PMD INVESTMENT COMPANY
Financial Statements for the
Six Months Ended June 30, 1999 and
Independent Accountants' Review Report
<PAGE>
INDEPENDENT ACCOUNTANTS' REVIEW REPORT
To The Shareholders and
The Board of Directors
PMD Investment Company
Omaha, Nebraska
We have reviewed the accompanying statement of assets and liabilities of PMD
Investment Company (the Company), including the schedule of investments, as of
June 30, 1999, and the related statements of operations and changes in net
assets for the six months then ended. These financial statements are the
responsibility of the Company's management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and of making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards, the objective of which is the
expression of an opinion regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the accompanying financial statements for them to be in conformity
with generally accepted accounting principles.
Our review was made for the purpose of expressing the limited assurance
described in the preceding paragraph concerning the financial statements taken
as a whole. The additional information in the supplementary information-selected
per share data and ratios included in footnote E for the six months ended June
30, 1999, is presented only for the purpose of additional analysis and is not a
required part of the basic financial statements. This additional information is
the responsibility of the Company's management. Such information has been
subjected to the inquiry and analytical procedures applied in the review of the
basic financial statements and we are not aware of any material modifications
that should be made thereto in order for such information to be in conformity
with generally accepted accounting principles when considered in relation to the
basic financial statements taken as a whole.
<PAGE>
We have previously audited, in accordance with generally accepted auditing
standards, the statement of assets and liabilities of PMD Investment Company,
including the schedule of investments, as of December 31, 1998, and the related
statements of operations and changes in net assets for the year then ended (not
presented herein) and the additional information included in footnote E for each
of the five years in the period ended December 31, 1998; and in our report dated
January 26, 1999, we expressed an unqualified opinion on those financial
statements and additional information. In our opinion, the information set forth
in the accompanying statement of changes in net assets for the year ended
December 31, 1998 and the per share data and ratios for each of the five years
in the period ended December 31, 1998 is fairly stated, in all material
respects, in relation to the financial statements from which it has been
derived.
Omaha, Nebraska
July 30, 1999
<PAGE>
PMD INVESTMENT COMPANY
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1999
(Unaudited - See Independent Accountants' Review Report)
- ------------------------------------------------------------------------------------
ASSETS:
<S> <C>
Investments in securities, at approximate market value,
amortized cost of $13,141,229 $13,226,433
Investment in tax-exempt money-market fund 964,338
-----------
Total Investments 14,190,771
Interest receivable 201,398
-----------
Total Assets 14,392,169
LIABILITIES:
Accrued expenses 11,539
-----------
Commitments and contingencies
NET ASSETS (equivalent to $4.23 per share based on 3,398,455 shares
of common stock outstanding at June 30, 1999) $14,380,630
===========
</TABLE>
See notes to financial statements.
2
<PAGE>
PMD INVESTMENT COMPANY
<TABLE>
<CAPTION>
SCHEDULE OF INVESTMENTS
JUNE 30, 1999
(Unaudited - See Independent Accountants' Review Report)
- ------------------------------------------------------------------------------------------------------------------------
Approximate
Principal Amortized Fair
Amount Cost Value
<S> <C> <C> <C>
Abbey National PLC Sub, 6.69%, due October 17,
2005 $ 550,000 $ 554,248 $ 539,776
Austin, Texas, Independent School District, G.O.
Unlimited PSF, 4.75%, due August 1, 2008,
callable August 1, 2007 500,000 496,591 497,065
Citigroup Inc., Senior Note, 9.5%, due
March 1, 2002 550,000 581,354 590,733
Clark County, Washington Public Utilities District #1
Electric Revenue, 6.3%, due January 1, 2004,
callable January 1, 2001 250,000 249,658 262,559
Denver Met Major League Baseball Stadium
District Colorado, 6.35%, due October 1, 2003 250,000 250,000 264,305
Federal Home Loan Mortgage Corporation, 7.0%,
due June 1, 2024 1,290,354 1,295,040 1,280,935
Federal National Mortgage Association, 6.5%,
due January 1, 2024 823,274 813,029 802,190
Federal National Mortgage Association, 7.8%,
due March 29, 2005, callable March 29, 2000 1,000,000 1,009,697 1,011,030
Florida State, General Services Revenues,
6%, due July 1, 2001 220,000 219,888 228,516
Grand Island, Nebraska, Sanitary Sewer Revenue,
4.8%, due April 1, 2000 400,000 400,000 403,720
Hanover County, Virginia IDA Public Facilities
Lease Revenue, 6.75%, due July 15, 2007 150,000 150,000 160,773
Jefferson County, West Virginia, Residential
Mortgage Revenue, Refunding Series A, 7.75%
due January 1, 2012, callable January 1, 2001 65,000 65,204 65,738
King County, Washington, School District #403,
4.3%, due June 1, 2010, callable June 1, 2008 500,000 495,752 466,805
Lincoln, Nebraska, Water Revenue, 6.7%, due
November 1, 2000 250,000 250,000 259,940
Mecklenburg County, NC, Pub Import Service,
4.4%, due February 1, 2011, callable February 1,
2008 500,000 491,551 475,530
Memphis, Tennessee, G.O. Unlimited OID,
4.65%, due July 1, 2007, callable July 1, 2005 500,000 498,514 495,065
</TABLE>
See notes to financial statements.
3
<PAGE>
PMD INVESTMENT COMPANY
<TABLE>
<CAPTION>
SCHEDULE OF INVESTMENTS
JUNE 30, 1999 (Continued)
(Unaudited - See Independent Accountants' Review Report)
- --------------------------------------------------------------------------------------------------------------------------
Approximate
Principal Amortized Fair
Amount Cost Value
<S> <C> <C> <C>
Minneapolis, Minnesota, Refunding Service, 4.25%,
due December 1, 2008 $ 500,000 $ 503,859 $ 477,515
Nebraska Investment Finance Authority, SFM
Revenue Proj. C, 6.9%, due March 15, 2000 170,000 170,000 173,732
Ohio State Highway Cap IMPTS, Series B, G.O.
Unlimited, 4.5%, due May 1, 2024 500,000 498,966 503,215
Omaha Public Power District, Nebraska Electric
Revenue, Series B, 5.9%, due February 1, 2006 450,000 450,000 483,426
Omaha Public Power District, Nebraska Electric
Revenue, Series A, 5%, due January 1, 2001 500,000 503,415 508,825
Sabine River Authority, Texas Water Supply
Facility, Lake Fork Project, 6.5%, due
December 1, 2001 265,000 264,690 275,120
Tucson, Arizona, G.O., Ref. 5.8%, due July 1, 2005 250,000 249,471 265,569
University of Nebraska Facilities Corp., University
Medical Center, Series A, 7.2%, due July 1, 2004 250,000 250,000 261,528
Utah State G.O. Unlimited, 4.9%, due July 1,
2009, callable July 1, 2007 500,000 497,531 501,970
Vermont State, Series B, 5.7%, due August 1, 2005 400,000 398,301 422,456
Virginia State, Pre-refunded Series A, G.O.
Unlimited, 4.0%, due June 1, 2003 500,000 502,515 496,230
Wake County, NC, Pub Import G.O. Unlimited,
4.5% due March 1, 2011, callable March 1, 2008 500,000 488,629 481,495
Washington State, Series A and AT-6, 5.8%, due
February 1, 2003 250,000 248,585 262,193
Wisconsin Housing and Economic Development,
Series 1, 7%, due October 1, 2003 295,000 294,741 308,479
----------- ----------- -----------
Total $13,128,628 $13,141,229 $13,226,433
=========== =========== ===========
</TABLE>
See notes to financial statements.
4
<PAGE>
PMD INVESTMENT COMPANY
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1999
(Unaudited - See Independent Accountants' Review Report)
- -------------------------------------------------------------------------------
<S> <C>
Interest Income:
From investments $ 394,554
Expenses:
Investment advisory fee 16,697
Custodian fees 2,000
Professional fees 18,972
Shareholders' servicing costs 2,443
Directors' fees 7,500
Other 9,815
---------
Total Expenses 57,427
Net Investment Income 337,127
Realized and unrealized gain on investments:
Net realized gain on investments 112
Change in unrealized appreciation of investments for the period (402,515)
---------
Net Realized Gain and Decrease in Unrealized
Appreciation on Investments (402,403)
---------
Decrease in Net Assets Resulting from Operations $ (65,276)
=========
</TABLE>
See notes to financial statements
5
<PAGE>
PMD INVESTMENT COMPANY
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1998 AND THE SIX MONTHS ENDED JUNE 30, 1999
(Unaudited - See Independent Accountants' Review Report)
- -----------------------------------------------------------------------------------------------------------------------------------
<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, 1998:
Net investment income - $ - $ - $ 736,507 $ - $ - $ 736,507
Net realized gain from securities
transactions - - - 17,920 - 17,920
Change in unrealized appreciation
of investments - - - - - 58,649 58,649
--------- --------- ---------- --------- --------- -------- -----------
Increase in net assets from operations - - - 736,507 17,920 58,649 813,076
Dividends - $.217 per share - - - (727,782) (9,229) - (737,011)
Common stock redeemed (54,918) (27,459) (210,881) - - - (238,340)
--------- --------- ---------- --------- --------- -------- -----------
Total decrease in net assets (54,918) (27,459) (210,881) 8,725 8,691 58,649 (162,275)
Net assets on January 1, 1998 3,453,773 1,726,886 13,023,282 (173,786) (26,908) 429,070 14,978,544
--------- --------- ---------- --------- --------- -------- -----------
Net assets on December 31, 1998 3,398,855 $1,699,427 $12,812,401 $(165,061) $ (18,217) $ 487,719 $14,816,269
========= ========= ========== ========= ========= ======== ===========
Six months ended June 30, 1999:
Net investment income - $ - $ - $ 337,127 $ - $ - $ 337,127
Net realized gain from securities
transactions - - - - 112 - 112
Change in unrealized appreciation
of investments - - - - - (402,515) (402,515)
--------- --------- ---------- --------- --------- -------- -----------
Increase in net assets from operations - - - 337,127 112 (402,515) (65,276)
Dividends - $.060 per share - - - (192,000) (11,455) - (203,455)
Dividends - $.049 per share - - - (165,164) - - (165,164)
Common stock redeemed (Note B) (400) (200) (1,544) - - - (1,744)
--------- --------- ---------- --------- --------- -------- -----------
Total decrease in net assets (400) (200) (1,544) (20,037) (11,343) (402,515) (435,639)
Net assets on January 1, 1999 3,398,855 1,699,427 12,812,401 (165,061) (18,217) 487,719 14,816,269
--------- --------- ---------- --------- --------- -------- -----------
Net assets on June 30, 1999 3,398,455 1,699,227 12,810,857 $(185,098) $ (29,560) $ 85,204 $14,380,630
========= ========= ========== ========= ========= ======== ===========
</TABLE>
See notes to financial statements.
6
<PAGE>
PMD INVESTMENT COMPANY
NOTES TO FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 1999
(Unaudited - See Independent Accountants' Review Report)
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.
Six-Month Financial Statements - The financial statements for the six months
ended June 30, 1999 reflect all adjustments which are, in the opinion of
management, necessary to fairly present statements of operations and changes
in net assets for the six month period presented.
Investment Securities - Investments in securities are valued at fair value as
determined by the Company's investment advisor at June 30, 1999.
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.
Reclassifications - Certain reclassifications have been made to the prior
year financial statements to be consistent with the June 30, 1999
presentation.
7
<PAGE>
B. REDEMPTION OF SHARES
At June 30, 1999, 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 30
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 $6,682,994 as of February 1, 1999, 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>
Six Months Ended Six Months Ended
June 30, 1999 June 30, 1998
-------------------------------- -------------------------------
Purchases Sales Purchases Sales
Tax Exempt:
Municipal bonds and notes $ -- $ 35,000 $ 977,480 $ 540,000
Taxable:
Government agency -- 301,438 -- 213,880
---------- ---------- ---------- ----------
-- 336,438 977,480 753,880
Other tax-exempt short-term
investments 481,277 165,321 394,550 876,776
---------- ---------- ---------- ----------
$ 481,277 $ 501,759 $1,372,030 $1,630,656
========== ========== ========== ==========
</TABLE>
Net realized gain on sale of investments was $112 and $14,021 for the six
months ended June 30, 1999 and 1998, respectively.
The diversification of investments based on fair value at June 30, 1999 is as
follows:
State and municipal tax-exempt bonds 63.4 %
U.S. government agency bonds 21.8
Corporate bonds 8.0
Short-term tax-exempt money market fund 6.8
-----
100.0 %
-----
8
<PAGE>
E. DISTRIBUTIONS TO SHAREHOLDERS
On July 26, 1999, a quarterly income distribution of $0.05092 per share
aggregating $173,049 was declared from investment income realized during
1999. The dividend is payable on August 2, 1999 to shareholders of record on
July 26, 1999.
F. SUPPLEMENTARY INFORMATION - SELECTED PER SHARE DATA AND RATIOS
<TABLE>
<CAPTION>
Six Months
Ended
June 30, Years Ended December 31,
1999 1998 1997 1996 1995 1994
(Unaudited)
<S> <C> <C> <C> <C> <C> <C>
Weighted average shares
outstanding 3,398,655 3,432,115 3,537,042 3,626,328 3,825,907 3,988,480
--------- --------- --------- --------- --------- ---------
Interest income $ 0.116 $ 0.244 $ 0.243 $ 0.251 $ 0.240 $ 0.255
Expenses 0.017 0.030 0.028 0.030 0.024 0.025
------ ------ ------ ------ ------ -----
Net investment income 0.099 0.214 0.215 0.221 0.216 0.230
Distribution from net
investment income (0.108) (0.215) (0.234) (0.262) (0.228) (0.243)
Increase (decrease) in
unrealized appreciation
of investments (0.118) 0.017 0.047 (0.094) 0.098 (0.244)
Net realized gain (loss)
from securities
transactions 0.000 0.005 0.003 0.010 0.051 -
------ ------ ------ ------ ------ -----
Increase (decrease) in
net assets (0.127) 0.021 0.031 (0.125) 0.137 (0.257)
Net asset value at
beginning of period 4.358 4.337 4.306 4.431 4.294 4.551
------ ------ ------ ------ ------ -----
Net asset value at end
of period $ 4.231 $ 4.358 $ 4.337 $ 4.306 $ 4.431 $ 4.294
======== ======== ======== ======== ======== =======
Ratio of expenses to
average net assets 0.4%* 0.7 % 0.7 % 0.7 % 0.5 % 0.6 %
Ratio of net investment
income to average net
assets 2.3%* 5.0 % 5.0 % 5.0 % 4.9 % 5.2 %
Portfolio turnover 0.0%* 16.6 % 12.0 % 19.8 % 59.6 % 2.3 %
Number of shares
outstanding at end of
period (in thousands) 3,398 3,399 3,454 3,597 3,805 3,979
</TABLE>
* Ratio has not been annualized.
9
