As filed with Securities and Exchange Commission on October 30, 1997
Registration No. 2-66073
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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 / X /
POST-EFFECTIVE AMENDMENT NO. 22 / X /
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 / X /
AMENDMENT NO. 22 / 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
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(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
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(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)(1)
_______ 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, 1997 was filed
on October 30, 1997, and the notice for the current fiscal year ending August
31, 1998 will be filed no later than October 30, 1998.
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<PAGE>
CROSS REFERENCE SHEET
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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
of Registrant.....................Cover Page;
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
Other Securities..................Purchase of Shares;
Redemption of Shares;
Dividends; Taxes; The
Company and its Common
Stock; Miscellaneous
7. Purchase of Securities
Being Offered.....................Net Asset Value; Pur-
chases of Shares
8. Redemption or Repurchase...........Redemption of Shares
9. Pending Legal Proceedings..........Pending Legal Proceedings
i
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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.
<PAGE>
December 30, 1997
TABLE OF CONTENTS
PAGE
Expenses of the Company................................... 2
Financial Highlights...................................... 3
Investment Objective...................................... 4
Risk Factors.............................................. 7
Investment Restrictions................................... 8
Net Asset Value........................................... 9
Purchase of Shares........................................ 9
Redemption of Shares...................................... 9
Dividends................................................. 10
Taxes..................................................... 11
Management of the Company................................. 13
Management's Discussion of Fund Performance............... 14
The Company's Common Stock................................ 16
Transfer Agent............................................ 16
Pending Legal Proceedings................................. 16
Miscellaneous............................................. 17
Application form.......................................... 18
1
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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,
1997* 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 fee 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 fees for custodian, legal, other
professionals, and the directors; 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 fiscal 1996 average net assets to settle certain
environmental litigation. During fiscal 1997 it accrued an additional $34,000 on
the same claim. Had the additional accrual been included in "Other Expenses,"
for fiscal 1997, such expenses would have been .57% instead of .37% of average
net assets. See "PENDING LEGAL PROCEEDINGS" for a description of the litigation
which gave rise to the fiscal 1996 and 1997 accruals.
<PAGE>
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, 1997 and 1996 and by Ernst & Young, LLP for each of the year
ended August 31, 1988 through August 31, 1995 appear, whose reports thereon 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>
Year Ended August 31
1997 1996 1995 1994 1993 1992 1991 1990 1989 1988
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA
(for a share outstanding
throughout the indicated
year)
Net asset value:
Beginning of year $3.933 $3.964 $3.909 $4.022 $3.540 $3.488 $3.635 $3.835 $3.767 $3.949
Income from operations:
Net investment income .221 .210 .237 .229 .453 .265 .059 .157 .278 .284
Net realized and
unrealized gain (loss)
on investments .041 (.004) .056 (.115) .137 .055 .051 (.065) .084 (.138)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total from investment .262 .206 .293 .114 .590 .320 .110 .092 .362 .146
operations
Less distributions:
Dividends from net
investment income (.221) (.210) (.237) (.227) (.108) (.265) (.059) (.157) (.278) (.298)
Distribution in
excess of net
investment income (.006) (.027) (.001) -0- -0- (.003) (.198) (.135) (.016) (.030)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total distributions (.227) (.237) (.238) (.227) (.108) (.268) (.257) (.292) (.294) (.328)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net asset value,
end of year $3.968 $3.933 $3.964 $3.909 $4.022 $3.540 $3.488 $3.635 $3.835 $3.767
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
TOTAL RETURN 6.71% 5.11% 7.52% 2.79% 16.69% 9.08% 3.00% 2.69% 10.29% 3.57%
RATIOS\SUPPLEMENTAL DATA
Net assets, end
of year (in
thousands) $17,015 16,847 16,982 16,745 17,636 15,260 15,659 16,268 17,094 16,723
Ratio of expenses to
to average net assets .57% 1.02% .37% .49% 5.03% .81% 6.04% 3.90% .52% .26%
Ratio of net invest-
ment income to average
net asets 5.56% 5.24% 6.08% 5.77% 11.93% 7.25% 1.54% 4.07% 7.28% 7.41%
Portfolio turnover
rate 28.98% 6.24% 22.73% 13.56% 40.06% 64.84% 101.88% 46.10% 18.81% 37.78%
</TABLE>
*See note 3 on following page
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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.
3. Expenses for 1993 were reduced by $950,000 as a result of the
settlement of environmental litigation at an amount less than
anticipated and provided for in prior years.
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.
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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 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
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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 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,
6
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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.
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, an investigation involving
environmental issues is pending with respect to the Company's activities when it
was an operating steel processing plant. There were like proceedings in the
past, settled or sucessfully resisted. It is believed that the pending
proceeding is likewise resolved as explained under the referenced heading. The
Company accrued amounts for the settlement which decreased the net asset value
of the fund and accordingly, the share value of the investor. Although
management is unaware of other enviromental matters involving the Company, there
7
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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 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.
8
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The foregoing percentage limitations will apply at the time of the
investment or other transaction and, except as provided in the next sentence,
shall not be considered violated unless an excess or deficiency occurs
immediately after and as a result of such investment or transaction. The Company
will not permit its borrowing to exceed 10% of its assets at any time for more
than three business days; should there be an excess of borrowing as a result of
a decrease in the value of the portfolio, the Company shall repay such portion
of the debt as is necessary to maintain the 10% ratio.
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 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.
9
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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
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 accreted. 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
10
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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, 1997 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, 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,
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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.
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.
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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.
From December 9, 1992 through July 15, 1997, Rittenhouse Financial
Services Inc. (RFS) has served as the Company's investments 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. Through September 1, 1997 he was chairman, chief executive
officer, chief investment officer and sole shareholder of RFS. Mr. Connell is
also president, director and sole shareholder of The Rittenhouse Trust Company,
a Pennsylvania state chartered commercial bank and trust company, and
Rittenhouse Financial Securities (a registered broker dealer) which is a
subsidiary of The Rittenhouse Trust Company. On September 1, 1997 RFS was
acquired by The John Nuveen Company.
13
<PAGE>
On October 7, 1997 the Board of NRM ratified an amendment to the
advisory agreement dated September 3, 1997 assigning the investment advisory
account and agreement from RFS to The Rittenhouse Trust Company. The Rittenhouse
Trust Company is qualified to act as an investment advisor for the company under
the Investment Advisors Act and the Investment Company Act. The assignment did
not result in a change of actual control or management of the investment
manager. The office of Rittenhouse Trust Company is at No. 2 Radnor Corporate
Center, 100 Matsonford Road, Radnor, Pennsylvania 19087.
RTC 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 RTC, 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 RTC, 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 RTC; (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 RTC, the Company pays RTC $10,000 annually
in quarterly installments, an amount equal to .06% of the Company's average net
assets.
Management's Discussion of Fund Performance
- -------------------------------------------
The slowdown in the U.S. economy that many analysts had forecast for
the second half of 1997 has proven elusive. Despite the ongoing strength in the
14
<PAGE>
economy during the past year, the Federal Reserve remains on the sidelines. Fed
officials have noted the "relatively benign inflation performance in the current
economic expansion" and admitted that "the reasons were not fully understood".
Not wanting to be viewed as "anti-growth", the Federal Reserve has declined to
raise short-term interest rates without a demonstrable pick-up in inflation.
Tax exempt municipal bond rates in the intermediate maturity range
decreased slightly over the past year, boosting total returns in that sector.
Between 8/31/96 and 8/31/97 rates increased between 10 and 40 basis points and
combined with tight supply allowed the fund to outperform its requisite
benchmarks.
The Company has maintained high current income by investing in a
diversified portfolio of tax exempt housing, G.O. and revenue bonds, and has
recently moved to limit its exposure to the Alternative Minimum Tax (AMT) by
swapping out of the AMT bonds into Non-AMT bonds with similar maturity and
credit characteristics. The following chart shows the components average annual
return for one, five and ten years periods ended on the last day of the
Company's last fiscal year, August 31, 1997.
NRM Investment Company
Total Return Calculation
Annualized Return Total Return on $1,000
1 Year 6.71% $1,067.10
5 Year 7.66% $1,446.34
10 Year 6.67% $1,907.32
*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.
15
<PAGE>
[IN THE DOCUMENT A GRAPH APPEARS
DEPICTING THE FOLLOWING PLOT POINTS.]
Plot Points for NRM Graph
Period: August 1987 through August 1997
NRM INDEX
87 10,000 10,000
88 10,357 10,406
89 11,423 11,155
90 11,730 11,907
91 12,083 13,110
92 13,179 14,413
93 15,379 15,687
94 15,809 15,944
95 16,998 17,204
96 17,866 17,842
97 19,065 18,500
Period: Inception through August 1997
NRM INDEX
85 10,000 10,000
86 11,894 11,433
87 12,691 12,205
88 13,144 12,701
89 14,497 13,615
90 14,887 14,533
91 15,334 16,001
92 16,726 17,591
93 19,518 19,146
94 20,063 19,460
95 21,572 20,997
96 22,674 21,776
97 24,196 22,580
16A
<PAGE>
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
directors can elect all of the directors.
As of October 18, 1997 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
-------------------------
The Environmental Protection Agency, on November 12, 1992, gave the
Company and others notice under the Comprehensive Environmental Response,
Compensation and Liability Act, 42 U.S.C. 9601 ff., to perform "remediation" in
connection with a landfill in Strasburg, Chester County, Pennsylvania. The
Company and the others, as a group, resisted the order.
17
<PAGE>
During the Company's 1996 and 1997 fiscal years the entities forming
the Company's group, through lead counsel, negotiated with a representative of
the Department of Justice in an effort to settle the responsibility of all of
group members. The group accepted the Department's last demand of $2.5 million
of which the Company's share is $111,000. In addition, one member of the group
is seeking indemnification from the others for funds it advanced to the project.
The Company's share of that is expected to be no greater than $34,000. The
Company has accrued $145,000 related to this matter as of August 31, 1997.
The Company is not aware of any other claim or proceeding.
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 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, 1997
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, 1997
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 ........... 9
Principal Shareholders of the Company ...................... 10
Custodian and Transfer Agent ............................... 11
Auditors ................................................... 11
Counsel .................................................... 12
Report of Independent Auditor .............................. 13
Financial Statements........................................ 13
1
<PAGE>
NRM INVESTMENT COMPANY
Statement of Additional Information
December 30, 1997
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
2
<PAGE>
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.
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.
3
<PAGE>
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
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.
4
<PAGE>
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 and accordingly there was no
capital gain dividend for any period ending during 1997. 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.
5
<PAGE>
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 gain from the sale on exchange of a capital asset held for
more than one year regardless 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.
6
<PAGE>
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 Direc-
tor of National
Rolling Mills Co.
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 Corpo-
ration.
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)John H. McCoy and George W. Connell are "interested" directors as defined in
the Investment Company Act of 1940.
7
<PAGE>
(1)George W. Connell Director Chairman and Chief
#2 Radnor Corporate Ctr. Executive Officer
Suite 400 of Rittenhouse
100 Matsonford Road Financial Services;
Radnor, PA 19087 President and
director of
Rittenhouse Finan-
cial Securities, a
registered broker-
age dealer; Presi-
dent, Director and
sole shareholder
of Rittenhouse
Trust Company a
Commercial Bank and
Trust Co. acting as
the Company's In-
vestment advisor.
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 Trust Company Services, Inc. ("RTC"), 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 with Rittenhouse Financial
Sevices and amended by assignment on September 3, 1997 to Rittenhouse Trust
Company not resulting in a change of actual control or management and 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
- ----------
1. See note 1 on prior page.
8
<PAGE>
Investment Advisors' Act of 1940 and other pertinent securities laws. For the
services provided, the Company has agreed to pay RTC, on a quarterly basis, a
fee at an annual flat rate of $10,000. In determining net asset value, the
Company accrues RTC's fees on a daily basis.
The agreement provides that except for violations of securities laws,
RTC 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, 1996, and August 31,
1997, the Company paid RTC $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 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, 1997 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 2. execution" means prompt
9
<PAGE>
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,
1997 and August 31, 1996 were 28.98% and 6.24% respectively.
Principal Shareholders of the Company
- -------------------------------------
As of October 17, 1997 John H. McCoy owned beneficially and of record
2,817,679 of the Company's outstanding voting securities and controlled the
Company. His control is sufficient 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
10
<PAGE>
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 17, 1997. All such shares are owned of record and
beneficially. All officers and directors of the Company, as a group owned as of
October 17, 1997, 3,642,533 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 and 1997 annual reports to shareholders for the years ended August 31, 1996
and August 31, 1997, have been audited by 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.
In the past Ernst & 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
highlights of NRM Investment Company appearing in the 1997 annual report to
Shareholders for the years ended August 31, 1988 through August 31, 1995 have
been audited by Ernst & Young LLP, independent auditors.
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 31,1997
12
<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>
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, 1997, the related statement of operations for the year then ended,
and the statement of changes in net assets and the financial highlights for each
of the two years in the period 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 audits. The financial highlights for each of
the years ended August 31, 1988 through August 31, 1995 were audited by other
auditors whose report, dated September 29, 1995, expressed an unqualified
opinion on the financial highlights.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of securities
owned as of August 31, 1997, by correspondence with the custodian. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the financial
position of NRM Investment Company at August 31, 1997, the results of its
operations for the year then ended, and the changes in its net assets and the
financial highlights for each of the two years in the period then ended, in
conformity with generally accepted accounting principles.
/s/ BEARD & COMPANY, INC.
Reading, Pennsylvania
September 19, 1997
<PAGE>
NRM INVESTMENT COMPANY
STATEMENT OF ASSETS AND LIABILITIES
- --------------------------------------------------------------------------------
August 31, 1997
- --------------------------------------------------------------------------------
ASSETS
Investments at value (cost $16,405,561) $16,949,395
Interest receivable 226,206
Prepaid expense 1,708
-----------
Total assets 17,177,309
-----------
LIABILITIES
Accrued expenses and other liabilities 162,705
-----------
NET ASSETS
Net assets, applicable to 4,287,547 outstanding shares,
equivalent to $ 3.97 a share $17,014,604
===========
See Notes to Financial Statements.
-2-
<PAGE>
================================================================================
NRM INVESTMENT COMPANY
SCHEDULE OF INVESTMENTS
================================================================================
- --------------------------------------------------------------------------------
August 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Municipal Bonds - 99.8% Amount Value
---------- ----------
<S> <C> <C>
General Obligation Bonds - 15.2%:
Rhode Island Public Buildings Authority, 8.20%, due 2/01/08, callable
2/01/98 at 102.0 $ 450,000 $ 466,677
Leominster, Massachusetts, 6.25%, due 4/01/08 300,000 326,490
Upper Dublin Pennsylvania School District, 5.50%, due 11/15/08 200,000 203,436
300,000 307,278
Lowell, Massachusetts, 5.50%, due 1/15/10 200,000 211,624
New York City, New York, 6.25%, due 8/01/10
Nevada State Colorado River Commission, Ltd Tax, 6.50%, due 10/01/12 400,000 432,740
Lowell, Massachusetts, 5.50%, due 12/15/15, callable 12/15/06 at 102 330,000 332,039
(AMBAC)
San Francisco, California City and County, Park Improvement series,
5.25%, due 6/15/16, callable 6/15/05 at 102 (MBIA) 300,000 297,849
----------
Total General Obligation Bonds 2,578,133
----------
Housing Finance Agency Bonds - 44.9%:
New Mexico Mortgage Finance Authority, Single-Family Mortgage Rev.,
7.90%, due 7/01/00 75,000 77,739
Rock Island, Illinois Residential Mortgage Revenue Refunding, 7.70%,
due 9/01/08, callable 9/01/02 at 102 150,000 162,551
Ford County, Kansas Single-Family Mortgage Revenue Refunding Bonds,
7.90%, due 8/01/10, callable 8/01/02 at 103, 8/01/05 at 100 250,000 268,678
Fort Worth, Texas Housing Finance Corporation, Home Mortgage Revenue
Refunding Series 1991, 8.50%, due 10/01/11, callable 10/01/01 at 103 380,000 413,052
Odessa, Texas Housing Finance Corporation, Home Mortgage Revenue
Refunding, 8.45%, due 11/01/11, callable 11/01/05 at 103 318,893 340,919
Montana State Housing, Single-Family Mortgage, 7.65%, due 10/01/10, 65,000 68,450
callable 10/01/00 at 102
Cityof Hobbs, New Mexico, Single-Family Mortgage Refunding Revenue Bonds,
8.75%, due 7/01/11, callable 7/01/02 at 102, 7/01/05 at 100 95,000 103,536
Cameron County, Texas Housing Finance Corporation, Single-Family
Mortgage Revenue Refunding, 6.20%, due 3/01/13, callable 9/01/05 at
100 435,000 445,270
</TABLE>
-3-
<PAGE>
- --------------------------------------------------------------------------------
NRM INVESTMENT COMPANY
SCHEDULE OF INVESTMENTS (CONTINUED)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
August 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Municipal Bonds - 99.8% (Continued) Amount Value
---------- ----------
<S> <C> <C>
Housing Finance Agency Bonds - 44.9% (Continued):
Labette and Cowley Counties, Kansas Single-Family Mortgage Refunding Bonds,
9.50%, due 4/01/13, callable 10/01/01 at 103 $ 30,000 $ 32,282
Vicksburg, Mississippi Lease Housing Corp., 5.80%, due 8/15/13 125,000 126,064
California Housing Finance Agency, Home Mortgage, 10.25%, due 2/01/14,
callable 2/01/92 at 102 60,000 60,712
Connecticut State Housing Finance Authority, 5.60%, due 5/15/14,
callable 5/15/03 at 102 200,000 202,474
Arkansas Development Finance Authority, 7.70%, due 12/01/14 245,000 250,422
Nevada Housing Division, Single-Family Mortgage, 7.35%, due 10/01/15 205,000 212,938
Louisiana Public Facilities Authority, Multi-Family Housing, 7.75%, due
11/01/16, callable 11/01/01 at 102 500,000 528,365
Pennsylvania Housing Finance Agency, Single-Family Mortgage, 5.45%, due
10/01/17, callable 10/01/03 at 102 150,000 150,297
Utah State Housing Finance Agency, Single-Family Mortgage, 6.30%, due
1/01/18 265,000 278,793
Maryland State Community Development Administration, Department of
Housing, 5.60%, due 4/01/18 250,000 249,992
Alaska State Housing Finance Corporation, 5.90%, due 12/01/19, callable
6/01/07 at 102 (MBIA) 250,000 254,660
Troy, New York Housing Development Corp., Multi-Family Housing, 8.10%,
due 2/01/22, callable 12/01/02 at 100 1,355,000 1,532,288
Quaker Hill Housing Corporation, Multi-Family, 7.55%, due 2/01/22 600,000 632,886
St. Alphios Housing Corporation, Multi-Family, 8.20%, due 2/01/24 1,145,000 1,212,990
----------
Total Housing Finance Agency Bonds 7,605,358
----------
Hospital Revenue Bonds - 12.0%:
Dauphin County, Pennsylvania Hospital Authority, HAPSCO Group, William
Penn Hospital Project, 5.50%, due 7/01/07 300,000 310,968
Falls Township Pennsylvania Hospital Authority, Delaware Valley Medical
Center, 6.90%, due 8/01/11, callable 8/01/02 at 102 345,000 376,281
Rhode Island State Health and Educational Building Corp., New England
Tech, 5.90%, due 3/01/10 100,000 102,726
</TABLE>
-4-
<PAGE>
- --------------------------------------------------------------------------------
NRM INVESTMENT COMPANY
SCHEDULE OF INVESTMENTS (CONTINUED)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
August 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Municipal Bonds - 99.8% (Continued) Amount Value
---------- ----------
<S> <C> <C>
Hospital Revenue Bonds - 12.0% (Continued):
Rochester, Minnesota, Health Care Facilities Revenue (Mayo
Foundation/Mayo Medical Center), 6.25%, due 11/15/12 $ 500,000 $ 500,000
Indiana Health Facilities Authority (Deaconess Hospital), 5.75%, due
3/01/15, callable 3/01/03 at 102 (MBIA) 100,000 101,211
Connecticut State Health and Educational Facilities Authority (Kimball
Hospital), 5.375%, due 7/01/16, callable 7/1/06 at 102 350,000 347,309
Fulton DeKalb, Georgia Hospital Authority, 5.50%, due 1/01/20, callable
7/01/03 at 102 (MBIA) 200,000 197,956
University of California Hospital Revenue (UC Davis Medical Center),
5.75%, due 7/01/20, callable 7/01/06 at 101 (AMBAC) 100,000 102,129
----------
Total Hospital Revenue Bonds 2,038,580
----------
Other Revenue Bonds - 27.7%:
Washington State Public Power Supply Nuclear Project #1, 5.60%, due
7/01/05 200,000 206,770
Lee County, Florida Certificates of Participation, 4.70%, due 10/01/06 100,000 98,956
Fitzgerald, Michigan School District, 5.00%, due 5/01/08, callable
5/01/06 at 100 200,000 201,244
Grand Rapids, Michigan Downtown Development Authority, 6.60%, due
6/01/08, callable 6/01/06 at 100 365,000 405,701
Shelby County, Indiana, Jail Building Corp., First Mortgage, 6.50%, due
7/15/09, callable 7/15/02 at 102 840,000 929,048
Alaska Industrial Development and Export Authority, 6.20%, due 4/01/10 280,000 295,008
New Jersey Economic Development Authority, Health Care Corp., 6.0%, due
7/01/11 200,000 211,916
Clark County, Washington Public Utility District, Electric System
Revenue, 5.10%, due 1/01/12, callable 1/01/08 at 100 200,000 196,004
New York State Letter of Credit, Government Assistance Corp., 5.375%,
due 4/01/12 50,000 50,073
Suffolk County, New York Water Authority, 5.00%, due 6/01/15, callable
6/01/03 at 102 (MBIA) 175,000 165,499
Vallejo, California Water Improvement Project (Soland County), 5.70%,
due 5/01/16, callable 5/01/06 at 102 (FSA) 100,000 101,704
</TABLE>
-5-
<PAGE>
- --------------------------------------------------------------------------------
NRM INVESTMENT COMPANY
SCHEDULE OF INVESTMENTS (CONTINUED)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
August 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Municipal Bonds - 99.8% (Continued) Amount Value
----------- -----------
<S> <C> <C>
Other Revenue Bonds - 27.7% (Continued):
Muhlenberg, Pennsylvania School District, 5.20%, due 4/01/17, callable
4/01/06 at 100 (MBIA) $ 250,000 $ 243,108
New Jersey Economic Development Authority, (Devereux Foundation),
5.50%, due 5/01/17, callable 5/01/07 at 101 (MBIA) 270,000 271,593
Brazos River Authority, Texas (Houston Light and Power), 5.60%, due
12/01/17, callable 12/01/03 at 102 (MBIA) 100,000 100,521
Tacoma, Washington Solid Waste Utility, 5.50%, due 12/01/17, callable
12/01/07 at 101 (AMBAC) 350,000 350,452
New York State LOC Government Assistance Corporation, 5.50%, due
4/01/18, callable 4/01/03 at 102 290,000 285,061
Los Angeles, California Convention and Exhibition Center, 5.375%, due
8/15/18, callable 8/15/03 at 102 (MBIA) 385,000 379,972
Santa Monica-Malibu, California Unified School District, 5.50%, due
8/01/18, callable 8/01/03 at 102 200,000 200,628
-----------
Total Other Revenue Bonds 4,693,258
-----------
Total Municipal Bonds (Cost $ 16,371,495) 16,915,329
-----------
Short-Term Investments - at cost approximating value - .2%,
Federated Pennsylvania Municipal Cash Fund #8 34,066 34,066
-----------
Total Investments - 100% (Cost $ 16,405,561) $16,949,395
===========
</TABLE>
See Notes to Financial Statements.
-6-
<PAGE>
================================================================================
NRM INVESTMENT COMPANY
STATEMENT OF OPERATIONS
================================================================================
- --------------------------------------------------------------------------------
Year Ended August 31, 1997
- --------------------------------------------------------------------------------
Investment income, interest $1,043,995
----------
Expenses:
Investment advisory fees 10,000
Custodian fees 8,864
Transfer and dividend disbursing agent fees 716
Legal and professional fees 27,138
Director's fees 4,500
Insurance 2,100
Capital stock tax 4,727
Provision for environmental claims 34,000
Miscellaneous 4,702
----------
96,747
----------
Net investment income 947,248
----------
Realized and unrealized gain on investments:
Net realized gain from investment transactions 142,091
Net unrealized appreciation of investments 35,620
----------
Net gain on investments 177,711
----------
Net increase in net assets resulting from operations $1,124,959
==========
See Notes to Financial Statements.
-7-
<PAGE>
================================================================================
NRM INVESTMENT COMPANY
STATEMENTS OF CHANGES IN NET ASSETS
================================================================================
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
Years Ended August 31, 1997 1996
- -------------------------------------------------------------------------------------
<S> <C> <C>
Operations:
Net investment income $ 947,248 $ 897,820
Net realized gain from investment
transactions 142,091 2,347
Net unrealized appreciation (depreciation) of
investments 35,620 (19,611)
------------ ------------
Net increase in net assets resulting
from operations 1,124,959 880,556
Distributions to shareholders, dividends from net
investment income (972,598) (1,015,246)
Capital share transactions, net increase from capital
share transactions 15,078 64
------------ ------------
Total increase (decrease) in net assets 167,439 (134,626)
Net assets:
Beginning of year 16,847,165 16,981,791
------------ ------------
End of year $ 17,014,604 $ 16,847,165
============ ============
</TABLE>
See Notes to Financial Statements.
-8-
<PAGE>
================================================================================
NRM INVESTMENT COMPANY
FINANCIAL HIGHLIGHTS
================================================================================
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
Years Ended August 31, 1997 1996 1995 1994 1993
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA (for a share outstanding
throughout the indicated year)
Net asset value, beginning of year $ 3.933 $ 3.964 $ 3.909 $ 4.022 $ 3.540
Net investment income .221 .210 .237 .229 .453
Net realized and unrealized gain (loss)
on investments .041 (.004) .056 (.115) .137
---------- ----------- ---------- --------- ----------
Total from investment operations .262 .206 .293 .114 .590
Less distributions:
Dividends from net investment income (.221) (.210) (.237) (.227) (.108)
Distribution in excess of net
investment income (.006) (.027) (.001) -- --
---------- ----------- ---------- --------- ----------
Total distributions (.227) (.237) (.238) (.227) (.108)
---------- ----------- ---------- --------- ----------
Net asset value, end of year $ 3.968 $ 3.933 $ 3.964 $ 3.909 $ 4.022
========== =========== ========== ========= ==========
TOTAL RETURN 6.71% 5.11% 7.52% 2.79% 16.69%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (in thousands) $ 17,015 $ 16,847 $ 16,982 $ 16,745 $ 17,636
Ratio of expenses to average net assets .57% 1.02% .37% .49% (5.03)%
Ratio of net investment income to average
net assets 5.56% 5.24% 6.08% 5.77% 11.93%
Portfolio turnover rate 28.98% 6.24% 22.73% 13.56% 40.06%
</TABLE>
See Notes to Financial Statements.
<PAGE>
==============================================================================
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
Years Ended August 31, 1992 1991 1990 1989 1988
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA (for a share outstanding
throughout the indicated year)
Net asset value, beginning of year $ 3.488 $ 3.635 $ 3.835 $ 3.767 $ 3.949
Net investment income .265 .059 .157 .278 .284
Net realized and unrealized gain (loss)
on investments .055 .051 (.065) .084 (.138)
------------- --------- ------------- ------------ ------------
Total from investment operations .320 .110 .092 .362 .146
Less distributions:
Dividends from net investment income (.265) (.059) (.157) (.278) (.298)
Distribution in excess of net
investment income (.003) (.198) (.135) (.016) (.030)
------------- --------- ------------- ------------ ------------
Total distributions (.268) (.257) (.292) (.294) (.328)
------------- --------- ------------- ------------ ------------
Net asset value, end of year $ 3.540 $ 3.488 $ 3.635 $ 3.835 $ 3.767
============= ========= ============ ============ ============
TOTAL RETURN 9.08% 3.00% 2.69% 10.29% 3.57%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (in thousands) $ 15,260 $ 15,659 $ 16,268 $ 17,094 $ 16,723
Ratio of expenses to average net assets .81% 6.04% 3.90% .52% .26%
Ratio of net investment income to average
net assets 7.25% 1.54% 4.07% 7.28% 7.41%
Portfolio turnover rate 64.84% 101.88% 46.10% 18.81% 37.78%
</TABLE>
-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, 1997 amounted to $ 10,000.
3
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 $ 4,982,734
and $ 4,877,711 respectively, during the year ended August 31, 1997.
At August 31, 1997, the cost of investment securities owned is the same
for financial reporting and federal income tax purposes. Net unrealized
appreciation of investment securities is $ 543,834 (aggregate gross
unrealized appreciation of $ 608,303 less aggregate unrealized
depreciation of $ 64,469).
-12-
<PAGE>
================================================================================
NRM INVESTMENT COMPANY
================================================================================
NOTES TO FINANCIAL STATEMENTS
4
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, 1997, the Fund had accrued $ 145,000 ($ 111,000 as of
August 31, 1996) for remediation costs, which represents its share of a
settlement offer made to the EPA and a contribution claim against the
Fund by another PRP involved in the same matter. The measurement of the
accrual is subject to uncertainties, including the difficulty in
estimating the extent and remedy of environmental contamination. The
Fund's legal counsel confirmed and advised that it is not possible to
predict with certainty what the Fund's ultimate liability will be.
However, the Fund believes that based on information presently
available, the Fund's liability beyond the amount accrued, including
the contribution claim, would not be significant.
5
TRANSACTIONS IN CAPITAL STOCK AND COMPONENTS OF NET ASSETS
Transactions in fund shares were as follows:
<TABLE>
<CAPTION>
Years Ended August 31,
1997 1996
--------------------------------------------------
Shares Amount Shares Amount
--------------------------------------------------
<S> <C> <C> <C> <C>
Additional shares purchased 3,856 $ 15,000 - $ -
Issued to shareholders in reinvestment of
dividends from net investment income 20 78 20 77
Redemptions - - (3) (13)
--------------------------------------------------
Net increase 3,876 $ 15,078 17 $ 64
==================================================
</TABLE>
-13-
<PAGE>
================================================================================
NRM INVESTMENT COMPANY
================================================================================
NOTES TO FINANCIAL STATEMENTS
5
TRANSACTIONS IN CAPITAL STOCK AND COMPONENTS OF NET ASSETS
(CONTINUED)
The components of net assets at August 31, 1997 and 1996 are as
follows:
<TABLE>
<CAPTION>
1997 1996
------------------------------------------
<S> <C> <C>
Capital shares - par value $ .01 per share, 4,287,547 shares and
4,283,671 shares issued and outstanding at August 31, 1997
and 1996 (10,000,000 full and fractional shares authorized);
and capital paid-in $ 17,758,522 $ 17,769,202
Accumulated net realized loss on investment transactions (1,158,144) (1,325,994)
Unrealized appreciation of investments 543,834 508,215
Overdistributed net investment income (129,608) (104,258)
------------------------------------------
Net assets $ 17,014,604 $ 16,847,165
==========================================
</TABLE>
<PAGE>
PART C
OTHER INFORMATION
-----------------
ITEM 24. Financial Statements and Exhibits:
(a) Financial Statements:
Part A:
Financial Highlights - ten years
ended August 31, 1997
Part B:
Report of Independent Auditors
Statement of Assets and Liabilities at August 31, 1997.
Statement of Operations for the year ended August 31, 1997.
Statements of Changes in Net Assets for each of the two years in
the period ended August 31, 1996 and August 31, 1997.
Schedule of Investments at August 31, 1997.
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>
(2) (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.
(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 Exhib it 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) (a) 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.
(b) Addendum to advisory agreement dated September 3,
1997 assigning the agreement to Rittenhouse Trust
Company, not resulting in a change of actual
control on management.
(6) Not applicable
<PAGE>
(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 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, 1997
pursuant to Rule 24f-2 as part of Registrant's rule 24f-2
Notice, incorporated by reference.
(a) Consent of Henderson, Wetherill, O'Hey & Horsey.
(b) Consent of Beard & Company, Inc.
(12) None.
(13) None.
(14) None.
(15) None.
<PAGE>
(16) None.
Item 25. Persons controlled by or Under Common Control with
Registrant.______________________________________________
Inapplicable.
Item 26. Number of Holders of Securities
-------------------------------
Title of Class Number of Record Holders
-------------- as of October 21, 1997
Common Stock ----------------------
116
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 Trust Company, Inc., is summarized
under "Advisory Agreement" in the Prospectus constituting Part I of
this Registration Statement, which summary is incorporated herein by
reference.
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
Road, Rosemont, Pennsylvania, 19010.
<PAGE>
Item 31. Management Services 2.
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 6, 1997.
-------------------------------
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 5, 1997.
-----------------------------
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 7, 1997.
------------------------------
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, 1997
NRM INVESTMENT COMPANY
By:
-------------------------------
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
---------------------- Executive Officer) 10/30/97
John H. McCoy
---------------------- Treasurer(Chief
Thomas F. Kilcullen Financial and
Accounting Officer)
and Secretary 10/30/97
The Post-Effective Amendment No. 22 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
- ----------------------- 10/30/97
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) (a) Investment Advisory Agreement dated November 30, 1992
is incorporated by reference to Exhibit 5
of Amendment No. 17 filed March 18, 1993.
<PAGE>
(b) Addendum to advisory agreement dated September 3, 1997.
(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, Inc.
(12) None
(13) None
(14) None
(15) None
(16) None
<PAGE>
EXHIBIT 5(a)
<PAGE>
[RITTENHOUSE TRUST COMPANY LETTERHEAD]
ADDENDUM TO THE ADVISORY CONTRACT
FOR THE ACCOUNT OF
NRM INVESTMENT COMPANY
This addendum will serve as authorization to transfer the investment
advisory account and agreement from Rittenhouse Financial Services, Inc, to The
Rittenhouse Trust Company.
Approved:
/s/ John H. McCoy 9/3/97
- ----------------------- --------------
John H. McCoy Date
Two Radnor Corporate Center, Suite 400, Radnor, PA 19087-4570
Phone: (610) 971-9300 Toll Free: (800) 847-6369 Fax: (610) 293-2444
<PAGE>
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. 22 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:
-------------------------------------
Edward Fackenthal
Dated: October 30, 1997
<PAGE>
Exhibit 11(b)
<PAGE>
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. 22 to the Registration Statement (Form N-1A No. 2-66073) dated
October 30, 1997, of NRM Investment Company of our report dated September 19,
1997, included in the 1997 annual report to shareholders of NRM Investment
Company.
BEARD & COMPANY, INC.
Reading, Pennsylvania
October 30, 1997
