-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, OC9fsr541nTuhScjjhco3pA1MHtELZpf6IaK428FeE4Seq+MW7KwU9UIafacyFGN wQNUbcffTiOZD++s3FL27w== 0000950116-06-001471.txt : 20060504 0000950116-06-001471.hdr.sgml : 20060504 20060504163217 ACCESSION NUMBER: 0000950116-06-001471 CONFORMED SUBMISSION TYPE: N-CSR PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20060228 FILED AS OF DATE: 20060504 DATE AS OF CHANGE: 20060504 EFFECTIVENESS DATE: 20060504 FILER: COMPANY DATA: COMPANY CONFORMED NAME: NRM INVESTMENT CO CENTRAL INDEX KEY: 0000313038 IRS NUMBER: 231922688 STATE OF INCORPORATION: PA FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: N-CSR SEC ACT: 1940 Act SEC FILE NUMBER: 811-02955 FILM NUMBER: 06808775 BUSINESS ADDRESS: STREET 1: 919 CONESTOGA RD STREET 2: ROSEMONT BUSINESS CAMPUS STE 112 BLDG 3 CITY: ROSEMONT STATE: PA ZIP: 19010 BUSINESS PHONE: 6105250904 MAIL ADDRESS: STREET 1: 919 CONESTOGA ROAD STREET 2: ROSEMONT BUSINESS CAMPUS STE 112 BLDG 3 CITY: ROSEMONT STATE: PA ZIP: 19010 N-CSR 1 n-csr.txt N-CSR UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-CSR CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES Investment Company Act file number: 811 02995 Exact name of registrant as specified in charter: NRM Investment Company Address of principal executive offices: NRM Investment Company, Rosemont Business Campus, Suite 112, Building 3 - 919 Conestoga Road, Rosemont, Pennsylvania 19010 Name and address of agent for service: John H. McCoy, President, NRM Investment Company, Rosemont Business Campus, Suite 112, Building 3 - 919 Conestoga Road, Rosemont, Pennsylvania 19010 Registrant's Telephone Number: (610) 527-7009 Date of fiscal year end: August 31, 2004 Date of Reporting Period: Semi-annual period ending February 28, 2006. ITEM 1 - REPORTS TO STOCKHOLDERS - --------------------------------- A copy of the report transmitted to shareholders pursuant to Rule 30e-1 under the Investment Company Act is attached hereto. ITEMS 2 - 5 - ----------- The within N-CSR is a semi-annual report and accordingly the information required by these items are not required at this time. ITEM 6 - SCHEDULE OF INVESTMENTS - -------------------------------- The information is included as part of the report to shareholders filed under Item 1 of this report and attached hereto. ITEMS 7, 8 - PROXY VOTING POLICIES AND PURCHASES OF EQUITY SECURITIES: --------------------------------------------------------- The information requested is not applicable to this open-end company. ITEM 9 - SUBMISSION OF MATTER TO A VOTE OF SECURITY HOLDERS - ----------------------------------------------------------- None. ITEM - 10 CONTROLS AND PROCEDURES - --------------------------------- The Fund operates through its five-member board of directors sitting as an executive committee of the whole; the board members receive only nominal director's fees. The Fund has no employees other than its officers none of whom receives compensation in such role. (The Assistant Secretary to the Fund is its counsel who receives compensation only for legal work, not in his role as a Fund officer.) The Fund engages independent contractors to provide investment, financial and custodial services. The Fund's principal executive and financial officer is its major shareholder and one of the five directors. In his view the following controls and procedures are effective to comply with the Regulations under the Investment Company Act. PORTFOLIO PROCEDURES 1. The Investment Advisor has discretion in investing the Fund's portfolio but only within the guidelines established by the Board of Directors, and those authorized to execute investment transactions act only on direction by the Board or Advisor. 2. Any significant inflows or outflows of cash will be brought to the President's attention to confirm that a related purchase or sale of securities or other disbursement was authorized by him. INVESTMENT CUSTODY AND SHAREHOLDER SERVICES 1. All transactions with shareholders and the custody of the Fund's Securities is performed by an independent corporate custodian. Any changes to these functions must be authorized by the Board of Directors. ACCOUNTING AND REPORTING 1. The recording, summarizing and reporting of all financial data will be performed by a CPA who is independent of the buying and selling of securities as well as the disbursement of the Fund's cash and transfer of the Fund's assets. 2. Upon discovery, the CPA will bring any unusual transaction directly to the President and/or Board's attention. 3. The CPA will provide directly to the Board of Directors a Statement of Net Assets and a Statement of Operations in accordance with generally accepted accounting principles within ten business days of each month end. CERTIFICATIONS I, John H. McCoy, President and Treasurer of the Fund (the Company's principal executive and financial officer) certify that: 1. I have reviewed this report on Form N-CSR of NRM Investment Company; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; (c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and (d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: 5/1/06 -------- /s/ John H. McCoy - -------------------------------------- John H. McCoy, President and Treasurer SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Registrant: NRM Investment Company By: /s/ John H. McCoy -------------------------------------- John H. McCoy, President and Treasurer Date: 5/1/06 -------- Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. By: /s/ John H. McCoy -------------------------------------- John H. McCoy, President and Treasurer Date: 5/1/06 -------- By: /s/ Edward Fackenthal -------------------------------------------------- Edward Fackenthal, Counsel and Assistant Secretary Date: 5/1/06 -------- NRM INVESTMENT COMPANY - -------------------------------------------------------------------------------- NRM INVESTMENT COMPANY SEMI-ANNUAL FINANCIAL STATEMENTS FEBRUARY 28, 2006 TABLE OF CONTENTS PAGE NO. FINANCIAL STATEMENTS: Statement of Assets and Liabilities 1 Schedule of Investments 2-5 Statement of Operations 6 Statements of Changes in Net Assets 7 Financial Highlights 8 Notes to Financial Statements 9-11 NRM INVESTMENT COMPANY - -------------------------------------------------------------------------------- STATEMENT OF ASSETS AND LIABILITIES UNAUDITED FEBRUARY 28, 2006 ------------ ASSETS Investments at fair value (cost $13,522,988) $ 13,720,027 Cash 400,000 Receivable from sale of securities 68,000 Interest and dividends receivable 156,141 Prepaid expenses 6,106 ------------- TOTAL ASSETS 14,350,274 ------------- LIABILITIES Dividends payable 102,478 Accrued expenses and other liabilities 162,167 ------------- TOTAL LIABILITIES 264,645 ------------- NET ASSETS, APPLICABLE TO 3,608,386 OUTSTANDING SHARES, EQUIVALENT TO $3.90 A SHARE $ 14,085,629 ============= See notes to financial statements. - -------------------------------------------------------------------------------- 1 NRM INVESTMENT COMPANY - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS
FEBRUARY 28, 2006 - UNAUDITED PRINCIPAL AMOUNT FAIR MUNICIPAL BONDS - 89.6% OR SHARES VALUE - ------------------------------------------------------------------------------------------------------------------------------------ GENERAL OBLIGATION BONDS - 24.8% Pennsylvania State, Fourth Series, 5.00%, due 7/1/08 500,000 $ 516,715 Philadelphia, Pennsylvania School District, 5.00%, due 4/1/10 200,000 211,536 Pennsylvania State, 5.125%, due 9/15/10, callable 3/15/07 (AMBAC) 265,000 273,493 Bucks County, Pennsylvania, 5.00%, due 6/15/11, callable 6/15/09 at 100 100,000 104,736 Pittsburgh, Pennsylvania, 5.00%, due 9/1/12, callable 3/1/12 at 100 (AMBAC) 250,000 264,573 Abington Heights School District, Lackawana County, Pennsylvania, 4.25%, due 2/15/13, callable 2/15/08 (FSA) 200,000 201,972 Berks County Pennsylvania, 5.00%, due 11/15/14, callable 11/15/08 at 100 (AMBAC) 100,000 103,254 Philadelphia, Pennsylvania School District, 5.625%, due 8/1/15, callable 8/1/12 at 100 (FGIC) 300,000 333,405 Philadelphia Pennsylvania School District, 5.25%, due 4/1/16, callable 4/1/09 at 100 (MBIA) 100,000 105,240 Wilson Pennsylvania School District, 5.375%, due 5/15/16, callable 5/15/12 (FSA) 425,000 463,849 Licking County, Ohio Joint Vocational School District, 5.50%, due 12/1/16, callable 12/1/12 at 100 (MBIA) 170,000 185,575 Pittsburgh, Pennsylvania, 5.50%, due 9/1/17, at 100 (FSA) 250,000 286,520 Fairfax County, Virginia, 5.50%, due 12/1/17, callable 12/1/07 at 102 135,000 142,371 Bucks County, Pennsylvania School District, 5.250%, due 12/1/17, callable 4/1/07 at 100 200,000 206,308 ----------- TOTAL GENERAL OBLIGATION BONDS 3,399,547 ----------- HOUSING FINANCE AGENCY BONDS -3.2% Odessa, Texas Housing Finance Corporation, Home Mortgage Revenue Refunding, 8.45%, due 11/1/11, callable 11/1/05 at 103 34,136 35,017 California Housing Finance Agency, Home Mortgage, 10.25%, due 2/1/14, callable 2/1/99 at 100 45,000 46,648 Nevada Housing Division, Single-Family Mortgage, 7.35%, due 10/1/15 5,000 5,001
See notes to financial statements. - -------------------------------------------------------------------------------- 2 NRM INVESTMENT COMPANY - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS (CONTINUED)
FEBRUARY 28, 2006 - UNAUDITED PRINCIPAL AMOUNT FAIR MUNICIPAL BONDS - 89.6% (CONTINUED) OR SHARES VALUE - ------------------------------------------------------------------------------------------------------------------------------------ HOUSING FINANCE AGENCY BONDS - 3.2% (CONTINUED) Alabama Housing Finance Authority, Single-Family Mortgage, 6.00%, due 10/1/16, callable 4/1/06 at 102 120,000 $ 122,520 Minnesota State Housing Finance Agency, Single-Family Mortgage, 5.95%, due 1/1/17, callable 1/1/07 at 101.50 70,000 71,564 Hawaii State Housing Finance and Development Corporation, Single-Family Mortgage, 5.45%, due 7/1/17 callable 7/1/07 at 102, callable 7/1/09 at 100 50,000 51,398 Utah State Housing Finance Agency, Single-Family Mortgage, 6.30%, due 1/1/18 10,000 10,034 Florida Housing Finance Corp., 5.25%, due 12/1/18, callable 12/1/08 at 102, 12/1/10 at 100 100,000 103,208 ----------- TOTAL HOUSING FINANCE AGENCY BONDS 445,390 ----------- HOSPITAL REVENUE BONDS - .9% Kalamazoo Michigan Hospital Finance Authority, Bronson Methodist, 5.75%, due 5/15/16 callable 5/15/06 at 102 (MBIA) 125,000 128,104 ----------- TOTAL HOSPITAL REVENUE BONDS 128,104 ----------- OTHER REVENUE BONDS - 60.7% Radnor Township Pennsylvania School District, 5.75%, due 3/15/19, 500,000 511,980 pre-refunded 3/15/07 Parkland Pennsylvania School District, 5.00%, due 9/1/07 (FGIC) 170,000 191,029 Grand Rapids, Michigan Downtown Development Authority, 6.60%, due 6/1/08, callable 6/1/06 at 100 365,000 368,051 Montgomery County Pennsylvania Industrial Development Authority, 5.00%, due 11/1/10 500,000 530,430 Allegheny County Pennsylvania Industrial Development Authority, 5.00%, due 11/1/11 (MBIA) 100,000 107,088 Pennsylvania State Higher Educational Facilities Authority, (Messiah College), 5.50%, due 5/1/11 500,000 530,740 Pennsylvania State Higher Educational Facilities Authority, 5.25%, due 1/1/12, callable 7/1/08 at 100 (MBIA) 175,000 181,661 Philadelphia Pennsylvania Gas Works, 18th Series, 5.00%, due 8/1/11 (CIFG) 430,000 456,737
See notes to financial statements. - -------------------------------------------------------------------------------- 3 NRM INVESTMENT COMPANY - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS (CONTINUED)
FEBRUARY 28, 2006 - UNAUDITED PRINCIPAL AMOUNT FAIR MUNICIPAL BONDS - 89.6% (CONTINUED) OR SHARES VALUE - ------------------------------------------------------------------------------------------------------------------------------------ OTHER REVENUE BONDS - 60.7% Pennsylvania State Higher Educational Facilities Authority, 5.375%, due 7/1/12, callable 7/1/09 at 100 (AMBAC) 100,000 $ 105,418 Pennsylvania Infrastructure Investment Authority, 5.00%, due 9/1/12 500,000 537,820 Jackson Mississippi Redevelopment Authority, Jackson Street Area Project, 5.70%, due 4/1/13, callable 10/1/05 at 100 (MBIA) 100,000 100,144 Harrisburg Pennsylvania Recovery Facilities, 5.00%, due 9/1/13, callable 9/1/08 at 101 (FSA) 100,000 104,666 Rock Hill South Carolina Utility System, 5.125%, due 1/1/14, callable 1/1/10 at 101 (FSA) 125,000 132,338 Philadelphia Pennsylvania Wastewater, 5.25%, due 11/1/14, callable 11/1/12 at 100 (FGIC) 250,000 272,372 Philadelphia Pennsylvania Water, 5.00%, due 7/1/14 250,000 271,977 Pennsylvania State Turnpike Commission, 5.25%, due 12/1/14, callable 12/1/08 at 101 (AMBAC) 230,000 241,506 Pennsylvania State Turnpike Commission, 5.25%, due 12/1/15, callable 12/1/08 at 101 (AMBAC) 200,000 209,485 Rochester Minnesota Independent School District No. 535, 5.75%, due 2/1/16, callable 2/1/10 at 100 100,000 107,662 Allegheny County PA Higher Educational Building Authority, 5.00%, due 6/15/16, callable 6/15/12 at 100 (AMBAC) 150,000 170,240 Ohio State Mental Health Capital Facilities, 5.50%, due 6/1/16, callable 6/1/11 at 100 (MBIA) 250,000 269,338 Pennsylvania State Higher Educational Facilities Authority, 5.00%, due 6/15/16, callable 6/15/12 at 100 (AMBAC) 100,000 106,301 Philadelphia Pennsylvania Gas Works, Forth Series, 5.25%, due 8/1/16, callable 8/1/13 250,000 271,365 Philadelphia Pennsylvania Industrial Development Lease Revenue, 5.40%, due 2/15/17, callable 2/15/07 at 102 (MBIA) 100,000 103,760 Delaware River Joint Toll Bridge Authority, 5.25%, due 7/1/17, callable 7/1/13 500,000 539,330 Delaware River Port Authority PA & NJ, 5.75% due 1/1/18, callable 1/1/10 at 100 (FSA) 100,000 107,730 Las Vegas Nevada Convention and Visitors Authority, 5.75%, due 7/1/18, callable 7/1/09 at 101 (AMBAC) 100,000 108,027 Pennsylvania State Turnpike, Registration Fee Revenue, 5.375%, due 7/15/18, callable 7/15/11 at 101 (AMBAC) 100,000 109,516 Red River Texas Education Finance Corporation, St. Marks School, 6.00%, due 8/15/17, callable 2/15/10 at 100 300,000 323,991 Red River Texas Education Finance Corporation, St. Marks School, 6.00%, due 8/15/18, callable 2/15/10 at 100 150,000 161,198
See notes to financial statements. - -------------------------------------------------------------------------------- 4 NRM INVESTMENT COMPANY - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS (CONTINUED)
FEBRUARY 28, 2006 - UNAUDITED PRINCIPAL AMOUNT FAIR MUNICIPAL BONDS - 89.6% (CONTINUED) OR SHARES VALUE - ------------------------------------------------------------------------------------------------------------------------------------ OTHER REVENUE BONDS - 60.7% (CONTINUED) Michigan Municipal Bond Authority, LOC Government Loans, 6.125%, due 12/1/18, callable 12/1/04 at 102, callable 12/1/06 at 100 (FGIC) 100,000 $ 101,142 Kennett Pennsylvania Consolidated School District, 5.25%, due 2/15/19, callable 2/15/13 (FGIC) 500,000 542,645 Placer County California Water Agency, Certificates of Participation, 5.50%, due 7/1/19, callable 7/1/09 at 101 (AMBAC) 320,000 344,240 Brevard County Florida School Board Certificates, 5.50%, due 7/1/21, callable 7/1/06 at 102 (AMBAC) 100,000 102,699 ----------- TOTAL OTHER REVENUE BONDS 8,322,626 ----------- TOTAL MUNICIPAL BONDS (COST $12,195,503) 12,295,667 ----------- OTHER SECURITIES -8.0% UBS AG Enhanced Appreciation Securities, due 3/31/06 250,000 286,875 UBS AG Enhanced Appreciation Securities, due 6/30/06 750,000 810,000 ----------- TOTAL OTHER SECURITIES (COST $1,000,000) 1,096,875 ----------- SHORT-TERM INVESTMENTS - AT COST APPROXIMATING FAIR VALUE - 2.4%, FEDERATED PENNSYLVANIA MUNICIPAL CASH TRUST #8 -(COST $327,485) 327,485 327,485 ----------- TOTAL INVESTMENTS - 100% (COST $13,522,988) $13,720,027 ===========
See notes to financial statements. - -------------------------------------------------------------------------------- 5 NRM INVESTMENT COMPANY - -------------------------------------------------------------------------------- STATEMENT OF OPERATIONS
UNAUDITED SIX-MONTH PERIOD ENDED FEBRUARY 28, 2006 - ----------------------------------------------------------------------------------------------------------------------------------- INVESTMENT INCOME $ 238,575 --------------- EXPENSES Investment advisory fees 7,696 Custodian fees 5,250 Transfer and dividend disbursing agent fees 950 Legal and professional fees 25,367 Directors' fees 6,200 Insurance 750 Capital stock tax 2,250 Miscellaneous 4,233 --------------- TOTAL EXPENSES 52,696 --------------- NET INVESTMENT INCOME 185,879 --------------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Net realized( loss) from investment transactions (1,618) Net unrealized appreciation of investments 13,405 --------------- NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS 11,787 --------------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 197,666 ===============
See notes to financial statements. - -------------------------------------------------------------------------------- 6 NRM INVESTMENT COMPANY - -------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS
UNAUDITED PERIOD/ YEAR ENDED FEBRUARY 28, 2006 AUGUST 31, 2005 - ----------------------------------------------------------------------------------------------------------------------------------- INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS Net investment income $ 185,879 $ 274,356 Net realized gain (loss) from investment transactions (1,618) 518,298 Net unrealized appreciation (depreciation) of investments 13,405 (133,043) ------------- ------------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS 197,666 659,611 DISTRIBUTIONS TO SHAREHOLDERS (184,767) (781,880) CAPITAL SHARE TRANSACTIONS (1,324,342) (59,678) ------------- ------------- TOTAL (DECREASE) IN NET ASSETS (1,311,443) (181,947) NET ASSETS - BEGINNING OF YEAR 15,397,072 15,579,019 ------------- ------------- NET ASSETS - END OF PERIOD/YEAR $ 14,085,629 $ 15,397,072 ============= =============
See notes to financial statements. - -------------------------------------------------------------------------------- 7 NRM INVESTMENT COMPANY - -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS
AUGUST 31, UNAUDITED FEBRUARY 28, -------------------------------------------------------------- 2006 2005 2004 2003 2002 2001 - ----------------------------------------------------------------------------------------------------------------------------------- PER SHARE DATA (FOR A SHARE OUTSTANDING THROUGHOUT THE INDICATED YEAR) Net asset value, beginning of year $3.900 $3.931 $3.834 $3.842 $3.837 $3.794 Net investment income .051 .070 .119 .146 .163 .199 Net realized and unrealized gain (loss) on investments .003 .097 .096 .006 .006 .054 ------------------------------------------------------------------------------- TOTAL FROM INVESTMENT OPERATIONS .054 .167 .215 .152 .169 .253 ------------------------------------------------------------------------------- Less distributions: Dividends from capital gains - (.130) (.009) - - - Dividends from net tax-exempt income (.045) (.061) (.103) (.146) (.163) (.199) Dividends from net taxable income (.005) (.007) (.006) - - - Distribution in excess of net investment income - - - (.014) (.001) (.011) ------------------------------------------------------------------------------- TOTAL DISTRIBUTIONS (.050) (.198) (.118) (.160) (.164) (.210) ------------------------------------------------------------------------------- NET ASSET VALUE, END OF PERIOD/YEAR $3.904 $3.900 $3.931 $3.834 $3.842 $3.837 =============================================================================== TOTAL RETURN 1.40% 3.76% 5.59% 3.96% 4.40% 6.70% RATIOS/SUPPLEMENTAL DATA Net assets, end of year (in thousands) 14,086 $15,397 $15,579 $15,198 $15,285 $15,322 Ratio of expenses to average net assets .36% 1.23% .67% 1.07% 1.43% .95% Ratio of net investment income to average net assets 1.26% 1.75% 3.04% 3.78% 4.24% 4.93% Portfolio turnover rate 41.21% 56.38% 47.45% 37.90% 16.82% 14.21%
See notes to financial statements. - -------------------------------------------------------------------------------- 8 NRM INVESTMENT COMPANY - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS NOTE 1 - NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES NATURE OF BUSINESS NRM Investment Company (the Fund) is registered under the Investment Company Act of 1940, as amended, as a non-diversified, open-end management investment company. The following is a summary of significant accounting policies consistently followed by the Fund in the preparation of its financial statements. VALUATION OF INVESTMENTS Investments in securities (other than debt securities maturing in 60 days or less) traded in the over-the-counter market, and listed securities for which no sale was reported on the last business day of the period, are valued based on prices furnished by a pricing service. This service determines the valuations using a matrix pricing system based on common bond features such as coupon rate, quality and expected maturity dates. Securities for which market quotations are not readily available are valued by the Investment Advisor under the supervision and responsibility of the Fund's Board of Directors. Investments in securities that are traded on a national securities exchange are valued at the closing prices. Short-term investments are valued at amortized cost, which approximates fair value. INVESTMENT TRANSACTIONS AND RELATED INVESTMENT INCOME Investment transactions are accounted for on the date the securities are purchased or sold (trade date). Realized gains and losses from investment transactions are reported on the basis of identified cost for both financial and federal income tax purposes. Interest income is recorded on the accrual basis for both financial and income tax reporting. In computing investment income, the Fund amortizes premiums over the life of the security, unless said premium is in excess of any call price, in which case the excess is amortized to the earliest call date. Discounts are accreted over the life of the security. TRANSACTIONS WITH SHAREHOLDERS Fund shares are sold and redeemed at the net asset value. Transactions of these shares are recorded on the trade date. Dividends and distributions are recorded by the Fund on the ex-dividend date. FEDERAL INCOME TAXES It is the Fund's policy to comply with the requirements of the Internal Revenue Code applicable to regulated investment companies and distribute substantially all of its net investment income and realized net gain from investment transactions to its shareholders and, accordingly, no provision has been made for federal income taxes. 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. - -------------------------------------------------------------------------------- 9 NOTE 2 - INVESTMENT ADVISOR AND MANAGEMENT FEES AND OTHER TRANSACTIONS WITH AFFILIATES The Fund has an investment advisory agreement which provides that the Fund will pay to the investment advisor, as compensation for services provided and expenses assumed, a fee. The annual flat rate was $10,000 through December 31, 2005 and subsequently thereto was increased to an annual rate of .30% of the fund's net asset value. The chief executive officer of the investment advisor is on the Board of Directors of the Fund. NOTE 3 - COST, PURCHASES AND SALES OF INVESTMENT SECURITIES Cost of purchases and proceeds from sales and maturities of investment securities, other than short-term investments, aggregated $5,628,667 and $7,639,114, respectively, during the period ended February 28, 2006. At February 28, 2006, the cost of investment securities owned is the same for financial reporting and federal income tax purposes. Net unrealized appreciation of investment securities is $197,039 (aggregate gross unrealized appreciation of $237,121,less aggregate unrealized depreciation of $40,082). NOTE 4 - DIVIDENDS PAYABLE On December 15, 2005 the Board of Directors declared a quarterly dividend of $.0284 per share to shareholders of record as of February 22, 2006, payable March 1, 2006. NOTE 5 - ENVIRONMENTAL LIABILITY The Fund has been identified as a potentially responsible party ("PRP") by the Environmental Protection Agency ("EPA") in remedial activities related to an environmental matter. The claim is divided into two parts: the first relates to groundwater contamination (OU-1), and the second relates to drummed waste and soil cleanup (OU-2). In addition, there are past costs incurred by the EPA. The Fund has joined a group (OU-1 Group) of defendants to share the costs of the OU-1 matter and has declined to join a group (OU-2 Group) to share the costs of the OU-2 matter as the Fund believes its linkage to this portion of the claim to be weak. The Fund has accrued $150,000 at February 28, 2006 as its estimate of the remaining commitment to the OU-1 Group. The Fund's share of the costs is subject to reallocation after all available evidence is analyzed. - -------------------------------------------------------------------------------- 10 NOTE 5 - ENVIRONMENTAL LIABILITY (CONTINUED) The OU-2 Group has begun a cost recovery suit against the Fund and others for the OU-1 and OU-2 work as well as past EPA costs. The total amount asserted for both the OU-1 and OU-2 matters is $3,000,000 and for the past EPA costs is $7,000,000. Of the amounts the Fund has already paid or will pay because of its OU-1 contract commitment, it will seek contribution or reimbursement from the other defendants. The Fund believes there is little evidence to link it to the OU-2 matter but the OU-2 Group will assert otherwise. Ultimately there will be an allocation of responsibility under court supervision which will ultimately resolve contracted and contributed claim costs. However, the outcome to the Fund is clearly uncertain and cannot be measured. The ultimate outcome may have a material adverse effect on the Fund's financial position or results of operations. NOTE 6 - TRANSACTIONS IN CAPITAL STOCK AND COMPONENTS OF NET ASSETS Transactions in fund shares were as follows:
PERIOD/YEAR ENDED ------------------------------------------------------ FEBRUARY 28, 2006 AUGUST 31, 2005 ----------------------- ------------------------ SHARES AMOUNT SHARES AMOUNT ----------- ---------- ---------- ---------- Shares issued in reinvestment of dividends 5 $22 20 $80 Shares redeemed 340,065 (1,324,364) 15,015 (59,758) -------- ----------- ------- -------- NET DECREASE (340,060) $(1,324,342) (14,995) $(59,678) ======== =========== ======= ======== The components of net assets at February28, 2006 and August 31, 2005 are as follows: FEBRUARY 28, AUGUST 31, 2006 2005 ------------- ----------- Capital shares, par value $.01 per share, 3,608,386 shares and 3,948,446 shares issued and outstanding at February 28, 2006 and August 31, 2005 (10,000,000 full and fractional shares authorized); and capital paid-in $13,999,485 $15,323,827 Accumulated net realized loss on investment transactions (1,618) - Unrealized appreciation of investments 197,039 183,633 Overdistributed net investment income (109,277) (110,388) ----------- ----------- NET ASSETS $14,085,629 $15,397,072 =========== ===========
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