SEMI-ANNUAL REPORT
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BREMER INVESTMENT FUNDS, INC.
[GRAPHIC OMITTED]
Bremer Growth Stock Fund
Bremer Bond Fund
March 31, 1999
TABLE OF CONTENTS
Page
Shareholder Letter.................................. 1
Statement of Assets and Liabilities................. 2
Statement of Operations............................. 3
Growth Stock Fund Statement of Changes in Net Assets 4
Bond Fund Statement of Changes in Net Assets........ 5
Growth Stock Fund Financial Highlights.............. 6
Bond Fund Financial Highlights...................... 7
Growth Stock Fund Schedule of Investments........... 8
Bond Fund Schedule of Investments...................11
Notes to the Financial Statements...................15
------------------------------------------------
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.
May 13, 1999
Dear Shareholders:
The opposite is true. Six months ago we were talking about difficulties in the
stock market and declining interest rates. Today, stock markets have rebounded
strongly and interest rates have risen almost one percent, so fixed income
returns have struggled.
Many of the international concerns of last year are slowly fading away. The
United States economy over the past two quarters has seen continued strong
growth. Gross domestic product grew 6.0% in the fourth quarter of 1998 and 4.5%
in the first quarter of 1999. The actions taken by the Federal Reserve last fall
to lower interest rates have kept the economy roaring along.
However, the strength of the economy has begun to put upward pressure on
interest rates. The Bremer Bond fund has a slight negative return for the past
six months, coinciding with the rise in interest rates. The fund has done
reasonably well as spreads versus treasuries on corporate, mortgage and
government bonds have tightened. The tightening has improved the relative
performance of the fund. We continue to like the non-treasury bonds,
particularly in the 3 to 4 year part of the curve.
The Bremer Growth Stock Fund has had a spectacular six months in rising over 30%
during that period. While, the S & P 500 Index was up 27.3%. The fund is
overweighted versus the S & P 500 in the following sectors: Technology,
Financial, Consumer Staples and Consumer Cyclicals. The top five holdings are
Cisco Systems, Inc., General Electric Company, Providian Financial Corporation,
Carnival Corporation and Dayton Hudson Corporation. Your portfolio manager and
equity analysts continue to focus on earning growth and quality companies at
reasonable valuation levels.
The total net assets of the two funds have grown to $157.5 million, thanks to
you and a strong stock market. The Bremer Funds staff thank you for your
business.
Sincerely,
/s/ Steven A. Laraway
Steven A. Laraway
Bremer Investment Funds
- -1-
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BREMER INVESTMENT FUNDS, INC.
====================================================================
STATEMENT OF ASSETS AND LIABILITIES (Unaudited)
March 31, 1999
- --------------------------------------------------------------------
---------- ---------
Growth Bond
Stock Fund Fund
---------- ---------
ASSETS:
Investments, at market value
(Cost of $41,950,881 and
$86,638,158, respectively) $70,401,486 $86,605,344
Dividends receivable 45,923 -
Interest receivable 13,951 944,191
Organizational expenses, net of
accumulated amortization 5,437 15,437
Other assets 2,073 2,584
---------- ---------
Total assets 70,478,870 87,567,556
---------- ---------
LIABILITIES:
Payable to Investment Adviser 41,390 51,167
Dividends payable - 393,635
Accrued expenses and other liabilities 25,099 29,931
---------- ---------
Total liabilities 66,489 474,733
---------- ---------
NET ASSETS $70,412,381 $87,092,823
========== =========
NET ASSETS CONSIST OF:
Capital stock $41,865,336 $86,900,279
Accumulated undistributed net
investment income 21,781 -
Accumulated undistributed net
realized gain on investments 74,659 225,358
Net unrealized appreciation
(depreciation) on investments 28,450,605 (32,814)
========== =========
Total Net Assets $70,412,381 $87,092,823
========== =========
Shares outstanding
(100 million shares authorized
for each Fund, $.0001 par value) 4,402,876 8,586,774
========== =========
Net Asset Value, Redemption Price
and Offering Price Per Share $15.99 $10.14
========== =========
See Notes to the Financial Statements.
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BREMER INVESTMENT FUNDS, INC.
===========================================================================
STATEMENT OF OPERATIONS (Unaudited)
Six Months Ended March 31, 1999
- ---------------------------------------------------------------------------
---------- ----------
Growth Bond
Stock Fund Fund
---------- ----------
INVESTMENT INCOME:
Dividend income (net of withholding tax
of $662 and $0, respectively) $250,743 $-
Interest income 58,901 2,642,684
--------- ----------
Total investment income 309,644 2,642,684
---------- ----------
EXPENSES:
Investment advisory fees 225,832 293,225
Administration fees 16,158 21,690
Shareholder servicing and accounting costs 22,000 26,957
Distribution fees 1,701 2,112
Custody fees 5,564 9,208
Federal and state registration 1,360 1,528
Professional fees 6,138 7,460
Reports to shareholders 886 1,842
Amortization of organizational expenses 2,730 2,730
Directors' fees and expenses 1,246 1,248
Other 878 1,018
---------- ----------
Total expenses 284,493 369,018
---------- ----------
NET INVESTMENT INCOME 25,151 2,273,666
---------- ----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain on investments and option
contracts expired or closed 74,698 261,938
Change in unrealized appreciation
(depreciation) on investments 16,863,187 (2,646,290)
---------- ----------
Net realized and unrealized gain
(loss) on investments 16,937,885 (2,384,352)
---------- ----------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS $16,963,036 ($110,686)
========== ==========
See Notes to the Financial Statements.
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BREMER INVESTMENT FUNDS, INC.
=========================================================================
STATEMENT OF CHANGES IN NET ASSETS
- -------------------------------------------------------------------------
-----------------------------
---------------
Growth Stock Fund
-----------------------------
Six Months Ended
March 31, 1999 Year Ended
(Unaudited) September 30, 1998
-------------- -------------
OPERATIONS:
Net investment income $ 25,151 $ 154,205
Net realized gain on investments
and option contracts expired or closed 74,698 301,927
Change in unrealized appreciation on
investments 16,863,187 1,488,913
-------------- -------------
Net increase in net assets resulting
from operations 16,963,036 1,945,045
-------------- -------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income (161,963) (134,687)
Net realized gains (301,927) (76,348)
-------------- -------------
-------------- -------------
Total dividends and distributions (463,890) (211,035)
-------------- -------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold 6,829,180 9,224,864
Proceeds from shares issued to holders
in reinvestment of dividends 11,863 2,085
Cost of shares redeemed (7,102,365) (7,890,044)
-------------- -------------
Net increase (decrease) in net
assets resulting from
capital share transactions (261,322) 1,336,905
-------------- -------------
TOTAL INCREASE IN NET ASSETS 16,237,824 3,070,915
-------------- -------------
NET ASSETS:
Beginning of period 54,174,557 51,103,642
-------------- -------------
End of period (including undistributed
net investment income of $21,781 and
$157,119, respectively) $70,412,381 $54,174,557
============== =============
See Notes to the Financial Statements.
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BREMER INVESTMENT FUNDS, INC.
=========================================================================
STATEMENT OF CHANGES IN NET ASSETS
- -------------------------------------------------------------------------
-----------------------------
Bond Fund
-----------------------------
Six Months Ended
March 31, 1999 Year Ended
(Unaudited) September 30, 1998
------------- -------------
OPERATIONS:
Net investment income $ 2,273,666 $ 4,307,210
Net realized gain on investments 261,938 240,538
Change in unrealized appreciation
(depreciation on investments) (2,646,290) 2,036,415
------------- -------------
Net increase (decrease) in net
assets resulting from operations (110,686) 6,584,163
------------- -------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income (2,262,452) (4,302,898)
Net realized gains (308,209) (22,945)
------------- -------------
Total dividends and distributions (2,570,661) (4,325,843)
------------- -------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold 14,070,606 20,352,435
Proceeds from shares issued to holders
in reinvestment of dividends 33,110 36,235
Cost of shares redeemed (7,085,560) (13,574,619)
------------- -------------
Net increase in net assets resulting
from capital share transactions 7,018,156 6,814,051
------------- -------------
TOTAL INCREASE IN NET ASSETS 4,336,809 9,072,371
------------- -------------
NET ASSETS:
Beginning of period 82,756,014 73,683,643
------------- -------------
End of period (including undistributed
net investment income of $0 and $0,
respectively) $87,092,823 $82,756,014
============= =============
See Notes to the Financial Statements.
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BREMER INVESTMENT FUNDS, INC.
==============================================================================
FINANCIAL HIGHLIGHTS
- ------------------------------------------------------------------------------
-----------------------------------------
Growth Stock Fund
-----------------------------------------
January 27,
Six Months Ended 19971
March 31, Year Ended through
1999 (Unaudited) September September
1998 1997
------------- ------------ ------------
PER SHARE DATA:
NET ASSET VALUE, BEGINNING OF
PERIOD $12.28 $11.90 $10.00
------------ -------------- ------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.01 0.04 0.03
Net realized and unrealized
gain on investments 3.81 0.39 1.87
------------ -------------- ------------
Total from investment
operations 3.82 0.43 1.90
------------ -------------- ------------
LESS DIVIDENDS AND DISTRIBUTIONS:
Dividends from net investment
income (0.04) (0.03) -
Distributions from net
realized gain (0.07) (0.02) -
------------ -------------- ------------
Total dividends and
distributions (0.11) (0.05) -
------------ -------------- ------------
NET ASSET VALUE, END OF PERIOD $15.99 $12.28 $11.90
============ ============== ============
TOTAL RETURN 31.10% 2 3.61% 19.00% 2
SUPPLEMENTAL DATA AND RATIOS:
Net assets, end of period $70,412,381 $54,174,557 $51,103,642
Ratio of net expenses to average
net assets 0.88% 3 0.91% 1.05% 3
Ratio of net investment income to
average net assets 0.08% 3 0.27% 0.62% 3
Portfolio turnover rate 6.50% 13.15% 11.30%
1 Commencement of Operations.
2 Not annualized.
3 Annualized.
See Notes to the Financial Statements.
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BREMER INVESTMENT FUNDS, INC.
===============================================================================
FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------
----------------------------------------
Bond Fund
----------------------------------------
January 27,
Six Months Ended 19971
March 31, Year Ended through
1999 (Unaudited) September September
1998 1997
-------------- ---------- -------------
PER SHARE DATA:
NET ASSET VALUE, BEGINNING OF
PERIOD $10.47 $10.18 $10.00
------------ -------------- ------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income 0.28 0.56 0.35
Net realized and unrealized
gain (loss)
on investments (0.29) 0.29 0.17
------------ -------------- -----------
Total from investment
operations (0.01) 0.85 0.52
------------ -------------- -----------
LESS DIVIDENDS AND DISTRIBUTIONS:
Dividends from net investment
income (0.28) (0.56) (0.34)
Distributions from net realized
gains (0.04) - -
------------ ----------------------------
Total dividends and
distributions (0.32) (0.56) (0.34)
------------ -------------- ------------
NET ASSET VALUE, END OF PERIOD $10.14 $10.47 $10.18
============ ============== ============
TOTAL RETURN (0.15%)2 8.59% 5.33% 2
SUPPLEMENTAL DATA AND RATIOS:
Net assets, end of period $87,092,823 $82,756,014 $73,683,643
Ratio of net expenses to average
net assets 0.88% 3 0.89% 1.01% 3
Ratio of net investment income to
average net assets 5.43% 3 5.46% 5.60% 3
Portfolio turnover rate 41.41% 66.66% 38.35%
1 Commencement of Operations.
2 Not annualized.
3 Annualized.
See Notes to the Financial Statements.
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BREMER INVESTMENT FUNDS, INC.
=======================================================================
SCHEDULE OF INVESTMENTS - March 31, 1999 (Unaudited)
Growth Stock Fund
- -----------------------------------------------------------------------
Shares Value
-------------------------------------
COMMON STOCKS - 94.2%
-------------------------------------
APPAREL - 1.7%
25,000 Intimate Brands, Inc. $ 1,203,125
---------
BANKING & FINANCIAL SERVICES - 10.8%
13,125 Banc One Corporation 722,695
15,000 Citigroup Inc. 958,125
10,000 Fannie Mae 692,500
24,200 Freddie Mac 1,382,425
20,400 KeyCorp 618,375
20,000 Providian Financial Corporation 2,200,000
30,000 Wells Fargo Company 1,051,875
---------
7,625,995
---------
BUSINESS SERVICE - 5.7%
20,000 Computer Associates International, Inc. 711,250
17,500 Equifax Inc. 601,563
19,000 First Data Corporation 812,250
36,000 IMS Health Incorporated 1,192,500
16,500 National Data Corporation 693,000
---------
4,010,563
---------
CAPITAL GOODS - 7.8%
15,000 Boeing Company, The 511,875
19,000 Dover Corporation 624,625
10,600 Emerson Electric Company 561,138
25,000 General Electric Company 2,765,625
35,000 United States Filter Corporation * 1,071,875
---------
5,535,138
---------
COMMUNICATIONS & MEDIA - 3.4%
25,000 CBS Corporation 1,023,437
17,250 Interpublic Group of Companies, Inc. 1,343,344
---------
2,366,781
---------
COSMETICS & SOAP - 3.8%
10,400 Colgate-Palmolive Company 956,800
13,944 Gillette Company 828,796
19,000 Kimberly-Clark Corporation 910,813
---------
2,696,409
---------
DRUGS - 5.3%
14,000 Merck & Company, Inc. 1,122,625
35,000 Mylan Laboratories Inc. 960,312
12,000 Pfizer, Inc. 1,665,000
---------
3,747,937
---------
ENERGY - 4.2%
6,616 BP Amoco Plc 667,803
19,000 El Paso Natural Gas Company 621,062
13,400 Enron Corporation 860,950
See Notes to the Financial Statements.
- -----------------------------------------------------------------------
ENERGY (continued) - 4.2%
9,000 Mobil Corporation $ 792,000
---------
2,941,815
---------
FOOD, BEVERAGE & TOBACCO - 2.2%
12,000 Bestfoods 564,000
25,000 PepsiCo, Inc. 979,688
---------
1,543,688
---------
HEALTH CARE - 4.7%
40,332 Boston Scientific Corporation * 1,635,967
18,400 Medtronic, Inc. 1,320,200
50,000 Safeskin Corporation * 371,875
---------
3,328,042
---------
INSURANCE - 5.1%
6,949 Aegon N.V. ADR 624,541
16,000 AFLAC, Inc. 871,000
12,844 American International Group, Inc. 1,549,308
9,600 MBIA, Inc. 556,800
---------
3,601,649
---------
RESTAURANT - 2.2%
34,000 McDonald's Corporation 1,540,625
---------
RETAIL - GENERAL - 8.5%
9,700 Albertson's, Inc. 526,831
30,000 Dayton Hudson Corporation 1,998,750
21,000 Saks Incorporated 546,000
18,000 Wal-Mart Stores, Inc. 1,659,375
44,000 Walgreen Company 1,243,000
---------
5,973,956
---------
TECHNOLOGY - 19.9%
22,000 American Power Conversion Corporation * 594,000
45,000 Atmel Corporation * 683,438
35,000 Cisco Systems, Inc. * 3,834,687
25,000 Cognos, Inc. 587,500
12,500 Hewlett-Packard Corporation 847,656
13,000 Intel Corporation 1,545,375
15,000 Lucent Technologies, Inc. 1,616,250
22,000 Microsoft Corporation * 1,971,750
See Notes to the Financial Statements.
- -----------------------------------------------------------------------
TECHNOLOGY (continued) - 19.9%
38,250 Oracle Corporation * $ 1,008,844
30,000 Sterling Software, Inc. * 712,500
25,000 3Com Corporation * 582,813
---------
13,984,813
---------
TELECOMMUNICATIONS - 4.1%
15,000 American Telephone and Telegraph
Corporation 1,197,187
18,658 MCI WorldCom, Inc. * 1,652,399
---------
2,849,586
---------
TRAVEL & RECREATION - 4.8%
45,000 Carnival Corporation 2,185,312
39,000 Walt Disney Company, The 1,213,875
---------
3,399,187
---------
TOTAL COMMON STOCKS (Cost of $37,898,704) 66,349,309
---------
-------------------------------------
SHORT-TERM INVESTMENTS - 5.8%
-------------------------------------
-------------------------------------
INVESTMENT COMPANIES - 4.6%
-------------------------------------
3,210,346 Firstar Institutional Money Market Fund 3,210,346
---------
Principal
Amount
-------------------------------------
VARIABLE RATE DEMAND NOTES - 1.2%
-------------------------------------
$485,491 Warner-Lambert Corporation, 4.5700% ** 485,491
356,341 Wisconsin Corporation Central Credit
Union, 4.6087% ** 356,340
---------
841,831
---------
TOTAL SHORT-TERM INVESTMENTS (Cost
of $4,052,177) 4,052,177
---------
TOTAL INVESTMENTS - 100.0% (Cost
of $41,950,881) 70,401,486
---------
Other assets in excess of
liabilities - 0.0% 10,895
---------
TOTAL NET ASSETS - 100.0% $70,412,381
=========
* Non-income producing security.
** Variable rate security. The rates listed are as of
March 31, 1999.
See Notes to the Financial Statements.
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BREMER INVESTMENT FUNDS, INC.
==================================================================
SCHEDULE OF INVESTMENTS - March 31, 1999 (Unaudited)
Bond Fund
- ------------------------------------------------------------------
Principal Amount
or Shares Value
----------------------------------------
LONG-TERM INVESTMENTS - 93.9%
----------------------------------------
----------------------------------------
CORPORATE BONDS & NOTES - 25.3%
----------------------------------------
BANK & BANK HOLDING CO. - 3.6%
First Union National Bank - North Carolina#
$3,190,000 6.18%, 02/15/36 $ 3,151,908
--------
FINANCIAL SERVICES - 14.4%
BHP Finance USA Ltd.#
1,395,000 6.42%, 03/01/26 1,388,399
Ford Capital B.V.
1,000,000 9.375%, 05/15/01 1,071,359
Ford Motor Credit Company
1,000,000 8.20%, 02/15/02 1,061,608
Lehman Brothers Holdings, Inc.
1,000,000 6.375%, 10/23/00 1,002,079
1,375,000 6.625%, 11/15/00 1,387,606
Merrill Lynch & Company
1,000,000 5.64%, 01/27/03 992,433
2,000,000 6.00%, 02/17/09 1,939,304
Reliastar Financial Corporation
1,608,000 7.125%, 03/01/03 1,658,338
St. Paul Companies, Inc.
1,000,000 7.37%, 08/20/07 1,058,582
Salomon, Inc.
1,000,000 6.25%, 05/15/03 1,006,518
--------
12,566,226
--------
FOOD, BEVERAGE & TOBACCO - 2.9%
Philip Morris Companies, Inc.
1,250,000 7.125%, 10/01/04 1,301,235
Supervalu, Inc.
1,250,000 6.56%, 06/09/05 1,252,555
--------
--------
2,553,790
--------
TRAVEL AND ENTERTAINMENT - 2.1%
Hilton Hotels Corporation
1,750,000 7.70%, 07/15/02 1,790,752
--------
UTILITIES - 2.3%
American Telephone and Telegraph
1,000,000 5.625%, 03/15/04 ## 996,354
Western Resources, Inc.
1,000,000 6.875%, 08/01/04 1,025,911
--------
2,022,265
--------
TOTAL CORPORATE BONDS &
NOTES (Cost of $21,963,578) 22,084,941
--------
See Notes to the Financial Statements.
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----------------------------------------
NON-AGENCY MORTGAGE-BACKED
SECURITIES - 5.2%
----------------------------------------
COLLATERALIZED MORTGAGE OBLIGATIONS - 5.2%
Chemical Mortgage Securities, Inc.
$1,127,000 Series 1994-1, Class A7, 6.25%, 01/25/09## $ 1,117,978
Countrywide Mortgage Backed Securities, Inc.
1,385,064 Series 1994-D, Class A9, 6.50%,
03/25/24 ## 1,378,713
Structured Asset Mortgage Investments, Inc.
2,000,000 Series 1998-12, Class A2, 6.05%, 02/25/29##
2,004,681
--------
--------
4,501,372
--------
TOTAL NON- AGENCY MORTGAGE-BACKED
SECURITIES (Cost of $4,518,946) 4,501,372
--------
----------------------------------------
U.S. GOVERNMENT AGENCY AND
AGENCY-BACKED ISSUES - 54.6%
----------------------------------------
Federal Farm Credit Bank
2,000,000 6.37%, 10/30/07 2,067,888
--------
Federal Home Loan Bank
1,000,000 6.00%, 11/03/00 1,011,521
1,000,000 6.085%, 12/23/02 1,020,003
1,500,000 6.00%, 05/08/03 ## 1,509,737
1,000,000 6.00%, 07/21/03 ## 1,000,960
1,065,000 5.44%, 10/15/03 1,059,152
1,250,000 6.15%, 10/14/04 1,282,531
1,750,000 6.12%, 08/26/08 ## 1,737,621
1,000,000 5.755%, 11/20/08 ## 972,040
--------
9,593,565
--------
Federal Home Loan Mortgage Corporation (FHLMC),
Participation Certificates
461,685 Pool #N97167, 7.50%, 12/01/03 474,293
1,005,000 6.95%, 10/24/11 1,095,756
--------
--------
1,570,049
--------
Federal Home Loan Mortgage Corporation (FHLMC),
653,036 Adjustable Rate Mortgage, Pool #845864,
7.6930%*, 07/01/24 669,466
1,047,563 Adjustable Rate Mortgage, Pool #785504,
6.0870%*, 03/01/25 1,057,774
--------
1,727,240
--------
Federal Home Loan Mortgage Corporation (FHLMC),
Real Estate Mortgage Investment Conduits (REMIC)
600,000 Series 1480, Class LE, 6.50%, 7/15/08 ## 600,093
2,000,000 Series 2078, Class PJ, 6.00%, 1/15/09 ## 2,007,250
500,000 Series 24, Class VB, 6.50%, 7/25/10 ## 497,783
See Notes to the Financial Statements.
- ------------------------------------------------------------------
Federal Home Loan Mortgage Corporation (FHLMC),
Real Estate Mortgage Investment Conduits (REMIC) (continued)
$1,500,000 Series 2102, Class TR, 6.00%, 10/15/11 ## $ 1,502,648
1,070,000 Series 1206, Class GC, 7.00%, 02/15/20 ## 1,073,738
1,000,000 Series 1466, Class PI, 7.00%, 08/15/20 ## 1,016,097
350,000 Series 1492, Class G, 6.50%, 09/15/20 ## 352,683
2,000,000 Series 16, Class M, 7.00%, 08/25/23 ## 2,012,084
--------
9,062,376
--------
Federal National Mortgage Association (FNMA),
Pass-Thru Certificates
1,250,000 7.55%, 04/22/02 1,324,848
1,151,101 Pool #432293, 6.00%, 06/01/13 1,143,879
2,481,608 Pool #424286, 6.50%, 06/01/13 2,507,791
2,317,354 Pool #303922, 6.00%, 05/01/16 2,271,251
--------
7,247,769
--------
Federal National Mortgage Association (FNMA),
554,708 Adjustable Rate Mortgage, Pool #066186,
5.9410%*, 09/01/18 554,286
441,700 Adjustable Rate Mortgage, Pool #197747,
6.30%*, 12/01/22 454,475
--------
--------
1,008,761
--------
Federal National Mortgage Association (FNMA),
Real Estate Mortgage Investment Conduits (REMIC)
500,000 Series 1993-134, Class L, 6.50%, 08/25/08 493,053
665,914 Series 1995-13B, Class B, 6.50%, 03/25/09 669,093
500,000 Series 1989-69, Class G, 7.60%, 10/25/19 515,035
1,049,000 Series G92-66, Class HB, 4.00%, 06/25/20 1,020,011
1,000,000 Series 1992-150, Class FV, 5.608%*, 05/25/21 997,944
1,000,000 Series 1992-125, Class J, 6.50%, 05/25/21 1,003,132
575,000 Series 1993-167, Class J, 6.75%, 12/25/22 583,571
272,510 Series 1993-38, Class O, 6.75%, 3/25/23 272,980
1,600,000 Series 1998-50, Class DN, 6.25%, 09/25/28 1,582,975
1,103,649 Series 1998-50, Class EN, 6.50%, 09/25/28 1,107,301
--------
8,245,095
--------
Government National Mortgage Association (GNMA),
58,651 Adjustable Rate Mortgages, Pool #859287,
6.625%*, 07/20/26 59,694
--------
Student Loan Marketing Association (SLMA),
1,860,747 Series 1996-2, Class A1, 5.005%*, 10/25/04## 1,857,518
--------
Tennessee Valley Authority
2,000,000 6.50%, 8/20/01 2,042,948
3,000,000 6.00%, 3/15/13 3,019,839
--------
5,062,787
--------
TOTAL U.S. GOVERNMENT AGENCY AND
AGENCY-BACKED ISSUES (Cost of $47,417,439) 47,502,742
--------
See Notes to the Financial Statements.
- ------------------------------------------------------------------
----------------------------------------
U.S. TREASURY OBLIGATIONS - 8.8%
----------------------------------------
U.S. Treasury Notes
$5,000,000 6.50%, 08/15/05 $ 5,309,375
U.S. Treasury Bonds
1,800,000 11.625%, 11/15/04 2,342,813
--------
TOTAL U.S. TREASURY OBLIGATIONS (Cost
of $7,784,094) 7,652,188
--------
TOTAL LONG-TERM INVESTMENTS
(Cost of $81,774,057) 81,741,243
--------
----------------------------------------
SHORT-TERM INVESTMENTS - 5.5%
----------------------------------------
----------------------------------------
COMMERCIAL PAPER - 4.5%
----------------------------------------
Aetna Services Corporation
1,000,000 5.03%, 04/23/99 996,926
--------
Norfolk Southern Corporation
1,000,000 5.00%, 04/05/99 999,444
1,000,000 5.05%, 04/12/99 998,457
1,000,000 5.00%, 04/19/99 997,500
--------
--------
2,995,401
--------
3,992,327
--------
----------------------------------------
VARIABLE RATE DEMAND NOTES - 1.0%
----------------------------------------
441,227 Warner-Lambert Co., 4.57% * 441,227
430,547 Wisconsin Corporation Central
Credit Union, 4.6087%* 430,547
--------
871,774
--------
TOTAL SHORT-TERM INVESTMENTS
(Cost of $4,864,101) 4,864,101
--------
TOTAL INVESTMENTS - 99.4% (Cost
of $86,638,158) 86,605,344
--------
Other assets in excess of
liabilities - 0.6% 487,479
--------
TOTAL NET ASSETS - 100.0% $87,092,823
========
# Putable.
## Callable.
* Variable rate security. The rates
listed are as of March 31, 1999.
See Notes to the Financial Statements.
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BREMER INVESTMENT FUNDS, INC.
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NOTES TO THE FINANCIAL STATEMENTS(Unaudited)
March 31, 1999
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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 principal investment objective of
the Growth Stock Fund is long-term appreciation of capital. Dividend income,
if any, is a secondary consideration. The principal 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.
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 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
net taxable income and net realized gains to shareholders.
c)Written Option Accounting - Each Fund may write call options on securities
either held in its portfolio, or which it has the right to obtain without
payment or further consideration, or for which it has segregated cash in the
amount of additional consideration. When a Fund writes an option, an amount
equal to the premium received is entered into the Fund's accounting records
as an asset and an equivalent liability. The amount of the liability is
subsequently marked-to-market to reflect the current value of the option
written. When an option expires, or if the Fund enters into a closing
purchase transaction, the Fund realizes a gain (or loss if the cost of a
closing transaction exceeds the premium received when the option was sold).
d)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.
e)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 daily and paid monthly.
Distributions of the Funds' net realized capital gains, if any, will be
declared at least annually.
f)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.
g)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 six months ended March 31, 1999, were
as follows:
Growth Fund Bond Fund
Shares sold 464,215 1,369,596
Shares issued
to holders in
reinvestment
of dividends 771 3,214
Shares redeemed (474,260) (689,389)
Net increase (decrease) (9,274) 683,421
Transactions in shares of the Funds for the year ended September 30, 1998,
were as follows:
Growth Fund Bond Fund
Shares sold 720,961 1,982,703
Shares issued
to holders in
reinvestment
of dividends 174 3,541
Shares redeemed (603,553) (1,321,162)
Net increase 117,582 665,082
4. INVESTMENT TRANSACTIONS
The aggregate purchases and sales of investments, excluding short-term
investments, by the Funds for the six months ended March 31, 1999, were as
follows:
Growth Fund Bond Fund
Purchases
U.S. Government $ 0 $24,106,245
Other 4,069,528 12,162,422
Sales
U.S. Government 0 27,209,485
Other 7,185,679 6,005,139
At March 31, 1999, gross unrealized appreciation and depreciation of
investments for tax purposes were as follows:
Growth Fund Bond Fund
Appreciation $ 30,190,967 $ 638,520
(Depreciation) (1,740,362) (671,334)
Net appreciation
on investments $ 28,450,605 $(32,814)
At March 31, 1999, the cost of investments for federal income tax purposes
was $41,950,881 and $86,638,158 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 Bremer
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 Bank Milwaukee, N.A., a subsidiary of Firstar Corporation, a publicly
held bank holding company, serves as custodian for the Funds. Firstar Mutual
Fund Services, LLC, a wholly owned limited liability company of Firstar Bank
Milwaukee, N.A., serves as 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.
On November 24, 1998, the Funds entered into an agreement with Rafferty
Capital Markets, Inc. to distribute the Funds' shares. The currently approved
rate is an annual rate of 0.01% of a Fund's average daily net assets. Payments
made pursuant to the Plan may only be used to pay distribution expenses in the
year incurred. For the six months ended March 31, 1999, $1,701 and $2,112 was
incurred pursuant to the distribution agreement by the Growth Stock Fund and
Bond Fund, respectively.
6. RELATED PARTIES
Bremer Trust, N.A. clients and Bremer Trust, N.A. affiliated clients held
4,383,657 and 8,582,781 outstanding shares of the Growth Stock Fund and
Bond Fund, respectively, as of March 31, 1999.
Investment Adviser
Bremer Trust, N.A.
Cold Spring Center
4150 Second Street South
St. Cloud, MN 56302-0986
Administrator, Dividend Paying Agent,
Shareholders' Servicing Agent
and Transfer Agent
Firstar Mutual Fund Services, LLC
615 East Michigan Street
Milwaukee, WI 53202
Custodian
Firstar Bank Milwaukee, N.A.
615 East Michigan Street
Milwaukee, WI 53202
Distributor
Rafferty Capital Markets, Inc.
550 Mamaroneck Avenue
Harrison, New York 10528
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
John M. Bishop
Stan Dardis
Steven A. Laraway
John J. Feda
