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
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Address of principal executive offices: NRM Investment Company, Rosemont
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Business Campus, Suite 112, Building 3 - 919 Conestoga Road, Rosemont,
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Pennsylvania 19010
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Name and address of agent for service: John H. McCoy, President, NRM Investment
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Company, Rosemont Business Campus, Suite 112, Building 3 - 919 Conestoga Road,
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Rosemont, Pennsylvania 19010
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Registrant's Telephone Number: (610) 527-7009
Date of fiscal year end: August 31, 2006
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ITEM 1 - REPORTS TO STOCKHOLDERS
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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:
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The registrant has adopted a code of ethics. It is incorporated by reference to
Exhibit to Item 11 (a)(1) to registrant's N-CSR filed for its fiscal year ending
August 31, 2005. The code of ethics is available, without charge, upon request,
by calling the Fund's assistant secretary, Edward Fackenthal, collect at 610 279
3370 or contacting him at his email address: edwardfackental@cs.com. The code of
ethics is also available on the EDGAR Database on the Commission's Internet site
at http://www.sec.gov.
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 86% of its shares. Registrant
has no salaried employees to otherwise fulfill the role of financial expert.
ITEM 4. ACCOUNTANT FEES AND SERVICES
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(a) Audit fees: 2005 2006
11,720 16,000
(b) Related fees 0 0
(c) (d) Tax & other fees 6,000 6,000(1)
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS
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See Item 3.
ITEM 6 - SCHEDULE OF INVESTMENTS
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The information is included as part of the report to shareholders filed under
Item 1 of this report and attached hereto.
ITEMS 7, 8
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Not applicable to Registrant
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(1) Billed annually on a non-segregated basis.
2
ITEM 9 - SUBMISSION OF MATTER TO A VOTE OF SECURITY HOLDERS
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None.
ITEM - 10 CONTROLS AND PROCEDURES
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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.
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
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: 10/30/06
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: 10/30/06
By: /s/ Edward Fackenthal
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Edward Fackenthal, Counsel and Assistant Secretary
Date: 10/30/06
4
NRM INVESTMENT COMPANY
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EXHIBITS
5
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, 2006, 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 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.
The Fund is not required to have, nor were we engaged to perform, an audit of
its internal control over financial reporting. Our audits included consideration
of internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Fund's internal control over
financial reporting. Accordingly, we express no such opinion. An audit also
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, 2006, 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, 2006, 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.
/s/ Beard Miller Company LLP
Beard Miller Company LLP
Reading, Pennsylvania
October 26, 2006
1
NRM INVESTMENT COMPANY
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STATEMENT OF ASSETS AND LIABILITIES
AUGUST 31, 2006
2006
ASSETS
Investments at fair value (cost $13,954,228) $14,210,573
Cash 7,425
Interest and dividends receivable 161,349
Prepaid expenses 6,714
-----------
TOTAL ASSETS 14,386,061
LIABILITIES
Accrued expenses and other liabilities 177,289
-----------
NET ASSETS, APPLICABLE TO 3,608,392 OUTSTANDING SHARES,
EQUIVALENT TO $3.94 A SHARE $14,208,772
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SEE NOTES TO FINANCIAL STATEMENTS.
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2
NRM INVESTMENT COMPANY
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SCHEDULE OF INVESTMENTS
AUGUST 31, 2006
PRINCIPAL FAIR
AMOUNT
OR SHARES VALUE
MUNICIPAL BONDS - 57.0%
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General Obligation Bonds - 14.6%
Philadelphia, Pennsylvania School District, 5.00%, due 4/1/10 200,000 $ 209,158
Bucks County, Pennsylvania, 5.00%, due 6/15/11, callable 6/15/09
at 100 100,000 103,741
Pittsburgh, Pennsylvania, 5.00%, due 9/1/12, callable 3/1/12 at
100 (AMBAC) 250,000 265,849
Pennsylvania State, First Series, 5.00%, due 7/1/13 300,000 322,926
Berks County, Pennsylvania, 5.00%, due 11/15/14, callable 11/15/08
at 100 (AMBAC) 100,000 102,665
Philadelphia, Pennsylvania School District, 5.625%, due 8/1/15,
callable 8/1/12 at 100 (FGIC) 300,000 330,861
Wilson, Pennsylvania School District, 5.375%, due 5/15/16,
callable 5/15/12 (FSA) 425,000 460,985
Pittsburgh, Pennsylvania, 5.50%, due 9/1/17, at 100 (FSA) 250,000 285,225
---------
TOTAL GENERAL OBLIGATION BONDS 2,081,410
---------
HOUSING FINANCE AGENCY BONDS - 1.1%
Odessa, Texas Housing Finance Corporation, Home Mortgage Revenue
Refunding, 8.45%, due 11/1/11, callable 11/1/05 at 103 28,384 28,907
California Housing Finance Agency, Home Mortgage, 10.25%, due
2/1/14, callable 2/1/99 at 100 45,000 46,489
Nevada Housing Division, Single-Family Mortgage, 7.35%, due 10/1/15 5,000 5,001
Minnesota State Housing Finance Agency, Single-Family Mortgage,
5.95%, due 1/1/17, callable 1/1/07 at 101.50 70,000 71,245
Utah State Housing Finance Agency, Single-Family Mortgage, 6.30%,
due 1/1/18 5,000 5,024
---------
TOTAL HOUSING FINANCE AGENCY BONDS 156,666
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SEE NOTES TO FINANCIAL STATEMENTS.
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3
NRM INVESTMENT COMPANY
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SCHEDULE OF INVESTMENTS (CONTINUED)
AUGUST 31, 2006
PRINCIPAL FAIR
AMOUNT
OR SHARES VALUE
MUNICIPAL BONDS - 57.0% (CONTINUED)
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OTHER REVENUE BONDS - 41.3%
Parkland, Pennsylvania School District, 5.35%, due 9/1/15 (FGIC) 170,000 $190,221
Grand Rapids, Michigan Downtown Development Authority, 6.60%, due
6/1/08, callable 6/1/06 at 100 365,000 365,398
Montgomery County, Pennsylvania Industrial Development Authority,
5.00%, due 11/1/10 500,000 526,165
Allegheny County, Pennsylvania Industrial Development Authority,
5.00%, due 11/1/11 (MBIA) 100,000 106,111
Pennsylvania State Higher Educational Facilities Authority, 5.25%,
due 1/1/12, callable 7/1/08 at 100 (MBIA) 175,000 179,846
Philadelphia, Pennsylvania Gas Works, 18th Series, 5.00%, due
8/1/11 (CIFG) 300,000 316,230
Pennsylvania State Higher Educational Facilities Authority,
5.375%, due 7/1/12, callable 7/1/09 at 100 (AMBAC) 100,000 104,495
Pennsylvania Infrastructure Investment Authority, 5.00%, due 9/1/12 500,000 536,000
Jackson, Mississippi Redevelopment Authority, Jackson Street Area
Project, 5.70%, due 4/1/13, callable 10/1/05 at 100 (MBIA) 100,000 100,129
Harrisburg, Pennsylvania Recovery Facilities, 5.00%, due 9/1/13,
callable 9/1/08 at 101 (FSA) 100,000 103,689
Philadelphia, Pennsylvania Wastewater, 5.25%, due 11/1/14,
callable 11/1/12 at 100 (FGIC) 250,000 271,137
Philadelphia, Pennsylvania Wastewater, 5.00%, due 7/1/14 250,000 271,172
Pennsylvania State Turnpike Commission, 5.25%, due 12/1/14,
callable 12/1/08 at 101 (AMBAC) 230,000 239,415
Pennsylvania State Turnpike Commission, 5.25%, due 12/1/15,
callable 12/1/08 at 101 (AMBAC) 200,000 207,908
Allegheny County, Pennsylvania Higher Educational Building
Authority, 5.50%, due 3/15/16, callable 6/15/12 at 100 (AMBAC) 150,000 169,384
Pennsylvania State Higher Educational Facilities Authority, 5.00%,
due 6/15/16, callable 6/15/12 at 100 (AMBAC) 100,000 105,845
Philadelphia, Pennsylvania Gas Works, Fourth Series, 5.25%, due
8/1/16, callable 8/1/13 250,000 270,085
Philadelphia, Pennsylvania Industrial Development Lease Revenue,
5.40%, due 2/15/17, callable 2/15/07 at 102 (MBIA) 100,000 102,755
Pennsylvania State Higher Educational Facilities Authority (Drexel
University), 5.25%, due 11/1/17 500,000 528,330
Delaware River Port Authority PA and NJ, 5.75% due 1/1/18,
callable 1/1/10 at 100 (FSA) 100,000 106,375
SEE NOTES TO FINANCIAL STATEMENTS.
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4
NRM INVESTMENT COMPANY
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SCHEDULE OF INVESTMENTS (CONTINUED)
AUGUST 31, 2006
PRINCIPAL
AMOUNT FAIR
OR SHARES VALUE
MUNICIPAL BONDS - 57.0% (CONTINUED)
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OTHER REVENUE BONDS - 41.3% (CONTINUED)
Chester County, Pennsylvania Health and Educational Authority
(Devereux), 5.00%, due 11/1/18 405,000 $ 427,255
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) 100,000 100,566
Kennett, Pennsylvania Consolidated School District, 5.25%, due
2/15/19, callable 2/15/13 (FGIC) 500,000 540,150
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TOTAL OTHER REVENUE BONDS 5,868,661
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TOTAL MUNICIPAL BONDS (COST $8,081,092) 8,106,737
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PREFERRED STOCK - 42.4%
ABN Amro Capital Trust VI, 6.25% 20,000 508,400
Aegon NV , 6.50% 15,000 377,100
Aegon NV, 6.75% 10,000 255,300
Barclays Bank, PLC ADR 20,000 515,200
CIT Group, Inc., 6.35% 15,000 386,250
Federal Home Loan Mortgage Corporation, 6.42% 5,000 268,750
Goldman Sachs Group, Inc. 1/1000 B 15,000 385,350
HSBC USA, Inc., 1/40 Series H 20,000 527,800
ING Groep NV, 7.05% 10,000 253,400
ING Groep NV, Perpetual Debt Security 16,000 396,320
Lehman Brothers Holdings, Inc. C Dep. 1/10 10,000 508,500
Metlife, Inc., 6.50% 17,500 447,125
Prudential PLC, 6.50% 12,500 318,750
Royal Bank of Scotland Group PLC ADR Series Q 20,000 518,000
Santander Financial SA, 6.41% 14,000 353,500
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TOTAL PREFERRED STOCKS (COST $5,789,045) 6,019,745
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SHORT-TERM INVESTMENTS - AT COST APPROXIMATING
FAIR VALUE - 0.6%
Federated Pennsylvania Municipal Cash Trust #8 - (Cost $84,091) 84,091 84,091
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TOTAL INVESTMENTS - 100% (COST $13,954,228) $14,210,573
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SEE NOTES TO FINANCIAL STATEMENTS.
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5
NRM INVESTMENT COMPANY
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STATEMENT OF OPERATIONS
YEAR ENDED AUGUST 31, 2006
2006
--------
INVESTMENT INCOME $550,208
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EXPENSES
Investment advisory fees 26,475
Custodian fees 15,425
Transfer and dividend disbursing agent fees 1,850
Legal and professional fees 51,659
Directors' fees 8,000
Insurance 1,800
Capital stock tax 4,450
Provision for environmental claims 35,522
Miscellaneous 5,833
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TOTAL EXPENSES 151,014
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NET INVESTMENT INCOME 399,194
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REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain from investment transactions 141,159
Net unrealized appreciation of investments 72,712
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NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS 213,871
--------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $613,065
========
SEE NOTES TO FINANCIAL STATEMENTS.
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6
NRM INVESTMENT COMPANY
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STATEMENTS OF CHANGES IN NET ASSETS
YEARS ENDED AUGUST 31, 2006 AND 2005
2006 2005
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INCREASE IN NET ASSETS FROM OPERATIONS
Net investment income $ 399,194 $ 274,356
Net realized gain from investment transactions 141,159 518,298
Net unrealized appreciation (depreciation) of investments 72,712 (133,043)
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NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS 613,065 659,611
DISTRIBUTIONS TO SHAREHOLDERS (477,046) (781,880)
CAPITAL SHARE TRANSACTIONS (1,324,319) (59,678)
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TOTAL DECREASE IN NET ASSETS (1,188,300) (181,947)
NET ASSETS - BEGINNING OF YEAR 15,397,072 15,579,019
------------ ------------
NET ASSETS - END OF YEAR $ 14,208,772 $ 15,397,072
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SEE NOTES TO FINANCIAL STATEMENTS.
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7
NRM INVESTMENT COMPANY
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FINANCIAL HIGHLIGHTS
YEARS ENDED AUGUST 31, 2006, 2005, 2004, 2003, AND 2002
2006 2005 2004 2003 2002
--------- --------- --------- --------- ---------
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
--------- --------- --------- --------- ---------
Net investment income .110 .070 .119 .146 .163
Net realized and unrealized gain on investments .059 .097 .096 .006 .006
--------- --------- --------- --------- ---------
TOTAL FROM INVESTMENT OPERATIONS .169 .167 .215 .152 .169
--------- --------- --------- --------- ---------
Less distributions:
Dividends from capital gains (.021) (.130) (.009) - -
Dividends from net tax-exempt income (.086) (.061) (.103) (.146) (.163)
Dividends from net taxable income (.024) (.007) (.006) - -
Distribution in excess of net investment
income - - - (.014) (.001)
--------- --------- --------- --------- ---------
TOTAL DISTRIBUTIONS (.131) (.198) (.118) (.160) (.164)
--------- --------- --------- --------- ---------
NET ASSET VALUE, END OF YEAR $ 3.938 $ 3.900 $ 3.931 $ 3.834 $ 3.842
========= ========= ========= ========= =========
TOTAL RETURN 4.40% 3.76% 5.59% 3.96% 4.40%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (in thousands) $ 14,209 $ 15,397 $ 15,579 $ 15,198 $ 15,285
Ratio of expenses to average net assets 1.05% 1.23% .67% 1.07% 1.43%
Ratio of net investment income to average net assets 2.77% 1.75% 3.04% 3.78% 4.24%
Portfolio turnover rate 88.85% 56.38% 47.45% 37.90% 16.82%
SEE NOTES TO FINANCIAL STATEMENTS.
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8
NRM INVESTMENT COMPANY
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NOTES TO FINANCIAL STATEMENTS
AUGUST 31, 2006
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 investment
objective of the Fund is to maximize and distribute income and
gains on a current basis. Its secondary objective is
preservation of capital. 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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9
NRM INVESTMENT COMPANY
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NOTES TO FINANCIAL STATEMENTS
AUGUST 31, 2006
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 pays to the investment advisor, as compensation for services
provided and expenses assumed, a fee at the annual flat rate of $10,000
through December 31, 2005. Subsequently thereto this fee 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. Furthermore, the Fund's president and chairman
of the Board owns 78.1% of the Fund's outstanding shares as of August
31, 2006.
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
$12,240,036 and $13,667,214, respectively, during the year ended August
31, 2006.
At August 31, 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 $256,345 (aggregate
gross unrealized appreciation of $286,678, less aggregate unrealized
depreciation of $30,333).
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.
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10
NRM INVESTMENT COMPANY
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NOTES TO FINANCIAL STATEMENTS
AUGUST 31, 2006
NOTE 4 - ENVIRONMENTAL LIABILITY (CONTINUED)
The Fund has accrued $150,000 at August 31, 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.
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 to
date and for the past EPA costs is $7,000,000. There will be ongoing
OU-1 operation and maintenance expenses for cleaning ground water for
the indefinite future and for indefinite amounts. 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,
---------------------------------------------------------
2006 2005
-------------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT
----------- ----------- ----------- -----------
Shares issued in reinvestment of
dividends 11 $ 45 20 $ 80
Shares redeemed (340,065) (1,324,364) (15,015) (59,758)
----------- ----------- ----------- -----------
NET DECREASE (340,054) $(1,324,319) (14,995) $ (59,678)
=========== =========== =========== ===========
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11
NRM INVESTMENT COMPANY
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NOTES TO FINANCIAL STATEMENTS
AUGUST 31, 2006
NOTE 5 - TRANSACTIONS IN CAPITAL STOCK AND COMPONENTS OF NET ASSETS (CONTINUED)
The components of net assets at August 31, 2006 and 2005 are as
follows:
2006 2005
------------ ------------
Capital shares, par value $.01 per share, 3,608,392 shares
and 3,948,446 shares issued and outstanding at August
31, 2006 and 2005 (10,000,000 full and fractional shares
authorized); and capital paid-in $ 13,999,508 $ 15,323,827
Unrealized appreciation of investments 256,345 183,633
Undistributed net investment income 66,347 0
Overdistributed net investment income* (113,428) (110,388)
------------ ------------
NET ASSETS $ 14,208,772 $ 15,397,072
============ ============
* For federal income tax purposes, there is no undistributed
net investment income. The book/tax difference arises from
amounts reserved for environmental litigation described in
Note 4 and not deducted for federal income tax purposes.
NOTE 6 - DISTRIBUTIONS TO SHAREHOLDERS
The tax character of distributions paid during 2006 and 2005 was
as follows:
2006 2005
-------- --------
Distributions paid from:
Tax-exempt interest dividends $316,754 $233,283
Taxable qualified dividends 67,700 937
Taxable ordinary dividends 17,779 29,498
Long-term capital gains 74,813 518,162
-------- --------
$477,046 $781,880
======== ========
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12
NRM INVESTMENT COMPANY
Financial Report
August 31, 2006
NRM INVESTMENT COMPANY
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TABLE OF CONTENTS
AUGUST 31, 2006
PAGE
FINANCIAL STATEMENTS:
Report of Independent Registered Public Accounting Firm 1
Statement of Assets and Liabilities 2
Schedule of Investments 3
Statement of Operations 6
Statements of Changes in Net Assets 7
Financial Highlights 8
Notes to Financial Statements 9