PMD INVESTMENT COMPANY
Financial Statements for the
Year Ended December 31, 1999 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,
1999, 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, 1999, 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, 1999, 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.
/s/ Deloitte & Touche LLP
Omaha, Nebraska
February 2, 2000
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
PMD INVESTMENT COMPANY
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1999
- -----------------------------------------------------------------------------------------------------------------------------
ASSETS:
Investments in securities, at fair value,
amortized cost of $12,902,432 $ 12,792,412
Investment in tax-exempt money market fund 971,203
------------
Total investments 13,763,615
Interest receivable 196,777
------------
Total assets 13,960,392
LIABILITIES:
Accrued expenses
17,758
------------
Commitments and contingencies
NET ASSETS (common stock, $.50 par value; 20,000 shares authorized; equivalent
to $4.17 per share based on 3,341,764 shares of common stock outstanding at
December 31, 1999) $ 13,942,634
============
</TABLE>
See notes to financial statements.
2
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<TABLE>
<CAPTION>
<S> <C> <C> <C>
PMD INVESTMENT COMPANY
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1999
- --------------------------------------------------------------------------------------------------------------------------
Principal Amortized Fair
Amount Cost Value
Abbey National PLC Sub, 6.69%, due October 17,
2005 $ 550,000 $ 553,911 $ 526,916
Austin, Texas, Independent School District, 4.75%,
due August 1, 2008 500,000 496,801 490,320
Citigroup Inc., Serial Note, 9.5%, due
March 1, 2002 550,000 575,323 576,119
Clark County, Washington Public Utilities District #1
Electric Revenue, 6.3%, due January 1, 2004 250,000 249,773 259,428
Denver Metropolitan Major League Baseball Stadium
District Colorado, 6.35%, due October 1, 2003 250,000 250,000 260,680
Federal Home Loan Mortgage Corporation, 7.0%,
due June 1, 2024 1,169,840 1,173,905 1,137,237
Federal National Mortgage Association, 6.5%,
due January 1, 2024 771,678 762,396 735,648
Federal National Mortgage Association, 7.8%,
due March 29, 2005 1,000,000 1,002,421 998,340
Florida State, General Services Revenues,
6%, due July 1, 2001 220,000 219,916 225,925
Grand Island, Nebraska Sanitary Sewer Revenue,
4.8%, due April 1, 2000 400,000 400,000 400,556
Hanover County, Virginia IDA Public Facilities
Lease Revenue, 6.75%, due July 15, 2007 150,000 150,000 158,339
Jefferson County, West Virginia Residential
Mortgage Revenue, Refunding Series A, 7.75%
due January 1, 2012 65,000 65,171 65,660
King County, Washington School District, 4.3%,
due June 1, 2010 500,000 495,947 460,350
Lincoln, Nebraska Water Revenue, 6.7%, due
November 1, 2000 250,000 250,000 255,420
Mecklenburg County, North Carolina Public
Service, 4.4%, due February 1, 2011 500,000 492,046 467,805
Memphis, Tennessee, 4.65%, due July 1, 2007 500,000 498,638 488,555
Minneapolis, Minnesota Refunding Service, 4.25%,
due December 1, 2008 500,000 503,658 471,550
</TABLE>
See notes to financial statements.
3
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<TABLE>
<CAPTION>
<S> <C> <C> <C>
PMD INVESTMENT COMPANY
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1999 (continued)
- -------------------------------------------------------------------------------------------------------------------------------
Principal Amortized Fair
Amount Cost Value
Nebraska Investment Finance Authority, 6.9%,
due March 15, 2000 $ 140,000 $ 140,000 $ 140,693
Ohio State Highway Capital Imports, Series B,
4.5%, due May 1, 2004 500,000 499,074 498,030
Omaha Public Power District, Nebraska Electric
Revenue, Series B, 5.9%, due February 1, 2006 450,000 450,000 474,372
Omaha Public Power District, Nebraska Electric
Revenue, Series A, 5%, due January 1, 2001 500,000 502,307 503,700
Sabine River Authority, Texas Water Supply
Facility, Lake Fork Project, 6.5%, due
December 1, 2001 265,000 264,755 270,846
Tucson, Arizona, G.O., Ref. 5.8%, due July 1, 2002 10,000 9,982 10,478
Tucson, Arizona, G.O., Ref. 5.8%, due July 1, 2005 240,000 239,534 251,129
University of Nebraska Facilities Corp., 7.2%,
due July 1, 2004 250,000 250,000 256,347
Utah State, 4.9%, due July 1, 2009 500,000 497,643 494,395
Vermont State, Series B, 5.7%, due August 1, 2005 400,000 398,441 416,440
Virginia State, G.O., 4%, due June 1, 2003 500,000 502,193 492,770
Wake City, North Carolina, 4.5%, due March 1, 2011 500,000 489,281 465,780
Washington State, Series A and AT-6, 5.8%, due
February 1, 2002 245,000 244,492 253,737
Washington State, Series A and AT-6, 5.8%, due
February 1, 2003 5,000 4,990 5,178
Wisconsin Housing and Economic Development,
Series 1, 7%, due October 1, 2003 270,000 269,884 279,669
------------ ------------ ------------
Totals $ 12,901,518 $ 12,902,432 $ 12,792,412
============ ============ ============
</TABLE>
See notes to financial statements.
4
<PAGE>
PMD INVESTMENT COMPANY
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1999
- -------------------------------------------------------------------------------
Interest Income:
From investments $ 779,644
Expenses:
Investment advisory fee 32,565
Custodian fees 4,000
Professional fees 32,812
Shareholders servicing costs 5,652
Directors fees 15,000
Other 10,849
--------
Total expenses 100,878
--------
Net investment income 678,766
Realized and unrealized gain (loss) on sales of investments:
Net realized gain on sale of investments 336
Change in unrealized appreciation of investments (598,175)
--------
(597,839)
--------
Net increase in net assets resulting from operations $ 80,927
========
See notes to financial statements.
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<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
PMD INVESTMENT COMPANY
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
- ----------------------------------------------------------------------------------------------------------------------------------
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 - $ - $ - $ 736,071 $ - $ - $ 736,071
Net realized gain from
securities transactions - - - - 17,920 - 17,920
Change in unrealized appreciation
of investments - - - - - 59,085 59,085
--------- ---------- ----------- -------- ------- --------- -----------
Increase in net assets from
operations - - - 736,071 17,920 59,085 813,076
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) 8,289 8,691 59,085 (162,275)
Net assets on January 1, 1998 3,453,773 1,726,886 12,616,121 189,797 16,670 429,070 14,978,544
--------- ---------- ----------- -------- ------- --------- -----------
Net assets on December 31, 1998 3,398,855 $1,699,427 $12,405,240 $198,086 $25,361 $488,155 $14,816,269
========= ========== =========== ======== ======= ========= ===========
Year ended December 31, 1999:
Net investment income - $ - $ - $ 678,766 $ - $ - $ 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 - - - 678,766 336 (598,175) 80,927
Dividends - $.211 per share - - - (699,855) (11,459) - (711,314)
Common stock redeemed (57,091) (28,546) (214,702) - - - (243,248)
--------- ---------- ----------- -------- ------- --------- -----------
Total decrease in net assets (57,091) (28,546) (214,702) (21,089) (11,123) (598,175) (873,635)
Net assets on January 1, 1999 3,398,855 1,699,427 12,405,240 198,086 25,361 488,155 14,816,269
--------- ---------- ----------- -------- ------- --------- -----------
Net assets on December 31, 1999 3,341,764 $1,670,881 $12,190,538 $176,997 $14,238 $(110,020) $13,942,634
========= ========== =========== ======== ======= ========= ===========
</TABLE>
See notes to financial statements.
6
<PAGE>
PMD INVESTMENT COMPANY
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
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, 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.
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.
Reclassifications - Certain amounts in the prior years' financial statements
have been reclassified to conform with the 1999 presentation.
B. REDEMPTION OF SHARES
At December 31, 1999, the Company had authorized 20,000,000 shares of $.50 par
value common stock.
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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 $5,652,000 as
of December 31, 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>
Year Ended Year Ended
December 31, 1999 December 31, 1998
Purchases Sales Purchases Sales
Tax Exempt:
Municipal bonds and notes $ - $ 90,000 $ 1,976,055 $ 1,364,787
Taxable:
Government agency - 473,549 504,060 1,190,827
--------- ----------- ----------- -----------
- 563,549 2,480,115 2,555,614
Other tax-exempt short-term
investments 498,106 796,666 3,367,242 3,485,820
--------- ----------- ----------- -----------
$ 498,106 $ 1,360,215 $ 5,847,357 $ 6,041,434
========= =========== =========== ===========
</TABLE>
Net realized gain on sale of investments was $336 and $17,920 for the years
ended December 31, 1999 and 1998, respectively.
The diversification of investments based on fair value at December 31, 1999 is
as follows:
State and municipal tax-exempt bonds 64.1 %
U.S. government agency bonds 20.9
Corporate bonds 8.0
Short-term tax-exempt money market fund 7.0
-----
100.0 %
=====
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E. DISTRIBUTIONS TO SHAREHOLDERS
On December 30, 1999, a quarterly income distribution of $0.052969 per share
aggregating $176,997 and a distribution of $0.004261 per share aggregating
$14,238 was declared from net realized gains from investment transactions during
1999. The dividend was paid on January 17, 2000 to shareholders of record on
January 10, 2000.
F. SUBSEQUENT EVENT
Subsequent to December 31, 1999, the principal shareholder of the Company died
on January 10, 2000. Federal estate tax obligations incident to his estate may
necessitate either liquidation of the Company or a substantial redemption of
shares of the Company's stock. No decisions have been made by the Board of
Directors of the Company or the shareholder's personal representative with
respect to such matters.
G. SUPPLEMENTARY INFORMATION - SELECTED PER SHARE DATA AND RATIOS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Years Ended December 31,
-------------------------------------------------------------------------------
1999 1998 1997 1996 1995
Weighted average shares outstanding 3,360,634 3,432,115 3,537,042 3,626,328 3,825,907
========= ========= ========= ========= =========
Interest income $ 0.232 $ 0.244 $ 0.243 $ 0.251 $ 0.240
Expenses 0.029 0.030 0.028 0.030 0.024
--------- --------- --------- --------- ---------
Net investment income 0.203 0.214 0.215 0.221 0.216
Distribution from net investment
income (0.211) (0.215) (0.234) (0.262) (0.228)
Increase (decrease) in unrealized
appreciation of investments (0.177) 0.017 0.047 (0.094) 0.098
Net realized gain (loss) from securities
transactions -- 0.005 0.003 0.010 0.051
--------- --------- --------- --------- ---------
Increase (decrease) in net assets (0.185) 0.021 0.031 (0.125) 0.137
Net asset value at beginning of period 4.358 4.337 4.306 4.431 4.294
--------- --------- --------- --------- ---------
Net asset value at end of period $ 4.173 $ 4.358 $ 4.337 $ 4.306 $ 4.431
========= ========= ========= ========= =========
Ratio of expenses to average net assets 0.7 % 0.7 % 0.7 % 0.7 % 0.5 %
Ratio of net investment income to
average net assets 4.7 % 5.0 % 5.0 % 5.0 % 4.9 %
Portfolio turnover -- 16.6 % 12.0 % 19.8 % 59.6 %
Number of shares outstanding at
end of period (in thousands) 3,342 3,399 3,454 3,597 3,805
</TABLE>
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