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<PAGE> 1
________________________________________________________________________________
SEMI-ANNUAL REPORT
=================================================================
BREMER INVESTMENT FUNDS, INC.
=================================================================
Bremer Growth Stock Fund
Bremer Bond Fund
MARCH 31, 1998
________________________________________________________________________________
<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 ............................... 6
Growth Stock Fund Schedule of Investments .......... 8
Bond Fund Schedule of Investments .................. 11
Notes to the Financial Statements .................. 15
</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
May 21, 1998
Dear Shareholders:
The last six months have been two quarters of solid progress for your mutual
funds. The Bremer Funds have grown to $139.63 million as of March 31, 1998,
which is due to contributions as well as price appreciation during that time
frame. The $61.30 million Bremer Growth Stock Fund generated a strong 15.33%
total return for the period October 1, 1997 to March 31, 1998. The Bremer Bond
Fund now totals $78.33 million of assets and had a 3.1% total return for six
months.
While bond yields fell in both quarters and the Bremer Bond Fund made steady
progress, it was two periods of contrast for the equity markets. During the
quarter ended December 31, 1997, returns from all equity market sectors were
dampened by the expectations that the economic difficulties in Asia would have
a strong impact on many of the world's economies. Year-to-date returns had
been exceptional through September and stock valuation levels were high, so
many investors took profits in the latter months of 1997 as the Asian problems
surfaced. Thus, that quarter's return for the Bremer Growth Fund was a modest
1.16%.
However, the impact of the Asian economic weakness on external markets did not
materialize as the year 1998 unfolded. Further, domestic economic growth
remained strong, inflation stayed low and interest rates continued to fall. So
portfolio managers put their large cash flows back into equity markets. The
fully invested Bremer Growth Stock Fund achieved a very good total return of
14.01% for the quarter ended March 31, 1998.
We continue to emphasize technology, healthcare, consumer and capital good
stocks. Those sectors are represented by such key holdings as Cisco Systems,
Pfizer Inc, Walt Disney, Carnival Corporation and General Electric Company.
Further, in spite of comparatively high market valuation levels, we continue to
find some large to medium cap growth stocks at fairly reasonable prices.
Bonds have provided better than coupon returns as bond yields have fallen since
September 30, 1997. The movement to lower yields has been mainly in maturities
of 3 to 30 years. Thus, with short term rates remaining high, the spread
between those rates and long rates has narrowed. A flattening of the yield
curve has occurred. Three primary focal points have driven the bond market.
First, the Asian crisis which, as mentioned above, could help slow the domestic
economy. Second, the strong U.S. economy has kept short term rates higher.
The possibility that the Federal Reserve could raise rates overnight because of
this continued strength will likely support current or slightly higher rates.
Third, inflation has remained well under control. Most inflation measures show
little or no inflation. In fact, 1997 inflation was only 1.7%, the lowest in
a generation. The low inflation has been behind the drop in yields of longer
maturity bonds.
What does this mean for fixed income going forward? We are likely to see long
term interest rates trade narrowly between 5.70% and 6.10%. Short term rates
will likely stay the same to slightly higher. The Bremer Bond Fund's duration
remains moderately longer than the Lehman Intermediate Government/Corporate
Index. Further, bonds are currently offering historically high real rates of
return, net of inflation. In a moderate growth economy, that should result in
reasonable total returns from fixed income products and your bond fund over the
next 6 to 12 months.
Once again, thank you for your business.
Sincerely,
/s/ Steven A. Laraway
Steven A. Laraway
President, Bremer Investment Funds, Inc.
-1-
<PAGE> 4
BREMER INVESTMENT FUNDS, INC.
STATEMENT OF ASSETS AND LIABILITIES (Unaudited)
March 31, 1998
<TABLE>
<CAPTION>
Growth Bond
Stock Fund Fund
---------- -----------
<S> <C> <C>
ASSETS:
Investments, at market value
(Cost of $43,587,494 and $76,629,569 respectively) $61,276,505 $77,482,482
Dividends receivable 40,523 -
Interest receivable 11,402 877,801
Organizational expenses, net of accumulated amortization 20,912 20,912
Other assets 5,464 5,587
----------- -----------
Total assets 61,354,806 78,386,782
=========== ===========
LIABILITIES:
Payable to Investment Adviser 35,326 46,374
Accrued expenses and other liabilities 15,210 15,308
----------- -----------
Total liabilities 50,536 61,682
----------- -----------
NET ASSETS $61,304,270 $78,325,100
=========== ===========
NET ASSETS CONSIST OF:
Capital stock $43,082,849 $77,544,541
Accumulated undistributed net investment income 86,217 42,293
Accumulated undistributed net realized gain (loss) on investments 446,193 (114,647)
Net unrealized appreciation on investments 17,689,011 852,913
----------- -----------
Total Net Assets $61,304,270 $78,325,100
=========== ===========
Shares outstanding
(100 million shares authorized for each Fund, $ .0001 par value) 4,484,207 7,674,292
Net Asset Value, Redemption Price and Offering Price Per Share $13.67 $10.21
=========== ===========
</TABLE>
See Notes to the Financial Statements
-2-
<PAGE> 5
BREMER INVESTMENT FUNDS, INC.
STATEMENT OF OPERATIONS (Unaudited)
Six Months Ended March 31, 1998
<TABLE>
<CAPTION>
Growth Bond
Stock Fund Fund
---------- ----------
<S> <C> <C>
INVESTMENT INCOME:
Dividend income (net of withholding tax of $114 and $0, respectively) $251,523 $ -
Interest income 79,465 2,431,010
---------- ----------
Total investment income 330,988 2,431,010
---------- ----------
EXPENSES:
Investment advisory fees 188,067 264,749
Administration fees 14,551 20,009
Shareholder servicing and accounting costs 23,045 26,540
Custody fees 4,446 5,832
Federal and state registration 5,050 4,954
Professional fees 4,562 4,888
Reports to shareholders 1,216 1,207
Amortization of organizational expenses 2,730 2,730
Directors' fees and expenses 1,091 1,091
Other 1,445 1,439
---------- ----------
Total expenses 246,203 333,439
---------- ----------
NET INVESTMENT INCOME 84,785 2,097,571
---------- ----------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain (loss) on investments 446,233 (105,268)
Change in unrealized appreciation on investments 7,590,506 275,851
---------- ----------
Net realized and unrealized gain on investments 8,036,739 170,583
---------- ----------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $8,121,524 $2,268,154
========== ==========
</TABLE>
See Notes to the Financial Statements
-3-
<PAGE> 6
BREMER INVESTMENT FUNDS, INC.
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Growth Stock Fund
--------------------------------------------
Six Months Ended January 27, 1997(1)
March 31, 1998 through
(Unaudited) September 30, 1997
----------------- -------------------
<S> <C> <C>
OPERATIONS:
Net investment income $84,785 $132,652
Net realized gain on investments 446,233 76,308
Change in unrealized appreciation on investments 7,590,506 5,623,711
----------- -----------
Net increase in net assets from operations 8,121,524 5,832,671
----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income (132,694) -
Net realized gains (76,348) -
----------- -----------
Total dividends and distributions (209,042) -
----------- -----------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold 4,809,697 20,452,900
Proceeds from common and commingled trust fund conversions - 27,496,387
Proceeds from shares issued to holders in reinvestment of
dividends 2,084 -
Cost of shares redeemed (2,523,635) (2,678,316)
----------- -----------
Net increase in net assets from capital share transactions 2,288,146 45,270,971
----------- -----------
TOTAL INCREASE IN NET ASSETS 10,200,628 51,103,642
----------- -----------
NET ASSETS:
Beginning of period 51,103,642 0
----------- -----------
End of period (including undistributed net investment
income of $86,217 and $134,645, respectively ) $61,304,270 $51,103,642
=========== ===========
</TABLE>
(1)Commencement of Operations
See Notes to the Financial Statements
-4-
<PAGE> 7
BREMER INVESTMENT FUNDS, INC.
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
BOND FUND
---------------------------------------
Six Months Ended January 27, 1997(1)
March 31, 1998 through
(Unaudited) September 30, 1997
---------------------------------------
<S> <C> <C>
OPERATIONS:
Net investment income $2,097,571 $1,578,954
Net realized gain (loss) on investments (105,268) 437
Change in unrealized appreciation on investments 275,851 693,976
----------- -----------
Net increase in net assets from operations 2,268,154 2,273,367
----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income (2,088,401) (1,547,305)
Net realized gains (9,816) -
----------- -----------
Total dividends and distributions (2,098,217) (1,547,305)
----------- -----------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold 10,303,692 36,235,356
Proceeds from common and commingled trust fund conversions - 44,960,417
Proceeds from shares issued to holders in reinvestment of
dividends 18,880 12,089
Cost of shares redeemed (5,851,052) (8,250,281)
----------- -----------
Net increase in net assets from capital share transactions 4,471,520 72,957,581
----------- -----------
TOTAL INCREASE IN NET ASSETS 4,641,457 73,683,643
----------- -----------
NET ASSETS:
Beginning of period 73,683,643 0
----------- -----------
End of period (including undistributed net investment
income of $42,293 and $37,744, respectively) $78,325,100 $73,683,643
=========== ===========
</TABLE>
(1)Commencement of Operations
See Notes to the Financial Statements
-5-
<PAGE> 8
BREMER INVESTMENT FUNDS, INC.
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
GROWTH STOCK FUND
--------------------------------------
Six Months Ended January 27, 1997(1)
March 31, 1998 through
(Unaudited) September 30, 1997
--------------------------------------
<S> <C> <C>
PER SHARE DATA:
NET ASSET VALUE, BEGINNING OF PERIOD $ 11.90 $ 10.00
---------------- ---------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.02 0.03
Net realized and unrealized gain on investments 1.80 1.87
---------------- ---------------
Total from investment operations 1.82 1.90
---------------- ---------------
LESS DIVIDENDS AND DISTRIBUTIONS:
Dividends from net investment income (0.03) -
Distributions from net realized gains (0.02) -
---------------- ---------------
Total dividends and distributions (0.05) -
---------------- ---------------
NET ASSET VALUE, END OF PERIOD $ 13.67 $ 11.90
================ ===============
TOTAL RETURN(2) 15.33% 19.00%
SUPPLEMENTAL DATA AND RATIOS:
Net assets, end of period $ 61,304,270 $ 51,103,642
Ratio of net expenses to average net assets(3) 0.91% 1.05%
Ratio of net investment income to average net assets(3) 0.32% 0.62%
Portfolio turnover rate 6.87% 11.30%
Average commission rate paid $ 0.1305 $ 0.1316
---------------- --------------
</TABLE>
(1)Commencement of Operations
(2)Not annualized
(3)Annualized
See Notes to the Financial Statements
- 6 -
<PAGE> 9
BREMER INVESTMENT FUNDS, INC.
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
BOND FUND
------------------------------------------
Six Months Ended January 27, 1997(1)
March 31, 1998 through
(Unaudited) September 30, 1997
------------------------------------------
<S> <C> <C>
PER SHARE DATA:
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.18 $ 10.00
-------------- --------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.28 0.35
Net realized and unrealized gain on investments 0.03 0.17
-------------- --------------
Total from investment operations 0.31 0.52
-------------- --------------
LESS DIVIDENDS AND DISTRIBUTIONS:
Dividends from net investment income (0.28) (0.34)
Distributions from net realized gains - -
-------------- --------------
Total dividends and distributions (0.28) (0.34)
-------------- --------------
NET ASSET VALUE, END OF PERIOD $ 10.21 $ 10.18
============== ==============
TOTAL RETURN(2) 3.10% 5.33%
SUPPLEMENTAL DATA AND RATIOS:
Net assets, end of period $ 78,325,100 $73,683,643
Ratio of net expenses to average net assets(3) 0.88% 1.01%
Ratio of net investment income to average net assets(3) 5.54% 5.60%
Portfolio turnover rate 31.59% 38.35%
Average commission rate paid n.a. n.a.
</TABLE>
(1)Commencement of Operations
(2)Not annualized
(3)Annualized
See Notes to the Financial Statements
- 7 -
<PAGE> 10
BREMER INVESTMENT FUNDS, INC.
SCHEDULE OF INVESTMENTS - March 31, 1998 (Unaudited)
GROWTH STOCK FUND
<TABLE>
<CAPTION>
Shares Value
------ -----
---------------------------------------------------
COMMON STOCKS - 96.6%
---------------------------------------------------
<S> <C>
APPAREL - 1.3%
29,000 Intimate Brands, Inc. $ 784,812
------------
BANKING & FINANCIAL SERVICES - 9.9%
13,125 Banc One Corporation 830,156
5,000 Citicorp 710,000
17,500 Equifax, Inc. 638,750
24,200 Federal Home Loan Mortgage Corporation 1,147,987
31,400 KeyCorp 1,187,313
18,000 Norwest Corporation 748,125
14,000 Providian Financial Corporation 804,125
------------
6,066,456
------------
BUSINESS SERVICE - 6.1%
36,000 Cisco Systems, Inc. * 2,461,500
21,750 Computer Associates International, Inc. 1,256,063
------------
3,717,563
------------
CAPITAL GOODS - 8.3%
17,000 Boeing Company, The 886,125
19,000 Dover Corporation 722,000
10,600 Emerson Electric Company 690,988
25,000 General Electric Company 2,154,688
15,000 Thermo Electron Corporation * 605,625
------------
5,059,426
------------
COMMUNICATIONS & MEDIA - 3.1%
25,000 CBS Corporation 848,438
17,250 Interpublic Group of Companies, Inc. 1,071,656
------------
1,920,094
------------
CONSUMER PRODUCTS - 1.7%
18,000 Cognizant Corporation 1,032,750
------------
COSMETICS & SOAP - 2.8%
10,400 Colgate-Palmolive Company 900,900
6,972 Gillette Company 827,489
------------
1,728,389
------------
DRUGS - 4.7%
7,000 Merck & Company, Inc. 898,625
35,000 Mylan Laboratories Inc. 805,000
12,000 Pfizer, Inc. 1,196,250
------------
2,899,875
------------
ENERGY - 5.4%
5,000 Amoco Corporation 431,875
9,500 El Paso Natural Gas Company 670,344
11,400 Enron Corporation 528,675
12,000 Halliburton Company 602,250
9,000 Mobil Corporation 689,625
5,000 Schlumberger Ltd. 378,750
------------
3,301,519
------------
</TABLE>
See Notes to the Financial Statements
- 8 -
<PAGE> 11
BREMER INVESTMENT FUNDS, INC.
SCHEDULE OF INVESTMENTS - March 31, 1998 (Unaudited)
GROWTH STOCK FUND
<TABLE>
<CAPTION>
Shares Value
- ------ -----
<S> <C>
FOOD, BEVERAGE & TOBACCO - 3.8%
5,500 Bestfoods $ 642,813
20,000 PepsiCo, Inc. 853,750
19,500 Philip Morris Companies, Inc. 812,906
--------------
2,309,469
--------------
HEALTH CARE - 6.3%
16,166 Boston Scientific Corporation * 1,091,205
17,000 First Health Group Corp. * 922,250
18,400 Medtronic, Inc. 954,500
26,250 Quorum Health Group, Inc. * 882,656
--------------
3,850,611
--------------
INSURANCE - 4.8%
3,450 Aegon N.V. ADR 418,528
11,250 AFLAC, Inc. 711,563
8,563 American International Group, Inc. 1,078,402
9,600 MBIA, Inc. 744,000
--------------
2,952,493
--------------
LODGING - 1.1%
33,000 La Quinta Inns, Inc. 693,000
--------------
MANUFACTURING - 2.5%
15,000 Crown Cork & Seal Company, Inc. 802,500
15,000 Kimberly-Clark Corporation 751,875
--------------
1,554,375
--------------
RESTAURANT - 3.9%
20,000 Cracker Barrel Old Country Store, Inc. 800,000
17,000 McDonald's Corporation 1,020,000
25,000 Wendy's International, Inc. 557,812
--------------
2,377,812
--------------
RETAIL - GENERAL - 7.9%
3,700 Albertson's, Inc. 194,712
15,000 Dayton Hudson Corporation 1,320,000
50,000 OfficeMax, Inc. * 893,750
21,000 Proffitt's, Inc. * 761,250
18,000 Wal-Mart Stores, Inc. 914,625
22,000 Walgreen Company 774,125
--------------
4,858,462
--------------
TECHNOLOGY - 15.7%
24,500 American Power Conversion Corporation * 702,844
30,000 Atmel Corporation * 451,875
15,000 Diebold, Inc. 660,000
18,000 Electronic Data Systems Corporation 825,750
19,000 First Data Corporation 617,500
</TABLE>
See Notes to the Financial Statements
- 9 -
<PAGE> 12
BREMER INVESTMENT FUNDS, INC.
SCHEDULE OF INVESTMENTS - March 31, 1998 (Unaudited)
GROWTH STOCK FUND
<TABLE>
<CAPTION>
Shares Value
- ------ -----
<S> <C>
TECHNOLOGY (continued) - 15.7%
8,500 Hewlett-Packard Corporation $ 538,688
15,400 Intel Corporation 1,202,163
10,000 Lucent Technologies, Inc. 1,278,750
12,400 Microsoft Corporation * 1,109,800
9,000 Motorola, Inc. 545,625
25,500 Oracle Corporation * 804,843
25,000 3Com Corporation * 898,437
------------
9,636,275
------------
TELECOMMUNICATIONS - 2.5%
12,000 American Telephone and Telegraph Corporation 787,500
15,000 MCI Communications Corporation 742,500
------------
1,530,000
------------
TRAVEL & RECREATION - 4.8%
22,500 Carnival Corporation 1,569,375
13,000 Walt Disney Company, The 1,387,750
------------
2,957,125
------------
TOTAL COMMON STOCKS (COST OF $41,541,495) 59,230,506
------------
---------------------------------------------------
SHORT-TERM INVESTMENTS - 3.3%
---------------------------------------------------
---------------------------------------------------
INVESTMENT COMPANIES - 1.4%
---------------------------------------------------
876,532 Firstar Institutional Money Market Fund 876,532
------------
Principal
Amount
---------------------------------------------------
VARIABLE RATE DEMAND NOTES - 1.9%
---------------------------------------------------
$203,145 General Mills, Inc., 5.2925%** 203,145
801,388 Johnson Controls, Inc., 5.2925%** 801,388
86,500 Pitney Bowes, Inc., 5.2925%** 86,500
78,434 Sara Lee Corporation, 5.2875%** 78,434
------------
1,169,467
------------
TOTAL SHORT-TERM INVESTMENTS (COST OF $2,045,999) 2,045,999
------------
TOTAL INVESTMENTS - 99.9% (COST OF $43,587,494) 61,276,505
Other assets in excess of liabilities - 0.1% 27,765
------------
TOTAL NET ASSETS - 100.0% $ 61,304,270
============
</TABLE>
* Non-income producing security.
** Variable rate security. The rates listed are as of March 31, 1998.
See Notes to the Financial Statements
- 10 -
<PAGE> 13
BREMER INVESTMENT FUNDS, INC.
SCHEDULE OF INVESTMENTS - March 31, 1998 (Unaudited)
BOND FUND
<TABLE>
<CAPTION>
Principal Amount
or Shares Value
--------- -----
<S> <C>
----------------------------------------------------
LONG-TERM INVESTMENTS - 92.3%
----------------------------------------------------
----------------------------------------------------
CORPORATE BONDS & NOTES - 32.5%
----------------------------------------------------
BANK & BANK HOLDING CO. - 7.5%
First Union National Bank - North Carolina#
$3,190,000 6.18%, 02/15/36 $3,185,783
Societe Generale -New York
2,542,000 7.40%, 06/01/06 2,643,001
-----------
5,828,784
-----------
FINANCIAL SERVICES - 13.3%
BHP Finance USA Ltd.#
1,395,000 6.42%, 03/01/26 1,387,383
Chrysler Financial Corporation
500,000 6.625%, 08/15/00 506,572
Ford Capital B.V.
500,000 9.375%, 05/15/01 543,520
Ford Motor Credit Company
750,000 8.20%, 02/15/02 800,543
General Electric Capital Corporation#,##
1,000,000 6.66%*, 05/01/18 1,014,401
Lehman Brothers Holdings, Inc.
657,000 Zero coupon, 05/16/98## 652,348
1,250,000 Zero coupon, 05/16/98 1,241,150
1,200,000 6.625%, 11/15/00 1,209,910
Reliastar Financial Corporation
648,000 7.125%, 03/01/03 668,855
Salomon, Inc.
1,355,000 7.125%, 08/01/99 1,374,131
1,000,000 7.25%, 01/15/00 1,018,487
-----------
10,417,300
-----------
FOOD, BEVERAGE & TOBACCO - 2.6%
Philip Morris, Inc.
1,145,000 7.125%, 10/01/04 1,184,004
750,000 7.20%, 02/01/07 775,171
-----------
1,959,175
-----------
INDUSTRIAL - 2.7%
Hercules, Inc.#
2,000,000 6.60%, 08/01/27 2,074,434
-----------
SAVINGS & LOAN - 0.6%
Anchor Savings Bank#
500,000 5.265%*, 08/15/08 499,545
-----------
TRAVEL AND ENTERTAINMENT - 2.9%
Hilton Hotels Corporation
500,000 9.80%, 10/15/98 509,211
1,750,000 7.70%, 07/15/02 1,791,527
-----------
2,300,738
-----------
</TABLE>
See Notes to the Financial Statements
11
<PAGE> 14
BREMER INVESTMENT FUNDS, INC.
SCHEDULE OF INVESTMENTS - March 31, 1998 (Unaudited)
BOND FUND
<TABLE>
<CAPTION>
Principal Amount
or Shares Value
--------- -----
<S> <C>
UTILITIES - 3.1%
SBC Communications, Inc.
$1,356,000 6.625%, 11/01/09 $1,381,613
Western Resources, Inc.
1,000,000 6.875%, 08/01/04 1,021,613
-----------
2,403,226
-----------
TOTAL CORPORATE BONDS
AND NOTES (Cost of $25,087,873) 25,483,202
-----------
----------------------------------------------------
U.S. GOVERNMENT AGENCY AND
AGENCY BACKED ISSUES - 51.1%
----------------------------------------------------
Federal Farm Credit Bank
750,000 5.70%, 03/05/01 747,925
670,000 6.32% 06/04/01 679,522
1,500,000 6.37%, 10/30/07 1,542,523
-----------
2,969,970
-----------
Federal Home Loan Bank
500,000 5.00%*, 05/10/00 491,910
2,000,000 6.00%, 11/03/00 2,010,800
1,250,000 5.86%, 12/19/01 1,250,329
1,000,000 6.085%, 12/23/02 1,009,432
1,000,000 5.87%, 02/13/03## 984,060
1,250,000 6.15%, 10/14/04 1,267,559
-----------
7,014,090
-----------
Federal Home Loan Mortgage Corporation (FHLMC),
Participation Certificates
1,284,326 Pool #N97167, 7.50%, 12/01/03 1,308,779
1,000,000 6.81%, 03/11/04 ## 1,003,269
277,180 Pool #256723, 6.00%, 03/01/09 274,289
1,588,792 Pool #E00541, 5.50%, 01/01/13 1,535,344
-----------
4,121,681
-----------
Federal Home Loan Mortgage Corporation (FHLMC),
1,432,304 Adjustable Rate Mortgage, 8.157%*, 07/01/24 1,494,508
-----------
Federal Home Loan Mortgage Corporation (FHLMC),
Real Estate Mortgage Investment Conduits (REMIC)
36,206 Series 1513, Class A, 4.60%, 05/15/98 36,159
420,000 Series 1808, Class A, 5.00%, 10/15/07 389,063
918,286 Series 1475, Class O, 7.00%, 02/15/08 915,587
600,000 Series 1480, Class LE, 6.50%, 07/15/08 597,960
500,000 Series 24, Class VB, 6.50%, 07/25/10 491,018
274,799 Series 1351, Class TA, 7.00%, 09/15/18 276,453
1,070,000 Series 1206, Class GC, 7.00%, 02/15/20 1,080,109
1,000,000 Series 1466, Class PI, 7.00%, 08/15/20 1,009,997
350,000 Series 1492, Class G, 6.50%, 09/15/20 351,624
725,366 Series 1559, Class WA, 6.00%, 07/15/22 722,480
2,000,000 Series 16, Class M, 7.00%, 08/25/23 1,972,065
-----------
7,842,515
-----------
</TABLE>
See Notes to the Financial Statements
-12-
<PAGE> 15
BREMER INVESTMENT FUNDS, INC.
SCHEDULE OF INVESTMENTS - March 31, 1998 (Unaudited)
BOND FUND
<TABLE>
<CAPTION>
Principal Amount
or Shares Value
--------- -----
<S> <C>
Federal National Mortgage Association (FNMA),
Pass-Thru Certificates
$1,250,000 7.55%, 04/22/02 $1,324,831
1,744,618 Pool #320470, 6.50%, 08/01/10 1,752,102
1,178,378 Pool #250530, 6.00%, 04/01/11 1,162,341
-----------
4,239,274
-----------
Federal National Mortgage Association (FNMA),
429,687 Adjustable Rate Mortgage, Pool #197747, 7.359%*, 12/01/22 445,894
-----------
Federal National Mortgage Association (FNMA),
Real Estate Mortgage Investment Conduits (REMIC)
632,599 Series 1992-3, Class F, 4.949%, 01/25/99 626,985
844,287 Series X-13B, Class B, 6.50%, 03/25/09 838,750
480,667 Series 1993-187, Class E, 5.75%, 11/25/16 478,754
300,000 Series 1992-36, Class PH, 7.50%, 02/25/18 302,847
500,000 Series 1989-69, Class G, 7.60%, 10/25/19 516,680
1,000,000 Series 1992-124, Class PH, 7.00%, 05/25/20 1,011,218
1,049,000 Series G92-66, Class HB, 4.00%, 06/25/20 961,671
1,000,000 Series 1992-125, Class J, 6.50%, 05/25/21 992,867
575,000 Series 1993-167, Class J, 6.75%, 12/25/22 587,401
1,184,209 Series 1993-223, Class EA, 6.50%, 12/25/23 1,173,625
16,988 Series 1994-59, Class PK, 6.00%, 03/25/24 16,834
-----------
7,507,632
-----------
Government National Mortgage Association (GMNA),
Adjustable Rate Mortgages
299,661 Pool #008332, 7.00%*, 03/20/18 307,727
473,015 Pool #008680, 7.00%*, 08/20/20 485,692
323,908 Pool #008162, 7.00%*, 03/20/23 332,297
523,278 Pool #008542, 7.00%*, 11/20/24 536,538
-----------
1,662,254
-----------
Tennessee Valley Authority
2,000,000 6.50%, 8/20/01 2,051,492
700,000 6.125%, 7/15/03 ## 700,155
-----------
2,751,647
-----------
TOTAL U.S. GOVERNMENT AGENCY AND
AGENCY-BACKED ISSUES (Cost of $39,726,612) 40,049,465
-----------
----------------------------------------------------
U.S. TREASURY OBLIGATIONS - 8.7%
----------------------------------------------------
U.S. Treasury Notes:
1,000,000 5.875%, 02/15/04 1,010,313
2,000,000 5.75%, 10/31/00 2,006,252
3,750,000 5.75%, 08/15/03 3,762,892
-----------
TOTAL U.S. TREASURY OBLIGATIONS (Cost of $6,644,726) 6,779,457
-----------
</TABLE>
See Notes to the Financial Statements
-13-
<PAGE> 16
BREMER INVESTMENT FUNDS, INC.
SCHEDULE OF INVESTMENTS - March 31, 1998 (Unaudited)
BOND FUND
<TABLE>
<CAPTION>
<S> <C>
TOTAL LONG-TERM INVESTMENTS
(Cost of $71,459,211) $72,312,124
--------------
----------------------------------------------------
SHORT-TERM INVESTMENTS - 6.6%
----------------------------------------------------
----------------------------------------------------
COMMERCIAL PAPER - 6.4%
----------------------------------------------------
Norfolk Southern Corporation
$1,500,000 5.67%, 04/08/98 1,498,346
1,500,000 5.75%, 04/30/98 1,493,052
--------------
2,991,398
--------------
Paine Webber Group Inc.
1,000,000 5.65%, 04/01/98 1,000,000
1,000,000 5.65%, 04/20/98 997,018
--------------
1,997,018
--------------
4,988,416
--------------
----------------------------------------------------
VARIABLE RATE DEMAND NOTES - 0.2%
----------------------------------------------------
92,091 Johnson Controls, Inc., 5.2925% * 92,091
89,851 Sara Lee Corporation, 5.2875% * 89,851
--------------
181,942
--------------
TOTAL SHORT-TERM INVESTMENTS
(Cost of $5,170,358) 5,170,358
--------------
TOTAL INVESTMENTS - 98.9% (Cost of $76,629,569) 77,482,482
--------------
Other assets in excess of liabilities - 1.1% 842,618
--------------
TOTAL NET ASSETS - 100.0% $78,325,100
==============
</TABLE>
# Putable.
## Callable.
* Variable rate security. The rates listed are as of March
31, 1998.
See Notes to the Financial Statements
-14-
<PAGE> 17
BREMER INVESTMENT FUNDS, INC.
NOTES TO THE FINANCIAL STATEMENTS (Unaudited)
March 31, 1998
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 Stock 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 Funds commenced operations on January 27,
1997.
All assets of the commingled trust funds from First American Trust,
N.A. (a subsidiary of Bremer Financial Corporation, a bank holding
company), which consisted solely of funds covered under ERISA, and thus
exempt from federal income taxes, were transferred to Bremer Investment
Funds, Inc. as of January 27, 1997. The securities were transferred at
market value, and the original cost basis was replaced with market. All
assets of the common trust funds from First American Trust, N.A., which are
maintained exclusively for collective investment of separate accounts, were
transferred as of September 12, 1997, and under Section 584(h) of the
Internal Revenue Code were treated as a tax-free event. To qualify as a
tax-exempt transaction, the securities were transferred at market value,
and the original cost basis and purchase dates were retained for book and
tax purposes. Proceeds from commingled and common trust fund conversions,
as shown on the Statement of Changes in Net Assets for the fiscal year
ended September 30, 1997, represents the market value of the commingled and
common trust funds at the respective dates of conversion. The change in
unrealized appreciation on investments on the Statement of Changes in Net
Assets for the fiscal year ended September 30, 1997, does not reflect the
$4,474,794 and ($116,914) in unrealized appreciation (depreciation) for the
Bremer Growth Stock Fund and Bremer Bond Fund, respectively, that existed
at the date of the common trust fund transfer.
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 have complied to date with the provisions of the
Internal Revenue Code applicable to regulated investment companies and
intend to continue to so comply in future years and to distribute
investment company
-15-
<PAGE> 18
BREMER INVESTMENT FUNDS, INC.
NOTES TO THE FINANCIAL STATEMENTS (Unaudited)
March 31, 1998
net taxable income and net capital gains to shareholders.
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) Other - Investment and shareholder transactions are recorded on 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 six months ended March 31,
1998, were as follows:
<TABLE>
<CAPTION>
GROWTH FUND BOND FUND
----------- ---------
<S> <C> <C>
Shares sold 392,839 1,004,248
Shares issued
to holders in
reinvestment
of dividends 174 1,848
Shares redeemed (203,374) (570,075)
--------- ---------
Net increase 189,639 436,021
========= =========
</TABLE>
Transactions in shares of the Funds for the period January 27, 1997 through
September 30, 1997, were as follows:
<TABLE>
<CAPTION>
GROWTH FUND BOND FUND
----------- -----------
<S> <C> <C>
Shares sold 1,997,948 3,592,988
Shares issued as
a result of
common and
commingled trust
fund conversions 2,537,938 4,461,380
Shares issued
to holders in
reinvestment
of dividends 0 1,199
Shares redeemed (241,318) (817,296)
--------- ---------
Net increase 4,294,568 7,238,271
========= =========
</TABLE>
4. INVESTMENT TRANSACTIONS
The aggregate purchases and sales of investments, excluding short-term
investments, by the Funds for the six months ended March 31, 1998, were
as follows:
<TABLE>
<CAPTION>
GROWTH FUND BOND FUND
----------- -----------
<S> <C> <C>
Purchases
U.S. Government $ 0 $20,310,927
Other 5,208,325 4,100,236
Sales
U.S. Government 0 18,462,346
Other 3,541,403 3,682,423
</TABLE>
-16-
<PAGE> 19
BREMER INVESTMENT FUNDS, INC.
NOTES TO THE FINANCIAL STATEMENTS (Unaudited)
March 31, 1998
At March 31, 1998, gross unrealized appreciation and depreciation of
investments for tax purposes were as follows:
<TABLE>
<CAPTION>
Growth Fund Bond Fund
----------- ---------
<S> <C> <C>
Appreciation $ 18,461,930 $ 1,045,969
(Depreciation) (772,919) (199,493)
------------ ------------
Net appreciation
on investments $ 17,689,011 $ 846,476
============ ============
</TABLE>
At March 31, 1998, the cost of investments for federal income tax
purposes was $43,587,494 and $76,636,006 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, N.A., a wholly owned subsidiary of Bremer Financial
Corporation. 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 Adviser has voluntarily agreed
to waive 12b-1 fees during the first two years of each Fund's operation.
6. RELATED PARTIES
First American Trust, N.A. clients and First American Trust, N.A.
affiliated clients held 4,476,935 and 7,672,696 outstanding shares of
the Growth Stock Fund and Bond Fund, respectively, as of March 31, 1998.
7. SUBSEQUENT EVENTS
Effective June 1, 1998, dividends from net investment income of the
Bond Fund will be declared daily and paid monthly.
-17-
<PAGE> 20
________________________________________________________________________________
INVESTMENT ADVISER
First American Trust, N.A.
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
________________________________________________________________________________
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