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SIGNATURE EDWARD FACKENTHAL
TITLE ASSISTANT SECRETARY
<PAGE>
ATTACHMENT TO NSAR FOR NRM-INVESTMENT COMPANY
SUB-ITEM E OF ITEM 77
The Fund had been identified as a potentially responsible party ("PRP")
by the United States Environmental Protection Agency ("EPA") in remediation
activities involving an environmental cleanup project at the Strasburg landfill
in Newlin Township, Chester County, Pennsylvania. In addition, another PRP who
contributed moneys to early cleanup activities at Strasburg sought contribution
from the Fund and other PRPs.
During the fiscal year ended August 31, 1998, the PRPs agreed among
themselves to a settlement offer of the EPA claims for the consideration of
$2,500,000 and of the contributing PRP claim for an additional $273,000. The EPA
and the contributing PRP accepted these sums. The PPRs paid and the EPA accepted
the agreed amount on January 8, 1999. 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
not possible to give absolute assurance in this regard.
The EPA asserted another environmental claim against the Fund and other
PRPs regarding a site known as Boarhead Farms situate in Bridgeton Township in
northern Bucks County, Pa. According to EPA's Record of Decision ("ROD") of
November, 1998 relative to estimated future costs, and EPA's past costs the
Agency's estimate of total remedial costs is $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. (Two of the six owned the alleged 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 to 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 the 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
1
<PAGE>
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 the protection afforded under CERCLA (The Superfund
Act) of contribution protection.
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
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.
The matter must be considered material. Counsel expects the least the
Company may expect to incur in regard to this project is the approximate
$100,000 presently committed. 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.
2
[BEARD & COMPANY LOGO]
Board of Directors
NRM Investment Company
Rosemont, Pennsylvania
In planning and performing our audit of the financial statements of NRM
Investment Company for the year ended August 31, 1999, we considered its
internal control structure, including procedures for safeguarding securities, in
order to determine our auditing procedures for the purpose of expressing our
opinion on the financial statements and to comply with the requirements of Form
N-SAR, not to provide assurance on the internal control structure.
The management of NRM Investment Company is responsible for establishing
and maintaining an internal control structure. In fulfilling this
responsibility, estimates and judgments by management are required to assess the
expected benefits and related costs of internal control structure policies and
procedures. Two of the objectives of an internal control structure are to
provide management with reasonable, but not absolute, assurance that assets are
safeguarded against loss from unauthorized use or disposition and transactions
are executed in accordance with management's authorization and recorded properly
to permit the preparation of financial statements in conformity with generally
accepted accounting principles.
Because of inherent limitations in any internal control structure, errors
or irregularities may occur and may not be detected. Also, projection of any
evaluation of the structure to future periods is subject to the risk that it may
become inadequate because of changes in conditions or that the effectiveness of
the design and operation may deteriorate.
Our consideration of the internal control structure would not necessarily
disclose all matters in the internal control structure that might be material
weaknesses under standards established by the American Institute of Certified
Public Accountants. A material weakness is a condition in which the design or
operation of the specific internal control structure elements does not reduce to
a relatively low level the risk that errors or irregularities in amounts that
would be material in relation to the financial statements being audited may
occur and not be detected within a timely period by employees in the normal
course of performing their assigned functions. However, we noted no matters
involving the internal control structure, including procedures for safeguarding
securities, that we consider to be material weaknesses as defined above as of
August 31, 1999.
This report is intended solely for the information and use of management
and the Securities and Exchange Commission.
BEARD & COMPANY, INC.
Harrisburg, Pennsylvania
October 11, 1999
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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