{.TX}1-13
<PAGE>
CHESAPEAKE INVESTORS, INC.
SEMI-ANNUAL REPORT
MARCH 31, 1998
<PAGE>
Dear Shareholder:
The financial report, contained herein, shows results for the six month
period ended March 31, 1998. Net investment income totalled $380,625 or
$.10 per share compared to $388,577 or $.10 per share for the six month period
ended March 31, 1997. The net asset value increased to $4.23 per share from
$4.12 per share as of March 31, 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
May 16, 1998
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<PAGE>
CHESAPEAKE INVESTORS, INC.
STATEMENT OF ASSETS AND LIABILITIES
MARCH 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
<S>
<C>
ASSETS:
Investments in Long-Term Securities, at Value
(Amortized Cost $14,252,410) $15,554,752
Investments in Short-Term Securities
(at cost which approximates market) 207,557
Accrued Interest Receivable 272,461
------------
Total Assets 16,034,770
------------
LIABILITIES:
Accounts Payable and Accrued Expenses 19,078
------------
Total Liabilities 19,078
------------
NET ASSETS:
Net Assets (Equivalent to $4.23 per share based on
3,783,960 shares of capital stock outstanding) $16,015,692
============
</TABLE>
See Notes to Financial Statements
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<PAGE>
CHESAPEAKE INVESTORS, INC.
SCHEDULE OF INVESTMENTS IN SECURITIES
MARCH 31, 1998
(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 $ 686,310 $ 706,993
Maricopa County
Arizona School District
5.5%, due 7/1/05 AAA 650,000 664,964 695,988
------------ ------------- ------------
Total Arizona 1,350,000 1,351,274 1,402,981
------------ ------------- ------------
Arkansas:
Jefferson County, Arkansas
Single Family Mortgage
7.25%, due 12/1/10 Aaa 365,000 328,481 451,834
Little Rock, Arkansas
Single Family Mortgage,
7.3%:
due 9/1/00 AAA 25,000 24,642 28,787
due 9/1/01 AAA 25,000 24,514 28,787
due 9/1/02 AAA 30,000 29,275 34,544
due 9/1/03 AAA 35,000 34,003 40,301
due 9/1/04 AAA 35,000 33,863 40,301
due 9/1/05 AAA 40,000 38,552 46,059
due 9/1/06 AAA 35,000 33,612 40,301
due 9/1/07 AAA 45,000 43,071 51,816
due 9/1/08 AAA 50,000 47,708 57,574
due 9/1/09 AAA 50,000 47,568 57,574
due 9/1/10 AAA 30,000 28,462 34,544
------------ ------------- ------------
Total Arkansas 765,000 713,751 912,422
------------ ------------- ------------
</TABLE>
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<PAGE>
CHESAPEAKE INVESTORS, INC.
SCHEDULE OF INVESTMENTS IN SECURITIES (CONTINUED)
MARCH 31, 1998
(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 300,000 277,610 313,617
------------ ------------- ------------
District of Columbia:
Georgetown University
Revenue Bond
7.4%, due 4/1/18 AA- 750,000 732,605 787,448
------------ ------------- ------------
Florida:
City of Gainesville, Florida,
Utility System Revenue,
9.125%, due 10/1/05 AAA 500,000 500,000 601,950
Florida State Board
of Education - Cap Outlay
7.25%, due 6/1/23 AA 200,000 198,859 216,396
------------ ------------- ------------
Total Florida 700,000 698,859 818,346
------------ ------------- ------------
Georgia:
Municipal Electric Authority
6%, due 1/1/05 AAA 700,000 732,537 765,954
------------ ------------- ------------
Illinois:
Chicago, Illinois
UTGO Public Library
6.60%, due 1/1/04 AAA 700,000 715,331 773,045
Chicago, Illinois
School Finance Authority
5%, due 6/1/09 AAA 650,000 617,710 663,696
------------ ------------- ------------
Total Illinois 1,350,000 1,333,041 1,436,741
------------ ------------- ------------
</TABLE>
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CHESAPEAKE INVESTORS, INC.
SCHEDULE OF INVESTMENTS IN SECURITIES (CONTINUED)
MARCH 31, 1998
(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 405,000 353,032 460,546
------------ ------------- ------------
Massachusetts:
Massachusetts State Utility
Government Bond,
7.625%, due 6/1/08 Aaa 500,000 550,699 560,510
------------ ------------- ------------
Minnesota:
Southern Minnesota Municipal
Power Agency, Serial A
5.7%, due 1/1/05 A+ 650,000 665,763 696,982
------------ ------------- ------------
New York:
New York State
Local Revenue
5.375%, due 4/1/16 A+ 200,000 187,167 201,544
New York State
Local Revenue
5.125%, due 4/1/10 AAA 400,000 391,858 414,308
------------ ------------- ------------
Total New York 600,000 579,025 615,852
------------ ------------- ------------
North Carolina:
North Carolina Municipal
Power Agency
7.25%, due 1/1/07 A 400,000 430,982 468,768
Charlotte, NC Utility
General Obligation
5.5%, due 7/1/07 AAA 500,000 518,056 529,330
------------ ------------- ------------
Total North Carolina 900,000 949,038 998,098
------------ ------------- ------------
</TABLE>
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<PAGE>
CHESAPEAKE INVESTORS, INC.
SCHEDULE OF INVESTMENTS IN SECURITIES (CONTINUED)
MARCH 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
Face Amortized
Rating* Amount Cost Value
------ ----------- ------------- -----------
<S> <C> <C> <C> <C>
Oklahoma:
Oklahoma State Turnpike
Authority
Turnpike Revenue
6.125%, due 1/1/20 A+ 360,000 356,025 386,834
----------- ------------- ------------
Pennsylvania:
Allegheny County, Pennsylvania
Hospital Development Authority
6.0%, due 11/1/23 AAA 700,000 672,586 743,610
Commonwealth of Pennsylvania
Utility Government Obligation
6.3%, due 11/1/02 AAA 700,000 712,775 758,597
Pennsylvania State Higher
Educational Facility
Authority
7.15%, due 6/15/15 AAA 500,000 503,487 532,270
Pennsylvania Intergovernmental
Coop Authority Special
Tax Revenue
7%, due 6/15/04 AAA 500,000 516,529 572,745
------------ ------------- ------------
Total Pennsylvania 2,400,000 2,405,377 2,607,222
------------ ------------- ------------
Texas:
Cypress-Fairbanks, Texas
Independent School District
5.5%, due 2/15/10 AAA 700,000 700,000 721,343
Texas Water Development
Board Revenue
5.5%, due 7/15/10 AAA 750,000 752,460 789,773
------------ ------------- ------------
Total Texas 1,450,000 1,452,460 1,511,116
------------ ------------- ------------
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<PAGE>
CHESAPEAKE INVESTORS, INC.
SCHEDULE OF INVESTMENTS IN SECURITIES (CONTINUED)
MARCH 31, 1998
(UNAUDITED)
</TABLE>
<TABLE>
<CAPTION>
Face Amortized
Rating* Amount Cost Value
------- ------------ ------------- ------------
<C> <C> <C> <C>
<S>
Utah:
Salt Lake City, Utah
Hospital Revenue
8.125%, due 5/15/15 AAA 700,000 709,742 886,627
------------ ------------- ------------
Washington:
Washington State Public Power
5.125%, due 7/1/17 AAA 400,000 391,572 393,456
------------ ------------- ------------
Total Investments in
Long-Term Securities $ 14,280,000 $ 14,252,410 $ 15,554,752
============ ============= ============
* 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, 3.05% $ 207,557 $ 207,557
Total Investments ------------- --------------
in Short-Term Securities $ 207,557 $ 207,557
============= ===============
</TABLE>
See Notes to Financial Statements
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CHESAPEAKE INVESTORS, INC.
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED
MARCH 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
<C>
<S>
INVESTMENT INCOME:
Interest Income $ 448,553
------------
EXPENSES:
Investment Advisory Fee 27,806
Custodian Fees 6,432
Transfer Agent and Dividend
Disbursing Agent Fees 6,033
Legal and Auditing Services 13,060
Administrative Services 9,000
Compensation of Directors not
Members of the Investment Adviser's Organization 3,000
Printing Costs 1,522
Miscellaneous 1,075
------------
Total Expenses 67,928
------------
Net Investment Income 380,625
------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Realized Gain From Investment
Transactions (Excluding Short-Term Securities):
Proceeds from Sales 406,000
Cost of Investments Sold 402,334
------------
Net Realized Gain on Investments 3,666
------------
Unrealized Gain on Investments:
Unrealized Appreciation of Investments
at Beginning of Period 1,248,756
Unrealized Appreciation of Investments
at End of Period 1,301,913
------------
Net Unrealized Gain on Investments 53,157
------------
Net Realized and Unrealized Gain on
Investments 56,823
------------
Net Increase in Net Assets Resulting
from Operations $ 437,448
============
</TABLE>
See Notes to Financial Statements
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<PAGE>
CHESAPEAKE INVESTORS, INC.
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE SIX MONTHS ENDED MARCH 31, 1998 AND
FOR THE YEAR ENDED SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
Six Month Period Year Ended
Ended March 31, September 30,
1998 1997
(Unaudited) (Audited)
-------------- --------------
<C> <C>
<S>
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net Investment Income $ 380,625 $ 801,265
Net Realized Gain (Loss) on
Investments 3,666 (2,511) Net Unrealized Gain (Loss)
Net Unrealized Gain
on Investments 53,157 252,500
------------- -------------
Net Increase in Net Assets
Resulting from Operations 437,448 1,051,254
Dividends to Shareholders from:
Net Investment Income
($.1075 and $.19 per share,
respectively) (406,771) (730,476)
Net Realized Gain on Investments
($.00 and $.04 per share,
respectively) -0- (158,742)
------------- -------------
Total Increase
in Net Assets 30,677 162,036 (37,119)
NET ASSETS:
Beginning of Period 15,985,015 15,822,979
------------- -------------
End of Period (Including Undistributed
Net Investment Income of $794,654
and $820,800, respectively, and
Undistributed Net Realized Gains
of $3,666 at March 31, 1998) $ 16,015,692 $ 15,985,015
============= ==============
</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 March 31, 1998, there were 6,000,000 shares of $.50 par value
capital stock authorized. Shares issued and outstanding at March 31, 1998
totalled 3,783,960.
(3) - PURCHASES AND SALES OF SECURITIES
Sales and maturities of securities during the six month period ended
March 31, 1998, other than short-term securities, aggregated $406,000.
Purchases of long-term securities during the six month period ended
March 31, 1998 aggregated $391,572.
For Federal income tax purposes, the identified cost of investments
owned, excluding short-term securities, at March 31, 1998, was $14,069,779.
Gross unrealized gains totalled $1,484,973 for Federal income tax purposes
at March 31, 1998.
(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, 1998 totalled $27,806.
For the six month period ended March 31, 1998, 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, 1998, the Company distributed
dividends of $406,771 to its shareholders. On March 24, 1998, the company
declared a $.05 per share dividend payable April 21, 1998, to shareholders of
record April 7, 1998.
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<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
1998 1997 1996 1995 1994
------ ------ ------ ------ -------
<C> <C> <C> <C> <C>
<S>
PER SHARE DATA:*
Investment Income $ .12 $ .24 $ .25 $ .29 $ .32
Expenses .02 .03 .03 .03 .03
------ ------ ------ ------ ------
Net Investment Income .10 .21 .22 .26 .29
Dividends from:
Net Investment Income (.11) (.19) (.23) (.28) (.27)
Net Realized Gain
on Investments - (.04) (.01) - (.03)
Net Realized and
Unrealized Gain
(Loss) on Investments .02 .06 .01 .05 (.32)
------ ------ ------ ------ ------
Net Increase (Decrease)
in Net Asset Value .01 .04 (.01) .03 (.33)
Net Asset Value:
Beginning of Period 4.22 4.18 4.19 4.16 4.49
------ ------ ------ ------ ------
End of Period $ 4.23 $ 4.22 $ 4.18 $ 4.19 $ 4.16
====== ====== ====== ====== ======
RATIOS:
Ratio of Expenses to
Average Net Assets .43% .72% .72% .74% .74%
Ratio of Net Investment
Income to Average Net
Assets 2.40% 5.07% 5.22% 6.18% 6.81%
</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,
Secretary-Treasurer
OFFICES
11785 Beltsville Drive
Beltsville, Maryland
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