As filed with Securities and Exchange Commission on October 30, 1998
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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. 23 /X/
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 /X/
AMENDMENT NO. 23 /X/
NRM INVESTMENT COMPANY
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(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, 1998 was filed
on October 30, 1998, and the notice for the current fiscal year ending August
31, 1999 will be filed no later than October 30, 1999.
<PAGE>
CROSS REFERENCE SHEET
Form N-1A Part A Item Prospectus Caption
1. Cover Page.........................Cover Page
2. Expenses of the Company............Expenses of the Company
3. Financial Highlights...............Financial Highlights
4. General Description................Cover Page;
of Registrant Investment Objective;
Risk Factors;
Investment Restrictions;
Taxes; The Company and
its Common Stock
5. Management of the Fund.............Management of the
Company; Transfer Agent
Management's Discussion
of Fund Performance
6. Capital Stock and..................Purchase of Shares;
Other Securities Redemption of Shares;
Dividends; Taxes; The
Company and its Common
Stock; Miscellaneous
7. Purchase of Securities.............Net Asset Value; Pur-
Being Offered chases of Shares
8. Redemption or Repurchase...........Redemption of Shares
9. Pending Legal Proceedings..........Pending Legal Proceedings
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NRM INVESTMENT COMPANY
Rosemont Business Campus
Rosemont, Pennsylvania 19010
NRM Investment Company (the "Company") is a no-load, open-end, diversified
investment company which seeks interest income exempt from federal income taxes
by investing one half or more of all of its assets in tax-exempt obligations
with maturities generally not exceeding twenty years from date of purchase, and
by investing up to one half of its assets in non-exempt obligations, or common
or preferred shares. An additional consideration respecting all investments is
preservation of capital.
This Prospectus sets forth concisely the information about the Company that
a prospective investor ought to know before investing. Investors should read
this Prospectus and retain it for future reference.
Additional information about the Company, contained in a Statement of
Additional Information, has been filed with the Securities and Exchange
Commission and is available upon request without charge by writing to the
Company at its address. The Statement of Additional Information bears the same
date as this Prospectus and is incorporated by reference in its entirety into
this prospectus.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
No person has been authorized to give any information or to make any
representations not contained in this Prospectus in connection with the offering
made by this Prospectus and, if given or made, such information or
representations must not be relied upon as having been authorized by the
Company. This Prospectus does not constitute an offering by the Company in any
jurisdiction in which such offering may not lawfully be made.
December 30, 1998
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TABLE OF CONTENTS
PAGE
----
Expenses of the Company .................................................. 2
Financial Highlights ..................................................... 4
Investment Objective ..................................................... 5
Risk Factors ............................................................. 8
Investment Restrictions .................................................. 9
Net Asset Value .......................................................... 10
Purchase of Shares ....................................................... 10
Redemption of Shares ..................................................... 11
Dividends ................................................................ 11
Taxes .................................................................... 12
Management of the Company ................................................ 14
Management's Discussion of Fund Performance .............................. 16
The Company's Common Stock ............................................... 20
Transfer Agent ........................................................... 20
Pending Legal Proceedings ................................................ 20
Miscellaneous ............................................................ 22
Application Form ......................................................... 23
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EXPENSES OF THE COMPANY
Annual Fund Operating Expenses
(as a percentage of average net assets)
Management Fees .06%
Other Expenses .36%
Total Fund Operating Expenses .42%
The following example, based upon the Company's fiscal year ending August 31,
1998* 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 $13 $23 $53
* 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, certain accruals or payments of recoveries against the Company
are considered extraordinary expenses and accordingly are not included in "Other
Expenses." To illustrate, during fiscal years ending August 31, 1996 and August
31, 1997, the Company accrued, respectively, $111,000 and $34,000 relative to a
single item of environmental litigation. They represented .65% and .20% of
average net assets for those years. Had they been included in "Other Expenses"
for those years, they would have, for 1996, increased expenses from .37% to .96%
and, for 1997, from .37% to .57%. During the fiscal year ending
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August 31, 1998, the Federal Environmental Protection Agency advanced an
additional claim, which because of its materiality, it being non-recurring and
atypical to normal business activity, and it not being of a nature normally
considered in evaluating operating results, the Board deemed it to be
extraordinary. See "PENDING LEGAL PROCEEDINGS" for a description of the current
claim.
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FINANCIAL HIGHLIGHTS
The following financial highlights present information about the investment
results of the Fund on a per share basis. The financial highlights have been
audited by Beard & Company, Inc. independent auditors, for the years ended
August 31, 1998, 1997 and 1996 and by Ernst & Young, LLP for each of the years
ended August 31, 1989 through August 31, 1995 whose reports thereon appear in
the NRM Investment Company annual report which may be obtained from the
Company's offices. The following data should be read in conjunction with the
financial statements, (including the audit report) related notes, and other
financial information incorporated by reference in the Statement of Additional
Information.
<TABLE>
<CAPTION>
Year Ended August 31
-------------------------------------------------------------------------------------------------
1998 1997 1996 1995 1994 1993 1992 1991 1990 1989
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<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 $3.968 $3.933 $3.964 $3.909 $4.022 $3.540 $3.488 $3.635 $3.835 $3.767
Income from operations:
Net investment income .222 .221 .210 .237 .229 .453 .265 .059 .157 .278
Net realized and
unrealized gain (loss)
on investments .087 .041 (.004) .056 (.115) .137 .055 .051 (.065) .084
-------------------------------------------------------------------------------------------------
Total from investment
operations .309 .262 .206 .293 .114 .590 .320 .110 .092 .362
Less distributions:
Dividends from
capital gains (.015)
net investment income (.221) (.221) (.210) (.237) (.227) (.108) (.265) (.059) (.157) (.278)
Distribution in
excess of net
investment income -0- (.006) (.027) (.001) -0- -0- (.003) (.198) (.135) (.016)
Total distributions (.236) (.227) (.237) (.238) (.227) (.108) (.268) (.257) (.292) (.294)
Net asset value,
end of year $4.041 $3.968 $3.933 $3.964 $3.909 $4.022 $3.540 $3.488 $3.635 $3.835
TOTAL RETURN 7.84% 6.71% 5.11% 7.52% 2.79% 16.69% 9.08% 3.00% 2.69% 10.29%
RATIOS\SUPPLEMENTAL
DATA Net assets, end
of year (in
thousands) $17,341 17,015 16,847 16,982 16,745 17,636 15,260 15,659 16,268 17,094
Ratio of expenses to
average net assets .42% .57% 1.02% .37% .49% (5.03%) .81% 6.04% 3.90% .52%
Ratio of net investment
income to average
net asets 5.50% 5.56% 5.24% 6.08% 5.77% 11.93% 7.25% 1.54% 4.07% 7.28%
Portfolio
turnover rate 12.57% 28.98% 6.24% 22.73% 13.56% 40.06% 64.84% 101.88% 46.10% 18.81%
</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. On September 1, 1997 RFS was acquired by a third party and on
October 7, 1997 the Company, by advisory assignment, began using the
services of Rittenhouse Trust Company which, before the acquisition,
was under the same control as RFS. See "Management of the Company" for
information about Rittenhouse Financial Services, Inc.
2. Prior to the Company's fiscal year ending August 31, 1998, there were
no distributions from realized capital gains.
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
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Company's objectives will be achieved. The investment objectives of (a) through
(d) above may not be changed without a vote of the holders of a majority of the
outstanding shares of the Company (as defined in "Miscellaneous"). The
restrictions in (e) and part of (c) are fixed by statute.
Municipal Bonds - Currently Available Securities
As above, the Company intends to invest no less than one half of all of its
assets in debt obligations issued by or on behalf of states, territories and
possessions of the 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 obliga tions 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.
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Municipal Bonds - When Issued Securities
The Company may purchase Municipal Bonds on a "when-issued" or delayed
delivery basis for delivery at a future specified date at a stated price and
yield. The Company would generally not pay for such securities or start earning
interest on them until they are received. The Company records when-issued
securities as an asset on the date of the purchase commitment. Thereafter the
securities are subject to changes in value based upon changes in the general
level of interest rates. To the extent that the Company remains substantially
fully invested at the same time that it has purchased "when-issued" or delayed
delivery securities, as it would generally do, there will be greater
fluctuations in its net assets than if the Company set aside cash to satisfy its
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.
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Other Investments
As a temporary investment or to maintain liquidity, the Company also may
hold a portion of its assets in cash or invest in any one or a combination of
the following: investment grade debt securities; money market instruments,
maturing in 12 months or less, such as domestic bank certificates of deposit (of
domestic banks which are insured by the Federal Deposit Insurance Corporation
and have total assets at the time of purchase of $1.5 billion); obligations of,
or guaranteed by, the United States Government and its agencies and
instrumentalities; tax-exempt commercial paper and municipal funds (subject to
investment restrictions); and repurchase agreements entered into with domestic
banks where the underlying securities are any of the foregoing.
In purchasing and selling municipal bonds, common and preferred shares, or
other investments, the Company's Board of Directors will not be restricted
except as previously set forth in this Prospectus and in the Statement of
Additional Information.
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, a matter 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
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sucessfully resisted. The pending matter is considered material but, at present,
of such an indefinite nature that counsel is unable to predict an amount or
range of liability; accordingly, the Company has not accrued any amount as an
expense. If and when amounts are accrued, they will decrease the net asset value
of the fund and, as a consequence, the share values of the investors' shares.
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;
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(5) Invest more than 25% of its total assets in securities of
nongovernmental issuers engaged in related trades or businesses.
The foregoing percentage limitations will apply at the time of the
investment or other transaction and, 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.
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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,
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any capital loss carryovers from prior years will be offset against current
capital gains.
All distributions of net investment income and any capital gains paid by
the Company will be paid by checks mailed to the shareholders, or by written
request by a shareholder, will be reinvested in additional shares of the Company
without sales charge at the net asset value per share as determined at the close
of business on the payment date. Confirmation statements reflecting additional
shares purchased through reinvestment of distributions will be mailed to all
shareholders who do not receive their distributions in cash.
TAXES
The Company qualified for the fiscal year ended August 31, 1998 and intends
to continue to qualify for and elect the special tax treatment afforded
regulated investment compa nies 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 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.
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Exempt-interest dividends may be taxable to investors under state or local
law as dividend income even though all or a portion of such distributions may be
derived from interest on tax-exempt obligations which, if realized directly,
would be exempt from such income taxes. For Pennsylvania residents, an exclusion
from Pennsylvania State personal taxable income is allowed for dividends or
distributions received from the Company to the extent they were earned by the
Company from Pennsylvania State and Local Government obligations.
If a shareholder receives an exempt-interest dividend with respect to any
share of the Company held for six months or less, any loss on the sale or
exchange of such share shall be disallowed to the extent of the amount of the
exempt-interest dividend. If a shareholder redeems any shares between dividend
record dates, the amount of any undistributed interest income will be included
in the net asset value per share and will increase the capital gain (or decrease
the capital loss) realized by the shareholder upon redemption. Capital gains
realized upon redemption are not exempt from federal income taxes.
Although exempt interest dividends are excludable from shareholders' gross
income, such dividends are taken into account in determining whether a portion
of social security benefits will be subjected to income tax under Section 86 of
the Internal Revenue Code.
Under the Code, interest on indebtedness incurred or continued to purchase
or carry tax-exempt securities (which would in whole or in part include shares
issued by the Company) will not be deductible by the borrower. Under procedures
established by the Internal Revenue Service, a purpose to use borrowed funds to
purchase or carry tax-exempt securities may be shown by either direct or
circumstantial evidence. To the extent interest expense is incurred to purchase
taxable investments, deductions therefore are generally limited to the amount of
the net taxable investment income.
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.
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In addition to exempt interest dividends, the Company will pay dividends of
at least 98% of the ordinary income it receives from investments generating
taxable income on a calendar year basis; 98% of its capital gain net income
(amounts, if any, in excess of current or carryover losses) for every year
ending on October 31; and, 100% of any undistributed amounts of ordinary and
capital gain income from the preceding calendar year.
The foregoing is only a brief summary of some of the important tax
considerations generally affecting the Company and its shareholders. No attempt
is made to present a detailed explanation of the federal, state and local income
tax treatment of the Company or its shareholders. This discussion is not
intended as a substitute for careful tax planning. Accordingly, potential
investors in the Company are urged to consult their tax advisors with specific
reference to their own tax situations.
In general, dividend record dates are set by the directors to occur on
approximately the 23rd day of February, May, August and November. Shareholders
will be advised annually within 60 days of the end of the Company's taxable year
as to the federal income tax consequences of distributions made during such
year, and will be similarly advised after the end of each calendar year.
MANAGEMENT OF THE COMPANY
The business and affairs of the Company are managed by the Company's Board
of Directors. The Company's by-laws provide for five directors and all positions
are filled. Two of the directors serving, including George W. Connell, are
"interested persons" within the meaning of that term under the Investment
Company Act of 1940. The Statement of Additional Information contains the names
of and the general background information concerning each director of the
Company.
From December 9, 1992 through July 15, 1997, Rittenhouse Financial Services
Inc. (RFS) 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
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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.
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 re
quirements 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.
15
<PAGE>
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
In a pre-emptive strike against a recession the Federal Reserve has
recently cut the Federal Funds Rate twice to 5.0%. These actions were out of
concern for how the increasing weakness in foreign economies would affect the
U.S. economy. While the U.S. economy has not weakened materially, the current
economic data being reported indicate a loss of momentum.
Tax exempt municipal bond interest rates in the intermediate maturity range
decreased slightly over the past year, boosting total returns in that sector.
Between August 31, 1997 and August 31, 1998 rates decreased approximately 25
basis points and combined with tight supply allowed the fund to out perform 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. The
following chart shows the company's average annual return for one, five and ten
year period ending on the last day of the company's last fiscal year, August 31,
1998.
NRM Investment Company
Total Return Calculation
Annualized Return Ending Redeemable Value
----------------- -----------------------
1 Year 7.84% $1,078.40
5 Year 5.98% $1,300.54
10 Year 7.10% $1,985.14
*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.
16
<PAGE>
[GRAPHIC]
In the printed version of the document, a line graph appears which depicts the
following plot points:
Period: August 1988 through August 1998
NRM INDEX
--- -----
88 10,000 10,000
89 11,029 10,720
90 11,326 11,442
91 11,666 12,598
92 12,725 13,850
93 14,849 15,074
94 15,264 15,322
95 16,412 16,532
96 17,251 17,145
97 18,408 17,778
98 19,851 18,990
17
<PAGE>
[GRAPHIC]
In the printed version of the document, a line graph appears which depicts the
following plot points:
Period: Inception through August 1998
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
98 26,093 24,119
18
<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 13, 1998 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
86% 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
There are two environmental matters pending against the Company, identified
as Strasburg and Boarhead Farms. Regarding Strasburg, the Company had been
identified as a potentially responsible party ("PRP") by the United States
Environmental Protection Agency ("EPA") in remedial activities involving an
environmental cleanup project at the Strasburg landfill in Newlin Township,
Chester County, Pennsylvania. Another PRP who contributed moneys to early
cleanup activities at Strasburg sought contribution from the Company and other
PRPs.
19
<PAGE>
The Strasburg PRPs agreed among themselves to a settlement offer of the EPA
claims for the consideration of $2,500,000 and of the contributing PRP claim for
an additional $273,000. The EPA and the contributing PRP accepted these sums.
The Company's shares were $125,000 and $16,500 respectively, totaling $141,500.
It paid the total in escrow on September 8, 1998, shortly after the close of the
Company's 1998 fiscal year. Thereafter the United States commenced suit against
the Company and the other PRPs, and at the same time filed the settlement
agreement for public comment and judicial approval. The settlement agreement has
"reopeners" allowing for an assertion of liability for contamination to
groundwater to the extent based upon newly discovered information, and for
natural resource damage.
It is likely that (a) after the public comment period, the court will
approve the settlement arrangements described above (at which time funds will be
released from escrow) and (b) there will be no additional claims made regarding
the reopeners. Accordingly this claim should no longer be regarded as material;
however, it is not possible to give absolute assurance in this regard.
The EPA asserted another environmental claim against the Company and other
PRPs regarding Boarhead Farms. This site is situate in Bridgeton Township in
northern Bucks County, Pa. The EPA's past and its tentative estimate of future
remedial costs total $30,000,000. A more exact amount will be determined after
EPA issues its Record of Decision ("ROD") for the project. To date there are
nine named PRPs sharing in a defense group ("the Group") and the Company's share
is one half of one share. The Group hired an investigator who has found
approximately 23 others who are arguably PRPs. The Group will attempt to bring
in as many of the 23 as possible to share expenses and liability, and to
otherwise resolve or try the matter. After the ROD is distributed, it is
expected the EPA will give the PRPs special notices to remediate. At that time
the Company will examine the evidence supposedly linking the Company's wastes
(when it was an operating steel company) to the site to determine whether it
will comply or litigate. The matter must be considered material. However, at
this time in light of the unknown number of participants, the uncertainty of the
ROD's provisions and related cleanup expense, and the issue of linkage, the
Company is unable to predict an amount or range of liability. The Company will
resist the claim vigorously.
The Company is not aware of any other claim or proceeding.
20
<PAGE>
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.
21
<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
22
<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.
9I 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
23
<PAGE>
NRM INVESTMENT COMPANY
Statement of Additional Information
December 30, 1998
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, 1998 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, 1998
Table of Contents
Page
----
Statement of Additional Information ...................................... 2
Investment Objective and Policies ....................................... 2
General Information and Description of Shares............................. 4
Taxes .................................................................... 4
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 .................................................................. 11
Report of Independent Auditor ............................................ 13
Financail Statements ..................................................... 13
1
<PAGE>
NRM INVESTMENT COMPANY
Statement of Additional Information
December 30, 1998
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
2
<PAGE>
authorities, and each multi-state agency of which a state is a member, is a
separate "issuer" as that term is used in the Prospectus and this Statement of
Additional Information. The non-governmental user of facilities financed by
private activity bonds is also considered to be an issuer.
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.
Taxes
A tax is imposed upon the Company based upon its investment company taxable
income and its net capital gains which
4
<PAGE>
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 there are undistributed capital gains of $8,434 or .002 per
share. The Company intends to distribute "exempt-interest" dividends as
described in the Company's prospectus and distribute at least 98% of its
ordinary income for each calendar year, 98% of its capital gain net income, if
any, computed on the basis of an October 31st fiscal year, and 100% of
undistributed adjusted taxable income amounts from the previous year.
Accordingly, it is unlikely that the Company will pay any income tax. However,
should the Company retain any earnings, it will be taxed on its undistributed
investment company taxable income and capital gains and may be subject to an
excise tax. To the extent income is distributed (whether in cash or additional
shares) it will be exempt, or taxable to the shareholders as ordinary, or
capital gain income, in proportion to the Company's receipt of such income.
Since the Company has earnings and profits generated in years before it was an
investment company, distributions to shareholders over and above the Company's
income for a period will be taxable to the shareholders to the extent of the
prior earnings and profits and will not be treated immediately as a return of
capital.
The Company is a personal holding company as defined by Sec. 542 of the
Code. Retained income will be taxed at the highest corporate tax rate. The
Company requested and on August 5, 1986 received a private ruling from the
Internal Revenue Service relating to investments in taxable securities. The
ruling interpreted the Tax Reform Act of 1984 in such a way as to confirm the
Company's ability to make investments in securities generating taxable income
without having to first make an accumulated earnings and profits distribution.
The Company has capital loss carryovers which may be used to offset gains
in securities which would otherwise be recognized.
Section 852(b)(5) of the Code provides, in effect, that if, at the close
of each quarter of its taxable year, at least 50% of the Company's total assets
consists of tax free obligations, the income from such investments may be passed
through to the shareholders, and for federal tax purposes,
5
<PAGE>
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
- ---------------- --------------- ----------------------------------
John H. McCoy(1) Director, *Former President of National
1010 Broadmoor Road Chairman, and Rolling Mills, Inc., a steel
Bryn Mawr, PA 19010 President rolling plant. Prior thereto,
he was President and Director of
National Rolling Mills Co.
Joseph V. Somers Director *Former President of Somers
1518 Mt. Pleasant Rd. Construction Company and Vice
Villanova, PA 19085 President of Industrial Lift
Truck Co.
Francis J. Rainer Director President, Rainer & Company, a
1415 Kyneton Drive Professional Corporation. He is
Villanova, PA 19085 also Vice-Chairman of the Board of
Delaware Valley Savings Bank
Thomas F. Kilcullen, Jr. Director *Former Vice President, Treasurer
4 Carriage Way Treasurer, and and Secretary of National Rolling
Berwyn, PA 19312 Secretary Mills Inc. Prior thereto, he
was Vice President and Treasurer
of National Rolling Mills Co.
George W. Connell(1) Director Chairman and Chief Executive
#2 Radnor Corporate Ctr. Officer of Rittenhouse Financial
Suite 400 Services; President and director
100 Matsonford Road of Rittenhouse Financial
Radnor, PA 19087 Securities, a registered
brokerage dealer; President,
Director and sole shareholder of
Rittenhouse Trust Company a
Commercial Bank and Trust Co.
acting as the Company's
investment advisor.
*Retired for more than five years.
- ----------
(1) John H. McCoy and George W. Connell are "interested" directors as
defined in the Investment Company Act of 1940.
7
<PAGE>
Since registering as an investment company under the Investment Company Act
of 1940, the Company has not paid and does not expect to pay any remuneration to
any of its officers. The company pays each director a fee of $250 for each
meeting of the Board of Directors attended and reimburses the directors for
their related out-of-pocket expenses.
Advisory Agreement
Rittenhouse 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
8
<PAGE>
the purchases and sales of securities on a nondiscretionary basis and to adhere
to the provisions of the Investment Advisors' Act of 1940 and other pertinent
securities laws. For the services provided, the Company has agreed to pay 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, 1997, and August 31, 1998,
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
$6,000.
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, 1998 the
Company paid no commissions in respect to portfolio transactions.
9
<PAGE>
The policy of the Advisor will be to seek "best execution" when placing
portfolio transactions for the Company. "Best execution" means prompt and
reliable execution at a price the Advisor has reason to believe represents the
lowest cost, including any commission in the case of a purchase, or the greatest
proceeds reasonably available. Subject to and in accordance with the provisions
of section 28(e) of the Securities Exchange Act of 1934, the Advisory Agreement
authorizes the Advisor to place orders for the purchase and sale of the
Company's securities with brokers or dealers who provide the Advisor with access
to supplemental research and security and economic analysis even though such
brokers and dealers execute such transactions at a higher net cost to the
Company than may result if other firms were used. These various services may
also be useful to the Advisor in connection with its services to their advisory
clients. The extent and continuation of this policy is subject to the review of
the Company's Board of Directors.
The Company does not expect its annual portfolio turnover rate to exceed
100%, but the rate of turnover will not be a limiting factor (as in fiscal 1991)
when the Company deems it desirable to sell or purchase securities. The
Company's portfolio turnover rates during the fiscal years ended August 31, 1998
and August 31, 1997 were 12.57% and 28.98% respectively.
Principal Shareholders of the Company
As of October 13, 1998 John H. McCoy owned beneficially and of record
2,817,680 of the Company's outstanding voting securities and controlled the
Company. His control is sufficient to appoint all members of the board of
directors and carry out the business of the Company without the affirmative vote
of any other shareholder or group of shareholders. The Company's principal
shareholders are as follows:
Percentage of
Name and address Ownership
---------------- -------------
John H. McCoy 66%
1010 Broadmoor Road
Bryn Mawr, Pa 19010
Francis J. Rainer 5.6%
1415 Kyneton Drive
Villanova, PA 19085
Joseph V. Somers 5.5%
1518 Mt. Pleasant Road
Villanova, PA 19085
Samuel R. Gilbert, Jr. 4.7%
3 Turtle Lane, The Landings
Savannah, GA 31411
Thomas F. Kilcullen, Jr. 4.7%
4 Carriage Way
Berwyn, PA 19312
10
<PAGE>
The percent owned is based on the number of outstanding shares of common
stock at October 13, 1998. All such shares are owned of record and beneficially.
All officers and directors of the Company, as a group owned as of October 13,
1998, 3,646,248 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, 1997 and
1998 annual reports to shareholders for the years ended August 31, 1996, August
31, 1997 and August 31, 1998, 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 1998 annual report to
Shareholders for the years ended August 31, 1989 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, 1998
<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>
[LOGO]
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,
1998, the related statements of operations for the year then ended, the
statement of changes in net assets for each of the two years in the period then
ended and the financial highlights for each of the three 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, 1989
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, 1998, by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of NRM
Investment Company at August 31, 1998, the results of its operations for the
year then ended, the changes in its net assets for each of the two years in the
period then ended and the financial highlights for each of the three years in
the period then ended, in conformity with generally accepted accounting
principles.
Reading, Pennsylvania
September 18, 1998
-1-
<PAGE>
NRM INVESTMENT COMPANY
STATEMENT OF ASSETS AND LIABILITIES
- --------------------------------------------------------------------------------
August 31, 1998
- --------------------------------------------------------------------------------
ASSETS
Investments at value (cost $16,455,057) $17,272,467
Interest receivable 229,038
Prepaid expense 1,577
-----------
Total assets 17,503,082
-----------
LIABILITIES
Accrued expenses and other liabilities 162,456
-----------
NET ASSETS
Net assets, applicable to 4,291,273 outstanding shares,
equivalent to $4.04 a share $17,340,626
===========
See Notes to Financial Statements.
-2-
<PAGE>
NRM INVESTMENT COMPANY
SCHEDULE OF INVESTMENTS
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
August 31, 1998
- ----------------------------------------------------------------------------------------------
Principal
Municipal Bonds - 99.3% Amount Value
- ----------------------------------------------------------- ---------------------------
<S> <C> <C>
General Obligation Bonds - 18.6%:
Leominster, Massachusetts, 6.25%, due 4/01/08 $ 300,000 $ 332,163
Upper Dublin Pennsylvania School District, 5.50%,
due 11/15/08 200,000 204,760
Lowell, Massachusetts, 5.50%, due 1/15/10 300,000 317,661
New York City, New York, 6.45%, due 8/01/10 200,000 218,876
Nevada State Colorado River Commission, Ltd Tax,
6.50%, due 10/01/12 400,000 438,272
Burgettstown, Pennsylvania, Washington County,
4.85%, due 2/01/14, callable 2/01/05 at 100 (FGIC) 125,000 125,076
Lowell, Massachusetts, 5.50%, due 12/15/15, callable
12/15/06 at 102 (AMBAC) 330,000 347,589
San Francisco, California City and County, Park
Improvement series, 5.25%, due 6/15/16, callable
6/15/05 at 102 (MBIA) 300,000 308,172
Richmond, Virginia, 6.25%, due 1/15/18, callable
1/15/01 at 102 870,000 923,670
-----------
Total General Obligation Bonds 3,216,239
-----------
Housing Finance Agency Bonds - 40.2%:
New Mexico Mortgage Finance Authority, Single-Family
Mortgage Rev., 7.90%, due 7/01/00 50,000 51,362
Rock Island, Illinois Residential Mortgage Revenue
Refunding, 7.70%, due 9/01/08, callable 9/01/02
at 102 115,000 124,222
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 100 165,000 178,015
Fort Worth, Texas Housing Finance Corporation,
Home Mortgage Revenue Refunding Series 1991,
8.50%, due 10/01/11, callable 10/01/01 at 103 340,000 368,733
Odessa, Texas Housing Finance Corporation,
Home Mortgage Revenue Refunding, 8.45%,
due 11/01/11, callable 11/01/05 at 103 262,878 285,688
Montana State Housing, Single-Family Mortgage,
7.65%, due 10/01/10, callable 10/01/00 at 102 60,000 62,928
City of Hobbs, New Mexico, Single-Family Mortgage
Refunding Revenue Bonds, 8.75%, due 7/01/11,
callable 7/01/02 at 103, 7/01/05 at 100 80,000 87,054
Cameron County, Texas Housing Finance Corporation,
Single-Family Mortgage Revenue Refunding, 6.20%,
due 3/01/13, callable 9/01/05 at 100 370,000 385,740
</TABLE>
-3-
<PAGE>
NRM INVESTMENT COMPANY
SCHEDULE OF INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
August 31, 1998
- ----------------------------------------------------------------------------------------------
Principal
Municipal Bonds - 99.3% (Continued) Amount Value
- ----------------------------------------------------------- ---------------------------
<S> <C> <C>
Housing Finance Agency Bonds - 40.2% (Continued):
Labette and Cowley Counties, Kansas Single-Family
Mortgage Refunding Bonds, 9.50%, due 4/01/13,
callable 10/01/01 at 103 $ 10,000 $ 10,760
Vicksburg, Mississippi Lease Housing Corp., 5.80%,
due 8/15/13 125,000 128,694
California Housing Finance Agency, Home Mortgage,
10.25%, due 2/01/14, callable 2/01/99 at 100 60,000 60,119
Connecticut State Housing Finance Authority, 5.60%,
due 5/15/14, callable 5/15/03 at 102 200,000 207,398
Nevada Housing Division, Single-Family Mortgage,
7.35%, due 10/01/15 175,000 182,934
Louisiana Public Facilities Authority,
Multi-Family Housing, 7.75%, due 11/01/16,
callable 11/01/01 at 102 500,000 528,935
Pennsylvania Housing Finance Agency, Single-Family
Mortgage, 5.45%, due 10/01/17,
callable 10/01/03 at 102 150,000 152,973
Utah State Housing Finance Agency, Single-Family
Mortgage, 6.30%, due 1/01/18 230,000 242,544
Maryland State Community Development Administration,
Department of Housing, 5.60%, due 4/01/18 205,000 213,015
Alaska State Housing Finance Corporation, 5.90%,
due 12/01/19, callable 6/01/07 at 102 (MBIA) 250,000 264,253
Troy, New York Housing Development Corp.,
Multi-Family Housing, 8.10%, due 2/01/22,
callable 12/01/02 at 100 1,335,000 1,567,050
Quaker Hill Housing Corporation, Multi-Family,
7.55%, due 2/01/22 600,000 636,090
St. Alphios Housing Corporation, Multi-Family,
8.20%, due 2/01/24 1,135,000 1,209,524
-----------
Total Housing Finance Agency Bonds 6,948,031
-----------
Hospital Revenue Bonds - 12.9%:
Dauphin County, Pennsylvania Hospital Authority,
HAPSCO Group, William Penn Hospital Project,
5.50%, due 7/01/07 300,000 320,043
Falls Township Pennsylvania Hospital Authority,
Delaware Valley Medical Center, 6.90%,
due 8/01/11, callable 8/01/02 at 102 285,000 312,009
Rhode Island State Health and Educational Building Corp.,
New England Tech, 5.90%, due 3/01/10 100,000 106,801
</TABLE>
-4-
<PAGE>
NRM INVESTMENT COMPANY
SCHEDULE OF INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
August 31, 1998
- ----------------------------------------------------------------------------------------------
Principal
Municipal Bonds - 99.3% (Continued) Amount Value
- ----------------------------------------------------------- ---------------------------
<S> <C> <C>
Hospital Revenue Bonds - 12.9% (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) 100,000 105,236
Connecticut State Health and Educational Facilities
Authority (Kimball Hospital), 5.375%, due 7/01/16,
callable 7/01/06 at 102 350,000 364,371
Montgomery County, Pennsylvania Higher Educational &
Health Authority (Holy Redeemer Health), 5.25%,
due 10/01/17, callable 10/01/07 at 101 (AMBAC) 200,000 203,784
Fulton DeKalb, Georgia Hospital Authority, 5.50%,
due 1/01/20, callable 7/01/03 at 102 (MBIA) 200,000 205,460
University of California Hospital Revenue
(UC Davis Medical Center), 5.75%, due 7/01/20,
callable 7/01/06 at 101 (AMBAC) 100,000 106,359
-----------
Total Hospital Revenue Bonds 2,224,063
-----------
Other Revenue Bonds - 27.6%:
Washington State Public Power Supply Nuclear Project #1,
5.60%, due 7/01/05 200,000 216,086
San Francisco City & County Redevelopment Finance Authority,
4.30%, due 8/01/06, callable 8/01/03 at 100 100,000 100,172
Lee County, Florida Certificates of Participation, 4.70%,
due 10/01/06 100,000 103,440
Fitzgerald, Michigan School District, 5.00%, due 5/01/08,
callable 5/01/06 at 100 200,000 208,016
Grand Rapids, Michigan Downtown Development Authority,
6.60%, due 6/01/08, callable 6/01/06 at 100 365,000 413,961
Alaska Industrial Development and Export Authority,
6.20%, due 4/01/10 270,000 289,829
New Jersey Economic Development Authority,
Health Care Corp., 6.0%, due 7/01/11 200,000 221,190
Clark County, Washington Public Utility District,
Electric System Revenue, 5.10%, due 1/01/12,
callable 1/01/08 at 100 200,000 205,060
Texas Muni Power Agency, 5.25%, due 9/01/12,
callable 9/01/03 at 100 (MBIA) 100,000 101,674
Suffolk County, New York Water Authority, 5.00%,
due 6/01/15, callable 6/01/03 at 102 (MBIA) 175,000 177,167
</TABLE>
-5-
<PAGE>
NRM INVESTMENT COMPANY
SCHEDULE OF INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
August 31, 1998
- ----------------------------------------------------------------------------------------------
Principal
Municipal Bonds - 99.3% (Continued) Amount Value
- ----------------------------------------------------------- ---------------------------
<S> <C> <C>
Other Revenue Bonds - 27.6% (Continued):
Vallejo, California Water Improvement Project
(Soland County), 5.70%, due 5/01/16,
callable 5/01/06 at 102 (FSA) $ 100,000 $ 107,965
Allegheny County Pennsylvania Airport Revenue
(Pittsburgh International), 5.00%, due 1/01/17,
callable 1/01/08 at 101 (MBIA) 395,000 394,796
Muhlenberg, Pennsylvania School District, 5.20%,
due 4/01/17, callable 4/01/06 at 100 (MBIA) 250,000 253,550
New Jersey Economic Development Authority,
(Devereux Foundation), 5.50%, due 5/01/17,
callable 5/01/07 at 101 (MBIA) 270,000 284,407
Brazos River Authority, Texas (Houston Light and Power),
5.60%, due 12/01/17, callable 12/01/03 at 102 (MBIA) 100,000 104,154
Tacoma, Washington Solid Waste Utility, 5.50%, due 12/01/17,
callable 12/01/07 at 101 (AMBAC) 350,000 368,567
New York State LOC Government Assistance Corporation,
5.50%, due 4/01/18, callable 4/01/03 at 102 290,000 297,505
Los Angeles, California Convention and Exhibition Center,
5.375%, due 8/15/18, callable 8/15/03 at 102 (MBIA) 385,000 392,896
Santa Monica-Malibu, California Unified School District,
5.50%, due 8/01/18, prerefunded 8/01/03 at 102 200,000 217,010
Chicago, Illinois Water Revenue, 5.25%, due 11/01/18,
callable 11/01/07 at 102 (FGIC) 200,000 202,606
Easton, Pennsylvania Area Joint Sewer Authority,
5.05%, due 12/01/18, callable 12/01/07 at 101 (FSA) 100,000 98,987
-----------
Total Other Revenue Bonds 4,759,038
-----------
Total Municipal Bonds (Cost $ 16,329,961) 17,147,371
-----------
Short-Term Investments - at cost approximating value - .7%,
Federated Pennsylvania Municipal Cash Fund #8 125,096
-----------
Total Investments - 100% (Cost $16,455,057) $17,272,467
===========
</TABLE>
See Notes to Financial Statements.
-6-
<PAGE>
NRM INVESTMENT COMPANY
STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------
Year Ended August 31, 1998
- --------------------------------------------------------------------------------
Investment income, interest $1,024,598
----------
Expenses:
Investment advisory fees 10,000
Custodian fees 10,155
Transfer and dividend disbursing agent fees 1,500
Legal and professional fees 30,400
Directors' fees 4,250
Insurance 1,916
Capital stock tax 3,600
Provision for environmental claims 4,000
Miscellaneous 7,385
----------
73,206
----------
Net investment income 951,392
----------
Realized and unrealized gain on investments:
Net realized gain from investment transactions 97,634
Net unrealized appreciation of investments 273,544
----------
Net gain on investments 371,178
----------
Net increase in net assets resulting from operations $1,322,570
==========
See Notes to Financial Statements.
-7-
<PAGE>
NRM INVESTMENT COMPANY
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
Years Ended August 31, 1998 1997
- ------------------------------------------------------------------------------------------
<S> <C> <C>
Operations:
Net investment income $ 951,392 $ 947,248
Net realized gain from investment transactions 97,634 142,091
Net unrealized appreciation of investments 273,544 35,620
----------- -----------
Net increase in net assets resulting
from operations 1,322,570 1,124,959
Distributions to shareholders, dividends from net
investment income (948,154) (972,598)
Distributions to shareholders, dividends from
capital gains (63,443) --
Capital share transactions, net increase from capital
share transactions 15,049 15,078
----------- -----------
Total increase in net assets 326,022 167,439
Net assets:
Beginning of year 17,014,604 16,847,165
----------- -----------
End of year $17,340,626 $17,014,604
=========== ===========
</TABLE>
See Notes to Financial Statements.
-8-
<PAGE>
NRM INVESTMENT COMPANY
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
Years Ended August 31, 1998 1997 1996 1995 1994
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA (for a share outstanding
throughout the indicated year)
Net asset value, beginning of year $ 3.968 $ 3.933 $ 3.964 $ 3.909 $ 4.022
Net investment income .222 .221 .210 .237 .229
Net realized and unrealized gain (loss)
on investments .087 .041 (.004) .056 (.115)
---------------------------------------------------------------------
Total from investment operations .309 .262 .206 .293 .114
Less distributions:
Dividends from capital gains (.015) - - - -
Dividends from net investment income (.221) (.221) (.210) (.237) (.227)
Distribution in excess of net
investment income - (.006) (.027) (.001) -
---------------------------------------------------------------------
Total distributions (.236) (.227) (.237) (.238) (.227)
---------------------------------------------------------------------
Net asset value, end of year $ 4.041 $ 3.968 $ 3.933 $ 3.964 $ 3.909
=====================================================================
TOTAL RETURN 7.84% 6.71% 5.11% 7.52% 2.79%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (in thousands) $17,341 $17,015 $16,847 $16,982 $16,745
Ratio of expenses to average net assets .42% .57% 1.02% .37% .49%
Ratio of net investment income to average
net assets 5.50% 5.56% 5.24% 6.08% 5.77%
Portfolio turnover rate 12.57% 28.98% 6.24% 22.73% 13.56%
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
Years Ended August 31, 1993 1992 1991 1990 1989
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA (for a share outstanding
throughout the indicated year)
Net asset value, beginning of year $ 3.540 $ 3.488 $ 3.635 $ 3.835 $ 3.767
Net investment income .453 .265 .059 .157 .278
Net realized and unrealized gain (loss)
on investments .137 .055 .051 (.065) .084
----------------------------------------------------------------------
Total from investment operations .590 .320 .110 .092 .362
Less distributions:
Dividends from capital gains - - - - -
Dividends from net investment income (.108) (.265) (.059) (.157) (.278)
Distribution in excess of net
investment income - (.003) (.198) (.135) (.016)
---------------------------------------------------------------------
Total distributions (.108) (.268) (.257) (.292) (.294)
---------------------------------------------------------------------
Net asset value, end of year $ 4.022 $ 3.540 $ 3.488 $ 3.635 $ 3.835
=====================================================================
TOTAL RETURN 16.69% 9.08% 3.00% 2.69% 10.29%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (in thousands) $17,636 15,260 $ 15,659 $16,268 $17,094
Ratio of expenses to average net assets (5.03)% .81% 6.04% 3.90% .52%
Ratio of net investment income to average
net assets 11.93% 7.25% 1.54% 4.07% 7.28%
Portfolio turnover rate 40.06% 64.84% 101.88% 46.10% 18.81%
</TABLE>
See Notes to Financial Statements
-9- and -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, 1998 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 $2,150,207 and
$2,240,191 respectively, during the year ended August 31, 1998.
At August 31, 1998, the cost of investment securities owned is the same for
financial reporting and federal income tax purposes. Net unrealized
appreciation of investment securities is $817,410 (aggregate gross
unrealized appreciation of $820,320 less aggregate unrealized depreciation
of $2,910).
-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 two environmental matters.
At August 31, 1998, the Fund had accrued $141,500 ($145,000 as of August
31, 1997) for remediation costs related to one matter, 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. This amount
was paid in September 1998. The Fund's legal counsel confirmed and advised
that the settlement agreement allows for future assertions, but that it is
likely that there will be no additional claims made with regard to this
matter.
With regard to the other matter, the Fund has been named as a PRP in a
claim asserted by the EPA. The number of other PRPs is currently unknown as
is the amount of future remedial costs, however, these costs are considered
to be material. The Fund's legal counsel has indicated that it is not
possible to predict a possible outcome or range of liability for the claim
and, accordingly, no accrual for loss has been made by the Fund. The Fund
intends to vigorously resist this claim.
<TABLE>
<CAPTION>
5
- ------------------------------------------------------------------------------------------------------
TRANSACTIONS IN CAPITAL STOCK AND COMPONENTS OF NET ASSETS
Transactions in fund shares were as follows:
Years Ended August 31,
----------------------------------------------
1998 1997
----------------------------------------------
Shares Amount Shares Amount
----------------------------------------------
<S> <C> <C> <C> <C>
Additional shares purchased 3,713 $14,997 3,856 $15,000
Issued to shareholders in reinvestment of
dividends from net investment income 13 52 20 78
----------------------------------------------
Net increase 3,726 $15,049 3,876 $15,078
==============================================
</TABLE>
-13-
<PAGE>
NRM INVESTMENT COMPANY
NOTES TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
5
- ---------------------------------------------------------------------------------------------------------
TRANSACTIONS IN CAPITAL STOCK AND COMPONENTS OF NET ASSETS
(CONTINUED)
The components of net assets at August 31, 1998 and 1997 are as follows:
1998 1997
-----------------------------
<S> <C> <C>
Capital shares - par value $.01 per share, 4,291,273
shares and 4,287,547 shares issued and outstanding
at August 31, 1998 and 1997 (10,000,000 full and
fractional shares authorized); and capital paid-in $16,641,153 $16,626,135
Accumulated net realized loss on investment transactions - (25,757)
Undistributed net realized gain on investment transactions 8,434 -
Unrealized appreciation of investments 817,410 543,834
Overdistributed net investment income (126,371) (129,608)
-----------------------------
Net assets $17,340,626 $17,014,604
=============================
</TABLE>
-14-
<PAGE>
PART C
OTHER INFORMATION
ITEM 24. Financial Statements and Exhibits:
(a) Financial Statements:
Part A:
Financial Highlights - ten years ended August 31, 1998
Part B:
Report of Independent Auditors
Statement of Assets and Liabilities at August 31, 1998.
Statement of Operations for the year ended August 31, 1998.
Statements of Changes in Net Assets for each of the two years in
the period ended August 31, 1997 and August 31, 1998.
Schedule of Investments at August 31, 1998.
Financial Highlights
Notes to Financial Statements
All other schedules for which provision is made in the applicable
accounting regulations of the Securities and Exchange Commission
are not required under the related instructions or are
inapplicable, and therefore have been omitted.
(b) Exhibits:
(1) (a) Articles of Incorporation are incorporated by reference
to Exhibit 1 of Registrant's Registration Statement on
Form N-1, filed November 29, 1979.
(b) Amendment to Articles of Incorporation incorporated by
reference to Exhibit 1(b) of Amendment No. 1 to
Registrant's Registration Statement on Form N-1, filed
June 11, 1980.
<PAGE>
(c) Amendment to Articles of Incorporation incorporated by
reference to Exhibit 1(c) of Amendment No. 3 to
Registrant's Registration Statement on Form N-1, filed
December 29, 1981.
(2) (a) By-Laws are incorporated by reference to Exhibit 2 of
Registrant's Registration Statement on form N-1, filed
November 29, 1979.
(b) Amendment to By-Laws incorporated by reference to Exhibit
2(b) of Amendment No. 3 to Registrant's Registration
Statement on form N-1, filed December 29, 1981.
(c) Amendment to By-Laws incorporated by reference to Exhibit
2(c) of Amendment No. 4 to Registration Statement on Form
N-1, filed December 29, 1982.
(d) Amendment to By-Laws of December 11, 1990 incorporated by
reference to Exhibit 2(d) of amendment #14 filed
January 30, 1991.
(3) None.
(4) Specimen certificate for share of common stock of Registrant
is incorporated by reference to Exhibit 4 to Amendment No. 1
to Registrant's Registration Statement on Form N-1, filed
June 11, 1980.
(5) (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 or management,
incorporated by reference to Exhibit 5(b) to Amendment
No. 22 to Registrant's Registration Statement on form
N-1A effective December 30, 1997.
<PAGE>
(6) Not applicable
(7) None.
(8) (a) Custodian Agreement, dated September 8, 1986, is
incorporated by reference to Exhibit 8 to Amendment No. 9
to Registrant's Registration Statement on N-1A effective
December 30, 1986.
(b) Amendment to custodian agreement dated November , 1994
incorporated by reference to exhibit 8(b) to
Registrant's Registration Statement on form N-1A
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 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, 1998
pursuant to Rule 24f-2 as part of Registrant's rule 24f-2
Notice, incorporated by reference.
(11) (a) Consent of Henderson, Wetherill, O'Hey & Horsey.
(b) Consent of Beard & Company, Inc.
(12) None.
(13) None.
<PAGE>
(14) None.
(15) None.
(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
-------------- ------------------------
Common Stock 117
Item 27. Indemnification.
The response to Item 4 to Part II of the Company's Registration
Statement on Form N-1, filed November 23, 1979, is incorporated herein
by reference.
Item 28. Business and Other Connections of Investment advisor
The business of Rittenhouse 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
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 13, 1998.
/s/ Francis J. Rainer
-----------------
Francis J. Rainer
<PAGE>
NRM INVESTMENT COMPANY
Power of Attorney
I hereby appoint John H. McCoy and Thomas F. Kilcullen, Jr., and each of
them, attorney for me and in my name and on my behalf to sign the registration
Statement on Form N-1A of NRM Investment Company and any amendments thereto to
be filed with the Securities and Exchange Commission under the Securities Act of
1933 or the Investment Company Act of 1940, and generally to do and perform all
things necessary to be done in that connection.
I have signed this Power of Attorney on October 15, 1998.
/s/ Joseph V. Somers
----------------
Joseph V. Somers
<PAGE>
NRM INVESTMENT COMPANY
Power of Attorney
I hereby appoint John H. McCoy and Thomas F. Kilcullen, Jr., and each of
them, attorney for me and in my name and on my behalf to sign the registration
Statement on Form N-1A of NRM Investment Company and any amendments thereto to
be filed with the Securities and Exchange Commission under the Securities Act of
1933 or the Investment Company Act of 1940, and generally to do and perform all
things necessary to be done in that connection.
I have signed this Power of Attorney on October , 1998.
/s/ George W. Connell
-----------------
George W. Connell
<PAGE>
Signatures
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940 the Registrant has duly caused this
Post-Effective Amendment to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in Rosemont, Pennsylvania
on October 30, 1998.
NRM INVESTMENT COMPANY
By: /s/ John H. McCoy
-----------------
John H. McCoy
President
Pursuant to the requirement of the Securities Act of 1933, this
Post-Effective Amendment to the Registration Statement has been signed by the
following persons in the capacities and on the dates indicated:
Signature Title Date
--------- ----- ----
/s/ John H.McCoy President (Chief 10/30/98
----------------------- Executive Officer)
John H. McCoy
/s/ Thomas F. Kilcullen Treasurer(Chief 10/30/98
----------------------- Financial and
Thomas F. Kilcullen Accounting Officer)
and Secretary
The Post-Effective Amendment No. 23 has also been signed by John H. McCoy,
Attorney-In-Fact, on behalf of the following directors on the Date indicated:
JOSEPH V. SOMERS
FRANCIS J. RAINER
GEORGE W. CONNELL
/s/ John H.McCoy 10/30/98
- ----------------
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, incorporated by
reference to Exhibit 5(b) to Amendment No. 22 to Registrant's
Registration Statement on form N-1A effective December 30, 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 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. 23 to the Registration Statement (No. 2-66073) on
Form N-1A under Securities act of 1933, as amended, of NRM Investment Company.
HENDERSON, WETHERILL, O'HEY & HORSEY
By: /s/ Edward Fackenthal
---------------------
Edward Fackenthal
Dated: October 30, 1998
<PAGE>
Exhibit 11(b)
CONSENT OF INDEPENDENT AUDITORS
We consent to the references to our Firm under the captions "Financial
Highlights" in the Prospectus and "Auditors" in the Statement of Additional
Information and to the incorporation by reference in this Post-Effective
Amendment No. 23 to the Registration Statement (Form N-1A No. 2-66073) dated
October 30, 1998, of NRM Investment Company of our report dated September 18,
1998, included in the 1998 annual report to shareholders of NRM Investment
Company.
BEARD & COMPANY, INC.
Reading, Pennsylvania
October 30, 1998
