As filed with Securities and Exchange Commission on October 30, 1996
Registration No. 2-66073
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
POST-EFFECTIVE AMENDMENT NO. 21 X
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X
AMENDMENT NO. 21 X
NRM INVESTMENT COMPANY
(Exact Name of Registrant as Specified in Charter)
Rosemont Business Campus
Suite 112, Building 3
919 Conestoga Road
Rosemont, Pennsylvania 19010
(Address of Principal Executive Offices)
Registrant's Telephone Number: (610) 525-0904
John H. McCoy, President, NRM Investment Company
Rosemont Business Campus
Suite 112, Building 3
919 Conestoga Road
Rosemont, Pennsylvania 19010
(Name and Address of Agent for Service)
It is proposed that this filing will become effective (check appropriate box)
_______ immediately upon filing pursuant to paragraph (b)
_______ on [date] pursuant to paragraph (b)
___X___ 60 days after filing pursuant to paragraph (a)(i)
_______ on [date] pursuant to paragraph (a)(1)
_______ 75 days after filing pursuant to paragraph (a)(2)
_______ on [date] pursuant to paragraph (a) of Rule 485
DECLARATION PURSUANT TO RULE 24f-2
The Registrant has registered an indefinite number or amount of securities under
the Securities Act of 1933 pursuant to Section (a) (1) of Rule 24f-2. The Rule
24f-2 Notice for the Registrant's fiscal year ending August 31, 1996 was filed
on October 30, 1996, and the notice for the current fiscal year ending August
31, 1997 will be filed no later than October 30, 1997.
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CROSS REFERENCE SHEET
Form N-1A Part A Item Prospectus Caption
- ----------------------------------------------------------------
1. Cover Page.............................. Cover Page
2. Expenses of the Company................. Expenses of the Company
3. Financial Highlights.................... Financial Highlights
4. General Description..................... Cover Page;
of Registrant Investment Objective;
Risk Factors;
Investment Restrictions;
Taxes; The Company and
its Common Stock
5. Management of the Fund.................. Management of the
Company; Transfer Agent;
Management's Discussion
of Fund Performance
6. Capital Stock and....................... Purchase of Shares;
Other Securities Redemption of Shares;
Dividends; Taxes; The
Company and its Common
Stock; Miscellaneous
7. Purchase of Securities.................. Net Asset Value; Pur-
Being Offered chases of Shares
8. Redemption or Repurchase................ Redemption of Shares
9. Pending Legal Proceedings............... Pending Legal Proceedings
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NRM INVESTMENT COMPANY
Rosemont Business Campus
Rosemont, Pennsylvania 19010
NRM Investment Company (the "Company") is a no-load, open-end,
diversified investment company which seeks interest income exempt from federal
income taxes by investing one half or more of all of its assets in tax-exempt
obligations with maturities generally not exceeding twenty years from date of
purchase, and by investing up to one half of its assets in non-exempt
obligations, or common or preferred shares. An additional consideration
respecting all investments is preservation of capital.
This Prospectus sets forth concisely the information about the Company
that a prospective investor ought to know before investing. Investors should
read this Prospectus and retain it for future reference.
Additional information about the Company, contained in a Statement of
Additional Information, has been filed with the Securities and Exchange
Commission and is available upon request without charge by writing to the
Company at its address. The Statement of Additional Information bears the same
date as this Prospectus and is incorporated by reference in its entirety into
this prospectus.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
No person has been authorized to give any information or to make any
representations not contained in this Prospectus in connection with the offering
made by this Prospectus and, if given or made, such information or
representations must not be relied upon as having been authorized by the
Company. This Prospectus does not constitute an offering by the Company in any
jurisdiction in which such offering may not lawfully be made.
December 30, 1996
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TABLE OF CONTENTS
PAGE
Expenses of the Company................................................ 2
Financial Highlights................................................... 3
Investment Objective................................................... 4
Risk Factors........................................................... 7
Investment Restrictions................................................ 7
Net Asset Value........................................................ 8
Purchase of Shares..................................................... 9
Redemption of Shares................................................... 9
Dividends.............................................................. 10
Taxes.................................................................. 10
Management of the Company.............................................. 12
Management's Discussion of Fund Performance............................ 14
The Company's Common Stock............................................. 14
Transfer Agent......................................................... 16
Pending Legal Proceedings.............................................. 16
Miscellaneous.......................................................... 18
Application form....................................................... 20
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EXPENSES OF THE COMPANY
Annual Fund Operating Expenses
(as a percentage of average net assets)
Management Fees .06%
Other Expenses .31%
Total Fund Operating Expenses .37%
The following example, based upon the Company's fiscal year ending August 31,
1996* illustrates the expenses that you would pay on a $1,000 investment over
various time periods assuming a 5% annual rate of return, whether or not there
is a redemption at the end of each time period. (The Company charges no sales
loads, exchange fees or redemption fees of any kind.)
One Year Three Years Five Years Ten Years
$4 $12 $21 $48
* This example should not be considered a representation of past or future
expenses or performance. Actual expenses may be greater or less than those
shown.
The purpose of the foregoing table is to assist the investor in
understanding the various costs and expenses that an investor in the fund will
bear directly or indirectly. A more complete description of management fees is
included in the prospectus under "MANAGEMENT OF THE COMPANY."
"Other expenses" include custodian fees, legal and professional fees,
directors' fees, insurance, capital stock tax, and miscellaneous expenses. Such
expenses are expected to recur without significant change. An exception applies
to legal fees which are significantly higher during periods of litigation. Also,
recoveries against the Company are considered extraordinary expenses and are not
included in "Other expenses." During the fiscal year ending August 31, 1996, the
Company, in addition to legal fees, accrued $111,000, or .65% of Annual Fund
Operating Expenses, to settle certain environmental litigation. Had such amount
been included, "Other expenses" would have been 1.02% instead of .37%. See
"PENDING LEGAL PROCEEDINGS" for a description of the litigation which gave rise
to the accrual and other litigation.
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FINANCIAL HIGHLIGHTS
The following financial highlights present information about the
investment results of the Fund on a per share basis. The financial highlights
have been audited by Beard & Company, Inc. independent auditors for the year
ended August 31, 1996 and by Ernst & Young, LLP for each of the years ended
August 31, 1987 through August 31, 1995, whose reports thereon appear in the NRM
Investment Company annual report which may be obtained from the Company's
offices. The following data should be read in conjunction with the financial
statements, (including the audit report) related notes, and other financial
information incorporated by reference in the Statement of Additional
Information.
<TABLE>
<CAPTION>
Years Ended August 31
1996 1995 1994 1993 1992
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<S> <C> <C> <C> <C> <C>
PER SHARE DATA
(for a share outstanding
throughout the indicated year)
Net asset value:
Beginning of year $ 3.954 $ 3.909 $ 4.022 $ 3.540 $ 3.488
Income from operations:
Net investment income .210 .237 .229 .453 .265
Net realized and unrealized gain (loss)
on investments (.004) .056 (.115) .137 .055
----------------------------------------------------------------------------
Total from investment operations .206 .293 .114 .590 .320
Less distributions:
Dividends from net investment income (.237) (.238) (.227) (.108) (.265)
Distribution in excess of net
investment income -- -- -- -- (.003)
----------------------------------------------------------------------------
Total distributions (.237) (.238) (.227) (.108) (.268)
----------------------------------------------------------------------------
Net asset value, end of year $ 3.933 $ 3.964 $ 3.909 $ 4.022 $ 3.540
============================================================================
TOTAL RETURN 5.11% 7.52% 2.79% 16.69% 9.08%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (in thousands) $ 16,847 $ 16,982 $ 16,745 $ 17,636 $ 15,260
Ratio of expenses to average net assets 1.02% .37% .49% (5.03)% .81%
Ratio of net investment income to average
net assets 5.24% 6.08% 5.77% 11.93% 7.25%
Portfolio turnover rate 6.24% 22.73% 13.56% 40.06% 64.84%
<CAPTION>
Years Ended August 31
1991 1990 1989 1988 1987
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<S> <C> <C> <C> <C> <C>
PER SHARE DATA
(for a share outstanding
throughout the indicated year)
Net asset value:
Beginning of year $ 3.635 $ 3.835 $ 3.767 $ 3.949 $ 4.012
Income from operations:
Net investment income .059 .157 .278 .284 .327
Net realized and unrealized gain (loss)
on investments .051 (.065) .084 (.138) (.070)
----------------------------------------------------------------------------
Total from investment operations .110 .092 .362 .146 .257
Less distributions:
Dividends from net investment income (.059) (.157) (.278) (.298) (.320)
Distribution in excess of net
investment income (.198) (.135) (.016) (.030) --
----------------------------------------------------------------------------
Total distributions (.257) (.292) (.294) (.328) (.320)
----------------------------------------------------------------------------
Net asset value, end of year $ 3.488 $ 3.635 $ 3.835 $ 3.767 $ 3.949
============================================================================
TOTAL RETURN 3.00% 2.69% 10.29% 3.57% 6.70%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (in thousands) $ 15,659 $ 16,268 $ 17,094 $ 16,723 $ 17,461
Ratio of expenses to average net assets 6.04% 3.90% .52% .26% .28%
Ratio of net investment income to average
net assets 1.54% 4.07% 7.28% 7.41% 8.16%
Portfolio turnover rate 101.88% 46.10% 18.81% 37.78% 11.09%
</TABLE>
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Notes to "Expenses of the Company" on the preceding page.
1. On December 11, 1990 the Company discontinued using Rittenhouse
Financial Services, Inc. as its investment advisor and on January 2,
1991 employed Morgan Grenfell Capital Management, Inc. On November 27,
1992 the Company discontinued Morgan Grenfell Services and on December
9, 1992 resumed using Rittenhouse Financial Services, Inc. as its
advisor. See "Management of the Company" for information about
Rittenhouse Financial Services, Inc.
2. There were no distributions from realized capital gains in any year.
INVESTMENT OBJECTIVE
The Company is a no-load, open-end, diversified investment company,
whose objectives are, in respect to one half or more of all of its assets, to
preserve capital and seek a high level of interest income exempt from federal
income taxes; and in respect to amounts less than one half of all of its assets,
to preserve capital and seek income and gains from purchasing non-exempt
obligations or common or preferred shares generating taxable income, and which,
in view of the Company are undervalued at the time of purchase. Except as
limited by (a) the foregoing objectives, (b) the foregoing proportions for
exempt and non-exempt securities, (c) express limitations under the "INVESTMENT
RESTRICTIONS" part of this prospectus, (d) the "Investment Objective and
Policies" part of the Statement of Additional Information, and (e) applicable
provisions of the Internal Revenue Code and the Investment Company Act, the
Company's Board of Directors shall be unrestricted in purchasing or selling
securities. There can be no assurance that the Company's objectives will be
achieved. The investment objectives of (a) through (d) above may not be changed
without a vote of the holders of a majority of the outstanding shares of the
Company (as defined in "Miscellaneous"). The restrictions in (e) and part of (c)
are fixed by statute.
Municipal Bonds - Currently Available Securities
As above, the Company intends to invest no less than one half of all
of its assets in debt obligations issued by or on behalf of states, territories
and possessions of the
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United States and the District of Columbia and their political subdivisions,
agencies, instrumentalities or authorities ("Municipal Bonds"), the interest
from which, in the opinion of counsel to the issuer, is exempt from federal
income tax. The Company presently intends to invest in long-term obligations
with maturities generally less than twenty years from date of purchase, but such
obligations will not necessarily be held until maturity. Generally, Municipal
Bonds with longer maturities tend to produce higher yields and are subject to
greater market fluctuations as a result of changes in interest rates than are
Municipal Bonds with shorter maturities and lower yields.
The two principal classifications of Municipal Bonds are "general
obligation" and "revenue" or "special obligation" bonds. General obligation
bonds are secured by the issuer's pledge of its faith, credit and taxing power
for the payment of principal and interest. Revenue or special obligation bonds
are payable only from the revenues derived from a particular facility or class
of facilities or, in some cases, from the proceeds of a special excise tax or
other specific revenue source such as from the user of the facility being
financed. Private activity bonds (formerly industrial development bonds) are in
most cases revenue bonds and do not generally constitute the pledge of the
credit or taxing power of the issuer of such bonds. Consequently, the credit
quality of such private activity bonds is directly related to the credit
standing of the corporate user of the facility involved. The portfolio may also
include "moral obligations" bonds which are normally issued by special purpose
public authorities. If an issuer of moral obligation bonds is unable to meet its
obligations, the repayment of such bonds becomes a moral commitment but not a
legal obligation of the state or municipality in question.
Municipal Bonds - When Issued Securities
The Company may purchase Municipal Bonds on a "when-issued" or delayed
delivery basis for delivery at a future specified date at a stated price and
yield. The Company would generally not pay for such securities or start earning
interest on them until they are received. The Company records when-issued
securities as an asset on the date of the purchase commitment. Thereafter the
securities are subject to changes in value based upon changes in the general
level of interest rates. To the extent that the Company remains substantially
fully invested at the same time that it has purchased "when-issued" or delayed
delivery securities, as it would generally do, there will be greater
fluctuations in its net assets than if the Company set aside cash to satisfy its
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purchase commitment. The Company does not intend to purchase "when-issued" or
delayed delivery securities for speculative purposes but only in furtherance of
its investment objective.
If the Company sells a "when-issued" or delayed delivery security
before delivery, any gain or loss would not be tax-exempt. When the Company
engages in "when-issued" or delayed delivery transactions, it relies on the
seller to consummate the trade. Failure of the seller to do so may result in the
Company incurring a loss or missing the opportunity to obtain a price considered
to be advantageous.
Common and Preferred Shares
The Company, as above, may make investments of less than one half of
all of its assets in common or preferred shares selected by the Company.
Normally the shares will pay taxable dividends; however, in order to achieve
capital appreciation, the Company may invest in shares of companies which do not
pay dividends on a current basis.
Shares will normally be purchased for investment and not for short
term trading purposes. However, such shares will be sold whenever the Company
determines that it is no longer compatible with the objectives and purposes of
the Company. There can be no assurance that the purchases, individually or as a
group, will produce either income or gain. The shares are subject to market
conditions which change frequently and cannot be predicted with accuracy.
Other Investments
As a temporary investment or to maintain liquidity, the Company also
may hold a portion of its assets in cash or invest in any one or a combination
of the following: investment grade debt securities; money market instruments,
maturing in 12 months or less, such as domestic bank certificates of deposit (of
domestic banks which are insured by the Federal Deposit Insurance Corporation
and have total assets at the time of purchase of $1.5 billion); obligations of,
or guaranteed by, the United States Government and its agencies and
instrumentalities; tax-exempt commercial paper and municipal funds (subject to
investment restrictions); and repurchase agreements entered into with domestic
banks where the underlying securities are any of the foregoing.
In purchasing and selling municipal bonds, common and preferred
shares, or other investments, the Company's Board of Directors will not be
restricted except as previously set forth in this Prospectus and in the
Statement of Additional Information
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RISK FACTORS
Generally the risks associated with the Company's investments in tax
free obligations involve the financial conditions of the state or municipal
issuers. Changes in economic conditions or the policies of the issuers could
have a significant effect upon the value of the securities which the Company
owns. Further, market rates of interest have a direct bearing upon the value of
the Company's securities regardless of the status of the issuers.
The investments the Company makes other than in tax free bonds will be
subject to all of the market risks generally associated with conditions within
the issuer, within the issuer's industry, or within the economy as a whole.
Although the Company will purchase only such investments as the advisor believes
to be undervalued, there is no certainty that this objective will be met.
An additional risk is the remaining liability of the Company itself
for activities it conducted before it became an investment company. As shown
under the heading of PENDING LEGAL PROCEEDINGS, suits and investigations
involving environmental issues are pending with respect to the Company's
activities when it was an operating steel processing plant. Should the Company
be found responsible or enter into settlement agreements providing for payment
of damages or other costs, it would, upon payment of such damages or costs
decrease the net asset value of the fund and accordingly decrease the share
value of the investor. Although management is unaware of other enviromental
matters involving the Company, there can be no assurance that such matters and
issues developing therefrom will not arise in the future.
INVESTMENT RESTRICTIONS
Certain of the following investment restrictions are fixed by statute;
others may not be changed without the approval of the holders of a majority of
the Company's outstanding voting securities.
The Company may not:
(1) Purchase any security of any issuer if as a result more than 5% of
the value of its assets would be invested in the securities of that issuer,
except that up to 25% of the Company's
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assets may be invested without regard to this limitation;
(2) Borrow money except from banks for temporary purposes and then in
amounts not in excess of 10% of the value of the Company's assets at the time of
such borrowing; or mortgage, pledge or hypothecate any assets except in
connection with any such borrowing and in amounts not in excess of the lesser of
the dollar amounts borrowed or 10% of the value of the Company's assets at the
time of such borrowing. (This borrowing provision is not for investment
leverage, but to facilitate management of the portfolio where the liquidation of
portfolio securities is deemed to be disadvantageous or inconvenient.);
(3) Purchase the securities of any other investment company except as
part of a merger, consolidation, or reorganization or purchase of assets
approved by the Company's stockholders; provided, that the Company may purchase
shares of any registered, open-end investment company if immediately after such
purchase, the Company will not own more than 3% of the outstanding voting stock
of any one investment company;
(4) Knowingly invest more than 10% of the value of the Company's
assets in securities with legal or contractual restrictions on resale;
(5) Invest more than 25% of its total assets in securities of
nongovernmental issuers engaged in related trades or businesses.
The foregoing percentage limitations will apply at the time of the
investment or other transaction and shall not be considered violated unless an
excess or deficiency occurs immediately after and as a result of such investment
or transaction.
NET ASSET VALUE
The net asset value per share for purposes of both purchases and
redemptions is determined by the Adviser as of the close of trading (4:00 p.m.
New York City time) on each day on which the New York Stock Exchange is open for
trading, other than a day during which no share was tendered for redemption and
no order to purchase or sell a share was received. It is computed by dividing
the value of all portfolio securities and other assets, less liabilities, by the
number of shares outstanding on such date. Portfolio securities for which market
quotations are readily available (other than debt securities maturing in 60 days
or less) are valued at market value. Securities for which market quotations are
not readily available are valued at their fair value by the Adviser
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under the supervision and responsibility of the Company's Board of Directors.
Absent unusual circumstances, portfolio securities maturing in 60 days or less
are normally valued at amortized cost.
PURCHASE OF SHARES
Those wishing to make purchases of the Company's shares may send a
check and completed application (see the form attached to this prospectus)
directly to Investors Trust Company, 2201 Ridgewood Road, #180, Wyomissing, PA
19610. Full and fractional shares will be purchased for the shareholder's
account at the net asset value per share next computed after receipt of the
order. Investments must be for at least one share and should be accompanied by
the "stub" from a confirmation sent from the Company's transfer agent to the
shareholder after each prior transaction. The Company imposes no sales charge on
purchases of its shares.
REDEMPTION OF SHARES
The Company will redeem its shares at their net asset value next
computed after the receipt of a written redemption request submitted in proper
form. If certificates have been issued for the shares to be redeemed, the
certificates must be either endorsed or accompanied by a stock power, signed
exactly as the shares are registered. If certificates have not been issued, a
signed stock power must accompany the request or the request itself must be in
similar form. In either case, unless the redemption proceeds are less than
$1,000, the signature(s) on the certificate(s), stock power(s) or request must
be guaranteed by a member firm of a national securities exchange or a commercial
bank. Additional documents may be required for shares redeemed by corporate,
partnership or fiduciary accounts.
Payment of the redemption proceeds will be made as soon as possible
but in no event later than seven days after receipt of a redemption request in
proper form, except under unusual circumstances as determined by the Securities
and Exchange Commission, or during any period when the New York Stock Exchange
is closed (other than customary weekend and holiday closings), during which
trading on the New York Stock Exchange is restricted, or for such other periods
as the Securities and Exchange Commission may permit. The proceeds paid upon
redemption may be more or less than the shareholder's cost, depending on the
value of the Company's portfolio securities at the time of redemption.
Redemption requests should be tendered to Investors Trust Company, 2201
Ridgewood Road, #180, Wyomissing, PA 19610. For purchase and redemption
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information call (610) 369-7287.
DIVIDENDS
The Company normally distributes its investment company income
quarterly and its capital gain net income at least annually.
In calculating interest income, premiums on securities are amortized
but discounts (except for original issue discounts) are not accrued. Dividend
accruals are normally made as of the ex-dividend dates of companies in which the
Company owns shares. In determining amounts of capital gain to be distributed,
any capital loss carryovers from prior years will be offset against current
capital gains.
All distributions of net investment income and any capital gains paid
by the Company will be paid by checks mailed to the shareholders, or by written
request by a shareholder, will be reinvested in additional shares of the Company
without sales charge at the net asset value per share as determined at the close
of business on the payment date. Confirmation statements reflecting additional
shares purchased through reinvestment of distributions will be mailed to all
shareholders who do not receive their distributions in cash.
TAXES
The Company qualified for the fiscal year ended August 31, 1996 and
intends to continue to qualify for and elect the special tax treatment afforded
regulated investment companies under Subchapter M of the Internal Revenue Code.
The Company will pay "exempt-interest" dividends of not less than 90% of its tax
exempt net income which may be treated by the Company's shareholders as items of
interest excludable from their gross income. The exempt interest treatment of
the dividends to shareholders will continue for as long as the Company holds no
less than 50% of its assets in securities exempt from Federal tax. As heretofore
indicated the Company intends to invest more than 50% of its assets in
securities the ordinary income from which is exempt from federal tax.
Interest on newly issued Municipal Bonds, the proceeds of which are
used to provide financing for persons other than states and local governmental
units (such bonds sometimes referred to as "private activity bonds") will
generally be tax exempt if certain requirements are met by the issuer,
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but for the most part in computing alternative minimum tax will be treated as an
item of tax preference for individual and corporate shareholders; accordingly,
it is anticipated that the Company, in purchasing new issues, will favor
governmental operations bonds over private activity bonds.
Any gain the Company recognizes on the disposition of exempt-interest
securities it purchased or purchases after April 30, 1993 and which is
attributable to accrued market discount will be taxed to the shareholders as
ordinary income; the balance of the gain, if any, will be taxed to the Company
or the shareholders as capital gain.
Exempt-interest dividends may be taxable to investors under state or
local law as dividend income even though all or a portion of such distributions
may be derived from interest on tax-exempt obligations which, if realized
directly, would be exempt from such income taxes. For Pennsylvania residents, an
exclusion from Pennsylvania State personal taxable income is allowed for
dividends or distributions received from the Company to the extent they were
earned by the Company from Pennsylvania State and Local Government obligations.
If a shareholder receives an exempt-interest dividend with respect to
any share of the Company held for six months or less, any loss on the sale or
exchange of such share shall be disallowed to the extent of the amount of the
exempt-interest dividend. If a shareholder redeems any shares between dividend
record dates, the amount of any undistributed interest income will be included
in the net asset value per share and will increase the capital gain (or decrease
the capital loss) realized by the shareholder upon redemption. Capital gains
realized upon redemption are not exempt from federal income taxes.
Although exempt interest dividends are excludable from shareholders'
gross income, such dividends are taken into account in determining whether a
portion of social security benefits will be subjected to income tax under
Section 86 of the Internal Revenue Code.
Under the Code interest on indebtedness incurred or continued to
purchase or carry tax-exempt securities (which would in whole or in part include
shares issued by the Company) will not be deductible by the borrower. Under
procedures established by the Internal Revenue Service, a purpose to use
borrowed funds to purchase or carry tax-exempt securities may be shown by either
direct or circumstantial evidence. To the extent interest expense is incurred to
purchase taxable investments, deductions therefore are generally limited to the
amount of the net taxable investment income.
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Under the Code corporate shareholders of the Company may be required
to pay an alternative minimum tax based in part upon the difference between the
shareholders' taxable income and its adjusted current earnings. In effect this
may require a tax for corporate shareholders on exempt interest dividends.
In addition to exempt-interest dividends, the Company will pay
dividends of at least 98% of the ordinary income it receives from investments
generating taxable income on a calendar year basis; 98% of its capital gain net
income (amounts, if any, in excess of current or carryover losses) for every
year ending on October 31; and, 100% of any undistributed amounts of ordinary
and capital gain income from the preceding calendar year.
The foregoing is only a brief summary of some of the important tax
considerations generally affecting the Company and its shareholders. No attempt
is made to present a detailed explanation of the federal, state and local income
tax treatment of the Company or its shareholders. This discussion is not
intended as a substitute for careful tax planning. Accordingly, potential
investors in the Company are urged to consult their tax advisors with specific
reference to their own tax situations.
In general, dividend record dates are set by the directors to occur on
approximately the 23rd day of February, May, August and November. Shareholders
will be advised annually within 60 days of the end of the Company's taxable year
as to the federal income tax consequences of distributions made during such
year, and will be similarly advised after the end of each calendar year.
MANAGEMENT OF THE COMPANY
The business and affairs of the Company are managed by the Company's
Board of Directors. The Company's by-laws provide for five directors and all
positions are filled. Two of the directors serving, including George W. Connell,
are "interested persons" within the meaning of that term under the Investment
Company Act of 1940. The Statement of Additional Information contains the names
of and the general background information concerning each director of the
Company.
Since December 9, 1992, Rittenhouse Financial Services, Inc. (RFS) has
served as the Company's investment advisor. RFS was organized in 1979 by Mr.
Connell, a 1958 graduate of the University of Pennsylvania and former first Vice
President of Drexel Burnham Lambert, Incorporated. He is chairman and chief
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executive officer and sole shareholder of RFS, and president and director of
Rittenhouse Trust Company (a commercial bank and trust company) and Rittenhouse
Financial Securities (a registered broker dealer) which is a subsidiary of
Rittenhouse Trust Company. Through its own activities and that of its related
companies, RFS provides advisory, brokerage and other financial services to
individual and institutional clients. The offices of the parent company are at
No. 2 Radnor Corporate Center, 100 Matsonford Road, Radnor, Pa. 19087.
RFS provides investment supervisory services to the Company on a
non-discretionary basis. Its activities are limited to making recommendations
with respect to purchases and sales of securities in accordance with the
Company's investment policies, the provisions of the Company's registration
statement, the requirements of the Investment Company Act of 1940 and the
requirements of the Internal Revenue Code of 1986.
Since the time the Company most recently employed RFS, Mr. George
Connell has been responsible to the Directors for day-to-day recommendations
regarding the Company's portfolio. In addition to being a principal of RFS, Mr.
Connell has been engaged in some or all of the various enterprises described
above for a period in excess of five years.
Since November 27, 1992, the members of the Company's Board of
Directors acting as a committee, and taking the advisor's recommendations into
account (1) has made decisions with respect to all purchases and sales of the
Company's portfolio (2) has directed the maintenance of records and (3) has been
responsible for the day-to-day management of the portfolio; further, the Board
also arranges for (4) the services of an independent certified public
accountant; (5) custodial and transfer agency services; (6) the computation of
net asset value by RFS; (7) the providing of fidelity bond coverage; (8) the
providing of other administrative services and facilities necessary to conduct
the Company's business; and (9) the providing of certain services necessary to
comply with federal securities laws. The Company assumes all expenses therefor.
For the services provided by RFS, the Company pays RFS $10,000
annually in quarterly installments, an amount equal to .06% of the Company's
average net assets.
Management's Discussion of Fund Performance
As the economy continued to grow during the past year there was slight
upward pressure on interest rates. The increase in rates was minor and contained
by the perception that inflation would be subdued and the economy's growth rate
would moderate.
13
<PAGE>
The Federal Reserve remained in a holding pattern keeping interest rates in a
fairly narrow trading range.
Tax exempt municipal bond rates in the intermediate maturity range
increased slightly over the past year, but total returns in that sector remained
positive.
A large component of the market's return came from coupon income
allowing the participants holding higher coupon bonds to out perform their
requisite benchmarks.
The Company has maintained high current income by investing in a
diversified portfolio of tax exempt housing, G.O. and revenue bonds. The
following chart shows the Company's average annual total return for one, five,
and ten year periods ended on the last day of the Company's last fiscal year,
August 31, 1996.
NRM Investment Company
Total Return Calculations
Annualized Returns* Total Return on $1,000
1 Year 5.11% $1,051.10
5 Year 8.14% $1,478.70
10 Year 6.66% $1,906.47
*Past Performance is not predictive of future performance.
The following page is a line graph comparing the initial account value
and subsequent account values at the end of each of the most recently completed
ten fiscal years of the Company, assuming a $10,000 investment in the Company at
the beginning of the first fiscal year, to the same investment over the same
periods in Lehman Bros. 10 year Municipal Index. Material in the table and the
graph showing past performance is not predictive of future performance.
THE COMPANY'S COMMON STOCK
The Company was incorporated on April 12, 1974 under the laws of the
Commonwealth of Pennsylvania. Each share in the Company has a par value of $.01
and has equal voting, dividend and liquidation rights. Shareholders are entitled
to one vote for each full share held, and fractional votes for fractional shares
held. The shares have no preemptive, conversion or cumulative voting rights.
Accordingly, holders of more than 50% of the shares voting for the election of
14
<PAGE>
[Following plot points from NRM Graph Page 14A]
NRM INDEX
86 10,000 10,000
87 12,691 10,675
88 13,144 11,109
89 14,497 11,909
90 14,887 12,711
91 15,334 13,995
92 16,726 15,386
93 19,518 16,746
94 20,063 17,021
95 21,572 18,365
96 22,674 19,047
14A
<PAGE>
directors can elect all of the directors.
As of October 18, 1996 John H. McCoy owned beneficially and of record
approximately 66% of the Company's outstanding shares and controlled the
Company. As of the same date, five shareholders owned beneficially approximately
85% of the Company's outstanding shares. A redemption of a significant number of
shares by one or more of these shareholders could require the Company to
liquidate portfolio securities to obtain all or a portion of the redemption
proceeds. The liquidation of portfolio securities under these circumstances
could be disadvantageous to the Company's remaining shareholders and could so
reduce the Company's total assets that continued operation as an investment
company would not be economically feasible.
TRANSFER AGENT
Investors Trust Company, 2201 Ridgewood Road, #180, Wyomissing, PA
19610 serves as the Company's transfer agent and dividend disbursing agent.
PENDING LEGAL PROCEEDINGS
National Rolling Mills of Malvern, Pa. (now Worthington Industries)
the purchaser of assets from the Company's 1979 asset transferee, was made a
party to environmental proceedings in the United States District Court for the
District of New Jersey, captioned State of New Jersey Department of
Environmental Protection, Plaintiff, v. Gloucester Environmental Management
Services, Inc., et al., (currently numbered 84-0152, and known as the "GEMS"
litigation). The Company was not then, nor since then, made party to the GEMS
litigation.
In 1988 Worthington notified the Company of its participation in the
GEMS cleanup and its view of the Company's responsibility over to it. At that
time the Company, having no evidence linking the Company's activities to the
GEMS site, was of the opinion that its exposure was not great. In March, 1994,
Worthington notified the Company that it had paid assessments in excess of
$162,000 to date as one of the group of alleged generators and that a proposal
was pending to assess Worthington an additional amount of approximately $600,000
to fund part of the GEMS cleanup, a sum that could increase if the group of
generators decreased or the projected costs increased. It was Worthington's
position that the Company and the Company's predecessor, as generators during
the years specified in the
15
<PAGE>
litigation, were responsible for these costs.
The Company's representatives read available discovery material in
Trenton, New Jersey and examined the available records at the United States
Environmental Protection Agency, Region II, New York, New York, and based
thereon concluded that there was, at that time, no effective evidence linking
material generated by the Company during its period of a steel processing plant
with material disposed of at the GEMS site. During the 1996 fiscal year counsel
also learned that there was additional confirmation by the major transporter's
principal that none of the Company's waste was deposited at the GEMS site during
the years in litigation.
Apart from the question of linkage, it is the Company's position that
by reason of indemnity and other contractual commitments in the sale of the
Company's assets in 1979 and the later purchase of them by Worthington, any
losses which the Company suffered in this regard should ultimately be borne by
Worthington. Worthington has in the past (regarding unrelated litigation, since
settled) vigorously contested any such commitment.
For the foregoing reasons, the Company, as in 1988, decided not to
participate in any GEMS cleanup committee or contribute toward a settlement.
The Company was advised in September, 1996, that the GEMS litigation
was settled subject to certain administrative conditions which are expected to
be fulfilled. We have been further advised that no decision has been made
whether the settling defendants or any group of them will pursue non-settling
parties for contribution or indemnity.
As in the past, it is difficult to evaluate the exposure of the
Company to the GEMS participants. However, as above, in the absence of evidence
proffered to us of hazardous waste originating at the Company's plant and being
transported to GEMS during the years pertinent to the litigation; in light of
the additional confirmation to that effect by the transporter; and because of
the claim the Company would have against Worthington for indemnity, the exposure
remains, in counsel's view, small; should a claim be made, counsel would advise
the Company to resist it vigorously.
In separate proceeding, the Environmental Protection Agency, on
November 12, 1992, gave the Company and others notice to perform "remediation"
in connection with a landfill in Strasburg, Chester County, Pennsylvania. The
Company and the others, as a group, are resisting the order. During its
operation, the
16
<PAGE>
landfill received in excess of 1,500,000 cubic yards of municipal waste and
220,000 tons of municipal sludge from municipal treatment works. In counsel's
view, the Company's involvement was de minimis. According to the limited
information now available, a hauler at the request of the Strasburg's owners,
and to control dust, transported and deposited the Company's waste oil on an
entrance road, all as directed by the Pennsylvania Department of Environmental
Resources.
To contain and treat all of the municipal and industrial waste, the
predicted remediation cost for the current phase of the project was in excess of
$11 million. Past response costs were reported to be in excess of $6 million.
Since the number of entities so notified is relatively small, the initial
exposure of the Company to EPA appeared significant.
During the current year the entities forming the Company's group,
through lead counsel, have been negotiating with a representative of the
Department of Justice in an effort to settle the responsibility of all of group
members. The last demand by the Department was $4.25 million from the group; the
group counteroffered $2,000,000 the ratable share of which for the Company would
be $111,000 which the Company accrued at August 31, 1996. As of this date, the
Department has not responded to the counteroffer. At least one member of our
group will be seeking indemnification from the others for funds it advanced to
the project. The Company's share of that is expected to be less than $50,000.
Since the foregoing opinions are based upon information now available
and furnished to, or otherwise found by counsel, and since the above matters are
ongoing, it is not possible to predict with reasonable accuracy what, if any,
the Company's ultimate liability will be. However, based upon presently known
facts, the Company's liability is not significant. Should facts come to light
which link the Company's prior activities with GEMS or the Chester County site
in ways of which the Company is not now aware, counsel would reassess the
Company's position accordingly.
MISCELLANEOUS
Shareholders will receive unaudited semi-annual reports describing the
Company's investment operations and annual audited financial statements,
including a list of the Company's investments.
As used in this Prospectus, a "vote of a majority of the outstanding
shares" of the Company means an affirmative vote of the lesser of (a) 50% of the
outstanding Shares of the Company or (b) 67% or more of the Shares of the
Company present at a
17
<PAGE>
meeting if not more than 50% of the outstanding Shares of the Company are
represented at the meeting in person or by proxy.
Inquiries regarding the Company may be directed to the Company at
(610) 525-0904.
18
<PAGE>
APPLICATION FORM: NRM INVESTMENT COMPANY
Mail to: Investors Trust Company, 2201 Ridgewood Road, #180,
Wyomissing, PA 19610.
________________________________________________________________________________
REGISTRATION: |_| Individual |_| Tenants in Common |_| Trustees
|_| Joint Tenants |_| Custodian |_| Other
________________________________________________________________________________
(Name) Social Security No.
(Tax Identification No.)
________________________________________________________________________________
(Name) Social Security No.
(Tax Identification No.)
________________________________________________________________________________
PERMANENT MAILING ADDRESS: _________________________________________________
Street Address City State Zip
GIFTS TO MINORS ________________________________________________As Custodian for
________________________________________________________________________________
Minor's First Name Initial Last Name Age Minor S.S. No.
Under the _______________________Uniform Gifts to Minors Act.
State
Initial order, payment enclosed
If this Application accompanies a check for the purchase of investment
company shares, I enclose a check payable to Investors Trust Company, and would
like you to:
|_| Issue Certificate, or |_| hold shares in account at Bank
|_| Check here if dividends and distribution are to be reinvested at net asset
value without sales charge.
________________________________________________________________________________
This application is made in accordance with the provisions of the current
Prospectus of the Company, a copy of which I have received, and the applicable
terms and conditions on the reverse side. I am of legal age in the State of my
residence.
________________________________________________________________________________
Date Signature Signature of co-owner
19
<PAGE>
TERMS AND CONDITIONS
PURCHASES OF COMPANY SHARES:
INITIAL PURCHASE: Upon receipt of the application form from the subscriber, and
accompanied by any necessary funds, Investors Trust Company, acting as agent for
the subscriber, will purchase as many shares (including fractional shares) of
the Company as may be purchased at the net asset value next computed after
receipt of the application form and payment to Investors Trust Company, 2201
Ridgewood Road, #180, Wyomissing, PA 19610. Fractional shares shall be purchased
to the nearest one-thousandth (1/1000) of a share. Initial purchases must be for
at least one share.
SUBSEQUENT PURCHASES: Upon receipt of additional funds, Investors Trust Company
will purchase additional shares (including fractional shares) in the same manner
as above. Additional purchases must be for at least one share.
The Company reserves the right in its discretion to reject all or any portion of
a purchase order and return the accompanying payment.
I hereby certify that the Tax Identification No. contained herein is true,
correct and complete and that I am not subject to backup withholding under
Section 3406 (a)(1)(C) of the Internal Revenue Code.
________________________________________________________________________________
Date Signature Signature of co-owner
20
<PAGE>
NRM INVESTMENT COMPANY
Statement of Additional Information
December 30, 1996
This Statement of Additional Information is not a prospectus, but should be read
in conjunction with the current Prospectus for NRM Investment Company (the
"Company"), dated December 30, 1996. Because this Statement of Additional
Information is not a prospectus, no investment in shares of the Company should
be made solely upon the information contained herein. A copy of the Prospectus
for the Company may be obtained by writing Investors Trust Company, 2201
Ridgewood Road, #180, Wyomissing, PA 19610, or by calling (610) 372-6414.
<PAGE>
NRM INVESTMENT COMPANY
Statement of Additional Information
December 30, 1996
Table of Contents
Page
Statement of Additional Information ................................... 2
Investment Objective and Policies .................................... 2
General Information and Description of Shares.......................... 4
Taxes ................................................................. 5
Directors and Officers ................................................ 7
Advisory Agreement .................................................... 8
Portfolio Transactions and Brokerage Commissions ...................... 10
Principal Shareholders of the Company ................................. 11
Custodian and Transfer Agent .......................................... 12
Auditors .............................................................. 12
Counsel ............................................................... 12
Report of Independent Auditor ......................................... 13
Financial Statements................................................... 13
1
<PAGE>
NRM INVESTMENT COMPANY
Statement of Additional Information
December 30, 1996
Statement of Additional Information
This Statement of Additional Information should be read in conjunction
with the Prospectus of the Company having the same date as this Statement of
Additional Information. Much of the information contained in this Statement of
Additional Information expands upon subjects discussed in the Prospectus. No
investment in shares of the Company should be made without first reading the
Prospectus of the Company.
Investment Objective and Policies
As stated in the Prospectus, the Company intends to invest primarily
in Municipal Bonds. Municipal Bonds include debt obligations issued to obtain
funds for various public purposes, including the construction of a wide range of
public facilities, refunding of outstanding obligations, and obtaining funds for
general operating expenses and loans to other public institutions and
facilities. In addition, certain types of private activity bonds are issued by
or on behalf of public authorities to obtain funds to provide privately operated
facilities. Such obligations are included within the term "Municipal Bonds" if
the interest paid thereon is exempt from federal income tax. (See reference to
"private activity bonds" under the discussion "TAXES" in the prospectus).
Municipal Bonds also include short-term tax-exempt municipal obligations such as
tax anticipation notes, bond anticipation notes, revenue anticipation notes, and
Public Housing Authority notes that are fully secured by a pledge of the full
faith and credit of the United States. Opinions relating to the validity of
Municipal Bonds and to the exemption of interest thereon from federal income
taxes are rendered by bond counsel to the respective issuing authorities at the
time of issuance. Neither the Company nor the advisor will review the
proceedings relating to the issuance of Municipal Bonds or the basis for such
opinions.
The District of Columbia, each state, each of its political
subdivisions, agencies, instrumentalities and authorities, and each multi-state
agency of which a state is a member, is a separate "issuer" as that term is used
in the Prospectus and this Statement of Additional Information. The
non-governmental user of facilities financed by private activity bonds is also
considered to be an issuer.
2
<PAGE>
The issuer's obligations under its Municipal Bonds are subject to the
provisions of bankruptcy, insolvency, and other laws affecting the rights and
remedies of creditors, such as the federal Bankruptcy Code, and laws, if any,
which may be enacted by Congress or state legislatures imposing a moratorium on
the payment of principal and interest or imposing other constraints or
conditions upon enforcement of such obligations. There is also the possibility
that as a result of litigation or other conditions, the power or ability of
issuers to meet their obligations for the payment of interest and principal on
their Municipal Bonds may be materially adversely affected.
In addition to the investment limitations stated in the Prospectus,
the Company is subject to the following limitations which may be changed only by
a vote of a majority of the outstanding shares of the Company (as defined under
"Miscellaneous" in the Company's Prospectus dated as of this date).
The Company may not:
1. Purchase securities on margin (except that it may obtain such
short-term credits as may be necessary for clearance of purchases and sales of
securities); make short sales of securities; or maintain a short position;
2. Make loans to other persons, except that the Company may purchase
or hold Municipal Bonds or other debt instruments in accordance with its
investment objective, policies, and restrictions;
3. Underwrite any issue of securities, except to the extent that the
purchase of Municipal Bonds directly from the issuer thereof in accordance with
the Company's investment objective, policies, and restrictions may be deemed to
be underwriting;
4. Purchase or sell commodities or commodity contracts or real estate
(except that the Company may invest in Municipal Bonds secured by real estate or
interests therein); invest in oil, gas, or their mineral exploration or
development programs.
5. Purchase any private activity bond where the payment of principal
and interest are the responsibility of an issuer (including its predecessors and
unconditional guarantors) which at the time of purchase had been in operation
for less than three years; and
3
<PAGE>
6. Issue any class of senior security or sell any senior security of
which it is an issuer, except that the Company may borrow money as set forth in
investment restriction 2 as set forth in the Company's Prospectus.
General Information and Description of Shares
The Company was incorporated on April 12, 1974, under the laws of the
Commonwealth of Pennsylvania, as National Rolling Mills Co. Through August 30,
1979, the Company was actively engaged in operations as a steel processing
plant. On August 31, 1979, the Company changed its name to NRM Investment
Company and registered with the Securities and Exchange Commission as an
open-end, diversified management investment company.
The Company's Articles of Incorporation authorize the Board of
Directors to issue up to ten million full and fractional shares of capital
stock. When issued for payment as described in this Statement of Additional
Information and in the Company's Prospectus dated as of the same date as this
Statement of Additional Information, the Company's shares will be fully paid and
non-assessable.
Share certificates for shares will not be issued unless the
shareholder specifically requests in writing. No separate charge is imposed on
the shareholder for the issuance of share certificates. Unless so requested, the
transfer agent will issue shares in non-certificate form and credit them to the
shareholder's account. Following each dividend and after each other transaction,
the transfer agent will mail a cumulative statement showing the total number of
full and fractional shares owned and the transactions in the shareholder's
account for the current year.
Taxes
A tax is imposed upon the Company based upon its investment company
taxable income and its net capital gains which in each case are not distributed
to its shareholders. In general, the Company's investment company taxable
income will be its taxable income (determined in the same manner as an ordinary
corporation), adjusted by excluding net long term capital gains over short term
capital losses and further adjusted by excluding any net operating losses and by
including the dividends paid deduction. The Company's capital gains subject to
tax are computed separately and are based upon the excess of its long term
capital gains over its net short term capital losses. Currently the Company's
tax loss carryovers exceed current capital gains
4
<PAGE>
and accordingly there was no capital gain dividend for any period ending during
1996. The Company intends to distribute "exempt-interest" dividends as described
in the Company's prospectus and distribute at least 98% of its ordinary income
for each calendar year, 98% of its capital gain net income, if any, computed on
the basis of an October 31st fiscal year, and 100% of undistributed adjusted
taxable income amounts from the previous year. Accordingly, it is unlikely that
the Company will pay any income tax. However, should the Company retain any
earnings, it will be taxed on its undistributed investment company taxable
income and capital gains and may be subject to an excise tax. To the extent
income is distributed (whether in cash or additional shares) it will be exempt,
or taxable to the shareholders as ordinary, or capital gain income, in
proportion to the Company's receipt of such income. Since the Company has
earnings and profits generated in years before it was an investment company,
distributions to shareholders over and above the Company's income for a period
will be taxable to the shareholders to the extent of the prior earnings and
profits and will not be treated immediately as a return of capital.
The Company is a personal holding company as defined by Sec. 542 of
the Code. Retained income will be taxed at the highest corporate tax rate. The
Company requested and on August 5, 1986 received a private ruling from the
Internal Revenue Service relating to investments in taxable securities. The
ruling interpreted the Tax Reform Act of 1984 in such a way as to confirm the
Company's ability to make investments in securities generating taxable income
without having to first make an accumulated earnings and profits distribution.
The Company has capital loss carryovers which may be used to offset
gains in securities which would otherwise be recognized.
Section 852 (b)(5) of the Code provides, in effect, that if, at the
close of each quarter of its taxable year, at least 50% of the Company's total
assets consists of tax free obligations, the income from such investments may be
passed through to the shareholders, and for federal tax purposes, excluded by
them from gross income reporting. By reason of this provision, the Company does
not intend to invest 50% or more of its assets in securities generating taxable
income.
If and to the extent declared by the Board of Directors, net realized
long-term capital gains will be distributed annually. See "Dividends." The
Company will have no tax liability with respect to net realized long-term
capital gains which are distributed although the distributions will be taxable
to shareholders as long-term capital gains regard-
5
<PAGE>
less of a shareholder's holding period of shares of the Company. Such
distributions will be designated as a capital gain dividend in a written notice
mailed by the Company to the shareholders not later than sixty days after the
close of the Company's taxable year.
State and Local. Depending upon the extent of the Company's activities
in states and localities in which it maintains offices, in which its agents or
independent contractors are located, or in which it is otherwise deemed to be
conducting business, the Company may be subject to the tax laws of such states
or localities.
The foregoing discussion, as well as that contained in the Company's
Prospectus, is only a summary of some of the important tax considerations
generally affecting the Company and its shareholders. No attempt is made to
present a detailed explanation of the federal income tax treatment of the
Company or its shareholders and this discussion is not intended as a substitute
for careful tax planning. Accordingly, potential investors in the Company are
urged to consult their tax Advisors with specific reference to their own tax
situations.
Directors and Officers
The directors and officers of the Company and their addresses and
principal occupations during the past five years are as follows:
Principal Occupation
Position During Past
Name and Address with Registrant Five Years
- --------------------------------------------------------------------------------
(1)John H. McCoy Director, Presently retired;
1010 Broadmoor Road Chairman, and former President
Bryn Mawr, PA 19010 President of National Rolling
Mills, Inc., a steel
rolling plant, since
August 1979. Prior thereto,
he was President and Director
of National Rolling Mills Co.
- ----------
(1) John H. McCoy and George W. Connell are "interested" directors as defined
in the Investment Company Act of 1940.
6
<PAGE>
Joseph V. Somers Director Presently retired;
1518 Mt. Pleasant Rd. former President of
Villanova, PA 19085 Somers Construction
Company and Vice
President of Indus-
trial Lift Truck Co.
Francis J. Rainer Director President,
1415 Kyneton Drive Rainer & Company, a
Villanova, PA 19085 Professional Corporation.
He is also Vice-
Chairman of the
Board of Delaware
Valley Savings Bank
Thomas F. Kilcullen, Jr. Director, Presently retired;
4 Carriage Way Treasurer, and former Vice Presi-
Berwyn, PA 19312 Secretary dent, Treasurer
and Secretary of
National Rolling
Mills Inc. since
August 1979. Prior
thereto, he was Vice
President and Treas-
urer of National
Rolling Mills Co.
(1)George W. Connell Director Chairman and Chief
#2 Radnor Corporate Executive Officer
Ctr., Suite 400 and sole shareholder
100 Matsonford Road of Rittenhouse Financial
Radnor, PA 19087 Service, the Company's
investment advisor;
President and director of
Rittenhouse Financial
Securities, a registered
brokerage dealer;
President, Director and
sole shareholder of
Rittenhouse Trust Company
a Commercial Bank and
Trust Co.
- ----------
(1) See note 1 on prior page.
7
<PAGE>
Since registering as an investment company under the Investment
Company Act of 1940, the Company has not paid and does not expect to pay any
remuneration to any of its officers. The company pays each director a fee of
$250 for each meeting of the Board of Directors attended and reimburses the
directors for their related out-of-pocket expenses.
Advisory Agreement
Rittenhouse Financial Services, Inc. ("RFS"), a Delaware Corporation
located at Two Radnor Corporate Center, 100 Matsonford Road, Radnor, Pa.,
19087-4514, has been retained by the Company to act as investment advisor under
an Advisory Agreement dated November 30, 1992, terminable at will, without
penalty, at the discretion of the Board of Directors.
Under the Advisory Agreement, Rittenhouse assumes no responsibilities
to the Company except, as provided in the prospectus, to make recommendations
to the Company's board respecting the purchases and sales of securities on a
nondiscretionary basis and to adhere to the provisions of the Investment
Advisors' Act of 1940 and other pertinent securities laws. For the services
provided, the Company has agreed to pay RFS, on a quarterly basis, a fee at an
annual flat rate of $10,000.
The agreement provides that except for violations of securities laws,
RFS shall not be liable for any action it takes for services rendered or not
rendered or for any mistakes of judgment or otherwise.
For each of the fiscal years ending August 31, 1994, and August 31,
1996, the Company paid RFS $10,000.
Raymond J. Keefe, a certified public accountant with principal offices
at 6 St. Albans Ave., Newtown Square, Pennsylvania 19073, provides certain
administrative services to the Company. Mr. Keefe maintains the books and
records of the Company, compiles its monthly and semi-annually financial
statements, computes its net asset value and net income under the supervision of
the advisor, prepares its federal and state income tax returns, and provides
assistance in the preparation of its semi-annual and annual reports to the
Securities and Exchange Commission. Mr. Keefe bears all expenses in connection
with the performance of his services. For the services provided and expenses
assumed, the Company pays Mr. Keefe on a quarterly basis an annual fee of
$5,600.
To the Company's knowledge as of the date of this
8
<PAGE>
Statement of Additional Information, there were no expense limitations imposed
by state securities regulations applicable to the Company.
Portfolio Transactions and Brokerage Commissions
Purchases and sales of portfolio securities will normally (but not
exclusively) be transacted with the issuer or with a primary market maker acting
as principal on a net basis with no brokerage commissions being paid by the
Company. Transactions placed through dealers serving as primary market makers
reflect the spread between the bid and the asked prices. The Company will also
purchase underwritten issues. However, when purchasing equity issues the
directors have authorized the Advisor to execute transactions that may result in
the Company paying some commissions. In the year ended August 31, 1996 the
Company paid no commissions in respect to portfolio transactions.
The policy of the Advisor will be to seek "best execution" when
placing portfolio transactions for the Company. "Best execution" means prompt
and reliable execution at a price the Advisor has reason to believe represents
the lowest cost, including any commission in the case of a purchase, or the
greatest proceeds reasonably available. Subject to and in accordance with the
provisions of section 28(e) of the Securities Exchange Act of 1934, the
Advisory Agreement authorizes the Advisor to place orders for the purchase and
sale of the Company's securities with brokers or dealers who provide the Advisor
with access to supplemental research and security and economic analysis even
though such brokers and dealers execute such transactions at a higher net cost
to the Company than may result if other firms were used. These various services
may also be useful to the Advisor in connection with its services to their
advisory clients. The extent and continuation of this policy is subject to the
review of the Company's Board of Directors.
The Company does not expect its annual portfolio turnover rate to
exceed 100%, but the rate of turnover will not be a limiting factor (as in
fiscal 1991) when the Company deems it desirable to sell or purchase securities.
The Company's portfolio turnover rates during the fiscal years ended August 31,
1996 and August 31, 1995 were 6.24% and 22.73% respectively.
Principal Shareholders of the Company
As of October 21, 1996 John H. McCoy owned beneficially and of record
2,817,680 of the Company's outstanding voting securities and controlled the
Company. His control is sufficient
9
<PAGE>
to appoint all members of the board of directors and carry out the business of
the Company without the affirmative vote of any other shareholder or group of
shareholders. The Company's principal shareholders are as follows:
Percentage of
Name and address Ownership
------------------------------------------------
John H. McCoy 66%
1010 Broadmoor Road
Bryn Mawr, Pa 19010
Francis J. Rainer 5.6%
1415 Kyneton Drive
Villanova, PA 19085
Joseph V. Somers 5.5%
1518 Mt. Pleasant Road
Villanova, PA 19085
Samuel R. Gilbert, Jr. 4.7%
3 Turtle Lane, The Landings
Savannah, GA 31411
Thomas F. Kilcullen, Jr. 4.7%
4 Carriage Way
Berwyn, PA 19312
The percent owned is based on the number of outstanding shares of
common stock at October 21, 1996. All such shares are owned of record and
beneficially. All officers and directors of the Company, as a group owned as of
October 21, 1996, 3,642,534 of the Company's common stock or 85% of its
outstanding voting securities.
Custodian and Transfer Agent
Investors Trust Company, ("ITC") serves as the Company's Custodian and
Transfer Agent. As Custodian, ITC holds the Company's assets subject to the
instructions of the Company's officers.
Auditors
Beard & Company, Inc., independent auditors, with offices at One Park
Plaza, P.O. Box 311, Reading, Pennsylvania 19603 serves as the Company's
auditors. The financial statements of NRM Investment Company appearing in the
1996 annual report to shareholders for the year ended August 31, 1996, have been
audited by
10
<PAGE>
Beard & Company, Inc., independent auditors, as set forth in their report
thereon included therein, and are incorporated by reference into this Statement
of Additional Information.
Ernst and Young LLP independent auditors, with offices at Wyomissing
Professional Center, 875 Berkshire Boulevard, P.O. Box 7045, Reading,
Pennsylvania 19610-6045 served as the Company's auditors. The financial
statements of NRM Investment Company appearing in the 1996 annual report to
Shareholders for the year ended August 31, 1995, have been audited by Ernst &
Young LLP, independent auditors, as set forth in their report thereon included
therein, and are incorporated by reference into this Statement of Additional
Information.
Counsel
Messrs. Henderson, Wetherill, O'Hey & Horsey, Suite 902, One
Montgomery Plaza, P.O. Box 751, Norristown, PA 19404, counsel to the Company,
have passed upon the legality of the shares offered hereby.
11
<PAGE>
NRM INVESTMENT COMPANY
FINANCIAL REPORT
AUGUST 31, 1996
<PAGE>
C O N T E N T S
Page
INDEPENDENT AUDITOR'S REPORT
ON THE FINANCIAL STATEMENTS 1
FINANCIAL STATEMENTS
Statement of assets and liabilities 2
Schedule of investments 3-6
Statement of operations 7
Statements of changes in net assets 8
Financial highlights 9 and 10
Notes to financial statements 11-14
<PAGE>
Beard & Company Inc.
CERTIFIED PUBLIC ACCOUNTANTS
INDEPENDENT AUDITOR'S REPORT
Shareholders and Board of Directors
NRM Investment Company
Rosemont, Pennsylvania
We have audited the accompanying statement of assets and liabilities of NRM
Investment Company, including the schedule of investments, as of August 31,
1996, and the related statement of operations, statement of changes in net
assets and the financial highlights for the year then ended. These financial
statements and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audit. The statement of changes
in net assets for the year ended August 31, 1995 and the financial highlights
for each of the years ended August 31, 1987 through August 31, 1995 were audited
by other auditors whose report, dated September 29, 1995, expressed an
unqualified opinion on those statements and financial highlights.
We conducted our audit 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
August 31, 1996, 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 audit provides 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 NRM
Investment Company at August 31, 1996, the results of its operations, changes in
its net assets and the financial highlights for the year then ended, in
conformity with generally accepted accounting principles.
BEARD & COMPANY, INC.
Reading, Pennsylvania
October 2, 1996
- 1 -
<PAGE>
To the Board of Directors and Shareholders of
NRM Investment Company
In our opinion, the accompanying statement of changes in net assets and the
financial highlights present fairly, in all material respects, the changes
in net assets of NRM Investment Company (the "Fund") for the year ended
August 31, 1995, and the financial highlights for each of the nine years
in the period ended August 31, 1995, in conformity with generally accepted
accounting principles. This financial statement and financial highlights
(hereafter referred to as "financial statements") are the responsibility
of the Fund's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with generally accepted auditing standards,
which require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
Ernst & Young LLP
Reading, Pennsylvania
September 29, 1995
1-A
<PAGE>
NRM INVESTMENT COMPANY
STATEMENT OF ASSETS AND LIABILITIES
- --------------------------------------------------------------------------------
August 31, 1996
- --------------------------------------------------------------------------------
ASSETS
Investments at value (cost $16,471,153) $16,979,368
Interest receivable 244,759
Prepaid expense 1,708
-----------
Total assets 17,225,835
-----------
LIABILITIES
Dividends payable 248,453
Accrued expenses and other liabilities 130,217
-----------
Total liabilities 378,670
-----------
Net assets, applicable to 4,283,671 outstanding shares,
equivalent to $3.93 a share $16,847,165
===========
See Notes to Financial Statements
- 2 -
<PAGE>
NRM INVESTMENT COMPANY
SCHEDULE OF INVESTMENTS
- --------------------------------------------------------------------------------
August 31, 1996
- --------------------------------------------------------------------------------
Principal
Municipal Bonds - 98% Amount Value
- ---------------------------------------------------- ------------------------
General Obligation Bonds - 13%:
Rhode Island Public Buildings Authority,
8.20%, due 2/1/08, callable 2/1/98 at 102.0 $ 450,000 $ 483,044
Leominster, Massachusetts, 6.25%, due 4/1/08 300,000 316,116
Upper Dublin Pennsylvania School District,
5.50%, due 11/15/08 200,000 200,726
Lowell, Massachusetts, 5.50%, due 1/15/10 300,000 296,349
New York City, New York, 6.25%, due 8/1/10 200,000 199,436
Port Houston, Texas, Harris County Port
Improvement, 5.70%, due 10/1/12 280,000 274,501
Nevada State Colorado River Commission,
Ltd Tax, 6.50%, due 10/1/12 400,000 424,580
----------
Total General Obligation Bonds 2,194,752
----------
Housing Finance Agency Bonds - 49%:
New Mexico Mortgage Finance Authority,
Single-Family Mortgage Rev., 7.90%,
due 7/1/00 90,000 93,382
Pennsylvania Housing Finance Agency,
Single-Family Mortgage, 5.60%, due 4/1/05 200,000 201,154
Pennsylvania Housing Finance Agency,
Single-Family Mortgage, 5.80%, due 4/1/07 100,000 100,837
Rock Island, Illinois Residential Mortgage
Revenue Refunding, 7.70%, due 9/1/08,
callable 9/1/02 at 102 180,000 191,090
Pasadena California Community Development,
Multi-family Housing, 5.875%, due 12/1/02 100,000 101,556
Ford County Kansas Single-Family Mortgage
Revenue Refunding Bonds, 7.90%, due 8/1/10,
callable 8/1/02 at 103, 8/1/05 at 100 285,000 305,509
Fort Worth Texas Housing Finance Corporation,
Home Mortgage Revenue Refunding Series 1991,
8.50%, due 10/1/11, callable 10/1/01 at 103 430,000 463,084
Odessa, Texas Housing Finance Corporation, Home
Mortgage Revenue Refunding, 8.45%, due 11/1/11,
callable 11/1/05 at 103 360,966 387,017
- 3 -
<PAGE>
NRM INVESTMENT COMPANY
SCHEDULE OF INVESTMENTS (CONTINUED)
- --------------------------------------------------------------------------------
August 31, 1996
- --------------------------------------------------------------------------------
Principal
Municipal Bonds (Continued) Amount Value
- ----------------------------------------------------- -----------------------
Housing Finance Agency Bonds (Continued):
Montana State Housing, Single-Family Mortgage,
7.65%, due 10/1/10, callable 10/1/00 at 102 $ 80,000 $ 84,099
City of Hobbs, New Mexico, Single-Family Mortgage
Refunding Revenue Bonds, 8.75%, due 7/1/11,
callable 7/1/02 at 102, 7/1/05 at 100 105,000 112,818
Cameron County, Texas Housing Finance
Corporation, Single-Family Mortgage Revenue
Refunding, 6.20%, due 3/1/13,
callable 9/1/05 at 100 495,000 503,182
Idaho Housing Agency, Single-Family Mortgage,
6.15%, due 7/1/12 300,000 299,367
Labette and Cowley Counties Kansas Single-Family
Mortgage Refunding Bonds, 9.50%, due 4/1/13,
callable 10/1/01 at 103 45,000 47,577
Vicksburg Mississippi Lease Housing Corp., 5.80%,
due 8/15/13 125,000 123,536
California Housing Finance Agency, Home Mortgage,
10.25%, due 2/1/14, callable 2/1/92 at 102 60,000 60,098
New Hampshire Housing Finance Agency, Single-Family
Mortgage Revenue, 6.50%, due 7/1/14,
callable 7/1/07 100,000 102,015
Arkansas Development Finance Authority,
7.70%, due 12/1/14 305,000 314,513
Massachusetts State Housing Finance Agency, Rental
Housing, 6.35%, due 7/1/15, callable 7/1/07 220,000 223,942
Nevada Housing Division, Single-Family Mortgage,
7.35%, due 10/1/15 260,000 268,858
Louisiana Public Facilities Authority, Multi-Family
Housing, 7.75%, due 11/1/16, callable 11/1/01
at 102 500,000 533,505
Utah State Housing Finance Agency, Single-Family
Mortgage, 6.30%, due 1/1/18 270,000 274,636
Troy, New York Housing Development Corp.,
Multi-Family Housing, 8.10%, due 2/1/22, callable
12/1/02 at 100 1,375,000 1,463,151
Quaker Hill Housing Corporation, Multi-Family,
7.55%, due 2/1/22 600,000 635,604
Rhode Island Housing and Finance, 8.25%,
due 10/1/22 110,000 114,456
St. Alphios Housing Corporation, Multi-Family,
8.20%, due 2/1/24 1,155,000 1,262,935
----------
Total Housing Finance Agency Bonds 8,267,921
----------
- 4 -
<PAGE>
NRM INVESTMENT COMPANY
SCHEDULE OF INVESTMENTS (CONTINUED)
- --------------------------------------------------------------------------------
August 31, 1996
- --------------------------------------------------------------------------------
Principal
Municipal Bonds (Continued) Amount Value
- ----------------------------------------------------- -----------------------
Hospital Revenue Bonds - 8%:
Dauphin County, Pennsylvania Hospital Authority,
HAPSCO Group, William Penn Hospital Project,
5.50%, due 7/1/07 $ 300,000 $ 303,111
Falls Township Pennsylvania Hospital Authority,
Delaware Valley Medical Center, 6.90%,
due 8/1/11, callable 8/1/02 at 102 400,000 416,780
Rhode Island State Health and Educational Building
Corp., New England Tech, 5.90%, due 3/1/10 100,000 101,485
Rochester, Minnesota, Health Care Facilities
Revenue (Mayo Foundation/Mayo Medical Center),
6.25%, due 11/15/12 500,000 539,595
----------
Total Hospital Revenue Bonds 1,360,971
----------
Other Revenue Bonds - 28%:
Dallas-Fort Worth Regional Airport, 4.20%,
due 11/1/99, callable 11/1/96 at 100 200,000 197,770
Washington State Public Power Supply Nuclear
Project #1, 5.60%, due 7/1/05 200,000 199,570
Metro Nashville Airport Authority, 5.50%,
due 7/1/06 100,000 101,133
Lee County, Florida Certificates of Participation,
4.70%, due 10/1/06 100,000 95,701
Fitzgerald, Michigan School District, 5.00%,
due 5/1/08, callable 5/1/06 at 100 200,000 193,126
Grand Rapids, Michigan Downtown Development
Authority, 6.60%, due 6/1/08, callable
6/1/06 at 100 365,000 399,186
Michigan Higher Education Student Loan, 6.00%,
due 9/1/08, callable 9/1/02 at 102 250,000 250,470
New York City Industrial Development Agency,
Term One Group Association Project, 6.10%,
due 1/1/09 535,000 530,832
Shelby County, Indiana, Jail Building Corp.,
First Mortgage, 6.50%, due 7/15/09, callable
7/15/02 at 102 840,000 929,569
Columbus, Georgia Airport Commission, 6.30%,
due 1/1/10 400,000 420,996
Alaska Industrial Development and Export
Authority, 6.20%, due 4/1/10 300,000 310,404
- 5 -
<PAGE>
NRM INVESTMENT COMPANY
SCHEDULE OF INVESTMENTS (CONTINUED)
- --------------------------------------------------------------------------------
August 31, 1996
- --------------------------------------------------------------------------------
Principal
Municipal Bonds (Continued) Amount Value
- ----------------------------------------------------- -----------------------
Other Revenue Bonds (Continued):
New Jersey Economic Development Authority, Health
Care Corp., 6.0%, due 7/1/11 $ 200,000 $ 205,970
New York State Letter of Credit, Government
Assistance Corp., 5.375%, due 4/1/12 300,000 290,331
Mercer County, New Jersey Improvement Authority,
Solid Waste Recovery, 6.70%, due 4/1/13,
callable 4/1/02 at 102 125,000 129,970
Philadelphia, Pennsylvania Airport Revenue,
6.0%, due 6/15/15 200,000 199,310
Port Authority-New York and New Jersey, 6.40%,
due 7/15/15 335,000 334,009
Pennsylvania Higher Education Assistance Agency,
Student Loan, 6.05%, due 1/1/19 70,000 69,570
-----------
Total Other Revenue Bonds 4,857,917
-----------
Total Municipal Bonds (Cost $16,173,346) 16,681,561
-----------
Short-Term Investments - at cost approximating
value - 2%, Federated Pennsylvania Municipal Cash
Fund #8 297,807 297,807
-----------
Total Investments - 100% (Cost $16,471,153) $16,979,368
===========
See Notes to Financial Statements.
- 6 -
<PAGE>
NRM INVESTMENT COMPANY
STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------
Year Ended August 31, 1996
- --------------------------------------------------------------------------------
Investment income, interest $ 1,073,020
-----------
Expenses:
Investment advisory fees 10,000
Custodian fees 9,900
Transfer and dividend disbursing agent fees 2,950
Legal and professional fees 28,700
Director's fees 4,750
Insurance 2,100
Capital stock tax 3,600
Provision for environmental claims 111,000
Miscellaneous 2,200
-----------
175,200
-----------
Net investment income 897,820
-----------
Realized and unrealized gain (loss) on investments:
Net realized gain from investment transactions 2,347
Net unrealized depreciation of investments (19,611)
-----------
Net loss on investments (17,264)
-----------
Net increase in net assets resulting from operations $ 880,556
===========
See Notes to Financial Statements
- 7 -
<PAGE>
NRM INVESTMENT COMPANY
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
Years Ended August 31, 1996 1995
- --------------------------------------------------------------------------------
Operations:
Net investment income $ 897,820 $ 1,012,956
Net realized gain (loss) from investment
transactions 2,347 (101,880)
Net unrealized appreciation (depreciation) of
investments (19,611) 345,218
-----------------------------
Net increase in net assets resulting
from operations 880,556 1,256,294
Distributions to shareholders, dividends from
net investment income (1,015,246) (1,019,507)
Capital share transactions, net increase from
capital share transactions 64 74
-----------------------------
Total increase (decrease) in net assets (134,626) 236,861
Net assets:
Beginning of year 16,981,791 16,744,930
-----------------------------
End of year $ 16,847,165 $ 16,981,791
=============================
See Notes to Financial Statements
- 8 -
<PAGE>
NRM INVESTMENT COMPANY
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
Years Ended August 31, 1996 1995 1994 1993 1992
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA (for a share outstanding
throughout the indicated year)
Net asset value, beginning of year $ 3.964 $ 3.909 $ 4.022 $ 3.540 $ 3.488
Net investment income .210 .237 .229 .453 .265
Net realized and unrealized gain (loss)
on investments (.004) .056 (.115) .137 .055
----------------------------------------------------------------------------
Total from investment operations .206 .293 .114 .590 .320
Less distributions:
Dividends from net investment income (.237) (.238) (.227) (.108) (.265)
Distribution in excess of net
investment income -- -- -- -- (.003)
----------------------------------------------------------------------------
Total distributions (.237) (.238) (.227) (.108) (.268)
----------------------------------------------------------------------------
Net asset value, end of year $ 3.933 $ 3.964 $ 3.909 $ 4.022 $ 3.540
============================================================================
TOTAL RETURN 5.11% 7.52% 2.79% 16.69% 9.08%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (in thousands) $ 16,847 $ 16,982 $ 16,745 $ 17,636 $ 15,260
Ratio of expenses to average net assets 1.02% .37% .49% (5.03)% .81%
Ratio of net investment income to average
net assets 5.24% 6.08% 5.77% 11.93% 7.25%
Portfolio turnover rate 6.24% 22.73% 13.56% 40.06% 64.84%
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
Years Ended August 31, 1991 1990 1989 1988 1987
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA (for a share outstanding
throughout the indicated year)
Net asset value, beginning of year $ 3.635 $ 3.835 $ 3.767 $ 3.949 $ 4.012
Net investment income .059 .157 .278 .284 .327
Net realized and unrealized gain (loss)
on investments .051 (.065) .084 (.138) (.070)
----------------------------------------------------------------------------
Total from investment operations .110 .092 .362 .146 .257
Less distributions:
Dividends from net investment income (.059) (.157) (.278) (.298) (.320)
Distribution in excess of net
investment income (.198) (.135) (.016) (.030) --
----------------------------------------------------------------------------
Total distributions (.257) (.292) (.294) (.328) (.320)
----------------------------------------------------------------------------
Net asset value, end of year $ 3.488 $ 3.635 $ 3.835 $ 3.767 $ 3.949
============================================================================
TOTAL RETURN 3.00% 2.69% 10.29% 3.57% 6.70%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (in thousands) $ 15,659 $ 16,268 $ 17,094 $ 16,723 $ 17,461
Ratio of expenses to average net assets 6.04% 3.90% .52% .26% .28%
Ratio of net investment income to average
net assets 1.54% 4.07% 7.28% 7.41% 8.16%
Portfolio turnover rate 101.88% 46.10% 18.81% 37.78% 11.09%
</TABLE>
See Notes to Financial Statements.
- 9 & 10 -
<PAGE>
NRM INVESTMENT COMPANY
NOTES TO FINANCIAL STATEMENTS
1
- --------------------------------------------------------------------------------
NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of business:
NRM Investment Company (the Fund) is registered under the Investment
Company Act of 1940, as amended, as a diversified, open-end management
investment company. The following is a summary of significant
accounting policies consistently followed by the Fund in the
preparation of its financial statements.
Valuation of investments:
Investments in securities (other than debt securities maturing in 60
days or less) traded in the over-the-counter market, and listed
securities for which no sale was reported on the last business day of
the year, are valued based on prices furnished by a pricing service.
This service determines the valuations using a matrix pricing system
based on common bond features such as coupon rate, quality and
expected maturity dates. Securities for which market quotations are
not readily available are valued by the Investment Advisor under the
supervision and responsibility of the Fund's Board of Directors.
Investments in securities that are traded on a national securities
exchange are valued at the closing prices. Short-term investments are
valued at amortized cost, which approximates value.
Investment transactions and related investment income:
Investment transactions are accounted for on the date the securities
are purchased or sold (trade date). Realized gains and losses from
investment transactions are reported on the basis of identified cost
for both financial and federal income tax purposes. Interest income is
recorded on the accrual basis for both financial and income tax
reporting. In computing investment income, the Fund amortizes premiums
over the life of the security, unless said premium is in excess of any
call price, in which case the excess is amortized to the earliest call
date. Discounts are accreted over the life of the security.
Transactions with shareholders:
Fund shares are sold and redeemed at the net asset value. Transactions
of these shares are recorded on the trade date. Dividends and
distributions are recorded by the Fund on the ex-dividend date.
Federal income taxes:
It is the Fund's policy to comply with the requirements of the
Internal Revenue Code applicable to regulated investment companies and
distribute substantially all of its net investment income and realized
net gain from investment transactions to its shareholders and,
accordingly, no provision has been made for federal income taxes.
- 11 -
<PAGE>
NRM INVESTMENT COMPANY
NOTES TO FINANCIAL STATEMENTS
1
- --------------------------------------------------------------------------------
NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
Estimates:
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 revenues
and expenses during the reporting period. Actual results could differ
from those estimates.
2
- --------------------------------------------------------------------------------
INVESTMENT ADVISOR AND MANAGEMENT FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Fund has an investment advisory agreement which provides that the
Fund will pay to the investment advisor, as compensation for services
provided and expenses assumed, a fee at the annual flat rate of
$10,000. The president of the investment advisor is on the Board of
Directors of the Fund.
Advisory fees for the year ended August 31, 1996 amounted to $10,000.
3
- --------------------------------------------------------------------------------
DIVIDENDS PAYABLE
On June 21, 1996, the Board of Directors declared a $.058 per share
dividend to shareholders of record on August 24, 1996, payable August
31, 1996. The dividend was paid in September 1996.
- 12 -
<PAGE>
NRM INVESTMENT COMPANY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
4
- --------------------------------------------------------------------------------
COST, PURCHASES AND SALES OF INVESTMENT SECURITIES
Cost of purchases and proceeds from sales and maturities of investment
securities, other than short-term investments, aggregated $1,127,242
and $1,129,589 respectively, during the year ended August 31, 1996.
At August 31, 1996, the cost of investment securities owned is the
same for financial reporting and federal income tax purposes. Net
unrealized appreciation of investment securities is $508,215
(aggregate gross unrealized appreciation of $551,983 less aggregate
unrealized depreciation of $43,768).
5
- --------------------------------------------------------------------------------
ENVIRONMENTAL LIABILITY
The Fund has been identified as a potentially responsible party
("PRP") by the Environmental Protection Agency ("EPA") in remedial
activities related to an environmental matter.
At August 31, 1996, the Fund had accrued $111,000 for remediation
costs, which represents its share of a settlement offer made to the
EPA. The measurement of the accrual is subject to uncertainties,
including the difficulty in estimating the extent and remedy of
environmental contamination. However, the Fund believes that based on
information presently available, the Fund's liability beyond the
amount accrued would not be significant.
The Fund is exposed to liability in another environmental matter,
however, the Fund's legal counsel, based upon existing facts, has
represented that the Fund's exposure is minimal. Accordingly, no
amounts have been accrued for potential claims related to this matter.
- 13 -
<PAGE>
NRM INVESTMENT COMPANY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
6
- --------------------------------------------------------------------------------
TRANSACTIONS IN CAPITAL STOCK AND COMPONENTS OF NET ASSETS
Transactions in fund shares were as follows:
Years Ended August 31,
1996 1995
--------------------------------------
Shares Amount Shares Amount
--------------------------------------
Issued to shareholders
in reinvestment of
dividends from net
investment income 20 $ 77 19 $ 74
Redemptions (3) (13) -- --
--------------------------------------
Net increase 17 $ 64 19 $ 74
======================================
The components of net assets at August 31, 1996 are as follows:
Capital shares - par value $ .01 per share,
4,283,671 shares issued and outstanding
(10,000,000 full and fractional shares
authorized); and capital paid-in $ 17,769,202
Accumulated net realized loss on investment
transactions (1,325,994)
Unrealized appreciation of investments 508,215
Overdistributed net investment income (104,258)
------------
Net assets $ 16,847,165
============
- 14 -
<PAGE>
PART C
OTHER INFORMATION
ITEM 24. Financial Statements and Exhibits:
(a) Financial Statements:
Part A:
Financial Highlights - ten years
ended August 31, 1996
Part B:
Report of Independent Auditors
Statement of Assets and Liabilities at August 31,
1996.
Statement of Operations for the year ended August 31, 1996.
Statements of Changes in Net Assets for each of the two years in
the period ended August 31, 1995 and August 31, 1996.
Schedule of Investments at August 31, 1996.
Financial Highlights
Notes to Financial Statements
All other schedules for which provision is made in the applicable
accounting regulations of the Securities and Exchange Commission
are not required under the related instructions or are
inapplicable, and therefore have been omitted.
(b) Exhibits:
(1) (a) Articles of Incorporation are incorporated by reference
to Exhibit 1 of Registrant's Registration Statement on Form
N-1, filed November 29, 1979.
(b) Amendment to Articles of Incorporation incorporated by
reference to Exhibit 1(b) of Amendment No. 1 to Registrant's
Registration Statement on Form N-1, filed June 11, 1980.
<PAGE>
(c) Amendment to Articles of Incorporation incorporated by
reference to Exhibit 1(c) of Amendment No. 3 to Registrant's
Registration Statement on Form N-1, filed December 29, 1981.
(2) (a) By-Laws are incorporated by reference to Exhibit 2 of
Registrant's Registration Statement on form N-1, filed
November 29, 1979.
(b) Amendment to By-Laws incorporated by reference to Exhibit
2(b) of Amendment No. 3 to Registrant's Registration
Statement on form N-1, filed December 29, 1981.
(c) Amendment to By-Laws incorporated by reference to Exhibit
2(c) of Amendment No. 4 to Registration Statement on Form
N-1, filed December 29, 1982.
(d) Amendment to By-Laws of December 11, 1990 incorporated by
reference to Exhibit 2(d) of Amendment #14 filed January
30, 1991.
(3) None.
(4) Specimen certificate for share of common stock of Registrant is
incorporated by reference to Exhibit 4 to Amendment No. 1 to
Registrant's Registration Statement on Form N-1, filed June 11,
1980.
(5) Investment Advisory Agreement dated November 30, 1992 is
incorporated by reference to Exhibit 5 to amendment No. 17 to
Registrant's Registration statement on form N-1A filed March 18,
1993.
(6) Not applicable
(7) None.
(8) (a) Custodian Agreement, dated September 8, 1986, is
incorporated by reference to Exhibit 8 to Amendment No. 9 to
Registrant's Registration Statement on N-1A effective
December 30, 1986.
<PAGE>
(b) Amendment to custodian agreement dated November , 1994
incorporated by reference to exhibit 8(b) to Registrant's
Registration Statement an NIA effective December 30, 1994.
(9) (a) Administration Agreement dated September 8, 1986, is
incorporated by reference to Exhibit 9 to Amendment No. 9 to
Registrant's Registration Statement on N-1A effective
December 30, 1986.
(b) Amendment to Administration Agreement dated March, 1993, is
incorporated by reference to Exhibit 9 to Amendment No. 17
to Registrant's Registration Statement on N-1A effective May
17, 1993.
(c) Second amendment to administration or agreement dated
November, 1994 incorporated by reference to exhibit 9(c)
to Registrant's Registration Statement on N-1A effective
December 30, 1994.
(10) Opinion and Consent of Counsel filed October 30, 1995 pursuant to
Rule 24f-2 as part of Registrant's rule 24f-2 Notice,
incorporated by reference.
(11) (a) Consent of Henderson, Wetherill, O'Hey & Horsey.
(b) Consent of Beard & Company, Inc.
(c) Consent of Ernst & Young, LLP
(12) None.
(13) None.
(14) None.
(15) None.
(16) None.
<PAGE>
Item 25. Persons controlled by or Under Common Control with
Registrant. ______________________________________
Inapplicable.
Item 26. Number of Holders of Securities
Number of Record Holders
Title of Class as of October 21, 1996
-------------- -----------------------
Common Stock 117
Item 27. Indemnification.
The response to Item 4 to Part II of the Company's Registration
Statement on Form N-1, filed November 23, 1979, is incorporated herein
by reference.
Item 28. Business and Other Connections of Investment advisor
The business of Rittenhouse Financial Services, Inc., is
summarized under "Advisory Agreement" in the Prospectus constituting
Part I of this Registration Statement, which summary is incorporated
herein by reference.
The business or other connections of each director and officer
of Rittenhouse Financial Services, Inc. is currently listed in the
investment advisor registration on Form ADV for Rittenhouse Financial
Services, Inc. (File No. 801-18394) and is hereby incorporated herein
by reference thereto.
Item 29. Principal Underwriters
Not applicable.
Item 30. Location of Accounts and Records
Books and other documents required to be maintained by section
31(a) of the 1940 Act and the Rules (17 CFR 270.31a-1 to 31a-3)
promulgated thereunder, are maintained by Raymond J. Keefe, 6 St.
Albans Avenue, Newtown Square, Pennsylvania 19073 except records
relating to the custody of the Company's assets and the shareholder
records which are maintained by Investors Trust Company, 2201
Ridgewood Road, #180, Wyomissing, PA 19610 and Registrant's articles
of incorporation, By-Laws and Minute Books which are maintained by its
Secretary, at the Company's principal executive offices, Conestoga
<PAGE>
Road, Rosemont, Pennsylvania, 19010.
Item 31. Management Services
None.
Item 32. Undertakings.
Not applicable.
<PAGE>
NRM INVESTMENT COMPANY
Power of Attorney
I hereby appoint John H. McCoy and Thomas F. Kilcullen, Jr., and each of
them, attorney for me and in my name and on my behalf to sign the registration
Statement on Form N-1A of NRM Investment Company and any amendments thereto to
be filed with the Securities and Exchange Commission under the Securities Act of
1933 or the Investment Company Act of 1940, and generally to do and perform all
things necessary to be done in that connection.
I have signed this Power of Attorney on October 8, 1996.
/s/Francis J. Rainer
----------------------
Francis J. Rainer
<PAGE>
NRM INVESTMENT COMPANY
Power of Attorney
I hereby appoint John H. McCoy and Thomas F. Kilcullen, Jr., and each of
them, attorney for me and in my name and on my behalf to sign the registration
Statement on Form N-1A of NRM Investment Company and any amendments thereto to
be filed with the Securities and Exchange Commission under the Securities Act of
1933 or the Investment Company Act of 1940, and generally to do and perform all
things necessary to be done in that connection.
I have signed this Power of Attorney on October 8, 1996.
/s/Joseph V. Somers
------------------------
Joseph V. Somers
<PAGE>
NRM INVESTMENT COMPANY
Power of Attorney
I hereby appoint John H. McCoy and Thomas F. Kilcullen, Jr., and each of
them, attorney for me and in my name and on my behalf to sign the registration
Statement on Form N-1A of NRM Investment Company and any amendments thereto to
be filed with the Securities and Exchange Commission under the Securities Act of
1933 or the Investment Company Act of 1940, and generally to do and perform all
things necessary to be done in that connection.
I have signed this Power of Attorney on October 8, 1996.
/s/ George W. Connell
------------------------
George W. Connell
<PAGE>
Signatures
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940 the Registrant has duly caused this
Post-Effective Amendment to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in Rosemont, Pennsylvania
on October 30, 1996.
NRM INVESTMENT COMPANY
By:/s/John H. McCoy
------------------------
John H. McCoy
President
Pursuant to the requirement of the Securities Act of 1933, this
Post-Effective Amendment to the Registration Statement has been signed by the
following persons in the capacities and on the dates indicated:
Signature Title Date
President (Chief
/s/John H. McCoy Executive Officer) 10/30/96
------------------------
John H. McCoy
/s/Thomas F. Kilcullen Treasurer (Chief
------------------------ Financial and
Thomas F. Kilcullen Accounting Officer)
and Secretary 10/30/96
The Post-Effective Amendment No. 21 has also been signed by John H.
McCoy, Attorney-In-Fact, on behalf of the following directors on the Date
indicated:
JOSEPH V. SOMERS
FRANCIS J. RAINER
GEORGE W. CONNELL
/s/John H. McCoy 10/30/96
- ------------------------
John H. McCoy
<PAGE>
EXHIBIT INDEX
(1) (a) Articles of Incorporation are incorporated by reference to Exhibit
A of Registrant's Registration Statement on Form N-1, filed November
29, 1979
(b) Amendment to Articles of Incorporation incorporated by reference to
Exhibit 1(b) of Amendment No. 1 to Registrant's Registration Statement
on Form N-1, filed June 11, 1980
(c) Amendment to Articles of Incorporation incorporated by reference to
Exhibit 1(c) of Amendment No. 3 to Registrant's Registration Statement
on Form N-1, filed December 29, 1981
(2) (a) By-Laws are incorporated by reference to Exhibit 2 of Registrant's
Registration Statement on Form N-1, filed November 29, 1979
(b) Amendment to By-Laws incorporated by reference to Exhibit 2(b) of
Amendment No. 3 to Registrant's Registration Statement on Form N-1,
filed December 29, 1981
(c) Amendment to By-Laws incorporated by reference to Exhibit 2(c) of
Amendment No. 4 to Registration Statement on Form N-1, filed December
29, 1983
(d) Amendment to By-Laws of December 11, 1990 incorporated by reference to
Exhibit 2(d) of Amendment No. 14 filed January 30, 1991.
(3) None
(4) Specimen certificate for share of common stock of Registrant is
incorporated by reference to Exhibit 4 to Amendment No. 1 to Registrant's
Registration Statement on Form N-1, filed June 11, 1980.
(5) Investment Advisory Agreement dated November 30, 1992 is incorporated by
reference to Exhibit 5 of Amendment No. 17 filed March 18, 1993.
<PAGE>
(6) Not applicable
(7) None
(8) (a) Custodian Agreement, dated September 8, 1986, is incorporated by
reference to Exhibit 8 to Amendment No. 9 to Registrant's Registration
Statement on N-1A effective December 30, 1986.
(b) Amendment to Custodian Agreement, dated November __, 1994 is
incorporated by reference to Exhibit 8(b) to Amendment No. 19 to
Registrant's Registration Statement effective December 30, 1994.
(9) (a) Administration Agency Agreement, dated September 8, 1986, is
incorporated by reference to Exhibit 9 to Amendment No. 9 to
Registrant's Registration Statement on N-1A effective December 30,
1986.
(b) Amendment to Administration Agreement, dated March __, 1993 is
incorporated by reference to Exhibit 9b to Amendment No. 17
Registrant's Registration Statement on N-1A filed March 18, 1993.
(c) Amendment to Administration Agreement, dated November __, 1994 is
incorporated by reference to Exhibit 9(c) to Amendment No. 19 to
Registrant's Registration Statement effective December 30, 1994.
(10) Opinion of Counsel, pursuant to Registrant's Rule 24f-2 Notice is
incorporated by reference.
(11) (a) Consent of Henderson, Wetherill, O'Hey & Horsey.
(b) Consent of Beard & Company.
(c) Consent of Ernst & Young, LLP
(12) None
(13) None
(14) None
(15) None
(16) None
Exhibit 11(a)
<PAGE>
CONSENT OF COUNSEL
We hereby consent to the use of our name and to the references to our firm
under the caption "counsel" included in and made part of Part B of
Post-Effective Amendment No. 21 to the Registration Statement (No. 2-66073) on
Form N-1A under Securities act of 1933, as amended, of NRM Investment Company.
HENDERSON, WETHERILL, O'HEY & HORSEY
By: /s/Edward Fackenthal
----------------------------
Edward Fackenthal
Dated: October 30, 1996
Exhibit 11(b)
CONSENT OF INDEPENDENT AUDITORS
We consent to the references to our firm under the captions "Financial
Highlights" in the Prospectus and "Auditors" in the Statement of Additional
Information and to the incorporation by reference in this Post-Effective
Amendment No. 21 to the Registration Statement (Form N-1A No. 2-66073) dated
October 30, 1996, of NRM Investment Company of our report dated October 2, 1996,
included in the 1996 annual report to shareholders of NRM Investment Company.
/s/ BEARD & COMPANY
--------------------------------
Beard & Company
Reading, Pa.
October 30, 1996
Exhibit 11(c)
Consent of Independent Accountants
We hereby consent to the references to our firm under the captions
"Financial Highlights" in the Prospectus and "Independent Auditors" in the
Statement of Additional Information and to the incorporation by reference
in this Post-Effective Amendment No. 21 to the Registration Statement (Form N-1A
No. 2-66073) dated October 30, 1996, of NRM Investment Company of our report
dated September 29, 1995, relating to the financial statement and financial
highlights of NRM Investment Company.
Ernst & Young LLP
Reading, Pennsylvania
October 30, 1996
