PMD INVESTMENT COMPANY
Financial Statements for the
Six Months Ended June 30, 2000 and
Independent Accountants' Review Report
<PAGE>
INDEPENDENT ACCOUNTANTS' REVIEW REPORT
To the Shareholders and
the Board of Directors of
PMD Investment Company
Omaha, Nebraska
We have reviewed the accompanying statement of assets and liabilities of PMD
Investment Company, including the schedule of investments, as of June 30, 2000,
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 auditing standards generally accepted in the United States of America, 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 accounting principles generally accepted in the United States of America.
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 G for the six months ended June
30, 2000, is presented 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 accounting principles generally accepted in the United States of America
when considered in relation to the basic financial statements taken as a whole.
<PAGE>
We have previously audited, in accordance with auditing standards generally
accepted in the United States of America, the statement of assets and
liabilities of PMD Investment Company, including the schedule of investments
(not presented herein), as of December 31, 1999, and the related statements of
operations (not presented herein) and changes in net assets for the year then
ended and the additional information included in footnote G for each of the five
years in the period ended December 31, 1999; and in our report dated February 2,
2000, 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,
1999 and the per share data and ratios for each of the five years in the period
ended December 31, 1999 is fairly stated, in all material respects, in relation
to the financial statements from which it has been derived.
/s/ Deloitte & Touche LLP
Omaha, Nebraska
July 25, 2000
<PAGE>
<TABLE>
<CAPTION>
PMD INVESTMENT COMPANY
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 2000
(Unaudited - See Independent Accountants' Review Report)
---------------------------------------------------------------------------------------------------
<S> <C>
ASSETS:
Investments in securities, at approximate market value,
amortized cost of $2,662,081 $ 2,597,441
Investment in tax-exempt money-market fund 11,135,304
-----------
Total Investments 13,732,745
Interest receivable 44,565
-----------
Total Assets 13,777,310
LIABILITIES:
Accrued expenses 10,025
Due to shareholders for shares tendered for redemption 9,115,430
-----------
Total Liabilities 9,125,455
-----------
Commitments and contingencies
NET ASSETS (common stock $.50 par value; 20,000 shares authorized; equivalent to
$4.12 per share based on 1,129,041 shares of common stock outstanding at
June 30, 2000) $ 4,651,855
===========
</TABLE>
See notes to financial statements.
2
<PAGE>
<TABLE>
<CAPTION>
PMD INVESTMENT COMPANY
SCHEDULE OF INVESTMENTS
JUNE 30, 2000
(Unaudited - See Independent Accountants' Review Report)
-----------------------------------------------------------------------------------------------------------
Approximate
Principal Amortized Fair
Amount Cost Value
<S> <C> <C> <C>
Citigroup Inc., Senior Note, 9.5%, due
March 1, 2002 $ 550,000 $ 569,293 $ 568,062
Federal Home Loan Mortgage Corporation, 7.0%,
due June 1, 2024 1,111,520 1,115,242 1,076,863
Federal National Mortgage Association, 6.5%,
due January 1, 2024 736,108 727,545 700,016
University of Nebraska Facilities Corp., University
Medical Center, Series A, 7.2%, due July 1, 2004 250,000 250,000 252,500
---------- ---------- ----------
$2,647,628 $2,662,080 $2,597,441
========== ========== ==========
</TABLE>
See notes to financial statements.
3
<PAGE>
<TABLE>
<CAPTION>
PMD INVESTMENT COMPANY
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2000
(Unaudited - See Independent Accountants' Review Report)
---------------------------------------------------------------------------------
<S> <C>
Interest Income:
From investments $ 375,197
Expenses:
Investment advisory fee 14,037
Custodian fees 2,000
Professional fees 26,859
Shareholders' servicing costs 1,960
Directors' fees 7,500
Other 3,447
---------
Total Expenses 55,803
---------
Net Investment Income 319,394
Realized and Unrealized Gain (Loss) on Investments:
Net realized loss on investments (186,862)
Change in Unrealized Appreciation of Investments for the Period 45,380
---------
Net Realized Loss and Increase in Unrealized
Appreciation on Investments (141,482)
---------
Increase in Net Assets Resulting from Operations $ 177,912
=========
</TABLE>
See notes to financial statements.
4
<PAGE>
<TABLE>
<CAPTION>
PMD INVESTMENT COMPANY
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1999 AND THE SIX MONTHS ENDED JUNE 30, 2000
(Unaudited - See Independent Accountants' Review Report)
---------------------------------------------------------------------------------------------------------------------------
Common Stock Undistributed
----------------------- Net
$.50 Par Retained Investment
Shares Value Earnings Income
------ ----- -------- ------
<S> <C> <C> <C> <C>
Year ended December 31, 1999:
Net investment income -- $ -- $ -- $ 678,766
Net realized gain from securities transactions -- -- -- --
Change in unrealized appreciation of investments -- -- -- --
--------- ------------ ------------ ------------
Increase in net assets from operations -- -- -- 678,766
Dividends - $.211 per share -- -- -- (699,855)
Common stock redeemed (Note B) (57,091) (28,546) (214,702) --
--------- ------------ ------------ ------------
Total decrease in net assets (57,091) (28,546) (214,702) (21,089)
Net assets on January 1, 1999 3,398,855 1,699,427 12,405,240 198,086
--------- ------------ ------------ ------------
Net assets on December 31, 1999 3,341,764 1,670,881 12,190,538 176,997
Net investment income -- -- -- 319,394
Net realized loss from securities transactions -- -- -- --
Change in unrealized appreciation of investments -- -- -- --
--------- ------------ ------------ ------------
Increase in net assets from operations -- -- -- 319,394
Dividends - $.057 per share -- -- -- (176,996)
Dividends - $.048 per share -- -- -- (161,026)
Common stock redeemed (Note B) (2,212,723) (1,106,362) (8,010,069) --
--------- ------------ ------------ ------------
Total decrease in net assets (2,212,723) (1,106,362) (8,010,069) (18,628)
Net assets on January 1, 2000 3,341,764 1,670,881 12,190,538 176,997
--------- ------------ ------------ ------------
Net assets on June 30, 2000 1,129,041 $ 564,519 $ 4,180,469 $ 158,369
========= ============ ============ ============
<CAPTION>
Accumulated
Realized Unrealized
Gain (Loss) Appreciation
on Sale of (Depreciation)
Securities of Investments Total
---------- -------------- -----
<S> <C> <C> <C>
Year ended December 31, 1999:
Net investment income $ -- $ -- $ 678,766
Net realized gain from securities transactions 336 -- 336
Change in unrealized appreciation of investments -- (598,175) (598,175)
------------ ------------ ------------
Increase in net assets from operations 336 (598,175) 80,927
Dividends - $.211 per share (11,459) -- (711,314)
Common stock redeemed (Note B) -- -- (243,248)
------------ ------------ ------------
Total decrease in net assets (11,123) (598,175) (873,635)
Net assets on January 1, 1999 25,361 488,155 14,816,269
------------ ------------ ------------
Net assets on December 31, 1999 14,238 (110,020) 13,942,634
Net investment income -- -- 319,394
Net realized loss from securities transactions (186,862) -- (186,862)
Change in unrealized appreciation of investments -- 45,380 45,380
------------ ------------ ------------
Increase in net assets from operations (186,862) 45,380 177,912
Dividends - $.057 per share (14,238) -- (191,234)
Dividends - $.048 per share -- -- (161,026)
Common stock redeemed (Note B) -- -- (9,116,431)
------------ ------------ ------------
Total decrease in net assets (201,100) 45,380 (9,290,779)
Net assets on January 1, 2000 14,238 (110,020) 13,942,634
------------ ------------ ------------
Net assets on June 30, 2000 $ (186,862) $ (64,640) $ 4,651,855
============ ============ ============
</TABLE>
5
<PAGE>
PMD INVESTMENT COMPANY
NOTES TO FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2000
(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, 2000 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, 2000.
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 .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 accounting principles generally accepted in the United States of
America 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.
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<PAGE>
B. REDEMPTION OF SHARES
At June 30, 2000, 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.
The principal shareholder of the Company died on January 10, 2000. Federal
estate tax obligations incident to his estate necessitated the redemption
of 2,206,000 shares of the Company's stock. The shares were redeemed
effective June 30, 2000 at $4.12 per share. This redemption was paid on
July 5, 2000.
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 $5,652,000 as of February 1, 2000,
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>
Six Months Ended Six Months Ended
June 30, 2000 June 30, 1999
--------------------------- ----------------------------
Purchases Sales Purchases Sales
<S> <C> <C> <C> <C>
Tax Exempt:
Municipal bonds and notes $ -- $ 8,949,939 $ -- $ 35,000
Taxable:
Government agency -- 1,093,890 -- 301,438
----------- ----------- ----------- -----------
-- 10,043,829 -- 336,438
Other tax-exempt short-term
investments 10,268,803 104,702 481,277 165,321
----------- ----------- ----------- -----------
$10,268,803 $10,148,531 $ 481,277 $ 501,759
=========== =========== =========== ===========
</TABLE>
Net realized loss on sale of investments was $186,862 for the six months
ended June 30, 2000. Net realized gain on sale of investments was $112 for
the six months ended June 30, 1999.
The diversification of investments based on fair value at June 30, 2000 is
as follows:
State and municipal tax-exempt bonds 1.9 %
U.S. government agency bonds 12.9
Corporate bonds 4.1
Short-term tax-exempt money market fund 81.1
------
100.0 %
======
7
<PAGE>
E. DISTRIBUTIONS TO SHAREHOLDERS
On July 13, 2000, a quarterly income distribution of $0.0479 per share
aggregating $54,081 was declared from investment income realized during
2000. The dividend is payable on July 31, 2000 to shareholders of record on
July 24, 2000.
F. SUBSEQUENT EVENTS
The Board of Directors of the Company resolved on July 13, 2000 to dissolve
the Company pending approval of the shareholders.
G. SUPPLEMENTARY INFORMATION - SELECTED PER SHARE DATA AND RATIOS
<TABLE>
<CAPTION>
Six Months
Ended Years Ended December 31,
June 30, ---------------------------------------------------------------------
2000 1999 1998 1997 1996 1995
(Unaudited)
<S> <C> <C> <C> <C> <C> <C>
Weighted average shares
outstanding 3,329,471 3,360,634 3,432,115 3,537,042 3,626,328 3,825,907
========= ========= ========= ========= ========= =========
Interest income $0.113 $0.232 $0.244 $0.243 $0.251 $0.240
Expenses 0.017 0.029 0.030 0.028 0.030 0.024
--------- --------- --------- --------- --------- ---------
Net investment income 0.096 0.203 0.214 0.215 0.221 0.216
Distribution from net
investment income (0.106) (0.211) (0.215) (0.234) (0.262) (0.228)
Increase (decrease) in
unrealized appreciation
of investments 0.014 (0.177) 0.017 0.047 (0.094) 0.098
Net realized gain (loss)
from securities
transactions (0.057) -- 0.005 0.003 0.010 0.051
--------- --------- --------- --------- --------- ---------
Increase (decrease) in
net assets (0.053) (0.185) 0.021 0.031 (0.125) 0.137
Net asset value at
beginning of period 4.173 4.358 4.337 4.306 4.431 4.294
--------- --------- --------- --------- --------- ---------
Net asset value at end
of period $4.120 $4.173 $4.358 $4.337 $4.306 $4.431
========= ========= ========= ========= ========= =========
Ratio of expenses to
average net assets 0.8 %* 0.7 % 0.7 % 0.7 % 0.7 % 0.5 %
Ratio of net investment
income to average net
assets 4.6 %* 4.7 % 5.0 % 5.0 % 5.0 % 4.9 %
Portfolio turnover 0.0 %* 0.0 % 16.6 % 12.0 % 19.8 % 59.6 %
Number of shares
outstanding at end of
period (in thousands) 1,129 3,342 3,399 3,454 3,597 3,805
* Ratio has been annualized.
</TABLE>
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