Report for the Six Months Ended June 30, 1999
REAL SILK INVESTMENTS, INCORPORATED
445 North Pennsylvania Street
Suite 500
Indianapolis, Indiana 46204
(317) 632-7359
____________________
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 CUSTODIAN OF SECURITIES
Registrar & Transfer Company Bank One Trust Company, N.A.
Cranford, New Jersey Indianapolis, Indiana
INDEPENDENT AUDITORS
KPMG LLP
Indianapolis, Indiana
REAL SILK INVESTMENTS, INCORPORATED
Financial Statements
June 30, 1999
Table of Contents
Page
Unaudited 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 Unaudited Financial Statements 6-14
Schedule of Investments in Securities 15-20
REAL SILK INVESTMENTS, INCORPORATED
Statement of Assets and Liabilities
June 30, 1999
Assets
Investments in securities (unaffiliated issuers), at market value:
Money market funds (cost: $2,652,843) $ 2,652,843
Common shares (cost: $12,079,173) 140,145,035
U.S. government and agency securities (cost: $1,193,772) 1,256,346
Other bonds and notes (cost: $6,653,196) 6,616,390
Total investments in securities (unaffiliated issuers) 150,670,614
Investments in securities (affiliated issuers), at market value:
Common shares (cost: $147,786) (note 4) 9,262,500
Total investments in securities 159,933,114
Cash 18,602
Accrued interest and dividends receivable 286,465
Other current assets 17,962
Office furniture and equipment, less accumulated
depreciation of $70,595 19,461
Total assets $ 160,275,604
Liabilities
Accounts payable and accrued expenses (note 5) 46,523
Total liabilities 46,523
Net Assets
Equivalent to $972.95 per share based on 164,683 shares of
$5.00 par value common stock outstanding (note 2) 160,229,081
Total liabilities and net assets $ 160,275,604
See accompanying notes to financial statements.
This statement was prepared by the Company and was not audited by the
independent auditors.
REAL SILK INVESTMENTS, INCORPORATED
Statement of Operations
Six months ended June 30, 1999
Investment income:
Dividends, including affiliated issuers of $132,000 (note 4) $ 1,193,755
Interest on securities from unaffiliated issuers 278,556
Total income 1,472,311
Expenses:
Officers' salaries 171,956
Other salaries and wages 65,068
Taxes other than federal income tax 37,884
Legal, auditing and other professional services (note 9) 163,144
Custodian fees 4,130
Directors' fees 18,200
Office expense and supplies 4,681
Insurance 37,497
Rent (note 8) 31,826
Pension (note 6) 11,211
Depreciation 4,180
Dues and subscriptions 6,676
Computer expense 5,817
Equipment lease 14,033
Sundry 21,572
Total expenses (note 5) 597,875
Net investment income 874,436
Net realized gain (loss) on investments (unaffiliated issuers):
Proceeds from sales 2,093,308
Cost of securities sold 2,068,628
Net realized gain (loss) on investments (note 3) 24,680
Unrealized appreciation in value of investments:
Beginning of period (January 1, 1999) 126,758,280
End of period (June 30, 1999) 137,206,345
Net increase in unrealized appreciation, including an
affiliated issuer's decrease of $412,500 (note 4) 10,448,065
Net realized and unrealized gain (loss) on investments 10,472,745
Net increase (decrease) in net assets resulting from operations $ 11,347,181
See accompanying notes to financial statements.
This statement was prepared by the Company and was not audited by the
independent auditors.
REAL SILK INVESTMENTS, INCORPORATED
Statements of Changes in Net Assets
Six months ended June 30, 1999 and 1998
1999 1998
Net investment income $ 874,436 1,187,608
Net realized gain (loss) on investments 24,680 24,557
Net increase (decrease) in unrealized appreciation 10,448,065 9,853,848
Net increase (decrease) in net assets resulting
from operations 11,347,181 11,066,013
Federal income tax paid on realized gain on behalf of
stockholders, charged to operations (note 1)
Cash distributions to stockholders from net investment
income ($5.00 per share) (note 1) (823,415) (823,415)
Deemed distributions to stockholders from net realized
gain on investments (note 1)
Additional paid-in capital (note 1)
Increase (decrease) in net assets 10,523,766 10,242,598
Net assets at beginning of period 149,705,315 122,682,914
Net assets at end of period (including undistributed net
investment income of $54,091 and $1,187,566,
respectively, and undistributed net realized
capital gain (loss) of $(4,458) and
$(85,858), respectively) $ 160,229,081 132,925,512
See accompanying notes to financial statements.
This statement was prepared by the Company and was not audited by the
independent auditors.
REAL SILK INVESTMENTS, INCORPORATED
Supplementary Information
Financial Highlights
Six months
ended
June 30, Year Ended December 31,
1999 1998 1997 1996 1995 1994
Per share data Unaudited
Investment income $ 8.94 17.65 17.67 17.85 17.52 16.23
Less: expenses 3.63 4.93 2.45 2.29 2.17 1.92
Net investment income 5.31 12.72 15.22 15.56 15.35 14.31
Net realized gain (loss)
on investments .15 .69 (.67) 2.95 (1.27) (.12)
Net increase (decrease) in unrealized
appreciation 63.44 163.63 130.00 37.10 71.10 (26.29)
Net increase (decrease) in net assets
resulting from operations 68.90 177.04 144.55 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) (5.00) (12.95) (15.00) (15.23) (15.28) (13.92)
Deemed distributions to stockholders from
net realized gains on investments (note 1) (2.49)
Additional paid-in capital (note 1) 1.62
Increase (decrease) in
net assets 63.90 164.09 129.55 40.38 69.90 (26.02)
Net asset value per share:
Beginning of period 909.05 744.96 615.41 575.03 505.13 531.15
End of period $ 972.95 909.05 744.96 615.41 575.03 505.13
Quoted market value per share, end
of period $ 655.00 570.00 520.00 450.00 420.00 375.00
Ratios/Supplemental Data: (for the six
months ended June 30, 1999, the
ratios are annualized to provide
comparisons)
Expenses to average
net assets .78% .63% .35% .39% .41% .36%
Net investment income to average
net assets 1.15% 1.62% 2.19% 2.67% 2.88% 2.71%
Portfolio turnover rate 0.00% 2.72% 3.68% 3.35% 2.04% 1.07%
Total return 31.70% 12.22% 19.13% 10.89% 16.31% 16.33%
Net assets, end of period
$160,229,081 149,705,315 122,682,914 101,347,344 94,697,920 83,186,717
See accompanying notes to financial statements. This statement was prepared by
the Company and was not audited by the independent auditors.
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
period. The cost bases of investments for federal income tax purposes are the
same as the book values.
Investment Income
Dividends 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.
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 its
income 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, 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 have been 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).
When built-in gains were realized, the Company 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 intends to continue to distribute all of its
personal holding company income.
Net investment income and net realized gains (losses) may differ for financial
statement and income tax purposes. The character of distributions made
during the year from net investment income or net realized gains, 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 six-month period ended June 30, 1999, the Company realized long-term
capital gains of$24,680. For the six-month period ended June 30, 1998, the
Company realized long-term capital gains of $27 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 gain of $24,557.
Note 2 - Net Assets
The Company's net assets at June 30, 1999, 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 $ 22,973,103
Accumulated undistributed income:
Undistributed net investment income 54,091
Undistributed net realized capital gains (losses) (note 1) (4,458)
Unrealized gains of $138,162,611 and unrealized losses of
$956,266 137,206,345
Net assets $ 160,229,081
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 six months ended
June 30, 1999:
Proceeds from
Sales and Net Gain
Maturities Cost (Loss)
Money market funds $ 1,371,564 1,371,564 -
Common shares 5 1 4
U.S. government securities 721,739 697,063 24,676
Other bonds and notes - - -
Totals $ 2,093,308 2,068,628
Net realized gain (loss) on investments $ 24,680
The aggregate cost of securities acquired during the six months ended June
30, 1999, was as follows:
Money market funds $ 2,702,385
Common shares -
U.S. government securities -
Other bonds and notes -
Total purchases of securities $ 2,702,385
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 June 30, 1999. There were no purchases or sales of
affiliated securities during the six months ended June 30, 1999.
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. 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 $14,033 for the six months ended June 30, 1999.
At July 1, 1999, the monthly lease payment required by the lease is $2,129. 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 six-month
period ended June 30, 1999, expenses reimbursed to the related party totaled
$43,989.
Note 6 - Retirement Plan
The Company sponsors 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 for the six months ended
June 30, 1999 was $11,211.
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, 2000. At June 30, 1999, 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 June 30, 1999, the monthly lease payment required
by the lease is $5,304.
Note 9 Recent Developments
On July 8, 1999, the Company executed a definitive agreement regarding the
previously announced merger with and into Lord Abbett Affiliated Fund, Inc.
("Affiliated Fund"), an open-end mutual fund with approximately $10 billion
in assets. The merger is subject to shareholder approval and certain
regulatory requirements and will result in an investment banker fee of
$1 million.
The most significant terms of the agreement are:
The Agreement is subject to Real Silk shareholder approval, which will
require the approval of a majority of the Real Silk shares entitled to
vote on the merger.
Before the merger, Real Silk will sell a sufficient amount of portfolio
securities to realize approximately $20 million in long-term capital gains.
Real Silk will retain the proceeds (which are deemed distributed to
shareholders) and will pay a tax at the highest corporate rate on these
retained gains. The shareholders will include these gains, as long term
capital gains, in their individual income tax returns and receive a credit
against their individual tax liability (including any liability attributable
to Real Silk's capital gains) equal to their share of the taxes paid by
Real Silk. The difference between the gains realized by Real Silk and
the taxes paid by Real Silk on behalf of the shareholders will be added
by the shareholders to their tax basis in their stock.
Immediately before the effective date of the merger, Real Silk will declare
and pay a taxable dividend to its shareholders by which it will distribute
all of its interest and dividend income for its tax year ending on the
closing date of the merger.
Real Silk and Affiliated Fund will determine their respective net asset
values per share and Real Silk shareholders will receive Affiliated Fund
shares with a value equal to the net asset value of their Real Silk shares.
The merger of Real Silk into Affiliated Fund is structured to qualify as a
"reorganization" under the Internal Revenue Code of 1986, as amended (the
"Code"). In order to assure that the merger will qualify as a
reorganization, it is necessary for shareholders of Real Silk to have a
"continuity of interest" in Affiliated Fund following the merger. In
connection with this requirement, certain Real Silk shareholders will be
asked to sign representation letters indicating that they have no "plan
or intention" to redeem Affiliated Fund shares they receive in the
merger. In addition, 65% of the Affiliated Fund shares received by each
Real Silk shareholder will be placed in an escrow account for a period of
one year. Following that one-year holding period, the escrow agent will
forward the Affiliated Fund shares to the owner. Any dividends or capital
gains distributions paid on the Affiliated Fund shares subject to the
escrow will be paid directly to the shareholder, and will not be placed
in the escrow.
Assuming that the merger does qualify as a reorganization under the Code,
Real Silk shareholders will not recognize income, gain or loss for tax
purposes as a result of their exchange of Real Silk shares for Affiliated
Fund shares under the Agreement. In that event, each Real Silk
shareholder will have a "carryover" tax basis in the Affiliated Fund shares
received in the merger, equal to their basis in the Real Silk shares
immediately prior to the merger. It is a condition to closing that Real
Silk and Affiliated Fund receive legal opinions from their special tax
counsel, based on the representation letters received from certain
shareholders and other representations that will be made by Real Silk and
Affiliated Fund, that the merger will qualify as a reorganization under the
Code.
The Affiliated Fund shares not subject to the escrow (35% of the total
shares) will be forwarded to the Real Silk shareholder upon surrender of
the shareholders' Real Silk shares. These shares may be sold at any time.
The redemption of those shares will result in tax liability to the holder.
Real Silk shareholders will be able to purchase additional shares of
Affiliated Fund through reinvestment of dividends or capital gains
distributions without paying a sales charge of any kind.
Real Silk shareholders will also be able to purchase additional shares of
Affiliated Fund with personal funds and will have the sales charge for those
shares determined in accordance with the Affiliated Fund prospectus. The
sales charge calculation will aggregate the Affiliated Fund shares
received by the shareholder in connection with the merger with the new
shares being purchased to determine the level of sales charge imposed on
the purchases.
Real Silk shareholders will also have the right to dissent from the merger
as provided by Indiana law and receive the "fair value" of their Real
Silk shares. Dissenting is a rather technical process and must be done
exactly as specified in the Indiana law.
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 (note 5), the Company anticipates an increase in
expenses during the remainder of 1999.
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 June 30,
1999, estimated benefits payable under the Plan would have been $296,568.
Note 11 Year 2000 Disclosure
The Company has taken steps to address the ability of the computer systems on
which the Company relies to correctly process date-related information on and
after January 1, 2000 (Year 2000 readiness). Difficulties with Year 2000
issues could potentially have a negative impact on handling securities trades,
payments of interest and dividends, pricing and account services. Although,
at this time, there can be no assurance that there will be no adverse impact on
the Company, the Company has taken steps reasonably designed to address the
Year 2000 issue.
REAL SILK INVESTMENTS, INCORPORATED
Schedule of Investments in Securities
June 30, 1999
Principal % of
Amount Total
or Number Industry Investment
Description of Shares Value Totals Portfolio
MONEY MARKET FUNDS (unaffiliated
issuers):
Money Market Funds
Fidelity Cash Reserves Fund 237,875 $ 237,875
One Group Prime Money Market Fund
(formerly Pegasus Money Market
Fund) 2,414,968 2,414,968
Total Money Market Funds $ 2,652,843 $ 2,652,843 1.66%
COMMON SHARES (unaffiliated issuers):
Sector: Business Services 4,006,070 2.50%
Industry: Information Services
Dun & Bradstreet Corporation 8,800 311,850
IMS Health, Inc. 17,600 550,000
*Nielsen Media Research, Inc. 2,933 85,790
*R.H. Donnelly Corporation 1,760 34,430
Industry: Office Furniture
Miller (Herman), Inc. 144,000 3,024,000
Sector: Consumer Goods 17,341,020 10.84%
Industry: Apparel/Textiles
Guilford Mills, Inc. 19,687 204,252
Russell Corporation 179,200 3,494,400
Industry: Food/Restaurants
ConAgra, Inc. 20,000 532,500
*Consolidated Products, Inc. 57,826 1,040,868
*Kroger Company, Inc. 432,000 12,069,000
REAL SILK INVESTMENTS, INCORPORATED
Schedule of Investments in Securities
June 30, 1999
Principal % of
Amount Total
or Number Industry Investment
Description of Shares Value Totals Portfolio
Sector: Diversified 2,159,301 1.35%
Industry: Conglomerate
*Cendant Corporation 10,000 205,000
Hanson, PLC (ADS) 3,634 161,258
TRW, Inc. 32,000 1,756,000
U.S. Industries, Inc. 2,179 37,043
Sector: Energy/Natural Resources 11,227,429 7.02%
Industry: Electric Utility
TXU (formerly Texas
Utilities Company) 5,160 213,818
Industry: Metals/Mining
Newmont Mining Corporation 54,916 1,091,456
Penn Virginia Corporation 80,000 1,580,000
Reynolds Metals Co., Inc. 8,344 492,296
Industry: Oil & Gas
Atlantic Richfield Co., Inc. 32,000 2,674,000
Kerr-McGee Corporation 18,000 903,375
Northwest Natural Gas, Inc. 23,400 564,525
Occidental Petroleum Corporation 9,570 202,166
Union Pacific Resources
Group, Inc. 29,118 474,988
Industry: Paper
Boise Cascade Corporation 6,666 285,805
Temple-Inland, Inc. 40,000 2,745,000
Sector: Financial 28,849,391 18.04%
Industry: Bank/Thrift
Bank One Corporation 150,543 8,966,717
*Ocwen Financial Corporation 27,000 239,625
REAL SILK INVESTMENTS, INCORPORATED
Schedule of Investments in Securities
June 30, 1999
Principal % of
Amount Total
or Number Industry Investment
Description of Shares Value Totals Portfolio
Industry: Insurance
American Financial Group, Inc. 33,902 1,154,787
Chubb Corporation 54,000 3,753,000
HSB Group, Inc. 279,000 11,491,313
Ohio Casualty Corporation 16,000 578,000
Radian Group (formerly CMAC
Investment Corporation) 8,000 390,500
ReliaStar Financial Corporation 42,078 1,840,912
Industry: Mortgage
*First Alliance Corporation 17,250 59,297
Industry: Mutual Funds
Scudder Large Company Value Fund 12,000 375,240
Sector: Industrial 23,276,416 14.55%
Industry: Capital Goods
Manitowoc Co., Inc. 189,000 7,867,125
Milacron, Inc. 36,000 666,000
Industry: Chemicals
Millennium Chemicals Inc. 2,076 48,916
Sigma-Aldrich Corporation 10,000 344,375
Industry: Environmental Services
Browning-Ferris Industries, Inc. 16,000 688,000
Industry: Steel
Nucor Corporation 288,000 13,662,000
Sector: Medical 13,642,250 8.53%
Industry: Pharmaceutical
Bristol-Myers Squibb Co., Inc. 16,000 1,127,000
Johnson & Johnson, Inc. 96,000 9,408,000
Lilly (Eli) & Co., Inc. 16,000 1,146,000
Merck & Co., Inc. 18,000 1,325,250
Mylan Laboratories, Inc. 24,000 636,000
REAL SILK INVESTMENTS, INCORPORATED
Schedule of Investments in Securities
June 30, 1999
Principal % of
Amount Total
or Number Industry Investment
Description of Shares Value Totals Portfolio
Sector: Technology 8,289,100 5.18%
Industry: Computer Hardware/Software
*Adaptec, Inc. 20,000 706,250
Hewlett-Packard Corporation 16,000 1,608,000
*Microsoft Corporation 24,000 2,164,500
*Network Associates, Inc. 10,000 146,875
Industry: Electronics
*DII Group, Inc. 20,000 746,250
*Marshall Industries Corporation 36,000 1,293,750
Motorola Inc. 7,000 663,250
*Vishay Intertechnology, Inc. 45,725 960,225
Sector: Communications 25,902,774 16.20%
Industry: Entertainment
Time Warner, Inc. 288,000 20,916,000
Industry: Telecommunication
Ameritech Corporation 16,000 1,176,000
Bell Atlantic Corporation 8,000 523,000
Bell South Corporation 24,000 1,107,000
GTE Corporation 7,900 596,450
*MCI Worldcom, Inc. 18,409 1,584,324
Sector: Transportation (see also
affiliated issuers) 5,451,284 3.41%
Industry: Automotive
MascoTech, Inc. 96,000 1,626,000
Industry: Railroads
Norfolk Southern Corporation 54,000 1,626,750
Union Pacific Corporation 34,380 2,004,784
Industry: Trucking
Wabash National Corporation 10,000 193,750
Total Common Shares
(unaffiliated issuers) $ 140,145,035 $140,145,035 87.62%
REAL SILK INVESTMENTS, INCORPORATED
Schedule of Investments in Securities
June 30, 1999
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 834,014 833,489
Federal National Mtg. Assn. REMIC,
6.00%, 2015 424,054 422,857
Total U.S. Government and Agency
Securities (unaffiliated issuers) $ 1,256,346 $1,256,346 .79%
OTHER BONDS AND NOTES (unaffiliated
issuers):
BankAmerica Corp., sub. debt.,
7.875%, 2002 1,000,000 1,041,410
Bear Stearns Co., Inc.,
6.50%, 2002 500,000 497,950
Commercial Credit Co.,
6.875%, 2002 500,000 506,450
General Motors Acceptance Corp. Note,
7.125%, 2003 500,000 509,440
Household Finance Corp. Note, 7.25%,
2003 1,000,000 1,015,330
J. P. Morgan Company, 7.625%,
2004 1,000,000 1,038,510
Lincoln National Corp. Note,
7.25%, 2005 1,500,000 1,511,685
Pacific Gas and Electric Co., 6.25%,
2004 500,000 495,615
Total Other Bonds and Notes
(unaffiliated issuers) $6,616,390 $6,616,390 4.14%
Total investments in securities
(unaffiliated issuers) $ 150,670,614 $ 150,670,614 94.21%
REAL SILK INVESTMENTS, INCORPORATED
Schedule of Investments in Securities
June 30, 1999
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 9,262,500 9,262,500 5.79%
Total investments in securities
(affiliated issuers) $ 9,262,500 $ 9,262,500 5.79%
Total investments in securities $159,933,114 $159,933,114 100.00%
See accompanying notes to financial statements.
This statement was prepared by the Company and was not examined by the
independent auditors.
