PMD INVESTMENT COMPANY
Financial Statements for the
Year Ended December 31, 1996
and Independent Auditors' Report
<PAGE>
INDEPENDENT AUDITORS' REPORT
To The Shareholders and
Board of Directors
PMD Investment Company
Omaha, Nebraska
We have audited the accompanying statement of assets and liabilities
of PMD Investment Company, including the schedule of investments, as
of December 31, 1996, and the related statement of operations for the
year then ended, the statements of changes in net assets for each of
the two years in the period then ended, and the selected per share
data and ratios for each of the five years in the period then ended.
These financial statements and per share data and ratios are the
responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements and per share data
and ratios based on our audits.
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 per share data and ratios 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
December 31, 1996, by correspondence with the custodian and brokers.
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 per share data and
ratios referred to above present fairly, in all material respects,
the financial position of PMD Investment Company as of December 31,
1996, 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 selected per share data and ratios for each of
the five years in the period then ended, in conformity with generally
accepted accounting principles.
January 20, 1997
Omaha, Nebraska
<TABLE>
<PAGE>
PMD INVESTMENT COMPANY
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1996
<CAPTION>
ASSETS:
<S> <C>
Investments in securities, at approximate market value,
amortized cost of $13,419,270 $13,684,913
Investment in tax-exempt money-market fund 1,624,179
___________
Total Investments 15,309,092
Interest receivable 193,756
___________
Total Assets 15,502,848
LIABILITIES:
Accrued expenses 13,045
___________
NET ASSETS (equivalent to $4.31 per share based on
3,596,795 shares of common stock outstanding at
December 31, 1996) $15,489,803
===========
See notes to financial statements.
</TABLE>
<TABLE>
<PAGE>
PMD INVESTMENT COMPANY
<CAPTION>
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1996
Approximate
Principal Amortized Market
Amount Cost Value
<S> <C> <C> <C>
Abby National PLC Sub, 6.69%, due October 17,
2005 $ 550,000 $ 555,939 $ 540,980
Clark County, Washington Public Utilities District #1
Electric Revenue, 6.3%, due January 1, 2004,
callable January 1, 2001 250,000 249,079 267,225
Denver Met Major League Baseball Stadium
District Colorado, 6.35%, due October 1, 2003 250,000 250,000 272,150
Douglas County, Nebraska SID #17 (Millard),
6.1%, due October 1, 2002 200,000 200,000 203,220
Federal Home Loan Mortgage Company, 7.0%,
due June 1, 2024 2,077,360 2,086,106 2,039,137
Federal National Mortgage Association, 6.5%,
due January 1, 2024 1,119,830 1,104,022 1,069,102
Federal National Mortgage Association, 7.8%,
due March 29, 2005, callable March 29, 2000 1,000,000 1,046,074 1,017,500
Florida State, General Services Revenues,
6%, due July 1, 2001 220,000 219,747 234,322
Grand Island, Nebraska Sanitary Sewer Revenue,
4.8%, due April 1, 2000 400,000 400,000 402,120
Hanover County, Virginia IDA Public Facilities
Lease Revenue, 6.75%, due July 15, 2007 150,000 150,000 164,610
Jefferson County, West Virginia Residential
Mortgage Revenue, Refunding Series A, 7.75%
due January 1, 2012, callable January 1, 2001 75,000 75,425 79,470
Lincoln, Nebraska Hospital Revenue, 7%, due
December 1, 1999, callable December 1, 1999 180,000 180,000 192,960
Lincoln, Nebraska Water Revenue, 6.7%, due
November 1, 2000 250,000 250,000 271,475
Milwaukee County, Wisconsin, Series A, 6.4%,
due December 1, 2003 200,000 201,568 208,520
Nebraska Educational Facility Authority,
Creighton University, 6.65%, due
September 1, 1998 250,000 250,000 261,250
Nebraska Educational Facility Authority,
Creighton University, 5.75%, due June 1, 1997 125,000 125,000 126,200
See notes to financial statements.
</TABLE>
<TABLE>
<PAGE>
PMD INVESTMENT COMPANY
<CAPTION>
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1996 (Continued)
Approximate
Principal Amortized Market
Amount Cost Value
<S> <C> <C> <C>
Nebraska Higher Education Loan Program
Series C, Adjustable Rate Revenue, 3.6%,
due December 1, 2015 $ 600,000 $ 600,000 $ 600,000
Nebraska Investment Finance Authority, 6.9%,
due March 15, 2000 295,000 295,000 306,741
Nebraska Investment Finance Authority, SFM
Revenue, GNMA Mortgage Backed Security
Program, Series D, 6%, due September 15, 1997 215,000 215,000 217,215
Omaha, Nebraska, 6.8%, due December 1, 1999 365,000 365,370 390,623
Omaha, Nebraska, 4.15%, due October 15,1998 485,000 486,146 486,843
Omaha Public Power District, Nebraska Electric
Revenue, Series B, 5.9%, due February 1, 2006 450,000 450,000 477,540
Omaha Public Power District, Nebraska Electric
Revenue, Series A, 5%, due February 1, 2001 500,000 508,956 511,050
Puerto Rico Public Buildings Authority,
Guaranteed Public Education and Health
Facilities, 7.75%, due July 1, 2002,
callable July 1, 1997 345,000 346,006 359,214
Richardson, Texas, 7%, due March 1, 2007 500,000 495,503 528,200
Sabine River Authority, Texas Water Supply
Facility, Lake Fork Project, 6.5%, due
December 1, 2001 265,000 264,363 284,928
Travelers Group Inc., Serial Note, 9.5%, due
March 1, 2002 500,000 555,023 562,100
Travelers Group Inc., Serial Note, 9.5%, due
March 1, 2002 50,000 56,288 56,210
Tucson, Arizona, G.O., Ref. 5.8%,
due July 1, 2005 250,000 249,247 266,250
University of Nebraska Facilities Corp., 7.2%,
due July 1, 2004, callable July 1, 2000 250,000 250,000 275,575
Vermont State, Series B, 5.7%, due August 1, 400,000 397,597 426,760
2005
Washington State, Series A and AT-6, 5.8%, due
February 1, 2003 250,000 247,220 264,700
Wisconsin Housing and Economic Development,
Series 1, 7%, due October 1, 2003 295,000 294,591 320,723
___________ ___________ ___________
Totals $13,312,190 $13,419,270 $13,684,913
=========== =========== ===========
See notes to financial statements.
</TABLE>
<TABLE>
<PAGE>
PMD INVESTMENT COMPANY
<CAPTION>
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1996
<S> <C>
Interest Income:
From investments $ 911,399
Expenses:
Investment advisory fee 36,307
Custodian fees 7,641
Professional fees 36,202
Shareholders' servicing costs 5,185
Directors' fees 15,000
Other 8,380
----------
Total Expenses 108,715
---------
Net Investment Income 802,684
Realized gain from securities
transactions:
Proceeds from sales 3,115,874
Cost of securities sold 3,079,888
----------
Net Realized Gain 35,986
Unrealized appreciation of investments:
Beginning of period 606,538
End of period 265,643
Change in Unrealized Appreciation (340,895)
Net Realized Gain and Decrease in Unrealized
Appreciation on Investments (304,909)
---------
Increase in Net Assets Resulting from Operations $ 497,775
==========
See notes to financial statements.
</TABLE>
<TABLE>
<PAGE>
PMD INVESTMENT COMPANY
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
YEARS ENDED DECEMBER 31, 1996 AND 1995
Accumulated
Undistributed Realized Unrealized
Common Stock Net Gain (Loss) Appreciated
Shares $.50 Par Retained Investment on Sale of (Depreciation)
Value Earnings Income Securities of Investments Total
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1995:
Net investment income - $ - $ - $ 826,288 $ - $ - $ 826,288
Net realized gain from
securities transactions - - - - 195,196 - 195,196
Change in unrealized
appreciation of
investments - - - - - 373,912 373,912
_________ __________ ___________ _________ _________ _________ ___________
Increase in net assets
from operations - - - 826,288 195,196 373,912 1,395,396
Dividends - $.228 per
share - - - (873,849) - - (873,849)
Common stock redeemed
(Note B) (173,447) (86,724) (657,744) - - - (744,468)
_________ __________ ___________ _________ _________ _________ ___________
Total decrease in
net assets (173,447) (86,724) (657,744) (47,561) 195,196 373,912 (222,921)
Net assets on January 1,
1995 3,978,774 1,989,387 15,040,246 (96,857) (76,675) 232,626 17,088,727
_________ __________ ___________ _________ _________ _________ ___________
Net assets on December 31,
1995 3,805,327 $1,902,663 $14,382,502 $(144,418) $ 118,521 $ 606,538 $16,865,806
========= ========== =========== ========= ========= ========= ===========
Year ended December 31, 1996:
Net investment income - $ - $ - $ 802,684 $ - $ - $ 802,684
Net realized gain from
securities transactions - - - - 35,986 - 35,986
Change in unrealized
appreciation of
investments - - - - - (340,895) (340,895)
_________ __________ ___________ _________ _________ _________ ___________
Increase in net assets
from operations - - - 802,684 35,986 (340,895) 497,775
Dividends - $.265 per share - - - (763,314) (190,738) - (954,052)
Common stock redeemed
(Note B) (208,532) (104,266) (815,460) - - - (919,726)
_________ __________ ___________ _________ _________ _________ ___________
Total decrease in
net assets (208,532) (104,266) (815,460) 39,370 (154,752) (340,895) (1,376,003)
Net assets on January 1,
1996 3,805,327 1,902,663 14,382,502 (144,418) 118,521 606,538 16,865,806
_________ __________ ___________ _________ _________ _________ ___________
Net assets on December 31,
1996 3,596,795 $1,798,39 $13,567,042 $(105,048) $ (36,231) $(265,643) $15,489,803
========= ========== =========== ========= ========= ========= ===========
See notes to financial statements.
</TABLE>
<PAGE>
PMD INVESTMENT COMPANY
NOTES TO FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1996
A. SIGNIFICANT ACCOUNTING POLICIES
The Company is registered under the Investment Company Act of
1940, as amended, as a closed-end diversified management
investment company. The following is a summary of significant
accounting policies followed by the Company in the preparation of
its financial statements.
Investment Securities - Investments in securities are valued at
market value as determined by the Company's investment advisor at
December 31, 1996.
Securities Transactions - Securities transactions are recorded on
a trade date basis. Cost of securities sold is determined using
the identified cost method.
Interest Income - Interest income, adjusted for amortization of
premium or accretion of discounts on investments in municipal
bonds and notes, is earned from settlement date and recorded on
the accrual basis.
Income Taxes - It is the Company's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute substantially all of its
income, including capital gains, to its shareholders. No income
tax provision has been made since substantially all the income and
capital gains are reported by the shareholders on their own tax
returns.
Management and Service Fees - The investment advisory fee, which
is payable monthly, is based on the value of net assets at each
month-end at the annual rate of one-quarter of one percent on the
first $10,000,000 of the net asset value and .15 percent of the
net asset value in excess of $10,000,000, with a minimum fee of
$10,000 per year. Fees for the services of each of the directors
of the Company are $5,000 annually with an additional $500 for
each board or committee meeting attended in excess of four
meetings each year. No additional compensation or benefits are
paid to officers or directors of the Company.
Use of 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.
B. REDEMPTION OF SHARES
At December 31, 1996, the Company had authorized 20,000,000 shares
of $.50 par value common stock.
Shareholders may redeem shares of stock and receive the net asset
value per share on any December 31 or June 30 by tendering the
shares to be redeemed 90 days prior to the intended redemption
date.
C. CONTINGENT LIABILITIES
On January 15, 1981, the Company sold substantially all of its
assets which had been used in its former operations as a discount
store business. Although the purchaser of the Company's operating
assets assumed substantially all of the Company's liabilities and
obligations as part of the purchase transaction, the Company
remains contingently liable for such liabilities and obligations,
including obligations under long-term real estate and equipment
leases and real estate mortgages until released by the obligees or
until such liabilities and obligations have been satisfied or
discharged. The total of such liabilities and obligations not
released by the obligees amounted to approximately $5,113,758 as
of December 31, 1996.
<TABLE>
D. PURCHASES AND SALES OF SECURITIES
The following summarizes the approximate value of securities
transactions for the periods indicated.
<CAPTION>
Year Ended Year Ended
December 31, 1996 December 31, 1995
Purchases Sales Purchases Sales
<S> <C> <C> <C> <C>
Tax Exempt:
Municipal bonds and notes $1,110,810 $1,541,000 $ - $ 6,643,741
Taxable:
Corporate - 526,372 1,686,395 -
Government agency - 1,048,502 8,529,665 3,235,176
__________ __________ ___________ ___________
1,110,810 3,115,874 10,216,060 9,878,917
Other tax-exempt short-term
investments 4,038,551 3,007,848 10,980,674 11,893,891
__________ __________ ___________ ___________
$5,149,361 $6,123,722 $21,196,734 $21,772,808
========== ========== =========== ===========
Net realized gain on sale of investments was $35,986 and $195,196
for the year ended December 31, 1996 and 1995, respectively.
</TABLE>
<TABLE>
E. SUPPLEMENTARY INFORMATION - SELECTED PER SHARE DATA AND RATIOS
<CAPTION>
Year Ended December 31,
1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C>
Weighted average shares
outstanding
3,626,328 3,825,907 3,988,480 4,061,542 4,109,168
========== ========== ========== ========== ==========
Interest income $ 0.251 $ 0.240 $ 0.255 $ 0.268 $ 0.295
Expenses 0.030 0.024 0.025 0.024 0.024
---------- ---------- ---------- ---------- ---------
Net investment income 0.221 0.216 0.230 0.244 0.271
Distribution from net
investment income (0.262) (0.228) (0.243) (0.251) (0.286)
Increase (decrease) in unrealized
appreciation of investments (0.094) 0.098 (0.244) 0.116 (0.019)
Net realized gain (loss) from
securities transactions 0.010 0.051 - (0.002) (0.005)
---------- ---------- ---------- ---------- ---------
Increase (decrease) in net assets (0.125) 0.137 (0.257) 0.107 (0.039)
Net asset value at beginning of
period 4.431 4.294 4.551 4.444 4.483
---------- ---------- ---------- ---------- ---------
Net asset value at end of period $ 4.306 $ 4.431 $ 4.294 $ 4.551 $ 4.444
========== ========== ========== ========== ==========
Ratio of expenses to average
net assets 0.7 % 0.5 % 0.6 % 0.5 % 0.5 %
Ratio of net investment income to
average net assets 5.0 % 4.9 % 5.2 % 5.4 % 6.2 %
Portfolio turnover 19.8 % 59.6 % 2.3 % 11.5 % 14.9 %
Number of shares outstanding at
end of period (in thousands) 3,597 3,805 3,979 4,072 4,074
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