<PAGE> 1
1933 Act Registration No. 333-15969
1940 Act Registration No. 811-7919
As filed with the Securities and Exchange Commission on December 19, 1996
SECURITIES AND EXCHANGE COMMISSION
Washington D. C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [x]
Pre-Effective Amendment No. 1 [x]
----
Post-Effective Amendment No. [ ]
---- and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [x]
Amendment No.
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BREMER INVESTMENT FUNDS, INC.
(Exact Name of Registrant as Specified in Charter)
P.O. Box 1956
St. Cloud, Minnesota 56302
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code: (320) 255-7174
Steven A. Laraway
P.O. Box 1956
St. Cloud, Minnesota 56302
(Name and Address of Agent for Service)
-------------------
Copies to:
Christopher C. Cleveland, Esq.
Briggs and Morgan, P.A.
2400 IDS Center
Minneapolis, Minnesota 55402
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Approximate Date of Proposed Public Offering: As soon as practicable after
effectiveness of this
Registration Statement.
It is proposed that this filing will become effective (check appropriate box)
[]immediately upon filing pursuant to paragraph (b)
[]on (date) pursuant to paragraph (b)
[]60 days after filing pursuant to paragraph (a)(1)
[]on (date) pursuant to paragraph (a)(1)
[]75 days after filing pursuant to paragraph (a)(2)
[]on (date) pursuant to paragraph (a)(2) of Rule 485
If appropriate, check the following box:
[] this post-effective amendment designates a new effective
date for a previously filed post-effective amendment.
The registrant hereby amends this registration statement on such date or dates
as may be necessary to delay its effective date until the registrant shall file
a further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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BREMER INVESTMENT FUNDS, INC.
CROSS REFERENCE SHEET
Form N-1A Item
<TABLE>
<CAPTION>
Part A - Prospectus Heading in Prospectus
- ------------------- ---------------------
<S> <C>
1. Cover Page Outside Cover Page
2. Synopsis Fund Expenses
3. Condensed Financial Information Not Applicable
4. General Description of Registrant The Funds; Investment
Objectives and
Policies; Securities
and Techniques Used by
the Funds; Risk
Factors; Investment
Restrictions; Fund
Shares and
Organization
5. Management of the Fund Management of the Funds
5A. Management's Discussion of Fund Not Applicable
Performance
6. Capital Stock and Other Securities The Funds; Dividends,
Distributions and Tax
Consequences; Back
Cover Page
7. Purchase of Securities Being Offered Plan of Distribution;
Price of Shares;
Purchasing Shares;
Shareholder Services
8. Redemption or Repurchase Redeeming Shares
9. Pending Legal Proceedings Not Applicable
Heading in Statement
of Additional
Part B - Statement of Additional Information Information
- -------------------------------------------- -----------------------
10. Cover Page Outside Cover Page
11. Table of Contents Table of Contents
12. General Information and History Not Applicable
13. Investment Objectives and Policies Investment Objectives
and Policies;
Investment
Limitations; Portfolio
Turnover
14. Management of the Fund Officers and Directors
</TABLE>
<PAGE> 3
BREMER INVESTMENT FUNDS, INC.
CROSS REFERENCE SHEET
Form N-1A Item
<TABLE>
<CAPTION>
Heading in Statement
of Additional
Part B - Statement of Additional Information Information
- -------------------------------------------- ----------------------
<S> <C>
15. Control Persons and Principal Holders
of Securities Not Applicable
16. Investment Advisory and Other Services Investment Adviser;
Transfer Agent and
Custodian
17. Brokerage Allocation and Other Practices Portfolio Transactions
18. Capital Stock and Other Securities (Included in
Prospectus under "The
Funds" and "Fund
Shares and
Organization")
19. Purchase, Redemption and Pricing of (Included in
Securities Being Offered Prospectus under
"Price of Shares,"
"Purchasing Shares"
and "Redeeming
Shares")
20. Tax Status (Included in
Prospectus under
"Dividends,
Distributions and Tax
Consequences")
21. Underwriters Not Applicable
22. Calculation of Performance Data Not Applicable
23. Financial Statements Financial Statements
</TABLE>
<PAGE> 4
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
Subject to completion, dated December 19, 1996.
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BREMER INVESTMENT FUNDS, INC.
- -------------------------------------------------------------------------------
PROSPECTUS
__________________, 1996
BREMER GROWTH STOCK FUND
BREMER BOND FUND
Bremer Investment Funds, Inc. ("BIFI") is an open-end, diversified
investment company which offers shares in two different mutual funds. This
prospectus provides information about the mutual funds, the Bremer Growth Stock
Fund and the Bremer Bond Fund, which have different investment portfolios and
objectives (each, a "Fund," and together, the "Funds").
SHARES OF THE FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK, NOR ARE THEY INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY. AN INVESTMENT IN
THE FUNDS INVOLVES INVESTMENT RISK, INCLUDING POSSIBLE LOSS OF PRINCIPAL, DUE
TO FLUCTUATION IN EACH FUND'S NET ASSET VALUE.
This Prospectus, which you should retain for future reference, is designed
to set forth concisely the information you should know before you invest. A
Statement of Additional Information dated ______________, 1996, and
incorporated herein by reference, has been filed with the Securities and
Exchange Commission. A copy of the Statement may be obtained, without charge,
by writing to or calling the Funds.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THE PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
<PAGE> 5
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Fund Expenses............................................................... 1
The Funds .................................................................. 3
Investment Objectives and Policies ......................................... 3
Securities and Techniques Used by the Funds ................................ 4
Risk Factors ............................................................... 7
Investment Restrictions .................................................... 9
Management of the Funds .................................................... 10
Plan of Distribution ....................................................... 11
Fund Shares and Organization ............................................... 12
Price of Shares ............................................................ 13
Purchasing Shares .......................................................... 14
Redeeming Shares ........................................................... 15
Dividends, Distributions and Tax Consequences .............................. 16
Performance Information .................................................... 18
Shareholder Services ....................................................... 18
</TABLE>
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FUND EXPENSES
The purpose of the following table is to assist investors in understanding
the various costs and expenses that an investor in the Funds will bear directly
or indirectly, and importantly, to compare the expense of an investment in the
Funds with other similar investments. "Other expenses" are estimated. Actual
expenses may be higher or lower than those shown.
<TABLE>
<CAPTION>
Growth
Stock Bond
Fund Fund
-------- -------
Shareholder Transaction Expenses.
<S> <C> <C>
Maximum sales load imposed on purchases .. None None
Maximum sales load imposed on reinvested
dividends ............................... None None
Deferred sales load ...................... None None
Redemption fees .......................... None(1) None(1)
Exchange fee ............................. None None
Annual Fund Operating Expenses.
--------------------------------
(as a percentage of average net assets)
Management fees .......................... 0.70% 0.70%
12b-1 fees ............................... 0.00%(2) 0.00%(2)
Other expenses ........................... 0.37% 0.30%
----- ------
Total fund operating expenses ............ 1.07% 1.00%
</TABLE>
________________
(1) A fee of $10 is charged for each wire redemption. See "Redeeming
Shares."
(2) The Investment Adviser has voluntarily agreed to waive 12b-1 fees payable
to it during the first year of each Fund's operation, and the Funds do not
expect to pay any 12b-1 fees during such period. The 12b-1 fees paid by a
Fund may not exceed an annual rate of 0.25% of the Fund's average daily
net assets. Absent the waiver of fees by the Investment Adviser, the
total estimated operating expenses for the Growth Stock Fund and the Bond
Fund (as a percentage of average net assets) would be 1.32% and 1.25%,
respectively. If 12b-1 fees are paid in the future, long-term
shareholders may pay more than the economic equivalent of the maximum
front end sales charge permitted by the National Association of Securities
Dealers, Inc.
<PAGE> 7
Example
A shareholder would pay the following expenses on a $1,000 investment,
assuming (1) 5% annual return and (2) redemption at the end of each time
period:
<TABLE>
<CAPTION>
Growth
Stock Bond
Fund Fund
------ ----
<S> <C> <C>
One year $ 11 $ 10
Three years $ 34 $ 32
Five years $ 59 $ 55
Ten years $131 $122
</TABLE>
THIS EXAMPLE IS BASED ON THE ESTIMATED ANNUAL OPERATING EXPENSES SHOWN
ABOVE AND SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES,
WHICH MAY BE MORE OR LESS THAN THOSE SHOWN. Federal securities regulations
require the example to assume an annual rate of return of 5%, but the actual
return for each Fund may be more or less than 5%.
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<PAGE> 8
THE FUNDS
BIFI is an open-end, diversified investment company which offers shares in
several different mutual funds, each of which evidences an interest in a
separate and distinct investment portfolio. Each share of a Fund represents an
undivided proportionate interest in that Fund. This Prospectus relates to the
Class A Common Stock (Growth Stock Fund) and Class B Common Stock (Bond Fund),
presently the only authorized classes of common stock. The Board of Directors
of BIFI may authorize additional series or classes of common stock in the
future.
INVESTMENT OBJECTIVES AND POLICIES
The investment objectives and policies of the Funds are described below.
There can be no assurance that any of these objectives will be achieved. The
investment objectives of the Funds are not fundamental and may be changed
without a vote of the shareholders, which could result in a Fund having
investment objectives different from those which a shareholder considered
appropriate for its investment needs at the time of its investment. A Fund
will provide its shareholders with written notification at least 30 days prior
to any change in the Fund's investment objectives.
If a Fund complies with a percentage limitation on investments at the time
an investment is made, a later increase or decrease in percentage resulting
from changes in asset value will not be deemed to violate the limitation,
except in the case of a limitation on illiquid investments and borrowings. For
information about each Fund's investment limitations, see "Investment
Restrictions."
GROWTH STOCK FUND
The Growth Stock Fund seeks long-term appreciation of capital by investing
primarily in a portfolio of equity securities of established companies with
above average prospects for growth or ones incurring significant fundamental
changes. Dividend income, if any, is a secondary consideration.
The Growth Stock Fund invests substantially all, but at least 65%, of its
total assets in common stocks, convertible securities, and other equity
securities of companies which
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<PAGE> 9
typically have an equity market capitalization of at least $1.0 billion.
Due to the exposure to equities, the Fund's net asset value may be
subject to greater fluctuations than a portfolio containing a majority of fixed
income securities.
The Growth Stock Fund invests primarily in common stocks chosen on the
basis of traditional research techniques, including the assessment of corporate
growth prospects, as well as risk and volatility characteristics. The Growth
Stock Fund may invest in common stocks, preferred stocks, warrants and put or
call options on stocks.
The Growth Stock Fund may also invest in the securities of foreign
companies which are traded on U.S. securities exchanges or on the OTC market in
depository receipt form. Such foreign corporate securities may present greater
risks in the form of nationalization, confiscation, domestic marketability or
other national or international political events.
For information about the securities and techniques used by the Growth
Stock Fund, see "Securities and Techniques Used by the Funds."
BOND FUND
The Bond Fund seeks to maximize total return, consistent with the
preservation of capital and prudent investment management, through investment
in an actively managed portfolio of fixed income securities.
The Bond Fund will invest in obligations issued or guaranteed by the U.S.
Government or its agencies; obligations issued or guaranteed by foreign
governments and obligations of domestic or foreign corporations (rated Baa or
better by Moody's, BBB or better by S&P, or unrated if determined by the
Investment Adviser to be of comparable quality); and mortgage-backed and other
asset backed securities. Mortgage-backed securities in which the Bond Fund may
invest include mortgage pass-through certificates and multiple class
pass-through certificates, real estate mortgage investment conduit pass-through
certificates and collateralized mortgage obligations.
Under normal market conditions, at least 65% of the Bond Fund's total
assets will be invested in debt obligations and government securities with
maturities at the time of acquisition of one year or more.
The obligations in which the Bond Fund invests will have various
maturities depending upon current and forecasted levels of interest rates and
the shape of the yield curve. The Bond Fund will have a duration between two
and five years. Duration is a measure of the expected life of a fixed income
security having greater precision than the concept of "term to maturity."
Duration incorporates a bond's yield, coupon interest payments, final maturity
and call features into one measure. Duration is one of the fundamental tools
used by the Investment Adviser in portfolio selection for the Bond Fund.
SECURITIES AND TECHNIQUES USED BY THE FUNDS
The following provides a summary of the securities and investment
techniques used by the Funds.
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<PAGE> 10
Convertible Securities. The Growth Stock Fund may invest in convertible
securities. Convertible securities are securities which may be exchanged or
converted into a predetermined number of shares of the issuer's underlying
common stock at the option of the holder during a specified time period.
Convertible securities may take the form of convertible preferred stock,
convertible bonds or debentures, units consisting of bonds and warrants, or a
combination of the features of several of these securities. The investment
characteristics of each convertible security varies greatly, which means
convertible securities can be utilized for varying investment objectives. In
choosing convertible securities, the Investment Adviser evaluates the
investment characteristics of the convertible securities as a fixed income
instrument and the investment potential of their underlying equity security for
capital appreciation. Factors considered include the economic and political
outlook, the relative value of various investment alternatives, the issuer's
financial condition, profitability and corporate management. Convertible
securities purchased by the Growth Stock Fund will be rated investment grade
or, if unrated, be of comparable quality in the opinion of the Investment
Adviser. "Investment grade" means securities rated at least Baa by Moody's
Investors Service or BBB by Standard & Poor's Ratings Group, Fitch Investors
Service, Inc. or Duff & Phelps Credit Rating Co.
Restricted and Other Illiquid Securities. The Growth Stock Fund may
acquire securities which are subject to legal, contractual or other
restrictions and costs which reduce the liquidity of the security on resale.
The Bond Fund may purchase "illiquid securities," defined as securities which
may not be disposed of in the ordinary course of business within seven days.
Because of time limitations, the Funds might not be able to dispose of these
securities at reasonable prices or at an advantageous time. The Growth Stock
Fund and the Bond Fund intend to limit the purchase of restricted or illiquid
securities to not more than 15% of their net assets.
When-Issued and Delayed Delivery Transactions. The Funds may purchase
securities on a when-issued or delayed delivery basis. These transactions are
arrangements in which the Funds purchase securities with payment and delivery
scheduled for a future time. The seller's failure to complete these
transactions may cause a Fund to miss a price or yield considered to be
advantageous. Settlement dates may be a month or more after entering into
these transactions, and the market values of the securities purchased may vary
from the purchase prices. Accordingly, a Fund may pay more or less than the
market value of the securities on the settlement date.
The Funds may dispose of a commitment prior to settlement if the
Investment Adviser deems it advantageous to do so. In addition, the Funds may
enter into transactions to sell their purchase commitments to third parties at
current market values and simultaneously acquire other commitments to purchase
similar securities at later dates. The Funds may realize short-term profits or
losses upon the sale of such commitments.
Temporary Investments. As a temporary defensive measure, as determined by
the Investment Adviser, a Fund may invest all or a portion of its assets in the
following securities:
- Short-term money market instruments;
- Securities issued and/or guaranteed as to payment of
principal and interest by the U.S. Government, its
agencies or instrumentalities; and
- Repurchase agreements. Repurchase agreements are
arrangements in which banks, broker-dealers and
other recognized financial institutions sell U.S.
5
<PAGE> 11
Government securities or other securities to a Fund and
agree at the time of sale to repurchase them at a mutually agreed
upon time and price. To the extent that the original seller does
not repurchase the securities from the Fund, the Fund could
receive less than repurchase price of any sale of such securities.
Put and Call Options. The Funds may purchase put options as a hedge to
attempt to protect securities which it holds against decreases in value. Fund
will purchase put options only if they are listed on a recognized options
exchange and the underlying securities are held in its portfolio.
Each Fund may also write call options on securities either held in its
portfolio, or which it has the right to obtain without payment of further
consideration, or for which it has segregated cash in the amount of any
additional consideration. The call options which a Fund writes and sells must
be listed on a recognized options exchange. Writing of calls is intended to
generate income and, thereby, protect against price movements in particular
securities in a Fund's portfolio. Prior to exercise or expiration, an option
position can only be terminated by entering into a closing purchase or sale
transaction. This requires a secondary market on an exchange which may or may
not exist for any particular call or put option at any specific time. The
absence of a liquid market to close options could have an adverse impact on a
Fund's ability to effectively hedge its portfolio.
Lending of Portfolio Securities. In order to generate income,
each Fund may lend up to one-third in net asset value of its portfolio
securities on a short-term or a long-term basis to broker-dealers, banks or
other institutional borrowers of securities. The Funds will only enter into
loan arrangements with broker-dealers, banks or other institutions which the
Investment Adviser has determined are creditworthy under guidelines established
by the Board of Directors and will receive collateral in the form of cash or
U.S. Government securities equal to at least 100% of the value of the
securities loaned.
Securities of Other Registered Investment Companies. The Funds may invest
up to 10% of their total assets in shares of other registered investment
companies, principally money market funds. An investment in a registered
investment company involves investment risk. In addition, by investing in other
registered investment companies, the Funds incur the expenses and distribution
costs charged by the other registered investment companies.
Real Estate Investment Trusts. The Growth Stock Fund may invest up to 10%
of its total assets in the securities of real estate investment trusts
("REITs"). REITs are publicly traded corporations or trusts that principally
acquire, hold and manage residential, commercial or industrial real estate. A
REIT is not taxed on income distributed to its shareholders, provided that at
least 95% of its taxable income for each taxable year is distributed to its
shareholders and the REIT is in compliance with all other regulatory
requirements. REITs may be negatively affected by changes in the value and
income generated by the underlying properties or the credit quality of mortgages
which they hold. REITs may have limited diversification and are subject to the
general risks of real estate investments.
Portfolio Turnover. Although the Funds do not intend to invest for the
purpose of seeking short-term profits, securities in their portfolios will be
sold whenever the Investment Adviser believes it is appropriate to do so in
light of each Fund's investment objective, without regard to the length of time
a particular security may have been held. The annual portfolio turnover rate is
estimated to be 50% for the Growth Stock Fund and up to 100% for the Bond Fund.
A Fund would have an annual portfolio turnover rate if all of its securities
were replaced within one year. High portfolio turnover (generally over 100%)
generally results in greater brokerage commissions and transaction costs, which
are paid directly by the Funds. In addition, complying with the "short-short"
test of the Internal Revenue Service could require a Fund to modify its
investment strategy by restricting its purchases and sales. Under the
"short-short" test, a fund may not receive more than 30% of its gross income
from gains realized from securities held for less than 90 days.
Additional Investment Techniques Used by the Bond Fund. The Bond Fund may
buy and sell interest rate futures contracts, futures contracts on securities
and fixed income securities indices and options on such contracts for the
purpose of hedging against changes in the value of securities which the Bond
Fund owns or anticipates purchasing due to anticipated changes in interest
rates. Participation in the options and futures markets involves additional
investment risks and transaction costs. If the Investment Adviser's assumptions
regarding the direction of the securities and interest rate markets are
incorrect, the value of The Bond Fund may be lower than if the hedging strategy
had not been used. There can be no assurance that a liquid market will exist at
a time when the Bond Fund seeks to close out a futures contract or a futures
option position.
For temporary defensive purposes, as determined by the Investment Adviser,
the Bond Fund may invest a substantial portion of its assets in cash or cash
equivalents, such as obligations of banks, commercial paper and short-term
obligations of U.S. or foreign issuers.
6
<PAGE> 12
RISK FACTORS
Although the Funds seek to moderate risk by investing in diversified
portfolios of securities, an investment in the Funds involves certain risks.
An investor in the Growth Stock Fund should consider the following:
Equity Securities. The market prices of equity securities, which include
common and preferred stocks and convertible securities, are generally subject
to greater volatility than prices of fixed income securities, such as bonds and
other debt obligations. The Growth Stock Fund is subject to the general risk
of adverse market conditions for equity securities. Although equity securities
in general have a history of long-term growth in value, their prices may
fluctuate dramatically in the short term due to changes in market conditions,
interest rates and various economic and political factors.
Fund Management. The Funds are actively managed by the Investment
Adviser. Fund performance depends on the ability of the Investment Adviser to
select and maintain a portfolio of securities which will achieve each Fund's
investment objectives. The Funds could under-perform compared with other funds
having similar investment objectives.
An investor in the Bond Fund should consider the following:
Credit Risk. The Bond Fund invests in debt securities and is subject to
credit risk, which is the risk that the issuer of a debt security will fail to
make payments when due.
Securities issued or guaranteed by the United States Government generally
are viewed as carrying minimal credit risk. Securities issued by governmental
entities but not backed by the full faith and credit of the United States, and
securities issued by private entities, are subject to higher levels of credit
risk. Shareholders in the Bond Fund bear the risk that payment defaults could
cause the value of the Bond Fund's investment portfolio to decline. The Bond
Fund's permitted investments are intended to limit the amount of credit risk
undertaken by the Bond Fund. The Bond Fund can invest in debt securities rated
as low as BBB by Standard & Poor's or Baa by Moody's, or which have been
assigned as equivalent rating by another nationally recognized statistical
rating organization, or which are of comparable quality in the judgment of the
Investment Adviser. Although these rating categories are investment grade,
obligations with these ratings are viewed as having speculative characteristics
and carry a somewhat higher risk of default than obligations rated in the
higher investment grade categories. If the rating of a debt security or
convertible security is downgraded below BBB/Baa, it is the intention of the
Bond Fund to dispose of the security.
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<PAGE> 13
Interest Rate Risk. The Bond Fund invests in fixed-rate debt securities
and is subject to interest rate risk, which is the risk that the value of a
fixed-rate debt security will decline due to changes in market interest rates.
In general, when interest rates rise, the value of a fixed-rate debt security
declines. When interest rates decline, the value of a fixed-rate debt security
generally increases. The final maturity of the debt also will affect interest
rate risk and price volatility of the portfolio. Generally, a debt security
with a longer maturity will have greater price volatility as a result of
interest rate changes than a debt security with a shorter maturity. Therefore,
Bond Fund shareholders bear the risk that increases in market interest rates
will cause the value of the investment portfolio to decline. Although the
Investment Adviser may engage in transactions intended to hedge the value of the
Bond Fund's portfolios against changes in market interest rates, there is no
assurance that such hedging transactions will be undertaken or will successfully
protect the value of the portfolio.
Call Risk. The Bond Fund invests in corporate bonds, which are subject to
call risk. Corporate bonds and some securities issued by United States
agencies may be subject to redemption ("called") at the option of the issuer at
a specified price prior to their stated maturity date. It may be advantageous
for an issuer to call its bonds if they can be refinanced through the issuance
of new bonds bearing a lower interest rate than the called bonds. Call risk
increases during periods of declining market interest rates.
If a bond held by the Bond Fund is called during a period of declining
interest rates, the Bond Fund will likely invest the proceeds received by it at
a lower interest rate than that of the called bond, causing a decrease in the
Bond Fund's income.
Mortgage-Related and Other Asset Backed Securities. Mortgage-backed
securities are securities representing interest in "pools" of mortgage loans
secured by residential or commercial real property in which payments of both
interest and principal on the securities are generally made monthly, in effect
"passing through" monthly payments made by the individual borrowers on the
mortgage loans which underlie the securities (net of fees paid to the issuer or
guarantor of the securities). Early repayment of principal on some
mortgage-backed securities (arising from prepayments of principal due to sale
of the underlying property, refinancing, or foreclosure, net of
fees and costs which may be incurred) may expose the Bond Fund to a lower rate
of return upon reinvestment of principal. Also, if a security subject to
prepayment has been purchased at a premium, in the event of prepayment the
value of the premium would be lost. Like other fixed income securities, when
interest rates rise, the value of a mortgage-backed security generally will
decline; however, when interest rates are declining, the value of
mortgage-backed securities with prepayment features may not increase as much as
other fixed income securities.
Payment of principal and interest on some mortgage-backed securities (but
not the market value of the securities themselves) may be guaranteed by the
full faith and credit of the U.S. Government (in the case of securities
guaranteed by GNMA); or guaranteed by agencies or instrumentalities of the U.S.
Government (in the case of securities guaranteed by FNMA or the Federal Home
Loan Mortgage Corporation ("FHLMC"), which are supported only by the
discretionary authority of the U.S. Government to purchase the agency's
obligations). Mortgage-backed securities created by non-governmental issuers
(such as commercial banks, savings and loan institutions, private mortgage
insurance companies, mortgage bankers and other secondary market issuers) may
be supported by various forms of insurance or guarantees, including individual
loan, title, pool and hazard insurance and
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<PAGE> 14
letters of credit, which may be issued by governmental entities, private
insurers or the mortgage poolers.
Collateralized Mortgage Obligations ("CMOs") are hybrid mortgage-related
instruments. Interest and prepaid principal on a CMO are paid, in most cases,
monthly. CMOs may be collateralized by whole mortgage loans but are more
typically collateralized by portfolios of mortgage-backed securities guaranteed
by GNMA, FHLMC, or FNMA. CMOs are structured into multiple classes with each
class bearing a different stated maturity. Monthly payments of principal,
including prepayments, are first returned to investors holding the shortest
maturity class; investors holding the longer maturity classes receive principal
only after the first class has been retired. CMOs that are issued or
guaranteed by the U.S. Government or by any of its agencies or
instrumentalities will be considered U.S. Government securities by the Funds,
while other CMOs, even if collateralized by U.S. Government securities, will
have the same status as other privately issued securities for purposes of
applying the Funds' diversification tests.
INVESTMENT RESTRICTIONS
The Funds have adopted certain restrictions designed to ensure
diversification of investment and to reduce investment risk. Certain of these
investment restrictions are fundamental policies, and may not be changed
without shareholder approval. A Fund may not:
(i) With respect to 75% of its total assets, invest more
than 5% of its total assets (determined at the time of
investment) in securities of any one issuer (other than U.S.
Government securities);
(ii) With respect to 75% of its total assets, purchase more
than 10% of the outstanding voting securities of any one
issuer; or
(iii) Invest 25% or more of its total assets (determined
at the time of investment) in one or more issuers having
their principal business activities in a single industry.
Additional information about each Fund's investment restrictions is contained
in the Statement of Additional Information. It is the position of the
Securities and Exchange Commission that open-end investment companies such as
the Funds should not make certain investments if thereafter more than 15% of
the value of their net assets would be so invested. As a matter of operating
policy (though not a fundamental policy), the Funds limit such investments to
no more than 15% of the value of their net assets. The investments in this 15%
limit include (i) those which are restricted (securities which cannot freely be
sold for legal or contractual reasons); (ii) fixed time deposits subject to
withdrawal penalties (other than overnight deposits); and (iii) repurchase
agreements having a maturity of more than seven days. The 15% limitation does
not include obligations which are payable at principal amount plus accrued
interest within seven days after purchase.
9
<PAGE> 15
MANAGEMENT OF THE FUNDS
The Board of Directors of BIFI has overall responsibility for overseeing
the management of the Funds. BIFI employs First American Trust Company of
Minnesota (the "Investment Adviser"), P.O. Box 1956, St. Cloud, Minnesota
56302, to manage the Funds' investment portfolios and certain other business
affairs under an agreement that compensates the Investment Adviser at the
annual rate of 0.7% of the average daily net assets of the Funds computed daily
and paid monthly.
The Investment Adviser has acted as investment adviser to BIFI since its
inception, but has not previously served as investment adviser to any other
registered investment company. As of September 30, 1996, the Investment
Adviser managed accounts with an aggregate value of approximately $675,000,000.
The Investment Adviser is a wholly owned subsidiary of Bremer Financial
Corporation, 445 Minnesota Street, Suite 2000, St. Paul, Minnesota 55101-2107,
a bank holding company.
The Glass-Steagall Act generally prohibits banks from engaging in the
business of underwriting, selling or distributing securities and from being
affiliated with companies principally engaged in those activities. In
addition, administrative and judicial interpretations of the Glass-Steagall Act
prohibit bank holding companies and their bank and nonbank subsidiaries from
organizing, sponsoring or controlling registered open-end investment companies
that are continuously engaged in distributing their shares. Bank holding
companies and their bank and nonbank subsidiaries may serve, however, as
investment advisers to registered investment companies, subject to a number of
terms and conditions. In the event of changes in federal or state
statutes or regulations or judicial and administrative interpretations or
decisions pertaining to permissible activities of bank holding companies and
their bank and nonbank subsidiaries, the Investment Adviser might be prohibited
from continuing these arrangements. In that event, it is expected that the
Board of Directors would make other arrangements and that shareholders would
not suffer adverse financial consequences.
Portfolio Managers. The Growth Stock Fund is managed by a team comprised
of David J. Erickson and Janet E. Vandendriessche. The Bond Fund is managed by
a team comprised of Paul W. Gifford, Jr. and David J. Erickson.
DAVID J. ERICKSON is Vice President/Chief Investment Officer of the
Investment Adviser and develops investment policies and procedures for the
Investment Company. He also serves as Chairman of the Investment Committee
which oversees the investment process for the Investment Adviser. Dave
conducts research on the economy, financial markets and specific investment
products. In addition, he oversees the management of seven internal funds. He
is heavily involved in stock selection and personally manages a key internal
stock fund. He has two decades of investment management experience as well as
BA and MBA degrees in finance from the University of Wisconsin, Madison.
JANET E. VANDENDRIESSCHE is Senior Vice President of the Investment
Adviser. She serves on the Investment Committee of the Investment Adviser.
Janet develops strategies,
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<PAGE> 16
conducts training, and manages portfolios to achieve performance
consistent with long-range objectives. She analyzes equities for the buy list
and manages an internal equity fund with total assets in excess of $6 million.
She serves on Bremer Financial Corporation's Corporate Investment Committee.
Janet administers Personal Trust accounts and manages portfolios in excess of
$200 million. She has 21 years of trust administration and investment
experience. Janet received her Bachelor of Arts degree in Mathematics from the
College of St. Benedict's. She received her Certified Financial Planner
designation in 1993.
PAUL W. GIFFORD, JR. is Trust Officer/Investment Manager of the Investment
Adviser. Paul's primary focus is on fixed income strategies including the
management of four internal bond funds. In addition, he assists in stock
selection for funds and accounts. Paul is an investment officer for the
Investment Adviser and serves on its Investment Committee. He has seven years
of investment experience since completing his Business Degree at Mankato State
University.
Firstar Trust Company, 615 East Michigan Street, P.O. Box 701, Milwaukee,
Wisconsin 53201-0701 (telephone 1-800-595-5552) acts as Transfer Agent,
Dividend Disbursing Agent and Custodian for the Funds. It controls all
securities and cash for the Funds, receives and pays for securities purchased,
delivers against payment for securities sold, receives and collects income from
investments, makes all payments for Fund expenses and performs other
administrative services. Firstar is not affiliated with BIFI or the Investment
Adviser.
PLAN OF DISTRIBUTION
The Funds have adopted a written plan of distribution (the "Plan") in
accordance with Rule 12b-1 under the Investment Company Act of 1940. The Plan
authorizes the Funds to make payments in connection with the distribution of
shares at an annual rate, as determined from time to time by the Board of
Directors, of up to 0.25% of a Fund's average daily net assets. Payments made
pursuant to the Plan may only be used to pay distribution expenses actually
incurred. Expenses incurred in one year may be carried forward and paid from
amounts available in future years. The Rule 12b-1 fees may be used to finance
any activity which is primarily intended to result in the sale of shares of a
Fund, including, but not limited to, advertising, compensation for sales and
marketing activities of financial institutions and others such as dealers and
distributors, shareholder account servicing, the printing and mailing of
prospectuses and the printing and mailing of sales literature. The Plan
permits the Funds to employ a distributor of shares, in which case payments
under the Plan will be made to the distributor and may be spent by the
distributor on any activities or expenses primarily intended to result in the
sale of the Funds' shares, including but not limited to, compensation to, and
expenses of, employees of the distributor who engage in or support distribution
of our shares, printing of prospectuses and reports, advertising and
preparation and distribution of sales literature. Overhead and salaries will
be allocated based on the percentage of time devoted to distribution
activities. Initially, all payments under the Plan will be made to the
Investment Adviser, which directly bears all sales and promotional expenses of
the Funds, other than expenses incurred to comply with laws
11
<PAGE> 17
regulating the issuance and sale of securities. The Investment Adviser
has voluntarily agreed to waive fees payable to it under the Plan during the
first year of each Fund's operations.
The Funds will pay all Fund expenses not assumed by the Investment
Adviser, including, but not limited to, the costs of preparing and printing
registration statements required under the Securities Act of 1933 and the
Investment Company Act of 1940 and any amendments thereto, the expenses of
qualifying shares for sale in various states, the printing and distribution
costs of prospectuses provided to existing shareholders, the cost of director
and officer liability insurance, reports to shareholders, reports to government
authorities and proxy statements, interest charges, brokerage commissions, and
expenses incurred in connection with portfolio transactions. The Funds will
also pay fees of directors who are not employees or interested persons of the
Funds, auditing and accounting services, fees and expenses of any custodian or
trustee having custody of the Funds' assets, expenses of calculating the net
asset value and repurchasing and redeeming shares, and charges and expenses of
dividend disbursing agents, registrars, and share transfer agents, including
the cost of keeping all necessary shareholder records and accounts.
The Funds have entered into an administration agreement (the
"Administration Agreement") with Firstar Trust Company (the "Administrator"),
615 East Michigan Street, Milwaukee, Wisconsin 53202. Under the Administration
Agreement, the Administrator maintains the books, accounts and
other documents required by the Investment Company Act of 1940, responds to
shareholder inquiries, prepares our financial statements and tax returns,
prepares certain reports and filings with the Securities and Exchange
Commission and with state regulatory authorities, furnishes statistical and
research data, clerical, accounting and bookkeeping services, keeps and
maintains the Funds' financial and accounting records and generally assists in
all aspects of the Funds' operations. The Administrator, at its own expense
and without reimbursement from the Funds, furnishes office space and all
necessary office facilities, equipment and executive personnel for performing
the services required to be performed by it under the Administration Agreement.
For its services during the first year of the Fund's operation, the Funds pay
the Administrator a fee, paid monthly, at an annual rate of 0.0425% of the
first $100,000,000 of each Fund's average net assets, 0.034% of the next
$400,000,000 of each Fund's average net assets, and 0.0255% of each Fund's net
assets in excess of $500,000,000. The Administrator's minimum annual fee,
regardless of net asset value, is $50,000.
Firstar Trust Company also provides custodial, transfer agency and
accounting services for the Funds. Information about the fees paid for these
services by the Funds to Firstar Trust Company is provided in the Statement of
Additional Information.
FUND SHARES AND ORGANIZATION
BIFI was incorporated under the laws of Maryland on August 26, 1996 and is
registered under the Investment Company Act of 1940 as an open-end management
company. The Articles of Incorporation authorize the Board of Directors to
issue up to 500 million shares of Common Stock, $.0001 par value per share. Of
these shares, 100 million have been authorized for each of the Growth Stock
Fund and the Bond Fund. Fund shares
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<PAGE> 18
are fully paid and non-assessable when issued; have no preference as to
conversion, exchange, dividends, redemption or other features; and have no
preemptive rights. The shares have no cumulative voting rights, meaning that
the holders of more than 50% of the shares voting for the election of directors
can elect 100% of the directors. Shares may be issued as either full or
fractional shares. Fractional shares have, pro rata, the same rights and
privileges as full shares.
Each share of a Fund has one vote. On certain matters, such as the
election of directors, all shares of all of the Funds vote together as one
series. On matters affecting only a particular Fund or class, the shares of
that Fund or class will vote as a separate series. An example of such a matter
would be a proposal to alter a fundamental investment restriction pertaining to
a Fund.
Under the laws of the State of Maryland and BIFI's Articles of
Incorporation, BIFI is not required to hold shareholder meetings unless they
are required by the Investment Company Act of 1940 or are requested in writing
by the holders of 25% or more of the outstanding shares of BIFI.
As of the date of this Prospectus, the Investment Adviser had provided the
initial seed capital for the Funds and owned all of the outstanding Common
Stock of the Funds. The ownership interest of the Investment Adviser will be
substantially diluted upon the issuance of shares to Fund investors. However,
so long as the Investment Adviser owns more than 25% of the outstanding voting
securities of a Fund, it may be deemed to be a controlling entity of that Fund.
PRICE OF SHARES
Shares of the Funds are sold and redeemed at net asset value. The net
asset value per share for purchase and redemption orders is determined once
daily, as of the close of regular trading hours (currently 3:00 p.m., Central
time) of the New York Stock Exchange (the "Exchange") on each day the Exchange
is open for trading. Net asset value per share of a Fund is calculated by
dividing the total market value of the Fund's investments and other assets,
less any liabilities, by the total outstanding shares of the Fund.
For the purpose of determining the aggregate net assets of the Funds, cash
and receivables will be valued at their face amounts. Interest will be recorded
as accrued and dividends will be recorded on the ex-dividend date. Investments
in equity securities which are traded on a national securities exchange or
reported on the Nasdaq National Market are stated at the last quoted sales
price if readily available for such equity securities on each business day;
other equity securities traded in the over-the-counter market and listed equity
securities for which no sale was reported on that date are stated at the last
quoted bid price. Debt obligations exceeding 60 days to maturity which are
actively traded are valued by an independent pricing service at the most
recently quoted bid price. Debt obligations with 60 days or less remaining
until maturity may be valued at their amortized cost, which approximates market
value. Options purchased or written by the Funds are valued at the average of
the current bid and asked prices. For securities where quotations are not
readily
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<PAGE> 19
available, or where the last quoted sale price is not considered
representative of the value of that security if it were to be sold on that day,
the security will be valued at fair value as determined in good faith by the
Investment Adviser.
PURCHASING SHARES
By Mail: Subscription for shares should be addressed to the Bremer Growth
Stock Fund or the Bremer Bond Fund, c/o Firstar Trust Company, Mutual Fund
Services, P.O. Box 701, Milwaukee, Wisconsin 53201-0701. Express or registered
mail should be sent to the Bremer Growth Stock Fund or the Bremer Bond Fund,
c/o Firstar Trust Company, Third Floor, 615 East Michigan Street, Milwaukee,
Wisconsin 53202. The U.S. Postal Service or independent delivery services are
not agents of the Funds, and deposit in the mail or with a delivery service or
receipt at Firstar Trust Company's post office box of purchase applications
does not constitute receipt by Firstar or a Fund.
By Wire: To purchase by wire transfer, federal funds should be
transmitted to Firstar Bank Milwaukee, N.A., ABA #0750-00022/ For Credit to:
Firstar Trust Company, Account #112-952-137/For Further Credit: Bremer Growth
Stock Fund or Bremer Bond fund [shareholder account number], [name of account].
An Account Application Form must be on file with Firstar Trust Company before
purchasing shares by wire. Before wiring funds, an investor should call
Firstar Trust Company at 1-800-595-5552 to advise the bank that funds are being
wired.
The price per share will be the net asset value next computed after the
time the application and funds are received in proper order by the Transfer
Agent. The determination of net asset value for a particular day is applicable
to all applications for the purchase of shares received at or before the close
of trading on the Exchange. Accordingly, purchase orders received on a day the
Exchange is open for trading, prior to the close of trading on that day, will
be valued as of the close of trading on that day. Applications for purchase of
shares after the close of trading on the Exchange will be based upon the net
asset value as determined as of the close of trading on the next day the
Exchange is open.
An initial purchase must be at least $2,000 ($1,000 for IRA purchases) and
each subsequent purchase must be at least $100, although the Funds reserve the
right to waive or change these minimums at its discretion. All applications to
purchase capital stock are subject to acceptance or rejection by authorized
officers of the Funds and are not binding until accepted. Applications will
not be accepted unless accompanied by payment in U.S. funds. Payment should be
made by check or wire transfer drawn on a U.S. bank, savings and loan, or
credit union. The Funds will not accept payment in cash or third party checks
for the purchase of shares. The Transfer Agent will charge a $20 fee against
an investor's account for any check that does not clear. Additionally, the
investor may be responsible for certain expenses incurred by a Fund if a
purchase is cancelled due to non-payment.
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<PAGE> 20
REDEEMING SHARES
Shareholders may redeem for cash all or a portion of their shares by
instructing the Transfer Agent at its office in Milwaukee, Wisconsin. Shares
will be redeemed at the net asset value next computed after the receipt of a
redemption request in good order. The determination of net asset value for a
particular day is applicable to all requests for the redemption of shares
received at or before the close of trading on the Exchange on that day (usually
3:00 p.m. Central time). Requests received for redemption on a day the
Exchange is open for trading, prior to the close of trading on that day, will
be valued as of the close of trading on that day. Requests for redemption of
shares received after the close of trading on the Exchange will be based upon
the net asset value as determined as of the close of trading on the next day
the Exchange is open. A redemption request must be in "good order" before the
proceeds can be released. This means the following will be required:
(i) A letter of instruction specifying the account number, number of
shares or dollar amount to be redeemed, signed by all owners of the
shares exactly as their names appear in the Fund's shareholder
records. If certificates have been issued representing shares to be
redeemed, they must accompany the letter and must be endorsed on the
back with the signature of the person whose name appears on the
certificate.
(ii) A guarantee of the signature of each owner by an eligible signature
guarantor such as a U.S. commercial bank, trust company, or member
of the New York Stock Exchange for redemption requests greater than
$10,000, if the address of record has been changed within the 15 days
preceding any liquidation, or if the proceeds of any redemption are
requested to be made payable to or sent to other than the address of
record.
(iii) In the case of estates, trusts, guardianships, custodianships,
corporations and pension and profit-sharing plans, other supporting
legal documents may be required.
If any portion of the shares to be redeemed represents an investment made
by check, the Fund may delay the payment of the redemption proceeds until the
transfer agent is reasonably satisfied that the check has been collected, which
may take up to twelve days from the purchase date.
Payment for shares redeemed will be mailed generally within two business
days, but no later than the seventh business day after receipt by the Transfer
Agent of the redemption request in good order, or within such shorter period as
may legally be required. If payment of liquidation proceeds is to be made by
federal wire transfer, a $10 wire fee will be applied.
No redemption request will become effective until all documents have been
received in proper form by Firstar Trust Company. The shareholder should
contact Firstar for
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<PAGE> 21
further information concerning documentation required for a redemption
of Fund shares. The U.S. Postal Service or independent delivery services are
not agents of the Funds, and deposit in the mail or with a delivery service or
receipt at Firstar Trust Company's post office box of redemption requests does
not constitute receipt by Firstar or a Fund.
Shareholders who have an IRA or other retirement plan must indicate on
their redemption request whether or not to withhold federal income tax.
Redemption requests failing to indicate an election not to have tax withheld
will be subject to withholding.
A redemption order may not be canceled or revoked by the shareholder
once it has been received and accepted by the Fund. Since the redemption price
is the net asset value per share determined at the same time and in the same
manner as for a purchase order received at that time, it reflects the market
value of the Fund's investments at the time of redemption. This value may be
more or less than the price originally paid for the shares, and the investor
may realize a gain or loss on redemption.
To redeem shares by telephone, an investor must check the appropriate box
on the account application. Proceeds redeemed by telephone will be mailed or
wired only to an investor's address or bank of record as shown on the records
of the Transfer Agent. In order to arrange for telephone redemptions after an
account has been opened or to change the bank, account, or address designated
to receive redemption proceeds, a written request must be sent to the Transfer
Agent. The request must be signed by each shareholder of the account with the
signatures guaranteed. Further documentation may be requested from
corporations, executors, administrators, trustees and guardians.
Neither the Funds nor the Transfer Agent will be responsible for the
authenticity of redemption instructions received by telephone. The Transfer
Agent has adopted certain procedures to safeguard against unauthorized
telephone instructions including recording all telephone transactions and
sending written confirmation of such transactions. The Funds reserve the right
to refuse a telephone redemption if they believe it is advisable to do so.
Procedures for redeeming shares by telephone may be modified or terminated by
the Funds at any time. During periods of substantial economic or market
change, telephone redemptions may be difficult to implement. If an investor is
unable to contact the Transfer Agent by telephone, shares may also be redeemed
by delivering the redemption request to the Transfer Agent in person or by mail
as described above.
DIVIDENDS, DISTRIBUTIONS AND TAX CONSEQUENCES
The Bond Fund will distribute all of its net investment income to
shareholders in the form of monthly dividends. The Growth Stock Fund will
distribute all of its net investment income to shareholders in the form of an
annual dividend, declared on the second to last business day of each calendar
year. If net capital gains are realized, the Fund will distribute them near
year-end in the year in which such gains are realized. The Funds intend to
comply with the special provisions of Subchapter M of the Internal Revenue Code
that relieve them from federal income tax on net investment income and capital
gains currently distributed to shareholders. The Internal Revenue Code
requires all regulated investment
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<PAGE> 22
companies to pay a nondeductible 4% excise tax if at least 98% of
ordinary income and 98% of capital gains are not paid out to shareholders
during the year in which they are earned or realized. The Funds intend to
distribute income and capital gains in such a manner as to avoid the imposition
of this excise tax.
Investors in a Fund may elect to have all income, dividends and capital
gains distributions reinvested in shares of the Fund or paid in cash, or to
have capital gains distributions reinvested and income dividends paid in cash.
Further information about dividend reinvestment is contained in the New Account
Application form accompanying this Prospectus. If an election is not specified,
all dividends and capital gains distributions will automatically be reinvested
in full and factional shares of the Fund, calculated to the nearest 1,000th of
a share. Shares are purchased at the net asset value in effect on the business
day after the dividend record date and are credited to the investor's account
on the dividend payment date. Cash dividends are also paid on the dividend
payment date. Investors will be informed of the number of shares purchased and
the price following each reinvestment. An election to reinvest or receive
dividends and distributions in cash will apply to all shares registered in an
investor's name, including those previously purchased through dividend
reinvestment.
An investor may change an election at any time by notifying the Fund in
writing. If such notice is received between a dividend declaration date and
the corresponding payment date, it will become effective on the day following
the payment date. The Funds may modify or terminate the dividend reinvestment
program at any time on 30 days' notice to participants.
Fund shareholders will be subject to federal income tax at ordinary rates
on distributions of investment income and short-term capital gains.
Distributions of net long-term capital gains are taxable to Fund shareholders
as long-term capital gain regardless of the length of time shares of the Fund
are held. Short-term capital gains are taxed at the same rate as an
individual's ordinary income; long-term capital gains are taxed at a maximum
rate of 28%. Dividends and distributions will be taxable whether received in
cash or reinvested in additional shares of the Fund. Shareholders will be
advised annually as to the source of distributions for tax purposes.
Distributions may also be subject to state and local taxes. Shareholders not
subject to tax on income will not be required to pay tax on amounts distributed
from a Fund.
Certain Fund shareholders may transfer appreciated assets to a Fund in
exchange for Fund shares (for example, upon the transfer of securities from a
predecessor common or collective fund). Upon a redemption of Fund shares, such
shareholders would realize taxable gain on the appreciation of such assets
prior to the time of the exchange, in addition to any subsequent appreciation
of Fund shares.
A Fund may be required to withhold federal income tax at a rate of 31%
(backup withholding) from dividend payments, distributions, and redemption
proceeds if a shareholder fails to furnish the Fund with a social security or
tax identification number. The shareholder also must certify that the number
is correct and that the shareholder is not subject to backup withholding. The
certification is included as part of the share purchase application form.
Dividends and distributions are paid on a per share basis. At the time of
such payment, therefore, the value of each share will be reduced by the amount
of the payment.
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<PAGE> 23
If shares are purchased shortly before the payment of a dividend or a
capital gains distribution, purchasers will pay the full price for the shares
and then receive some portion of the price back as a taxable dividend or
distribution.
The foregoing is a general summary of current federal income tax law
regarding the Funds. Investors should consult with their own tax adviser
regarding federal, state and local tax consequences of an investment in the
Funds.
PERFORMANCE INFORMATION
Either Fund may, from time to time, advertise information regarding its
performance. A Fund's average annual total rate of return will be expressed in
terms of the average annual compounded rate of return on a hypothetical
investment in the Fund over a specified period, will reflect the deduction of a
proportional share of Fund expenses (on an annual basis) and will assume that
all dividends and capital gains distributions are reinvested when paid. Total
return indicates the positive or negative rate of return that a shareholder
would have earned from reinvested dividends and distributions and changes in
net asset value per share during the period.
Performance information for the Funds may be compared, in reports and
promotional literature to: (i) the Standard & Poor's 500 Stock Index, the Dow
Jones Industrial Average, the Lehman Brothers Intermediate Government Corporate
Bond Index or various other unmanaged indices, and (ii) the performance of
other mutual funds. Unmanaged indices may assume the reinvestment of income
distributions, but generally do not reflect deductions for administrative and
management costs and expenses.
Performance information for a Fund reflects only the performance of
hypothetical investments in the Fund during the particular time periods on
which the calculations are based. Such information should not be considered as
representative of the performance of the Fund in the future. The performance
of a Fund will vary based not only on the current market value of the
securities held in its portfolio, but also on changes in the Fund's expenses
and in the asset size of the Fund. Performance information should be
considered in light of a Fund's investment objectives and policies, the types
and quality of the Fund's portfolio investments, market conditions during the
particular time period and operating expenses.
SHAREHOLDER SERVICES
Shareholder Reports. Shareholders will receive a confirmation statement
reflecting each purchase and redemption of Fund shares, as well as periodic
statements detailing distributions made by the Funds. In addition, the Funds
will send shareholders semi-annual reports showing its portfolio holdings and
will provide tax information annually.
Systematic Investments. Shareholders may arrange to make regular monthly
or quarterly investments in the Funds through automatic withdrawals from a bank
account. The minimum for each systematic investment in a Fund is $100 and a
shareholder must have
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<PAGE> 24
a minimum of $2,000 invested in the Fund before making systematic investments.
A shareholder may specify systematic investments on the initial account
application or by submitting a Systematic Investment application at a later
date.
Systematic Withdrawals. Shareholders may arrange to make regular monthly
or quarterly withdrawals of cash (minimum of $250 per withdrawal) from any Fund
that has a minimum balance of $50,000 at the time the systematic withdrawal
election is made. To activate systematic withdrawals, a shareholder must
submit a Systematic Withdrawal application to the Fund. There is no charge for
withdrawals. Withdrawal payments are derived from liquidation of sufficient
shares from a shareholder's account to make the designated payments. If
systematic withdrawals exceed reinvested dividends and capital gain
distributions, a shareholder's original investment will be reduced and
ultimately exhausted. Withdrawals are redemptions of shares and may cause a
shareholder to realize gains or losses for tax purposes. The withdrawal plan
may be terminated at any time by calling or writing to the Fund.
Telephone Exchange Privilege. Shareholders are generally permitted to
exchange their shares in one Fund for shares of the other Fund without charge
or commission by the Fund, provided that such other shares may be legally sold
in the state of the shareholder's residence. The minimum amount per transfer
is $2,000. Telephone exchange privileges automatically apply to each
shareholder of record and the representative of record unless and until the
transfer agent receives written instructions from the shareholder(s) of record
canceling the privilege.
In order to request an exchange by telephone, an investor must give the
account name, account number and the amount or number of shares to be
exchanged. During periods of significant economic or market change, telephone
exchanges may be difficult to implement. If a shareholder is unable to contact
the Fund by telephone, the shareholder may also deliver the exchange request to
the Transfer Agent in person or by mail at the addresses listed on the back
cover of this Prospectus.
Individual Retirement Accounts. Individuals who receive compensation or
earned income may establish their own tax-sheltered individual retirement
account (IRA), even if they are active participants in a qualified retirement
plan. The Funds offer a prototype IRA plan which may be adopted by
individuals. Earnings on amounts held in an IRA are not taxed until
withdrawal. The amount of deduction, if any, allowed for IRA contributions is
limited for individuals who participate in an employer sponsored retirement
plan and whose incomes exceed specified limits.
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<TABLE>
<S> <C>
NEW ACCOUNT INFORMATION: TRANSFER AGENT AND CUSTODIAN:
1-800-595-5552 Firstar Trust Company
P.O. Box 701
SHAREHOLDER ACCOUNT INFORMATION: Milwaukee, Wisconsin 53201-0701
(Regular Mail Address)
1-800-595-5552 Mutual Fund Services
615 East Michigan Street, 3rd Floor
INVESTMENT ADVISER: Milwaukee, Wisconsin 53202
(Overnight or Express Mail Address)
First American Trust Company
P.O. Box 986 PUBLIC ACCOUNTANTS:
St. Cloud, Minnesota 56302-0986
Arthur Andersen LLP
100 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
LEGAL COUNSEL:
Briggs and Morgan,
Professional Association
2400 IDS Center
80 South Eighth Street
Minneapolis, Minnesota 55402
</TABLE>
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<PAGE> 26
BREMER INVESTMENT FUNDS, INC.
STATEMENT OF ADDITIONAL INFORMATION
Dated ______________, 1996
Bremer Investment Funds, Inc. ("BIFI") is an open-end, diversified
investment company, which consists of two mutual funds, the Bremer Growth Stock
Fund and the Bremer Bond Fund, which have different investment portfolios and
objectives (each, a "Fund," and together, the "Funds").
This Statement of Additional Information is not a prospectus, but contains
information in addition to and more detailed than what is contained in the
Prospectus for the Funds. It should be read in conjunction with the
Prospectus, dated ______________, 1996, which has been filed with the
Securities and Exchange Commission and can be obtained, without charge, by
calling or 1-800-595-5552 or writing to Bremer Investment Funds, Inc., c/o
Firstar Trust Company, P.O. Box 701, Milwaukee, Wisconsin 53201-0701. This
Statement of Additional Information has been incorporated by reference into the
Prospectus.
Table of Contents
Investment Objectives and Policies ....................................... 2
Investment Limitations ................................................... 2
Portfolio Turnover ....................................................... 3
Purchasing and Redeeming Shares .......................................... 3
Officers and Directors ................................................... 3
Principal Holders of Securities .......................................... 4
Investment Adviser ....................................................... 4
Transfer Agent and Custodian ............................................. 5
Portfolio Transactions ................................................... 5
Financial Statements .................................................... 6
<PAGE> 27
INVESTMENT OBJECTIVES AND POLICIES
The investment objectives, policies and limitations of the Funds are
described in the Prospectus under the heading "Investment Objectives and
Policies."
INVESTMENT LIMITATIONS
Each Fund is subject to certain fundamental investment restrictions
described in the Prospectus under the heading "Investment Restrictions." Such
investment restrictions may not be changed without the approval of a majority
of the shareholders of the Fund. The vote of a majority of the shareholders
means the vote, at a meeting of the shareholders, of holders representing (a)
67% or more of the voting securities present at such meeting, if the holders of
more than 50% of the outstanding voting securities are present or represented
by proxy; or (b) more than 50% of the outstanding voting securities, whichever
is less.
In addition, the Funds have adopted other investment limitations and will
not:
1) Purchase securities on margin, participate in a joint trading
account or sell securities short.
2) Lend money.
3) Purchase or sell real estate or interests in real estate,
commodities or commodity futures. The Growth Stock Fund may invest
in the securities of real estate investment trusts up to 10% of the
Growth Stock Fund's total net assets.
4) Borrow money except temporarily from a bank (5% of lower of
cost or market of total assets) for emergency or extraordinary
purposes.
5) Purchase securities of other regulated investment companies,
except in open market transactions limited to not more than 10% of
its total assets, or except as part of merger, consolidation or
other acquisition.
6) Invest more than 5% of its total assets in securities of
issuers that have less than three years of continuous operations or
in any equity or fixed income securities of any issuer which are not
readily marketable.
7) Invest more than 5% of its total assets in securities of any
one issuer (except cash, cash items, repurchase agreements and U.S.
Government obligations) or acquire more than 10% of any class of
voting shares of any one issuer.
8) Invest 25% or more of the Growth Stock Fund's total net
assets in companies of any one industry or group of related
industries.
9) Hold more than 10% of the Bond Fund's total net assets in
bonds rated Baa by Moody's or BBB by S&P.
2
<PAGE> 28
PORTFOLIO TURNOVER
The annual portfolio turnover rate is not expected to exceed 50% for the
Growth Stock Fund and 100% for the Bond Fund. No limit, however, has been
placed on the rate of portfolio turnover of the Funds, and securities may be
sold without regard to the time they have been held when, in the opinion of the
Investment Adviser, investment considerations warrant such action. Portfolio
turnover rate is calculated by dividing the lesser of a Fund's annual sales or
purchases of portfolio securities (exclusive of securities with maturities of
one year or less at the time the Fund acquired them) by the monthly average
value of the securities in the Fund's portfolio during the year.
PURCHASING AND REDEEMING SHARES
The purchase and redemption of shares of the Funds are subject to the
procedures described under the headings "Purchasing Shares" and "Redeeming
Shares" in the Prospectus, which is incorporated herein by reference.
OFFICERS AND DIRECTORS
The officers and directors of BIFI and their principal occupations for the
last five years are set forth below. Unless otherwise noted, the address for
each director and officer is Bremer Investment Funds, Inc., P.O. Box 1956, St.
Cloud, Minnesota 56302.
<TABLE>
<CAPTION>
Position(s) Held Principal Occupation(s)
Name and Address With Registrant During Past Five Years
- ---------------- --------------- ----------------------
<S> <C> <C>
Steven A. Laraway* President and President/Chief
Director Executive Officer of
First American Trust
Company of Minnesota
since February 1992;
Vice President of Bank
One Ohio Trust Company
from March 1987 to
February 1992.
David J. Erickson* Vice President Vice President/Chief
Investment Officer of
First American Trust
Company of Minnesota
since January 1993;
Vice President -
Investments of North
Central Trust Company
from September 1987 to
January 1993.
Paul W. Gifford, Jr.* Secretary Investment
Manager/Trust Officer
of First American
Trust Company of
Minnesota. Mr.
Gifford has held
various positions with
First American Trust
Company since December
1990.
Richard A. DiNello* Treasurer Chief Financial
Officer of First
American Trust Company
of Minnesota. Mr.
DiNello has held
various positions with
First American Trust
Company since July
1986.
</TABLE>
3
<PAGE> 29
<TABLE>
<CAPTION>
Position(s) Held Principal Occupation(s)
Name and Address With Registrant During Past Five Years
- ---------------- --------------- ----------------------
<S> <C> <C>
John M. Bishop Director President of Bishop
Lakedale Telephone Company Communications
Highway 55 East Corp. for more than
Annadale, MN 55302 the past five
years.
John V. Botsford Director President of
Suite 300 Botsford & Rice,
3100 South Columbia Rd. Inc. for more than
P.O. Box 14388 the past five years
Grand Forks, ND 58208-4388 and Managing Partner
of Botsford & Rice
Cooperative
Securities, LLP.
John J. Feda Director Retired.
607 South First Street
Marshall, MN 56258
William H. Lipschultz* Director Chairman of Bremer
445 Minnesota St., Suite 2000 Financial Corporation
St. Paul, MN 55101-2107 since 1996 and Vice
President - Regional
Manager of Stone
Container Corporation
from January 1977 to
February 1996.
Daniel C. Reardon* Director Financial
U.S. Annuity Financial Group Representative with
Suite 145 U.S. Annuity
1565 Cliff Road Financial Group
Eagan, MN 55122 since May 1995 and
Financial
Representative with
Prudential
Securities from
January 1990 to May
1995.
- -------------------------------
</TABLE>
*Interested person of the Fund, as defined in the Investment Company Act of
1940.
BIFI does not pay any remuneration to its officers and directors other
than fees to directors who are not officers or otherwise interested
persons of BIFI.
PRINCIPAL HOLDERS OF SECURITIES
As of December 17, 1996, First American Trust Company of Minnesota, a
Minnesota corporation, held one share of Class A Common Stock (the Growth Stock
Fund) and 9,999 shares of Class B Common Stock (the Bond Fund), which
represented all of BIFI's capital stock outstanding on such date. Such shares
were issued in consideration of the initial capitalization of BIFI. Upon the
conversion of certain common and collective trust funds into shares of BIFI,
such shares of stock will represent less than 5% of each class of outstanding
Common Stock. First American Trust Company of Minnesota is a wholly owned
subsidiary of Bremer Financial Corporation.
INVESTMENT ADVISER
First American Trust Company of Minnesota (the "Investment Adviser")
serves as the investment adviser of the Funds under the terms of an Investment
Advisory Agreement dated
4
<PAGE> 30
December 17, 1996. The Investment Advisory Agreement must be
approved annually by the Board of Directors of BIFI, including a majority of
those directors who are not parties to such contract or "interested persons" of
any such party as defined in the Investment Company Act of 1940, by vote cast
in person at a meeting called for such purpose. The Agreement may be
terminated at any time, without penalty, on 60 days' written notice by BIFI's
Board of Directors, by the holders of a majority of the Funds' outstanding
voting securities or by the Investment Adviser. The Agreement automatically
terminates in the event of its assignment (as defined in the Investment
Company Act of 1940 and the rules thereunder).
As compensation for its services to the Funds, the Investment Adviser
receives monthly compensation at the annual rate of 0.7% of the average daily
net assets of the Funds, computed daily and paid monthly. First American Trust
has agreed with the Funds that the expense ratio will not exceed the expense
limitation of any state in which the Funds' shares are sold.
BIFI bears all expenses of its operation, other than those assumed by the
Investment Adviser. Such expenses include payment for distribution, transfer
agent services, accounting services, certain administration services, legal
fees and payment of taxes. The expenses of organizing BIFI and registering and
qualifying its initial shares under federal and state securities laws will be
charged to BIFI's operations as an expense amortized over a period not to
exceed five years.
The Investment Adviser is a wholly owned subsidiary of Bremer Financial
Corporation, a bank holding company. The officers of BIFI also serve as officers
of the Investment Adviser, as described above in "Officers and Directors."
BIFI has adopted a written plan of distribution in accordance with Rule
12b-1 under the Investment Company Act of 1940. See "Plan of Distribution" in
the Prospectus.
TRANSFER AGENT AND CUSTODIAN
Firstar Trust Company, P.O. Box 701, Milwaukee, Wisconsin 53201-0701,
(telephone 1-800-595-5552), acts as administrator, custodian, transfer agent
and dividend disbursing agent and is reimbursed for all expenditures incurred
in the discharge of these responsibilities.
Firstar Trust Company and BIFI are parties to a Fund Administration
Servicing Agreement, Fund Accounting Servicing Agreement, Custodian Agreement
and Transfer Agent Agreement. Pursuant to such agreements, Firstar Trust
Company controls all securities and cash for the Funds, receives and pays for
securities purchased, delivers against payment for securities sold, receives
and collects income from investments, makes all payments for Fund expenses and
performs other administrative services, as directed in writing by authorized
officers of the Funds. Certain information regarding the administrative
services provided by Firstar Trust Company is contained in the Prospectus under
the heading "Plan of Distribution."
PORTFOLIO TRANSACTIONS
Subject to policies established by BIFI's Board of Directors, the
Investment Adviser is responsible for the Funds' portfolio decisions and the
placing of orders to effect the Funds' portfolio transactions. With respect to
such transactions, the Investment Adviser seeks to obtain the best net results
for the Funds, taking into account such factors as price (including the
applicable brokerage commission or dealer spread), size of order, difficulty of
execution and operational facilities of the firm involved. While the
Investment Adviser generally seeks reasonably competitive commission rates, the
Funds will not necessarily be paying the lowest commission or spread available.
BIFI has no obligation to deal with any broker or dealer in the execution of
its portfolio transactions. There is no affiliation between any broker-dealer
or affiliated persons of any broker-dealer who executes transactions for the
Funds and BIFI's officers and directors or the Investment Adviser.
Investment decisions for each Fund are made independently. When the Funds
are simultaneously engaged in the purchase or sale of the same securities, the
transactions are averaged
5
<PAGE> 31
as to price and allocated as to amount in accordance with a formula
deemed equitable to each Fund. In some cases this system could adversely
affect the price paid or received by a Fund, or the size of the position
obtainable for a Fund.
Decisions with respect to allocations of portfolio brokerage will be made
by the Investment Adviser. Portfolio transactions are normally placed with
broker-dealers which provide the Investment Adviser with research and
statistical assistance. Recognizing the value of these factors, a Fund may pay
brokerage commissions in excess of those which another broker might charge for
effecting the same transaction.
FINANCIAL STATEMENTS
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholder and Board of Directors
of Bremer Investment Funds, Inc.:
We have audited the statement of assets and liabilities of Bremer Investment
Funds, Inc. (the "Fund"), (a Maryland corporation comprised of the Bremer
Growth Stock Fund and the Bremer Bond Fund) as of December 17, 1996. This
financial statement is the responsibility of the Fund's management. Our
responsibility is to express an opinion on this financial statement based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statement is free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statement. 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 audit provides a reasonable basis
for our opinion.
In our opinion, the statement of assets and liabilities referred to above
presents fairly, in all material respects, the net assets of the Fund as of
December 17, 1996, in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Milwaukee, Wisconsin,
December 17, 1996.
6
<PAGE> 32
BREMER INVESTMENT FUNDS, INC.
Statement of Assets and Liabilities
December 17, 1996
<TABLE>
<CAPTION>
Bremer Growth Bremer Bond
Stock Fund Fund
------------- -----------
<S> <C> <C>
ASSETS
Cash $ 10 $ 99,990
Unamortized organizational costs 27,699 27,699
Prepaid registration expense 11,209 11,209
---------- ------------
Total Assets 38,918 138,898
---------- ------------
LIABILITIES
38,908 38,908
Payable to Adviser ---------- ------------
38,908 38,908
Total Liabilities ---------- ------------
NET ASSETS $ 10 $ 99,990
=========== ============
Capital Stock $ 10 $ 99,990
=========== ============
Shares outstanding 1 9,999
=========== ============
Offering and redemption price/net asset value per share $ 10.00 $ 10.00
=========== ============
</TABLE>
The accompanying notes to financial statement are an integral part of this
statement.
NOTES TO FINANCIAL STATEMENT
1. Bremer Investment Funds, Inc. (the "Fund"), an open-end, diversified,
management investment company, was incorporated under the laws of the
state of Maryland on August 26, 1996, and consists of the Bremer Growth
Stock Fund and the Bremer Bond Fund. The Fund is authorized to issue up
to 500 million shares of $.0001 par value per share common stock. Of
these shares, 100 million have been authorized for each of the Bremer
Growth Stock Fund and the Bremer Bond Fund. The Bremer Growth Stock
Fund's investment objective is to seek long-term appreciation of capital
by investing primarily in a portfolio of equity securities of established
companies with above average prospects for growth or ones incurring
significant fundamental changes. The Bremer Bond Fund's investment
objective is to seek maximum total return, consistent with the
preservation of capital and prudent investment management, through
investment in an actively managed portfolio of fixed income securities.
The Fund has had no operations to date other than those relating to
organizational matters and the sale of 10,000 shares of common stock; one
for the Bremer Growth Stock Fund and 9,999 for the Bremer Bond Fund, to
its original stockholder, First American Trust Company of Minnesota.
2. The Fund has an agreement with First American Trust Company of Minnesota
(the "Adviser"), to furnish management services to the Fund. Under the
terms of this agreement, the Fund will pay the Adviser a monthly fee based
on the Fund's average daily net assets at the annual rate of .70%.
3. The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at
the date of the financial statements. Actual results could differ from
those estimates.
4. Organizational costs are being deferred and amortized over the period of
benefit, but not to exceed 60 months from the Fund's commencement of
operations. These costs were advanced by the Adviser and will be
reimbursed by the Fund. The proceeds of any redemption of the initial
shares by the original stockholder or any transferee will be reduced by a
pro-rata portion of any then unamortized organizational expenses in the
same proportion as the number of initial shares being redeemed bears to
the number of initial shares outstanding at the time of such redemption.
Prepaid registration expenses are amortized over the period of benefit
which is generally one year.
5. The Fund has adopted a written plan of distribution in accordance with
Rule 12b-1 which authorizes the Fund to make payments in connection with
the distribution of shares at an annual rate, as determined from time to
time by the Board of Directors, of up to .25% of the Fund's average daily
net assets. Initially, all payments under the plan will be made to the
Adviser, which directly bears all sales and promotional expenses of the
Fund, other than expenses incurred to comply with laws. The Adviser has
voluntarily agreed to waive 12b-1 fees payable to it during the first year
of the Fund's operation.
7
<PAGE> 33
PART C. OTHER INFORMATION
Item 24. Financial Statements and Exhibits
---------------------------------
(a) Financial Statements
The financial statements below are contained in Part B of this
Registration Statement:
Balance Sheet as of December 17, 1996.
Report of Independent Auditors.
(b) Exhibits
1. Articles of Incorporation.
2. Bylaws.
3. Not applicable.
4. Articles of Incorporation, Article IV and Article
VII. (See Exhibit 1).
5. Form of Investment Advisory Agreement between Registrant
and First American Trust Company of Minnesota dated
December 17, 1996.
6. Not applicable.
7. Not applicable.
8. Custodian Agreement between the Registrant and
Firstar Trust Company dated November 5, 1996.
9.A. Fund Administration Servicing Agreement between
the Registrant and Firstar Trust Company dated November 5,
1996.
9.B. Fund Accounting Servicing Agreement between the
Registrant and Firstar Trust Company dated November 5,
1996.
9.C. Transfer Agent Agreement between the Registrant
and Firstar Trust Company dated November 5, 1996.
10. Opinion and consent of Briggs and Morgan, Professional
Association.
11. Consent of Arthur Andersen LLP.
12. None.
8
<PAGE> 34
13. Subscription Agreement between Registrant and
First American Trust Company of Minnesota dated December 17,
1996.
14.A. Form of Individual Retirement Custodial Account.
14.B. Form of Individual Retirement Account Disclosure Statement.
15. Plan of Distribution.
16. Not applicable.
17. Financial Data Schedule.
18. Not applicable.
Item 25. Persons Controlled By or Under Common Control with Registrant
----------------------------------------------------------------
Not applicable.
Item 26. Number of Holders of Securities
----------------------------------------------------------------
Title of Class Number of Record Holders
------------------------------- -------------------------------
Class A Common Stock, par
value $.0001 per share One, as of December 17, 1996*
Class B Common Stock, par
value $.0001 per share One, as of December 17, 1996*
* Issued in consideration of initial seed capital.
Item 27. Indemnification
---------------
The Registrant's Articles of Incorporation state that each
present or former director, officer, agent and employee of the
Registrant or any predecessor or constituent corporation, and each
person, who, at the request of the Registrant, serves or has served
another business enterprise in any such capacity, and the heirs and
personal representatives of each of the foregoing shall be
indemnified by the Registrant to the fullest extent permitted by
Maryland law against all expenses, including without limitation
amounts of judgments, fines, amounts paid in settlement, attorneys'
and accountants' fees, and costs of litigation, which shall
necessarily or reasonably be incurred by him or her in connection
with any action, suit or proceeding to which he or she was, is or
shall be a party, or with which he or she may be threatened, by
reason of his or her being or having been a director, officer,
agent or employee of the Registrant or such predecessor or
constituent corporation or such business enterprise, whether or not
he or she continues to be such at the time of incurring such
expenses. Such indemnification may include without limitation the
purchase of insurance and advancement of any expenses, and the
Registrant shall be empowered to enter into agreements to limit the
liability of directors and officers of the Registrant. No
indemnification shall be made in violation of the Maryland General
Corporation Law or the Investment Company Act of 1940.
9
<PAGE> 35
Item 28. Business and Other Connections of Investment Adviser
----------------------------------------------------
Not applicable.
Item 29. Principal Underwriters
----------------------
Not applicable.
Item 30. Location of Accounts and Records
--------------------------------
Custodian: Firstar Trust Company
615 East Michigan Street
Milwaukee, WI 53202
Transfer Agent: Overnight Deliveries Firstar Trust Company
Mutual Fund Services
615 Michigan Street,
3rd Floor
Milwaukee, WI 53202
Transfer Agent: Mailing Address Firstar Trust Company
Mutual Fund Services
P.O. Box 701
Milwaukee, WI 53201-0701
Investment Adviser: First American Trust
Company of Minnesota
P.O. Box 986
St. Cloud, Minnesota 56302
Item 31. Management Services
-------------------
Not applicable.
Item 32. Undertakings
------------
The Registrant hereby undertakes to file a post-effective
amendment, using financial statements which need not be certified,
within four to six months from the effective date of this Registration
Statement.
Insofar as indemnification for liability arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the foregoing
provisions, or otherwise, the registrant has been advised that in the
opinion of the Securities and Exchange Commission such indemnification
is against public policy as expressed in the Securities Act of 1933
and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by
the Registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered,
the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Act and will be
governed by the final adjudication of such issue.
10
<PAGE> 36
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940 the Registrant has duly caused this Registration Statement
to be signed on its behalf by the undersigned, thereunto duly authorized, in
the City of St. Cloud, and State of Minnesota on the 18th day of December,
1996.
BREMER INVESTMENT FUNDS, INC.
By: /s/ Steven A. Laraway
---------------------------
Steven A. Laraway
President
Pursuant to the requirements of the Securities Act of 1933, this registration
statement has been signed below by the following persons in the capacities and
on the dates indicated.
<TABLE>
<S> <C> <C>
/s/ Steven A. Laraway President and Director December 18, 1996
- ------------------------- (Principal Executive Officer)
Steven A. Laraway
/s/ Richard A. DiNello Treasurer (Principal December 17, 1996
- ------------------------- Financial and Accounting
Richard A. DiNello Officer)
* Director December 18, 1996
- -------------------------
John M. Bishop
* Director December 18, 1996
- -------------------------
John V. Botsford
* Director December 18, 1996
- -------------------------
John J. Feda
* Director December 18, 1996
- -------------------------
William H. Lipschultz
* Director December 18, 1996
- -------------------------
Daniel C. Reardon
</TABLE>
/s/ Steven A. Laraway
- ---------------------
* Steven A. Laraway
Attorney-in-Fact
<PAGE> 37
EXHIBIT INDEX
1. Articles of Incorporation.
2. Bylaws.
3. Not applicable.
4. Articles of Incorporation, Article IV and Article VII. (See Exhibit 1).
5. Form of Investment Advisory Agreement between Registrant and First
American Trust Company of Minnesota dated December 17, 1996. (Filed
herewith.)
6. Not applicable.
7. Not applicable.
8. Custodian Agreement between the Registrant and Firstar Trust Company
dated November 5, 1996.
9.A. Fund Administration Servicing Agreement between the Registrant and
Firstar Trust Company dated November 5, 1996.
9.B. Fund Accounting Servicing Agreement between the Registrant and Firstar
Trust Company dated November 5, 1996.
9.C. Transfer Agent Agreement between the Registrant and Firstar Trust Company
dated November 5, 1996.
10. Opinion and consent of Briggs and Morgan, Professional Association.
11. Consent of Arthur Andersen LLP. (Filed herewith.)
12. None.
13. Subscription Agreement between Registrant and First American Trust
Company of Minnesota dated December 17, 1996. (Filed herewith.)
14.A. Form of Individual Retirement Custodial Account.
14.B. Form of Individual Retirement Account Disclosure Statement.
15. Plan of Distribution.
16. Not applicable.
17. Financial Data Schedule. (Filed herewith.)
18. Not applicable.
<PAGE> 1
EXHIBIT 5
INVESTMENT ADVISORY AGREEMENT
THIS AGREEMENT made this 17th day of December, 1996 between Bremer
Investment Funds, Inc., a Maryland corporation (the "Company"), and First
American Trust Company of Minnesota, a Minnesota corporation (the "Advisor").
WHEREAS, the Company shall become registered under the Investment
Company Act of 1940, as amended (the "Act"), as an open-end management
investment company; and
WHEREAS, the Company is initially authorized to issue shares of Class A
Common Stock (the Growth Stock Fund) and shares of Class B Common Stock (the
Bond Fund) (each, a Fund, and collectively, the "Funds"); and
WHEREAS, the Company desires to retain the Adviser, which is an
investment adviser exempt from registration under the Investment Advisers Act
of 1940, as the investment adviser for the Funds.
NOW, THEREFORE, the Company and the Adviser do mutually promise and
agree as follows:
1. Employment. The Company hereby employs the Adviser to manage the
investment and reinvestment of the assets of the Funds for the period and on
the terms set forth in this Agreement. The Adviser hereby accepts such
employment for the compensation herein provided and agrees during such period
to render the services and to assume the obligations herein set forth.
2. Authority of the Adviser. The Adviser shall supervise and manage
the investment portfolios of the Funds, and, subject to such policies as the
Board of Directors of the Company (the "Board") may determine, direct the
purchase and sale of investment securities in the day to day management of the
Funds. The Adviser shall for all purposes herein be deemed to be an independent
contractor and shall, unless otherwise expressly provided or authorized, have
no authority to act for or represent the Company or the Funds in any way or
otherwise be deemed an agent of the Company or the Funds. However, one or more
shareholders, officers, directors or employees of the Adviser may serve as
directors and/or officers of the Company, but without compensation or
reimbursement of expenses for such services from the Company. Nothing
contained herein shall be deemed to require the Company to take any action
contrary to its Articles of Incorporation, as amended, restated or supplemented
from time to time, or any applicable statute or regulation, or to relieve or
deprive the Board of its responsibility for and control of the affairs of the
Funds.
3. Expenses. The Adviser, at its own expense and without reimbursement
from the Company or the Funds, shall furnish office space, and all necessary
office facilities, equipment and executive personnel for managing the
investments of the Funds. The Adviser shall not be required to pay any
expenses of a Fund except as provided herein if the total expenses borne by the
Fund, including the Adviser's fee and the fees paid to the Fund's
<PAGE> 2
Administrator but excluding all federal, state and local taxes, interest,
brokerage commissions and extraordinary items, in any year exceed that
percentage of the average net assets of the Fund for such year, as determined
by valuations made as of the close of each business day, which is the most
restrictive percentage provided by the state laws of the various states in
which the Fund's shares are qualified for sale. The expenses of a Fund's
operations borne by the Fund include by way of illustration and not limitation,
directors fees paid to those directors who are not officers of the Company, the
costs of preparing and printing registration statements required under the
Securities Act of 1933, as amended and the Act, the expense of registering its
shares with the Commission and in the various states, the printing and
distribution cost of prospectuses mailed to existing shareholders, the cost of
stock certificates (if any), director and officer liability insurance, reports
to shareholders, reports to government authorities and proxy statements,
interest charges, taxes, legal expenses, salaries of administrative and
clerical personnel, association membership dues, auditing and accounting
services, insurance premiums, brokerage and other expenses connected with the
execution of portfolio securities transactions, fees and expenses of the
custodian of the Fund's assets, expenses of calculating the net asset value and
repurchasing and redeeming shares, printing and mailing expenses, charges and
expenses of dividend disbursing agents, registrars and stock transfer agents
and the cost of keeping all necessary shareholder records and accounts.
The Company shall monitor the expense ratios of the Funds on a monthly
basis. If the accrued amount of the expenses of a Fund exceeds the expense
limitation established herein, the Company shall create an account receivable
from the Adviser in the amount of such excess. In such a case, the monthly
payment of the Adviser's fee will be reduced by the amount of such excess,
subject to adjustment month by month during the balance of the Company's fiscal
year if accrued expenses thereafter fall below the expense limitation.
4. Compensation of the Adviser. For the services to be rendered by the
Adviser hereunder, the Company, through and on behalf of the Funds, shall pay
to the Adviser an advisory fee, paid monthly, based on the average net assets
of the Funds, as determined by valuations made as of the close of each business
day of the month. The monthly advisory fee shall be 1/12 of 0.7% (0.7% per
annum) on the average daily net assets of the Funds. For any month in which
this Agreement is not in effect for the entire month, such fee shall be reduced
proportionately on the basis of the number of calendar days during which it is
in effect and the fee computed upon the average net asset value of the business
days during which it is so in effect.
5. Ownership of Shares of the Fund. The Adviser shall not take an
ownership position in the Funds, and shall not permit any of its shareholders,
officers, directors or employees to take a long or short position in the shares
of the Funds, except for the purchase of shares of the Funds for investment
purposes at the same price as that available to the public at the time of
purchase or in connection with the initial capitalization of the Funds.
2
<PAGE> 3
6. Exclusivity. The services of the Adviser to the Funds hereunder are
not to be deemed exclusive and the Adviser shall be free to furnish similar
services to others as long as the services hereunder are not impaired thereby.
During the period that this Agreement is in effect, the Adviser shall be the
Funds' sole investment adviser.
7. Liability. In the absence of willful misfeasance, bad faith, gross
negligence or reckless disregard of obligations or duties hereunder on the part
of the Adviser, the Adviser shall not be subject to liability to the Funds or
to any shareholder of the Funds for any act or omission in the course of, or
connected with, rendering services hereunder, or for any losses that may be
sustained in the purchase, holding or sale of any security.
8. Brokerage Commissions. The Adviser, subject to the control and
direction of the Board, shall have authority and discretion to select brokers
and dealers to execute portfolio transactions for the Funds and for the
selection of the markets on or in which the transactions will be executed. The
Adviser may cause the Funds to pay a broker-dealer which provides brokerage and
research services, as such services are defined in Section 28(e)(3) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), a commission
for effecting a securities transaction in excess of the amount another
broker-dealer would have charged for effecting such transaction, if the Adviser
determines in good faith that such amount of commission is reasonable in
relation to the value of brokerage and research services provided by the
executing broker-dealer, viewed in terms of either that particular transaction
or such broker-dealer's overall responsibilities with respect to the accounts
as to which such broker-dealer exercises investment discretion (as defined in
Section 3(a)(35) of the Exchange Act). The Adviser shall provide such reports
as the Board may reasonably request with respect to the Funds' total brokerage
commissions and the manner in which that brokerage commission was allocated.
9. Code of Ethics. The Adviser has adopted a written code of ethics
complying with the requirements of Rule 17j-1 under the Act and has provided
the Company with a copy of the code of ethics and evidence of its adoption.
Upon the written request of the Company, the Adviser shall permit the Company
to examine any reports required to be made by the Adviser pursuant to Rule
17j-1(c)(1) under the Act.
10. Amendments. This Agreement may be amended by the mutual consent of
the parties; provided, however, that in no event may it be amended without the
approval of the Board in the manner required by the Act, and by the vote of the
majority of the outstanding voting securities of the Funds, as defined in the
Act.
11. Termination. This Agreement may be terminated at any time, without
the payment of any penalty, by the Board or by a vote of the majority of the
outstanding voting securities of the Funds, as defined in the Act, upon giving
sixty (60) days' written notice to the Adviser. This Agreement may be
terminated by the Adviser at any time upon the giving of sixty (60) days'
written notice to the Company. This Agreement shall terminate automatically in
the event of its assignment (as defined in Section 2(a)(4) of the Act). Subject
to prior termination as hereinbefore provided, this Agreement shall continue in
effect for an initial period beginning as of the date hereof and ending
December 16, 1997
3
<PAGE> 4
and indefinitely thereafter, but only so long as the continuance after such
initial period is specifically approved annually by (i) the Board or by the
vote of the majority of the outstanding voting securities of the Funds, as
defined in the Act, and (ii) the Board in the manner required by the Act,
provided that any such approval may be made effective not more than sixty (60)
days thereafter.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed on the day first above written.
BREMER INVESTMENT FUNDS, INC.
By: /s/ Steven A. Laraway
-------------------------------------
Steven A. Laraway
President
FIRST AMERICAN TRUST COMPANY OF MINNESOTA
By: /s/ Richard A. DiNello
-------------------------------------
Richard A. DiNello
Vice President/Chief Financial Officer
4
<PAGE> 1
EXHIBIT-11
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
-----------------------------------------
As independent public accountants, we hereby consent to the use of our report,
and to all references to our firm, included in or made a part of this Form N-1A
registration statement for Bremer Investment Funds, Inc.
ARTHUR ANDERSEN LLP
Milwaukee, Wisconsin,
December 17, 1996.
<PAGE> 1
EXHIBIT 13
SUBSCRIPTION AGREEMENT
Bremer Investment Funds, Inc.
P. O. Box 1956
St. Cloud, Minnesota 56302
Gentlemen:
The undesigned hereby subscribes for one share of Class A Common Stock
(the Growth Stock Fund) and 9,999 shares of Class B Common Stock (the Bond
Fund), $0.0001 par value per share (the "Shares"), of Bremer Investment Funds,
Inc. (the "Fund"), and agrees to pay to the Fund the sum of $100,000 in cash.
It is understood that, upon acceptance hereof by the Fund, certificates
representing the Shares subscribed for shall be issued to the undersigned and
such Shares shall be deemed to be fully paid and nonassessable.
The undersigned agrees that it is purchasing the Shares for investment
only, with no intention of resale. The undersigned acknowledges that the
Shares have not been registered under the Securities Act of 1933, as amended,
and that the certificates representing the Shares will bear appropriate
restrictive legends.
Dated and effective as of this 17th day of December, 1996.
FIRST AMERICAN TRUST COMPANY
OF MINNESOTA
By: /s/ Richard A. DiNello
------------------------
Richard A. DiNello
Vice President/Chief Financial
Officer
The foregoing subscription is hereby accepted effective as of 17th day of
December, 1996.
BREMER INVESTMENT FUNDS, INC.
By: /s/ Steven A. Laraway
------------------------
Steven A. Laraway
President
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