{.TX}1-14
<PAGE>
CHESAPEAKE INVESTORS, INC.
ANNUAL REPORT
SEPTEMBER 30, 1999
<PAGE>
Dear Shareholder:
The financial report, contained herein, shows results for the fiscal year
ended September 30, 1999. Net investment income totalled $767,329 or
$.20 per share compared to $787,576 or $.21 per share for the previous year.
The net asset value decreased to $4.08 per share from $4.29 per share as of
September 30, 1998.
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 19, 1999
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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, 1999, 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 financial highlights for each of the five years in
the period then ended. These financial statements and financial highlights
are the responsibility of the Company's 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 generally accepted auditing
standards. 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 and financial highlights. Our procedures included
confirmation of securities owned as of September 30, 1999, 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 and financial highlights referred to
above present fairly, in all material respects, the financial position of
Chesapeake Investors, Inc. as of September 30, 1999, 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 financial highlights 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 19, 1999
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CHESAPEAKE INVESTORS, INC.
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
<S>
<C>
ASSETS:
Investments in Long-Term Securities, at Value
(Amortized Cost $14,326,498) $14,994,880
Investments in Short-Term Securities
(at cost which approximates market) 206,875
Accrued Interest Receivable 262,558
-----------
Total Assets 15,464,313
-----------
LIABILITIES:
Accounts Payable and Accrued Expenses 18,566
-----------
Total Liabilities 18,566
-----------
NET ASSETS:
Net Assets (Equivalent to $4.08 per share based on
3,783,960 shares of capital stock outstanding) $15,445,747
===========
</TABLE>
See Notes to Financial Statements
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<PAGE>
CHESAPEAKE INVESTORS, INC.
SCHEDULE OF INVESTMENTS IN SECURITIES
SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
Face Amortized
Rating* Amount Cost Value
------ ------------ ------------- ------------
<S> <C> <C> <C> <C>
Investments in Long-Term
Securities:
Alabama:
Birmingham, Alabama
Refunding UT GO
5.0%, due 4/1/19 AA $ 420,000 $ 420,000 $ 382,830
------------ ------------- ------------
Arizona:
Salt River Project,
Arizona - Series C Revenue
5.5%, due 1/1/28 AA 700,000 687,000 683,340
Maricopa County
Arizona School District
5.5%, due 7/1/05 AAA 650,000 661,868 678,665
----------- ------------- ------------
Total Arizona 1,350,000 1,348,868 1,362,005
----------- ------------- ------------
Arkansas:
Jefferson County, Arkansas
Single Family Mortgage
7.25%, due 12/1/10 Aaa 365,000 332,806 416,538
Little Rock, Arkansas
Single Family Mortgage,
7.3%:
due 9/1/00 AAA 25,000 24,864 25,782
due 9/1/01 AAA 25,000 24,727 26,438
due 9/1/02 AAA 30,000 29,521 32,454
due 9/1/03 AAA 35,000 34,279 38,055
due 9/1/04 AAA 35,000 34,129 38,325
due 9/1/05 AAA 40,000 38,845 44,004
due 9/1/06 AAA 35,000 33,860 38,728
due 9/1/07 AAA 45,000 43,379 50,089
due 9/1/08 AAA 50,000 48,038 58,505
due 9/1/09 AAA 50,000 47,887 58,850
due 9/1/10 AAA 30,000 28,648 33,516
------------ ------------- ------------
Total Arkansas 765,000 720,983 861,284
------------ ------------- ------------
</TABLE>
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<PAGE>
CHESAPEAKE INVESTORS, INC.
SCHEDULE OF INVESTMENTS IN SECURITIES (CONTINUED)
SEPTEMBER 30, 1999
<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 300,000 278,646 302,640
------------ ------------- ------------
Florida:
City of Gainesville, Florida,
Utility System Revenue,
9.125%, due 10/1/05 AAA 500,000 500,000 595,850
Florida State Board
of Education - Cap Outlay
7.25%, due 6/1/23 AA 200,000 198,927 208,520
------------ ------------- ------------
Total Florida 700,000 698,927 804,370
------------ ------------- ------------
Georgia:
Municipal Electric Authority
6%, due 1/1/05 AAA 700,000 725,306 741,510
------------ ------------- ------------
Illinois:
Chicago, Illinois
UTGO Public Library
6.60%, due 1/1/04 AAA 700,000 711,332 751,100
Chicago, Illinois
School Finance Authority
5%, due 6/1/09 AAA 650,000 622,048 645,645
------------ ------------- ------------
Total Illinois 1,350,000 1,333,380 1,396,745
------------ ------------- ------------
Louisiana:
Shreveport, Louisiana,
Single Family Mortgage,
6.75%, due 9/1/10 Aaa 405,000 359,310 436,914
------------- ------------- ------------
</TABLE>
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CHESAPEAKE INVESTORS, INC.
SCHEDULE OF INVESTMENTS IN SECURITIES (CONTINUED)
SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
Face Amortized
Rating* Amount Cost Value
------ ------------ ------------- -----------
<C> <C> <C> <C>
<S>
Massachusetts:
Massachusetts State Utility
Government Bond,
7.625%, due 6/1/08 Aaa 500,000 543,219 537,400
------------ ------------- ------------
Minnesota:
Southern Minnesota Municipal
Power Agency, Serial A
5.7%, due 1/1/05 A+ 650,000 662,261 678,080
------------ ------------- ------------
New Jersey:
New Jersey State Ref-Ser F
5.25%, due 8/1/14 AA+ 750,000 761,518 737,625
------------ ------------- ------------
New York:
New York State
Local Revenue
5.375%, due 4/1/16 A+ 200,000 188,236 194,720
New York State
Local Revenue
5.125%, due 4/1/10 AAA 400,000 393,250 399,320
------------ ------------- ------------
Total New York 600,000 581,486 594,040
------------ ------------- ------------
North Carolina:
North Carolina Municipal
Power Agency
7.25%, due 1/1/07 A- 400,000 425,671 434,800
Charlotte, NC Utility
General Obligation
5.5%, due 7/1/07 AAA 500,000 515,128 518,400
------------ ------------- ------------
Total North Carolina 900,000 940,799 953,200
------------ ------------- ------------
</TABLE>
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<PAGE>
CHESAPEAKE INVESTORS, INC.
SCHEDULE OF INVESTMENTS IN SECURITIES (CONTINUED)
SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
Face Amortized
Rating* Amount Cost Value
------ ----------- ------------- -----------
<S> <C> <C> <C> <C>
Pennsylvania:
Allegheny County, Pennsylvania
Hospital Development Authority
6.0%, due 11/1/23 AAA 700,000 674,193 714,700
Commonwealth of Pennsylvania
Utility Government Obligation
6.3%, due 11/1/02 AAA 700,000 708,594 739,480
Pennsylvania State Higher
Educational Facility
Authority
7.15%, due 6/15/15 AAA 500,000 503,184 511,600
Pennsylvania Intergovernmental
Coop Authority Special
Tax Revenue
7%, due 6/15/04 AAA 500,000 512,508 552,100
------------ ------------- ------------
Total Pennsylvania 2,400,000 2,398,479 2,517,880
------------ ------------- ------------
Texas:
Cypress-Fairbanks, Texas
Independent School District
5.5%, due 2/15/10 AAA 700,000 700,000 709,952
Texas Water Development
Board Revenue
5.5%, due 7/15/10 AAA 750,000 752,161 763,425
------------ ------------- ------------
Total Texas 1,450,000 1,452,161 1,473,377
------------ ------------- ------------
</TABLE>
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<PAGE>
CHESAPEAKE INVESTORS, INC.
SCHEDULE OF INVESTMENTS IN SECURITIES (CONTINUED)
SEPTEMBER 30, 1999
<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 700,000 708,890 846,020
------------ ------------- ------------
Washington:
Washington State Public Power
5.125%, due 7/1/17 AAA 400,000 392,265 368,960
------------ ------------- ------------
Total Investments in
Long-Term Securities $ 14,340,000 $ 14,326,498 $ 14,994,880
============ ============= ============
* 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, 2.41% $ 206,875 $ 206,875
Total Investments ------------- --------------
in Short-Term Securities $ 206,875 $ 206,875
============= ===============
</TABLE>
See Notes to Financial Statements
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CHESAPEAKE INVESTORS, INC.
STATEMENT OF OPERATIONS
YEAR ENDED SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
<C>
<S>
INVESTMENT INCOME:
Interest Income $ 892,378
------------
EXPENSES:
Investment Advisory Fee 55,048
Custodian Fees 11,720
Transfer Agent and Dividend
Disbursing Agent Fees 13,927
Legal and Auditing Services 17,207
Administrative Services 18,000
Compensation of Directors not
Members of the Investment Adviser's Organization 3,500
Printing Costs 3,604
Miscellaneous 2,043
------------
Total Expenses 125,049
------------
Net Investment Income 767,329
------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Realized Gain From Investment
Transactions (Excluding Short-Term Securities):
Proceeds from Sales 1,252,121
Cost of Investments Sold 1,189,805
------------
Net Realized Gain on Investments 62,316
------------
Unrealized Loss on Investments:
Unrealized Appreciation of Investments
at Beginning of Year 1,514,865
Unrealized Appreciation of Investments
at End of Year 668,382
------------
Net Unrealized Loss on Investments (846,483)
------------
Net Realized and Unrealized Loss on
Investments (784,167)
------------
Net Decrease in Net Assets Resulting
from Operations $ (16,838)
============
</TABLE>
See Notes to Financial Statements
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CHESAPEAKE INVESTORS, INC.
STATEMENTS OF CHANGES IN NET ASSETS
YEARS ENDED SEPTEMBER 30, 1999 AND 1998
<TABLE>
<CAPTION>
1999 1998
-------------- --------------
<C> <C>
<S>
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net Investment Income $ 767,329 $ 787,576
Net Realized Gain on
Investments 62,316 3,666
Net Unrealized Gain (Loss)
on Investments (846,483) 266,109
------------- -------------
Net Increase (Decrease) in Net Assets
Resulting from Operations (16,838) 1,057,351
Dividends to Shareholders from:
Net Investment Income (793,465) (785,161)
Net Realized Gain on Investments (1,155) -
-------------- -------------
Total Increase (Decrease)
in Net Assets (811,458) 272,190
NET ASSETS:
Beginning of Year 16,257,205 15,985,015
------------- -------------
End of Year (Including Undistributed
Net Investment Income of $797,079
and $823,215, respectively, and
undistributed net realized gains
of $62,316 and $1,155,
respectively) $ 15,445,747 $ 16,257,205
============= =============
</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, 1999, there were 6,000,000 shares of $.50 par value
capital stock authorized. Shares issued and outstanding at September 30, 1999
totalled 3,783,960.
(3) - PURCHASES AND SALES OF SECURITIES
Sales and maturities of securities during fiscal year 1999, other than
short-term securities, aggregated $1,252,121.
Purchases of long-term securities during fiscal year 1999, aggregated
$1,281,648.
For Federal income tax purposes, the identified cost of investments
owned, excluding short-term securities, at September 30, 1999, was $14,126,961.
Gross unrealized gains and losses totalled $958,197 and $90,278, respectively,
for Federal income tax purposes at September 30, 1999.
(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 fiscal year 1999 totalled $55,048.
For fiscal year 1999, fees of $18,000 for administrative services were
paid to Carrollton Enterprises Management Company, LLC. The Chairman of the
Board is the owner of that firm.
(5) - DIVIDENDS
During fiscal year 1999, the Company distributed dividends of $794,620
to its shareholders. On October 5, 1999, the Company declared a $.065 per
share dividend, aggregating $245,957, payable November 2, 1999, to
shareholders of record October 19, 1999.
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<PAGE>
CHESAPEAKE INVESTORS, INC.
SUPPLEMENTARY INFORMATION
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
----------------------------------------------------
1999 1998 1997 1996 1995
------ ------ ------ ------ -------
<C> <C> <C> <C> <C>
<S>
PER SHARE DATA:*
Investment Income $ .23 $ .24 $ .24 $ .25 $ .29
Expenses .03 .03 .03 .03 .03
------ ------ ------ ------ ------
Net Investment Income .20 .21 .21 .22 .26
Dividends from:
Net Investment Income (.21) (.21) (.19) (.23) (.28)
Net Realized Gain
on Investments - - (.04) (.01) -
Net Realized and
Unrealized Gain
(Loss) on Investments (.20) .07 .06 .01 .05
------ ------ ------ ------ ------
Net Increase (Decrease)
in Net Asset Value (.21) .07 .04 (.01) .03
Net Asset Value:
Beginning of Year 4.29 4.22 4.18 4.19 4.16
------ ------ ------ ------ ------
End of Year $ 4.08 $ 4.29 $ 4.22 $ 4.18 $ 4.19
====== ====== ====== ====== ======
RATIOS:
Ratio of Expenses to
Average Net Assets .79% .72% .72% .72% .74%
Ratio of Net Investment
Income to Average Net
Assets 4.82% 4.90% 5.07% 5.22% 6.18%
</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
Edna L. Ryon
Harry F. Breitback
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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