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, 2005
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.
ITEM 2 CODE OF ETHICS:
- -----------------------
The registrant has adopted a code of ethics. It is attached as an Exhibit to
Item 11 (a)(1).
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT:
- -----------------------------------------
The Board of Directors does not have an audit committee and accordingly the
entire board oversees the Registrant's accounting and financial reporting
processes including the audits of its financial statements. The board employs an
outside accountant responsible for normal bookkeeping, tax preparation and
recordkeeping, and employs a firm of independent auditors to report on internal
controls and certify its financial records on an annual basis. The bookkeeper
and outside auditor both qualify as financial experts. The outside accountant
and auditor are engaged on behalf of the Registrant by the Company's president
and their engagements are ratified yearly by the shareholders. The outside
auditor provides no services for the Registrant's investment adviser. Note: the
members of the five-member board of directors own 87% of its shares. Registrant
has no salaried employees to otherwise fulfill the role of financial expert.
ITEM 4. ACCOUNTANT FEES AND SERVICES
- ------------------------------------
(a) Audit fees: 2004 2005
11,302 11,720
(b) Related fees 0 0
(c) (d) Tax & other fees 6,000 6,000(1)
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS
- ---------------------------------------------
See Item 3.
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
- ----------
Not applicable to Registrant
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. It has no employees other than its officers
none of whom receives compensation other than nominal director's fees. It
engages independent contractors to provide investment, financial and custodial
services.
- ----------
(1) Billed annually on a non-segregated basis.
2
PORTFOLIO PROCEDURES
1. The Investment Advisor and those authorized to execute investment
transactions do not have discretion to change the Fund's portfolio outside of
the guidelines established by the Board of Directors.
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.
3
CERTIFICATIONS
I, John H. McCoy, President and Treasurer of the Fund 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
4
(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: 10/28/05
- --------------------------
/s/ John H. McCoy
- --------------------------------------
John H. McCoy, President and Treasurer
5
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: 10/28/05
- --------------------------
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: 10/28/05
- --------------------------
By: /s/ Edward Fackenthal
- --------------------------------------------------
Edward Fackenthal, Counsel and Assistant Secretary
Date: 10/28/05
- --------------------------
6
EXHIBITS
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Shareholders and Board of Directors
NRM Investment Company
We have audited the accompanying statement of assets and liabilities of
NRM Investment Company (the Fund), including the schedule of investments, as of
August 31, 2005, 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 financial highlights for each of the five years in the period
then ended. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements and financial highlights 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 August 31, 2005, 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 financial highlights
referred to above present fairly, in all material respects, the financial
position of NRM Investment Company at August 31, 2005, 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 financial highlights for each of
the five years in the period then ended, in conformity with accounting
principles generally accepted in the United States of America.
[GRAPHIC OMITTED]
7
NRM INVESTMENT COMPANY
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STATEMENT OF ASSETS AND LIABILITIES
AUGUST 31, 2005
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2005
----------------
ASSETS
Investments at fair value (cost $15,280,350) $15,463,982
Interest and dividends receivable 104,586
Prepaid expenses 625
----------------
TOTAL ASSETS 15,569,193
LIABILITIES
Accrued expenses and other liabilities 172,121
----------------
NET ASSETS, APPLICABLE TO 3,948,446 OUTSTANDING SHARES, EQUIVALENT $15,397,072
TO $3.90 A SHARE
================
See notes to financial statements.
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2
NRM INVESTMENT COMPANY
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SCHEDULE OF INVESTMENTS
AUGUST 31, 2005
- --------------------------------------------------------------------------------------------------------------------
PRINCIPAL
AMOUNT FAIR
MUNICIPAL BONDS - 51.3% OR SHARES VALUE
- --------------------------------------------------------------------------------------------------------------------
GENERAL OBLIGATION BONDS - 14.5%
Seattle, Washington, 3.00%, due 12/1/06 100,000 $ 100,118
Snohomish County, Washington, Fire Protection District No. 1, 3.00%,
due 12/1/07 (FSA) 135,000 134,845
Bucks County, Pennsylvania, 5.00%, due 6/15/11, callable 6/15/09 at 100 100,000 106,092
Pittsburgh, Pennsylvania, 5.00%, due 9/1/12, callable 3/1/12 at 100
(AMBAC) 250,000 269,785
Berks County Pennsylvania, 5.00%, due 11/15/14, callable 11/15/08 at
100 (AMBAC) 100,000 105,105
Philadelphia, Pennsylvania School District, 5.625%, due 8/1/15,
callable 8/1/12 at 100 (FGIC) 300,000 340,752
Philadelphia Pennsylvania School District, 5.25%, due 4/1/16, callable
4/1/09 at 100 (MBIA) 100,000 107,455
Montgomery County Texas Municipal Utility District 67, 6.00%, due
9/1/16, callable 9/1/05 at 100 (AMBAC) 250,000 250,000
Licking County Ohio Joint Vocational School District, 5.375%, due
12/1/16, callable 12/1/12 at 100 (MBIA) 170,000 188,736
Pittsburgh Pennsylvania School District, 5.50%, due 9/1/17 (FSA) 250,000 292,452
Fairfax County, Virginia, 5.50%, due 12/1/17, callable 12/1/07
at 102 135,000 144,858
Bucks County, Pennsylvania School District, 5.250%, due 12/1/17,
callable 4/1/07 at 100 200,000 208,594
----------------
TOTAL GENERAL OBLIGATION BONDS 2,248,792
----------------
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 40,589 41,442
California Housing Finance Agency, Home Mortgage, 10.25%, due 2/1/14,
callable 2/1/99 at 100 50,000 52,074
Nevada Housing Division, Single-Family Mortgage, 7.35%, due 10/1/15 5,000 5,001
Alabama Housing Finance Authority, Single-Family Mortgage, 6.00%, due
10/1/16, callable 4/1/06 at 102 140,000 143,716
Minnesota State Housing Finance Agency, Single-Family Mortgage, 5.95%,
due 1/1/17, callable 1/1/07 at 101.50 80,000 82,304
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 51,844
See notes to financial statements.
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3
NRM INVESTMENT COMPANY
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SCHEDULE OF INVESTMENTS (CONTINUED)
AUGUST 31, 2005
- --------------------------------------------------------------------------------------------------------------------
PRINCIPAL
AMOUNT FAIR
MUNICIPAL BONDS - 51.3% (CONTINUED) OR SHARES VALUE
- --------------------------------------------------------------------------------------------------------------------
HOUSING FINANCE AGENCY BONDS - 3.2% (CONTINUED)
Utah State Housing Finance Agency, Single-Family Mortgage, 6.30%, due
1/1/18 10,000 $ 10,070
Florida Housing Finance Corp., 5.25%, due 12/1/18, callable 12/1/08 at
102, 12/1/10 at 100 100,000 104,120
----------------
TOTAL HOUSING FINANCE AGENCY BONDS 490,571
----------------
HOSPITAL REVENUE BONDS - 1.6%
St. Mary Hospital Authority, Pennsylvania Health System, 3.00%, due
11/15/07 125,000 122,371
Kalamazoo Michigan Hospital Finance Authority, Bronson Methodist,
5.75%, due 5/15/16 callable 5/15/06 at 102 (MBIA) 125,000 130,052
----------------
TOTAL HOSPITAL REVENUE BONDS 252,423
----------------
OTHER REVENUE BONDS - 32.0%
Grand Rapids, Michigan Downtown Development Authority, 6.60%, due
6/1/08, callable 6/1/06 at 100 365,000 370,971
Colorado Water Reserve Power Authority, 4.00%, due 9/1/06 315,000 318,229
Allegheny County Pennsylvania Industrial Development Authority, 5.00%,
due 11/1/11 (MBIA) 100,000 109,127
Pennsylvania State Higher Educational Facilities Authority, 5.25%, due
1/1/12, callable 7/1/08 at 100 (MBIA) 175,000 184,494
Philadelphia Pennsylvania Gas Works, 18th Series, 5.00%, due 8/1/11
(CIFG) 430,000 465,785
Central and Western Chester County IDA, Heatherwood Project, 5.75%,
due 2/1/12, callable 2/1/02 at 100 155,000 155,122
Pennsylvania State Higher Educational Facilities Authority, 5.375%,
due 7/1/12, callable 7/1/09 at 100 (AMBAC) 100,000 107,607
Jackson Mississippi Redevelopment Authority, Jackson Street Area
Project, 5.70%, due 4/1/13, callable 10/1/05 at 100 (MBIA) 100,000 100,180
Harrisburg Pennsylvania Recovery Facilities, 5.00%, due 9/1/13,
callable 9/1/08 at 101 (FSA) 100,000 106,675
Rock Hill South Carolina Utility System, 5.125%, due 1/1/14, callable
1/1/10 at 101 (FSA) 125,000 134,199
Philadelphia Pennsylvania Wastewater, 5.25%, due 11/1/14, callable
11/1/12 at 100 (FGIC) 250,000 277,295
See notes to financial statements.
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4
NRM INVESTMENT COMPANY
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SCHEDULE OF INVESTMENTS (CONTINUED)
AUGUST 31, 2005
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PRINCIPAL
AMOUNT FAIR
MUNICIPAL BONDS - 51.3% (CONTINUED) OR SHARES VALUE
- --------------------------------------------------------------------------------------------------------------------
OTHER REVENUE BONDS - 32.0% (CONTINUED)
Pennsylvania State Turnpike Commission, 5.25%, due 12/1/14, callable
12/1/08 at 101 (AMBAC) 230,000 $ 247,106
Pennsylvania State Turnpike Commission, 5.25%, due 12/1/15, callable
12/1/08 at 101 (AMBAC) 200,000 214,266
Rochester Minnesota Independent School District No. 535, 5.75%, due
2/1/16, callable 2/1/10 at 100 100,000 109,745
Allegheny County PA Higher Educational Building Authority, 5.50%, due
3/1/16 (AMBAC) 150,000 173,432
Ohio State Mental Health Capital Facilities, 5.50%, due 6/1/16,
callable 6/1/11 at 100 (MBIA) 250,000 273,685
Pennsylvania State Higher Educational Facilities Authority, 5.00%, due
6/15/16, callable 6/15/12 at 100 (AMBAC) 100,000 107,784
Philadelphia Pennsylvania Industrial Development Lease Revenue, 5.40%,
due 2/15/17, callable 2/15/07 at 102 (MBIA) 100,000 105,100
Delaware River Port Authority PA & NJ, 5.75%, due 1/1/18, callable
1/1/10 at 100 (FSA) 100,000 110,121
Las Vegas Nevada Convention and Visitors Authority, 5.75%,
due 7/1/18, callable 7/1/09 at 101 (AMBAC) 100,000 110,437
Pennsylvania State Turnpike, Registration Fee Revenue, 5.375%, due
7/15/18, callable 7/15/11 at 101 (AMBAC) 100,000 112,019
Red River Texas Education Finance Corporation, St. Marks School,
6.00%, due 8/15/17, callable 2/15/10 at 100 300,000 329,574
Red River Texas Education Finance Corporation, St. Marks School,
6.00%, due 8/15/18, callable 2/15/10 at 100 150,000 164,335
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) 100,000 101,865
Placer County California Water Agency, Certificates of Participation,
5.50%, due 7/1/19, callable 7/1/09 at 101 (AMBAC) 320,000 351,264
Brevard County Florida School Board Certificates, 5.5%, due 7/1/21,
callable 7/1/06 at 102 (AMBAC) 100,000 104,148
----------------
TOTAL OTHER REVENUE BONDS 4,944,565
----------------
TOTAL MUNICIPAL BONDS (COST $7,771,433) 7,936,351
----------------
See notes to financial statements.
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5
NRM INVESTMENT COMPANY
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SCHEDULE OF INVESTMENTS (CONTINUED)
AUGUST 31, 2005
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PRINCIPAL
AMOUNT FAIR
OR SHARES VALUE
- --------------------------------------------------------------------------------------------------------------------
COMMON STOCKS - 8.1%
Abbott Labs 900 $ 40,617
Aflac, Inc. 750 32,415
American International Group, Inc. 700 41,440
Anheuser Busch Cos., Inc. 900 39,879
Automatic Data Processing, Inc. 950 40,613
Becton Dickinson & Co. 600 31,578
Citigroup Inc. 1,600 70,032
Coca Cola Co. 700 30,800
Colgate Palmolive Co. 900 47,250
Exxon Mobile Corp. 900 53,910
Gannett Company Inc. 750 54,540
General Electric Co. 2,000 67,220
Home Depot Inc. 1,200 48,384
Intel Corp. 2,000 51,440
Johnson & Johnson 1,000 63,390
Johnson Controls Inc. 500 29,990
Lowes Companies, Inc. 400 25,724
McGraw Hill Cos., Inc. 750 36,165
Medtronic Inc. 650 37,050
Microsoft Corp. 2,100 57,498
Novartis AG ADR 500 24,375
Pepsico Inc. 1,000 54,850
Pfizer Inc. 1,800 45,863
Procter & Gamble Co. 800 44,384
Target Corporation 400 21,500
3M Company 400 28,460
Wal Mart Stores, Inc. 900 40,464
Wells Fargo & Co. 900 53,658
Sysco Corp. 1,300 43,394
----------------
TOTAL COMMON STOCKS (COST $1,284,722) 1,256,883
----------------
OTHER REGULATED INVESTMENT COMPANIES - 30.9%
Evergreen Pennsylvania Bond Fund 87,032 1,000,000
ING Global Equity Dividend & Premium Opportunity Fund 40,000 824,000
North Track S&P 100 Index Fund 92,490 2,955,053
----------------
TOTAL OTHER REGULATED INVESTMENT COMPANIES (COST $4,800,000) 4,779,053
----------------
See notes to financial statements.
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6
NRM INVESTMENT COMPANY
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SCHEDULE OF INVESTMENTS (CONTINUED)
AUGUST 31, 2005
- --------------------------------------------------------------------------------------------------------------------
PRINCIPAL FAIR
AMOUNT
OR SHARES VALUE
- --------------------------------------------------------------------------------------------------------------------
OTHER SECURITIES - 9.5%
UBS AG Enhanced Appreciation Securities, due 2/28/06 400,000 $ 445,000
UBS AG Enhanced Appreciation Securities, due 3/31/06 250,000 270,625
UBS AG Enhanced Appreciation Securities, due 6/30/06 750,000 751,875
----------------
TOTAL OTHER SECURITIES (COST $1,400,000) 1,467,500
----------------
SHORT-TERM INVESTMENTS - AT COST APPROXIMATING FAIR VALUE - 0.2%,
FEDERATED PENNSYLVANIA MUNICIPAL CASH TRUST #8 (COST $24,195) 24,195 24,195
----------------
TOTAL INVESTMENTS - 100% (COST $15,280,350) $15,463,982
================
See notes to financial statements.
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7
NRM INVESTMENT COMPANY
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STATEMENT OF OPERATIONS
YEAR ENDED AUGUST 31, 2005
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2005
- --------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME $466,989
----------------
EXPENSES
Investment advisory fees 10,000
Custodian fees 7,818
Transfer and dividend disbursing agent fees 3,146
Legal and professional fees 71,226
Directors' fees 6,000
Insurance 1,500
Capital stock tax 4,600
Provision for environmental claims 80,243
Miscellaneous 8,100
----------------
TOTAL EXPENSES 192,633
----------------
NET INVESTMENT INCOME 274,356
----------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain from investment transactions 518,298
Net unrealized depreciation of investments (133,043)
----------------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS 385,255
----------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $659,611
================
See notes to financial statements.
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8
NRM INVESTMENT COMPANY
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STATEMENTS OF CHANGES IN NET ASSETS
YEARS ENDED AUGUST 31, 2005 AND 2004
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2005 2004
- --------------------------------------------------------------------------------------------------------------------
INCREASE IN NET ASSETS FROM OPERATIONS
Net investment income $ 274,356 $ 471,938
Net realized gain from investment transactions 518,298 565,490
Net unrealized depreciation of investments (133,043) (190,718)
---------------- ----------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS 659,611 846,710
DISTRIBUTIONS TO SHAREHOLDERS (781,880) (465,704)
CAPITAL SHARE TRANSACTIONS (59,678) 15
---------------- ----------------
TOTAL INCREASE (DECREASE) IN NET ASSETS (181,947) 381,021
NET ASSETS - BEGINNING OF YEAR 15,579,019 15,197,998
---------------- ----------------
NET ASSETS - END OF YEAR $15,397,072 $15,579,019
================ ================
See notes to financial statements.
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9
NRM INVESTMENT COMPANY
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FINANCIAL HIGHLIGHTS
YEARS ENDED AUGUST 31, 2005, 2004, 2003, 2002, 2001
- ------------------------------------------------------------------------------------------------------------------------------------
2005 2004 2003 2002 2001
- ------------------------------------------------------------------------------------------------------------------------------------
PER SHARE DATA (FOR A SHARE OUTSTANDING THROUGHOUT THE
INDICATED YEAR)
Net asset value, beginning of year $3.931 $3.834 $3.842 $3.837 $3.794
------------ ------------- ------------- ------------ -----------
Net investment income .070 .119 .146 .163 .199
Net realized and unrealized gain on investments .097 .096 .006 .006 .054
------------ ------------- ------------- ------------ -----------
TOTAL FROM INVESTMENT OPERATIONS .167 .215 .152 .169 .253
Less distributions:
Dividends from capital gains (.130) (.009) - - -
Dividends from net tax-exempt income (.061) (.103) (.146) (.163) (.199)
Dividends from net taxable income (.007) (.006) - - -
Distribution in excess of net investment
income - - (.014) (.001) (.011)
------------ ------------- ------------- ------------ -----------
TOTAL DISTRIBUTIONS (.198) (.118) (.160) (.164) (.210)
------------ ------------- ------------- ------------ -----------
NET ASSET VALUE, END OF YEAR $3.900 $3.931 $3.834 $3.842 $3.837
============ ============= ============= ============ ===========
TOTAL RETURN 3.76% 5.59% 3.96% 4.40% 6.70%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (in thousands) $15,397 $15,579 $15,198 $15,285 $15,322
Ratio of expenses to average net assets 1.23% .67% 1.07% 1.43% .95%
Ratio of net investment income to average net assets 1.75% 3.04% 3.78% 4.24% 4.93%
Portfolio turnover rate 56.38% 47.45% 37.90% 16.82% 14.21%
See notes to financial statements.
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10
NRM INVESTMENT COMPANY
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NOTES TO FINANCIAL STATEMENTS
AUGUST 31, 2005
- --------------------------------------------------------------------------------
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 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 year, 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.
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11
NRM INVESTMENT COMPANY
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NOTES TO FINANCIAL STATEMENTS
AUGUST 31, 2005
- --------------------------------------------------------------------------------
NOTE 1 - NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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.
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 at the annual flat rate
of $10,000. 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
$8,333,834 and $8,795,742, respectively, during the year ended August
31, 2005.
At August 31, 2005, the cost of investment securities owned is the
same for financial reporting and federal income tax purposes. Net
unrealized appreciation of investment securities is $183,633 (aggregate
gross unrealized appreciation of $284,903, less aggregate unrealized
depreciation of $101,270).
NOTE 4 - 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 August 31, 2005 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.
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12
NRM INVESTMENT COMPANY
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NOTES TO FINANCIAL STATEMENTS
AUGUST 31, 2005
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NOTE 4 - 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 5 - TRANSACTIONS IN CAPITAL STOCK AND COMPONENTS OF NET ASSETS
Transactions in fund shares were as follows:
YEARS ENDED AUGUST 31,
--------------------------------------------------------------------------
2005 2004
----------------------------------- ------------------------------------
SHARES AMOUNT SHARES AMOUNT
---------------- ---------------- ---------------- ----------------
Shares issued in reinvestment of
dividends 20 $ 80 13 $52
Shares redeemed (15,015) (59,758) (9) (37)
---------------- ---------------- ---------------- ----------------
NET INCREASE (DECREASE) (14,995) $(59,678) 4 $15
================ ================ ================ ================
The components of net assets at August 31, 2005 and 2004 are as follows:
2005 2004
---------------- ----------------
Capital shares, par value $.01 per share, 3,948,446 shares
and 3,963,441 shares issued and outstanding at August
31, 2005 and 2004 (10,000,000 full and fractional shares
authorized); and capital paid-in $15,323,827 $15,383,505
Unrealized appreciation of investments 183,633 316,676
Overdistributed net investment income (110,388) (121,162)
---------------- ----------------
NET ASSETS $15,397,072 $15,579,019
================ ================
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13
NRM INVESTMENT COMPANY
FINANCIAL REPORT
AUGUST 31, 2005
NRM INVESTMENT COMPANY
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TABLE OF CONTENTS
AUGUST 31, 2005
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PAGE
----
FINANCIAL STATEMENTS:
Report of Independent Registered Public Accounting Firm 7
Statement of Assets and Liabilities 2
Schedule of Investments 3
Statement of Operations 9
Statements of Changes in Net Assets 10
Financial Highlights 11
Notes to Financial Statements 12
NRM INVESTMENT COMPANY
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NRM INVESTMENT COMPANY
(the "Company")
CODE OF ETHICS AS RESTATED
--------------------------
And Amended
-----------
I. Legal Requirement.
------------------
Rule 17j-1(b) under the Investment Company Act of 1940, as amended (the
"1940 Act"), makes it unlawful for any officer or director of the Company, the
investment advisor or any person affiliated with the Company or an Advisor, in
connection with the purchase or sale, directly or indirectly, by such person of
a security "Held or to be Acquired" by the Company:
1. To employ any device, scheme or artifact to defraud the
Company;
2. To make to the Company any untrue statement of a material fact
or omit to state to the Company a material fact necessary in
order to make the statements made, in light of the
circumstances under which they are made, not misleading;
3. To engage in any act, practice, or course of business that
operates or would operate as a fraud or deceit upon the
Company; or
4. To engage in any manipulative practice with respect to the
Company's investment portfolios.
II. Purpose of the Code of Ethics.
------------------------------
In compliance with general fiduciary rules and with amended Rule 17j-1
(c) under the Investment Company Act, the Company requires that its directors,
officers and other employees, the directors, officers and other employees of the
Company's investment advisor, and the directors, officers and other employees of
its other advisors will conduct their personal investment activities in
accordance with (1) the duty at all times to place the interests of the
Company's shareholders first, (2) the requirement that all personal securities
transactions be conducted in a manner consistent with this Code of Ethics and in
such manner as to avoid any actual or potential conflict of interest or any
abuse of an individual's position of trust and responsibility, and (3) the
fundamental standard that the Company, investment advisor and other Advisory
personnel should not take inappropriate advantage of their positions.
NRM INVESTMENT COMPANY
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In view of the amendments to Rule 17j-1 effective October 29, 1999, the
Company's Board of Directors has determined to restate in its entirety the
Company's existing code of ethics and to adopt this Code of Ethics to limit or
proscribe conduct for certain types of personal securities transactions that
might involve conflicts of interest or an appearance of impropriety, and to
establish reporting requirements and enforcement procedures consistent with the
Rule amendments.
III. Definitions.
------------
The following two definitions of "Access Person" and "Advisory
Person" are taken from the amended Rule. They are included for the purpose of
alerting individuals affected by this Code to adhere to its provisions. As
provided in "C" other definitions are contained in detail in the Rule and the
individual or his counsel is directed thereto.
A. An "Access Person" means: (1) each director (2) each officer, (3)
each employee of (i) the Company (ii) any Company in a control relationship to
the Company (iii) an Advisory Person, or (iv) the investment advisor, who in
connection with his or her regular functions or duties, makes, participates in,
or obtains information regarding the purchase or sale of a security by the
Company or whose functions relate to the making of any recommendations with
respect to such purchases or sales.
B. An "Advisory Person" means a corporate or individual Access Person
other than the directors, officers and other employees of the Company, persons
or entities in a control relationship with the Company, or its investment
advisor.
NRM INVESTMENT COMPANY
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C. Other definitions contained in amended Rule 17j-1 (a) as they relate
to Access Persons, including Advisory Persons, or as they are otherwise
applicable in this Code of Ethics are incorporated herein; they are identified
herein by being in initial capitals.
IV Policies of the Company Regarding Personal Securities Transactions.
-------------------------------------------------------------------
A. General Policy.
---------------
No Access Person of the Company shall engage in any act, practice or
course of business that would violate the provisions of Rule 17j-1(b) set
forth above, or in connection with any personal investment activity, engage
in conduct inconsistent with this Code of Ethics. All affected Access
Persons, to demonstrate compliance, shall file the reports provided in the
Rule and in this Code.
B. Specific Policies.
------------------
1. Restrictions on Personal Securities Transactions by Access Persons.
-------------------------------------------------------------------
a. No Access Person may buy or sell securities in an Initial Public
Offering or Limited Public Offering for his personal portfolio or the
portfolio of a member of his immediate family without obtaining written
authorization from the Company's president or his designee PRIOR to
effecting such security transaction. A written authorization for such
security transaction will be provided by the president or his designee to
the person receiving the authorization (if granted) and to the Company's
record-keeper to memorialize the authorization that was granted.
NOTE: If an Access Person has questions as to whether
purchasing or selling a security in an Initial Public Offering or a Limited
Public Offering for his personal portfolio or the portfolio of a member of
his immediate family requires prior authorization, the Access Person should
consult the Company's President or designee for clearance or denial of
clearance to trade PRIOR to effecting any securities transactions.
NRM INVESTMENT COMPANY
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b. It is the Company's intent to establish a "blackout period" within
which to limit an Access Person's trading in securities in which the Company
holds or is considering holding a position. Accordingly, without obtaining
written authorization from the Company's president or designee PRIOR to
effecting a security transaction, no Access Person, for his personal portfolio
or the portfolio of a member of his immediate family, shall engage in the
Purchase or Sale of a Covered Security within the most recent fifteen day period
from the Company's acquisition or sale of a like security or from the last time
a like security was being considered for purchase or sale by the Company.
c. Pre-clearance approval under paragraphs (a) or (b) will expire at the
close of business on the fifth trading day after the date on which the
authorization is received, and the Access Person is required to renew clearance
for the transaction if the trade is not completed before the authority expires.
V. Procedures.
-----------
In order to provide the Company with information to enable it to
determine with reasonable assurance whether the provisions of this Code are
being observed by its Access Persons:
A. Each Access Person of the Company (except an Advisory Person to the
investment adviser who reports to the Investment Advisor) shall direct his
broker to supply to the Company's president or his designee, on a timely basis,
duplicate copies of confirmations of all securities transactions in which the
person has, or by reason of such transaction acquires any direct or indirect
beneficial ownership(2) and copies of periodic statements for all securities
accounts.
- ----------
(2) You will be treated as the "beneficial owner" of a security under
this policy only if you have a direct or indirect pecuniary interest in the
security.
(a) A direct pecuniary interest is the opportunity, directly or
indirectly, to profit, or to share the profit, from the transaction.
(b) An indirect pecuniary interest is any non-direct financial
interest, but is specifically defined in the rules to include securities held by
members of your immediate family sharing the same household; securities held by
a partnership of which you are a general partner; securities held by a trust of
which you are the settlor if you can revoke the trust without the consent of
another person, or a beneficiary if you have or share investment control with
the trustees; and equity securities which may be acquired upon exercise of an
option or other right, through conversion.
NRM INVESTMENT COMPANY
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B. Each Access Person of the Company shall submit initial(3) and annual
reports to the Company's president or his designee, showing all initial holdings
the access person maintains individually, with a broker, dealer or bank; and
shall submit reports showing yearly transactions in Covered Securities in which
the person has, or by reason of such transaction acquires, any direct or
indirect beneficial ownership.(4)
C. The Company's president or his designee shall notify each Access Person
of the Company who may be required to make reports pursuant to this Code that
such person is subject to this reporting requirement and shall deliver a copy of
this Code to each such person.
D. The Company's president or designee shall review the reports received,
and as appropriate compare the reports with the pre-clearance authorization
received, and report to the Company's Board of Directors:
(1) with respect to any transaction that appears to evidence a possible
violation of this Code; and
(2) apparent violations of the reporting requirements stated herein.
E. The Board shall consider the reports made to it hereunder and shall
determine whether the policies established by the Rule and this Code have been
complied with or violated, and if violated, what sanctions, if any, should be
imposed on the violator, including but not limited to a letter of censure,
suspension or termination of the employment of the violator, or the unwinding of
the transaction and the disgorgement of any profits to the Company. The Board
shall review the operation of this Code at least once a year.
F. The Company's investment adviser shall adopt, maintain and enforce
separate codes of ethics with respect to its personnel in compliance with
amended Rule 17j-1 and Rule 204-2(a) of the Investment Advisers Act of 1940 or
Section 15 (f) of the Securities Exchange Act of 1934, as applicable, and shall
forward to the Company's President and the Company's counsel copies of such code
and all future amendments and modifications thereto.
- ----------
For interpretive guidance on this test, you should consult counsel
(3) Initial reports need not be filed for access persons who became such before
March 1,2000.
(4) See footnote 1 above.
NRM INVESTMENT COMPANY
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G. At each quarterly Board of Directors' meeting the investment adviser
shall report to the Company's Board of Directors:
(1) any reported securities transaction that occurred during the prior
quarter that appears to have been inconsistent with the provisions of the
code of ethics adopted by the Company's investment adviser; and
(2) all disciplinary actions(5) taken in response to such violations.
H. At least once a year, the Company's investment adviser shall provide to
the Board a report which contains (a) a summary of existing procedures
concerning personal investing by advisory persons and any changes in the
procedures during the past year and (b) an evaluation of current compliance
procedures and a report on any recommended changes in existing restrictions or
procedures based upon the Company's experience under this Code, industry
practices, or developments in applicable laws and regulations.
I. This Code, the codes of the investment adviser, a copy of each report by
an Access Person, any written report hereunder by the Company's investment
adviser and lists of all persons required to make reports shall be preserved
with the Company's records for the period required by amended Rule 17j-1. The
Company shall keep all reports and lists sealed and marked "Confidential" to be
disclosed only to the Company's president or his designee or to authorized
Securities and Exchange Commission personnel as required by law.
VI. Certification.
--------------
Each Access Person will be required to certify annually that he has read
and understood this Code of Ethics, and will abide by it. Each Access Person
will further certify that he has disclosed or reported all personal securities
transactions required to be disclosed or reported under this Code of Ethics.
- --------
(5) Disciplinary action may include but is not limited to any action that has a
material financial effect upon the individual involved, such as fining,
suspending, or demoting an employee, imposing a substantial fine or requiring
the disgorgement of profits.