BRIDGES INVESTMENT FUND, INC.
THIRTY-SIXTH
ANNUAL SHAREHOLDER REPORT
1998
CONTENTS OF REPORT
Pages 1 - 6 Shareholder Letter
Exhibit 1 Statement of Income and Expenses by
Page 7 Calendar Quarter for the Year Ended
December 31, 1998
Exhibit 2 Historical Financial Information
Pages 8 - 10
Exhibit 3 Portfolio Transactions During the Period From
Pages 11 - 12 October 1, 1998, through December 31, 1998
Exhibit 4 Reports to Stockholders of Management
Page 13 Companies
Page 14 Report of Independent Public Accountants
Pages 15 - 29 Audited Financial Statements for the
Year Ended December 31, 1998
MD&A 1 - 5 Management Discussion and Analysis
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
KPMG Peat Marwick LLP
Two Central Park Plaza
Suite 1501
Omaha, Nebraska 68102-1617
Corporate Counsel
Baird, Holm, McEachen,
Pedersen, Hamann & Strasheim
1500 Woodmen Tower
Omaha, Nebraska 68102
<PAGE>
January 25, 1999
Dear Shareholder:
President's Report
In 1998 Bridges Investment Fund had a total return of 26.87% based on a
year-end 1997 net asset value of $29.02 per share, a year-end 1998 net asset
value of $34.26 per share, net investment income of $0.44 per share during 1998,
and net capital gains of $2.11648 per share during 1998. Assuming a shareholder
owned the Fund for an entire year and reinvested dividends and capital gain
distributions on the payable dates, the compound total return for the year was
27.13%.
Total returns for the Fund over the past five years are summarized in the
table which follows:
<TABLE>
Yr. Over Yr. Returns Yr. End Asset Allocation
<CAPTION>
Salomon Bros.
7-10 Yr. % %
Year BIF S&P 500 Corp. Index Year Equities Fixed
<S> <C> <C> <C> <C> <C> <C>
1998 26.87 28.58 9.14 1998 83.4 16.6
1997 21.47 33.35 9.71 1997 85.1 14.9
1996 17.77 22.94 2.84 1996 73.6 26.4
1995 30.46 37.54 21.53 1995 70.7 29.3
1994 0.39 1.32 ( 5.53) 1994 68.8 31.2
</TABLE>
The Fund's primary investment objectives are (1) long-term capital growth
and (2) the generation of a moderate amount of investment income; as a growth
and income fund, the Fund tends to lag equity indexes such as the S&P 500 during
years of strong price appreciation, given that the portfolio's asset allocation
is rarely 100% dedicated to equities. In fact, the Fund's asset allocation has
averaged approximately 75% equities and 25% cash and fixed income over the past
five years. While the Fund's allocation to fixed income securities provides
shareholders with a higher level of current income than is typically attainable
in equity-only mutual funds, this more defensive asset allocation structure also
serves to cushion the Fund during periods of declining stock prices, just as it
acts as a drag on performance during periods of rapidly appreciating equity
values.
The lower risk profile that the Fund assumes through its use of some fixed
income securities and its objective of generating some investment income for
shareholders over time has served to extend to 21 the number of consecutive
years in which the Fund has earned a positive total return. However, given the
combination of high equity valuations, low interest rates, and the increasingly
volatile environment for the capital markets that we anticipate in 1999, it may
be difficult for this streak to be extended to a 22nd year.
The current low interest rate environment has made it especially hard to
find attractive fixed income securities that meet both our yield and quality
criteria. As such, we allowed the equity component of the Fund to rise somewhat
on balance during 1998 given our sense that the long-term potential for equity
returns was somewhat more attractive than that for fixed income, particularly in
the wake of the sharp equity market decline during the third quarter of 1998.
Over the next three-to-five years, we believe that common stocks are modestly
more attractive than bonds, although we believe the returns from both equities
and fixed income will be markedly lower than those experienced in both sectors
over the past five years.
Shareholder Letter 2 January 25, 1999
The Fund's 26.87% total return in 1998 compared favorable with the 28.58%
total return experienced by the S&P 500 during the year. Generally, the Fund
has not performed as well relative to the S&P 500 during years of strong equity
market appreciation given its allocation to fixed income securities as discussed
above. However, in 1998, the Fund's overweighting in technology, financial
services, and telecommunication sectors was beneficial. While the Fund's common
stocks in the aggregate during the year posted a 32.87% total return, returns
were not evenly distributed across sectors or individual securities. The Fund's
common stocks generated unrealized gains or stock price appreciation of
$9,561,554 during 1998; six stocks (Capital One, Freddie Mac, Gap, Home Depot,
MCI WorldCom, and Microsoft) accounted for $4,010,975 or 41.95% of those gains.
Clearly, 1998 was a year in which stock selection was extremely important in
generating strong equity market returns. The following table summarizes the
performance of the Fund's top ten common stockholdings at year-end 1998 and
provides a comparison to the top ten holdings at year-end 1997:
<TABLE>
<CAPTION>
EPS P/E
12/31/98 1998 % of Growth on
No. of Market Total % of Total 98 vs. Est.
Shares Company Value Return Equities Assets 1997 99 EPS
<S> <C> <C> <C> <C> <C> <C> <C>
30,000 Freddie Mac 1,933,125 55.01 4.8 4.0 22 22.1
30,000 Gap Inc. 1,683,750 139.01 4.2 3.5 54 38.8
10,000 Microsoft 1,386,875 111.11 3.4 2.9 36 63.8
10,000 Intel 1,185,625 71.95 2.9 2.4 - 9 29.5
8,000 Merck 1,180,000 37.75 2.9 2.4 15 31.4
10,000 Capital One 1,150,000 153.61 2.8 2.4 41 26.4
18,000 Home Depot 1,101,375 118.77 2.7 2.3 28 46.2
20,000 Philip Morris 1,070,000 13.25 2.6 2.2 9 14.7
24,000 PepsiCo. 981,000 13.89 2.4 2.0 6 30.8
13,000 MCI WorldCom 932,750 137.19 2.3 1.9 70 50.3
Total 12,604,500 31.2 26.0
Tot.BIF
Equities 40,395,318
Tot.BIF
Assets 48,437,075
<CAPTION>
P/E
12/31/97 % of on
No. of Market % of Total Est.
Shares Company Value Equities Assets 98 EPS
<S> <C> <C> <C> <C> <C>
30,000 Philip Morris 1,357,500 4.4 3.7 14.3
30,000 Freddie Mac 1,258,125 4.0 3.4 18.2
10,000 Merck 1,060,000 3.4 2.9 24.7
7,500 Microsoft 969,375 3.1 2.6 28.2
12,000 General Elec. 880,500 2.8 2.4 26.2
24,000 PepsiCo 870,000 2.8 2.4 30.9
230 First Natl.NE 851,000 2.7 2.3 13.3
22,500 Gap Inc. 797,344 2.6 2.2 19.5
10,000 Chevron 770,000 2.5 2.1 29.3
12,000 Hewlett-Pack. 748,500 2.4 2.0 18.9
Total 9,562,344 30.7 26.1
Tot.BIF
Equities 31,179,406
Tot.BIF
Assets 36,647,535
</TABLE>
Shareholder Letter 3 January 25, 1999
The wide dispersion in price performance among stocks was not limited just
to the Fund. The median price gain for stocks in the S&P 500 was 8% during 1998
versus the Index's 26.7% appreciation; 71% of S&P 500 stocks trailed the Index
by 15% or more in 1998 (i.e., had price gains of 11.7% or less during the year).
Moreover, approximately two-thirds of all publicly traded stocks in the U.S.
finished 1998 with zero or negative price appreciation.
While the six stocks noted above significantly enhanced the Fund's
performance during 1998, they obviously now carry much higher valuations at the
start of 1999, as all six stocks enjoyed price appreciation well in excess of
their earnings growth during the year. Ironically, we took profits in partial
positions of three of the six during 1998 (Capital One, Gap, and Microsoft),
sensing that valuations in the summer had reached fairly full levels. It would
have been better to have stood pat as all three stocks finished 1998 at higher
price levels than where we sold them during the year. However, going forward,
we will continue to remain vigilant with respect to the valuation levels of all
the equities we hold in the portfolio, particularly those that carry larger
percentage weightings. While 1999 may provide us with the opportunity to again
harvest some profits during periods in which valuations appear to be
unsustainably high, it is important to know that we believe all of the companies
within the equity portion of the portfolio have strong business franchises with
outstanding long-term prospects. As 1998 proved, it is difficult to time the
sales of good companies.
We anticipate that 1999 could be the most difficult year for equity
investors since 1990, given the currently high level of common stock valuations,
the level of speculation that exists in the market as evidenced by the
incredible performance of internet-related equities, particularly in the fourth
quarter of 1998, and the apparent complacency of many investors, especially in
the wake of the rapid recovery of the stock market in the aftermath of the
vicious but brief bear market which culminated in early October. Given this
background, investors should not be surprised to see equity prices marked down
anywhere from 15-40% at some point during 1999. We will endeavor to use any
significant broad market pullbacks as an opportunity to increase our positions
in those companies which we believe have the strongest business franchises and
outlooks for cash flow and earnings growth over the foreseeable future.
At this juncture, it may be appropriate to briefly review the Fund's
approach to investing in common stocks. Our belief is that over the long run,
stock price performance ultimately is fairly closely correlated with a company's
ability to generate free cash flow and grow earnings for its shareholders.
While over the past several years, stock prices have diverged widely in many
cases from underlying earnings growth, we believe that over time, the market is
a reasonably accurate measuring mechanism and that stock prices cannot grow at
rates that exceed underlying business profit growth indefinitely, even during
periods when declining interest rates have the effect of increasing the long-
term value of those businesses. Given this philosophy, the Fund's approach is
to seek to identify those companies which we believe have operating
characteristics that enable them to grow the value of their business at an
above-average rate over a reasonably long period of time. Once identified, we
seek to position capital in those companies at prices which we believe allow for
favorable long-term returns on that capital invested.
At the valuation levels that existed at year-end 1998, there are very few
companies which appear to offer long-term stock price returns that we would
consider to be outstanding or remarkable, especially if corporate earnings
during 1999 were to disappoint investors relative to current consensus
expectations and/or should interest rates rise appreciably from current levels.
We do believe, however, that a significant broad market decline during 1999
Shareholder Letter 4 January 25, 1999
would allow stock prices to decline to levels which more reasonable reflect
longer-term earnings growth prospects going forward. The timing of such a
decline and the catalyst that might trigger it are obviously very difficult to
predict in advance. Our investment approach will continue to be to know the
companies in the Fund well from both a business operations and valuation
standpoint and to view those companies as long-term investments. Fund
shareholders should view any significant decline in the net asset value of the
Fund in coming months as an opportunity to add more capital to a group of strong
businesses at more attractive valuation levels rather than being disappointed
that the net asset value of the Fund has been temporarily diminished.
Longer term, we remain most constructive with respect to the outlook for
financial asset returns and the prospects for growth in the value of the
companies in which we are invested in the Fund. We will continue to seek to own
those companies in the Fund which we believe offer the best combination of
earnings growth potential and reasonable valuation characteristics.
The text for the Management's Discussion and Analysis of the results for
1998 and the investment returns for the previous one year, five year, and ten
year periods are located immediately following page 29 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.
The Board of Directors and the officers of the Fund join me in expressing
our continuing appreciation for your investment in the shares of our Company.
Sincerely,
Edson L. Bridges III
President
ELBIII:kjs
Chairman's Message
Dear Shareholder:
This portion of the Shareholder Letter will address the regular, routine
matters regarding the operation of the Fund, the year-end 1998 dividend, tax
information, special information for IRA accounts, and requests for proxies at
our Annual Meeting. In addition, I will comment about the need for three new
directors, preparations for the year 2000, plans for marketing shares of the
Fund, and the growth in new accounts last year.
An Extraordinary Period
The investment results for the four years 1995 _ 1998 were so unusually
positive that, to me, it seemed appropriate to focus the main commentary for
this Shareholder Letter upon the investment position of the Fund and the
environment for securities. Consequently, this letter was divided into two
parts for this time. I know that you will appreciate and enjoy this approach.
Fund Operations
Please refer to Exhibits 1 through 3, the Report of Independent Public
Accountants, and pages 5 through 29 in the accompanying Audited Financial
Statements for the year ending December 31, 1998, to locate the supporting
detail and supplementary information about the Fund's operations during 1998.
Shareholder Letter 5 January 25, 1999
Dividend
On December 1, 1998, 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 1998 and from any undistributed net
investment income earlier in 1998. This dividend was made payable on January
25, 1999, from net income accrued through December 31, 1998, to shareholders of
record on the same date. The determination of the exact amount per share of
this dividend was delegated to the Chairman 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 Chairman and the Treasurer determined the ordinary income regular
dividend to be $.0925 per share and the year-end extra amount to be $.0125 per
share for a total of $.105 per share to be paid out under the dividend
resolution adopted by the Board of Directors on December 1, 1998. This payment,
in addition to the $.09 per share previously paid and declared in October, 1998,
brought the total cash distributions payable from ordinary income earned during
the Fourth Quarter of 1998 and throughout the entire year of 1998 to $.195 per
share. The $.0925 per share regular and $.0125 extra amounts determined by the
Chairman and Treasurer were confirmed and ratified by the Board of Directors at
their most recent regular meeting held on January 12, 1999.
Tax Information
A letter of explanation regarding the taxability of the dividend and
capital gains payment made by the Fund during 1998 will accompany this letter to
you. You should provide a copy of this letter dated January 25, 1999, 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 1998 for your shareholder account on or about January 31, 1999.
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, 1998. 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 1999.
Annual Meeting
The Proxy and Proxy Statement for the Thirty-Sixth Annual Meeting of the
Shareholders of the Fund, to be held on Tuesday, February 16, 1999, 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
Shareholder Letter 6 January 25, 1999
following the shareholder meeting. The results for the last Annual Meeting of
the Shareholders of the Fund were published in a letter dated April 27, 1998.
This same report appears as Exhibit 4, attached hereto, to fulfill the annual
communication requirement.
New Directors
The expansion of the Board of Directors to fourteen members from eleven has
several objectives: (1) to gather the experience and wisdom of three highly
qualified persons; (2) to begin to renew the Board with somewhat younger members
who will be knowledgeable about the Fund's affairs before more senior
individuals retire; and (3) to expand the number of non-interested persons of
the Board to six out of the fourteen positions in order to achieve greater than
40% participation from such individuals. The greater than 40% level permits the
Fund greater latitude in commencing marketing information efforts and the
creation of distribution of shares more broadly than is the case at this point
in time.
Price Quote
As of December 15, 1998, the Fund's net asset value was published in the
Wall Street Journal for the first time. You may find us in the MUTUAL FUND
QUOTATIONS, usually in about the middle of the second column on the first page
where those listings are located. This new development is the prelude to the
creation of a web site for the Fund and the qualifications of Fund's shares for
sale in states other than Nebraska. Ne deadlines have been set for the
completion of the next steps in the development of our Fund.
The Year 2000 Preparations
An extensive disclosure about the year 2000 plans was made in the
Management Discussion and Analysis section of the Annual Report for 1997, copies
of which have been made available to you at an earlier date. Considerable
progress concerning the Fund's operational readiness was made during 1998. The
centerpiece of our efforts was the new custom software that was written and
completed and tested for the transfer agency and dividend disbursing functions.
In specifics, the Fund utilizes fully year 2000 compliant computer software.
Our preparation activities for 1999 will focus on development and refinement of
contingency plans for failures from vendors for usual and customary services to
the investment manager. In addition, an assessment of the state of readiness
for the year 2000 by companies in which the Fund invests will also be underway.
New Accounts
In 1998, there were about 100 new accounts, net of closed accounts, that
were opened with the Fund. More than 40 of these new shareholders were
Education IRA entities that first became available to our investors after the
issuance of the April 27, 1998 Prospectus. The maximum annual contribution to
each account is only $500 per year, but, for young children and grandchildren,
this is an excellent vehicle for accumulating capital to support a college or
post-graduate education. The tax-free distributions may commence at age 18, but
could be delayed up to age 30. Unused balances may be transferred to other
siblings.
Sincerely,
Edson L. Bridges II
Chairman
ELBII:elc
<PAGE>
-7-
<TABLE>
Exhibit 1
BRIDGES INVESTMENT FUND, INC.
STATEMENT OF INCOME AND EXPENSES
BY CALENDAR QUARTER
FOR THE YEAR ENDED DECEMBER 31, 1998
<CAPTION>
March 31, June 30, September 30, December 31, Annual
<S> 1998 1998 1998 1998 Total
Investment Income: <C> <C> <C> <C> <C>
Interest $ 95,276 $ 91,835 $109,971 $120,809 $417,891
Dividends 163,162 106,598 111,936 96,103 477,799
Total Investment Income $258,438 $198,433 $221,907 $216,912 $895,690
Expenses:
Management fees $ 49,597 $ 52,829 $ 50,601 $ 56,911 $209,938
Custodian fees 6,885 7,358 7,285 7,916 29,444
Insurance 5,623 5,865 5,699 6,171 23,358
Bookkeeping services 4,327 4,193 4,047 4,589 17,156
Printing and supplies 4,987 2,335 1,869 2,303 11,494
Professional services 2,725 2,725 2,725 2,625 10,800
Dividend disbursing and
transfer agent fees 3,440 2,678 2,558 3,069 11,745
Computer programming 1,250 1,250 1,250 2,250 6,000
Foreign taxes paid on
dividends -- 963 328 -- 1,291
Taxes and licenses 266 267 266 266 1,065
_________ ________ _________ _________ ________
Total Expenses $ 79,100 $ 80,463 $ 76,628 $ 86,100 $322,291
NET INVESTMENT INCOME $179,338 $117,970 $145,279 $130,812 $573,399
Sources: Unaudited Quarterly Reports to the Shareholders of Bridges
Investment Fund, Inc. for the March 31, June 30, and September 30
periods. Annual total information is per the accompanying financial
statements.
</TABLE>
<PAGE>
-8-
<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 -
-9-
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 -
-10-
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 -
12-31-98 48,433,113 1,413,731 34.26 .215 2.11648
</TABLE>
<PAGE>
-11-
<TABLE>
Exhibit 3
BRIDGES INVESTMENT FUND, INC.
PORTFOLIO TRANSACTIONS
DURING THE PERIOD FROM
OCTOBER 1, 1998, THROUGH DECEMBER 31, 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>
(1)<F1> Berkshire Hathaway, Inc. Class B 210 210
Altera Corporation 2,000 2,000
American Express Company 2,000 2,000
Amgen, Inc. 3,000 3,000
CGS Systems International, Inc. 3,000 3,000
Capital One Financial 2,500 10,000
Chancellor Media Corporation 2,000 2,000
Chase Manhattan Corporation 1,000 2,000
Cisco Systems, Inc. 1,500 9,000
Clear Channel Communications 2,000 10,000
Comcast Corp. Class A Special 3,000 3,000
Compaq Computer Corporation 5,000 10,000
Dell Computer 1,500 1,500
Disney, Walt, Company 1,000 22,000
EMC Corporation 3,000 8,000
Edwards, J.D. & Company 1,000 1,000
Finova 2,000 2,000
(2)<F2> Gap, Inc. 10,000 30,000
Gulfstream Aerospace Corporation 5,000 5,000
HNC Software, Inc. 3,000 13,000
Home Depot, Inc. 1,000 18,000
Intel Corporation 2,000 10,000
Level 3 Communications Sr. Notes 100M 250M
9.125% due May 1, 2008
(3)<F3> MBNA Corporation 5,000 15,000
Merrill Lynch & Co., Inc. 3,000 3,000
Morgan Stanley Dean Witter 2,000 2,000
Discover and Company
Nokia Corporation Class A ADR 4,500 6,000
Paychex, Inc. 1,000 1,000
R & B Falcon Corporation 15,000 15,000
Solectron Corporation 1,000 6,000
(4)<F4> Sprint PCS Group, Inc. 2,500 2,500
Transaction Systems Architects, 3,000 18,000
Inc. Class A
U.S. Bancorp 2,000 2,000
Vodafone Group PLC ADR 1,000 1,000
(5)<F5> Wells Fargo 12,000 12,000
Various Issues of Commercial Paper 24,415M 2,445M
Notes Purchased during
4th Quarter, 1998
(See Footnotes on Page 12)
<PAGE>
-12-
Exhibit 3
BRIDGES INVESTMENT FUND, INC.
PORTFOLIO TRANSACTIONS
DURING THE PERIOD FROM
OCTOBER 1, 1998 THROUGH DECEMBER 31, 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>
Abbott Labs 1,000 15,000
America Online, Inc. 2,000 --
Dell Computer 6,000 1,500
Dow Chemical Company 2,000 5,000
Eagle USA Airfreight, Inc. 3,000 22,000
Ericsson, L.M. Telephone Co. 20,000 --
ADR Class B
(1)<F1> General Re Corporation 2,000 --
MGIC Investment Corporation 1,000 4,000
Merck & Co., Inc. 1,000 8,000
Microsoft Corporation 2,000 10,000
(5)<F5> Norwest Corporation 12,000 --
Nucor Corporation 1,000 4,500
SLM Holding Corporation 3,500 3,500
Sunguard Data Systems 3,200 --
West Teleservices 5,800 44,200
Various Issues of Commercial 25,985M --
Paper Notes maturing during
4th Qtr., 1998
<F1>(1) - Received 210 shares in a .105-for-1 merger with General Re Corporation
on 12-22-98.
<F2>(2) - Received 10,000 shares in a 3-for-2 stock split on 12-1-98.
<F3>(3) - Received 5,000 shares in a 3-for-2 stock split on 10-1-98.
<F4>(4) - Received 2,500 shares in a 3-for-2 spin-off from Sprint Corporation on
11-25-98.
<F5>(5) - Received 12,000 shares in a 1-for-1 merger with Norwest Corporation on
11-02-98.
</TABLE>
<PAGE>
<PAGE>
-13-
<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 17, 1998, 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 1,053,500 None 515
Edson L. Bridges II 1,053,500 None 515
Edson L. Bridges III 1,053,500 None 515
N. P. Dodge, Jr. 1,053,500 None 515
John W. Estabrook 1,053,500 None 515
Jon D. Hoffmaster 1,053,500 None 515
John J. Koraleski 1,053,500 None 515
Roger D. Kupka 1,053,500 None 515
Gary L. Petersen 1,053,500 None 515
Roy A. Smith 1,053,500 None 515
L.B. Thomas 1,053,500 None 515
</TABLE>
(3) A brief description for each matter voted upon at the meeting:
<TABLE>
<CAPTION>
For Against Abstain
Matters Voted Upon
<S> <C> <C> <C>
(a) For a proposed investment 1,053,500 None 515
advisory contract which continues
the employment of Bridges
Investment Counsel, Inc. as
investment adviser to the Fund
for the period from April 17,
1998 through April 17, 1999
(b) For the ratification of the 1,052,210 None 1,805
selection of Arthur Andersen
LLP as independent auditors
of the Fund for the Fiscal
Year ending December 31, 1998
</TABLE>
<PAGE>
-14-
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, 1998, and the related statement of operations, the statement
of changes in net assets, and the financial highlights for the year 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 audit. The
accompanying financial statement of Bridges Investment Fund, Inc. as of December
31, 1997 including the statement of changes for the year ended December 31, 1997
and the financial highlights for each of the years in the four year period then
ended were audited by other auditors whose report thereon dated January 16,
1998, expressed an unqualified opinion on those statements.
We conducted our audit 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, 1998, 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 audit provides 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, 1998, the results of its
operations, the changes in its net assets and the financial highlights for the
year then ended, in conformity with generally accepted accounting principles.
KPMG PEAT MARWICK LLP
Omaha, Nebraska
January 8, 1999
<PAGE>
-15-
<TABLE>
BRIDGES INVESTMENT FUND, INC.
SCHEDULE OF PORTFOLIO INVESTMENTS
DECEMBER 31, 1998
<CAPTION>
Number Market
of Shares Cost Value
Title of Security
<S> <C> <C> <C>
COMMON STOCKS - (83.4%)
Advertising - 1.5%
Interpublic Group of Companies, Inc. (The) 2,000 $ 106,953 $ 159,500
Outdoor Systems, Inc.*<FN> 19,050 323,364 571,500
$ 430,317 $ 731,000
Aerospace/Defense _ 0.5%
Gulfstream Aerospace Corp.*<FN> 5,000 $ 216,088 $ 266,250
Aircraft - Manufacturing - 0.8%
The Boeing Company 12,000 $ 278,135 $ 392,250
Amusements - Recreation _ Sporting Goods - 0.5%
Nike, Inc. 6,000 $ 192,422 $ 243,375
Banking and Finance - 5.3%
Chase Manhattan Corporation (The) 2,000 $ 86,650 $ 142,000
First National of Nebraska, Inc. 230 346,835 775,100
MBNA Corporation 15,000 234,825 372,187
SLM Holding Corporation 3,500 130,100 168,000
State Street Corporation 8,000 66,525 561,000
U.S. Bancorp (New) 2,000 70,160 71,000
Wells Fargo & Co. (New) 12,000 164,810 479,250
$ 1,099,905 $ 2,568,537
Beverages - Soft Drinks - 2.2%
Coca-Cola Company (The) 1,000 $ 62,049 $ 67,000
PepsiCo, Inc. 24,000 307,470 981,000
$ 369,519 $ 1,048,000
Chemicals - 2.8%
The Dow Chemical Company 5,000 $ 288,887 $ 454,688
Du Pont (E.I.) De Nemours & Company 8,000 273,935 424,500
Monsanto Company 10,000 116,190 475,000
$ 679,012 $ 1,354,188
Consumer Services _ 0.4%
Quintilies Transnational Corp.*<FN> 4,000 $ 170,687 $ 213,500
Communications - Radio and Television _ 1.1%
Clear Channel Communications, Inc.*<FN> 10,000 $ 366,954 $ 545,000
<FN>*Nonincome-producing security
-16-
BRIDGES INVESTMENT FUND, INC.
SCHEDULE OF PORTFOLIO INVESTMENTS
(Continued)
DECEMBER 31, 1998
<CAPTION>
Number Market
Title of Security of Shares Cost Value
<S> <C> <C> <C>
COMMON STOCKS (Continued)
Computers - Hardware and Software - 11.0%
Cisco Systems, Inc.*<FN> 9,000 $ 290,726 $ 835,313
Compaq Computer Corporation 10,000 359,227 420,000
Dell Computer Corporation *<FN> 1,500 109,594 109,781
EMC Corporation*<FN> 8,000 358,855 680,000
HNC Software, Inc.*<FN> 13,000 414,471 525,688
Hewlett-Packard Co. 7,000 97,309 478,187
Microsoft Corporation*<FN> 10,000 93,361 1,386,875
Transaction Systems Architects, Inc.*<FN> 18,000 600,521 900,000
$ 2,324,064 $ 5,335,844
Data Processing and Management _ 0.5%
CSG Systems*<FN> 3,000 $ 165,750 $ 237,000
Diversified Operations _ 1.0%
Berkshire Hathaway Inc., Class B *<FN> 210 $ 150,375 $ 493,500
Drugs - Medicines _ Cosmetics - 8.9%
Abbott Laboratories 15,000 $ 169,395 $ 735,000
<PAGE>
Amgen, Inc.*<FN> 3,000 248,687 313,687
Bristol-Myers Squibb Co. 4,000 141,675 535,250
Elan Corporation PLC ADR*<FN> 10,000 419,005 699,375
Johnson & Johnson 10,000 109,396 838,750
Merck & Co., Inc. 8,000 274,266 1,180,000
$ 1,362,424 $ 4,302,062
Electrical Equipment and Supplies - 1.7%
General Electric Co. 8,000 $ 147,473 $ 816,000
Electronic Components _ Conductors _ 0.2%
Altera Corporation*<FN> 2,000 $ 96,625 $ 121,750
Electronics - 3.6%
Intel Corporation 10,000 $ 334,735 $ 1,185,625
Solectron Corporation *<FN> 6,000 230,974 557,625
$ 565,709 $ 1,743,250
Finance _ Credit Cards _ 0.4%
American Express Company 2,000 $ 165,255 $ 205,000
Finance _ Diversified _ 0.3%
Morgan Stanley, Dean Witter, Discover & Co. 2,000 $ 106,015 $ 142,000
Finance _ Investment Banks _ 0.4%
Merrill Lynch & Co, Inc. 3,000 $ 168,586 $ 200,250
<FN>*Nonincome-producing security
-17-
BRIDGES INVESTMENT FUND, INC.
SCHEDULE OF PORTFOLIO INVESTMENTS
(Continued)
DECEMBER 31, 1998
<CAPTION>
Number
Title of Security of Shares Cost Valuet
<S> <C> <C> <C>
COMMON STOCKS (Continued)
Finance - Real Estate - 4.0%
Freddie Mac 30,000 $ 470,320 $ 1,933,125
Finance - Services - 2.7%
Capital One Financial Corporation 10,000 $ 468,201 $ 1,150,000
FINOVA 2,000 80,535 107,875
Paychex, Inc. 1,000 43,438 51,438
$ 592,174 $ 1,309,313
Food - Miscellaneous Products - 2.2%
Philip Morris Companies, Inc. 20,000 $ 338,693 $ 1,070,000
Insurance - Mortgage _ 0.3%
MGIC Investment Corporation 4,000 $ 177,450 $ 159,250
Insurance - Multiline - 0.5%
American International Group, Inc. 2,500 $ 118,455 $ 241,563
Insurance - Municipal Bond - 1.3%
MBIA, Inc. 10,000 $ 422,688 $ 655,625
Linen Supply and Related Products - 0.6%
Cintas Corporation 4,000 $ 166,578 $ 281,750
Medical Sterilization Products _ 0.4%
Steris Corporation *<FN> 6,000 $ 169,500 $ 170,625
Metal Products _ Miscellaneous - 0.4%
Nucor Corporation 4,500 $ 68,056 $ 194,625
Motion Pictures and Theatres - 1.4%
The Walt Disney Company 22,000 $ 236,300 $ 660,000
Oil and Gas _ Drilling _ 0.2%
R & B Falcon Corporation *<FN> 15,000 $ 193,345 $ 113,437
Petroleum Producing - 5.4%
Amoco Corporation 10,000 $ 246,160 $ 590,000
Atlantic Richfield Company 4,000 211,835 261,500
Chevron Corporation 10,000 340,535 829,375
Exxon Corporation 8,000 198,750 585,000
Mobil Corporation 4,000 127,075 348,500
$ 1,124,355 $ 2,614,375
<FN>*Nonincome-producing security
-18-
BRIDGES INVESTMENT FUND, INC.
SCHEDULE OF PORTFOLIO INVESTMENTS
(Continued)
DECEMBER 31, 1998
<CAPTION>
Number Market
Title of Security of Shares Cost Value
<S> <C> <C> <C>
COMMON STOCKS (Continued)
Publishing - Newspapers - 1.1%
Gannett Co., Inc. 8,000 $ 179,310 $ 516,000
Publishing - Electronic - 0.7%
Reuters Group PLC, ADR Sponsored 5,199 $ 166,303 $ 329,487
Radio _ 0.2%
Chancellor Media Corporation *<FN> 2,000 $ 62,688 $ 95,750
Retail Stores - Apparel and Clothing - 3.5%
Gap, Inc. 30,000 $ 258,323 $ 1,683,750
Retail Stores _ Building Materials and Home
Improvement _ 2.3%
The Home Depot, Inc. 18,000 $ 455,080 $ 1,101,375
Retail Stores _ Department - 1.9%
Dayton Hudson Corporation 17,000 $ 164,690 $ 922,250
Retail Stores - Variety - 0.6%
Albertson's Inc. 5,000 $ 98,910 $ 318,437
Schools _ 0.5%
Sylvan Learning System *<FN> 7,500 $ 200,090 $ 228,750
Software Applications _ 0.1%
J. D. Edwards & Co. *<FN> 1,000 $ 40,250 $ 28,375
Software _ Network _ 0.6%
Network Associates, Inc. *<FN> 4,500 $ 188,076 $ 298,125
Telecommunications - 6.0%
AirTouch Communications, Inc.*<FN> 8,000 $ 345,725 $ 579,500
Level 3 Communications *<FN> 7,000 245,425 301,875
MCI WorldCom, Inc. *<FN> 13,000 466,187 932,750
Sprint Corporation 5,000 83,964 420,625
Sprint PCS Corporation *<FN> 2,500 10,082 57,812
Vodafone Group PLC 1,000 139,080 161,125
West Teleservices Corporation*<FN> 44,200 625,394 430,950
$ 1,915,857 $ 2,884,637
Telecommunications _ Equipment _ 1.5%
Nokia Corporation 6,000 $ 492,858 $ 722,625
Television _ Cable _ 0.4%
Comcast Corporation 3,000 $ 141,375 $ 176,063
<FN>*Nonincome-producing security
-19-
BRIDGES INVESTMENT FUND, INC.
SCHEDULE OF PORTFOLIO INVESTMENTS
(Continued)
DECEMBER 31, 1998
<CAPTION>
Number Market
Title of Security of Shares Cost Value
<S> <C> <C> <C>
COMMON STOCKS (Continued)
Transportation _ Airfreight _ 1.1%
Eagle USA Airfreight, Inc. *<FN> 22,000 $ 416,042 $ 539,000
Transportation _ Railroads - 0.4%
Union Pacific Corporation 4,000 $ 148,580 $ 180,250
TOTAL COMMON STOCKS (Cost - $18,061,661) $18,061,661 $40,387,318
PREFERRED STOCKS (2.4%)
Banking and Finance _ 1.3%
CFC Capital Trust 9.375% Preferred, Series B 5,000 $ 125,000 $ 129,375
CFB Capital II 8.20% Cumulative Preferred 5,000 125,000 126,875
Harris Preferred Capital Corp., 10,000 250,000 256,250
7.375%, Series A
Silicon Valley Bancshares Capital 5,000 125,000 115,000
8.25% Preferred Series I
$ 625,000 $ 627,500
Telecommunications - 0.6%
AirTouch Communications, Inc. 4.25% Series C 3,000 $ 137,925 $ 309,000
Convertible Preferred
Utilities _ Electric _ 0.5%
Tennessee Valley Authority 6.75% 10,000 $ 250,000 $ 263,125
Variable Preferred Series D
Total Preferred Stocks (Cost - $1,012,925) $ 1,012,925 $ 1,199,625
Total Stocks (Cost - $19,074,586) $19,074,586 $41,586,943
DEBT SECURITIES (13.9%)
Energy - Alternate Sources - 0.5%
CalEnergy Co., Inc., 7.63% Notes
due October 15, 2007 $200,000 $ 200,000 $ 214,025
Food - Miscellaneous Products - 0.2%
Super Valu Stores, Inc., 8.875%
Promissory Notes, due June 15, 1999 $100,000 $ 100,689 $ 101,444
Household Appliances and Utensils - 0.2%
Maytag Corp., 9.75% Notes,
due May 15, 2002 $100,000 $ 102,200 $ 112,133
<FN>*Nonincome-producing security
-20-
BRIDGES INVESTMENT FUND, INC.
SCHEDULE OF PORTFOLIO INVESTMENTS
(Continued)
DECEMBER 31, 1998
<CAPTION>
Principal Market
Title of Security Amount Cost Value
<S> <C> <C> <C>
DEBT SECURITIES (Continued)
Office Equipment and Supplies - 0.2%
Xerox Corporation, 9.750% Notes
due March 15, 2000 $100,000 $ 100,025 $ 105,000
Retail Stores _ Department - 0.6%
Dillard Department Stores, Inc., 7.850%
Debentures, due October 1, 2012 $150,000 $ 151,348 $ 163,897
Sears Roebuck & Co., 9.375% Debentures
due November 1, 2011 100,000 $ 106,399 129,898
$ 257,747 $ 293,795
Telecommunications _ 0.5%
Level 3 Communications, Inc., 9.125% Senior $250,000 $ 241,937 $ 248,265
Notes due May 1, 2008
U.S. Government _ 6.6%
U.S. Treasury, 9.125% Notes,
due May 15, 1999 $200,000 $ 215,900 $ 203,187
U.S. Treasury, 8.750% Notes,
due August 15, 2000 200,000 211,900 212,813
U.S. Treasury, 8.000% Notes,
due May 15, 2001 200,000 199,052 214,875
U.S. Treasury, 7.500% Notes,
due May 15, 2002 200,000 214,098 217,250
U.S. Treasury, 10.750% Bonds
due February 15, 2003 200,000 219,525 244,531
U.S. Treasury, 7.250% Notes,
due May 15, 2004 300,000 303,245 337,641
U.S. Treasury, 7.500% Notes,
due February 15, 2005 300,000 305,871 343,641
U.S. Treasury, 9.375% Bonds,
due February 15, 2006 200,000 256,223 255,094
U.S. Treasury, 7.625% Bonds,
due February 15, 2007 300,000 307,910 325,172
U.S. Treasury, 8.750% Bonds,
due November 15, 2008 200,000 237,472 233,469
-21-
BRIDGES INVESTMENT FUND, INC.
SCHEDULE OF PORTFOLIO INVESTMENTS
DECEMBER 31, 1998
<CAPTION>
Principal Market
Title of Security Amount Cost Value
<S> <C> <C> <C>
DEBT SECURITIES (Continued)
U.S. Treasury, 9.125% Bonds,
due May 15, 2009 200,000 $ 234,910 $ 239,812
U.S. Treasury, 7.500% Bonds,
due November 15, 2016 300,000 308,539 372,750
$ 3,014,645 $ 3,200,235
Commercial Paper - Short Term _ 5.1%
American Express Credit Corporation
Commercial Paper Note 6.00%
due January 5, 1999 $1,195,000 $ 1,195,000 $ 1,195,000
Ford Motor Credit Corporation
Commercial Paper Note 5.91%
due January 4, 1999 1,250,000 $ 1,250,000 1,250,000
$ 2,445,000 $ 2,445,000
TOTAL DEBT SECURITIES (Cost - $6,462,243) $ 6,462,243 $ 6,719,897
TOTAL INVESTMENTS IN SECURITIES
(Cost - $25,536,829) (99.7%) $25,536,829 $48,306,840
CASH AND RECEIVABLES
LESS TOTAL LIABILITIES (0.3%) 126,273
NET ASSETS, December 31, 1998 (100.0%) $48,433,113
</TABLE>
The accompanying notes to financial statements
are an integral part of this schedule.
<PAGE>
-22-
<TABLE>
BRIDGES INVESTMENT FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1998
<CAPTION>
<S>
ASSETS Amount
<C>
Investments, at market value
Common and preferred stocks
(cost $19,074,586) $41,586,943
Debt securities (cost $6,462,243) 6,719,897
Total Investments $48,306,840
Cash 156,446
Receivables
Dividends and interest 109,263
Subscriptions to capital stock 93,864
TOTAL ASSETS $48,666,413
LIABILITIES
Dividend distributions payable $ 148,442
Redemption of Capital stock 1,500
Investment advisor, management and
service fees payable 59,980
Accrued operating expenses 23,378
TOTAL LIABILITIES $ 233,300
NET ASSETS
Capital stock, $1 par value _ Authorized
3,000,000 shares,
1,413,731 shares outstanding $ 1,413,731
Paid-in surplus - 24,244,352
Net capital paid in on shares $25,658,083
Net unrealized appreciation on investments 22,770,011
Accumulated undistributed net
investment income 5,019
TOTAL NET ASSETS $48,433,113
NET ASSET VALUE PER SHARE $34.26
OFFERING PRICE PER SHARE $34.26
REDEMPTION PRICE PER SHARE $34.26
<FN>The accompanying notes to financial statements
are an integral part of this statement.
</TABLE>
<PAGE>
-23-
<TABLE>
BRIDGES INVESTMENT FUND, INC.
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
<CAPTION>
Amount Amount
<S> <C> <C>
INVESTMENT INCOME
Interest $417,891
Dividends (Net of foreign withholding taxes
of $1,291) 476,508
Total Investment Income $ 894,399
EXPENSES
Management fees $ 209,938
Custodian fees 29,444
Insurance and Other Administrative Fees 23,358
Bookkeeping services 17,156
Printing and supplies 11,494
Professional services 10,800
Dividend disbursing and transfer
agent fees 11,745
Computer programming 6,000
Taxes and licenses 1,065
Total Expenses $ 321,000
NET INVESTMENT INCOME $ 573,399
NET REALIZED AND UNREALIZED
GAIN ON INVESTMENTS
Net realized gain on transactions in
investment securities $2,816,870
Net increase in unrealized
appreciation of investments 6,973,448
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS $ 9,790,318
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $10,363,717
<FN>The accompanying notes to financial statements
are an integral part of this statement.
</TABLE>
<PAGE>
-24-
<TABLE>
BRIDGES INVESTMENT FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1998 AND 1997
<CAPTION>
1998 1997
<S> <C> <C>
INCREASE IN NET ASSETS
Operations -
Net investment income $ 573,399 $ 624,462
Net realized gain on transactions in
investment securities 2,816,870 380,365
Net increase in unrealized
appreciation of investments 6,973,448 5,456,770
Net increase in net assets
resulting from operations $ 10,363,717 $6,461,597
Net equalization credits 9,098 3,157
Distributions to shareholders from -
Net investment income (573,399) (624,462)
Net realized gain from investment
transactions (2,810,407) (383,918)
Return of Capital (9,316) (2,651)
Net capital share transactions 4,805,885 1,944,324
Total Increase in Net Assets $ 11,785,578 $7,398,047
NET ASSETS:
Beginning of year $ 36,647,535 $29,249,488
End of year $ 48,433,113 $36,647,535
<FN>The accompanying notes to financial statements
are an integral part of these statements.
</TABLE>
<PAGE>
-25-
BRIDGES INVESTMENT FUND, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
(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 $23,102,283 $16,375,653
Aggregate gross unrealized
depreciation on
securities (332,272) (579,090)
Net $22,770,011 $15,796,563 $6,973,448
</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.
-26-
B. Federal Taxes -
The Fund intends to comply with the requirements of the Internal
Revenue Code applicable to regulated investment companies and not be
subject to federal income tax. Therefore, no income tax provision is
required. The Fund also intends to distribute its taxable net
investment income and realized gains, if any, to avoid the payment of
any federal excise taxes.
The character of distributions made during the year from net
investment income or net realized gains may differ from its ultimate
characterization for federal income tax purposes. In addition, due to
the timing of dividend distributions, the fiscal year in which amounts
are distributed may differ from the year that the income or realized
gains or losses were recorded by the Fund.
C. Distribution To Shareholders -
The Fund accrues income dividends to shareholders on a quarterly
basis as of the ex-dividend date. Distributions of net realized gains
are made on an annual basis to shareholders as of 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.
-27-
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. There were no amounts
reimbursed in the year ended December 31, 1998.
(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>
<CAPTION>
1998 1997
<S> <C> <C>
United States government obligations $ -- $ --
Other Securities 9,631,883 6,360,243
Total Cost $9,631,883 $6,360,243
</TABLE>
Net proceeds from sales of long-term investments during the years
ended December 31, were:
<TABLE>
<CAPTION>
1998 1997
<S> <C> <C>
United States government obligations $ 200,000 $ 200,000
Other Securities 9,280,532 2,388,453
Total Net Proceeds $9,480,532 $2,588,453
Total Cost Basis of
Securities Sold $6,663,662 $2,208,087
</TABLE>
(5) NET ASSET VALUE
The net asset value per share represents the effective price for all
subscriptions and redemptions.
-28-
(6) CAPITAL STOCK
Shares of capital stock issued and redeemed are as follows:
<TABLE>
<CAPTION>
1998 1997
<S> <C> <C>
Shares sold 108,559 95,567
Shares issued to shareholders in
reinvestment of net investment
income and realized gain from
security transactions 87,751 32,365
196,310 127,932
Shares redeemed 45,397 55,945
Net increase 150,913 71,987
Value of capital stock issued and redeemed is as follows:
<CAPTION>
1998 1997
<S> <C> <C>
Shares sold $3,444,495 $2,553,754
Shares issued to shareholders in
reinvestment of net investment
income and realized gain from
security transactions 2,800,423 884,491
$6,244,918 $3,438,245
Shares redeemed 1,439,033 1,493,921
Net increase $4,805,885 $1,944,324
</TABLE>
(7) DISTRIBUTION TO SHAREHOLDERS
On December 1, 1998 a cash distribution was declared from net
investment income accrued through December 31, 1998. This distribution was
ultimately calculated as $.105 per share aggregating $148,442. The
dividend will be paid on January 25, 1999, to shareholders of record on
December 31, 1998.
-29-
<TABLE>
FINANCIAL HIGHLIGHTS*
Per share income and capital changes for a share outstanding for each
of the last five years were:
<CAPTION>
1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $29.02 $24.56 $21.54 $17.10 $17.80
Income From Investment Operations
Net Investment Income $ .44 $ .51 $ .55 $ .58 $ .59
Net Gains or (Losses) on Securities
(both realized and unrealized) 7.36 4.77 3.28 4.63 (.52)
Total From Investment Operations $ 7.80 $ 5.28 $ 3.83 $ 5.21 $ .07
Less Distributions
Dividends from net investment income $ (.44) $ (.51) $ (.55) $ (.58) $ (.59)
Distributions from capital gains (2.12) (.31) (.26) (.19) (.18)
Total Distributions $(2.56) $ (.82) $ (.81) $ (.77) $ (.77)
Net Asset Value, End of Period $34.26 $29.02 $24.56 $21.54 $17.10
Total Return 26.87% 21.47% 17.78% 30.46% .39%
Ratios/Supplemental Data
Net Assets, End of Period
(in thousands) $48,433 $36,648 $29,249 $24,052 $18,096
Ratio of Expenses to Average
Net Assets**<F1> .77% .81% .87% .89% .90%
Ratio of Net Investment Income to
Average Net Assets **<F1> 1.37% 2.64% 3.23% 3.80% 4.25%
Portfolio Turnover Rate 24% 8% 8% 7% 10%
<FN>* Per share income and capital change data is computed using the weighted
average number of shares outstanding method.
<F1>**Average net asset data is computed using monthly net asset value figures.
</TABLE>
<PAGE>
Bridges Investment Fund, Inc. January 25, 1999
Shareholder Communication
Annual Report for 1998
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 III, President of the Fund and Executive Vice
President - Investments, of Bridges Investment Counsel, Inc., is responsible for
the day-to-day operation of the Fund's portfolio. Mr. Bridges III dedicates his
professional efforts toward security research and portfolio management 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 15 years.
Mr. Edson L. Bridges II, Chairman and Chief Executive Officer, served as
the portfolio manager for almost 34 years from July 1, 1963 through April 13,
<PAGE>
1997. He is available to be a back-up person to Mr. Bridges III whenever the
assumption of that responsibility is appropriate or required.
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
1998, the most recently completed fiscal year, developed a 27.13% total return
for a $10,000 investment with cash distributions reinvested in shares of capital
stock in the Fund. This number differs from the 26.87% total return reported on
page one of the cover letter to this Annual Report 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 relevant market conditions and the investment strategies pursued by the
Fund's investment adviser that materially affected the performance of Registrant
during the most recently completed fiscal year are fully described on pages one
through four of the Shareholder Letter.
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
<PAGE>
Shareholder Communication MD&A-2 January 25, 1999
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 4. 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 1998 is an integral part of the overall presentation concerning
investment performance.
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 5.
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%
to 80% 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 -- 1998.
The initiative to support the primary investment objective of long term
capital growth is causing a reduction in the ownership of income earning assets
(U.S. Treasury securities, corporate bonds, preferred stocks) as a percent of
total market value for the Fund's portfolio. In addition, the number of common
stocks held in the portfolio that do not make dividend payments has increased
significantly in 1997 and 1998.
The disclosures required for Item 5(c) and Item 5A.(a), (b), and (c)
conclude at this point in this text.
Other Comments
History of Calculations for MD&A Page 4 -- The table that appears on page 4
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.
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 Communication MD&A-3 January 25, 1999
<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
1997 BIF, Inc. 12,229 + 3.9 20,147 +14.7 35,959 +27.6
1998 BIF, Inc. 12.712 + 3.9 24,098 +19.6 41,014 +14.1
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
1997 S&P 500 13,332 + 9.0 25,112 +24.7 55,261 +34.8
1998 S&P 500 12,852 - 3.6 29,366 +16.3 57,706 + 4.4
<FN>
Sources: Graphs in MD&A Reports 1993 through 1998
N.C.: Not Calculated
</TABLE>
The foregoing data show significant variations from time to time. 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 5, 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,
/s/ Edson L. Bridges II
Edson L. Bridges II
Chairman
<TABLE>
<PAGE>
<CAPTION>
Year BIF S & P 500
<S> <C> <C>
1988 10,000.00 10,000.00
1989 13,157.53 12,248.31
1990 12,748.62 12,470.40
1991 16,616.11 15,090.95
1992 17,880.47 16,001.45
1993 19,671.13 17,008.04
1994 19,937.75 17,059.02
1995 27,402.40 22,339.81
1996 33,678.97 26,374.13
1997 44,900.79 32,263.20
1998 57,706.55 41,014.45
<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 27.13%
5 Year 19.25%
10 Year 15.16%
<FN>Past Performance is not predictive of future performance.
</TABLE>
<PAGE>
Shareholder Communication MD&A-5 January 25, 1999
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
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 particularly with
respect to the difficulty of matching income reinvestment dates in the indexes
with the reinvestment calendar scheme in effect for the Fund. Therefore, at
this point in time, the Fund management has decided not to present the
comparisons to the more narrow indices.
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the
Thirty-Sixth Annual Shareholder Report 1998 and is qualified in its
entirety by reference to such report.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<INVESTMENTS-AT-COST> 25,536,829
<INVESTMENTS-AT-VALUE> 48,306,840
<RECEIVABLES> 203,127
<ASSETS-OTHER> 156,446
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 48,666,413
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 233,300
<TOTAL-LIABILITIES> 233,300
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 25,658,083
<SHARES-COMMON-STOCK> 1,413,731
<SHARES-COMMON-PRIOR> 1,262,818
<ACCUMULATED-NII-CURRENT> 5,019
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 22,770,011
<NET-ASSETS> 48,433,113
<DIVIDEND-INCOME> 476,508
<INTEREST-INCOME> 417,891
<OTHER-INCOME> 0
<EXPENSES-NET> 321,000
<NET-INVESTMENT-INCOME> 573,399
<REALIZED-GAINS-CURRENT> 2,816,870
<APPREC-INCREASE-CURRENT> 6,973,448
<NET-CHANGE-FROM-OPS> 10,363,717
<EQUALIZATION> 9,098
<DISTRIBUTIONS-OF-INCOME> 573,399
<DISTRIBUTIONS-OF-GAINS> 2,810,407
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 108,559
<NUMBER-OF-SHARES-REDEEMED> 45,397
<SHARES-REINVESTED> 87,751
<NET-CHANGE-IN-ASSETS> 11,785,578
<ACCUMULATED-NII-PRIOR> 5,237
<ACCUMULATED-GAINS-PRIOR> (6,462)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 209,938
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 321,000
<AVERAGE-NET-ASSETS> 41,987,618
<PER-SHARE-NAV-BEGIN> 29.02
<PER-SHARE-NII> 0.44
<PER-SHARE-GAIN-APPREC> 7.36
<PER-SHARE-DIVIDEND> 0.44
<PER-SHARE-DISTRIBUTIONS> 2.56
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 34.26
<EXPENSE-RATIO> 0.77
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
