PMD INVESTMENT COMPANY
Financial Statements for the
Year Ended December 31, 1997 and
Independent Auditors' Report
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, 1997, 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, 1997, by correspondence with the custodian. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide
a reasonable basis for our opinion.
In our opinion, the financial statements and selected 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, 1997, 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.
Deloitte & Touche LLP
January 23, 1998
Omaha, Nebraska
<TABLE>
PMD INVESTMENT COMPANY
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1997
<CAPTION>
ASSETS:
<S> <C>
Investments in securities, at fair value,
amortized cost of $13,568,969 $13,998,039
Investment in tax-exempt money market fund 786,501
___________
Total Investments 14,784,540
Interest receivable 209,216
___________
Total Assets 14,993,756
LIABILITIES:
Accrued expenses 15,212
___________
Commitments and contingencies
NET ASSETS (equivalent to $4.34 per
share based on 3,453,773 shares of
common stock outstanding at
December 31, 1997)
$14,978,544
===========
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
PMD INVESTMENT COMPANY
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1997
<S> <C> <C> <C>
Principal Amortized Fair
Amount Cost Value
Abbey National PLC Sub, 6.69%, due
October 17, 2005 $ 550,000 $ 555,261 $ 562,980
Austin, Texas, Independent School District, 4.75%,
due August 1, 2008 500,000 496,172 506,650
Clark County, Washington Public Utilities District #1
Electric Revenue, 6.3%, due January 1, 2004,
callable January 1, 2001 250,000 249,311 268,175
Denver Metropolitan Major League Baseball Stadium
District Colorado, 6.35%, due October 1, 2003 250,000 250,000 271,425
Federal Home Loan Mortgage Corporation, 7.0%,
due June 1, 2024 1,875,661 1,883,238 1,892,166
Federal National Mortgage Association, 6.5%,
due January 1, 2024 1,029,120 1,015,178 1,017,697
Federal National Mortgage Association, 7.8%,
due March 29, 2005, callable March 29, 2000 1,000,000 1,031,523 1,032,200
Florida State, General Services Revenues,
6%, due July 1, 2001 220,000 219,803 233,882
Grand Island, Nebraska Sanitary Sewer Revenue,
4.8%, due April 1, 2000 400,000 400,000 405,360
Hanover County, Virginia IDA Public Facilities
Lease Revenue, 6.75%, due July 15, 2007 150,00 150,000 163,080
Jefferson County, West Virginia Residential
Mortgage Revenue, Refunding Series A, 7.75%
due January 1, 2012, callable January 1, 2001 75,000 75,349 80,408
Lincoln, Nebraska Hospital Revenue, 7%, due
December 1, 1999, callable December 1, 1998 180,000 180,000 188,370
Lincoln, Nebraska Water Revenue, 6.7%, due
November 1, 2000 250,000 250,000 267,100
Memphis, Tennessee, 4.65%, due July 1, 2007,
callable July 1, 2005 500,000 498,266 504,300
Milwaukee County, Wisconsin, Series A, 6.4%,
due December 1, 2003 200,000 201,339 204,480
Nebraska Educational Facility Authority,
Creighton University, Series A, 6.65%, due
September 1, 1998 250,000 250,000 254,500
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
PMD INVESTMENT COMPANY
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1997 (continued)
<S> <C> <C> <C>
Principal Amortized Fair
Amount Cost Value
Nebraska Investment Finance Authority, 6.9%,
due March 15, 2000 $ 260,000 $ 260,000 $272,194
Ohio State Highway Capital Imports, Series B,
4.5%, due May 1, 2024 500,000 498,642 509,800
Omaha, Nebraska, 6.8%, due December 1, 1999 365,000 365,245 381,352
Omaha, Nebraska, 4.15%, due October 15, 1998 485,000 485,496 486,843
Omaha Public Power District, Nebraska Electric
Revenue, Series B, 5.9%, due February 1, 2006 450,000 450,000 492,210
Omaha Public Power District, Nebraska Electric
Revenue, Series A, 5%, due January 1, 2001 500,000 506,739 513,700
Richardson, Texas, 7%, due March 1, 2007 500,000 495,946 512,250
Sabine River Authority, Texas Water Supply
Facility, Lake Fork Project, 6.5%, due
December 1, 2001 265,000 264,493 282,225
Travelers Group Inc., Serial Note, 9.5%, due
March 1, 2002 500,000 544,385 561,100
Travelers Group Inc., Serial Note, 9.5%, due
March 1, 2002 50,000 55,060 56,110
Tucson, Arizona, G.O., Ref. 5.8%, due July 1, 2005 250,000 249,336 269,600
University of Nebraska Facilities Corp., 7.2%,
due July 1, 2004, callable July 1, 2000 250,000 250,000 270,375
Utah State, 4.9%, due July 1, 2009, callable
July 1, 2007 500,000 497,980 512,300
Vermont State, Series B, 5.7%, due August 1, 2005 400,000 397,878 435,600
Washington State, Series A and AT-6, 5.8%, due
February 1, 2003 250,000 247,677 266,700
Wisconsin Housing and Economic Development,
Series 1, 7%, due October 1, 2003 295,000 294,652 322,907
----------- --------- ---------
Totals $13,499,781 $13,568,969 $13,998,039
=========== ========== ==========
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
PMD INVESTMENT COMPANY
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1997
<S> <C>
Interest Income:
From investments $860,186
Expenses:
Investment advisory fee 27,798
Custodian fees 6,205
Professional fees 41,312
Shareholders' servicing costs 6,704
Directors' fees 15,000
Other 3,799
--------
Total Expenses 100,818
--------
Net Investment Income 759,368
Realized and unrealized gain on investments:
Net realized gain on investments 9,323
Change in unrealized appreciation of investments
for the year 163,427
--------
Net realized gain on investments 172,750
--------
Net Increase in Net Assets Resulting from
Operations $932,118
========
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
PMD INVESTMENT COMPANY
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
<S> <C> <C> <C> <C> <C> <C> <C>
Accumulated
Undistributed Realized Unrealized
Common Stock Net Gain (Loss) Appreciation
$.50 Par Retained Investment on Sale of (Depreciation)
Shares Value Earnings Income Securities of Investments Total
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 (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 $1,798,397 $13,567,042 $(105,048) $ (36,231) $ 265,643 $15,489,803
========= ========== =========== ========= ========= ========= ===========
Year ended December 31, 1997:
Net investment income - $ - $ - $ 759,368 $ - $ - $ 759,368
Net realized gain from
securities transactions - - - - 9,323 - 9,323
Change in unrealized appreciation
of investments - - - - - 163,427 163,427
--------- ---------- ----------- --------- ---------- --------- -----------
Increase in net assets from
operations - - - 759,368 9,323 163,427 932,118
Dividends - $.239 per share - - - (818,877) (9,229) - (828,106)
Common stock redeemed (143,022) (71,511) (543,760) - - - (615,271)
--------- ---------- ----------- --------- ---------- --------- -----------
Total decrease in net assets (143,022) (71,511) (543,760) (59,509) 94 163,427 (511,259)
Net assets on January 1, 1997 3,596,795 1,798,397 13,567,042 (105,048) (36,231) 265,643 15,489,803
--------- ---------- ----------- --------- ---------- ---------- ------------
Net assets on
December 31, 1997 3,453,773 $1,726,886 $13,023,282 $(164,557) $ (36,137) $ 429,070 $14,978,544
========= ========== =========== ========= ========= = ======= ===========
See notes to financial statements.
</TABLE>
PMD INVESTMENT COMPANY
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
A. SIGNIFICANT ACCOUNTING POLICIES
PMD Investment Company (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
fair value as determined by the Company's investment advisor at
December 31, 1997.
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.
Distributions to Shareholders - Dividends to shareholders are recorded
on the ex-dividend date.
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 .25 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, 1997, 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 $6,250,590 as of December 31, 1997, the most recent
date for which such information is available.
D. PURCHASES AND SALES OF SECURITIES
The following summarizes the approximate value of securities transactions
for the periods indicated.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Year Ended Year Ended
December 31, 1997 December 31, 1996
Purchases Sales Purchases Sales
Tax Exempt:
Municipal bonds and notes $1,990,035 $1,528,900 $1,110,810 $1,541,000
Taxable:
Corporate - - - 526,372
Government agency - 292,410 - 1,048,502
---------- ---------- ---------- ----------
1,990,035 1,821,310 1,110,810 3,115,874
Other tax-exempt short-term
investments 2,240,565 3,078,243 4,038,551 3,007,848
---------- ---------- ---------- ----------
$4,230,600 $4,899,553 $5,149,361 $6,123,722
========== ========== ========== ==========
</TABLE>
Net realized gain on sale of investments was $9,323 and $35,986 for
the years ended December 31, 1997 and 1996, respectively.
The diversification of investments based on fair value at
December 31, 1997 is as follows:
State and municipal tax-exempt bonds 60.0%
U.S. government agency bonds 7.0
Corporate bonds 8.0
Short-term tax-exempt money market fund 5.3
Other 19.7
------
100.0%
======
E. DISTRIBUTIONS TO SHAREHOLDERS
On December 30, 1997, a quarterly income distribution of
$0.055893 per share aggregating $190,001 and a distribution of
$0.002715 per share aggregating $9,229 was declared from net
realized gains from investment transactions (including
$0.000005 applicable to short-term gains that are taxable to
shareholders as ordinary income dividends) during 1997. The
dividend was paid on January 18, 1998 to shareholders of record
on January 9, 1998.
F. SUPPLEMENTARY INFORMATION-SELECTED PER SHARE DATA AND RATIONS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Years Ended December 31,
------------------------------------------------------------------
1997 1996 1995 1994 1993
Weighted average shares
outstanding 3,537,042 3,626,328 3,825,907 3,988,480 4,061,542
========= ========= ========= ========= =========
Interest income $ 0.243 $ 0.251 $ 0.240 $ 0.255 $ 0.268
Expenses 0.028 0.030 0.024 0.025 0.024
-------- --------- --------- --------- ---------
Net investment income 0.215 0.221 0.216 0.230 0.244
Distribution from net
investment income (0.234) (0.262) (0.228) (0.243) (0.251)
Increase (decrease)
in unrealized appreciation
of investments 0.047 (0.094) 0.098 (0.244) 0.116
Net realized gain (loss)
from securities
transactions 0.003 0.010 0.051 - (0.002)
--------- --------- --------- --------- ---------
Increase (decrease) in
net assets 0.031 (0.125) 0.137 (0.257) 0.107
Net asset value at
beginning of period 4.306 4.431 4.294 4.551 4.444
--------- --------- --------- --------- ---------
Net asset value at end
of period $ 4.337 $ 4.306 $ 4.431 $ 4.294 $4.551
========= ========= ========= ========= =========
Ratio of expenses to
average net assets 0.7 % 0.7 % 0.5 % 0.6 % 0.5 %
Ratio of net investment
income to average net
assets 5.0 % 5.0 % 4.9 % 5.2 % 5.4 %
Portfolio turnover 12.0 % 19.8 % 59.6 % 2.3 % 11.5 %
Number of shares
outstanding at end of
period (in thousands) 3,454 3,597 3,805 3,979 4,072
</TABLE>
