BRIDGES INVESTMENT FUND, INC.
THIRD QUARTER
1998
CONTENTS OF REPORT
Pages 1 - 3 Shareholder Letter
Exhibit 1 Portfolio Transactions from July 1, 1998,
through September 30, 1998
Exhibit 2 Quarter-to-Quarter Changes in Financial Data
Pages F1-F13 Unaudited Financial Statements for the
Nine Months Ended September 30, 1998
<PAGE>
This report has been prepared for the information of the shareholders
of Bridges Investment Fund, Inc. and is under no circumstances to be
construed as an offering of shares of the Fund. Such offering is made only
by Prospectus, a copy of which may be obtained by inquiry to the Fund's
office.
<PAGE>
BRIDGES INVESTMENT FUND, INC.
8401 West Dodge Road
Omaha, Nebraska 68114
Telephone 402-397-4700
Facsimile 402-397-8617
Directors
Frederick N. Backer
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 - Chairman and
Chief Executive Officer
Edson L. Bridges III - 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
<PAGE>
BRIDGES INVESTMENT FUND, INC.
8401 WEST DODGE ROAD
OMAHA, NEBRASKA 68114
OCTOBER 26, 1998
DEAR SHAREHOLDER:
THIRD QUARTER AND NINE MONTHS, 1998 REVIEW
THE NET ASSET VALUE PER SHARE OF THE FUND WAS $30.90 ON SEPTEMBER 30, 1998.
THIS PRICE REPRESENTED THE THIRD HIGHEST NET ASSET VALUE FOR ANY CALENDAR
QUARTER REPORTING DATE. THE $30.90 NET ASSET VALUE PER SHARE WAS 8.0% BELOW THE
$33.58 PRICE FOR JUNE 30, 1998, AND IT WAS 6.5% UP FROM THE YEAR-END, 1997
VALUATION OF $29.02 PER SHARE. THE CASH AMOUNTS DISTRIBUTED FROM 1998
INVESTMENT INCOME DURING THE FIRST NINE MONTHS OF THE YEAR WERE $.225 PER SHARE.
THUS, THE TOTAL VALUE IMPROVEMENT THAT DEVELOPED FROM THE JANUARY 1 THROUGH
SEPTEMBER 30, 1998 OPERATIONS FOR THE FUND WAS $2.105 PER SHARE. THIS NUMBER
WAS DERIVED BY COMBINING $1.88 IN PRICE APPRECIATION ($30.90 LESS $29.02 EQUALS
$1.88) WITH $.225 IN DIVIDEND INCOME DISTRIBUTIONS. WHEN COMPARED TO THE
BEGINNING NET ASSET VALUE OF $29.02, THIS $2.105 PER SHARE INCREASE IN VALUE
RESULTED IN A 7.25% TOTAL RETURN FOR THE FUND FOR THE FIRST NINE MONTHS OF 1998.
THE UPWARD TREND FOR COMMON STOCKS DURING 1998 WAS INTERRUPTED BY
SIGNIFICANT SELLOFFS NEAR THE END OF AUGUST, 1998 AND SEPTEMBER, 1998 THAT WERE
RELATED TO FEARS STEMMING FROM ECONOMIC AND FINANCIAL PROBLEMS IN ASIA, RUSSIA
AND LATIN AMERICA. OVERVALUATIONS AND DISAPPOINTING EARNINGS REPORTS WERE ALSO
FACTORS IN THE INVESTOR DECISIONS TO SELL STOCKS AFTER MID-JULY, 1998.
THE NET ASSETS OF THE FUND WERE $40,423,166 ON SEPTEMBER 30, 1998. NET
ASSETS DECLINED $3,177,598 FROM THE JUNE 30, 1998 TOTAL OF $43,600,764, A
DECREASE OF 7.3% FOR THE THIRD QUARTER OF 1998. FOR THE FIRST NINE MONTHS OF
1998, NET ASSETS WERE UP $3,775,631, OR 10.3% FROM THE $36,647,535 LEVEL AT
DECEMBER 31, 1997. ON A TRAILING TWELVE MONTHS BASIS (SEPTEMBER 30, 1997 TO
SEPTEMBER 30, 1998), NET ASSETS GREW FROM $36,500,979 TO $40,423,166, A 10.8%
IMPROVEMENT.
NET INVESTMENT INCOME WAS $442,586 FOR THE FIRST NINE MONTHS OF 1998,
COMPARED TO $486,381 FOR THE SAME PERIOD IN 1997. NET REALIZED GAINS ON
INVESTMENTS FOR THE FIRST NINE MONTHS OF 1998 WERE $2,592,856, COMPARED TO
$222,141 FOR THE SAME TIME FRAME IN 1997. THERE WAS A NET DECREASE IN
UNREALIZED APPRECIATION ON INVESTMENTS OF $390,200 FOR THE FIRST NINE MONTHS OF
1998, COMPARED TO A $5,500,602 NET INCREASE IN UNREALIZED APPRECIATION ON
INVESTMENTS ACHIEVED DURING THE FIRST THREE CALENDAR QUARTERS OF 1997.
PLEASE REFER TO EXHIBITS 1 AND 2 AND PAGES F-1 THROUGH F-13 FOR SPECIFIC
DETAILS COVERING THE FUND'S RECENT PORTFOLIO TRANSACTIONS; THE HISTORICAL DATA
WITH RESPECT TO DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS; AND OTHER FINANCIAL
STATEMENT INFORMATION AS OF SEPTEMBER 30, 1998.
DIVIDEND
ON OCTOBER 13, 1998, THE BOARD OF DIRECTORS DECLARED AN $.11 PER SHARE
DIVIDEND ON THE SHARES OF CAPITAL STOCK OUTSTANDING ON THE OCTOBER 13, 1998
RECORD DATE WITH THIS INCOME DISTRIBUTION AMOUNT TO BE PAYABLE ON OR ABOUT
OCTOBER 26, 1998. THIS DIVIDEND IS PAYABLE FROM THE NET INVESTMENT INCOME
EARNED DURING THE JULY _ SEPTEMBER, 1998 QUARTER.
<PAGE>
Shareholder Letter 2 October 26, 1998
OFFICER RESIGNATION
DOUGLAS P. PERSON, VICE PRESIDENT OF THE FUND, RESIGNED HIS POSITION
EFFECTIVE JULY 31, 1998. MR. PERSON ACCEPTED AN INVESTMENT MANAGEMENT POSITION
UNDER THE DIRECTION OF MR. VINOD GUPTA, FOUNDER AND CHAIRMAN OF INFOUSA, AN
OMAHA-BASED MARKET RESEARCH AND DATA BASED INFORMATION SERVICE FOR BUSINESS
DEVELOPMENT AND PLANNING.
RESIGNATION OF AUDITOR
ON AUGUST 21, 1998, THE FUND RECEIVED A LETTER OF RESIGNATION AS AUDITOR
FROM THE PARTNER IN CHARGE OF THE RELATIONSHIP AT ARTHUR ANDERSEN LLP. THIS
ACTION WAS TAKEN TO AVOID A CONFLICT OF INTEREST UNDER AICPA CODE OF ETHICS AND
SEC REGULATIONS WHEN MR. DANIEL F. KORALESKI WAS MADE A PARTNER OF ARTHUR
ANDERSEN LLP ON SEPTEMBER 1, 1998. MR. KORALESKI IS THE BROTHER OF MR. JOHN J.
KORALESKI, A DIRECTOR OF THE FUND.
MR. DANIEL F. KORALESKI HAD BEEN AN EMPLOYEE OF ARTHUR ANDERSEN LLP IN THE
CHICAGO AREA DURING THE TIME FRAME THAT MR. JOHN J. KORALESKI HAS BEEN A
DIRECTOR OF THE FUND. THE CODE OF ETHICS AND REGULATIONS WERE SUCH THAT A 500
MILE SEPARATION WAS SUFFICIENT TO AVOID A POTENTIAL CONFLICT OF INTEREST. MR.
DANIEL F. KORALESKI WAS RECENTLY TRANSFERRED TO THE OMAHA OFFICE OF ARTHUR
ANDERSEN LLP AND HIS ELEVATION TO PARTNER STATUS BROUGHT THE POSSIBILITY OF A
CONFLICT OF INTEREST INTO QUESTION EVEN THOUGH NEITHER DANIEL OR JOHN HAVE EVER
DISCUSSED THE BUSINESS MATTERS OF THIS FUND.
ARTHUR ANDERSEN LLP WILL CONTINUE TO RECEIVE THE AGREED COMPENSATION FROM
THE FUND FOR THE BALANCE OF 1998 TO REFLECT THE SERVICES PERFORMED DURING 1998
THAT ARE ARRANGED FOR UNDER A FLAT FEE.
APPOINTMENT OF A NEW AUDITOR
ON OCTOBER 13, 1998, A MAJORITY OF THE NON-INTERESTED PERSON MEMBERS OF THE
BOARD OF DIRECTORS OF THE FUND VOTED TO RETAIN THE AUDIT SERVICES OF KPMG PEAT
MARWICK LLP TO CONDUCT THE AUDIT OF THE FUND'S BOOKS OF ACCOUNT AND RECORDS FOR
THE CALENDAR YEAR ENDING DECEMBER 31, 1998 AND TO PREPARE FEDERAL AND STATE TAX
RETURNS FOR THE SAME YEAR. THIS ACTION BY THE BOARD OF DIRECTORS WILL BE A
MATTER TO BE AFFIRMED AND RATIFIED AT THE FUND'S ANNUAL MEETING TO BE HELD ON
FEBRUARY 16, 1999.
TRANSITION
REPRESENTATIVES OF ARTHUR ANDERSEN LLP WILL BE AVAILABLE TO THE FUND AND TO
REPRESENTATIVES OF KPMG PEAT MARWICK LLP TO ASSIST IN A SMOOTH TRANSFER OF AUDIT
RESPONSIBILITIES AND FOR BACKGROUND AS NEEDED. ARTHUR ANDERSEN LLP WILL THEN
HAVE CONCLUDED 35 YEARS OF SERVICE TO OUR SHAREHOLDERS. IT IS THE JUDGMENT OF
THE MANAGEMENT THAT REPRESENTATIVES OF ARTHUR ANDERSEN LLP HAVE CONDUCTED THEIR
SERVICES IN A HIGHLY PROFESSIONAL MANNER, AND THAT THE FUND'S MANAGEMENT HAS
BENEFITED GREATLY FROM THE LONG TERM RELATIONSHIP. THROUGH THIS LETTER, WE ARE
EXPRESSING THE APPRECIATION OF OUR SHAREHOLDERS FOR THE LONG AND SUCCESSFUL
PERIOD OF SERVICE BY ARTHUR ANDERSEN LLP.
<PAGE>
Shareholder Letter 3 October 26, 1998
THIRD QUARTER CHANGES IN PORTFOLIO AND OTHER COMMENTS
DURING THE QUARTER ENDING SEPTEMBER 30, 1998, WE MADE A NUMBER OF
SIGNIFICANT CHANGES IN THE PORTFOLIO AS THE MARKET'S INCREASED VOLATILITY
PRESENTED OPPORTUNITIES TO REPOSITION THE PORTFOLIO. NINE POSITIONS WERE
COMPLETELY ELIMINATED EITHER BECAUSE THE HOLDING HAD REACHED WHAT WE WOULD
CONSIDER TO BE FULL VALUATION OR BECAUSE THE MARKET'S DECLINE CREATED MORE
FAVORABLE OPPORTUNITIES IN OTHER STOCKS. STOCKS ELIMINATED COMPLETELY IN THE
PORTFOLIO DURING THE QUARTER INCLUDED ACCUSTAFF, CALENERGY, CATERPILLAR, CENDANT
FDX, GTE, HEALTHSOUTH, SCHLUMBERGER, AND SUN MICROSYSTEMS.
NEW EQUITY POSITIONS WERE INITIATED IN CHASE MANHATTAN, COCA-COLA,
INTERPUBLIC GROUP, NOKIA, AND LEVEL 3. THESE PURCHASES WERE LINKED BY THE
COMMON THEME OF BEING COMPANIES THAT GENERALLY HAVE BETTER GROWTH PROSPECTS THAN
THE AFOREMENTIONED STOCK SALES AND HAD EXPERIENCED PRICE DECLINES FROM THEIR 52-
WEEK HIGHS WHICH WERE SIGNIFICANTLY GREATER THAN THE MARKET AS A WHOLE, THEREBY
PROVIDING ATTRACTIVE VALUATION ENTRY POINTS.
WE ALSO ADDED TO A NUMBER OF POSITIONS ALREADY HELD IN THE PORTFOLIO,
INCLUDING AIRTOUCH, AIG, CAPITAL ONE, EAGLE USA, QUINTILES TRANSNATIONAL,
TRANSACTION SYSTEMS ARCHITECTS, AND WEST TELESERVICES.
THE OUTLOOK
WE ANTICIPATE THAT THE INCREASED VOLATILITY RECENTLY EXPERIENCED IN THE
STOCK MARKET WILL PERSIST FOR A PERIOD OF TIME GIVEN THE HIGH LEVEL OF
UNCERTAINTY ON THE PART OF INVESTORS WITH RESPECT TO THE RESOLUTION OF THE KEY
ISSUES FACING THE MARKET AT PRESENT. THESE ISSUES INCLUDE THE DURATION AND
DEPTH OF THE ECONOMIC PROBLEMS FACED BY ASIA, THE REPERCUSSIONS OF THE FINANCIAL
PROBLEMS OF A NUMBER OF HEDGE FUNDS AND THE FINANCIAL INSTITUTIONS THAT HAVE
LENT THEM MONEY, AND THE TIMING OF THE NEXT ECONOMIC RECESSION.
VALUATION, WHILE IMPROVED DUE TO THE GENERAL DECLINE IN STOCK PRICES SINCE
THE MID-JULY HIGHS, STILL REMAINS RELATIVELY HIGH BY LONG-TERM HISTORIC
STANDARDS, PARTICULARLY FOR THE LARGE CAP GROWTH SECTOR OF THE MARKET. HOWEVER,
ANY COMBINATION OF LOWER STOCK PRICES, LOWER INTEREST RATES, AND IMPROVED
CORPORATE EARNINGS OVER THE NEXT SEVERAL QUARTERS WOULD SERVE TO ENHANCE THE
INTERMEDIATE-TERM APPRECIATION POTENTIAL FOR THE MARKET AS A WHOLE AND MANY
INDIVIDUAL SECURITIES.
WE WILL CONTINUE TO TAKE A STOCK-SPECIFIC APPROACH TO THE EQUITY MARKET,
LOOKING TO ADD TO POSITIONS IN COMPANIES WITH ATTRACTIVE VALUATIONS AND ABOVE-
AVERAGE LONG-TERM EARNINGS GROWTH PROSPECTS DURING THE PERIODS OF MARKET
WEAKNESS WE BELIEVE WILL MATERIALIZE PERIODICALLY OVER THE NEXT SEVERAL
QUARTERS. OUR LONGER-TERM OUTLOOK FOR THE EQUITY MARKET IN GENERAL AND THE
COMPANIES IN OUR PORTFOLIO IN PARTICULAR REMAINS CONSTRUCTIVE.
MANY THANKS FOR YOUR CONTINUED INVESTMENT IN OUR FUND.
SINCERELY YOURS,
EDSON L. BRIDGES II
CHAIRMAN
EDSON L. BRIDGES III
PRESIDENT
ELBII:ELBIII:ELC
<PAGE>
<PAGE>
<TABLE>
EXHIBIT 1
BRIDGES INVESTMENT FUND, INC.
PORTFOLIO TRANSACTIONS
DURING THE PERIOD FROM
JULY 1, 1998, THROUGH SEPTEMBER 30, 1998
<CAPTION>
Bought or Held After
Received Transaction
Securities $1,000 Par $1,000 Par
Common Stocks Unless Value (M) Value (M)
Described Otherwise or Shares or Shares
<S> <C> <C>
AirTouch Communications 1,000 8,000
(1)<F1> American International Group 1,000 2,500
Capital One Financial 500 7,500
Chase Manhattan Corp. 1,000 1,000
(2)<F2> Cisco Systems 2,500 7,500
(3)<F3> Clear Channel Communications 5,500 8,000
Coca-Cola Company 1,000 1,000
(4)<F4> Dell Computer 3,000 6,000
(5)<F5> Disney, Walt Co. 14,000 21,000
Eagle USA Airfreight 2,000 25,000
(6)<F6> Home Depot, Inc. 9,000 17,000
Interpublic Group Cos. 2,000 2,000
Level 3 Communications 7,000 7,000
Level 3 Communications
9.125% due May 1, 2008 150M 150M
Nokia Corp. Sponsored ADR 1,500 1,500
Quintiles Transnational Corp. 1,000 4,000
(7)<F7> Steris Corp. 3,000 6,000
Transaction Systems Architects 2,000 15,000
Class A
West Teleservices 7,000 50,000
Various Issues of Commercial 31,580M 4,015M
Paper Notes Purchased during
3rd Qtr., 1998
<F1>(1) - Received 750 shares in a 3-for-2 stock split on July 31, 1998.
<F2>(2) - Received 2,500 shares in a 3-for-2 stock split on September 16, 1998.
<F3>(3) - Received 2,500 shares in a 2-for-1 stock split on July 29, 1998.
<F4>(4) - Received 3,000 shares in a 2-for-1 stock split on September 8, 1998.
<F5>(5) - Received 14,000 shares in a 3-for-1 stock split on July 10, 1998.
<F6>(6) - Received 8,000 shares in a 2-for-1 stock split on July 6, 1998.
<F7>(7) - Received 3,000 shares in a 2-for-1 stock split on August 25, 1998.
<PAGE>
-2-
BRIDGES INVESTMENT FUND, INC.
PORTFOLIO TRANSACTIONS
DURING THE PERIOD FROM
JULY 1, 1998 THROUGH SEPTEMBER 30, 1998
(Continued)
<CAPTION>
Sold or Held After
Exchanged Transacion
Securities $1,000 Par $1,000 Par
Common Stocks Unless Value (M) Value (M)
Described Otherwise or Shares or Shares
<S> <C> <C>
AccuStaff 7,000 --
America Online, Inc. 1,000 2,000
Bristol Myers Squibb 1,000 4,000
CalEnergy, Inc. 8,000 --
Capital One Financial 1,000 7,500
Caterpillar, Inc. 6,000 --
Cendant Corp. 7.50% Conv. Pfd. 3,000 --
Series I $3.75
Dayton Hudson Corp. 3,000 17,000
Dell Computer 2,000 6,000
FDX Corp. 6,000 --
GTE Corporation 10,000 --
General Electric Co. 2,000 8,000
HEALTHSOUTH Corp. 10,000 --
Hewlett Packard 3,000 7,000
Merck & Co. 1,000 9,000
Microsoft Corp. 3,000 12,000
Schlumberger 2,000 --
SunMicrosystems, Inc. 4,000 --
Various Issues of Commercial 29,080M --
Paper Notes maturing during
3rd Qtr., 1998
</TABLE>
<PAGE>
<TABLE>
Exhibit 2
BRIDGES INVESTMENT FUND, INC.
HISTORICAL FINANCIAL INFORMATION
<CAPTION>
Net Shares Net Asset Dividend/ Capital
Valuation Assets Outstanding Value/Share Share Gains/Share
Date
<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 -
<PAGE>
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 -
<PAGE>
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
03-31-97 30,255,441 1,210,627 24.99 - -
06-30-97 34,567,391 1,229,643 28.11 .1325 -
09-30-97 36,500,979 1,242,731 29.37 .135 -
12-31-97 36,647,535 1,262,818 29.02 .24 0.30571
03-31-98 41,413,655 1,283,322 32.27 - -
06-30-98 43,600,764 1,298,420 33.58 .135 -
09-30-98 40,423,166 1,308,173 30.90 .09 -
</TABLE>
<PAGE>
<TABLE>
F-1
BRIDGES INVESTMENT FUND, INC.
SCHEDULE OF PORTFOLIO INVESTMENTS
SEPTEMBER 30, 1998
(Unaudited)
<CAPTION>
Number Market
of Shares Value
Title of Security
<S> <C> <C>
COMMON STOCKS - (76.4%)
Advertising - 1.2%
Interpublic Group of Companies, Inc. (The) 2,000 $ 107,876
Outdoor Systems, Inc.*<FN> 19,050 371,475
$ 479,351
Aircraft - Manufacturing - 1.0%
The Boeing Company 12,000 $ 411,756
Amusements - Recreation - Sporting Goods - 0.5%
Nike, Inc. 6,000 $ 220,878
Banking and Finance - 5.6%
Chase Manhattan Corporation (The) 1,000 $ 43,125
First National of Nebraska, Inc. 230 839,500
MBNA Corporation 10,000 286,250
Norwest Corporation 12,000 432,000
SLM Holding Corporation 7,000 227,066
State Street Corporation 8,000 436,504
$ 2,264,445
Beverages - Soft Drinks - 1.9%
Coca-Cola Company (The) 1,000 $ 57,625
PepsiCo, Inc. 24,000 706,512
$ 764,137
Chemicals - 4.0%
The Dow Chemical Company 7,000 $ 598,066
Du Pont (E.I.) De Nemours & Company 8,000 450,000
Monsanto Company 10,000 562,500
$ 1,610,566
Communications _ Radio and Television - 0.9%
Clear Channel Communications, Inc.*<FN> 8,000 $ 380,000
Computers - Hardware and Software - 10.9%
America Online, Inc.*<FN> 2,000 $ 223,250
Cisco Systems, Inc.*<FN> 7,500 463,597
Compaq Computer Corporation 5,000 158,125
Dell Computer Corporation *<FN> 6,000 394,500
EMC Corporation*<FN> 5,000 286,875
HNC Software, Inc.*<FN> 10,000 406,250
Hewlett-Packard Co. 7,000 370,566
Microsoft Corporation*<FN> 12,000 1,320,756
Network Associates, Inc. *<FN> 4,500 159,750
SunGard Data Systems, Inc. *<FN> 3,200 100,800
Transaction Systems Architects, Inc.*<FN> 15,000 532,500
$ 4,416,969
<FN>*Nonincome-producing security
<PAGE>
F-2
BRIDGES INVESTMENT FUND, INC.
SCHEDULE OF PORTFOLIO INVESTMENTS
(Continued)
SEPTEMBER 30, 1998
(Unaudited)
<CAPTION>
Number Market
of Shares Value
Title of Security
<S> <C> <C>
COMMON STOCKS (Continued)
Drugs - Medicines _ Cosmetics - 9.4%
Abbott Laboratories 16,000 $ 695,008
Bristol-Myers Squibb Co. 4,000 415,500
Elan Corporation PLC ADR*<FN> 10,000 720,630
Johnson & Johnson 10,000 782,500
Merck & Co., Inc. 9,000 1,166,067
$ 3,779,705
Electrical Equipment and Supplies - 1.6%
General Electric Co. 8,000 $ 636,504
Electronics - 2.3%
Intel Corporation 8,000 $ 686,000
Solectron Corporation *<FN> 5,000 240,625
$ 926,625
Finance - Real Estate - 3.7%
Freddie Mac 30,000 $ 1,488,750
Finance - Services - 1.9%
Capital One Financial Corporation 7,500 $ 772,973
Food - Miscellaneous Products - 2.3%
Philip Morris Companies, Inc. 20,000 $ 925,000
Healthcare - Commercial Services - 0.4%
Quintiles Transnational Corp.*<FN> 4,000 $ 175,000
Insurance - Mortgage _ 0.5%
MGIC Investment Corporation 5,000 $ 184,375
Insurance - Multiline - 1.5%
American International Group, Inc. 2,500 $ 195,937
General Re Corp. 2,000 406,000
$ 601,937
Insurance - Municipal Bond - 1.3%
MBIA, Inc. 10,000 $ 536,880
Linen Supply - Uniform Rental & Sales - 0.5%
Cintas Corporation 4,000 $ 200,500
<FN>*Nonincome-producing security
<PAGE>
F-3
BRIDGES INVESTMENT FUND, INC.
SCHEDULE OF PORTFOLIO INVESTMENTS
(Continued)
SEPTEMBER 30, 1998
(Unaudited)
<CAPTION>
Number Market
of Shares Value
Title of Security
<S> <C> <C>
COMMON STOCKS (Continued)
Medical - Services _ 0.4%
Steris Corporation *<FN> 6,000 $ 169,500
Metal Products - Miscellaneous - 0.6%
Nucor Corporation 5,500 $ 223,438
Motion Pictures and Theatres - 1.3%
The Walt Disney Company 21,000 $ 532,875
Petroleum Producing - 6.3%
Amoco Corporation 10,000 $ 538,750
Atlantic Richfield Company 4,000 283,752
Chevron Corporation 10,000 840,630
Exxon Corporation 8,000 565,000
Mobil Corporation 4,000 303,752
$ 2,531,884
Publishing - Newspapers - 1.1%
Gannett Co., Inc. 8,000 $ 428,504
Publishing - Electronic - 0.6%
Reuters Group PLC, ADR Sponsored 5,199 $ 258,650
Retail Stores - Apparel and Clothing - 2.6%
Gap, Inc. 20,000 $ 1,055,000
Retail Stores - Building Materials and Home
Improvement _ 1.7%
The Home Depot, Inc. 17,000 $ 671,500
Retail Stores - Department - 1.5%
Dayton Hudson Corporation 17,000 $ 607,750
Retail Stores - Variety - 0.7%
Albertson's Inc. 5,000 $ 270,625
Schools - Educational Services - 0.4%
Sylvan Learning Systems, Inc. *<FN> 7,500 $ 175,313
<FN>*Nonincome-producing security
<PAGE>
F-4
BRIDGES INVESTMENT FUND, INC.
SCHEDULE OF PORTFOLIO INVESTMENTS
(Continued)
SEPTEMBER 30, 1998
(Unaudited)
<CAPTION>
Number Market
Title of Security of Shares Value
<S> <C> <C>
COMMON STOCKS (Continued)
Telecommunications - 5.3%
AirTouch Communications, Inc.*<FN> 8,000 $ 456,000
Level 3 Communications 7,000 223,566
MCI WorldCom, Inc.*<FN> 13,000 635,375
Sprint Corporation 5,000 360,000
West Teleservices Corporation*<FN> 50,000 481,250
$ 2,156,191
Telecommunications _ Equipment _ 1.2%
Ericsson (L.M.) Telephone SP ADR 20,000 $ 367,500
Nokia Corporation _ Sponsored ADR A 1,500 117,375
$ 484,875
Transportation _ Airfreight _ 0.9%
Eagle USA Airfreight, Inc. *<FN> 25,000 $ 350,000
Transportation - Railroads - 0.4%
Union Pacific Corporation 4,000 $ 170,500
TOTAL COMMON STOCKS (Cost - $15,895,395) $30,862,956
PREFERRED STOCKS (2.8%)
Banking and Finance - 1.6%
CFC Capital Trust 9.375% Preferred, Series B 5,000 $ 128,125
CFB Capital II 8.20% Cumulative Preferred 5,000 126,250
Harris Preferred Capital Corp., 10,000 253,130
7.375%, Series A
Silicon Valley Bancshares Capital 5,000 120,000
8.25% Preferred Series I
$ 627,505
Telecommunications - 0.6%
AirTouch Communications, Inc. 4.25% Series C 3,000 $ 244,500
Convertible Preferred
Utilities _ Electric _ 0.6%
Tennessee Valley Authority 6.75% 10,000 $ 260,630
Variable Preferred Series D
Total Preferred Stocks (Cost - $1,012,925) $ 1,132,635
Total Stocks (Cost - $16,908,320) $31,995,591
<FN>*Nonincome-producing security
<PAGE>
F-5
BRIDGES INVESTMENT FUND, INC.
SCHEDULE OF PORTFOLIO INVESTMENTS
(Continued)
SEPTEMBER 30, 1998
(Unaudited)
<CAPTION>
Number of
Shares or
Principal Market
Title of Security Amount Value
<S> <C> <C>
DEBT SECURITIES (20.4%)
Energy - Alternate Sources - 0.5%
CalEnergy Co., Inc., 7.63% Notes
due October 15, 2007 $200,000 $ 208,860
Food - Miscellaneous Products - 0.2%
Super Valu Stores, Inc., 8.875%
Promissory Notes, due June 15, 1999 $100,000 $ 102,32
Household Appliances and Utensils - 0.3%
Maytag Corp., 9.75% Notes,
due May 15, 2002 $100,000 $ 115,290
Office Equipment and Supplies - 0.3%
Xerox Corporation, 9.750% Notes
due March 15, 2000 $100,000 $ 106,790
Retail Stores - Department - 0.8%
Dillard Department Stores, Inc., 7.850%
Debentures, due October 1, 2012 $150,000 $ 177,435
Sears Roebuck & Co., 9.375% Debentures
due November 1, 2011 100,000 130,646
$ 308,081
Telecommunications _ 0.3%
Level 3 Communications, Inc., 9.125% Senior $150,000 $ 141,750
Notes due May 1, 2008
U.S. Government _ 8.1%
U.S. Treasury, 9.125% Notes,
due May 15, 1999 $200,000 $ 205,344
U.S. Treasury, 8.750% Notes,
due August 15, 2000 200,000 215,594
U.S. Treasury, 8.000% Notes,
due May 15, 2001 200,000 217,750
U.S. Treasury, 7.500% Notes,
due May 15, 2002 200,000 220,625
U.S. Treasury, 10.750% Bonds
due February 15, 2003 200,000 249,969
U.S. Treasury, 7.250% Notes,
due May 15, 2004 300,000 342,375
<PAGE>
F-6
BRIDGES INVESTMENT FUND, INC.
SCHEDULE OF PORTFOLIO INVESTMENTS
(Continued)
SEPTEMBER 30, 1998
(Unaudited)
<CAPTION>
Principal Market
Title of Security Amount Value
<S> <C> <C>
DEBT SECURITIES (Continued)
U.S. Treasury, 7.500% Notes,
due February 15, 2005 $300,000 $ 351,282
U.S. Treasury, 9.375% Bonds,
due February 15, 2006 200,000 261,125
U.S. Treasury, 7.625% Bonds,
due February 15, 2007 300,000 328,687
U.S. Treasury, 8.750% Bonds,
due November 15, 2008 200,000 238,125
U.S. Treasury, 9.125% Bonds,
due May 15, 2009 200,000 245,156
U.S. Treasury, 7.500% Bonds,
due November 15, 2016 300,000 382,453
$ 3,258,485
Commercial Paper - Short Term _ 9.9%
American Express Credit Corporation
Commercial Paper Note 5.38%
due October 2, 1998 $1,880,000 $ 1,880,000
General Electric Credit Corporation
Commercial Paper Note 5.20%
due October 6, 1998 1,000,000 1,000,000
Prudential Funding Corp.
Commercial Paper Note 5.22%
due October 6, 1998 1,135,000 1,135,000
$ 4,015,000
TOTAL DEBT SECURITIES (Cost - $7,937,492) $ 8,256,584
TOTAL INVESTMENTS IN SECURITIES
(Cost - $24,845,812) (99.6%) $40,252,175
CASH AND RECEIVABLES
LESS TOTAL LIABILITIES (0.4%) 170,991
NET ASSETS, September 30, 1998 (100.0%) $40,423,166
<FN>The accompanying notes to financial statements
are an integral part of this schedule.
</TABLE>
<PAGE>
F-7
<TABLE>
BRIDGES INVESTMENT FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 1998
(UNAUDITED)
<CAPTION>
ASSETS AMOUNT
<S> <C>
INVESTMENTS, AT MARKET VALUE
COMMON AND PREFERRED STOCKS (COST $16,908,320) $31,995,591
DEBT SECURITIES (COST $7,937,492) 8,256,584
TOTAL INVESTMENTS $40,252,175
CASH 99,958
RECEIVABLES
DIVIDENDS AND INTEREST 130,922
SUBSCRIPTIONS TO CAPITAL STOCK 13,403
TOTAL ASSETS $40,496,458
LIABILITIES
INVESTMENT ADVISOR, MANAGEMENT AND
SERVICE FEES $ 50,600
ACCRUED OPERATING EXPENSES 22,692
TOTAL LIABILITIES $ 73,292
NET ASSETS
CAPITAL STOCK, $1 PAR VALUE _ AUTHORIZED
3,000,000 SHARES, LESS 769,823 SHARES
REDEEMED; 2,077,996 SHARES ISSUED;
1,308,173 SHARES OUTSTANDING $ 1,308,173
PAID-IN SURPLUS -
EXCESS OVER PAR VALUE OF AMOUNTS RECEIVED
FROM SALE OF 2,077,996 SHARES, LESS
AMOUNTS PAID OUT IN REDEEMING
769,823 SHARES 20,963,134
NET CAPITAL PAID IN ON SHARES $22,271,307
ACCUMULATED NET REALIZED GAIN ON INVESTMENT
TRANSACTIONS 2,586,394
NET UNREALIZED APPRECIATION ON INVESTMENTS 15,406,363
ACCUMULATED UNDISTRIBUTED NET INVESTMENT INCOME 159,102
TOTAL NET ASSETS $40,423,166
NET ASSET VALUE PER SHARE $30.90
OFFERING PRICE PER SHARE $30.90
REDEMPTION PRICE PER SHARE $30.90
<FN>THE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
ARE AN INTEGRAL PART OF THIS STATEMENT.
</TABLE>
<PAGE>
F-8
<TABLE>
BRIDGES INVESTMENT FUND, INC.
STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
(Unaudited)
<CAPTION>
AMOUNT AMOUNT
<S> <C> <C>
INVESTMENT INCOME
Interest $297,082
Dividends 381,696
Total Investment Income $678,778
EXPENSES
MANAGEMENT FEES $ 153,027
Custodian fees 21,528
Insurance and Other Administrative Fees 17,187
Bookkeeping services 12,567
Printing and supplies 9,191
Professional services 8,175
Dividend disbursing and transfer
agent fees 8,676
Computer programming 3,750
Taxes and licenses 799
Foreign Taxes Paid 1,292
Total Expenses $ 236,192
NET INVESTMENT INCOME $ 442,586
NET REALIZED AND UNREALIZED
GAIN ON INVESTMENTS
Net realized gain on transactions in
investment securities $2,592,856
Net decrease in unrealized
appreciation of investments (390,200)
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS $2,202,656
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $2,645,242
<FN>The accompanying notes to financial statements
are an integral part of this statement.
</TABLE>
<PAGE>
F-9
<TABLE>
BRIDGES INVESTMENT FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
(UNAUDITED)
<CAPTION>
1998 1997
<S> <C> <C>
INCREASE IN NET ASSETS
OPERATIONS -
NET INVESTMENT INCOME $ 442,586 $ 486,381
NET REALIZED GAIN ON TRANSACTIONS IN
INVESTMENT SECURITIES 2,592,856 225,051
NET DECREASE IN UNREALIZED
APPRECIATION OF INVESTMENTS (390,200) 5,500,602
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $ 2,645,242 $6,212,034
NET EQUALIZATION CREDITS 1,357 2,157
DISTRIBUTIONS TO SHAREHOLDERS FROM -
NET INVESTMENT INCOME (290,078) (326,386)
NET REALIZED GAIN FROM INVESTMENT
TRANSACTIONS - -
EQUALIZATION - -
NET CAPITAL SHARE TRANSACTIONS 1,419,110 1,363,686
TOTAL INCREASE IN NET ASSETS $ 3,775,631 $7,251,491
NET ASSETS:
BEGINNING OF YEAR 36,647,535 29,249,488
END OF YEAR (INCLUDING ACCUMULATED
UNDISTRIBUTED NET INVESTMENT INCOME
OF $159,102 AND $166,884, RESPECTIVELY) $ 40,423,166 $36,500,979
<FN>THE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
ARE AN INTEGRAL PART OF THESE STATEMENTS.
</TABLE>
<PAGE>
<PAGE>
F-10
BRIDGES INVESTMENT FUND, INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1998
(UNAUDITED)
(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>
1998 1997 NET CHANGE
<S> <C> <C> <C>
NET UNREALIZED APPRECIATION
(DEPRECIATION):
AGGREGATE GROSS UNREALIZED
APPRECIATION
ON SECURITIES $16,198,740 $16,077,365
AGGREGATE GROSS UNREALIZED
DEPRECIATION
ON SECURITIES (792,377) (236,970)
NET $15,406,363 $15,840,395 $(434,032)
</TABLE>
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.
<PAGE>
F-11
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.
<PAGE>
F-12
(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 THREE MONTHS
ENDED SEPTEMBER 30, WAS:
<TABLE>
<CAPTION>
1998 1997
<S> <C> <C>
UNITED STATES GOVERNMENT OBLIGATIONS $ -- $ --
OTHER SECURITIES 5,801,152 4,180,769
TOTAL COST $5,801,152 $4,180,769
</TABLE>
NET PROCEEDS FROM SALES OF LONG-TERM INVESTMENTS DURING THE THREE
MONTHS ENDED SEPTEMBER 30, WERE:
<TABLE>
<CAPTION> 1998 1997
<S> <C> <C>
UNITED STATES GOVERNMENT OBLIGATIONS $ 200,000 $ --
OTHER SECURITIES 7,486,804 1,896,848
TOTAL NET PROCEEDS $7,686,804 $1,896,848
TOTAL COST BASIS OF
SECURITIES SOLD $5,093,948 $1,671,797
</TABLE>
(5) NET ASSET VALUE
THE NET ASSET VALUE PER SHARE REPRESENTS THE EFFECTIVE PRICE FOR ALL
SUBSCRIPTIONS AND REDEMPTIONS.
<PAGE>
F-13
(6) CAPITAL STOCK
SHARES OF CAPITAL STOCK ISSUED AND REDEEMED ARE AS FOLLOWS:
<TABLE>
<CAPTION>
1998 1997
<S> <C> <C>
SHARES SOLD 60,837 75,896
SHARES ISSUED TO SHAREHOLDERS IN
REINVESTMENT OF NET INVESTMENT
INCOME AND REALIZED GAIN FROM
SECURITY TRANSACTIONS 11,706 16,233
72,543 92,129
SHARES REDEEMED 27,188 40,229
NET INCREASE 45,355 51,900
</TABLE>
VALUE OF CAPITAL STOCK ISSUED AND REDEEMED IS AS FOLLOWS:
<TABLE>
<CAPTION>
1998 1997
<S> <C> <C>
SHARES SOLD $1,907,202 $1,982,095
SHARES ISSUED TO SHAREHOLDERS IN
REINVESTMENT OF NET INVESTMENT
INCOME AND REALIZED GAIN FROM
SECURITY TRANSACTIONS 366,608 425,686
$2,273,810 $2,407,781
SHARES REDEEMED 854,700 1,044,095
NET INCREASE $1,419,110 $1,363,686
</TABLE>
(7) DISTRIBUTION TO SHAREHOLDERS
ON OCTOBER 13, 1998 A DISTRIBUTION OF $.11 PER SHARE AGGREGATING
$144,196 WAS DECLARED TO SHAREHOLDERS OF RECORD ON OCTOBER 13, 1998, TO BE
PAYABLE ON OCTOBER 26, 1998.
(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.
<PAGE>
