As filed with Securities and Exchange Commission on October 27, 1999
Registration No. 2-66073
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
POST-EFFECTIVE AMENDMENT NO. 25 [X]
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
AMENDMENT NO. 25 [X]
NRM INVESTMENT COMPANY
(Exact Name of Registrant as Specified in Charter)
Rosemont Business Campus
Suite 112, Building 3
919 Conestoga Road
Rosemont, Pennsylvania 19010
(Address of Principal Executive Offices)
Registrant's Telephone Number: (610) 525-0904
John H. McCoy, President, NRM Investment Company
Rosemont Business Campus
Suite 112, Building 3
919 Conestoga Road
Rosemont, Pennsylvania 19010
(Name and Address of Agent for Service)
It is proposed that this filing will become effective (check appropriate box)
_______ immediately upon filing pursuant to paragraph (b)
_______ on [date] pursuant to paragraph (b)
___X___ 60 days after filing pursuant to paragraph (a)(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, 1999 was filed
on October 27, 1999, and the notice for the current fiscal year ending August
31, 2000 will be filed no later than October 27, 2000.
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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, 1999
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TABLE OF CONTENTS
PAGE
Summary of Risk and Return; Investments, Risks, and
Performance................................................. 1
Investment Objectives and Strategies................. 1
Summary of Principal Risks of Investing in the Fund.. 1
Bar Chart and Table........................................... 2
Fees and Expenses of the Company.............................. 3
Investment Objectives, Principal Investments Strategies
and Related Risks........................................... 4
Municipal Bonds - Currently Available Securities..... 5
Municipal Bonds - When Issued Securities............. 6
Common and Preferred shares.......................... 6
Other Investments.................................... 7
Turnover............................................. 7
Risks of Investing in the Fund....................... 7
Management's Discussion of Fund Performance................... 8
Graph......................................................... 10
Total Return Calculation...................................... 11
Management of the Company..................................... 12
Investment Advisor................................... 12
Pending Legal Proceedings............................ 13
Capital Stock........................................ 15
Shareholder Information....................................... 15
Pricing of Shares.................................... 15
Purchase of Shares................................... 16
Redemption of Fund Shares............................ 16
Dividends............................................ 17
Taxes................................................ 17
Financial Highlights.......................................... 21
Application Form.............................................. 22
Terms and Conditions................................. 23
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SUMMARY OF RISK AND RETURN
INVESTMENTS, RISKS, AND PERFORMANCE
Investment Objectives and Strategies
The Fund invests the majority of its assets in municipal bonds. Income from
these is generally exempt from Federal Income Tax to the Fund. Under similar tax
rules, so long as the Fund invests more than half of its assets in municipals,
its distributions to its shareholders from these tax free sources will likewise
be free from federal tax. The Fund's primary objective is to select suitable
municipal bonds to earn and distribute tax free interest. To accomplish its
objective, it has employed an investment advisor to be aware of and analyze the
municipal bond market to recommend advantageous purchases and sales. By so
doing, it tries to maintain bonds of short duration, competitive rates, with
little risk of principal. The advisor in part relies upon outside sources such
as brokerage firms to make its recommendations. On occasion the Fund considers
advice from its advisors and elsewhere about investments other than municipals.
As a secondary objective, it may make purchases of these up to one half of the
Funds assets.
Summary of Principal Risks of Investing in the Fund
The risks of investing in the Company's fund include the economic condition
of the municipalities that issue the bonds the Company buys. The issuer may fail
to make principal payment or payment on time. Interest rates change constantly
and most often affect the value of the bonds. Normally if rates increase, the
value of the portfolio decreases. To the extent the Company invests in other
than municipal bonds, there is a risk that the businesses in which the Company
invests will fail or that market conditions will lessen the value of its stock
or other security. For any of the foregoing reasons or for other risks including
those hereafter described, loss of money is a risk of investing in the fund. For
a more complete discussion of risks of investing in the fund, see "Risks of
Investing in the Fund" later in this prospectus.
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Bar Chart and Table
The bar chart and table shown below provide an indication of the risks of
investing in the Fund by showing changes in the Fund's performance from year to
year and by showing how the Fund's average annual returns for 1, 5, and 10 years
compare to those of a broad-based securities market index. How the Fund has
performed in the past is not necessarily an indication of how the Fund will
perform in the future.
NRM Investment Company Bar Chart
Period: August 1990 through August 1999
90 2.7%
91 3.0%
92 9.1%
93 16.7%
94 2.8%
95 7.5%
96 5.1%
97 6.7%
98 7.8%
99 1.6%
Average Annual Total
Returns (for period
ending 08/31/99) Past One Year Past 5 years Past 10 Years
NRM Investment Co. 1.56% 5.72% 6.22%
Lehman Bros. Municipal
5 YR GO 2.21% 4.84% 6.12%
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FEES AND EXPENSES OF THE COMPANY
This table describes the expenses that you may pay if you buy and hold
shares of the Fund. The Fund charges no shareholder fees, sales loads, exchange
fee or redemption fees of any kind.
Annual Fund Operating Expenses
The following are expenses that are deducted from Fund Assets:
Management Fees .06%
Other Expenses .36%
Total Annual Fund Operating Expenses .42%
Example:
This example is intended to help you compare the cost of investing in the
Fund with the cost of investing in other mutual funds.
The example assumes that you invest $10,000 in the Fund for the time
periods indicated and then redeem all of your shares at the end of those
periods. The Example also assumes that your investment has a 5% return each year
and that the Fund's operating expenses remain the same. Although your actual
costs may be higher or lower, based on these assumptions your costs would be:
One Year Three Years Five Years Ten Years
$4 $13 $2 $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
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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 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. For the
fiscal year ending August 31, 1999, the Company accrued expenses of $100,000 in
regard to this liability. Had this sum been included in "Other Expenses" for
fiscal 1999, it would have increased expenses from .37% to .94%. See "PENDING
LEGAL PROCEEDINGS" for a description of the current claim.
INVESTMENT OBJECTIVES, PRINCIPAL INVESTMENTS STRATEGIES,
and RELATED RISKS
Objectives
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 "Description
of the Fund and its Investments and Risks" section of Statement of Additional
Information, and (d) 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 obligations with maturities generally less than twenty years from date
of purchase, but such obligations will not necessarily be held until maturity.
Generally, Municipal Bonds with longer maturities tend to produce higher yields
and are subject to greater market fluctuations as a result of changes in
interest rates than are Municipal Bonds with shorter maturities and lower
yields.
The two principal classifications of Municipal Bonds are "general
obligation" and "revenue" or "special obligation" bonds. General obligation
bonds are secured by the issuer's pledge of its faith, credit and taxing power
for the payment of principal and interest. Revenue or special obligation bonds
are payable only from the revenues derived from a particular facility or class
of facilities or, in some cases, from the proceeds of a special excise tax or
other specific revenue source such as from the user of the facility being
financed. Private activity bonds (formerly industrial development bonds) are in
most cases revenue bonds and do not generally constitute the pledge of the
credit or taxing power of the issuer of such bonds. Consequently, the credit
quality of such private activity bonds is directly related to the credit
standing of the corporate user of the facility involved. The portfolio may also
include "moral obligations" bonds which are normally issued by special purpose
public authorities. If an issuer of moral obligation bonds is unable to meet its
obligations, the repayment of such bonds becomes a moral commitment but not a
legal obligation of the state or municipality in question.
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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.
Turnover
The Company will not be restricted in engaging in active and frequent
trading of portfolio securities to achieve its principal investments strategies,
although in the past five fiscal years the portfolio turnover rate has not
exceed 28.98%, and in the year ending August 31, 1999 was 3.27%. To the extent
the Company engages in trades it is likely that it will recognize gain which
will increase the taxable income flowing through to the shareholders or loss
which will decrease the net asset value of the Company and its shares. Trading
in bonds will incur expenses measured by the difference between bid and asked
prices; trading in other securities will incur commission expenses reducing net
asset value.
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.
Risks of Investing in the Fund
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
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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 successfully resisted. The pending matter is considered material.
Presently counsel for the Company has determined that the Company's share of a
contracted obligation to clean the first phase of an environmentally damaged
site will be $100,000. The Company's remaining obligation is 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. Based upon the
foregoing or based upon other factors affecting the market generally or the Fund
in particular, there is a risk of losing money by investing in the Fund.
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE
In a pre-emptive strike against inflation, the Federal Reserve has recently
raised the federal Funds Rate twice to 5.25%. The economy may continue to move
forward over the next several months with GDP final demand growing around a 4%
pace. Consumers are likely to sustain spending at a strong rate as employment
remains high and consumer confidence is at near record levels. Some hints of
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slower economic growth are beginning to appear but the evidence is far from
overwhelming. The recent shift toward a more positive yield curve is a sign that
investor expectations are shifting from a deflationary to an inflationary bias.
Between August, 1998 and August, 1999 Municipal bond rates in the
intermediate range increased approximately 60 basis points. This increase in
interest rates has curtailed total returns in that sector. Throughout the year
we have continued to emphasize high current income along with high credit
quality in our bond selections. The credit quality of the portfolio remained
very strong during the fiscal year with 100% of the bonds rated investment grade
or better. Approximately 70% of the portfolio's holdings were rated "AAA", the
highest bond rating. During the period we shortened the average maturity from
17.0 to 16.0 years.
In addition, we have maintained broad diversification over a range of
different kinds of tax exempt bonds including general obligations, housing,
hospital and revenue bonds.
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.
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[In the printed version there appears a line graph
with the following plot points depicted]
Plot Points for NRM Investment Company Graph
Period: August 1990 through August 1999
NRM INDEX
90 10,000 10,000
91 10,300 11,010
92 11,235 12,104
93 13,111 13,174
94 13,477 13,390
95 14,490 14,448
96 15,231 14,984
97 16,253 15,537
98 17,527 16,596
99 17,801 16,963
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NRM Investment Company
Total Return Calculation
Annualized Return Ending Redeemable Value
$1000 Invested
1 Year 1.56% $1,015.60
5 Year 5.72% 1,228.43
10 Year 6.22% 1,780.06
*Past Performance is not predictive of future performance.
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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 sole compensation of the directors is $400 per meeting
which normally are limited to four per year. The Statement of Additional
Information contains the names of and the general background information
concerning each director of the Company.
Investment Advisor
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 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 transferring 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
applicable banking laws of the Commonwealth of Pennsylvania. 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 Suite 450, No. 3 Radnor
Corporate Center, 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
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statement, the requirements of the Investment Company Act of 1940 and the
requirements of the Internal Revenue Code of 1986.
Since the time the Company most recently employed RTC, Mr. George Connell
has been responsible to the Directors for day-to-day recommendations regarding
the Company's portfolio. In addition to being a principal of RTC, Mr. Connell
has been engaged in some or all of the various enterprises described above for a
period in excess of five years.
Since November 27, 1992, the members of the Company's Board of Directors
acting as a committee, and taking the advisor's recommendations into account (1)
have made decisions with respect to all purchases and sales of the Company's
portfolio (2) have directed the maintenance of records and (3) have been
responsible for the day-to-day management of the portfolio; further, the Board
also arranges for (4) the services of an independent certified public
accountant; (5) custodial and transfer agency services; (6) the computation of
net asset value by RTC; (7) the providing of fidelity bond coverage; (8) the
providing of other administrative services and facilities necessary to conduct
the Company's business; and (9) the providing of certain services necessary to
comply with federal securities laws. The Company assumes all expenses therefor.
For the services provided by RTC, the Company pays RTC $10,000 annually in
quarterly installments, an amount equal to .06% of the Company's average net
assets.
Pending Legal Proceedings
In recent years, the Company has been identified as a Potentially
Responsible Party ("PRP") in two environmental proceedings asserted by the
United States Environmental Protection Agency. They are denominated the
Strasburg landfill in Newlin Township, Chester County, Pennsylvania, and
Boardhead Farms situate in Bridgeton Township in northern Bucks County, Pa.
During the fiscal year ended August 31, 1998, the Strasburg PRPs agreed
among themselves to a settlement offer of the EPA claims for the consideration
of $2,500,000 and of a contributing PRP claim for an additional $273,000. The
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Company's share of the combined amount was $141,500. The EPA and the
contributing PRP accepted these sums. The PPRs paid and the EPA accepted the
agreed amount on January 8, 1999, and the contributing PRP accepted its agreed
amount at the same time.
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. In counsel's view, it
is unlikely that there will be additional claims regarding the reopeners.
Accordingly this claim should no longer be regarded as material; however, it is
mentioned here since it is not possible to give absolute assurance in this
regard.
The Boarhead matter is ongoing, unresolved and material. In November 1998
EPA issued a Record of Decision ("ROD") relative to estimated future cleanup
costs. Those together with EPA's remedial costs already incurred total
$26,000,000.
To date there are six named PRPs sharing in a defense group ("the Group")
and the Fund's share, should it remain in the Group (see below), is one half of
one share. (The Company and another of the six owned an alleged waste generator
at different times and are considered one member.) The Group's investigation has
identified 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
otherwise resolve or try the matter.
After the ROD was distributed, EPA gave certain PRPs special notices to
remediate. The Company was not among them. The Company's interpretation of this
circumstance is that the EPA, based upon evidence available to it at the time,
determined that the Company was not sufficiently linked to the site to warrant a
cleanup direction. Nevertheless other PRPs who did receive special notices have
pointed out evidence which may lead to a link between the Company and the
Boarhead site. The Company will continue to examine whatever evidence is
presented that may create such a link. Based thereon it will make a decision
whether it will remain a member of the Group. If at any time it declines to
participate further with the Group, it will be exposed to contribution claims
from those remaining and will lose contribution protection afforded under CERCLA
(The Superfund Act).
The Company is contractually committed to pay a one half per capita share
of the first phase of the Boarhead cleanup. The total cost for this phase is
approximately $1 million, of which the Company's share is approximately
$100,000. During the first phase cleanup and pending the determination of
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responsibilities for later phases of the program, the Group will engage in
allocation taking into account existing and what is expected to be later
discovered evidence. Based thereon, the $100,000 commitment may be increased,
decreased or remain static. By the same means, the Company will judge its cost
exposure for the later and larger cleanup phases.
Counsel expects the least the Company may expect to incur in regard to this
project is the approximate $100,000 presently committed and accrued. However, at
this time in light of the unknown number of participants, the uncertainty of the
ROD's estimates for future operation costs and related cleanup expense, the
issue of linkage, the absence of knowledge of evidence to be presented to the
Group's allocator, counsel is unable to predict an amount or range of liability
beyond $100,000. The Fund will resist all claims vigorously.
Capital Stock
As of October 12, 1999 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.
SHAREHOLDER INFORMATION
Pricing of Shares
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
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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
valued at amortized cost.
Purchase of Shares
Those wishing to make purchases of the Company's shares may send a check
and completed application (see the form attached to this prospectus) directly to
Investors Trust Company, 2201 Ridgewood Road, #180, Wyomissing, PA 19610. Full
and fractional shares will be purchased for the shareholder's account at the net
asset value per share next computed after receipt of the order. Investments must
be for at least one share and should be accompanied by the "stub" from a
confirmation sent from the Company's transfer agent to the shareholder after
each prior transaction. The Company imposes no sales charge on purchases of its
shares.
Redemption of Fund 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.
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Payment of the redemption proceeds will be made as soon as possible but in
no event later than seven days after receipt of a redemption request in proper
form, except under unusual circumstances as determined by the Securities and
Exchange Commission, or during any period when the New York Stock Exchange is
closed (other than customary weekend and holiday closings), during which trading
on the New York Stock Exchange is restricted, or for such other periods as the
Securities and Exchange Commission may permit. The proceeds paid upon redemption
may be more or less than the shareholder's cost, depending on the value of the
Company's portfolio securities at the time of redemption. Redemption requests
should be tendered to Investors Trust Company, 2201 Ridgewood Road, #180,
Wyomissing, PA 19610. For purchase and redemption information call (610)
369-7287.
Dividends
The Company normally distributes its investment company income quarterly
and its capital gain net income at least annually.
In calculating interest income, premiums on securities are amortized but
discounts (except for original issue discounts) are not accreted. Dividend
accruals are normally made as of the ex-dividend dates of companies in which the
Company owns shares. In determining amounts of capital gain to be distributed,
any capital loss carryovers from prior years will be offset against current
capital gains.
All distributions of net investment income and any capital gains paid by
the Company will be paid by checks mailed to the shareholders, or by 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, 1999 and
intends to continue to qualify for and elect the special tax treatment afforded
17
<PAGE>
regulated investment companies under Subchapter M of the Internal Revenue Code.
The Company will pay "exempt-interest" dividends of not less than 90% of its tax
exempt net income which may be treated by the Company's shareholders as items of
interest excludable from their gross income. The exempt interest treatment of
the dividends to shareholders will continue for as long as the Company holds no
less than 50% of its assets in securities exempt from Federal tax. As heretofore
indicated the Company intends to invest more than 50% of its assets in
securities the ordinary income from which is exempt from federal tax. Ordinary
and capital gain income from sources other than exempt securities will be taxed
to the shareholders whether the income is received in the form of a cash
distribution or reinvested to acquire additional shares.
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.
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
18
<PAGE>
record dates, the amount of any undistributed interest income will be included
in the net asset value per share and will increase the capital gain (or
decrease the capital loss) realized by the shareholder upon redemption. Capital
gains realized upon redemption are not exempt from federal income taxes.
Although exempt interest dividends are excludable from shareholders' gross
income, such dividends are taken into account in determining whether a portion
of social security benefits will be subjected to income tax under Section 86 of
the Internal Revenue Code.
Under the Code, interest on indebtedness incurred or continued to purchase
or carry tax-exempt securities (which would in whole or in part include shares
issued by the Company) will not be deductible by the borrower. Under procedures
established by the Internal Revenue Service, a purpose to use borrowed funds to
purchase or carry tax-exempt securities may be shown by either direct or
circumstantial evidence. To the extent interest expense is incurred to purchase
taxable investments, deductions therefore are generally limited to the amount of
the net taxable investment income.
Under the Code, corporate shareholders of the Company may be required to
pay an alternative minimum tax based in part upon the difference between the
shareholders' taxable income and its adjusted current earnings. In effect this
may require a tax for corporate shareholders on exempt interest dividends.
In addition to exempt interest dividends, the Company will pay dividends of
at least 98% of the ordinary income it receives from investments generating
taxable income on a calendar year basis; 98% of its capital gain net income
(amounts, if any, in excess of current or carryover losses) for every year
ending on October 31; and, 100% of any undistributed amounts of ordinary and
capital gain income from the preceding calendar year.
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.
19
<PAGE>
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.
20
<PAGE>
FINANCIAL HIGHLIGHTS
The following financial highlights table is intended to help you
understand the Fund's financial performance for the past 5 years. Certain
information reflects financial results for a single Fund share. The total
returns in the table represent the rate that an investor would have earned on an
investment in the Fund (assuming reinvestment of all dividends and
distributions). This information for the years 1996 through 1999 has been
audited by Beard & Company, Inc. independent auditors, whose report, along with
the Fund's financial statements, are included in the SAI or annual report, which
is available upon request. For the year ending August 31, 1995, Ernest & Young,
LLP audited the information.
<TABLE>
<CAPTION>
Year Ended August 31
1999 1998 1997 1996 1995
--------- --------- --------- ------- -------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA
(for a share outstanding
throughout the indicated
year)
Net asset value, beginning of year $ 4.041 $ 3.968 $ 3.933 $ 3.964 $ 3.909
Income from investment operations:
Net investment income .191 .222 .221 .210 .237
Net realized and unrealized gain
(loss) on investments (.125) .087 .041 (.004) .056
--------- --------- --------- ------- -------
Total from investment operations .066 .309 .262 .206 .293
Less distributions:
Dividends from capital gains (.002) (.015)
Dividends from net investment income (.161) (.221) (.221) (.210) (.237)
Distribution in excess of net
investment income (.023) -0- (.006) (.027) (.001)
--------- --------- --------- ------- -------
Total distributions (.186) (.236) (.227) (.237) (.238)
--------- --------- --------- ------- -------
Net asset value end of year $ 3.921 $ 4.041 $ 3.968 $ 3.933 $ 3.964
========= ========== ======== ======= =======
TOTAL RETURN 1.56% 7.84% 6.71% 5.11% 7.52%
RATIOS\SUPPLEMENTAL DATA
Net assets, end of year (in thousands) $ 16,824 $ 17,341 $ 17,015 $ 16,847 $ 16,982
Ratio of expenses to average net assets .99% .42% .57% 1.02% .37%
Ratio of net investment income to
average net assets 4.72% 5.50% 5.56% 5.24% 6.08%
Portfolio turnover rate 3.27% 12.57% 28.98% 6.24% 22.73%
</TABLE>
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 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.
I hereby certify that the Tax Identification No. contained herein is true,
correct and complete and that I am not subject to backup withholding under
Section 3406 (a)(1)(C) of the Internal Revenue Code.
- ------------------------------------------------------------------
Date Signature of co-owner
23
<PAGE>
[PROSPECTUS BACK COVER]
The Company's Statement of Additional Information contains additional
information about the Fund, which in large part expands the discussion contained
in the prospectus and which may be of interest to some investors. Additional
information about the Fund's investments is available in the Fund's annual and
semi-annual reports to shareholders. The Statement of Additional Information and
the Fund's annual and semi-annual reports are available, without charge, upon
request, by calling the Fund's Custodian and Transfer Agent, Investor's Trust
Company (collect, if a toll charge) at 610 372 6414, or by writing to the Agent
at 2201 Ridgewood Road # 180, Wyomissing, Pa. 19610; personnel at Investor's
Trust will be available to receive shareholder inquires and to furnish other
pertinent information to interested people.
Information about the Fund (including the SAI) can be reviewed and copied
at the Commission's Public Reference Room in Washington, D.C. Also, information
on the operation of the Commissions' Public Reference Room may be obtained by
calling the Commission at 1-800 SEC 0330. The reports and other information
about the Fund are available on the Commission's Internet site at
http://www.sec.gov. Copies of this information may be obtained, upon payment of
a duplicating fee, by writing the Public Reference Section of the Commission,
Washington, D.C. 20549-6009
The Fund's file number is 2-66073
24
<PAGE>
NRM INVESTMENT COMPANY
Statement of Additional Information
December 30, 1999
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, 1999. 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, 1999
Table of Contents
PAGE
Statement of Additional Information....................... 1
Fund History.............................................. 1
Description of the Fund; Its Investments and Risks........ 1
Investment Objective and Policies................ 1
Investment Policies and Restrictions............. 3
Management of the Fund.................................... 4
Control Persons and Principal Holders of Securities....... 6
Advisory Services......................................... 7
Portfolio Transactions and Brokerage Commissions.......... 8
The Company's Common Stock................................ 9
Purchase, Redemption, Pricing of Shares;..................
Underwriting............................................ 9
Other Information of Interest to Investors................ 9
Other Services................................... 9
Accounting....................................... 9
Custodian and Transfer Agent..................... 10
Auditors......................................... 10
Counsel.......................................... 10
Taxation of the Fund...................................... 11
State and Local.................................. 12
Report of Independent Auditor............................. 13
Financial Statements...................................... 13
<PAGE>
NRM INVESTMENT COMPANY
Statement of Additional Information
December 30, 1999
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.
FUND HISTORY
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.
DESCRIPTION OF THE FUND
ITS INVESTMENTS AND RISKS
Investment Objective and Policies
The Company is an open-end, management investment company. As stated in the
Prospectus, it 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
1
<PAGE>
private activity bonds are issued by or on behalf of public authorities to
obtain funds to provide privately operated facilities. Such obligations are
included within the term "Municipal Bonds" if the interest paid thereon is
exempt from federal income tax. (See reference to "private activity bonds" under
the discussion "TAXES" in the prospectus). Municipal Bonds also include
short-term tax-exempt municipal obligations such as tax anticipation notes, bond
anticipation notes, revenue anticipation notes, and Public Housing Authority
notes that are fully secured by a pledge of the full faith and credit of the
United States. Opinions relating to the validity of Municipal Bonds and to the
exemption of interest thereon from federal income taxes are rendered by bond
counsel to the respective issuing authorities at the time of issuance. Neither
the Company nor the advisor will review the proceedings relating to the issuance
of Municipal Bonds or the basis for such opinions.
The District of Columbia, each state, each of its political subdivisions,
agencies, instrumentalities and authorities, and each multi-state agency of
which a state is a member, is a separate "issuer" as that term is used in the
Prospectus and this Statement of Additional Information. The non-governmental
user of facilities financed by private activity bonds is also considered to be
an issuer.
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).
2
<PAGE>
Investment Policies and Restrictions
The Company may not:
1. 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.)
2. 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;
3. 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;
4. 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;
5. 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.
6. 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
7. 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
paragraph 1. above.
3
<PAGE>
8. 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.
9. 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.
10. Knowingly invest more than 10% of the value of the Company's assets in
securities with legal or contractual restrictions on resale.
11. 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.
MANAGEMENT OF THE FUND
The Fund is managed by its board of directors with the authority and
responsibilities enumerated in the Pennsylvania Business Corporation Law of
1988. In addition, the Board acts as a committee of the whole in making
investment decisions for the Fund. The Board appoints the Company's officers.
The directors and officers of the Company and their addresses and principal
occupations during the past five years are as follows:
4
<PAGE>
Principal Occupation
Position During Past
Name and Address with Registrant Five Years
- ---------------- --------------- ----------------------
(1)John H. McCoy Director, *Former President
1010 Broadmoor Road Chairman, and of National Rolling
Bryn Mawr, PA 19010 President Mills, Inc., a steel
rolling plant. Prior
thereto, he was
President and Direc-
tor of National
Rolling Mills Co.
Joseph V. Somers Director *Former President of
1518 Mt. Pleasant Rd. Somers Construction
Villanova, PA 19085 Company and Vice
President of Indus-
trial Lift Truck Co.
Francis J. Rainer Director Former President,
1415 Kyneton Drive Rainer & Company, a
Villanova, PA 19085 Professional Corporation.
He is also Vice-
Chairman of the
Board of Delaware
Valley Savings Bank
Thomas F. Kilcullen, Jr. Director *Former Vice Presi-
4 Carriage Way Treasurer, and dent, Treasurer
Berwyn, PA 19312 Secretary and Secretary of
National Rolling
Mills Inc. Prior
thereto, he was Vice
President and Treas-
urer of National
Rolling Mills Co.
(2)George W. Connell Director Chairman, Chief
#3 Radnor Corporate Ctr. Executive Officer,
Suite 450 Director and sole
- --------
(1) John H. McCoy and George W. Connell are "interested" directors as defined in
the Investment Company Act of 1940.
(2) See note 1.
5
<PAGE>
100 Matsonford Road shareholder of The
Radnor, PA 19087 Rittenhouse Trust
Company, a commer-
cial bank and trust
company acting as
the Company's in-
vestment advisor,
President and
Director of Ritten-
house Trust Securi-
ties, a registered
brokerage dealer,
Member of the
Investment Committee
of Rittenhouse
Financial Services,
Inc., a John Nuveen
Company.
*Retired for more than five years.
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 $400 for each
meeting of the Board of Directors attended and reimburses the directors for
their related out-of-pocket expenses.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As of October 12, 1999 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
6
<PAGE>
Francis J. Rainer 5.6%
1415 Kyneton Drive
Villanova, PA 19085
Joseph V. Somers 5.5%
1518 Mt. Pleasant Road
Villanova, PA 19085
Samuel R. Gilbert, Jr. 4.7%
3 Turtle Lane, The Landings
Savannah, GA 31411
Thomas F. Kilcullen, Jr. 4.7%
4 Carriage Way
Berwyn, PA 19312
The percent owned is based on the number of outstanding shares of common
stock at October 12, 1999. All such shares are owned of record and beneficially.
All officers and directors of the Company, as a group owned as of October 12,
1999, 3,646,248 of the Company's common stock or 85% of its outstanding voting
securities.
ADVISORY SERVICES
Rittenhouse Trust Company Services, Inc. ("RTC"), a Delaware Corporation
located at Three Radnor Corporate Center, 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 Services 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.
RTC's sole shareholder, George Connell, controls the advisor. His
qualifications, affiliations, and business history are contained in the
prospectus. He is a board member of the Company and accordingly an interested
person.
Under the Advisory Agreement, Rittenhouse assumes no responsibilities to
the Company except, as provided in the prospectus, to make recommendations to
the Company's board respecting the purchases and sales of securities on a
nondiscretionary basis and to adhere to the provisions of the Investment
Advisors' Act oF 1940 and other pertinent securities laws. For the services
7
<PAGE>
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, August 31, 1998, and
August 31, 1999, the Company paid RTC $10,000.
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, 1999 the
Company paid no commissions in respect to portfolio transactions.
The policy of the Advisor will be to seek "best execution" when placing
portfolio transactions for the Company. "Best execution" means prompt and
reliable execution at a price the Advisor has reason to believe represents the
lowest cost, including any commission in the case of a purchase, or the greatest
proceeds reasonably available. Subject to and in accordance with the provisions
of section 28(e) of the Securities Exchange Act of 1934, the Advisory Agreement
authorizes the Advisor to place orders for the purchase and sale of the
Company's securities with brokers or dealers who provide the Advisor with access
to supplemental research and security and economic analysis even though such
brokers and dealers execute such transactions at a higher net cost to the
Company than may result if other firms were used. These various services may
also be useful to the Advisor in connection with its services to their advisory
clients. The extent and continuation of this policy is subject to the review of
the Company's Board of Directors.
8
<PAGE>
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, 1999
and August 31, 1998 were 3.27% and 12.57% respectively.
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 are not restricted in either trading or
retaining, there are no material obligations associated with owning the
Company's shares other than investment risk and litigation risks described in
the prospectus, there are 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.
PURCHASE, REDEMPTION, PRICING OF SHARES; UNDERWRITING
The Funds shares are offered to the public as described in the prospectus.
There are no special purchase plans or methods; and there are no sales loads of
any kind. Shares are offered to the public at net asset value determined as
described in the prospectus. The Company has no underwriter.
OTHER INFORMATION OF INTEREST TO INVESTORS
Other Services
Accounting
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
9
<PAGE>
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.
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 Harrisburg,
Pennsylvania serves as the Company's auditors. The financial statements of NRM
Investment Company appearing in the 1996, 1997, 1998 and 1999 annual reports to
shareholders for the years ended August 31, 1996, August 31, 1997 August 31,
1998, and August 31, 1999, 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 1999 annual report to
Shareholders for the years ended August 31, 1990 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.
10
<PAGE>
TAXATION OF THE FUND
As stated in the prospectus, the Company is qualified under Subchapter M of
the Internal Revenue Code; those provisions normally permit a deduction for the
Company from its taxable income of distributions made to the Company's
shareholders from its earnings. A failure to qualify under Subchapter M would
result in a tax on the Company based upon its earned income, and an additional
tax on the shareholders based upon their distributions.
In general, a tax is imposed upon the Company based upon its investment
company taxable income and its net capital gains which in each case are not
distributed to its shareholders. In general, the Company's investment company
taxable income will be its taxable income (determined in the same manner as an
ordinary corporation), adjusted by excluding net long term capital gains over
short term capital losses and further adjusted by excluding any net operating
losses and by including the dividends paid deduction. The Company's capital
gains subject to tax are computed separately and are based upon the excess of
its long term capital gains over its net short term capital losses. Currently
there are no undistributed capital gains. 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
11
<PAGE>
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.
Currently, the Company has no capital loss carryovers to offset gains in
securities.
Section 852 (b)(5) of the Code provides, in effect, that if, at the close
of each quarter of its taxable year, at least 50% of the Company's total assets
consists of tax free obligations, the income from such investments may be passed
through to the shareholders, and for federal tax purposes, excluded by them from
gross income reporting. By reason of this provision, the Company does not intend
to invest 50% or more of its assets in securities generating taxable income.
If and to the extent declared by the Board of Directors, net realized
long-term capital gains will be distributed annually. See "Dividends." The
Company will have no tax liability with respect to net realized long-term
capital gains which are distributed although the distributions will be taxable
to shareholders as gain from the sale on exchange of a capital asset held for
more than one year regardless of a shareholder's holding period of shares of the
Company. Such distributions will be designated as a capital gain dividend in a
written notice mailed by the Company to the shareholders not later than sixty
days after the close of the Company's taxable year.
State and Local. Depending upon the extent of the Company's activities in
states and localities in which it maintains offices, in which its agents or
independent contractors are located, or in which it is otherwise deemed to be
conducting business, the Company may be subject to the tax laws of such states
or localities.
The foregoing discussion, as well as that contained in the Company's
Prospectus, is only a summary of some of the important tax considerations
generally affecting the Company and its shareholders. No attempt is made to
present a detailed explanation of the federal income tax treatment of the
Company or its shareholders and this discussion is not intended as a substitute
for careful tax planning. Accordingly, potential investors in the Company are
urged to consult their tax Advisors with specific reference to their own tax
situations.
12
<PAGE>
NRM INVESTMENT COMPANY
FINANCIAL REPORT
AUGUST 31, 1999
<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>
[In the printed document there appears a bar chart
with the following plot points depicted]
NRM INVESTMENT COMPANY
10 YEAR RETURNS
1990 2.7%
1991 3.0%
1992 9.1%
1993 16.7%
1994 2.8%
1995 7.5%
1996 5.1%
1997 6.7%
1998 7.8%
1999 1.6%
During the 10-year period shown in the bar chart, the highest annual return was
16.7% (fiscal year ending 8/31/93) and the lowest annual return was 1.6% (fiscal
year ending 8/31/99)
Average Annual Total Returns Past One Year Past 5 Years Past 10 Years
(For period ending 08/31/99)
NRM Investment Company 1.56% 5.72% 6.22%
Lehman Bros. Municipal 5 YR GO 2.21% 4,84% 6.12%
<PAGE>
INDEPENDENT AUDITOR'S REPORT
Shareholders and Board of Directors
NRM Investment Company
Rosemont, Pennsylvania
We have audited the accompanying statement of assets and liabilities of
NRM Investment Company, including the schedule of investments, as of August 31,
1999, 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 four 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, 1990
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, 1999, 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, 1999, 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 four years in the period then ended, in conformity with generally accepted
accounting principles.
/s/ BEARD & COMPANY, INC.
-------------------------
BEARD & COMPANY, INC.
Harrisburg, Pennsylvania
October 11, 1999
-1-
<PAGE>
NRM INVESTMENT COMPANY
STATEMENT OF ASSETS AND LIABILITIES
- -------------------------------------------------------------------------------
August 31, 1999
- -------------------------------------------------------------------------------
ASSETS
Investments at value (cost $16,451,154) $16,731,138
Interest receivable 217,861
Prepaid expense 3,477
-----------
Total assets 16,952,476
-----------
LIABILITIES
Accrued expenses and other liabilities 128,225
-----------
NET ASSETS
Net assets, applicable to 4,291,307 outstanding shares,
equivalent to $ 3.92 a share $16,824,251
===========
See Notes to Financial Statements.
-2-
<PAGE>
NRM INVESTMENT COMPANY
SCHEDULE OF INVESTMENTS
- ------------------------------------------------------------------------------
August 31, 1999
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Municipal Bonds - 98.6% Amount Value
- -------------------------------- ---------- ----------
<S> <C> <C>
General Obligation Bonds - 18.6%:
Leominster, Massachusetts, 6.25%, due 4/01/08 $ 300,000 $ 321,060
Upper Dublin Pennsylvania School District, 5.50%,
due 11/15/08 200,000 201,280
Lowell, Massachusetts, 5.50%, due 1/15/10 300,000 306,360
New York City, New York, 6.45%, due 8/1/10, pre-refunded 5,000 5,457
New York City, New York, 6.45%, due 8/01/10 195,000 205,959
Nevada State Colorado River Commission, Ltd Tax,
6.50%, due 10/01/12 400,000 422,880
Burgettstown, Pennsylvania, Washington County,
4.85%, due 2/01/14, callable 2/01/05 at 100 (FGIC) 125,000 116,638
Lowell, Massachusetts, 5.50%, due 12/15/15, callable 12/15/06 at 102
(AMBAC) 330,000 332,409
San Francisco, California City and County, Park
Improvement series, 5.25%, due 6/15/16, callable
6/15/05 at 102 (MBIA) 300,000 291,750
Richmond, Virginia, 6.25%, due 1/15/18, callable
1/15/01 at 102 870,000 911,325
----------
Total General Obligation Bonds 3,115,118
----------
Housing Finance Agency Bonds - 37.8%:
New Mexico Mortgage Finance Authority, Single-Family Mortgage Rev.,
7.90%, due 7/01/00 30,000 30,507
Rock Island, Illinois Residential Mortgage Revenue Refunding, 7.70%,
due 9/01/08, callable 9/01/02
at 102 85,000 91,188
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 100 130,000 136,331
Fort Worth, Texas Housing Finance Corporation, Home Mortgage Revenue
Refunding Series 1991, 8.50%,
due 10/01/11, callable 10/01/01 at 103 255,000 269,229
Odessa, Texas Housing Finance Corporation, Home Mortgage Revenue
Refunding, 8.45%, due 11/01/11, callable 11/01/05 at 103 210,391 219,627
Montana State Housing, Single-Family Mortgage,
7.65%, due 10/01/10, callable 10/01/00 at 102 35,000 36,242
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 65,000 69,134
</TABLE>
-3-
<PAGE>
NRM INVESTMENT COMPANY
SCHEDULE OF INVESTMENTS (CONTINUED)
- ------------------------------------------------------------------------------
August 31, 1999
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Municipal Bonds - 98.6% (Continued) Amount Value
- ----------------------------------- --------- ---------
<S> <C> <C>
Housing Finance Agency Bonds - 37.8% (Continued):
Cameron County, Texas Housing Finance Corporation, Single-Family
Mortgage Revenue Refunding, 6.20%,
due 3/01/13, callable 9/01/05 at 100 $ 225,000 $ 232,132
Alabama Housing Finance Authority, 4.60%, due 4/1/11, callable 10/1/08
at 102, callable 10/1/10 at 100 100,000 93,780
Vicksburg, Mississippi Lease Housing Corp., 5.80%,
due 8/15/13 125,000 126,350
California Housing Finance Agency, Home Mortgage, 10.25%, due 2/01/14,
callable 2/01/99 at 100 60,000 60,054
Connecticut State Housing Finance Authority, 5.60%,
due 5/15/14, callable 5/15/03 at 102 200,000 200,920
Nevada Housing Division, Single-Family Mortgage,
7.35%, due 10/01/15 115,000 119,060
Louisiana Public Facilities Authority, Multi-Family Housing, 7.75%, due
11/01/16, callable 11/01/01 at 102 500,000 525,500
Pennsylvania Housing Finance Agency, Single-Family Mortgage, 5.45%, due
10/01/17, callable 10/01/03 at 102 150,000 146,070
Utah State Housing Finance Agency, Single-Family Mortgage, 6.30%, due
1/01/18 175,000 182,018
Maryland State Community Development Administration, Department of
Housing, 5.60%, due 4/01/18 185,000 185,740
Alaska State Housing Finance Corporation, 5.90%, due 12/01/19, callable
6/01/07 at 102 (MBIA) 250,000 252,300
Troy, New York Housing Development Corp., Multi-Family Housing, 8.10%,
due 2/01/22, callable 12/01/02 at 100 1,315,000 1,524,874
Quaker Hill Housing Corporation, Multi-Family, 7.55%,
due 2/01/22 600,000 633,900
St. Alphios Housing Corporation, Multi-Family, 8.20%,
due 2/01/24 1,125,000 1,194,187
----------
Total Housing Finance Agency Bonds 6,329,143
----------
Hospital Revenue Bonds - 12.8%:
Dauphin County, Pennsylvania Hospital Authority,
HAPSCO Group, William Penn Hospital Project,
5.50%, due 7/01/07 300,000 308,310
Falls Township Pennsylvania Hospital Authority, Delaware Valley Medical
Center, 6.90%, due 8/01/11, callable 8/01/02 at 102 285,000 290,529
Rhode Island State Health and Educational Building Corp., New England
Tech, 5.90%, due 3/01/10 100,000 102,550
</TABLE>
-4=
<PAGE>
NRM INVESTMENT COMPANY
SCHEDULE OF INVESTMENTS (CONTINUED)
- -------------------------------------------------------------------------------
August 31, 1999
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Municipal Bonds - 98.6% (Continued) Amount Value
- ----------------------------------- --------- ---------
<S> <C> <C>
Hospital Revenue Bonds - 12.8% (Continued):
Rochester, Minnesota, Health Care Facilities Revenue (Mayo
Foundation/Mayo Medical Center), 6.25%, due 11/15/12 $ 500,000 $ 500,000
Indiana Health Facilities Authority (Deaconess Hospital), 5.75%, due
3/01/15, callable 3/01/03 at 102 (MBIA) 100,000 101,610
Connecticut State Health and Educational Facilities Authority (Kimball
Hospital), 5.375%, due 7/01/16, callable 7/01/06 at 102 350,000 344,120
Montgomery County, Pennsylvania Higher Educational &
Health Authority (Holy Redeemer Health), 5.25%, due 10/01/17,
callable 10/01/07 at 101 (AMBAC) 200,000 190,960
Fulton DeKalb, Georgia Hospital Authority, 5.50%, due 1/01/20, callable
7/01/03 at 102 (MBIA) 200,000 195,880
University of California Hospital Revenue (UC Davis Medical Center),
5.75%, due 7/01/20, callable 7/01/06 at 101 (AMBAC) 100,000 100,760
----------
Total Hospital Revenue Bonds 2,134,719
----------
Other Revenue Bonds - 29.4%:
Washington State Public Power Supply Nuclear Project #1, 5.60%, due
7/01/05 200,000 206,640
San Francisco City & County Redevelopment Finance Authority, 4.30%, due
8/01/06, callable 8/01/03 at 100 100,000 97,370
Lee County, Florida Certificates of Participation, 4.70%,
due 10/01/06 100,000 99,870
Fitzgerald, Michigan School District, 5.00%, due 5/01/08, callable
5/01/06 at 100 200,000 200,760
Clark County, Nevada Airport Authority, 5.125%, due 6/1/06, callable
6/1/03 at 101 (MBIA) 100,000 101,650
Grand Rapids, Michigan Downtown Development Authority, 6.60%, due
6/01/08, callable 6/01/06 at 100 365,000 396,609
Alaska Industrial Development and Export Authority,
6.20%, due 4/01/10 245,000 254,947
New Jersey Economic Development Authority, Health Care Corp., 6.0%, due
7/01/11 200,000 208,480
Clark County, Washington Public Utility District, Electric System
Revenue, 5.10%, due 1/01/12, callable
1/01/08 at 100 200,000 195,180
Texas Muni Power Agency, 5.25%, due 9/01/12, callable 9/01/03 at 100
(MBIA) 100,000 99,870
</TABLE>
-5-
<PAGE>
NRM INVESTMENT COMPANY
SCHEDULE OF INVESTMENTS (CONTINUED)
- ------------------------------------------------------------------------------
August 31, 1999
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Municipal Bonds - 98.6% (Continued) Amount Value
- ----------------------------------- --------- ---------
<S> <C> <C>
Other Revenue Bonds - 29.4% (Continued):
Suffolk County, New York Water Authority, 5.00%, due 6/01/15, callable
6/01/03 at 102 (MBIA) $ 175,000 $ 165,970
Vallejo, California Water Improvement Project (Soland County), 5.70%,
due 5/01/16, callable 5/01/06 at 102 (FSA) 100,000 102,050
Philadelphia, Pennsylvania Water and Waste Water, 5%, due 6/15/16,
callable 6/15/03 at 100 (FSA) 150,000 140,085
Allegheny County Pennsylvania Airport Revenue
(Pittsburgh International), 5.00%, due 1/01/17,
callable 1/01/08 at 101 (MBIA) 385,000 357,434
Muhlenberg, Pennsylvania School District, 5.20%,
due 4/01/17, callable 4/01/06 at 100 (MBIA) 250,000 238,675
New Jersey Economic Development Authority, (Devereux Foundation),
5.50%, due 5/01/17, callable 5/01/07 at
101 (MBIA) 270,000 268,812
Washington State Public Power Supply, Project No. 1, 5.125%, due
7/1/17, callable 7/1/08 at 102 200,000 184,420
Brazos River Authority, Texas (Houston Light and Power), 5.60%, due
12/01/17, callable 12/01/03 at 102 (MBIA) 100,000 99,410
Tacoma, Washington Solid Waste Utility, 5.50%, due 12/01/17, callable
12/01/07 at 101 (AMBAC) 350,000 345,940
New York State LOC Government Assistance Corporation, 5.50%, due
4/01/18, callable 4/01/03 at 102 290,000 285,969
Los Angeles, California Convention and Exhibition Center, 5.375%, due
8/15/18, callable 8/15/03 at 102 (MBIA) 385,000 378,417
Santa Monica-Malibu, California Unified School District, 5.50%, due
8/01/18, prerefunded 8/01/03 at 102 200,000 211,700
Chicago, Illinois Water Revenue, 5.25%, due 11/01/18,
callable 11/01/07 at 102 (FGIC) 200,000 189,540
Easton, Pennsylvania Area Joint Sewer Authority,
5.05%, due 12/01/18, callable 12/01/07 at 101 (FSA) 100,000 91,960
-----------
Total Other Revenue Bonds 4,921,758
-----------
Total Municipal Bonds (Cost $ 16,220,754) 16,500,738
-----------
Short-Term Investments - at cost approximating value - 1.4%,
Federated Pennsylvania Municipal Cash Fund #8 230,400
-----------
Total Investments - 100% (Cost $16,451,154) $16,731,138
===========
</TABLE>
See Notes to Financial Statements.
-6-
<PAGE>
NRM INVESTMENT COMPANY
STATEMENT OF OPERATIONS
- ------------------------------------------------------------------------------
Year Ended August 31, 1999
- ------------------------------------------------------------------------------
Investment income, interest $ 991,730
---------
Expenses:
Investment advisory fees 10,000
Custodian fees 10,300
Transfer and dividend disbursing agent fees 2,700
Legal and professional fees 35,402
Directors' fees 6,450
Insurance 1,785
Capital stock tax 2,934
Provision for environmental claim 100,000
Miscellaneous 3,092
---------
172,663
---------
Net investment income 819,067
---------
Realized and unrealized gain on investments:
Net realized gain from investment transactions 25
Net unrealized depreciation of investments (537,425)
---------
Net loss on investments (537,400)
---------
Net increase in net assets resulting from operations $ 281,667
=========
See Notes to Financial Statements.
-7-
<PAGE>
NRM INVESTMENT COMPANY
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
Years Ended August 31, 1999 1998
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
Operations:
Net investment income $ 819,067 $ 951,392
Net realized gain from investment transactions 25 97,634
Net unrealized appreciation (depreciation) of investments (537,425) 273,544
------------ ------------
Net increase in net assets resulting
from operations 281,667 1,322,570
Distributions to shareholders, dividends from net
investment income (789,597) (948,154)
Distributions to shareholders, dividends from
capital gains (8,583) (63,443)
Capital share transactions, net increase from capital
share transactions 138 15,049
------------ ------------
Total increase (decrease) in net assets (516,375) 326,022
Net assets:
Beginning of year 17,340,626 17,014,604
------------ ------------
End of year $ 16,824,251 $ 17,340,626
============ ============
</TABLE>
See Notes to Financial Statements.
-8-
<PAGE>
NRM INVESTMENT COMPANY
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
Years Ended August 31, 1999 1998 1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA (for a share outstanding
throughout the indicated year)
Net asset value, beginning of year $ 4.041 $ 3.968 $ 3.933 $ 3.964 $ 3.909
Net investment income .191 .222 .221 .210 .237
Net realized and unrealized gain (loss) on
investments (.125) .087 .041 (.004) .056
-----------------------------------------------------------------
Total from investment operations .066 .309 .262 .206 .293
Less distributions:
Dividends from capital gains (.002) (.015) -- -- --
Dividends from net investment income (.161) (.221) (.221) (.210) (.237)
Distribution in excess of net investment
income (.023) -- (.006) (.027) (.001)
-----------------------------------------------------------------
Total distributions (.186) (.236) (.227) (.237) (.238)
-----------------------------------------------------------------
Net asset value, end of year $ 3.921 $ 4.041 $ 3.968 $ 3.933 $ 3.964
=================================================================
TOTAL RETURN 1.56% 7.84% 6.71% 5.11% 7.52%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (in thousands) $16,824 $17,341 $17,015 $16,847 $16,982
Ratio of expenses to average net assets .99% .42% .57% 1.02% .37%
Ratio of net investment income to average net
assets 4.72% 5.50% 5.56% 5.24% 6.08%
Portfolio turnover rate 3.27% 12.57% 28.98% 6.24% 22.73%
</TABLE>
See Notes to Financial Statements.
-9-
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
Years Ended August 31, 1994 1993 1992 1991 1990
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA (for a share outstanding
throughout the indicated year) $ 4.022 $ 3.540 $ 3.488 $ 3.635 $ 3.835
Net asset value, beginning of year .229 .453 .265 .059 .157
Net investment income
(.115) .137 .055 .051 (.065)
Net realized and unrealized gain (loss) on ---------------------------------------------------------------------------
investments
.114 .590 .320 .110 .092
Total from investment operations
-- -- -- -- --
Less distributions: (.227) (.108) (.265) (.059) (.157)
Dividends from capital gains
Dividends from net investment income -- -- (.003) (.198) (.135)
Distribution in excess of net investment ---------------------------------------------------------------------------
income
(.227) (.108) (.268) (.257) (.292)
---------------------------------------------------------------------------
Total distributions
$ 3.909 $ 4.022 $ 3.540 $ 3.488 $ 3.635
===========================================================================
Net asset value, end of year
2.79% 16.69% 9.08% 3.00% 2.69%
TOTAL RETURN
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (in thousands) $ 16,745 $ 17,636 $ 15,260 $ 15,659 $ 16,268
Ratio of expenses to average net assets .49% (5.03)% .81% 6.04% 3.90%
Ratio of net investment income to average net
assets 5.77% 11.93% 7.25% 1.54% 4.07%
Portfolio turnover rate 13.56% 40.06% 64.84% 101.88% 46.10%
</TABLE>
-10-
<PAGE>
NRM INVESTMENT COMPANY
NOTES TO FINANCIAL STATEMENTS
1
- ------------------------------------------------------------------
NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of business:
NRM Investment Company (the Fund) is registered under the
Investment Company Act of 1940, as amended, as a diversified,
open-end management investment company. The following is a summary
of significant accounting policies consistently followed by the
Fund in the preparation of its financial statements.
Valuation of investments:
Investments in securities (other than debt securities maturing in
60 days or less) traded in the over-the-counter market, and listed
securities for which no sale was reported on the last business day
of the year, are valued based on prices furnished by a pricing
service. This service determines the valuations using a matrix
pricing system based on common bond features such as coupon rate,
quality and expected maturity dates. Securities for which market
quotations are not readily available are valued by the Investment
Advisor under the supervision and responsibility of the Fund's
Board of Directors. Investments in securities that are traded on a
national securities exchange are valued at the closing prices.
Short-term investments are valued at amortized cost, which
approximates value.
Investment transactions and related investment income:
Investment transactions are accounted for on the date the
securities are purchased or sold (trade date). Realized gains and
losses from investment transactions are reported on the basis of
identified cost for both financial and federal income tax
purposes. Interest income is recorded on the accrual basis for
both financial and income tax reporting. In computing investment
income, the Fund amortizes premiums over the life of the security,
unless said premium is in excess of any call price, in which case
the excess is amortized to the earliest call date. Discounts are
accreted over the life of the security.
Transactions with shareholders:
Fund shares are sold and redeemed at the net asset value.
Transactions of these shares are recorded on the trade date.
Dividends and distributions are recorded by the Fund on the
ex-dividend date.
Federal income taxes:
It is the Fund's policy to comply with the requirements of the
Internal Revenue Code applicable to regulated investment companies
and distribute substantially all of its net investment income and
realized net gain from investment transactions to its shareholders
and, accordingly, no provision has been made for federal income
taxes.
-11-
<PAGE>
NRM INVESTMENT COMPANY
NOTES TO FINANCIAL STATEMENTS
1
- -----------------------------------------------------------------
NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
Estimates:
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
2
- -----------------------------------------------------------------------------
INVESTMENT ADVISOR AND MANAGEMENT FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Fund has an investment advisory agreement which provides that the
Fund will pay to the investment advisor, as compensation for services
provided and expenses assumed, a fee at the annual flat rate of $
10,000. The president of the investment advisor is on the Board of
Directors of the Fund.
Advisory fees for the year ended August 31, 1999 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 $ 556,641 and
$ 617,464 respectively, during the year ended August 31, 1999.
At August 31, 1999, the cost of investment securities owned is the same
for financial reporting and federal income tax purposes. Net unrealized
appreciation of investment securities is $ 279,984 (aggregate gross
unrealized appreciation of $ 475,708 less aggregate unrealized
depreciation of $ 195,724).
-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.
During 1999, the Fund paid $ 141,500, which was fully accrued as of
August 31, 1998, 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. 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 for the claim,
however, the Fund is contractually committed to pay a portion of the
first phase of the cleanup. The Fund's share of this is approximately $
100,000 which was accrued at August 31, 1999. The Fund intends to
vigorously resist this claim.
5
- ----------------------------------------------------------
TRANSACTIONS IN CAPITAL STOCK AND COMPONENTS OF NET ASSETS
Transactions in fund shares were as follows:
<TABLE>
<CAPTION>
Years Ended August 31,
1999 1998
----------------------------------------------------
SHARES AMOUNT Shares Amount
----------------------------------------------------
<S> <C> <C> <C> <C>
Additional shares purchased -- $ -- 3,713 $ 14,997
Issued to shareholders in reinvestment of
dividends from net investment income 34 138 13 52
--------------------------------------------------
Net increase 34 $ 138 3,726 $ 15,049
==================================================
</TABLE>
-13-
<PAGE>
NRM INVESTMENT COMPANY
NOTES TO FINANCIAL STATEMENTS
5
- ----------------------------------------------------------
TRANSACTIONS IN CAPITAL STOCK AND COMPONENTS OF NET ASSETS
(CONTINUED)
The components of net assets at August 31, 1999 and 1998 are as
follows:
<TABLE>
<CAPTION>
1999 1998
---------------------------------
<S> <C> <C>
Capital shares - par value $ .01 per share, 4,291,307
shares and 4,291,273 shares issued and outstanding
at August 31, 1999 and 1998 (10,000,000 full and
fractional shares authorized); and capital paid-in $ 16,641,291 $ 16,641,153
Accumulated net realized loss on investment transactions - -
Undistributed net realized gain on investment transactions - 8,434
Unrealized appreciation of investments 279,984 817,410
Overdistributed net investment income (97,024) (126,371)
------------------------------------
Net assets $ 16,824,251 $ 17,340,626
====================================
</TABLE>
-14-
<PAGE>
PART C
OTHER INFORMATION
ITEM 23. (a) (i) Articles of Incorporation - Articles
of Incorporation are incorporated by reference to
Exhibit 1 of Registrant's Registration Statement
on Form N-1, filed November 29, 1979.
(ii) 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.
(iii) 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.
(b) (i) By-Laws are incorporated by reference to Exhibit 2
of Registrant's Registration Statement on form N-1,
filed November 29, 1979.
(ii) 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
(iii) 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
(iv) Amendment to By-Laws of December 11,
1990 incorporated by reference to
Exhibit 2(d) of Amendment No. 14
filed January 30, 1991.
(c) None
<PAGE>
(d) (i) 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.
(ii) Addendum to advisory agreement dated
September 3, 1997 assigning the agree
ment 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.
(e) Not applicable
(f) Not applicable
(g) (i) 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.
(ii) 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.
(h) (i) 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.
(ii) 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.
(iii) 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.
<PAGE>
(i) Opinion and Consent of Counsel filed
concurrently and incorporated herein.
(j) (i) Consent of Counsel, Henderson, Wetherill
(ii) Consent of Auditor, Beard & Company, Inc.
(k) Not applicable
(l) Not applicable
(m) Not applicable
(n) Not applicable
Item 24. Not applicable
Item 25. 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 26. 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 27. Not applicable
Item 28. Books and other documents required to be main-
tained 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 Regis-
trant'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.
Item 29. Not applicable
Item 30. 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 , 1999.
/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 7, 1999.
/s/ Francis J. Rainer
----------------------------
Francis J. Rainer
20
<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 , 1999.
/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 26, 1999.
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
--------------------- Executive Officer) 10/26/99
John H. McCoy
/s/Thomas F. Kilcullen Treasurer(Chief
---------------------- Financial and
Thomas F. Kilcullen Accounting Officer)
and Secretary 10/26/99
The Post-Effective Amendment No. 25 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
Date 10/26/99
<PAGE>
EXHIBIT INDEX
Exhibit/Item
(1) Item 23 - (a) (i) Articles of Incorporation are incorpo-
rated by reference to Exhibit A of Registrant's
Registration Statement on Form N-1, filed
November 29, 1979
(ii) 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
(iii) Amendment to Articles of Incorporation incorpo rated
by reference to Exhibit 1(c) of Amendment No. 3 to
Registrant's Registration Statement on Form N-1,
filed December 29, 1981
(b) (i) By-Laws are incorporated by reference to Exhibit 2
of Registrant's Registration Statement on Form
N-1, filed November 29, 1979
(ii) 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
(iii) 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
(iv) Amendment to By-Laws of December 11, 1990 incorporated
by reference to Exhibit 2(d) of Amendment No. 14 filed
January 30, 1991.
(c) None
(d) (i) Investment Advisory Agreement dated November 30, 1992
is incorporated by reference to Exhibit 5 of Amendment
No. 17 filed March 18, 1993.
(ii) 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.
<PAGE>
(e) Not applicable
(f) Not applicable
(g) (i) 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.
(ii) 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.
(h) (i) 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.
(ii) 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.
(iii) 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.
(i) Opinion of Counsel, pursuant to Registrant's Rule 24f-2
Notice, filed currently herewith is incorporated by
reference.
(j) (i) Consent of Henderson, Wetherill, O'Hey & Horsey.
(ii) Consent of Beard & Company, Inc.
(l) None
(m) None
(n) None
<PAGE>
(2) Item 24. None
(3) Item 25. 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.
(4) Item 26. 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.
(5) Item 27. Not applicable
(6) Item 28. 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.
(7) Item 29. Not applicable
(8) Item 30 Not applicable
<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. 25 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: 10/26/99
EXHIBIT (1) Item 23 (j)(i)
<PAGE>
CONSENT OF INDEPENDENT AUDITORS
We consent to the references to our Firm under the captions "Financial
Highlights" in the Prospectus and "Auditors" in the Statement of Additional
Information and to the incorporation by reference in this Post-Effective
Amendment No. 25 to the Registration Statement (Form N-1A No. 2-66073) dated
October 27, 1999 of NRM Investment Company of our report dated October 11, 1999,
included in the 1999 annual report to shareholders of NRM Investment Company.
/s/ Beard & Company, Inc.
--------------------------
BEARD & COMPANY, INC.
Harrisburg, Pennsylvania
October 25, 1999
EXHIBIT (1) Item 23 (j)(ii)
