2.47% 5.22% 6.18% 6.81% 6.82%
</TABLE>
*Selected data for a share of capital stock outstanding throughout the year.
- 12 -
<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,
Secretary-Treasurer
OFFICES
11785 Beltsville Drive
Beltsville, Maryland
- 13 -
