BRIDGES INVESTMENT FUND, INC.
8401 West Dodge Road
Omaha, Nebraska 68114
Telephone 402-397-4700
Facsimile 402-397-8617
Directors
---------
Frederick N. Backer, Chairman of the Board
Edson L. Bridges II
Edson L. Bridges III
N. P. Dodge, Jr.
John W. Estabrook
Jon D. Hoffmaster
John J. Koraleski
Roger A. Kupka
Gary L. Petersen
Roy A. Smith
L.B. Thomas
Officers
--------
Edson L. Bridges II - President
Edson L. Bridges III - Executive Vice President
Douglas P. Person - Vice President
Rosemary M. Teckmeyer - Vice President
Mary Ann Mason - Secretary
Kathleen J. Stranik - Assistant Secretary
Nancy K. Dodge - Treasurer
Auditor
-------
Arthur Andersen LLP
1700 Farnam Street
Omaha, Nebraska 68102
Corporate Counsel
-----------------
Baird, Holm, McEachen,
Pedersen, Hamann & Strasheim
1500 Woodmen Tower
Omaha, Nebraska 68102
Shareholder Letter 1 January 23, 1997
January 23, 1997
Dear Shareholder:
Review of 1996
- --------------
The net asset value per share of the Fund was $24.56 on December 31, 1996,
ex-dividend $.145 per share. This price was 14.0% higher than the $21.54 net
asset value per share at year-end 1995. The cash amounts distributed and made
payable to shareholders during 1996 added up to $.80730 per share, consisting of
$.55 in dividends and $.25730 in realized capital gains. Thus, the Fund's total
return components for 1996 were $3.02 in price appreciation ($24.56 - $21.54 =
$3.02) and $.80730 for a combined value improvement of $3.82730 per share. This
$3.82730 per share increase in value, when compared to the beginning net asset
value of $21.54, resulted in a 17.77% total return for the Fund during 1996.
This 17.77% total return for 1996 extended to 19 the number of consecutive
years in which the Fund earned a positive total return.
The popular stock market averages, as measured by the Dow Jones Industrial
Average and the Standard & Poor's 500 Composite Index, were up 29.49% and 22.96%
respectively during 1996. The stock market's performance in 1996 was
extraordinary in the sense that large price gains were achieved on top of a
previous record high for the stock market. The stock price advances in 1996
were justified once again by solid increases in earnings per share. A favorable
interest rate environment was a less dominant factor in the upward progress for
stock prices during 1996.
Shareholder Letter 2 January 23, 1997
Fund Operations
- ---------------
The net assets of the Fund were $29,249,488 on December 31, 1996,
representing the highest level for shares outstanding for any calendar quarter
reporting date. During 1996, net assets grew $5,196,742 or 21.6% from the
$24,052,746 value on December 31, 1995.
There were 1,190,831 shares outstanding on December 31, 1996. This
position was the highest level for shares outstanding for any financial
statement reporting period for the Fund. The net gain for shares outstanding
during 1996 was 74,211 units, constituting a 6.6% increase compared to the
1,116,620 extant at December 31, 1995.
In 1996, the ratio of net investment income to average net assets was
3.23%, the ratio of operating expenses to average net assets was 0.87%, and the
portfolio turnover rate was 11%. The net investment income ratio of 3.23% was
at the lowest level in the last five years, reflecting historically low current
returns for 1996 for common stocks due to sharply elevated stock prices. The
0.87% ratio of operating expenses for 1996 was the lowest cost in the 34 year
history of the Fund. The 11% portfolio turnover rate for 1996 was typical for
the past five periods, although trading in the portfolio securities was well
below the 20%-30% of average net asset turnover that prevailed for a ten-year or
longer period of time in the past. In general, the companies in the Fund's
portfolio have performed up to or exceeded the earnings expectations set by the
management, thereby qualifying themselves as outstanding holdings on a long-term
basis.
Please refer to Exhibits 1 through 3, the Report of Independent Public
Accountants, and pages 13 through 27 in the accompanying Audited Financial
Shareholder Letter 3 January 23, 1997
Statements for the year ending December 31, 1996, to locate the supporting
detail and supplementary information about the Fund's operations during 1996.
The text for the Management's Discussion and Analysis of the results for
1996 and the investment returns for the previous one year, five year, and ten
year periods are located immediately following page 27 at the end of the Audited
Financial Statements. The text for Management's Discussion and Analysis is
provided as an integral part of the Fund's annual Prospectus disclosures. This
information is intended to be extensive for a complete comprehension of the
Fund's investment position and performance.
Dividend
- --------
On December 3, 1996, the Board of Directors declared a regular quarterly
dividend and a year-end extra dividend from the net investment income earned
during the October-December Quarter of 1996 and from any undistributed net
investment income earlier in 1996. This dividend was made payable on January
23, 1997, from net income accrued through December 31, 1996, to shareholders of
record on the same date. The determination of the exact amount per share of
this dividend was delegated to the President and Treasurer of the Fund after the
precise net income of the Fund was established on the record date. These two
officers were ceded the authority to classify income payments between a regular
quarterly amount and the year-end extra amount.
The President and the Treasurer determined the ordinary income regular
dividend to be $.135 per share and the year-end extra amount to be $.01 per
share for a total of $.145 per share to be paid out under the dividend
resolution adopted by the Board of Directors on December 3, 1996. This payment,
in addition to the $.14 per share previously paid and declared in October, 1996,
brought the total cash distributions payable from ordinary income earned during
the Fourth Quarter of 1996 and throughout the entire year of 1996 to $.285 per
Shareholder Letter 4 January 23, 1997
share. The $.135 per share regular and $.01 extra amounts determined by the
President and Treasurer were confirmed and ratified by the Board of Directors at
their most recent regular meeting held on January 14, 1997.
Tax Information
- ----------------
A letter of explanation regarding the taxability of the dividend and
capital gains payments made by the Fund during 1996 will accompany this letter
to you. You should provide a copy of this letter dated January 23, 1997, which
addresses the preparation of information for Federal income tax returns, to your
tax preparer or consultant.
Form 1099-DIV
- --------------
Bridges Investor Services, Inc. has prepared and will issue a Form 1099-DIV
for 1996 for your shareholder account on or about January 31, 1997.
Market Value Information
- ------------------------
Investors who own Individual Retirement Act and Standard Retirement Plan
accounts in the Fund will receive a special message on the enclosed dividend
reinvestment confirmation statement to disclose the market value of your account
as of December 31, 1996. This information will be utilized in the filing of the
Form 5498 and the Form 5500EZ reports with the appropriate Federal authorities
by our personnel later on in 1997.
Annual Meeting
- --------------
Shareholder Letter 5 January 23, 1997
The Proxy and Proxy Statement for the Thirty-Fourth Annual Meeting of the
Shareholders of the Fund, to be held on Tuesday, February 18, 1997, at 11:00
a.m., will accompany this report. Shareholders are encouraged to attend the
Annual Meeting at the offices of the Fund. If you plan to be present, please
notify the Fund's Corporate Secretary, Mrs. Mary Ann Mason, or our Treasurer,
Mrs. Nancy K. Dodge by phone, by letter, or by written note on your Proxy form.
Under Federal regulations that became effective on November 23, 1994, the
Fund must report the results or tabulation of the votes on each matter and
director nominees in the next shareholder semi-annual and annual communication
following the shareholder meeting. The results for the last Annual Meeting of
the Shareholders of the Fund were published in a letter dated April 29, 1996.
This same report appears as Exhibit 4, attached hereto, to fulfill the annual
communication requirement.
The Outlook
- ------------
Solid, consistent growth in corporate profits, reasonable interest rates,
and controlled, moderate annual rates of inflation for consumer prices are the
three major contributing influences to the positive climate for bond and stock
prices since 1991 that have built the present fine asset values for securities
holders during the mid-1990's. For 1997, the Fund's management expects that
beneficial effects from these conditions will continue with perhaps some less
persistency than the trends witnessed in 1995 and 1996.
With respect to interest rates, there has been some recent divergence
between the movement of the short and long-term maturity markets wherein the
long sector has price weakness and rising yields, while the short rates have
been stable to slightly down in recent weeks. The advance in long-term yields
may be a reflection of intensifying price inflation -- the 3.3% gain for the
consumer price index for 1996 was the highest annual inflation rate since 1990.
Shareholder Letter 6 January 23, 1997
The U.S. economy continues its long, slow advance from the 1990-1991
recession into 1997. Inventories held by manufacturers are generally low
relative to sales volumes. A rising ratio of sales to inventory would be a key
indicator of a coming recession. In late 1996, the reverse reading was the
case. The composite index of eleven leading indicators of future economic
activity was at a record level, portending a rising trend for general business
activity in the United States for at least the first six to nine months of 1997.
The recovery and the recent strength of the U.S. dollar in relation to foreign
currencies, particularly the German mark and the Japanese yen, are likely to
slow the growth in U.S. exports and dampen overall production in some sectors of
the U.S. manufacturing economy during 1997. In sum, the economic outlook for
the domestic economy and financial markets is more positive than analysts would
normally expect for the sixth year of an expansion phase for the general
business cycle.
The present elevated level of stock prices may already reflect these
positive assessments. Normal trading patterns for past stock market advances to
new peaks would call for a pullback of 20% or more from the top. This
expectation has been in place for two years or more without coming to pass.
What are the factors unique to this cycle that have postponed the anticipated
market correction? The ones of greatest importance may be: (1) the changes in
asset allocations away from fixed income towards common stocks by investors in
401(k) plans that keep a steady flow of cash from paychecks going to equity fund
managers; (2) the increased use of index funds that immediately invest cash
received into stocks without regard for valuation standards; (3) the positive
price trend for stocks creates its own psychological momentum; and (4) the
dynamic earnings in the year-over-year improvements in earnings per share that
tend to be better than expected. The potential double digit returns for stocks
seem highly attractive in comparison to single digit probable annual rewards for
fixed income securities.
Shareholder Letter 7 January 23, 1997
The end of these trends is difficult to forecast. The Fund's management
will be alert to an alteration of the prevailing market psychology. The
portfolio has cash reserves and Treasuries ready to acquire good values in a
market selloff or correction. Meantime, the earnings outlook for most of our
portfolio companies is positive for 1997 over 1996 levels, and the management is
cautiously optimistic about prospects for this year.
Appreciation
- -------------
The Board of Directors and the officers of the Fund join me in expressing
our appreciation for your investment in shares of our Company.
Sincerely yours,
Edson L. Bridges II
President
ELBII:kjs
-5-
<TABLE>
Exhibit 1
---------
BRIDGES INVESTMENT FUND, INC.
-----------------------------
STATEMENT OF INCOME AND EXPENSES
BY CALENDAR QUARTER
FOR THE YEAR ENDED DECEMBER 31, 1996
<CAPTION>
March 31, June 30, September 30, December 31, Annual
1996 1996 1996 1996 Total
<S> <C> <C> <C> <C> <C>
Investment Income:
Interest $109,862 $111,227 $117,939 $124,354 $463,382
Dividends 101,326 101,173 106,865 103,730 413,094
------- ------- ------- ------- -------
Total Investment Income $211,188 $212,400 $224,804 $228,084 $876,476
------- ------- ------- ------- -------
Expenses:
Management fees $ 32,107 $ 33,649 $ 33,450 $ 36,380 $135,586
Custodian fees 8,452 8,837 8,787 9,521 35,597
Bookkeeping services 1,621 3,640 2,982 4,857 13,100
Printing and supplies 5,399 2,513 2,272 2,603 12,787
Professional services 2,725 2,725 2,725 2,725 10,900
Insurance 2,349 2,349 3,348 2,099 10,145
Dividend disbursing and
transfer agent fees 3,246 2,141 1,899 2,105 9,391
Computer programming 1,125 1,125 1,650 3,700 7 600
Taxes and licenses 266 266 267 266 1,065
Foreign taxes paid on
dividends - 765 289 - 1,054
------- ------- ------- ------- -------
Total Expenses $ 57,290 $ 58,010 $ 57,669 $ 64,256 $237,225
-------- -------- -------- -------- --------
NET INVESTMENT INCOME $153,898 $154,390 $167,135 $163,828 $639,251
======== ======== ======== ======== ========
<FN>
Sources: Unaudited Quarterly Reports to the Shareholders of Bridges
Investment Fund, Inc. for the March 31, June 30, and September 30
periods. Audited information for the Annual Total.
</TABLE>
-6-
<TABLE>
Exhibit 2
---------
BRIDGES INVESTMENT FUND, INC.
-----------------------------
HISTORICAL FINANCIAL INFORMATION
<CAPTION>
Valuation Net Shares Net Asset Dividend/ Capital
Date Assets Outstanding Value/Share Share Gains/Share
---- ------ ----------- ----------- -------- -----------
<S> <C> <C> <C> <C> <C>
07-01-63 $ 109,000 10,900 $10.00 $ - $ -
09-30-63 109,764 10,900 10.07 - -
12-31-63 159,187 15,510 10.13 .07 -
03-31-64 202,354 19,105 10.59 .07 -
06-30-64 253,932 23,438 10.83 .07 -
09-30-64 310,307 28,286 10.97 .07 -
12-31-64 369,149 33,643 10.97 .07 -
03-31-65 434,523 38,531 11.28 .075 .028
06-30-65 491,068 44,667 10.99 .07 -
09-30-65 558,913 47,710 11.71 .07 -
12-31-65 621,241 51,607 12.04 .07 -
03-31-66 661,711 55,652 11.89 .085 -
06-30-66 643,920 57,716 11.16 .07 -
09-30-66 592,628 58,610 10.11 .07 -
12-31-66 651,282 59,365 10.97 .07 -
03-31-67 728,115 60,181 12.10 .085 -
06-30-67 753,075 61,364 12.27 .07 -
09-30-67 823,967 62,810 13.12 .07 -
12-31-67 850,119 64,427 13.20 .07 -
03-31-68 812,416 65,607 12.38 .105 -
06-30-68 1,013,629 72,214 14.04 .07 -
09-30-68 1,046,852 72,633 14.41 .07 -
12-31-68 1,103,734 74,502 14.81 .07 -
03-31-69 1,083,278 77,393 14.00 .15 -
06-30-69 1,030,784 79,169 13.02 .07 -
09-30-69 1,063,290 83,291 12.77 .07 -
12-31-69 1,085,186 84,807 12.80 .07 -
03-31-70 1,061,534 87,349 12.15 .16 -
06-30-70 843,133 88,367 9.54 .07 -
09-30-70 959,114 89,417 10.73 .07 -
12-31-70 1,054,162 90,941 11.59 .07 -
03-31-71 1,168,919 91,819 12.73 .16 -
06-30-71 1,198,777 92,573 12.94 .07 -
09-30-71 1,200,753 92,723 12.95 .07 -
12-31-71 1,236,601 93,285 13.26 .07 -
03-31-72 1,285,684 93,661 13.73 .14 .08
06-30-72 1,228,951 93,834 13.10 .07 -
09-30-72 1,208,454 92,258 13.10 .07 -
12-31-72 1,272,570 93,673 13.59 .07 -
03-31-73 1,152,089 96,695 11.91 .13 .07
06-30-73 1,073,939 97,943 10.96 .07 -
09-30-73 1,131,789 99,353 11.39 .07 -
12-31-73 1,025,521 100,282 10.23 .07 -
-7-
EXHIBIT 2 - HISTORICAL FINANCIAL INFORMATION
Valuation Net Shares Net Asset Dividend/ Capital
Date Assets Outstanding Value/Share Share Gains/Share
---- ------ ----------- ----------- --------- -----------
03-31-74 988,697 101,763 9.72 .14 -
06-30-74 863,820 101,578 8.50 .07 -
09-30-74 667,051 101,292 6.59 .07 -
12-31-74 757,545 106,909 7.09 .07 -
03-31-75 909,125 106,162 8.56 .14 -
06-30-75 1,028,687 106,517 9.66 .07 -
09-30-75 954,187 107,651 8.86 .07 -
12-31-75 1,056,439 111,619 9.46 .07 -
03-31-76 1,230,953 115,167 10.69 .16 -
06-30-76 1,265,767 117,506 10.77 .07 -
09-30-76 1,313,363 121,229 10.83 .07 -
12-31-76 1,402,661 124,264 11.29 .08 -
03-31-77 1,335,592 126,714 10.54 .188 .062
06-30-77 1,456,451 134,575 10.82 .08 -
09-30-77 1,450,573 139,402 10.41 .08 -
12-31-77 1,505,147 145,252 10.36 .08 -
03-31-78 1,418,417 146,380 9.69 .211 .049
06-30-78 1,523,758 145,470 10.47 .09 -
09-30-78 1,672,364 150,729 11.10 .09 -
12-31-78 1,574,097 153,728 10.24 .09 -
03-31-79 1,724,695 162,627 10.61 .204 .051
06-30-79 1,773,427 163,640 10.84 .09 -
09-30-79 1,913,242 167,426 11.43 .09 -
12-31-79 1,872,059 165,806 11.29 .09 -
03-31-80 1,769,935 170,882 10.36 .25 .0525
06-30-80 1,974,288 169,675 11.64 .10 -
09-30-80 2,204,689 173,549 12.70 .10 -
12-31-80 2,416,997 177,025 13.65 .10 -
03-31-81 2,424,976 184,148 13.17 .29 .0868
06-30-81 2,356,007 186,307 12.65 .11 -
09-30-81 2,128,956 183,447 11.61 .11 -
12-31-81 2,315,441 185,009 12.52 .12 -
03-31-82 2,165,531 194,140 11.15 .39 .19123
06-30-82 2,074,816 190,067 10.92 .13 -
09-30-82 2,262,073 189,837 11.92 .13 -
12-31-82 2,593,411 195,469 13.27 .13 -
03-31-83 2,815,081 209,390 13.44 .40 .2500
06-30-83 3,030,744 212,068 14.29 .15 -
09-30-83 3,210,564 223,059 14.39 .15 -
12-31-83 3,345,988 229,238 14.60 .15 -
03-31-84 3,279,542 247,700 13.24 .32 .5000
06-30-84 3,322,155 262,695 12.65 .16 -
09-30-84 3,554,876 263,783 13.48 .16 -
12-31-84 3,727,899 278,241 13.40 .16 -
03-31-85 4,058,327 300,068 13.52 .22 .6800
06-30-85 4,351,707 305,496 14.24 .16 -
09-30-85 4,260,686 310,379 13.73 .16 -
12-31-85 4,962,325 318,589 15.58 .16 -
03-31-86 5,663,449 347,479 16.30 .208 .86227
06-30-86 6,174,120 365,531 16.89 .16 -
-8-
EXHIBIT 2 - HISTORICAL FINANCIAL INFORMATION
Valuation Net Shares Net Asset Dividend/ Capital
Date Assets Outstanding Value/Share Share Gains/Share
---- ------ ----------- ----------- -------- -----------
09-30-86 6,392,215 399,871 15.99 ,16 -
12-31-86 6,701,786 407,265 16.46 .16 -
03-31-87 8,766,205 491,228 17.85 .196 .79447
06-30-87 9,214,305 509,569 18.08 .16 -
09-30-87 9,921,139 530,566 18.70 .16 -
12-31-87 7,876,275 525,238 15.00 .14 .24513
03-31-88 8,649,901 565,608 15.29 .16 -
06-30-88 9,027,829 574,563 15.71 .15 -
09-30-88 8,986,977 575,956 15.60 .16 -
12-31-88 8,592,807 610,504 14.07 .38 1.10967
03-31-89 9,103,009 618,331 14.72 - -
06-30-89 9,531,124 614,861 15.50 .16 -
09-30-89 10,815,006 652,207 16.58 .16 -
12-31-89 10,895,182 682,321 15.97 .35 0.53769
03-31-90 11,000,740 695,558 15.82 - -
06-30-90 11,521,748 696,414 16.54 .16 0.02646
09-30-90 10,534,037 706,268 14.92 .16 -
12-31-90 11,283,448 744,734 15.15 .35 0.40297
03-31-91 12,685,391 759,477 16.70 - -
06-30-91 12,485,281 766,387 16.29 .16 -
09-30-91 13,225,379 780,213 16.95 .16 -
12-31-91 14,374,679 831,027 17.30 .34 0.29292
03-31-92 14,428,305 851,349 16.95 - -
06-30-92 14,691,191 863,019 17.02 .15 -
09-30-92 15,940,013 910,936 17.50 .16 -
12-31-92 17,006,789 971,502 17.51 .325 0.15944
03-31-93 18,071,613 1,008,275 17.92 - -
06-30-93 17,621,101 992,755 17.75 .15 -
09-30-93 17,949,559 999,163 17.96 .15 -
12-31-93 17,990,556 1,010,692 17.80 .3125 0.17075
03-31-94 17,777,177 1,021,219 17.41 - -
06-30-94 17,953,364 1,033,984 17.36 .14 -
09-30-94 18,472,176 1,036,473 17.82 .15 -
12-31-94 18,096,297 1,058,427 17.10 .30 0.17874
03-31-95 19,835,494 1,072,309 18.50 - -
06-30-95 21,416,325 1,076,463 19.90 .14 -
09-30-95 22,527,409 1,082,829 20.80 .14 -
12-31-95 24,052,746 1,116,620 21.54 .295 0.19289
03-31-96 26,025,304 1,148,429 22.66 - -
06-30-96 27,108,210 1,157,425 23.42 .1325 -
09-30-96 27,451,784 1,165,788 23.55 .1325 -
12-31-96 29,249,488 1,190,831 24.56 .285 0.25730
</TABLE>
-9-
<TABLE>
Exhibit 3
---------
BRIDGES INVESTMENT FUND, INC.
-----------------------------
PORTFOLIO TRANSACTIONS
DURING THE PERIOD FROM
OCTOBER 1, 1996, THROUGH DECEMBER 31, 1996
<CAPTION>
Bought or Held After
Securities Received Transaction
---------- ---------- -----------
$1,000 Par $1,000 Par
Common Stocks Unless Value (M) Value (M)
Described Otherwise or Shares or Shares
<S> <C> <C>
(1) <F1> First USA 2,000 4,000
(2) <F2> Microsoft Corporation 4,000 8,000
(3) <F3> NIKE, Inc. 2,000 4,000
(4) <F4> Sun Microsystems, Inc. 1,000 2,000
(5) <F5> Lucent Technologies, Inc. 1,620.42 1,620.42
(6) <F6> Union Pacific Resources Group 3,387.6 3,387.6
MemberWorks, Inc. 2,000 2,000
Transaction System Architects 4,000 4,000
West Teleservices Corporation 11,000 11,000
AirTouch Communications, Inc. 3,000 3,000
4.25% Series C Conv. Preferred
U.S. Treasury Bonds - 7.625% 100M 300M
due 2/15/07
U.S. Treasury Bonds - 7.50% 100M 300M
due 11/15/16
U.S. Treasury Notes - 7.25% 100M 300M
due 5/15/04
U.S. Treasury Notes - 7.50% 100M 300M
due 2/15/05
Various issues of Commercial 40,120M 2,920M
Paper Notes Purchased during
4th Qtr., 1996
<F1>(1) - Received 2,000 shares in a 2-for-1 stock split on November 11, 1996.
<F2>(2) - Received 4,000 shares in a 2-for-1 stock split on December 9, 1996.
<F3>(3) - Received 2,000 shares in a 2-for-1 stock split on October 24, 1996.
<F4>(4) - Received 1,000 shares in a 2-for-1 stock split on December 11, 1996.
<F5>(5) - Received in a 0.324084-for-1 spin-off from A T & T on October 1, 1996.
<F6>(6) - Received in a 0.8469-for-1 spin-off from Union Pacific on October 16,
1996
-10-
Exhibit 3
BRIDGES INVESTMENT FUND, INC.
-----------------------------
PORTFOLIO TRANSACTIONS
DURING THE PERIOD FROM
OCTOBER 1, 1996, THROUGH DECEMBER 31, 1996
(Continued)
<CAPTION>
Sold or Held After
Securities Exchanged Transaction
$1,000 Par $1,000 Par
---------- ---------- ------------
Common Stocks Unless Value (M) Value (M)
Described Otherwise or Shares or Shares
<S> <C> <C>
Brinker International, Inc. 3,000 --
Linear Technology Corporation 1,000 --
Monsanto Company 5,500 12,000
Perrigo Company 3,000 --
Wal-Mart Stores, Inc. 10,000 --
360 Communications Company 2,666 --
Lucent Technologies, Inc. .42 1,620
Union Pacific Resources Group .6 3,387
Various issues of Commercial Paper 40,085M --
Notes maturing during
4th Qtr., 1996
</TABLE>
-11-
<TABLE>
Exhibit 4
---------
BRIDGES INVESTMENT FUND, INC.
-----------------------------
REPORTS TO STOCKHOLDERS OF MANAGEMENT COMPANIES
In Accordance With
Rule 30d-1(b) of the General Rules and Regulations Promulgated Under
The Investment Company Act of 1940 as Amended
"If any matter was submitted during the period covered by the shareholder
report to a vote of the shareholders, through the solicitation of proxies
or otherwise, furnish the following information:"
(1) Annual Meeting held on February 20, 1996, at 11:00 a.m.
(2) Election of Directors for one year terms (All Directors Stand for
Annual Election):
<CAPTION>
- - - - - -Votes Cast - - - - - -
Withhold
For All Authority
Names of Directors Nominees To Vote For
Elected at Meeting For Except All Nominees
------------------ --- -------- ------------
<S> <C> <C> <C>
Frederick N. Backer 1,008,182 None 1,549
Edson L. Bridges II 1,008,182 None 1,549
Edson L. Bridges III 1,005,209 2,973 1,549
N. P. Dodge, Jr. 1,007,540 642 1,549
John W. Estabrook 1,008,182 None 1,549
Jon D. Hoffmaster 1,006,973 1,209 1,549
John J. Koraleski 1,008,182 None 1,549
Roger D. Kupka 1,008,182 None 1,549
Gary L. Petersen 1,008,182 None 1,549
Roy A. Smith 1,008,182 None 1,549
L.B. Thomas 1,008,182 None 1,549
</TABLE>
(3) A brief description for each matter voted upon at the meeting:
<TABLE>
<CAPTION>
Matters Voted Upon For Against Abstain
------------------ --- ------- -------
<S> <C> <C> <C>
(a) For a proposed investment 1,007,291 None 2,440
advisory contract which continues
the employment of Bridges
Investment Counsel, Inc. as
investment adviser to the Fund
for the period from April 17,
1996 through April 17, 1997
(b) For the ratification of the 1,006,973 None 2,758
selection of Arthur Andersen
LLP as independent auditors
of the Fund for the Fiscal
Year ending December 31, 1996
</TABLE>
-12-
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
----------------------------------------
To the Shareholders and the Board of Directors of
Bridges Investment Fund, Inc.:
We have audited the accompanying statement of assets and liabilities of
Bridges Investment Fund, Inc., including the schedule of portfolio investments,
as of December 31, 1996, and the related statement of operations for the year
then ended, the statements of changes in net assets for each of the two years in
the period then ended, and the financial highlights for each of the five years
in the period then ended. These financial statements and financial highlights
are the responsibility of the Fund's management. Our responsibility is to
express an opinion on these financial statements and financial highlights based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements and financial highlights. Our procedures included confirmation of
securities owned as of December 31, 1996, by correspondence with the custodian
and brokers. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
Bridges Investment Fund, Inc. as of December 31, 1996, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended, and the financial highlights for each of
the five years in the period then ended, in conformity with generally accepted
accounting principles.
ARTHUR ANDERSEN LLP
Omaha, Nebraska
January 15, 1997
-13-
<TABLE>
BRIDGES INVESTMENT FUND, INC.
SCHEDULE OF PORTFOLIO INVESTMENTS
DECEMBER 31, 1996
<CAPTION>
Number Market
Title of Securities of Shares Value
<S> <C> <C>
COMMON STOCKS - (74.0%)
Aircraft - Manufacturing - 2.2%
The Boeing Co. 6,000 $ 639,000
Amusements - Recreation - Sporting Goods 0.8%
NIKE, Inc. 4,000 $ 240,000
Banking and Finance - 5.4%
First National of Nebraska, Inc. 230 $ 782,000
NationsBank Corporation 3,000 293,250
Norwest Corporation 6,000 261,000
State Street Boston Corp. 4,000 258,500
-----------
$ 1,594,750
-----------
Beverages - Soft Drinks - 2.4%
PepsiCo, Inc. 24,000 $ 702,000
Building Materials - Forest Products - 0.7%
Georgia Pacific Corp. 3,000 $ 216,000
Chemicals - 7.4%
The Dow Chemical Company 7,000 $ 548,625
Du Pont (E.I.) De Nemours & Company 4,000 376,500
Eastman Kodak Company 7,000 561,750
Monsanto Company 12,000 466,500
Morton International, Inc. 5,000 203,750
-----------
$ 2,157,125
-----------
Computers - Hardware and Software - 6.7%
Cisco Systems, Inc.*<F5> 2,000 $ 127,250
Electronic Data Systems Corp. 4,223 182,645
HNC Software, Inc.*<F5> 2,000 62,500
Hewlett-Packard Co. 12,000 603,000
International Business Machines Corporation 1,000 151,500
Microsoft Corporation*<F5> 8,000 661,000
Sun Microsystems, Inc.*<F5> 2,000 51,376
Transaction System Architects*<F5> 4,000 133,000
-----------
$ 1,972,271
-----------
Commercial Services - 0.1%
MemberWorks, Inc.*<F5> 2,000 $ 30,500
-14-
BRIDGES INVESTMENT FUND, INC.
SCHEDULE OF PORTFOLIO INVESTMENTS
(Continued)
DECEMBER 31, 1996
<CAPTION>
Number Market
Title of Security of Shares Value
<S> <C> <C>
COMMON STOCKS (Continued)
Drugs - Medicines - Cosmetics - 7.6%
Abbott Laboratories 8,000 $ 406,000
Amgen, Inc.*<F5> 1,000 54,375
Bristol-Myers Squibb Co. 3,000 327,000
Elan Corporation PLC ADR*<F5> 4,000 133,000
Johnson & Johnson 10,000 497,500
Merck & Co., Inc. 10,000 796,250
-----------
$ 2,214,125
-----------
Electrical Equipment and Supplies - 2.0%
General Electric Co. 6,000 $ 593,250
Electronics - 3.5%
Intel Corporation 4,000 $ 523,752
Motorola, Inc. 8,000 490,000
-----------
$ 1,013,752
-----------
Finance - Real Estate - 2.3%
Federal Home Loan Mortgage Corporation 6,000 $ 662,250
Finance - Services - 0.5%
First USA, Inc. 4,000 $ 138,500
Food - Miscellaneous Products - 3.9%
Philip Morris Companies, Inc. 10,000 $ 1,130,000
Forest Products & Paper - 1.0%
Kimberly-Clark Corporation 3,000 $ 285,750
Insurance - Multiline - 1.4%
American International Group, Inc. 1,000 $ 108,250
General Re Corp. 2,000 315,500
-----------
$ 423,750
-----------
Insurance - Municipal Bond - 1.0%
MBIA, Inc. 3,000 $ 303,750
-15-
BRIDGES INVESTMENT FUND, INC.
SCHEDULE OF PORTFOLIO INVESTMENTS
(Continued)
DECEMBER 31, 1996
<CAPTION>
Number Market
Title of Security of Shares Value
<S> <C> <C>
COMMON STOCKS (Continued)
Lumber and Wood Products - 0.8%
Weyerhaeuser Company 5,000 $ 236,875
Machinery - Construction & Mining - 0.8%
Caterpillar, Inc. 3,000 $ 225,750
Metal Products - Miscellaneous - 1.0%
Nucor Corporation 5,500 $ 280,500
Motion Pictures and Theatres - 1.7%
Walt Disney Co. 7,000 $ 488,250
Petroleum Producing - 7.0%
Amoco Corporation 5,000 $ 403,125
Atlantic Richfield Company 2,000 265,000
Chevron Corporation 10,000 650,000
Exxon Corporation 4,000 392,000
Mobil Corporation 2,000 244,500
Union Pacific Resources Group 3,387 98,223
-----------
$ 2,052,848
-----------
Printing and Engraving - 0.6%
Deluxe Corp. 5,000 $ 163,750
Publishing - Newspapers - 1.0%
Gannett Co., Inc. 4,000 $ 299,500
Publishing - Electronic - 1.6%
Reuters Holdings PLC 6,000 $ 459,000
Restaurants - Food Service - 0.2%
Apple South, Inc. 3,500 $ 47,250
Retail Stores - Apparel and Clothing - 1.4%
Gap, Inc. 14,000 $ 421,750
Retail Stores - Building Materials and Home
Improvement - 0.5%
Home Depot, Inc. 3,000 $ 150,375
-16-
BRIDGES INVESTMENT FUND, INC.
SCHEDULE OF PORTFOLIO INVESTMENTS
(Continued)
DECEMBER 31, 1996
<CAPTION>
Number Market
Title of Security of Shares Value
<S> <C> <C>
COMMON STOCKS (Continued)
Retail Stores - Department - 1.4%
Dayton Hudson Corporation 10,500 $ 412,125
Retail Stores - Variety - 0.8%
Albertson's Inc. 6,500 $ 231,563
Telecommunications - 4.5%
A T & T Corp. 5,000 $ 216,875
GTE Corporation 10,000 453,750
Lucent Technologies, Inc. 1,620 74,925
Sprint Corporation 8,000 319,000
West Teleservices Corporation*<F5> 11,000 250,250
-----------
$ 1,314,800
-----------
Transportation - Railroads - 0.8%
Union Pacific Corporation 4,000 $ 240,500
Utilities - Telecommunications - 0.4%
U S West Communications Group 4,000 $ 129,000
Waste Management - 0.6%
WMX Technologies, Inc. 5,500 $ 178,750
------------
TOTAL COMMON STOCKS (Cost - $11,400,758) $21,649,359
------------
PREFERRED STOCKS (0.5%)
Telecommunications - (0.5%)
AirTouch Communications, Inc. 4.25% Series C 3,000 $ 135,000
Convertible Preferred
Total Preferred Stocks (Cost - $137,925) $ 135,000
-----------
Total Stocks (Cost - $11,538,683) $21,784,359
-----------
<F5>*Nonincome-producing security
-17-
BRIDGES INVESTMENT FUND, INC.
SCHEDULE OF PORTFOLIO INVESTMENTS
(Continued)
DECEMBER 31, 1996
<CAPTION>
Principal Market
Title of Security Amount Value
<S> <C> <C>
DEBT SECURITIES (25.4%)
Broadcast - Radio and Television (0.1%)-
Comcast Corporation 3.375% Step-Up
Convertible Subordinated Debentures
due September 9, 2005 $ 50,000 $ 46,750
Food - Miscellaneous Products (0.4%) -
Super Valu Stores, Inc. 8.875%
Promissory Notes, due June 15, 1999 $100,000 $ 105,633
U.S. Government (11.9%) -
U.S. Treasury, 8.875% Notes,
due November 15, 1997 200,000 204,812
U.S. Treasury, 9.000% Notes,
due May 15, 1998 200,000 207,937
U.S. Treasury, 9.125% Notes,
due May 15, 1999 200,000 213,750
U.S. Treasury, 8.750% Notes,
due August 15, 2000 200,000 216,750
U.S. Treasury, 8.000% Notes,
due May 15, 2001 200,000 213,688
U.S. Treasury, 7.500% Notes,
due May 15, 2002 200,000 211,500
U.S. Treasury, 10.750% Bonds
due February 15, 2003 200,000 244,813
U.S. Treasury, 7.250% Notes,
due May 15, 2004 300,000 315,750
U.S. Treasury, 7.50% Notes,
due February 15, 2005 300,000 320,906
U.S. Treasury, 9.375% Bonds,
due February 15, 2006 200,000 240,625
-18-
BRIDGES INVESTMENT FUND, INC.
SCHEDULE OF PORTFOLIO INVESTMENTS
(Continued)
DECEMBER 31, 1996
<CAPTION>
Principal Market
Title of Security Amount Value
<S> <C> <C>
DEBT SECURITIES (Continued)
U.S. Government - (Continued)
U.S. Treasury, 7.625% Bonds,
due February 15, 2007 300,000 314,812
U.S. Treasury, 8.75% Bonds,
due November 15, 2008 200,000 224,625
U.S. Treasury, 9.125% Bonds,
due May 15, 2009 200,000 230,375
U.S. Treasury, 7.500% Bonds,
due November 15, 2016 300,000 324,656
------------
$ 3,484,999
-----------
Household Appliances and Utensils (0.4%) -
Maytag Corp., 9.75% Notes,
due May 15, 2002 $100,000 $ 113,491
Office Equipment and Supplies (0.4%) -
Xerox Corporation, 9.750%
Notes, due March 15, 2000 $100,000 $ 109,125
Retail Stores - Broad Line Chains (0.5%) -
Costco Wholesale Corporation 5.750%
Convertible Subordinated Debentures,
due May 15, 2002 $150,000 $ 143,625
Retail Stores - Department (0.9%) -
Dillard Department Stores, Inc. 7.850%
Debentures, due October 1, 2012 $150,000 $ 160,090
Sears Roebuck & Co.
9.375% Debentures, due
November 1, 2011 100,000 120,000
-----------
$ 280,090
-----------
Textiles - Miscellaneous (0.3%) -
Guilford Mills, Inc. 6.000%
Convertible Subordinated Debentures
due September 15, 2012 $100,000 $ 101,000
-19-
BRIDGES INVESTMENT FUND, INC.
SCHEDULE OF PORTFOLIO INVESTMENTS
(Continued)
DECEMBER 31, 1996
<CAPTION>
Principal Market
Title of Security Amount Value
<S> <C> <C>
DEBT SECURITIES (Continued)
Transportation - Railroads (0.5%) -
Union Pacific Corporation 6.00%
Notes, due September 1, 2003 $ 150,000 $ 142,172
Commercial Paper - Short Term (10.0%) -
American Express Credit Corp.
Commercial Paper Note 5.5%
due January 7, 1997 $1,460,000 $ 1,460,000
Ford Motor Credit Corp.
Commercial Paper Note 5.5%
due January 7, 1997 $1,460,000 $ 1,460,000
-----------
$ 2,920,000
-----------
TOTAL DEBT SECURITIES (Cost - $7,352,768) $ 7,446,885
-----------
TOTAL INVESTMENTS IN SECURITIES
(Cost - $18,891,451) (99.9%) $29,231,244
CASH AND RECEIVABLES
LESS TOTAL LIABILITIES (0.1%) 18,244
-----------
NET ASSETS, December 31, 1996 (100.0%) $29,249,488
===========
<FN>The accompanying notes to financial statements
are an integral part of this schedule.
-20-
</TABLE>
<TABLE>
BRIDGES INVESTMENT FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1996
<CAPTION>
Amount
<S> <C>
ASSETS
Investments, at market value
Common and preferred stocks (cost $11,538,683) $21,784,358
Debt securities (cost $7,352,768) 7,446,886
-----------
Total Investments $29,231,244
Cash 117,812
Receivables
Dividends and interest 127,617
Subscriptions to capital stock 7,000
----------
TOTAL ASSETS $29,483,673
===========
LIABILITIES
Dividend distributions payable $ 172,671
Accrued operating expenses 61,514
-----------
TOTAL LIABILITIES $ 234,185
-----------
NET ASSETS
Capital stock, $1 par value - Authorized 3,000,000
shares,less 686,691 shares redeemed; 1,877,522
shares issued; 1,190,831 shares outstanding $ 1,190,831
Paid-in surplus -
Excess over par value of amounts received from sale
of 1,877,522 shares, less amounts paid out in
redeeming 686,691 shares 17,717,042
----------
Net capital paid in on shares $18,907,873
Accumulated net realized loss on investment
transactions (2,910)
Net unrealized appreciation on investments 10,339,793
Accumulated undistributed net investment income 4,732
-----------
TOTAL NET ASSETS $29,249,488
===========
NET ASSET VALUE PER SHARE $24.56
======
OFFERING PRICE PER SHARE $24.56
======
REDEMPTION PRICE PER SHARE $24.56
======
<FN>The accompanying notes to financial statements
are an integral part of this statement.
</TABLE>
-21-
<TABLE>
BRIDGES INVESTMENT FUND, INC.
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
<CAPTION>
Amount Amount
<S> <C> <C>
NVESTMENT INCOME
Interest $463,382
Dividends 413,094
--------
Total Investment Income $876,476
EXPENSES
Management fees $135,586
Custodian fees 35,597
Bookkeeping services 13,100
Printing and supplies 12,787
Professional services 10,900
Insurance 10,145
Dividend disbursing and transfer
agent fees 9,391
Computer programming 7,600
Taxes and licenses 1,065
Foreign taxes paid on dividends 1,054
-------
Total Expenses $ 237,225
---------
NET INVESTMENT INCOME $ 639,251
----------
REALIZED AND UNREALIZED
GAIN ON INVESTMENTS, NET
Net realized gain on transactions in
investment securities $ 310,925
Net increase in unrealized
appreciation of investments 3,502,945
---------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS $3,813,870
----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $4,453,121
==========
<FN>The accompanying notes to financial statements
are an integral part of this statement.
</TABLE>
-22-
<TABLE>
BRIDGES INVESTMENT FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1996 AND 1995
<CAPTION>
1996 1995
<S> <C> <C>
INCREASE IN NET ASSETS
Operations -
Net investment income $ 639,251 $ 622,174
Net realized gain on transactions in
investment securities 310,925 243,759
Net increase in unrealized
appreciation of investments 3,502,945 4,750,041
----------- ---------
Net increase in net assets
resulting from operations $ 4,453,121 $5,615,974
Net equalization credits 4,640 1,028
Distributions to shareholders from -
Net investment income (639,251) (622,174)
Net realized gain from investment
transactions (304,773) (211,269)
Equalization (4,109) (64)
Net capital share transactions 1,687,114 1,172,954
---------- ----------
Total Increase in Net Assets $ 5,196,742 $5,956,449
NET ASSETS:
Beginning of year 24,052,746 18,096,297
---------- ----------
End of year (including accumulated
undistributed net investment income
of $4,732 and $4,199, respectively) $29,249,488 $24,052,746
=========== ===========
<FN>The accompanying notes to financial statements
are an integral part of these statements.
</TABLE>
-23-
BRIDGES INVESTMENT FUND, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Bridges Investment Fund, Inc. (Fund) is registered under the
Investment Company Act of 1940 as a diversified, open-end management
investment company. The primary investment objective of the Fund is long-
term capital appreciation. In pursuit of that objective, the Fund invests
primarily in common stocks. The following is a summary of significant
accounting policies consistently followed by the Fund in the preparation of
its financial statements. The policies are in conformity with generally
accepted accounting principles.
A. Investments -
Security transactions are recorded on the trade date at purchase
cost or sales proceeds. Dividend income is recognized on the ex-
dividend date, and interest income is recognized on an accrual basis.
Securities owned are reflected in the accompanying statement of
assets and liabilities and the schedule of portfolio investments at
quoted market value. Quoted market value represents the last recorded
sales price on the last business day of the calendar year for
securities traded on a national securities exchange. If no sales were
reported on that day, quoted market value represents the closing bid
price. The cost of investments reflected in the statement of assets
and liabilities and the schedule of portfolio investments is the same
as the basis used for Federal income tax purposes. The difference
between cost and quoted market value of securities is reflected
separately as unrealized appreciation (depreciation) as applicable.
<TABLE>
<CAPTION>
1996 1995 Net
Change
<S> <C> <C> <C>
Net unrealized appreciation (depreciation):
Aggregate gross unrealized
appreciation on securities $10,462,757 $7,035,300
Aggregate gross unrealized
deorecuatuib on securities (122,964) (198,452)
------------ -----------
Net $10,339,793 $6,836,848 $3,502,945
=========== ========== ==========
The net realized gain (loss) from the sales of securities is
determined for income tax and accounting purposes on the basis of the cost
of specific securities. The gain computed on the basis of average cost
would have been substantially the same as that reflected in the
accompanying statement of operations.
-24-
B. Federal Income Taxes -
It is the Fund's policy to comply with the requirements of the
Internal Revenue Code of 1986, as amended, applicable to regulated
investment companies, including the distribution of substantially all
taxable income including net realized gains on sales of investments.
Therefore, no provision is made for Federal income taxes.
C. Distribution To Shareholders -
The Fund accrues dividends to shareholders on the ex-dividend
date.
D. Equalization -
The Fund uses the accounting practice of equalization by which a
portion of the proceeds from sales and costs of redemption of capital
shares, equivalent on a per share basis to the amount of undistributed
net investment income on the date of the transactions, is credited or
charged to undistributed income. As a result, undistributed net
investment income per share is unaffected by sales or redemption of
capital shares.
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.
(2) INVESTMENT ADVISORY CONTRACT
Under an Investment Advisory Contract, Bridges Investment Counsel,
Inc. (Investment Adviser) furnishes investment advisory services and
performs certain administrative functions for the Fund. In return, the
Fund has agreed to pay the Investment Adviser a fee computed on a quarterly
basis at the rate of 1/8 of 1% of the average net asset value of the Fund
during the quarter, equivalent to 1/2 of 1% per annum. Certain officers
and directors of the Fund are also officers and directors of the Investment
Adviser. These officers do not receive any compensation from the Fund
other than that which is received indirectly through the Investment
Adviser.
The contract between the Fund and the Investment Adviser provides that
total expenses of the Fund in any year, exclusive of stamp and other taxes,
but including fees paid to the Investment Adviser, shall not exceed, in
total, a maximum of 1 and 1/2% of the average month end net asset value of
the Fund for the year. Amounts, if any, expended in excess of this
limitation are reimbursed by the Investment Adviser as specifically
identified in the Investment Advisory Contract.
-25-
(3) DIVIDEND DISBURSING AND TRANSFER AGENT
Effective October 1, 1987, dividend disbursing and transfer agent
services are provided by Bridges Investor Services, Inc. (Transfer Agent).
The fees paid to the Transfer Agent are intended to approximate the cost to
the Transfer Agent for providing such services. Certain officers and
directors of the Fund are also officers and directors of the Transfer
Agent.
(4) SECURITY TRANSACTIONS
The cost of long-term investment purchases during the years ended
December 31, was:
</TABLE>
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
United States government obligations $ 915,945 $ 199,498
Other Securities 1,597,324 1,181,022
---------- ----------
Total Cost $2,513,269 $1,380,520
========== ==========
</TABLE>
Net proceeds from sales of long-term investments during the years
ended December 31, were:
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
United States government obligations $ 423,528 $ 200,000
Other Securities 1,567,634 1,503,775
---------- ---------
Total Net Proceeds $1,991,162 $1,703,775
========== ==========
Total Cost Basis of
Securities Sold $1,680,237 $1,460,016
========== ==========
</TABLE>
(5) NET ASSET VALUE
The net asset value per share represents the effective price for all
subscriptions and redemptions.
-26-
(6) CAPITAL STOCK
Shares of capital stock issued and redeemed are as follows:
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Shares sold 88,405 83,027
Shares issued to shareholders in
reinvestment of net investment
income and realized gain from
security transactions 34,880 36,926
--------- ---------
123,285 119,953
Shares redeemed 49,074 61,760
-------- --------
Net increase 74,211 58,193
======== ========
Value of capital stock issued and redeemed is as follows:
<CAPTION>
1996 1995
<S> <C> <C>
Shares sold $1,992,810 $1,627,894
Shares issued to shareholders in
reinvestment of net investment
income and realized gain from
security transactions 832,894 725,065
----------- -----------
$2,825,704 $2,352,959
Shares redeemed 1,138,590 1,180,005
---------- ----------
Net increase $1,687,114 $1,172,954
========== ==========
</TABLE>
(7) DISTRIBUTION TO SHAREHOLDERS
On December 3, 1996 a cash distribution was declared from net
investment income accrued through December 31, 1996. This distribution was
ultimately calculated as $.145 per share aggregating $168,562. (This
dividend includes $4,109 that represents a return of capital distribution
to shareholders for Federal income tax purposes.) The dividend will be
paid on January 23, 1997, to shareholders of record on December 31, 1996.
(8) DERIVATIVE FINANCIAL INSTRUMENTS
In October, 1994, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 119, Disclosure about
Derivative Financial Investments and Fair Value of Financial Instruments.
The Fund has not entered into any such investment or investment contracts.
A covered call option contract is a form of a financial derivative
instrument. The Fund's investment and policy restrictions do permit the
Fund to sell or write covered call option contracts under certain
circumstances and limitations as set forth in the Fund's prospectus.
-27-
FINANCIAL HIGHLIGHTS*
Per share income and capital changes for a share outstanding for each
of the last five years were:
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $21.54 $17.10 $17.80 $17.51 $17.30
Income From Investment Operations
Net Investment Income $ .55 $ .58 $ .59 $ .61 $ .63
Net Gains or (Losses) on Securities
(both realized and unrealized)
3.28 4.63 (.52) .46 .37
---- ---- ----- ---- ------
Total From Investment Operations $ 3.83 $ 5.21 $ .07 $ 1.07 $ 1.00
Less Distributions
Dividends from net investment income (.55) (.58) (.59) (.61) (.63)
Distributions from capital gains (.26) (.19) (.18) (.17) (.16)
------ ----- ------ ----- ------
Total Distributions $ (.81) $ (.77) $ (.77) $ (.78) $ (.79)
------ ------ ----- ----- ------
Net Asset Value, End of Period $24.56 $21.54 $17.10 $17.80 $17.51
====== ====== ====== ====== ======
Ratios/Supplemental Data
Net Assets, End of Period
(in thousands)
$29,249 $24,052 $18,096 $17,991 $17,007
Ratio of Expenses to Average
Net Assets**
.87% .89% .90% .90% .94%
Ratio of Net Income to
Average Net Assets **<F6>
3.23% 3.80% 4.25% 4.32% 4.57%
Portfolio Turnover Rate 11% 7% 10% 11% 7%
<FN>* Per share income and capital change data is computed using the
weighted average number of shares outstanding method.
<F6>** Average net asset data is computed using monthly net asset value
figures.
</TABLE>
Shareholder Letter MD&A-1 January 23, 1997
Bridges Investment Fund, Inc. January 23, 1997
Shareholder Communication
Annual Report for 1996
MANAGEMENT'S DISCUSSION AND ANALYSIS
Introduction
- ------------
The following information is provided in response to Item 5 and Item 5A in
the Form N-1A to be filed annually under the Investment Company Act of 1940 with
the Securities and Exchange Commission in Washington, D.C. The Form N-1A
prescribes certain information that is to be included in the Prospectus for the
Fund.
Item 5(c)
- ---------
Item 5(c) requires the disclosure of the name and title of the person or
persons employed by or associated with the Fund's investment adviser, Bridges
Investment Counsel, Inc., who are primarily responsible for the day-to-day
management of the Fund's portfolio as well as the length of their service and
business experience during the past five years.
Mr. Edson L. Bridges II, President of the Fund and President of Bridges
Investment Counsel, Inc., is primarily responsible for the day-to-day management
of the Firm's portfolio. Mr. Bridges II has conducted this responsibility for
the past five years, and, in fact, for the entire span of the Fund's more than
33 years of operation.
Mr. Edson L. Bridges III, Executive Vice President of the Fund and
Executive Vice President - Investments, of Bridges Investment Counsel, Inc., is
the back-up person for the day-to-day operation of the Fund's portfolio. Mr.
Shareholder Letter MD&A-2 January 23, 1997
Bridges III has dedicated the last five years as a research person and portfolio
manager for Bridges Investment Counsel, Inc. Mr. Bridges III has been employed
in these areas of responsibility for all clients, including Bridges Investment
Fund, Inc., for more than 13 years.
Item 5A.(a)
- -----------
The first response under this disclosure is Item 5A.(a) that requests the
management to briefly discuss those factors, including relevant market
conditions and the investment strategies and techniques pursued by the Fund's
investment adviser, that materially affected the performance of the Registrant
during the most recently completed fiscal year. The investment performance for
1996, the most recently completed fiscal year, was a 17.92% total return for a
$10,000 investment with cash distributions reinvested in shares of capital stock
in the Fund. This number differs from the 17.77% total return reported on page
one because that earlier calculation did not reinvest dividends and the capital
gains distribution and did not include the cost of five reinvestment transaction
fees.
The statistical information shown in Table 1 is taken from quarterly
appraisal reports prepared by Bridges Investment Counsel, Inc. for the
management and Directors of Bridges Investment Fund, Inc. These reports state
the investment position of the Fund's portfolio as of December 31, 1995, and
December 31, 1996. The changes in asset allocations by classes of securities
should be of assistance in identifying the factors that materially affected the
Fund's investment performance during 1996. Refer to Table 1, on pages 8 and 9:
As shown on Table, 1, the total market value of the Fund's portfolio grew
22.27% during 1996 to a new all-time high of $29,415,159. The book value or
investment cost basis paid for securities increased $1,845,618 to $19,075,366
Shareholder Letter MD&A-3 January 23, 1997
for an increase of 10.71% for the twelve months ended December 31, 1996. At
year-end 1996, the estimated annual income for the Fund's portfolio securities
was $914,451, up 9.49%% from the $835,164 forecast made one year earlier.
During 1996, cash reserves were increased $1,018,747 to $3,103,915 to build
assets for the acquisition of more attractive values in common stocks on the
next significant downward price correction in the stock market. Some of these
reserves would also be allocated to purchases of corporate bonds, if interest
rates should rise to more rewarding levels.
The book value or cost basis in U.S. Treasury Securities was raised
$482,612 or 16.41% during 1996 to maintain and raise the stream of interest
income to support quarterly dividend payments to shareholders and to pay
operating expenses. The market value improvement for this group of securities
was only 10.31% for 1996, reflecting lower prices and higher yields that
developed during the year in comparison to the year-end 1995 levels. Overall,
the U.S. Treasury Securities experienced a 5.25% decline in unrealized
appreciation for 1996 due to the higher interest rates and other factors.
Bond calls by corporate issuers caused the Fund's positions in bonds,
debentures, and notes to decline by $157,160 during 1996. The increased
interest rate environment brought about a market value reduction of about
$32,793 over the same period of time. Some convertible debentures were sold
with the proceeds invested elsewhere, with the result that the converted assets
in the group declined 37.78% or $181,698 at cost to $299,265 at the end of the
year.
The portfolio's entire beginning of the year position in convertible
preferred stocks was called for conversion during 1996. The Fund received the
underlying common stocks in exchange for the preferred stocks. One new
convertible preferred stock was added back to this group.
Shareholder Letter MD&A-4 January 23, 1997
Commitments to common stocks were built up $867,498 at cost to $11,400,758
during 1996, an increase of 8.24% over year-end 1995. The new companies added
to the portfolio were: Cisco Systems, Inc., HNC Software, Inc. MemberWorks,
Inc., Amgen, Inc., First USA, Inc., Home Depot, Inc., and West Teleservices
Corporation.
The leading common stocks in the Fund's portfolio in terms of market
performance during 1996, listed in order of the greatest percentage advance to
the least gain from the beginning of the year were: Intel Corporation,
Microsoft Corporation, Cisco Systems, Inc., International Business Machines
Corporation, Nike, Inc., Bristol-Myers Squibb Co., E.I. DuPont DeNemours &
Company, Monsanto Company, State Street Boston Corp., and First USA, Inc.
During 1996, the greatest increase for one of these ten companies was 140%, and
the smallest gain was 50%.
At year-end, the key characteristics of the Fund's common stock portfolio
that are indicators for future higher values for the next one-to-five years are
set forth below. The data is based on the dollar-weighted representation of
companies at market value in the portfolio:
Shareholder Letter MD&A-5 January 23, 1997
<TABLE>
<CAPTION>
Sales Price/ Mean Est.
Indicator: 5 Yr. Earnings EPS EPS Historical LTD %
Growth Ratio Change Growth EPS 1995 of Total
Rate 1997 EPS '96-'97 Next 5 Yrs. Stability ROE Capital
<S> <C> <C> <C> <C> <C> <C> <C>
Indicator 12.9% 19.6x 18.2% 14.8% 9.0% 19.3% 23.3%
Value
<FN>
Definitions: EPS -- Earnings per share
ROE -- Net after-tax income return as a percent of common equity
LTD -- Long-term debt as a percent of total shareholder equity and
long-term liabilities
Stability -- Consistency of earnings per share on growth trend line
</TABLE>
Shareholder Letter MD&A-6 January 23, 1997
The recent price/earnings ratio of 19.6x estimated earnings per share for
1997 is significantly above the normal long-term average of 13 times for the
general market. The potential earnings per share gain of 18.2% for 1997
represents a forecast for a substantial improvement over 1996. The 14.8% per
year forecast for earnings per share growth for the next five years represents
an improvement over 1996 expectations at the same point in time. The same data
base is used each year to present these readings. We believe the 19.6x
price/earnings ratio figure may be somewhat overstated due to our understatement
of earnings per share in the data base.
The Fund holds commercial paper and U.S. Treasury securities for a
potential reserve for securities purchases and for the development of investment
income to pay operating expenses and a modest dividend. The Fund owns corporate
bonds to achieve the highest interest income available in support of its
dividend policy. Until 1994, interest rates have been declining since the early
1980's in a secular trend. New two-decade low rates were reached in 1993,
thereby reducing the realized actual and potential interest income for the
portfolio. The Fund's quarterly and year-end extra dividends declined slightly
in response to the long-term downtrend in interest rates. A record of the
Fund's past five-year dividend payments can be found on page 27 of the audited
financial statements.
Convertible debentures and preferred stocks were selected over straight
preferred stocks, bonds, and debentures to protect the market value of the
instruments against large unrealized losses in the event interest rates reversed
in 1996 and later years. Convertible securities were also selected to provide
an annual income return on investment of 5%-6% compared to the 1%-2% average
current return available from common stocks in 1996.
Shareholder Letter MD&A-7 January 23, 1997
In conclusion, the Fund's management maintained a consistent course with
the past in terms of the continued employment of traditional growth stocks for
the predominant objective for the common stock segment of the total portfolio.
Some yield common stocks, convertible securities, corporate bonds, and U.S.
Treasury securities were utilized to develop predictable income streams to cover
operating expenses and to make dividend payments that were $.55 per share on a
beginning net asset value per share of $21.54 for a current return of 2.55% for
a one-year investment in the Fund.
Item 5A.(b)
- -----------
The Fund is required to provide a line graph comparing the initial account
value and subsequent account values at the end of each of the most recently
completed ten fiscal years of the Fund, assuming a $10,000 investment in the
Fund at the beginning of the first fiscal year to the same investment over the
same periods in an appropriate broad-based securities market index. In a table
placed within or contiguous to the graph, the Fund's average annual total
returns for the one, five, and ten-year periods ended on the last day of the
most recent fiscal year, computed in accordance with applicable SEC regulations
and guidelines, are provided.
This line graph appears on page MD&A 10. The information on the line graph
is set forth without amplifying commentary. However, the interpretative
discussion that precedes and follows in this section of the Annual Shareholder
Report for 1996 is an integral part of the overall presentation concerning
investment performance.
Shareholder Letter MD&A-8 January 23, 1997
The assumptions for the preparation of data to compute performance for the
Standard & Poor's 500 Composite Index and for Bridges Investment Fund, Inc.,
along with other items of information and analysis appear at pages MD&A 11.
The Standard & Poor's 500 Composite Stock Index was chosen as the
appropriate broad-based market index for comparison with our Fund for the
purpose of benchmarking the results of a 100% common stock investment as an
alternative to an investment in our Fund. Common stocks would average about 70%
of total market value in the Fund's portfolio over the last decade. This
observation means that our Fund's investment record cannot be expected to match
the results of a securities investment in the Standard & Poor's 500 Composite
Index because the same degree of risk/reward has not been assumed by the Fund.
Nevertheless, the S&P 500 has the best data for tracking the general price
trends for large capitalization, widely owned stocks, a representative list of
which is held by our Fund.
Item 5A.(c)
- -----------
This response addresses the impact that any policy or practice as to the
maintenance of a specified level of distributions to shareholders had on
investment strategies of the Fund and the per share net asset value during the
Fund's last fiscal year -- 1996.
The management of the Fund has generally tried to maintain a $.14-$.16 per
share quarterly dividend payment to the shareholders since 1983. The impact of
this policy in 1996 was to restrain the total dollars allocated to common stocks
and thereby to limit, to the degree that more than 75% of total asset
allocations to stocks were not made, the upside price appreciation potential for
the net asset value per share. The choice of acquiring convertible debentures
and convertible preferred stocks was also influenced by this policy to develop
significant streams of income.
Shareholder Letter MD&A-9 January 23, 1997
Shareholders should be aware that the income return component on certain
stocks and bonds may provide a modicum of protection against downward moves in
comparison to low and non-dividend paying common stocks in bear market
situations when they arise from time to time. The Fund's management believed a
significant price correction for common stocks was possible during 1996 due to
the advanced, high level for the popular stock market averages that are in long
uptrends dating back to lows in 1990, 1987, 1982, and 1974. Therefore, yield
bearing securities are regularly acquired and held for defensive purposes.
There will be one dividend payment taxable to 1996 and payable on January
23, 1997, that included a return of capital of $.0035 per share. Please refer
to the accompanying letter entitled Information for your Federal Income tax
Return - 1996 dated January 23, 1997, for complete details. The return of
capital resulted from the utilization of amounts reserved in the Fund's
equalization account that protects existing shareholders from a dilution of
their proportionate allocation of income from new shares being subscribed less
amounts of accumulated income allocated to shares redeemed.
The disclosures required for Item 5(c) and Item 5A.(a), (b), and (c)
conclude at this point in this text.
Further Observations by Management
- ----------------------------------
The Portfolio Manager's Views -- At no time has the senior portfolio
manager represented to the Board of Directors, the management of Bridges
Investment Counsel, Inc., or the shareholders of the Fund that our portfolio of
securities will be operated to match or exceed the investment results for any
particular securities price index or group of indices. The portfolio manager
attempts to be well invested in quality securities selected to achieve the long-
Shareholder Letter MD&A-10 January 23, 1997
term growth of common stock values and the development of a modest amount of
current income.
Direction of Disclosures -- The direction of disclosures by mutual funds
------------------------
will be to provide a greater amount of information on investment results. Those
requirements placed upon fund management will intensify the need to develop
competitive returns to confirm management's ability and skill, or the search
will deepen to find or create a composite index that justifies the funds'
results as they unfold. Our Fund's disclosure for the 1996 Annual Report was
made on the same basis as in past years to the Standard & Poor's 500 Composite
Index even though the calculations present an unfavorable comparison because
management anticipates that the investment results for our Fund are well known
to its investors with or without the graphic presentations, and that a 10.92%
per ten year long-term annual return has been acceptable to our shareholders.
Board of Director Views -- The Fund's Board of Directors has discussed and
-----------------------
will continue to address the establishment of reasonable investment objectives
that should be reached regularly by management over a number of years. Those
targets may or may not be communicated to shareholders, as expectations should
not be raised to unrealistic levels, nor can such figures be used as a means of
encouraging or influencing a prospective investment in the Fund. The Board may
conclude that the Fund as operated should be classified as a balanced fund
rather than a growth and income fund, as total return comparisons are made for
the Board between our Fund and other small mutual funds in both the balanced and
growth and income categories. There were no resolutions adopted by the Fund's
Board of Directors with respect to a change in the representation of the Fund as
a growth and income open-end investment company during 1996.
The Board has heard reports from the management of the Fund that Bridges
Investment Counsel, Inc. or a new affiliate organization may sponsor several new
Shareholder Letter MD&A-11 January 23, 1997
mutual funds to provide a range of choices for investment objectives, one of
which would be a fixed income alternative and the other a capital appreciation
common stock fund. In this possible environment, Bridges Investment Fund, Inc.
could be positioned in between the other two choices for prospective investors
as a balanced fund. No decisions have been made regarding any of these matters
other than to conduct research into these possible opportunities.
The Determinants of Investment Returns -- Investment returns are a function
--------------------------------------
of many variables. The governing factors are the beginning date for the
calculation, the ending date for the calculation, and the securities owned in
the subject portfolio for the intervening periods. The long-term investment
returns in our Fund were achieved without assuming a maximum risk/reward
position. Midstream in the 1984 to 1995 time frame, there was the most
significant market crash in October, 1987, since the famous October, 1929, crash
that was associated with the Great Depression of the 1930's. The Board of
Directors of the Fund requested the management of the Fund to invest more
conservatively in 1988 than in prior years. The result was a reduction of about
10% in the total assets committed to common equities. The value of $10,000
invested in our Fund versus the S&P 500 investment begins to trail the Composite
Index by a wider margin after 1988 than in earlier years.
History of Calculations for MD&A Page 10 -- The table that appears on page
-----------------------------------------
10 sets forth the dollars reported for a $10,000 investment in Bridges
Investment Fund, Inc. and the Standard & Poor's 500 Composite Stock Index in the
one year, five year, and ten year illustrations. One purpose for this
presentation is to demonstrate the dynamics that result from dropping off the
base year and starting with a new one. The data for each Annual Shareholder
Report Management's Discussion and Analysis will be published to portray the
volatility and/or consistency of the returns as they develop over the years.
Shareholder Letter MD&A-12 January 23, 1997
The level of prices at the opening of the investment and at the time of the last
calculation carry the dominant forces in the determination of the final results:
Shareholder Letter MD&A-13 January 23, 1997
<TABLE>
Value of a $10,000 Investment
-----------------------------
<CAPTION>
% Chg. % Chg. % Chg.
Annual Prior Prior Prior
Report Yr. Yr. Yr.
Year Investment 1 Yr. Disclo. 5 Yr. Disclo. 10 Yr. Disclo.
<S> <C> <C> <C> <C> <C> <C> <C>
1993 BIF, Inc. 10,618 N.C. 17,154 N.C. 27,656 N.C.
1994 BIF, Inc. 10,033 -5.5 13,882 -19.1 27,502 -0.6
1995 BIF, Inc. 13,066 +30.2 18,031 +29.9 27,949 +1.6
1996 BIF, Inc. 11,792 -9.8 17,566 -2.6 28,186 +0.8
1993 S&P 500 11,010 N.C. 19,703 N.C. 39,656 N.C.
1994 S&P 500 10,122 -8.1 15,153 -23.1 37,800 -4.7
1995 S&P 500 13,661 +35.0 21,334 +40.8 39,519 +4.6
1996 S&P 500 12,229 -10.5 20,134 - 5.6 41,001 +3.8
<FN>
Sources: Graphs in MD&A Reports 1993 through 1996
N.C.: Not Calculated
</TABLE>
Shareholder Letter MD&A-14 January 23, 1997
The change in the base year for the five year calculations was particularly
dramatic for the 1994 disclosure. With respect to the calculation for the
$10,000 investments in the S&P 500 Composite Index, the values calculated do not
have deductions for operating expenses and brokerage expenses that are reflected
in the values shown for an investment in the Fund. The values shown for the S&P
500 Composite Index may not be similar to data prepared by other issuers of this
type of information due to the methodology and timing for the reinvestment of
dividends received by S&P companies. Please refer to MD&A, page 11, for further
information.
Integrity and Trust -- In the final analysis, investors make judgments
-------------------
about organizations and the persons who manage and operate them. There can and
should be a strong faith and trust factor that develops over time. Our
investment record is based upon extensive research efforts and conservative
judgments. The process to improve efforts is a continuing one, particularly
with respect to addressing the implementation of what we know to the investment
selection process. The results of the changes in this direction will probably
be an increase in the portfolio turnover to adjust better to rapidly changing
market conditions. The management believes that its organization and people are
at the highest level of proficiency now than at any time in our entire
relationship with the Fund.
Respectfully submitted,
Edson L. Bridges II
President
Shareholder Letter MD&A-15 January 23, 1997
ELBII:kjs
Shareholder Letter MD&A-16 January 23, 1997
<TABLE>
Table 1: Comparative Investment Positions of Bridges Investment Fund, Inc.
on December 31, 1995, and December 31, 1996
<CAPTION>
Numeric %
12/31/95 12/31/96 Change Change
<S> <C> <C> <C> <C>
Asset
Cash Reserves:
Market Value $ 2,085,168 $ 3,103,915 $1,018,747 +48.86
Book Value 2,085,168 $ 3,103,915 1,018,747 +48.86
Unrealized Gain or (Loss) 0 0 0 --
Market Value/Book Value 100.00 100.00 100.00
Annual Income-Estimated $ 104,475 $ 156,950 $ 52,475 +50.23
U.S. Treasury Securities:
Market Value $ 3,159,375 $ 3,485,000 $ 325,625 +10.31
Book Value 2,941,257 3,423,919 482,662 +16.41
Unrealized Gain or (Loss) $ 218,118 $ 61,081 $ (157,037) -72.00
Market Value/Book Value 107.42 101.78 (5.64) - 5.25
Annual Income-Estimated $ 236,500 $ 268,125 $ 31,625 +13.37
Corp. Bonds, Debentures & Notes:
Market Value $ 940,464 $ 750,511 $ (189,953) -20.20
Book Value 866,744 709,584 (157,160) -18.13
Unrealized Gain or (Loss) $ 73,720 $ 40,927 $ (32,793) -44.48
Market Value/Book Value 108.51 105.77 2.74 - 2.53
Shareholder Letter MD&A-17 January 23, 1997
Annual Income-Estimated $ 71,462 $ 58,525 $ (12,937) -18.10
Convertible Debentures:
Market Value $ 466,806 $ 291,375 $ (175,431) -37.58
Book Value 480,963 299,265 (181,698) -37.78
Unrealized Gain or (Loss) $ (14,157) $ ( 7,890) $ ( 6,267) -54.27
Market Value/Book Value 97.06 97.36 0.30 + 0.31
Annual Income-Estimated $ 30,834 $ 16,312 $ (14,522) -47.10
Convertible Preferred Stock:
Market Value $ 397,875 $ 135,000 $ (262,875) -64.07
Book Value 322,355 137,925 (184,430) -57.21
Unrealized Gain or (Loss) $ 75,520 $ ( 2,925) $ ( 78,450) N.M.<F71>
Market Value/Book Value 123.43 97.68 (25.75) -21.86
Annual Income-Estimated $ 20,250 $ 6,375 $ (13,875) -68.52
Common Stock:
Market Value $17,007,998 $21,649,358 $4,641,360 +27.29
Book Value 10,533,260 11,400,758 867,498 + 8.24
Unrealized Gain or (Loss) $ 6,474,738 $10,248,600 $3,773,862 +58.29
Market Value/Book Value 161.47 189.89 28.42 +17.60
Annual Income-Estimated $ 371,643 $ 408,164 $ 36,521 + 9.83
Table 1 (Continued)
Numeric %
12/31/95 12/31/96 Change Change
Shareholder Letter MD&A-18 January 23, 1997
Total Portfolio:
Market Value $24,057,687 $29,415,159 $5,357,472 +22.27
Book Value 17,229,748 19,075,366 1,845,618 +10.71
Unrealized Gain or (Loss) $ 6,827,939 $10,339,739 $3,511,854 +51.43
Market Value/Book Value 140.21 154.20 13.99 9.98
Annual Income-Estimated $ 835,164 $ 914,451 $ 79,287 +9.49
<FN>
N.M.-Calculation Not Statistically Meaningful<F71>
Note: The statistics shown above are obtained from internal management reports that
may or may not precisely agree with audited financial data.
</TABLE>
Shareholder Letter MD&A-19 January 23, 1997
<TABLE>
<CAPTION>
12/31/95
12/31/96
Portfolio Diversification % of Mkt. Val. % of Mkt. Val.
<S> <C> <C>
Cash Reserves 8.7 10.5
U.S. Treasury Securities 13.1 11.8
Corp. Bonds, Deb. & Notes 3.9 2.6
Convertible Debentures 1.9 1.0
Convertible Preferred Stocks 1.7 0.5
Common Stocks 70.7 73.6
Total 100.0 100.0
</TABLE>
<TABLE>
Graph to demonstrate the "Comparison of Change in Value of a $10,000
Investment in Bridges Investment Fund, Inc. and the Standard and Poors
500 Index"
<CAPTION>
Shareholder Letter MD&A-20 January 23, 1997
BIF S&P 500
Year
<S> <C> <C>
1986 10,000.00 10,000.00
1987 10,077.68 10,444.59
1988 10,625.15 12,160.00
1989 13,011.99 15,993.90
1990 13,248.25 15,489.04
1991 16,032.61 20,213.73
1992 16,999.57 21,751.36
1993 18,069.28 23,942.47
1994 18,123.76 24,235.44
1995 23,734.52 33,343.96
1996 28,186.50 41,001.27
<FN>
(Amounts in table above represent year-end market values, and are plotted as
data points on a line graph in the actual annual shareholder report.)
<FN>
Average Annual Total Return for Bridges Investment Fund, Inc.:
1 Year 17.92%
5 Year 11.93%
10 Year 10.82%
<FN>
Past Performance is not predictive of future performance.
Shareholder Letter MD&A-21 January 23, 1997
INFORMATION SUPPORTING AND SETTING QUALIFICATIONS
FOR INVESTMENT RETURNS
Assumptions
- -----------
1.The initial investment was made at the public offering price last
calculated on the business day before the first day of the first fiscal
year.
2.The subsequent account values are based on the net asset values of the
Fund last calculated on the last business day of the first and each
subsequent fiscal year.
3.The calculation for the final account value assumes the account was closed
and the redemption was at the price last calculated on the last business
day of the most recent fiscal year.
4.All dividends and capital gains distributions by the Fund were reinvested
at the price on the reinvestment dates. The dividend for the Standard &
Poor's 500 Composite Index for the previous quarter was invested at the
month-end price closest to the reinvestment date for the Fund.
5.Reinvestment fees for dividend and capital gains distributions were
deducted before reinvestment in shares of the Fund. The Standard & Poor's
500 Composite Index was not charged with any brokerage commissions,
reinvestment fees, or operating expenses.
Appropriate Index
- -----------------
The Fund is to select an "appropriate broad-based securities market index"
that is administered by an organization that is not an affiliated person of the
Shareholder Letter MD&A-22 January 23, 1997
Fund or its investment adviser. The securities index chosen must be adjusted to
reflect reinvestment of dividends on securities in the index, but not the
expenses of the Fund.
Use of Additional Indexes
- -------------------------
In addition to the required comparison to a broadly-based index, mutual
fund registrants with the Securities and Exchange Commission are urged to
compare their performances to other more narrowly-based indexes that reflect the
market sectors in which they invest. Management has investigated commercial
paper, Treasury Bill, Treasury Note, Treasury Bond, and Corporate Bond indexes
to cover those portfolio segments not invested in the common stock market. Some
problems with comparable information have been encountered. Therefore, at this
point in time, the Fund management has decided not to present the comparisons to
the more narrow indices.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the
Thirty-Fourth Annual Shareholder Report 1996 and is qualified in its entirety by
reference to such report.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 18,891,451
<INVESTMENTS-AT-VALUE> 29,231,244
<RECEIVABLES> 134,617
<ASSETS-OTHER> 117,812
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 29,483,673
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 234,185
<TOTAL-LIABILITIES> 234,185
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 18,907,873
<SHARES-COMMON-STOCK> 1,190,831
<SHARES-COMMON-PRIOR> 1,116,620
<ACCUMULATED-NII-CURRENT> 4,732
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (2,910)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 10,339,793
<NET-ASSETS> 29,249,488
<DIVIDEND-INCOME> 413,094
<INTEREST-INCOME> 463,382
<OTHER-INCOME> 0
<EXPENSES-NET> 237,825
<NET-INVESTMENT-INCOME> 639,251
<REALIZED-GAINS-CURRENT> 310,925
<APPREC-INCREASE-CURRENT> 3,502,945
<NET-CHANGE-FROM-OPS> 4,453,121
<EQUALIZATION> 4,640
<DISTRIBUTIONS-OF-INCOME> 639,251
<DISTRIBUTIONS-OF-GAINS> 304,773
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 123,285
<NUMBER-OF-SHARES-REDEEMED> 49,074
<SHARES-REINVESTED> 34,880
<NET-CHANGE-IN-ASSETS> 4,453,121
<ACCUMULATED-NII-PRIOR> 4,199
<ACCUMULATED-GAINS-PRIOR> (9,062)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 135,586
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 237,225
<AVERAGE-NET-ASSETS> 27,117,305
<PER-SHARE-NAV-BEGIN> 21.54
<PER-SHARE-NII> 0.55
<PER-SHARE-GAIN-APPREC> 3.28
<PER-SHARE-DIVIDEND> 0.55
<PER-SHARE-DISTRIBUTIONS> 0.81
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 24.56
<EXPENSE-RATIO> 0.87
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
