<PAGE> 1
________________________________________________________________________________
SEMI-ANNUAL REPORT
=======================================================================
BREMER INVESTMENT FUNDS, INC.
=======================================================================
Bremer Growth Stock Fund
Bremer Bond Fund
March 31, 1997
________________________________________________________________________________
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Shareholder Letter ................................................. 1
Statement of Assets and Liabilities ................................ 2
Statement of Operations ............................................ 3
Statement of Changes in Net Assets ................................. 4
Financial Highlights ............................................... 5
Growth Stock Fund Schedule of Investments .......................... 6
Bond Fund Schedule of Investments .................................. 9
Notes to the Financial Statements .................................. 13
</TABLE>
________________________________________________
NOTICE TO INVESTORS
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.
<PAGE> 3
================================================================================
BREMER INVESTMENT FUNDS, INC.
================================================================================
May 1997
________________________________________________________________________________
Dear Fellow Shareholder:
This is our first shareholder letter since the Bremer Growth Stock Fund
and the Bremer Bond Fund became effective on January 23, 1997. The combined
assets of the Bremer Funds have grown to over $65 million as of March 31,
1997.
Since the inception of the Funds, both the stock and bond markets have
been extremely volatile. The S & P 500 has risen and fallen 10% in the
three months ended March 31, while interest rates have risen 50 basis
points. Much of the volatility can be attributed to the strong growth of
the domestic economy and the anticipation of the Federal Reserve Board
raising interest rates. On March 25, the Federal Reserve did raise the
Federal Fund Rate by 0.25%. The reason for this rate increase was to slow
the U.S. economy from the 5.6% growth rate in the first quarter to a more
moderate 2.5% level. We will see if this is accomplished over the next
several months.
The Bremer Growth Stock Fund is managed by David J. Erickson and Janet
Vandendriessche both of First American Trust Company of Minnesota. That
fund ended the quarter at about $26.75 million invested in 66 domestic
large cap growth stocks. Turnover has been modest as the focus has been on
investing the incoming cashflows to the fund, as the stock markets have
strengthened. Currently, we are overweighted in the following market
sectors: technology, consumer cyclicals and consumer staples.
The top ten holdings are: Intel Corporation, General Electric, Colgate
Palmolive, Carnival Cruise, Merck & Co., Pfizer, Inc., Citicorp, Walt
Disney Company, American International Group and Federal Home Loan Mortgage
Corporation. Those ten positions account for about 21% of net assets.
Looking forward, we would expect continued market volatility in the
coming quarters as the domestic economy deals with continued growth and
wage inflation. However, such market volatility is not beyond the
historical norms of many past years and the trends should have an upward
bias.
The $38.78 million Bremer Bond Fund is managed by Paul W. Gifford and
David J. Erickson.
As mentioned above, the Federal Reserve Board raised rates in March. We
added a 10% weighting in adjustable rate mortgage securities to take
advantage of the anticipated rise in short-term rates.
We also have maintained the duration of the portfolio at or less than
our benchmark, the Lehman Intermediate Government/Corporate Index. Duration
is a volatility measurement that incorporates a bond yield, coupon interest
payments, final maturity and call features into one measure. The duration
of the portfolio will indicate if we are bearish (short duration), neutral
(equal duration) or bullish (long duration) on interest rates versus our
benchmark.
We are very excited about offering the Bremer Funds to you and look
forward to meeting your investment goals.
Sincerely,
STEVEN A. LARAWAY
President, Bremer Investment Funds, Inc.
-1-
<PAGE> 4
================================================================================
BREMER INVESTMENT FUNDS, INC.
================================================================================
STATEMENT OF ASSETS AND LIABILITIES
March 31, 1997
(Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
------------- ------------
GROWTH BOND
STOCK FUND FUND
------------- ------------
<S> <C> <C>
ASSETS:
Investments, at value
(Cost of $28,233,144 and $38,945,962, respectively) $27,150,985 $38,520,053
Dividends receivable 25,245 428,342
Interest receivable 8,140 14,121
Organizational expenses, net of accumulated amortization 26,388 26,388
Other assets 11,245 11,245
Cash --- 11,500
----------- -----------
Total assets 27,222,003 39,011,649
----------- -----------
LIABILITIES:
Payable for securities purchased 411,700 ---
Payable to Investment Adviser 43,029 48,108
Dividend payable --- 163,744
Accrued expenses and other liabilities 14,096 17,121
----------- -----------
Total Liabilities 468,825 228,973
----------- -----------
NET ASSETS $26,753,178 $38,782,676
=========== ===========
NET ASSETS CONSIST OF:
Capital stock $27,858,290 $39,204,719
Accumulated undistributed net investment income 41,342 6,351
Accumulated undistributed net realized loss on investments (64,295) (2,485)
Net unrealized depreciation on investments (1,082,159) (425,909)
----------- -----------
Total Net Assets $26,753,178 $38,782,676
=========== ===========
Shares outstanding
(100 million shares authorized for each Fund, $ .0001 par value) 2,788,206 3,905,942
Net Asset Value, Redemption Price and Offering Price Per Share $9.60 $9.93
=========== ===========
</TABLE>
See Notes to the Financial Statements
- --------------------------------------------------------------------------------
-2-
<PAGE> 5
================================================================================
BREMER INVESTMENT FUNDS, INC.
================================================================================
STATEMENT OF OPERATIONS
January 27, 1997(1) through March 31, 1997
(Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
----------- ---------
GROWTH BOND
STOCK FUND FUND
----------- ---------
<S> <C> <C>
INVESTMENT INCOME:
Dividend Income $ 67,066 $ 5,000
Interest Income 21,451 350,661
----------- ---------
Total investment income 88,517 355,661
----------- ---------
EXPENSES:
Investment advisory fees 29,818 37,831
Administration fees 3,686 3,686
Shareholder servicing and accounting costs 6,552 7,875
Custody fees 756 1,386
Federal and state registration 3,591 4,662
Professional fees 1,512 1,512
Reports to shareholders 315 315
Amortization of organizational expenses 945 945
Directors' fees and expenses 504 504
Other 441 441
----------- ---------
Total expenses 48,120 59,157
----------- ---------
NET INVESTMENT INCOME 40,397 296,504
----------- ---------
REALIZED AND UNREALIZED LOSS ON INVESTMENTS:
Net realized loss on investments (64,295) (2,485)
Change in unrealized depreciation on investments (1,082,159) (425,909)
----------- ---------
Net realized and unrealized loss on investments (1,146,454) (428,394)
----------- ---------
NET DECREASE IN NET ASSETS
RESULTING FROM OPERATIONS ($1,106,057) ($131,890)
=========== =========
</TABLE>
(1) Commencement of Operations
See Notes to the Financial Statements
- --------------------------------------------------------------------------------
-3-
<PAGE> 6
================================================================================
BREMER INVESTMENT FUNDS, INC.
================================================================================
STATEMENT OF CHANGES IN NET ASSETS
January 27, 1997(1) through March 31, 1997
(Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION> ------------ -------------
GROWTH BOND
STOCK FUND FUND
------------ -------------
<S> <C> <C>
OPERATIONS:
Net investment income $40,397 $296,504
Net realized loss on investments (64,295) (2,485)
Change in unrealized depreciation on investments (1,082,159) (425,909)
----------- -----------
Net decrease in net assets from operations (1,106,057) (131,890)
----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income --- (291,098)
----------- -----------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold 14,934,333 23,630,395
Proceeds from collective trust fund conversion 13,350,932 19,855,542
Shares issued to holders in reinvestment of dividends --- 2,244
Cost of shares redeemed (426,030) (4,282,517)
----------- -----------
Net increase in net assets from capital share transactions 27,859,235 39,205,664
----------- -----------
TOTAL INCREASE IN NET ASSETS 26,753,178 38,782,676
----------- -----------
NET ASSETS:
Beginning of period 0 0
----------- -----------
End of period (including undistributed net investment
income of $41,342 and $6,351, respectively) $26,753,178 $38,782,676
=========== ===========
</TABLE>
(1)Commencement of Operations
See Notes to the Financial Statements
-4-
<PAGE> 7
================================================================================
BREMER INVESTMENT FUNDS, INC.
================================================================================
FINANCIAL HIGHLIGHTS
January 27, 1997(1) through March 31, 1997
(Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
------------- ------------
GROWTH BOND
STOCK FUND FUND
------------- ------------
<S> <C> <C>
PER SHARE DATA:
NET ASSET VALUE, BEGINNING OF PERIOD $10.00 $10.00
----------- -----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.01 0.08
Net realized and unrealized loss on investments (0.41) (0.07)
----------- -----------
Total from investment operations (0.40) 0.01
----------- -----------
Less dividends from net investment income --- (0.08)
----------- -----------
NET ASSET VALUE, END OF PERIOD $9.60 $9.93
=========== ===========
TOTAL RETURN(2) (4.00%) 0.09%
SUPPLEMENTAL DATA AND RATIOS:
Net assets, end of period $26,753,178 $38,782,676
Ratio of net expenses to average net assets(3) 1.13% 1.09%
Ratio of net investment income to average net assets(3) 0.95% 5.49%
Portfolio turnover rate 2.70% 11.34%
Average commission rate paid $0.1551 n.a.
</TABLE>
(1)Commencement of Operations
(2)Not annualized
(3)Annualized
See Notes to the Financial Statements
-5-
<PAGE> 8
================================================================================
BREMER INVESTMENT FUNDS, INC.
================================================================================
SCHEDULE OF INVESTMENTS - March 31, 1997 (Unaudited)
GROWTH STOCK FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
- ------ -----
COMMON STOCKS - 88.1%
<S> <C> <C>
APPAREL - 1.1%
15,000 Intimate Brands, Inc. $ 283,125
----------
BANKING & FINANCIAL SERVICES - 7.4%
8,932 Banc One Corporation 355,047
4,500 Citicorp 487,125
9,000 Equifax, Inc. 245,250
17,000 Federal Home Loan Mortgage Corporation 463,250
9,000 KeyCorp 438,750
----------
1,989,422
----------
BUSINESS SERVICE - 3.2%
8,500 Cisco Systems, Inc.* 409,062
11,500 Computer Associates International, Inc. 447,063
----------
856,125
----------
CAPITAL GOOD - 6.1%
7,000 Dover Corporation 367,500
6,000 Emerson Electric Company 270,000
7,000 General Electric Company 694,750
10,000 Thermo Electron Corporation* 308,750
----------
1,641,000
----------
COMMUNICATIONS & MEDIA - 2.5%
9,000 Harcourt General, Inc. 418,500
5,000 Interpublic Group of Companies, Inc. 263,750
----------
682,250
----------
CONSUMER PRODUCT - 1.1%
10,500 Cognizant Corporation 305,812
----------
COSMETIC & SOAP - 3.4%
6,000 Colgate-Palmolive Company 597,750
4,260 Gillette Company 309,382
----------
907,132
----------
DRUGS - 5.2%
6,000 Medtronic, Inc. 373,500
6,000 Merck & Company, Inc. 505,500
6,000 Pfizer, Inc. 504,750
----------
1,383,750
----------
ENERGY - 8.2%
4,000 Amoco Corporation 346,500
4,000 El Paso Natural Gas 226,500
7,000 Enron Corporation 266,000
3,000 Exxon Corporation 323,250
4,500 Halliburton Company 304,875
3,000 Mobil Corporation 391,875
3,000 Schlumberger, Ltd. 321,750
----------
2,180,750
----------
</TABLE>
See Notes to the Financial Statements
-6-
<PAGE> 9
================================================================================
BREMER INVESTMENT FUNDS, INC.
================================================================================
SCHEDULE OF INVESTMENTS - March 31, 1997 (Unaudited)
GROWTH STOCK FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
------ -----
<S> <C> <C>
ENTERTAINMENT & LEISURE - 1.2%
10,000 Viacom, Inc.* $ 331,250
----------
FOOD, BEVERAGE & TOBACCO - 3.8%
2,000 CPC International, Inc. 164,000
12,500 PepsiCo, Inc. 407,812
4,000 Philip Morris Companies, Inc. 456,500
----------
1,028,312
----------
HEALTH CARE - 4.9%
6,000 Boston Scientific Corporation* 370,500
6,500 Healthcare COMPARE Corporation* 264,063
9,500 Quorum Health Group, Inc.* 293,312
10,000 Vencor, Inc.* 378,750
----------
1,306,625
----------
INSURANCE - 4.5%
7,000 AFLAC, Inc. 262,500
4,000 American International Group, Inc. 469,500
2,000 MBIA, Inc. 191,750
5,000 Providian Corporation 267,500
----------
1,191,250
----------
LODGING - 1.5%
20,000 La Quinta Inns, Inc. 410,000
----------
RESTAURANT - 3.3%
10,000 Cracker Barrel Old Country Store, Inc. 261,250
6,000 McDonald's Corporation 283,500
15,000 Wendy's International, Inc. 309,375
----------
854,125
----------
RETAIL - GENERAL - 2.2%
8,000 Dayton Hudson Corporation 334,000
6,000 Walgreen Company 251,250
----------
585,250
----------
TECHNOLOGY - 17.7%
10,000 American Power Conversion Corporation 216,250
4,126 Boeing Company, The 406,927
7,500 Diebold, Inc. 282,187
10,000 Electronic Data Systems Corporation 403,750
13,000 First Data Corporation 440,375
6,000 Hewlett-Packard Corporation 319,500
5,000 Intel Corporation 695,625
7,000 Lucent Technologies, Inc. 369,250
5,000 Microsoft Corporation* 458,438
5,500 Motorola, Inc. 332,063
11,000 Oracle Systems Corporation* 424,188
7,000 U.S. Robotics Corporation* 387,625
----------
4,736,178
----------
</TABLE>
See Notes to the Financial Statements
-7-
<PAGE> 10
================================================================================
BREMER INVESTMENT FUNDS, INC.
================================================================================
SCHEDULE OF INVESTMENTS - March 31, 1997 (Unaudited)
GROWTH STOCK FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
------ -----
<S> <C> <C>
TRAVEL & RECREATION - 3.9%
15,000 Carnival Corporation $ 555,000
6,600 Walt Disney Company, The 481,800
------------
1,036,800
------------
MANUFACTURING - 3.7%
5,500 Crown Cork & Seal Company, Inc. 283,937
5,000 Fluor Corporation 262,500
4,500 Kimberly-Clark Corporation 447,188
------------
993,625
------------
UTILITY - 3.2%
7,000 American Telephone and Telegraph Corporation 243,250
6,000 GTE Corporation 279,750
9,000 MCI Communications Corporation 320,625
500 NCR Corporation* 17,625
------------
861,250
------------
TOTAL COMMON STOCKS (Cost of $24,646,190) 23,564,031
------------
SHORT-TERM INVESTMENTS - 13.4%
INVESTMENT COMPANIES - 4.8%
1,292,989 Portico Institutional Money Market Fund 1,292,989
------------
<CAPTION>
Principal
Amount
---------
<S> <C> <C>
COMMERCIAL PAPER - 1.0%
$260,000 Prudential Funding Corporation 260,000
------------
VARIABLE RATE DEMAND NOTES - 7.6%
943,625 American Family Financial Services 943,625
1,046,738 Johnson Controls, Inc. 1,046,738
43,602 Wisconsin Electric Power Company 43,602
------------
2,033,965
------------
TOTAL SHORT-TERM INVESTMENTS
(COST OF $3,586,954) 3,586,954
------------
TOTAL INVESTMENTS - 101.5%
(COST OF $28,233,144) 27,150,985
Liabilities in Excess of Other Assets - (1.5%) (397,807)
------------
TOTAL NET ASSETS - 100.0% $26,753,178
============
</TABLE>
* Non-income producing security.
See Notes to the Financial Statements
-8-
<PAGE> 11
================================================================================
BREMER INVESTMENT FUNDS, INC.
================================================================================
SCHEDULE OF INVESTMENTS - March 31, 1997 (Unaudited)
BREMER BOND FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal Amount
or Shares Value
---------------- -----
<S> <C> <C>
LONG-TERM INVESTMENTS - 86.4%
CORPORATE BONDS & NOTES - 43.6%
BANK & BANK HOLDING CO. - 2.8%
First Union National Bank - North Carolina #
$1,190,000 6.18%, 02/15/36 $1,099,597
----------
FINANCIAL SERVICES - 24.5%
BHP Finance USA Ltd.#
1,000,000 6.42%, 03/01/26 961,507
Chrysler Financial Corporation
500,000 6.625%, 08/15/00 495,601
Ford Capital B.V.
500,000 9.375%, 05/15/01 538,959
Ford Motor Credit Company
750,000 8.20%, 02/15/02 781,075
General Electric Capital Corporation#
1,000,000 6.66%, 05/01/18 995,006
Goldman Sachs Group, L.P.**
1,100,000 6.375%, 06/15/00 (Acquired 01/24/97, Cost of $1,089,436) 1,078,297
Household International, Inc.
600,000 6.00%, 03/15/99 591,023
John Deere Capital Corporation
500,000 6.00%, 02/01/99 494,745
Lehman Brothers Holdings, Inc.
250,000 Zero coupon, 05/16/98 232,522
657,000 Zero coupon, 05/16/98 611,069
1,000,000 6.625%, 11/15/00 984,510
Salomon, Inc.
750,000 7.125%, 08/01/99 753,038
Travelers Group, Inc.#
1,000,000 6.875%, 06/01/25 975,869
----------
9,493,221
----------
FOOD, BEVERAGE & TOBACCO - 4.9%
Philip Morris, Inc.
1,200,000 7.125%, 10/01/04 1,164,143
750,000 7.20%, 02/01/07 724,890
----------
1,889,033
----------
INSURANCE - 2.0%
Hartford Financial Services Group, Inc.
800,000 6.375%, 11/01/02 769,553
----------
RETAIL - GENERAL - 3.8%
J.C. Penney & Company, Inc.#
1,500,000 6.90%, 08/15/26 1,477,908
----------
SAVINGS & LOAN - 1.3%
Anchor Savings Bank#
500,000 6.251%*, 8/15/08 499,458
----------
</TABLE>
See Notes to the Financial Statements
-9-
<PAGE> 12
================================================================================
BREMER INVESTMENT FUNDS, INC.
================================================================================
SCHEDULE OF INVESTMENTS - March 31, 1997 (Unaudited)
BREMER BOND FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal Amount
or Shares Value
---------------- -----
<S> <C> <C>
TRAVEL AND ENTERTAINMENT - 3.1%
Hilton Hotels Corporation
$500,000 9.80%, 10/15/98 $ 520,132
700,000 7.70%, 07/15/02 701,852
--------------
1,221,984
--------------
UTILITY - ELECTRIC - 1.2%
Public Service Company of Colorado
470,000 6.00%, 01/01/01 451,939
--------------
TOTAL CORPORATE BONDS
AND NOTES (Cost of $17,207,998) 16,902,693
--------------
PREFERRED STOCK - 0.7%
UTILITY - ELECTRIC - 0.7%
10,000 Tennessee Valley Authority 253,750
--------------
TOTAL PREFERRED STOCK (Cost of $256,250 ) 253,750
--------------
U.S. GOVERNMENT AGENCY AND
AGENCY ISSUES - 34.1%
Federal Home Loan Mortgage Corporation (FHLMC),
Participation Certificates:
$1,000,000 6.81%, 03/11/04 975,730
1,025,978 Pool E00389, 6.50%, 07/01/10 995,373
700,595 Pool E63742, 6.50%, 04/01/11 678,883
--------------
2,649,986
--------------
Federal Home Loan Mortgage Corporation (FHLMC),
2,196,194 Adjustable Rate Mortgage, 7.716%*, 07/01/24 2,281,930
--------------
Federal Home Loan Mortgage Corporation (FHLMC),
Real Estate Mortgage Investment Conduits (REMIC):
420,000 Series 1808, Class A, 5.00%, 10/15/07 366,167
600,000 Series 1480, Class LE, 6.50%, 07/15/08 564,258
472,047 Series 1351, Class TA, 7.00%, 09/15/18 473,166
264,377 Series 1255, Class E, 7.50%, 01/15/19 265,810
350,000 Series 1492, Class G, 6.50%, 09/15/20 331,569
--------------
2,000,970
--------------
Federal Housing Authority (FHA),
553,657 Adjustable Rate Mortgage, Pool #008680,
7.125%*, 08/20/20 566,944
--------------
Federal National Mortgage Association (FNMA),
Pass-Thru Certificates:
649,781 Pool #190255, 6.50%, 02/01/09 631,126
846,303 Pool #320470, 6.50%, 08/01/10 818,705
--------------
1,449,831
--------------
</TABLE>
See Notes to the Financial Statements
-10-
<PAGE> 13
================================================================================
BREMER INVESTMENT FUNDS, INC.
================================================================================
SCHEDULE OF INVESTMENTS - March 31, 1997 (Unaudited)
BREMER BOND FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal Amount
or Shares Value
- ----------------- -----
<S> <C> <C>
Federal National Mortgage Association (FNMA):
Real Estate Mortgage Investment Conduits (REMIC):
$480,667 Series 1993-187, Class E, 5.75%, 11/25/16 $468,285
396,722 Series 1992-27, Class PH, 7.00%, 05/25/17 397,468
300,000 Series 1992-36 Class PH, 7.50%, 02/25/18 301,926
500,000 Series 1992-125, Class J, 6.50%, 05/25/21 465,150
669,522 Series 1992-138 Class O, 7.50%, 07/25/22 664,501
575,000 Series 1993-167, Class J, 6.75%, 12/25/22 545,784
-----------
2,843,114
-----------
Government National Mortgage Association (GMNA),
Adjustable Rate Mortgages:
355,089 Pool #008332, 6.50%*, 03/20/18 360,192
393,124 Pool #008162, 6.50%*, 03/20/23 398,639
654,202 Pool #008542, 6.875%*, 11/20/24 667,346
-----------
1,426,177
-----------
TOTAL U.S. GOVERNMENT AGENCY AND
AGENCY-BACKED ISSUES (Cost of $13,279,588) 13,218,952
-----------
U.S. TREASURY OBLIGATIONS - 8.0%
U.S. Treasury Notes:
2,500,000 5.75%, 10/31/00 2,427,345
750,000 5.75%, 08/15/03 707,813
-----------
TOTAL U.S. TREASURY OBLIGATIONS (Cost of $3,192,626) 3,135,158
-----------
TOTAL LONG-TERM INVESTMENTS
(COST OF $33,936,462) 33,510,553
-----------
SHORT-TERM INVESTMENTS - 12.9%
COMMERCIAL PAPER - 4.0%
1,000,000 General Motors Acceptance Corporation 999,852
569,000 Prudential Funding Corporation 569,000
-----------
1,568,852
-----------
INVESTMENT COMPANIES - 1.5%
581,837 Portico Institutional Money Market Fund 581,837
-----------
VARIABLE RATE DEMAND NOTES - 4.8%
$311,403 American Family Financial Services 311,403
1,116,459 Johnson Controls, Inc. 1,116,459
182,838 Pitney Bowes, Inc. 182,838
4,356 Sara Lee Corporation 4,356
235,832 Warner-Lambert Company 235,832
12,117 Wisconsin Electric Power Company 12,117
-----------
1,863,005
-----------
</TABLE>
See Notes to the Financial Statements
-11-
<PAGE> 14
================================================================================
BREMER INVESTMENT FUNDS, INC.
================================================================================
SCHEDULE OF INVESTMENTS - March 31, 1997 (Unaudited)
BREMER BOND FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal Amount
or Shares Value
- ---------------- -----
<S> <C> <C>
U. S. GOVERNMENT AGENCY AND
AGENCY ISSUES - 2.6%
Federal Farm Credit Bank,
$1,000,000 5.60%, 4/27/97 $ 995,806
------------
TOTAL SHORT-TERM INVESTMENTS
(COST OF $5,009,500) 5,009,500
------------
TOTAL INVESTMENTS - 99.3% (COST OF $38,945,962) 38,520,053
Other Assets in Excess of Liabilities - 0.7% 262,623
------------
TOTAL NET ASSETS - 100% $38,782,676
============
</TABLE>
# Putable.
* Variable rate security. The rates listed are as of March 31, 1997.
** Restricted security.
See Notes to the Financial Statements
-12-
<PAGE> 15
================================================================================
BREMER INVESTMENT FUNDS, INC.
================================================================================
NOTES TO THE FINANCIAL STATEMENTS
March 31, 1997
(Unaudited)
- --------------------------------------------------------------------------------
1. ORGANIZATION
Bremer Investment Funds, Inc. (the "Company") was incorporated on
August 26, 1996, as a Maryland Corporation and is registered as an open-end
management investment company under the Investment Company Act of 1940.
The Bremer Growth Stock Fund and the Bremer Bond Fund (the "Funds") are
separate, diversified investment portfolios of the Company. The principle
investment objective of the Growth Fund is long-term appreciation of
capital. Dividend income, if any, is a secondary consideration. The
principle investment objective of the Bond Fund is to maximize total
return. The Investment Adviser held one share of the Growth Stock Fund
capital stock and 9,999 shares of the Bond Fund capital stock at $10 per
share on January 15, 1997. The Fund commenced operations on January 27,
1997.
The costs incurred in connection with the organization, initial
registration and public offering of shares, aggregating $27,332 and $27,332
for the Growth Stock Fund and Bond Fund, respectively, have been paid by
the Funds. These costs are being amortized over the period of benefit, but
not to exceed sixty months from the Fund's commencement of operations.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies
consistently followed by the Funds in the preparation of their financial
statements. These policies are in conformity with generally accepted
accounting principles.
a) Investment Valuation - Securities that are listed on a securities
exchange are valued at the last quoted sales price on the day
the valuation is made. Price information on listed stocks is taken
from the exchange where the security is primarily traded.
Securities which are listed on an exchange but which are not traded
on the valuation date are valued at the mean between the latest bid
and asked prices. Unlisted securities for which market quotations
are readily available are valued at the last sale price, or if no
sale, at the mean between the latest bid and asked price. Other
assets and securities for which no quotations are readily available
are valued at fair value as determined by the Investment Adviser
under the supervision of the Board of Directors. Instruments with
a remaining maturity of 60 days or less are valued at an amortized
cost, which approximates market value.
b) Federal Income Taxes - No provision for federal income taxes has
been made since the Funds intend to comply with the provisions
of the Internal Revenue Code available to regulated investment
companies in the current and future years.
c) Income and Expenses - The Funds are charged for those expenses that
are directly attributable to each portfolio, such as advisory,
administration and certain shareholder service fees. Expenses that
are not directly attributable to a portfolio are typically
allocated among the Company's portfolios in proportion to their
respective net assets, number of shareholder accounts or net sales,
where applicable.
d) Distributions to Shareholders - Dividends from net investment
income of the Growth Stock Fund are declared and paid annually.
Dividends from net investment income of the Bond Fund are declared
and paid monthly. Distributions of the Funds' net realized capital
gains, if any, will be declared at least annually.
e) Use of Estimates - The preparation of financial statements in
conformity with generally accepted accounting principles
requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those
estimates.
f) Restricted Security - The Bond Fund owns a certain investment
security which is unregistered and thus restricted to resale.
This security is valued by the Fund after giving due consideration
to pertinent factors
-13-
<PAGE> 16
================================================================================
BREMER INVESTMENT FUNDS, INC.
================================================================================
NOTES TO THE FINANCIAL STATEMENTS
March 31, 1997
(Unaudited)
- --------------------------------------------------------------------------------
including recent private sales, market conditions and the
issuer's financial performance. Where future disposition of this
security requires registration under the Securities Act of 1933,
the Fund has the right to include their security in such
registration, generally without cost to the Fund. The Fund has no
right to require registration of unregistered securities.
g) Other - Investment and shareholder transactions are recorded no
later than the first business day after the trade date. The
Funds determine the gain or loss realized from the investment
transactions by comparing the original cost of the security lot
sold with the net sales proceeds. Dividend income is recognized on
the ex-dividend date or as soon as information is available to the
Funds, and interest income is recognized on an accrual basis.
Generally accepted accounting principles require that permanent
financial reporting and tax differences be reclassified to capital
stock.
3. CAPITAL SHARE TRANSACTIONS
Transactions in shares of the Funds for the period January 27, 1997 through
March 31, 1997 were as follows:
<TABLE>
<CAPTION>
Growth Fund Bond Fund
----------- ---------
<S> <C> <C>
Shares sold 1,495,304 2,344,127
Shares issued as
a result of
collective trust
fund conversion 1,335,093 1,985,554
Shares issued
to holders in
reinvestment
of dividends 0 225
Shares redeemed (42,191) (423,964)
--------- ---------
Net increase 2,788,206 3,905,942
========= =========
</TABLE>
4. INVESTMENT TRANSACTIONS
The aggregate purchases and sales of investments, excluding short-term
investments, by the Funds for the period January 27, 1997 through March 31,
1997, were as follows:
<TABLE>
<CAPTION>
Growth Fund Bond Fund
----------- -----------
<S> <C> <C>
Purchases
U.S. Government $ 0 $18,254,264
Other 26,418,955 29,665,483
Sales
U.S. Government 0 1,776,382
Other 1,448,470 9,644,106
</TABLE>
At March 31, 1997, gross unrealized appreciation and depreciation of
investments for tax purposes were as follows:
<TABLE>
<CAPTION>
Growth Fund Bond Fund
----------- ----------
<S> <C> <C>
Appreciation $ 338,911 $ 16,191
(Depreciation) (1,421,070) (442,100)
------------ ----------
Net depreciation
on investments ($1,082,159) ($425,909)
============ ==========
</TABLE>
At March 31, 1997, the cost of investments for federal income tax purposes
was $28,233,144 and $38,945,962 for the Growth Stock Fund and Bond Fund,
respectively.
5. INVESTMENT ADVISORY AND OTHER AGREEMENTS
The Funds have entered into an Investment Advisory Agreement with First
American Trust Company of Minnesota, a wholly owned subsidiary of Bremer
Financial Corporation, a bank holding company. Pursuant to its advisory
agreement with the Funds, the Investment Adviser is entitled to receive a
fee, calculated daily and payable monthly, at the annual rate of 0.70% as
applied to the Fund's daily net assets.
Firstar Trust Company, a subsidiary of Firstar Corporation, a publicly
held bank holding company, serves as custodian, transfer agent,
administrator and accounting services agent for the Funds.
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 of up to 0.25% of a Fund's average
daily net assets. The Investment Advisor has voluntarily agreed to waive
12b-1 fees during the first year of each Fund's operation.
-14-
<PAGE> 17
________________________________________________________________________________
INVESTMENT ADVISER
First American Trust Company of Minnesota
Cold Spring Center
4150 Second Street South
St. Cloud, MN 56302-0986
ADMINISTRATOR, DIVIDEND PAYING AGENT,
SHAREHOLDERS' SERVICING AGENT,
CUSTODIAN AND TRANSFER AGENT
Firstar Trust Company
Mutual Fund Services
615 East Michigan Street
Milwaukee, WI 53202
COUNSEL
Briggs and Morgan
2400 IDS Center
80 South Eighth Street
Minneapolis, MN 55402
INDEPENDENT AUDITORS
Arthur Andersen LLP
100 East Wisconsin Avenue
Milwaukee, WI 53202
DIRECTORS
Steven A. Laraway
John M. Bishop
John V. Botsford
John J. Feda
William H. Lipschultz
________________________________________________________________________________
