Annual Report
REAL SILK INVESTMENTS, INCORPORATED
445 North Pennsylvania Street
Suite 500
Indianapolis, Indiana 46204
(317) 632-7359
Indianapolis Indiana
Year Ended December 31, 1998
REAL SILK INVESTMENTS, INCORPORATED
____________________
Officers
D. R. Efroymson. . . . . . . . . President and Treasurer
L. M. Efroymson. . . . . . . . . . . . . .Vice President
J. D. Efroymson. . . . . . . . . . . . . .Vice President
M. A. Singer . . . . . . . . . .Assistant Vice President
J. D. Hagan. . . . . . . . . . .Assistant Vice President
L. A. Cox. . . . . . . . . . . . . . . . . . . Secretary
D. A. Link . . . . . . . . . . . . . Assistant Secretary
_____________________
Directors
Robert L. Beal Peter Z. Grossman
Terry W. Bowmaster Norman C. Kleifgen, Jr.
William A. Carter Samuel L. Odle
Daniel R. Efroymson Eli J. Segal
Loralei M. Efroymson Gideon J. Stein
Herbert D. Falender Mary Ann Stein
Transfer Agent and Registrar
Registrar & Transfer Company
Cranford, New Jersey
Custodian of Securities
NBD Bank, N. A.
Indianapolis, Indiana
Independent Auditors
KPMG LLP
Indianapolis, Indiana
REAL SILK INVESTMENTS, INCORPORATED
Financial Statements
December 31, 1998
Table of Contents
Page
Independent Auditors' Report 1
Financial Statements:
Statement of Assets and Liabilities 2
Statement of Operations 3
Statements of Changes in Net Assets 4
Supplementary Information Financial Highlights 5
Notes to Financial Statements 6-11
Additional Information:
Schedule of Investments in Securities 12-17
Independent Auditors' Report
The Stockholders and Board of Directors
Real Silk Investments, Incorporated:
We have audited the accompanying statement of assets and liabilities of Real
Silk Investments, Incorporated, including the schedule ofinvestments in
securities, as of December 31, 1998, the related statement of operations for
the year then ended, the statements of changes in net assets for each of the
years in the two-year period ended December 31, 1998, and the financial
highlights for each of the years in the four-year period ended December 31,
1998. 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 audit. The financial highlights for the year ended December 31, 1994
were audited by other auditors whose report thereon, dated January 19, 1995,
expressed an unqualified opinion.
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. Our procedures included confirmation of
securities owned as of December 31, 1998 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
Real Silk Investments, Incorporated at December 31, 1998, the results of its
operations for the year then ended, the changes in its net assets for each of
the years in the two-year period ended December 31, 1998, and the financial
highlights for each of the years in the four-year period ended December 31,
1998 in conformity with generally accepted accounting principles.
Indianapolis, Indiana
January 22, 1999
REAL SILK INVESTMENTS, INCORPORATED
Statement of Assets and Liabilities
December 31, 1998
Assets
Investments in securities (unaffiliated issuers), at market value:
Money market funds (cost: $1,322,022) $ 1,322,022
Common shares (cost: $12,079,173) 128,969,511
U.S. government and agency securities (cost: $1,890,835) 1,977,545
Other bonds and notes (cost: $7,170,737) 7,424,755
Total investments in securities (unaffiliated issuers) 139,693,833
Investments in securities (affiliated issuers), at market value:
Common shares (cost: $147,786) (note 4) 9,675,000
Total investments in securities 149,368,833
Cash 10,577
Accrued interest and dividends receivable 307,648
Other current assets 37,998
Office furniture and equipment, less accumulated
depreciation of $66,415 23,641
Total assets $ 149,748,697
Liabilities
Accounts payable and accrued expenses (note 5) 43,382
Total liabilities 43,382
Net Assets
Equivalent to $909.05 per share based on 164,683 shares of
$5.00 par value common stock outstanding (note 2) 149,705,315
Total liabilities and net assets $ 149,748,697
See accompanying notes to financial statements.
REAL SILK INVESTMENTS, INCORPORATED
Statement of Operations
Year ended December 31, 1998
Investment income:
Dividends, including affiliated issuers
of $264,000 (note 4) $ 2,240,133
Interest on securities from unaffiliated issuers 665,930
Total income 2,906,063
Expenses:
Officers' salaries 199,437
Other salaries and wages 103,088
Taxes other than federal income tax 60,651
Legal, auditing and other professional services (note 9) 165,154
Custodian fees 4,000
Directors' fees 28,500
Investment banking fees (note 9) 50,000
Office expense and supplies 10,158
Insurance 33,977
Rent (note 8) 56,657
Pension (note 6) 12,189
Depreciation 8,929
Dues and subscriptions 8,009
Computer expense 4,221
Equipment lease 17,934
Sundry 48,998
Total expenses (note 5) 811,902
Net investment income 2,094,161
Net realized gain (loss) on investments (unaffiliated issuers):
Proceeds from sales 11,285,917
Cost of securities sold 11,221,641
64,276
Capital gain distributions from other investment companies 25,200
89,476
Federal income tax benefit (note 1) 24,530
Net realized gain (loss) on investments (note 3) 114,006
Unrealized appreciation in value of investments:
Beginning of year 112,784,952
End of year 126,758,280
13,973,328
(Increase) decrease in deferred federal income
tax payable (note 1) 12,973,551
Net increase in unrealized appreciation, including an
affiliated issuer's decrease of $675,000 (note 4) 26,946,879
Net realized and unrealized gain (loss) on investments 27,060,885
Net increase (decrease) in net assets resulting from operations$ 29,155,046
See accompanying notes to financial statements.
REAL SILK INVESTMENTS, INCORPORATED
Statements of Changes in Net Assets
Years ended December 31, 1998 and 1997
1998 1997
Net investment income $ 2,094,161 2,507,155
Net realized gain (loss) on investments 114,006 (110,414)
Net increase (decrease) in unrealized appreciation 26,946,879 21,409,074
Net increase (decrease) in net assets resulting
from operations 29,155,046 23,805,815
Federal income tax paid on realized gain on behalf of
stockholders, charged to operations (note 1) - -
Cash distributions to stockholders from net investment
income ($12.95 and $15.00 per
share, respectively) (note 1) (2,132,645) (2,470,245)
Deemed distributions to stockholders from net realized
gain on investments (note 1) - -
Additional paid-in capital (note 1) - -
Increase (decrease) in net assets 27,022,401 21,335,570
Net assets at beginning of year 122,682,914 101,347,344
Net assets at end of year (including undistributed net
investment income of $3,070 and $823,372,
respectively, and undistributed net realized
loss on investments of $29,137 and
$110,414, respectively) $ 149,705,315 122,682,914
See accompanying notes to financial statements.
REAL SILK INVESTMENTS, INCORPORATED
Supplementary Information
Financial Highlights
Year Ended December 31,
1998 1997 1996 1995 1994
Per share data
Investment income $ 17.65 17.67 17.85 17.52 16.23
Less: expenses 4.93 2.45 2.29 2.17 1.92
Net investment income 12.72 15.22 15.56 15.35 14.31
Net realized gain (loss) on investments .69 (.67) 2.95 (1.27) (.12)
Net increase (decrease) in unrealized
appreciation 163.63 130.00 37.10 71.10 (26.29)
Net increase (decrease) in net assets
resulting from operations 177.04 144.55 55.61 85.18 (12.10)
Federal income tax paid on realized gain
on behalf of stockholders, charged
to operations (note 1) - - .87 - -
Cash distributions to stockholders from
net investment income (note 1) (12.95) (15.00) (15.23) (15.28) (13.92)
Deemed distributions to stockholders from
net realized gain on
investments (note 1) - - (2.49) - -
Additional paid-in capital (note 1) - - 1.62 - -
Increase (decrease) in net assets 164.09 129.55 40.38 69.90 (26.02)
Net asset value per share:
Beginning of year 744.96 615.41 575.03 505.13 531.15
End of year $ 909.05 744.96 615.41 575.03 505.13
Quoted market value per share,
end of year $ 570.00 520.00 450.00 420.00 375.00
Ratios/Supplemental Data
Expenses to average net assets .63% .35% .39% .41% .36%
Net investment income to average
net assets 1.62% 2.19% 2.67% 2.88% 2.71%
Portfolio turnover rate 2.72% 3.68% 3.35% 2.04% 1.07%
Total return 12.22% 19.13% 10.89% 16.31% 16.33%
Net assets, end of
year $149,705,315 122,682,914 101,347,344 94,697,920 83,186,717
See accompanying notes to financial statements.
REAL SILK INVESTMENTS, INCORPORATED
Notes to Financial Statements
December 31, 1998
Note 1 - Summary of Significant Accounting Policies
Real Silk Investments, Incorporated (the Company) is registered under the
Investment Company Act of 1940 (as amended) as a closed-end diversified
management investment company. The Company, which primarily invests in
common stock, has no external managers and pays no management fees. The
significant accounting policies of the Company, which are in conformity with
generally accepted accounting principles for closed-end management investment
companies, are described below.
Investments
Investments in securities traded on national securities exchanges or the
NASDAQ National Market are valued at the last reported sales price. Other
securities traded on the over-the-counter market are valued at the closing
bid prices. Bonds and notes are valued on the basis of quotations furnished
by recognized trade sources. Purchases and sales of securities are recorded
as of the trade dates. Costs of securities sold are determined by specific
shares or average shares if specific shares are not available. Net
unrealized gains or losses are determined based on the net change between the
market value and cost of investments held as of the beginning and end of the
fiscal year. The cost bases of investments for federal income tax purposes
are the same as the book values.
Investment Income
Dividend and interest income are recorded on the accrual basis of accounting.
Cash dividends from securities are recorded as income on the ex-dividend
dates. Dividends for which the recipient has the choice to receive cash or
stock are recognized as investment income in the amount payable in cash.
Other noncash dividends are recognized as investment income at the fair
market value of the property received.
Use of Estimates and Assumptions
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of increase and decrease in net assets from operations
during the period. Actual results could differ from those estimates.
(Continued)
REAL SILK INVESTMENTS, INCORPORATED
Notes to Financial Statements
Federal Income Tax
Prior to January 1, 1989, the Company was subject to federal income tax as a
regular ("C") corporation. Beginning January 1, 1989, the Company qualified
and elected to be taxed as a regulated investment company within the meaning
of Section 851 of the Internal Revenue Code and is currently reporting tax on
such basis. As a regulated investment company, the Company generally does
not pay federal income tax at the corporate level on current earnings which
are passed through to its stockholders.
The Tax Reform Act of 1986 gives the United States Treasury Department the
authority, under Section 337(d)(1), to promulgate regulations to assure that
the purposes of certain provisions of that Act (those taxing appreciated
property on the sale or liquidation of a corporation) are not circumvented by
the use of various entities, including regulated investment companies. In
Notice 88-19, the Treasury stated its intention to issue regulations
generally making a C corporation taxable on built-in gains at the time it
converts to a regulated investment company, but permitting it to elect to be
subject to rules similar to those applicable to a corporation which elects to
be taxed as an S corporation. Those rules impose an income tax on the
built-in gains of a C corporation which are recognized during the first ten
years following its election to be taxed as an S corporation. If the
intended regulations were adopted as described in Notice 88-19, the
appreciation of the assets of the Company as of January 1, 1989 (the
"built-in gains") would be taxed to the extent these gains were realized
prior to January 1, 1999. To date, no such regulations have been issued.
Because the authority to promulgate such regulations exists and because the
Treasury Department issued Notice 88-19, the Company recorded a deferred tax
liability in its financial statements for the potential tax, until December
31, 1998. Due to the expiration on December 31, 1998, of the ten-year
period subject to the built-in gains tax, the Company reversed its built-in
gains deferred tax liability, resulting in a decrease in the deferred federal
income tax payable and an increase in unrealized appreciation and net assets
of approximately $13.0 million (approximately $79 per share).
As built-in gains have been realized, the Company has deposited with the
Internal Revenue Service (IRS) amounts representing the potential tax on the
realized built-in gains. The Company requested refunds of the amounts
deposited to protect the Company's right to those deposits. The Company has
received refunds from the IRS for the amounts deposited representing the
potential tax on realized built-in gains for the tax years ended December 31,
1992, 1993, 1995, 1996 and 1997.
Also, the Company is a personal holding company as defined in Section 542 of
the Internal Revenue Code. As a personal holding company, the Company is
subject to a special surtax on any undistributed personal holding company
income. However, the Company distributes all of its personal holding company
income.
REAL SILK INVESTMENTS, INCORPORATED
Notes to Financial Statements
Net investment income and net realized gains (losses) may differ for
financial statement and tax purposes. The character of distributions made
during the year from net investment income or net realized gains (losses), if
any, may differ from the ultimate characterization for federal income tax
purposes.
Distributions to Stockholders
The policy of the Company is to distribute all investment company taxable
income without incurring tax at the corporate level and without jeopardizing
the Company's regulated investment company status. All or most of its net
realized long-term capital gains are retained and, as such, are treated as
deemed distributions to the shareholders.
As a regulated investment company, the Company may annually elect to treat
retained long-term capital gains as distributed to its stockholders on the
last day of the year. The Company must pay a tax at the highest corporate
rate on the retained gains deemed distributed. The stockholders include
these capital gains in their individual income tax returns and receive a
credit equal to their share of the tax paid by the Company. The difference
between the gains retained by the Company and the tax paid by the Company on
behalf of the stockholders is added by the stockholders to the basis of their
stock.
For the year ended December 31, 1998, the Company realized long-term capital
gains of $89,476 and received refunds of the 1995 built-in gains tax deposit
of $3,600 and the 1997 built-in gains tax deposit of $20,930, resulting in a
net realized long-term capital gain of $114,006. As of December 31, 1998,
for tax purposes the Company had a net realized loss of $29,137 that is
available for use until December 31, 2005.
Note 2 - Net Assets
The Company's net assets at December 31, 1998 were comprised of the following
elements:
Common stock ($5.00 par value) and additional paid-in
capital; 300,000 shares authorized, 164,683 shares
issued and outstanding $ 22,973,102
Accumulated undistributed income:
Undistributed net investment income 3,070
Undistributed net realized gains (losses) (29,137)
Unrealized gains of $127,577,075 and unrealized
losses of $818,795 126,758,280
Net assets $ 149,705,315
Under generally accepted accounting principles, permanent differences between
financial reporting and reporting for federal income tax purposes are to be
identified and appropriately reclassified between the components of net
assets. As a result of such permanent book-to-tax differences,
reclassification of $781,819 of accumulated undistributed net investment
income and $32,729 of accumulated net realized gain resulted in a net
increase to additional paid-in capital of $814,548 as of December 31, 1998.
These permanent differences relate to retained tax-exempt net investment
income, built-in gain refund adjustments, expenses which are not deductible
for federal income tax purposes, and other permanent book-to-tax differences.
Note 3 - Investments
Following is a summary of securities sold during the year ended December 31,
1998:
Proceeds from
Sales and Net Gain
Maturities Cost (Loss)
Money market funds $ 6,765,633 6,765,633 -
Common shares 90 20 70
U.S. government and agency securities 4,520,194 4,455,988 64,206
Other bonds and notes - - -
Totals $11,285,917 11,221,641 64,276
Capital gain distributions from
other investment companies 25,200
89,476
Federal income tax - refunds of 1995
and 1997 built-in gains deposits 24,530
Net realized gain (loss) on investments $ 114,006
No built-in gains were realized for the year ended December 31, 1998. As of
December 31, 1998, the Company is no longer subject to the built-in gains
tax (note 1).
The aggregate cost of securities acquired during the year ended December 31,
1998, was as follows:
Money market funds $ 7,548,482
Common shares 687,650
U.S. government securities 1,003,984
Other bonds and notes 2,107,585
Total purchases of securities $ 11,347,701
(Continued)
Note 4 - Investment in Affiliated Issuer
The Company is an affiliated company, as defined in Section 2(a)(2) and
2(a)(3) of the Investment Company Act of 1940, with respect to its investment
in Arnold Industries, Inc., a publicly traded company. The Company and
affiliated persons owned more than five percent of the voting common stock of
Arnold Industries, Inc. at December 31, 1998. There were no purchases or
sales of affiliated securities during the year-ended December 31, 1998.
Note 5 - Expenses
Prior to July 31, 1998, the Company shared personnel with two entities, and
office facilities with one of those entities, both considered to be related
parties as defined by Statement of Financial Accounting Standards No. 57,
"Related Party Disclosures." One of the related parties is a private
partnership of which certain officers and directors of the Company are
partners. The other related party, with which there were no direct
transactions, is a not-for-profit charitable foundation of which certain
officers and directors are also directors of the Company. For the seven
months ended July 31, 1998, certain costs were allocated among the three
entities based on actual usage or management's estimate of use if actual
usage could not be determined precisely. The sharing of personnel and
facilities with the not-for-profit charitable foundation ceased as of July
31, 1998.
Certain office equipment, primarily computer and telecommunications
equipment, used by the Company is owned by the related private partnership.
The Company annually enters into a one-year operating lease with the related
party. On July 1, 1998, the Company entered into a one-year operating lease
with a thirty-day cancellation clause with the related party. Payments to
the related party under the lease totaled $18,769 for the year ended December
31, 1998. At December 31, 1998, the monthly lease payment required by the
lease is $2,228. A portion of the lease amount is attributable to certain
equipment purchased by the private partnership related party from a vendor
that may be considered a related party.
The related private partnership purchases office supplies and similar items
used by the Company. On a monthly basis, the Company reimburses the related
party for its allocated share of the office supplies. For the year ended
December 31, 1998, expenses reimbursed to the related party totaled $51,688.
This total includes approximately $455 that was reimbursed to the private
partnership for a vendor that may also be considered a related party.
Accounts payable at December 31, 1998 includes $2,287 of related party
expenses.
Note 6 - Retirement Plan
Effective January 1, 1992, the Company began sponsoring a money purchase
pension plan which covers all employees of the Company who have met certain
service requirements. Annually, the Company must contribute to the Plan an
amount equal to five percent of each participant's compensation. Pension
expense was $12,189 in 1998.
Note 7 - Line of Credit
The Company has an unsecured line of credit for short-term bank borrowings of
up to $5 million, with interest computed at the bank's prime rate. The line
of credit expires on July 1, 1999. At December 31, 1998, the entire line of
credit was unused.
Note 8 - Rent Commitment
In March 1998, the Company entered into a one-year extension on the operating
lease dated March 1993 for office space. The extended lease is on a
month-to-month basis. At December 31, 1998, the monthly payment required by
the lease is $5,304.
Note 9 - Recent Developments
On March 20, 1998, the Board of Directors of the Company announced its
intention to explore options for the future of the Company. These options,
among others, include continuing as is, merging with another investment
company or liquidating the Company. In October 1998, the Company engaged an
investment banker to assist it in identifying and evaluating potential
options. The investment banker's fees vary up to a maximum of $1 million
based on the terms of the option chosen.
As a result of the exploration of options for the future and the
discontinuation of shared personnel with the related party not-for-profit
charitable foundation (see note 5), the Company incurred additional expenses
during 1998 and anticipates doing so into the future.
Note 10 - Commitments
In November 1998, the Board of Directors approved a Welfare Benefit Severance
Pay Plan for certain full-time employees of the Company. Potential benefits
under the Plan are contingent upon the occurrence of certain change in
control provisions, as defined. If the Plan had been triggered as of
December 31, 1998, estimated benefits payable under the Plan would have been
approximately $290,000.
REAL SILK INVESTMENTS, INCORPORATED
Schedule of Investments in Securities
December 31, 1998
Principal % of
Amount Total
or Number Industry Investment
Description of Shares Value Totals Portfolio
MONEY MARKET FUNDS (unaffiliated issuers):
Money Market Funds $ 1,322,022 .89%
Fidelity Cash Reserves Fund 232,410 $ 232,410
Pegasus Money Market Fund 1,089,612 1,089,612
Total money market funds $ 1,322,022 $ 1,322,022 .89%
COMMON SHARES (unaffiliated issuers):
Sector: Business Services 4,890,015 3.27%
Industry: Information Services
Dun & Bradstreet Corporation 8,800 277,746
IMS Health, Inc. 8,800 663,846
Nielsen Media Research 2,933 52,794
R.H. Donnelly Corporation 1,760 25,629
Industry: Office Furniture
Miller (Herman), Inc. 144,000 3,870,000
Sector: Consumer Goods 18,859,093 12.63%
Industry: Apparel/Textiles
Guilford Mills, Inc. 19,687 328,517
Russell Corporation 179,200 3,639,910
Industry: Food/Restaurants
ConAgra, Inc. 20,000 630,000
*Consolidated Products, Inc. 57,826 1,192,666
*Kroger Company, Inc. 216,000 13,068,000
Sector: Diversified 2,168,869 1.45%
Industry: Conglomerate
*Cendant Corporation 10,000 193,120
Hanson, PLC (ADS) 3,634 141,726
TRW, Inc. 32,000 1,793,984
U.S. Industries, Inc. 2,179 40,039
*Non-Income Producing Security
REAL SILK INVESTMENTS, INCORPORATED
Schedule of Investments in Securities
December 31, 1998
Principal % of
Amount Total
or Number Industry Investment
Description of Shares Value Totals Portfolio
Sector: Energy/Natural Resources 9,543,204 6.39%
Industry: Electric Utility
Texas Utilities Company 5,160 240,905
Industry: Metals/Mining
Newmont Mining Corporation 54,916 1,002,217
Penn Virginia Corporation 80,000 1,470,000
Reynolds Metals Co., Inc. 8,344 439,620
Industry: Oil & Gas
Atlantic Richfield Co., Inc. 32,000 2,092,000
Kerr-McGee Corporation 18,000 688,500
Northwest Natural Gas, Inc. 23,400 605,475
Occidental Petroleum Corporation 9,570 161,494
Union Pacific Resources Group, Inc. 29,118 263,867
Industry: Paper
Boise Cascade Corporation 6,666 206,646
Temple-Inland, Inc. 40,000 2,372,480
Sector: Financial 27,820,611 18.63%
Industry: Bank/Thrift
Bank One Corporation
(formerly First Chicago NBD
Corporation) 150,543 7,687,027
*Ocwen Financial Corporation 27,000 332,424
Industry: Insurance
American Financial Group, Inc. 33,902 1,487,450
Chubb Corporation 54,000 3,496,500
CMAC Investment Corporation 8,000 367,496
HSB Group, Inc. 279,000 11,456,298
Ohio Casualty Corporation 16,000 658,000
ReliaStar Financial Corporation 42,078 1,940,848
Industry: Mortgage
*First Alliance Corporation 17,250 64,688
*Non-Income Producing Security
REAL SILK INVESTMENTS, INCORPORATED
Schedule of Investments in Securities
December 31, 1998
Principal % of
Amount Total
or Number Industry Investment
Description of Shares Value Totals Portfolio
Industry: Mutual Funds
Scudder Large Company Value Fund 12,000 329,880
Sector: Industrial 19,530,252 13.08%
Industry: Capital Goods
Manitowoc Co., Inc. 126,000 5,591,250
Milacron, Inc. (formerly
Cincinnati Milacron, Inc.) 36,000 693,000
Industry: Chemicals
Millennium Chemicals, Inc. 2,076 41,260
Sigma-Aldrich Corporation 10,000 293,750
Industry: Environmental Services
Browning-Ferris Industries, Inc. 16,000 454,992
Industry: Steel
Nucor Corporation 288,000 12,456,000
Sector: Medical 12,627,996 8.45%
Industry: Pharmaceutical
Bristol-Myers Squibb Co., Inc. 8,000 1,070,496
Johnson & Johnson, Inc. 96,000 8,052,000
Lilly (Eli) & Co., Inc. 16,000 1,422,000
Merck & Co., Inc. 9,000 1,327,500
Mylan Laboratories, Inc. 24,000 756,000
Sector: Technology 6,070,820 4.06%
Industry: Computer Hardware/Software
*Adaptec, Inc. 20,000 351,240
Hewlett-Packard Corporation 16,000 1,092,992
*Microsoft Corporation 12,000 1,664,244
*Network Associates, Inc. 10,000 662,500
*Non-Income Producing Security
REAL SILK INVESTMENTS, INCORPORATED
Schedule of Investments in Securities
December 31, 1998
Principal % of
Amount Total
or Number Industry Investment
Description of Shares Value Totals Portfolio
Industry: Electronics
*DII Group, Inc. 20,000 460,000
*Marshall Industries Corporation 36,000 882,000
Motorola, Inc. 7,000 427,434
*Vishay Intertechnology, Inc. 36,580 530,410
Sector: Communications 22,351,201 14.96%
Industry: Entertainment
Time Warner, Inc. 288,000 17,873,856
Industry: Telecommunication
Ameritech Corporation 16,000 1,014,000
Bell Atlantic Corporation 8,000 432,000
Bell South Corporation 24,000 1,197,000
GTE Corporation 7,900 513,500
MCI Worldcom Inc. (formerly
MCI Communications Corporation) 18,409 1,320,845
Sector: Transportation (see also
affiliated issuers) 5,107,450 3.42%
Industry: Automotive
MascoTech, Inc. 96,000 1,644,000
Industry: Railroads
Norfolk Southern Corporation 54,000 1,711,098
Union Pacific Corporation 34,380 1,549,232
Industry: Trucking
Wabash National Corporation 10,000 203,120
Total common shares
(unaffiliated issuers) $128,969,511 $128,969,511 86.34%
*Non-Income Producing Security
REAL SILK INVESTMENTS, INCORPORATED
Schedule of Investments in Securities
December 31, 1998
Principal % of
Amount Total
or Number Industry Investment
Description of Shares Value Totals Portfolio
U.S. GOVERNMENT AND AGENCY SECURITIES
(unaffiliated issuers):
Federal Home Loan Mtg. Corp. REMIC,
5.75%, 2006 1,000,000 1,000,000
Federal National Mtg. Assn. Guaranteed
REMIC, 6.75%, 2018 269,047 268,121
Federal National Mtg. Assn. REMIC,
6.00%, 2015 710,760 709,424
Total U.S. government and agency
securities (unaffiliated issuers) $1,977,545 $1,977,545 1.32%
OTHER BONDS AND NOTES (unaffiliated issuers):
Bank America Corp., sub. debt.,
7.875%, 2002 1,000,000 1,079,660
Bear Stearns Co., Inc.
6.50%, 2002 500,000 509,470
Commercial Credit Co.,
6.875%, 2002 500,000 520,825
General Motors Acceptance Corp. Note,
7.125%, 2003 500,000 529,385
Household Finance Corp. Note, 7.625%,
1999 500,000 505,070
Household Finance Corp. Note,
7.25%, 2003 1,000,000 1,058,910
J. P. Morgan Company,
7.625%, 2004 1,000,000 1,092,030
Lincoln National Corp. Note,
7.25%, 2005 1,500,000 1,607,835
Pacific Gas and Electric Co., 6.25%,
2004 500,000 521,570
Total other bonds and notes
(unaffiliated issuers) $ 7,424,755 $ 7,424,755 4.97%
Total investments in securities
(unaffiliated issuers) $139,693,833 $139,693,833 93.52%
*Non-Income Producing Security
REAL SILK INVESTMENTS, INCORPORATED
Schedule of Investments in Securities
December 31, 1998
Principal % of
Amount Total
or Number Industry Investment
Description of Shares Value Totals Portfolio
COMMON SHARES (affiliated issuers):
Sector: Transportation (see also
unaffiliated issuers)
Industry: Trucking
Arnold Industries, Inc. 600,000 9,675,000 9,675,000 6.48%
Total investments in securities
(affiliated issuers) $9,675,000 $9,675,000 6.48%
Total investments in securities $149,368,833 $149,368,833 100.00%
See accompanying notes to financial statements.
