-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, IOTbXUQB/G0gGaAztfdT/Ymf7hwZluiJnyCcym8b65wcgs1o4kS8c9HVmet+O4to OpLStLZuAUMmwbY4YlW/OA== 0000014170-01-000001.txt : 20010131 0000014170-01-000001.hdr.sgml : 20010131 ACCESSION NUMBER: 0000014170-01-000001 CONFORMED SUBMISSION TYPE: N-30D/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20001231 FILED AS OF DATE: 20010130 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BRIDGES INVESTMENT FUND INC CENTRAL INDEX KEY: 0000014170 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 476027880 STATE OF INCORPORATION: NE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-30D/A SEC ACT: SEC FILE NUMBER: 811-01209 FILM NUMBER: 1519126 BUSINESS ADDRESS: STREET 1: 8401 W DODGE RD STREET 2: SUITE 256 CITY: OMAHA STATE: NE ZIP: 68114 BUSINESS PHONE: 4023974700 MAIL ADDRESS: STREET 1: 8401 WEST DODGE ROAD STREET 2: SUITE 256 CITY: OMAHA STATE: NE ZIP: 68114 N-30D/A 1 0001.txt BRIDGES INVESTMENT FUND, INC. THIRTY-EIGHTH ANNUAL SHAREHOLDER REPORT 2000 CONTENTS OF REPORT Pages 1 - 7 Shareholder Letter Exhibit 1 Statement of Income and Expenses by Page 8 Calendar Quarter for the Year Ended December 31, 2000 Exhibit 2 Historical Financial Information Page 9 Exhibit 3 Portfolio Transactions During the Period From Pages 10 - 11 October 1, 2000, through December 31, 2000 Exhibit 4 Reports to Stockholders of Management Page 12 Companies Page 13 Independent Auditors' Report Pages 14 - 27 Audited Financial Statements for the Year Ended December 31, 2000 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. 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 John T. Reed Roy A. Smith Janice D. Stoney L.B. Thomas John K. Wilson Officers Edson L. Bridges II - Chairman and Chief Executive Officer Edson L. Bridges III _ President and Chief Investment Officer Brian M. Kirkpatrick _ Vice President Mary Ann Mason - Secretary Kathleen J. Stranik - Assistant Secretary Nancy K. Dodge - Treasurer Linda J. Morris _ Assistant Treasurer Auditor KPMG LLP Two Central Park Plaza Suite 1501 Omaha, Nebraska 68102-1617 Corporate Counsel Counsel to Independent Directors Baird, Holm Koley, Jessen, P.C. Attorneys at Law Attorneys at Law 1500 Woodmen Tower One Pacific Place, Suite 800 Omaha, Nebraska 68102 1125 South 103 Street Omaha, Nebraska 68124 January 23, 2001 Dear Shareholder: President's Report In 2000, Bridges Investment Fund, Inc. had a total return of -13.93% based on a year-end 1999 net asset value of $46.24 per share, a year-end 2000 net asset value of $38.59 per share, net investment income of $0.40 per share during 2000, and net capital gains of $.80880716 per share during 2000. 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 -14.09. Total returns for the Fund over the past five years are summarized in the table which follows:
Yr. Over Yr. Returns Yr. End Asset Allocation Salomon Bros. 7-10 Yr. % % Year BIF S&P 500 Corp. Index Year Equities Fixed 2000 -14.09 -9.10 10.83 2000 83.1 16.9 1999 38.90 21.04 -3.02 1999 86.3 13.7 1998 27.48 28.58 9.14 1998 83.4 16.6 1997 22.33 33.35 9.71 1997 85.1 14.9 1996 18.06 22.94 2.84 1996 73.6 26.4
Salomon Bros. 7-10 Yr. BIF S&P 500 Corp. Index Three year compound annual total return: 15.01 12.26 3.24 Five year compound annual total return: 17.05 18.32 5.76 The Fund's primary investment objectives are (1) long-term capital growth and (2) the generation of a moderate amount of investment income. The year 2000 was characterized by much more difficult and challenging equity market conditions than at any time since 1990. After five consecutive years with total returns in excess of 20% (an unprecedented run), the S&P 500 had a total return of -9.1% in 2000, its first negative year since it declined 3.1% in 1990. The Fund's total return of -14.09% trailed the S&P 500 and represented the Fund's first negative total return year since 1977. While we were disappointed to see such a long streak of uninterrupted positive years broken, we believe that the declines in equity prices and equity valuations during 2000 were both overdue, and much more importantly, needed, from the standpoint of cleansing speculative excesses from the market and setting the stage for better equity performance in coming years. Over the last two years (1999 and 2000), the Fund had a total return of 19.33% versus 10.02% for the S&P 500. On a three-year basis, the Fund had a compound annual total return of 15.01% versus 12.26% for the S&P 500. Over the five-year period ending December 31, 2000, the Fund had a compound annual total return of 17.05% versus 18.32% for the S&P 500. Shareholder Letter 2 January 23, 2001 Contrary to 1999, when the Fund's fixed income investments were a drag on portfolio returns, the Fund's bonds served to cushion the Fund's performance in 2000, as interest rates peaked during late January and declined during most of the remainder of the year. The Salomon Brothers 7-10 year Corporate Index advanced 10.83%, while the Fund's bonds, which have an average life of 2.6 years, had a total return of 10.93%. In retrospect, we should have extended the average life of the Fund's bond portfolio in the early part of 2000 when rates were higher. It is likely that we will look to extend bond maturities in the Fund in the future once interest rates rise coincident with an eventual uptick in the pace of economic growth. It is possible that this opportunity may not present itself until the latter part of 2001 or sometime in 2002. In a sense, the strong performance of bonds during 2000 and the relatively poor performance of equities puts the capital markets in almost the opposite position of where they stood 12 months ago. We believe the significant decline across most segments of the equity market during 2000 and the consequent improvement in valuations make equities somewhat more attractive over the next three-to-five years relative to bonds, as yields on five to ten-year Treasuries have fallen to a little over 5%. Despite the improvement in equity valuations, we believe that a number of signs point to a slowing in economic growth over the course of 2001, and that the uncertainties associated with a slowing economy favor the odds of a continued choppy and volatile equity market environment. Further, many corporations will face difficult earnings comparisons over the course of this year, as corporate profitability in 1999 was extremely high by historic standards. Consequently, 2001 may prove to be a challenging and transitional year for equity investors. The common stock portion of the Fund had a total return of -17.74% during 2000, which meaningfully lagged the -9.10% total return for the S&P 500. The following table summarizes the performance of the Fund's common stocks over the past five years BIF Common Stock Total Returns
Annual Total Returns Cumulative Total Returns BIF Stocks S&P 500 BIF Stocks S&P 500 2000 -17.74 -9.10 2000 -17.74 -9.10 1999 46.60 21.04 1999-2000 18.70 10.02 1998 32.93 28.58 1998-2000 56.24 41.46 1997 27.00 33.35 1997-2000 97.00 88.65 1996 25.04 22.94 1996-2000 145.06 131.93
Our sense is that in many cases, our companies from a financial operations standpoint outperformed their stock market performance. Again, 2000 tended to be the mirror opposite of 1999, when many of our companies' stock prices did better than their underlying financial performance. Shareholder Letter 3 January 23, 2001 When 1999 and 2000 are looked at on a consolidated basis, the portfolio's equities advanced 18.70% versus a 10.02% total return for the S&P 500. Despite this strong absolute and relative stock price performance over the past two years, many of the Fund's holdings enjoyed significantly better financial performance in terms of growth of revenues, cash flow, and earnings, and, consequently, we believe the Fund is well positioned from a valuation standpoint relative to the growth prospects we think are reasonable for our holdings over the next three-to-five years. The following table summarizes the performance of the Fund's top ten common stockholdings at year-end 2000 and provides a comparison to the top ten holdings at year-end 1999:
12/31/00 % % of Tot. Tot. EPS EPS No. of Market of Tot. Rtn. Retn. 5 Yr. % Chg. EPS LT Net % Chg. % Chg. Hist. 00 Vs. P/E P/E Future Shares Company Value Equities Assets Qtr. 12 Mos. Gr. Rate 99 2001 2002 Gr. Rate 47,000 Capital One 3,093,188 5.2% 4.3% -6.0% 36.8% 29% 30% 22.6 18.3 25% 50,000 Nokia 2,175,000 3.7% 3.0% 9.3% -8.5% - 27% 46.3 35.1 30% 75,000 West 2,109,375 3.5% 3.0% 27.8% 15.1% 5% 30% 23.4 19.7 22% Teleserv. 30,000 Freddie Mac 2,066,250 3.5% 2.9% 27.7% 47.8% 20% 15% 17.7 15.5 15% 25,000 Qualcomm 2,054,688 3.5% 2.9% 15.4% -53.3% - 72% 64.7 49.5 37% 30,000 EMC Corp. 1,995,000 3.4% 2.8% -32.9% 21.7% 38% 44% 65.2 52.4 30% 16,000 Merck 1,498,000 2.5% 2.1% 26.2% 41.2% 16% 18% 29.2 26.5 13% 40,000 Vodafone 1,432,500 2.4% 2.0% -3.2% -27.2% 24% 22% 73.1 43.7 25% 36,000 Cisco 1,377,000 2.3% 1.9% -30.8% -28.6% 32% 44% 48.4 37.9 30% Systems 30,000 Home Depot 1,370,625 2.3% 1.9% -13.8% -33.3% 30% 15% 33.1 27.9 23% 19,171,626 32.3% 26.8% Total 59,488,293 83.1% Equities Total Net 71,411,520 Assets 12/31/99 % % of Tot. Tot. EPS EPS No. of Market of Tot. Net Rtn. Rtn. 5 Yr. % Chg. EPS LT % Chg. % Chg. Hist. 99 Vs. P/E P/E Future Shares Company Value Equities Assets Qtr. 12 Mos. Gr. Rate 98 2000 2001 Gr. Rate 26,000 Qualcomm 4,582,500 7.6% 6.6% 272.4% 2619.4% 95% 182% 173.0 133.0 40% 20,000 Microsoft 2,335,000 3.9% 3.3% 28.9% 68.4% 46% 57% 71.2 61.1 25% 50,000 Gap 2,300,000 3.8% 3.3% 43.8% 23.2% 33% 36% 30.3 25.1 20% 12,000 Nokia 2,292,750 3.8% 3.3% 112.6% 219.0% - 36% 67.5 54.4 25% 30,000 Home Depot 2,062,500 3.4% 3.0% 50.4% 68.8% 27% 39% 56.4 44.9 24% 40,000 Vodafone 1,980,000 3.3% 2.8% 4.1% 54.4% 26% 49% 69.7 46.7 25% 18,000 Cisco 1,928,250 3.2% 2.8% 56.2% 130.8% 37% 29% 107.0 84.4 30% Systems 18,000 HNC Software 1,903,500 3.2% 2.7% 166.5% 161.5% - -15% 91.2 66.1 40% 16,000 EMC Corp. 1,748,000 2.9% 2.5% 53.1% 157.1% 30% 40% 76.9 59.1 30% 35,000 Capital One 1,686,563 2.8% 2.4% 23.6% 26.0% 25% 31% 21.4 17.2 25% 22,819,063 37.9% 32.7% Total 60,166,326 86.3% Equities Total Net 69,735,684 Assets
Shareholder Letter 4 January 23, 2001 While it is easy to get caught up in the volatility of the capital markets on a day-to-day basis, we believe that our shareholders' interests are best served by an investment approach that seeks to allocate capital to those companies which we believe provide the best opportunity for capital appreciation over the long run, given our assessment of the sustainability of those companies' strong financial performance and their competitive position in the sectors in which they compete. We will continue to balance each company's prospects for earnings and cash flow growth over time against the current market valuation of its common stock. Periods of high volatility and declining stock prices and equity valuations actually provide us with more and better opportunities to establish and increase positions in those companies with the best long-term prospects at more favorable valuation levels which allow for more attractive long-term returns. While we expect 2001 will be at least as challenging as 2000 was, we remain constructive on the long-term growth prospects for the companies that we own, and we will continue to maintain a disciplined, focused, and growth-oriented equity investment philosophy. We appreciate your continued confidence, patience, and support. Sincerely, \s\ Edson L. Bridges III Edson L. Bridges III, CFA President ELBIII:kjs Shareholder Letter 5 January 23, 2001 Chairman's Message Dear Shareholder: Highlight Comments The Fund benefited from the excellent long term investment record (1978 - 1999) of 22 consecutive positive total annual returns, combined with the extraordinary 38.9% total return earned in 1999 by receiving many new investors during 2000. A total value of $17,764,369 worth of shares of capital stock was issued last year -- -- an amount equal to 25.47% of the $69,735,684 in net assets at the end of 1999. We welcome our new shareholders, and we thank everyone for sticking with us during a difficult and tumultuous year in the stock market. During 1999, the Fund commenced the process of registering shares of capital stock in states other than Nebraska in response to a growing number of inquiries from many areas of our nation regarding possible purchases of our shares. By the end of 2000, the Fund had become registered in 20 states. The initiative to have shares available in all 50 states will continue in the year 2001. The costs for this state registration program are paid for by Bridges Investment Counsel, Inc. from its investment advisory fee. Financial Statements Details regarding the Fund's Audited Financial Statements will appear in the Independent Auditors' Report, in the Schedule of Portfolio Investments, in the Statement of Assets and Liabilities, in the Statement of Operations, in the Statement of Changes in Net Assets, in the Notes to Financial Statements, and in the Financial Highlights. This information appears on pages 14 to 27 of this report. Exhibits The audited financial statements are supplemented by four Exhibits that appear immediately after this letter. Exhibit 1 records the income and expenses of the Fund for each calendar quarter for 2000. Exhibit 2 sets forth the financial history of the Fund since 1963. Exhibit 3 itemizes the purchases, sales, and other transactions in the Fund's portfolio for the quarter that ended December 31, 2000, and Exhibit 4 provides a required report concerning the last Annual Meeting of Shareholders. Dividend On December 5, 2000, the Board of Directors declared a quarterly dividend from the net investment income earned during the October - December Quarter of 2000 and from any undistributed net investment income that was earned earlier in 2000. This dividend was made payable on January 23, 2001, from net income that was received through December 31, 2000, to shareholders of record on December 29, 2000. The exact amount of this dividend was delegated to the Chairman and the Treasurer of the Fund after the precise net income of the Fund was established on the record date. The Chairman and Shareholder Letter 6 January 23, 2001 the Treasurer determined the ordinary income dividend to be $.10 per share to be paid out under the December 5, 2000 resolution adopted by the Board of Directors. This payment, in addition to the $.11 per share previously paid and declared in October, 2000, brought the total distributions paid or payable from ordinary income earned during the Fourth Quarter of 2000 and earlier in 2000 to $.21 per share. The $.10 per share dividend amount was confirmed and ratified by the Board of Directors at their most recent regular meeting that was held on January 9, 2001. Tax Information A letter of explanation regarding the taxability of the dividend and the capital gains payments made by the Fund during 2000 will accompany this letter to you. You should provide a copy of this letter, dated January 23, 2001, to your tax preparer or consultant. This letter specifies the information that is necessary for the preparation of a federal income tax return. Form 1099-DIV Bridges Investor Services, Inc. has prepared and will issue a Form 1099 DIV for 2000 for your shareholder account on or about January 31, 2001. 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, 2000. This information will be utilized in the filing of the Form 5498 and the Form 5500 EZ reports to the appropriate federal authorities by our personnel later on in the year 2001. Bridges Investment Management, Inc. Last year, the Shareholder Letter for the 1999 Annual Report included a section entitled "Business Plans" that described the purposes for creating Bridges Investment Management, Inc. as a succession company to Bridges Investment Counsel, Inc. for the handling of discretionary portfolio management accounts and for appropriate continuity of services in the event of my death, disability, or full retirement from Bridges Investment Counsel, Inc. Bridges Investment Management, Inc. was formally separated from Bridges Investment Counsel, Inc. on December 15, 2000. The new Firm will have its own service income stream and balance sheet assets and capital, and its personnel and capabilities are now fully prepared to accept the management responsibilities for the Fund. However, as you will note on pages 17 - 20 in the Proxy Statement for the Annual Meeting of Shareholders to be held on February 20, 2001, Bridges Investment Counsel, Inc. is expected to continue as manager of the Fund for the upcoming year, and the thirty-ninth renewal of the investment advisory contract between the Fund and the manager through the approval of the shareholders will be acted upon at that February 20, 2001 meeting. Shareholder Letter 7 January 23, 2001 Director Fees The independent directors of the Fund have determined to end the stipends that have historically been paid by Bridges Investment Counsel, Inc. from its fee income for services by such persons effective with the last meeting held in December, 2000. Commencing in January, 2001, director fees for meetings attended will be paid from the Fund's resources. This new cost to the Fund will approximate $15,000 to $20,000 per year, depending upon the number of Committee and Board meetings held and upon the number of independent directors that attend each meeting. Further details may be found on page 16 of the Proxy Statement. Authorized Shares The Fund's recent success in selling capital stock has reduced the inventory of available authorized shares to be used for issuance in 2001 and beyond to a quite low level. Consequently, the Board of Directors is asking you to double the number of authorized shares from 3,000,000 to 6,000,000 for approval at our February 20, 2001 meeting. Appreciation Everyone connected with the Fund is grateful for your support and presence as a shareholder. With best wishes for the New Year. Sincerely, \s\ Edson L. Bridges II Edson L. Bridges II, CFA Chairman ELBII:elc -8- Exhibit 1 BRIDGES INVESTMENT FUND, INC. STATEMENT OF INCOME AND EXPENSES BY CALENDAR QUARTER FOR THE YEAR ENDED DECEMBER 31, 2000
March 31, June 30, September 30, December 31, Annual 2000 2000 2000 2000 Total Investment Income: Interest $173,836 $230,740 $233,155 $208,976 $ 846,707 Dividends _ (net of foreign withholding taxes) 108,703 89,121 96,853 92,437 387,114 Total Investment Income $282,539 $319,861 $330,008 $301,413 1,233,821 Expenses: Management fees $ 89,183 $ 92,655 $ 96,807 $ 90,696 $369,341 Custodian fees 11,418 11,766 12,181 11,569 46,934 Insurance 6,349 6,349 6,348 6,349 25,395 Bookkeeping services 6,418 5,100 5,288 6,033 22,839 Printing and supplies 7,377 2,906 2,793 3,383 16,459 Professional services 2,625 3,420 3,050 7,647 16,742 Dividend disbursing and transfer agent fees 8,114 6,288 5,816 6,257 26,475 Computer programming 1,250 1,250 1,250 1,800 5,550 Taxes and licenses 266 266 267 266 1,065 _________ ________ _________ _________ ________ Total Expenses $133,000 $130,000 $133,800 $134,000 $530,800 NET INVESTMENT INCOME $149,539 $189,861 $196,208 $167,413 $703,021 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.
-9- Exhibit 2 BRIDGES INVESTMENT FUND, INC. SELECTED HISTORICAL FINANCIAL INFORMATION - - - - - - - - - - - - -Year End Statistics - - - - - - - - - - - - -
Valuation Net Shares Net Asset Dividend/ Capital Date Assets Outstanding Value/Share Share Gains/Share 07-01-63 $ 109,000 10,900 $10.00 $ - $ - 12-31-63 159,187 15,510 10.13 .07 - 12-31-64 369,149 33,643 10.97 .28 - 12-31-65 621,241 51,607 12.04 .285 .028 12-31-66 651,282 59,365 10.97 .295 - 12-31-67 850,119 64,427 13.20 .295 - 12-31-68 1,103,734 74,502 14.81 .315 - 12-31-69 1,085,186 84,807 12.80 .36 - 12-31-70 1,054,162 90,941 11.59 .37 - 12-31-71 1,236,601 93,285 13.26 .37 - 12-31-72 1,272,570 93,673 13.59 .35 .08 12-31-73 1,025,521 100,282 10.23 .34 .07 12-31-74 757,545 106,909 7.09 .35 - 12-31-75 1,056,439 111,619 9.46 .35 - 12-31-76 1,402,661 124,264 11.29 .38 - 12-31-77 1,505,147 145,252 10.36 .428 .862 12-31-78 1,574,097 153,728 10.24 .481 .049 12-31-79 1,872,059 165,806 11.29 .474 .051 12-31-80 2,416,997 177,025 13.65 .55 .0525 12-31-81 2,315,441 185,009 12.52 .63 .0868 12-31-82 2,593,411 195,469 13.27 .78 .19123 12-31-83 3,345,988 229,238 14.60 .85 .25 12-31-84 3,727,899 278,241 13.40 .80 .50 12-31-85 4,962,325 318,589 15.58 .70 .68 12-31-86 6,701,786 407,265 16.46 .688 .86227 12-31-87 7,876,275 525,238 15.00 .656 1.03960 12-31-88 8,592,807 610,504 14.07 .85 1.10967 12-31-89 10,895,182 682,321 15.97 .67 .53769 12-31-90 11,283,448 744,734 15.15 .67 .40297 12-31-91 14,374,679 831,027 17.30 .66 .29292 12-31-92 17,006,789 971,502 17.51 .635 .15944 12-31-93 17,990,556 1,010,692 17.80 .6225 .17075 12-31-94 18,096,297 1,058,427 17.10 .59 .17874 12-31-95 24,052,746 1,116,620 21.54 .575 .19289 12-31-96 29,249,488 1,190,831 24.56 .55 .25730 12-31-97 36,647,535 1,262,818 29.02 .5075 .30571 12-31-98 48,433,113 1,413,731 34.26 .44 2.11648 12-31-99 69,735,684 1,508,154 46.24 .30 .91088 12-31-00 71,411,520 1,850,301 38.59 .40 .80880716
-10- Exhibit 3 BRIDGES INVESTMENT FUND, INC. PORTFOLIO TRANSACTIONS DURING THE PERIOD FROM OCTOBER 1, 2000, THROUGH DECEMBER 31, 2000
Bought or Held After Securities Received Transaction Common Stocks Unless $1,000 Par $1,000 Par Described Otherwise Value (M) Value (M) or Shares or Shares AES Corporation 2,000 22,000 Altera Corporation 5,000 25,000 Analog Devices, Inc. 5,000 5,000 Applied Materials 9,000 9,000 Broadcom Corp. 1,000 4,000 CSG Systems International 1,000 26,000 (1) Calpine Corporation 11,000 17,000 Capital One Financial 7,000 47,000 Clear Channel Communications 2,000 12,000 Fifth Third Bancorp 5,000 5,000 (2) Flextronics International Ltd. 18,000 25,000 Goldman Sachs Group 3,000 7,000 (3) I2 Technologies, Inc. 5,000 8,000 Interpublic Group Cos. 2,000 7,000 Juniper Networks 7,000 7,000 Level 3 Communications 18,000 33,000 Morgan Stanley Dean Witter 3,000 16,000 PMC - Sierra 2,000 5,000 (4) Providian Financial 7,000 10,000 (5) Retek, Inc. 22,374 22,374 Schwab, Charles Corp. 5,000 13,000 (6) Sun Microsystems, Inc. 15,000 26,000 Veritas Software Co. 2,000 5,000 Worldcom Inc. Communications 5,000 25,000 Various Issues of Commercial Paper 99,265M 6,825M Notes Purchased during 4th Quarter, 2000 (1) Received 7,000 shares in a 2-for-1 stock split on November 15, 2000. (2) Received 10,000 shares in a 2-for-1 stock split on October 17, 2000. (3) Received 4,000 shares in a 2-for-1 stock split on December 6, 2000. (4) Received 5,000 shares in a 2-for-1 stock split on December 1, 2000. (5) Received 22,374 shares in spin-off from HNC Software on October 2, 2000. (6) Received 13,000 shares in a 2-for-1 stock split on December 6, 2000. -11- Exhibit 3 BRIDGES INVESTMENT FUND, INC. PORTFOLIO TRANSACTIONS DURING THE PERIOD FROM OCTOBER 1, 2000, THROUGH DECEMBER 31, 2000 (Continued) Sold or Held After Securities Exchanged Transacion Common Stocks Unless $1,000 Par $1,000 Par Described Otherwise Value (M) Value (M) or Shares or Shares Dow Chemical Company 18,000 -- EMC Corporation 2,000 30,000 Echostar Communications 5,000 11,000 First Dada Corporation 15,000 -- Juniper Networks 3,000 4,000 Level 3 Communications 3,000 30,000 Qualcomm, Inc. 1,000 25,000 Retek, Inc. 2,374 20,000 Sun Microsystems, Inc. 4,000 13,000 Transaction Systems Architects 32,000 -- U.S. Bancorp 10,000 -- Voicestream Wireless Corp. 2,000 -- Various Issues of Commercial 99,840M -- Paper Notes maturing during 4th Qtr., 2000
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 15, 2000, at 11:00 a.m. (2) Election of Directors for one year terms (All Directors Stand for Annual Election):
- - - - - -Votes Cast - - - - - - Withhold For All Authority Names of Directors Nominees To Vote For Elected at Meeting For Except All Nominees Frederick N. Backer 1,274,346 None 3,607 Edson L. Bridges II 1,274,346 None 3,607 Edson L. Bridges III 1,274,346 None 3,607 N. P. Dodge, Jr. 1,274,346 None 3,607 John W. Estabrook 1,274,346 None 3,607 Jon D. Hoffmaster 1,274,346 None 3,607 John J. Koraleski 1,274,346 None 3,607 Roger D. Kupka 1,274,346 None 3,607 Gary L. Petersen 1,274,346 None 3,607 John T. Reed 1,274,346 None 3,607 Roy A. Smith 1,274,346 None 3,607 Janice D. Stoney 1,274,346 None 3,607 L.B. Thomas 1,274,346 None 3,607 John K. Wilson 1,274,346 None 3,607
(3) A brief description for each matter voted upon at the meeting:
Matters Voted Upon For Against Abstain (a) For a proposed investment 1,277,233 None 720 advisory contract which continues the employment of Bridges Investment Counsel, Inc. as investment adviser to the Fund for the period from April 17, 2000 through April 17, 2001 (b) For the ratification of the 1,275,796 None 2,157 selection of KPMG LLP as independent auditors of the Fund for the Fiscal Year ending December 31, 2000
-13- INDEPENDENT AUDITORS' REPORT 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, 2000, the related statement of operations for the year then ended, the statements of changes in net assets each of the years in the two year period then ended, and the financial highlights for each of the years in the three year period then ended. These financial statements are the responsibility of Bridges Investment Fund, Inc. Our responsibility is to express an opinion on these financial statements based on our audit. The financial highlights for each of the years in the two year period ended December 31, 1997 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 auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of December 31, 2000 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, 2000, the results of its operations for the year then ended, the changes in its net assets for each of the years in the two year period then ended, and the financial highlights for each of the years in the three year period then ended, in conformity with accounting principles generally accepted in the United States of America. KPMG LLP January 8, 2001 -15- BRIDGES INVESTMENT FUND, INC. SCHEDULE OF PORTFOLIO INVESTMENTS DECEMBER 31, 2000
Number Title of Security of Shares Cost Valuet COMMON STOCKS - (83.1%) Advertising _ 0.4% Interpublic Group of Companies, Inc. (The) 7,000 $ 227,412 $ 297,938 Banking and Finance - 3.3% Fifth Third Bancorp 5,000 $ 232,813 $ 298,750 First National of Nebraska, Inc. 230 346,835 483,000 State Street Corporation 8,000 66,525 993,680 Wells Fargo & Co. 10,000 138,173 556,875 $ 784,346 $ 2,332,305 Beverages _ Soft Drinks - 1.4% PepsiCo, Inc. 20,000 $ 256,225 $ 991,250 Communications _ Radio and Television _ 0.8% Clear Channel Communications, Inc.* 12,000 $ 464,114 $ 581,250 Computers _ Hardware and Software - 6.9% Cisco Systems, Inc.* 36,000 290,726 1,377,000 HNC Software, Inc.* 18,000 125,257 534,375 I2 Technologies, Inc.* 8,000 601,469 435,000 Juniper Networks, Inc.* 4,000 633,720 504,250 Microsoft Corporation* 20,000 93,361 870,000 Tibco Software, Inc.* 6,000 153,194 287,625 Retek, Inc.* 20,000 435,690 487,500 VERITAS Software Corporation* 5,000 620,656 437,500 $ 2,954,073 $ 4,933,250 Computers _ Memory Devices _ 2.8% EMC Corporation/MASS* 30,000 $ 344,065 $ 1,995,000 Computers _ Micro _ 1.0% Sun Microsystems, Inc.* 26,000 $ 523,875 $ 724,750 Data Processing and Management _ 1.7% CSG International Inc. Systems* 26,000 $ 916,526 $ 1,220,375 Diversified Operations _ 1.6% Berkshire Hathaway Inc., Class B * 500 $ 600,020 $ 1,177,000 *Nonincome-producing security -16- BRIDGES INVESTMENT FUND, INC. SCHEDULE OF PORTFOLIO INVESTMENTS (Continued) DECEMBER 31, 2000 Number Market Title of Security of Shares Cost Value COMMON STOCKS (Continued) Drugs - Medicines _ Cosmetics - 8.1% Abbott Laboratories 15,000 $ 169,395 $ 726,563 Amgen, Inc.* 15,000 463,500 959,062 Bristol-Myers Squibb Co. 8,000 141,675 591,500 Elan Corporation PLC ADR* 20,000 419,005 936,250 Johnson & Johnson 10,000 109,396 1,050,625 Merck & Co., Inc. 16,000 274,266 1,498,000 $ 1,577,237 $ 5,762,000 Electrical Equipment and Supplies - 1.6% General Electric Co. 24,000 $ 147,473 $ 1,150,500 Electric _ Generation _ 3.2% AES Corporation* 22,000 $ 743,237 $ 1,218,250 Calpine Corporation* 17,000 757,529 766,063 Enron Corp. 4,000 346,467 332,500 $ 1,847,233 $ 2,316,813 Electronic Components _ Conductors _ 4.5% Altera Corporation* 25,000 $ 706,937 $ 657,812 Analog Devices, Inc.* 5,000 296,550 255,938 Applied Matrials, Inc.* 9,000 406,500 343,687 Broadcom Corporation Class A* 4,000 667,052 338,000 Intel Corporation 40,000 334,735 1,210,000 PMC - Sierra, Inc.* 5,000 858,094 393,125 $ 3,269,868 $ 3,198,562 Electronics - 2.4% Flextronics International Ltd.* 25,000 $ 814,957 $ 712,500 Solectron Corporation * 30,000 439,416 1,017,000 $ 1,254,373 $ 1,729,500 Finance _ Credit Cards _ 1.5% American Express Company 20,000 $ 837,772 $ 1,098,750 Finance _ Diversified _ 2.5% Citigroup, Inc. 9,999 $ 514,720 $ 510,574 Morgan Stanley, Dean Witter, Discover & Co. 16,000 882,988 1,268,000 $ 1,397,708 $ 1,778,574 Finance _ Investment Banks _ 1.6% Merrill Lynch & Co., Inc. 6,000 $ 168,586 $ 409,125 Goldman Sachs Group, Inc. (The) 7,000 770,350 748,562 $ 938,936 $ 1,157,687 *Nonincome-producing security -17- BRIDGES INVESTMENT FUND, INC. SCHEDULE OF PORTFOLIO INVESTMENTS (Continued) DECEMBER 31, 2000 Number Title of Security of Shares Cost Valuet COMMON STOCKS (Continued) Finance - Real Estate - 2.9% Freddie Mac 30,000 $ 470,320 $ 2,066,250 Finance _ Services - 5.6% Capital One Financial Corporation 47,000 $ 1,229,952 $ 3,093,187 Paychex, Inc. 7,500 154,125 364,687 Providian Financial Corportion 10,000 538,294 575,000 $ 1,922,371 $ 4,032,874 Insurance _ Multiline - 1.4% American International Group, Inc. 10,000 $ 566,397 $ 985,625 Internet Brokers _ 0.5% Charles Schwab Corporation (The) 13,000 $ 397,876 $ 368,875 Linen Supply and Related Products - 0.4% Cintas Corporation* 6,000 $ 166,578 $ 319,125 Medical Instruments - 0.8% Medtronic, Inc. 10,000 $ 504,734 $ 603,750 Motion Pictures and Theatres - 0.9% The Walt Disney Company 22,000 $ 236,300 $ 636,625 Petroleum Producing - 4.0% BP Amoco PLC-Sponsored ADR 19,000 $ 443,238 $ 909,625 Chevron Corporation 10,000 340,535 844,375 Exxon Mobil Corporation 13,000 318,735 1,130,188 $ 1,102,508 $ 2,884,188 Publishing _ Electronic - 0.7% Reuters Group PLC, ADR 5,199 $ 166,303 $ 512,102 Retail Stores _ Apparel and Clothing - 1.8% Gap, Inc. 50,000 $ 521,360 $ 1,275,000 Retail Stores _ Building Materials and Home Improvements _ 1.9% The Home Depot, Inc. 30,000 $ 587,115 $ 1,370,625 Retail Stores _ Department - 1.4% Target Corporation 30,000 $ 146,129 $ 967,500 *Nonincome-producing security -18- BRIDGES INVESTMENT FUND, INC. SCHEDULE OF PORTFOLIO INVESTMENTS (Continued) DECEMBER 31, 2000 Number Market Title of Security of Shares Cost Value COMMON STOCKS (Continued) Telecommunications - 7.4% Level 3 Communications, Inc. * 30,000 $ 1,060,546 $ 984,375 Sprint PCS Corporation * 20,000 581,333 408,750 Vodafone Airtouch PLC 40,000 915,541 1,432,500 West Teleservices Corporation* 75,000 1,150,972 2,109,375 WorldCom, Inc. * 25,000 588,656 350,000 $ 4,297,048 $ 5,285,000 Telecommunications _ Equipment _ 5.9% Nokia Corporation Sponsored ADR 50,000 $ 585,643 $ 2,175,000 Qualcomm Inc. * 25,000 455,060 2,054,688 $ 1,040,703 $ 4,229,688 Telecommunications - Satellite - 0.4% EchoStar Communications Corporation* 11,000 $ 562,281 $ 250,250 Television _ Cable _ 0.6% Comcast Corporation* 10,000 $ 309,375 $ 417,500 Transportation _ Airfreight _ 1.2% EGL, Inc. * 35,000 $ 466,542 $ 837,812 TOTAL COMMON STOCKS (Cost - $31,805,196) $31,805,196 $59,488,293 PREFERRED STOCKS (1.3%) Banking and Finance _ 0.8% CFB Capital II 8.20% Cumulative Preferred 5,000 $ 125,000 $ 119,375 CFC Capital Trust 9.375% Preferred, Series B 5,000 125,000 117,500 Harris Preferred Capital Corp., 10,000 250,000 236,250 7.375%, Series A Silicon Valley Bancshares 5,000 125,000 102,500 8.25% Preferred Series I $ 625,000 $ 575,625 Oil Comp. _ Exploration and Production _ 0.2% Canadian Occidental Petroleum Ltd. 5,000 $ 125,000 $ 115,312 9.375% Preferred _ Series I *Nonincome-producing security -19- BRIDGES INVESTMENT FUND, INC. SCHEDULE OF PORTFOLIO INVESTMENTS (Continued) DECEMBER 31, 2000 Number Market Title of Security of Shares Cost Value Utilities _ Electric _ 0.3% Tennessee Valley Authority 6.75% 10,000 $ 250,000 $ 233,750 Variable Preferred Series D Total Preferred Stocks (Cost - $1,000,000) $ 1,000,000 $ 924,687 Total Stocks (Cost - $32,805,196) $32,805,196 $60,412,980 DEBT SECURITIES (15.1%) Auto-Cars/Light Trucks _ 0.4% General Motors Corporation 7.700% Debentures due April 15, 2016 $250,000 $ 252,320 $ 250,715 Energy _ Alternate Sources - 0.3% CalEnergy Co., Inc., 7.630% Notes due October 15, 2007 $200,000 $ 200,000 $ 205,779 Hotels and Motels _ 0.4% Marriot International 7.875% Notes Series C due September 15, 2009 $250,000 $ 250,068 $ 257,302 Household Appliances and Utensils - 0.1% Maytag Corp., 9.750% Notes, due May 15, 2002 $100,000 $ 102,200 $ 104,330 Retail Stores _ Department - 0.3% Dillard Department Stores, Inc., 7.850% Debentures, due October 1, 2012 $150,000 $ 151,347 $ 103,237 Sears Roebuck & Co., 9.375% Debentures due November 1, 2011 100,000 $ 106,399 111,462 $ 257,746 $ 214,699 Telecommunications _ 0.3% Level 3 Communications, Inc., 9.125% Senior $250,000 $ 241,938 $ 205,551 Notes due May 1, 2008 U.S. Government _ 3.7% U.S. Treasury, 8.000% Notes, due May 15, 2001 $200,000 $ 199,052 $ 201,594 U.S. Treasury, 7.500% Notes, due May 15, 2002 200,000 214,098 205,594 U.S. Treasury, 10.750% Bonds due February 15, 2003 200,000 219,525 221,969 BRIDGES INVESTMENT FUND, INC. SCHEDULE OF PORTFOLIO INVESTMENTS (Continued) DECEMBER 31, 2000 Principal Market Title of Security Amount Cost Value DEBT SECURITIES (Continued) U.S. Treasury, 7.250% Notes, due May 15, 2004 300,000 303,245 319,313 U.S. Treasury, 7.500% Notes, due February 15, 2005 300,000 305,871 326,390 U.S. Treasury, 9.375% Bonds, due February 15, 2006 200,000 256,222 238,000 U.S. Treasury, 7.625% Bonds, due February 15, 2007 300,000 307,910 306,516 U.S. Treasury, 8.750% Bonds, due November 15, 2008 200,000 237,472 217,781 U.S. Treasury, 9.125% Bonds, due May 15, 2009 200,000 234,910 222,687 U.S. Treasury, 7.500% Bonds, due November 15, 2016 300,000 308,539 361,687 $ 2,586,844 $ 2,621,531 Commercial Paper _ Short Term _ 9.6% American Express Credit Corporation Commercial Paper Note 6.258% due January 5, 2001 2,500,000 $ 2,500,000 $ 2,500,000 Ford Motor Credit Corporation Commercial Paper Note 6.358% due January 2, 2001 3,200,000 3,200,000 3,200,000 General Electric Credit Corporation Commercial Paper Note 5.907% due January 5, 2001 1,125,000 1,125,000 1,125,000 $ 6,825,000 $ 6,825,000 TOTAL DEBT SECURITIES (Cost - $10,716,116) $10,716,116 $10,684,907 TOTAL INVESTMENTS IN SECURITIES - (99.5%) (Cost - $43,521,312) $43,521,312 $71,097,887 CASH AND RECEIVABLES LESS TOTAL LIABILITIES _ (0.5%) 313,633 NET ASSETS, December 31, 2000 _ (100.0%) $71,411,520 The accompanying notes to financial statements are an integral part of this schedule.
-20- BRIDGES INVESTMENT FUND, INC. STATEMENT OF ASSETS AND LIABILITIES DECEMBER 31, 2000
ASSETS Amount Investments, at market value Common and preferred stocks (cost $32,805,196) $60,412,980 Debt securities (cost $10,716,116) 10,684,907 Total investments $71,097,887 Cash 220,602 Receivables Dividends and interest 97,932 Subscriptions to capital stock 320,860 Securities Sold 302 TOTAL ASSETS $71,737,583 LIABILITIES Dividend distributions payable $ 185,030 Redemption of capital stock 9,774 Investment advisor, management and service fees payable 90,696 Accrued operating expenses 40,563 TOTAL LIABILITIES $ 326,063 NET ASSETS Capital stock, $1 par value - Authorized 3,000,000 shares, 1,850,301 shares outstanding $ 1,850,301 Paid-in surplus - 42,266,307 Net capital paid in on shares $44,116,608 Net unrealized appreciation on investments 27,576,575 Accumulated undistributed net realized losses (286,307) Accumulated undistributed net investment income 4,644 TOTAL NET ASSETS $71,411,520 NET ASSET VALUE PER SHARE $38.59 OFFERING PRICE PER SHARE $38.59 REDEMPTION PRICE PER SHARE $38.59
[FN] The accompanying notes to financial statements are an integral part of this statement. -21- BRIDGES INVESTMENT FUND, INC. STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2000
INVESTMENT INCOME Amount Interest $846,707 Dividends (Net of foreign withholding taxes of $4,981) 387,114 Total Investment Income $ 1,233,921 EXPENSES Management fees $ 369,341 Custodian fees 46,934 Insurance and Other Administrative Fees 25,395 Bookkeeping services 22,839 Printing and supplies 16,459 Professional services 16,742 Dividend disbursing and transfer agent fees 26,475 Computer programming 5,550 Taxes and licenses 1,065 Total Expenses $ 530,800 NET INVESTMENT INCOME $ 703,021 NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS Net realized loss on transactions in investment securities $ (68,062) Net decrease in unrealized appreciation of investments (11,774,401) NET REALIZED AND UNREALIZED LOSS ON INVESTMENTS $(11,842,463) NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS $(11,139,442) The accompanying notes to financial statements are an integral part of this statement.
-22- BRIDGES INVESTMENT FUND, INC. STATEMENTS OF CHANGES IN NET ASSETS FOR THE YEAR ENDED DECEMBER 31, 2000 AND 1999
2000 1999 INCREASE IN NET ASSETS Operations - Net investment income $ 703,021 $ 434,398 Net realized gain/(loss) on transactions in investment securities (68,062) 2,401,788 Net increase/(decrease) in unrealized appreciation of investments (11,774,401) 16,580,965 Net increase/(decrease) in net assets resulting from operations $(11,139,442) $19,417,151 Net equalization credits 13,498 3,190 Distributions to shareholders from - Net investment income (703,021) (434,398) Net realized gain from investment transactions (1,277,024) (1,343,009) Return of capital (10,248) (6,815) Net capital share transactions 14,792,073 3,666,452 Total increase in Net Assets $ 1,675,836 $21,302,571 NET ASSETS: Beginning of year $ 69,735,684 $48,433,113 End of year $ 71,411,520 $69,735,684 The accompanying notes to financial statements are an integral part of these statements.
-23- BRIDGES INVESTMENT FUND, INC. NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2000 (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 accounting principles generally accepted in the United States of America. 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 for Federal Income tax purposes is approximately the same as the cost of investments reflected in the accompanying statement of net assets and schedule of portfolio investments. The difference between cost and quoted market value of securities is reflected separately as unrealized appreciation (depreciation) as applicable.
Net unrealized appreciation 2000 1999 Net Change (depreciation): Aggregate gross unrealized appreciation on securities $30,194,492 $39,880,716 Aggregate gross unrealized depreciation on securities (2,617,917) (529,740) Net $27,576,575 $39,350,976 $(11,774,401)
The net realized gain (loss) from the sales of securities is determined for income tax and accounting purposes on the basis of the cost of specific securities. The gain computed on the basis of average cost would have been substantially the same as that reflected in the accompanying statement of operations. -24- B. Federal 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. -25- 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 twelve months ended December 31, 2000. (3) DIVIDEND DISBURSING AND TRANSFER AGENT 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:
2000 1999 United States government obligations $ -- $ -- Other Securities 23,216,912 9,166,680 Total Cost $23,216,912 $9,166,680
Net proceeds from sales of long-term investments during the years ended December 31, were:
2000 1999 United States government obligations $ 200,000 $ 200,500 Other Securities 12,036,551 8,675,466 Total Net Proceeds $12,236,551 $8,875,966
(5) NET ASSET VALUE The net asset value per share represents the effective price for all subscriptions and redemptions. -26- (6) CAPITAL STOCK Shares of capital stock issued and redeemed are as follows:
2000 1999 Shares sold 377,263 123,704 Shares issued to shareholders in reinvestment of net investment income and realized gain from security transactions 37,066 35,210 414,329 158,914 Shares redeemed 72,181 64,491 Net increase 342,148 94,423
Value of capital stock issued and redeemed is as follows:
2000 1999 Shares sold $16,215,549 $4,777,640 Shares issued to shareholders in reinvestment of net investment income and realized gain from security transactions 1,548,820 1,435,313 $17,764,369 $6,212,953 Shares redeemed 2,972,296 2,546,501 Net increase $14,792,073 $3,666,452
(7) DISTRIBUTIONS TO SHAREHOLDERS On December 29, 2000 a cash distribution was declared from net investment income accrued through December 31, 2000. This distribution was ultimately calculated as $.100 per share aggregating $185,030. The dividend will be paid on January 23, 2001 to shareholders of record on December 29, 2000. -27- FINANCIAL HIGHLIGHTS* Per share income and capital changes for a share outstanding for each of the last five years were:
2000 1999 1998 1997 1996 Net Asset Value, Beginning of Period $46.24 $34.26 $29.02 $24.56 $21.54 Income/(Loss) From Investment Operations Net Investment Income $ .40 $ .30 $ .44 $ .51 $ .55 Net Gains or (Losses) on Securities (both realized and unrealized) (6.84) 12.89 7.36 4.77 3.28 Total From Investment Operations $(6.44) $13.19 $ 7.80 $ 5.28 $ 3.83 Less Distributions Dividends from net investment income $ (.40) $ (.30) $ (.44) $ (.51) $ (.55) Distributions from capital gains (.81) (.91) (2.12) (.31) (.26) Total Distributions $(1.21) $(1.21) $(2.56) $ (.82) $ (.81) Net Asset Value, End of Period $38.59 $46.24 $34.26 $29.02 $24.56 Total Return (14.09)% 38.90% 27.48% 22.33% 18.06% Ratios/Supplemental Data Net Assets, End of Period (in thousands) $71,412 $69,736 $48,433 $36,648 $29,249 Ratio of Expenses to Average Net Assets** .72% .73% .77% .81% .87% Ratio of Net Investment Income to Average Net Assets ** .95% .78% 1.37% 2.64% 3.23% Portfolio Turnover Rate 19% 16% 24% 8% 8% * Per share income and capital change data is computed using the weighted average number of shares outstanding method. ** Average net asset data is computed using monthly net asset value figures.
Bridges Investment Fund, Inc. January 23, 2001 Shareholder Communication Annual Report for 2000 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 16 years. Mr. Brian M. Kirkpatrick, Vice President of the Fund and Director of Research for Bridges Investment Counsel, Inc., is capable for assuming portfolio management responsibilities of the Fund in instances where his decisions would be needed. Mr. Kirkpatrick has a more than eight year career with the Firm. 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, 1997. He is available to be a back-up person to Mr. Bridges III whenever the assumption of that responsibility is appropriate or required. Mr. Bridges' career as an investment adviser covers a span of more than 41 years. Item 5A.(a) The first response under this disclosure is Item 5A.(a) that requests the management to briefly discuss those factors, including relevant market conditions and the investment strategies and techniques pursued by the Fund's investment adviser, that materially affected the performance of the Registrant during the most recently completed fiscal year. The investment performance for 2000, the most recently completed fiscal year, developed a negative 14.09% total return for a $10,000 investment with cash distributions reinvested in shares of capital stock in the Fund. 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 Shareholder Communication MD&A-2 January 23, 2001 broad-based securities market index. In a table placed within or contiguous to the graph, the Fund's average annual total returns for the one, five, and ten- year periods ended on the last day of the most recent fiscal year, computed in accordance with applicable SEC regulations and guidelines, are provided. This line graph appears on page MD&A 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 2000 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 in the typical year 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. In 2000, the Fund's total return trailed the S & P by a wide margin. 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 -- 2000. 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 1998 to 2000 time frame. 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 23, 2001 Value of a $10,000 Investment
% Chg. % Chg. % Chg. Annual Prior Prior Prior Report Yr. Yr. Yr. Year Investment 1 Yr. Disclo. 5 Yr. Disclo. 10 Yr. Disclo. 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 1999 BIF, Inc. 13,891 + 9.3 33,467 +38.9 46,614 +13.6 2000 BIF, Inc. 8,591 -38.1 21,948 -34.4 39,332 -15.6 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 1999 S&P 500 12,101 -.5.8 35,026 +19.3 53,075 - 8.8 2000 S&P 500 9,089 -24.9 23,163 -33.9 49,728 - 6.2 Sources: Graphs in MD&A Reports 1993 through 1999 N.C.: Not Calculated
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 the comparative 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 Year BIF S & P 500 1990 10,000.00 10,000.00 1991 13,033.66 12,100.29 1992 14,025.42 12,829.27 1993 15,430.01 13,635.24 1994 15,639.14 13,675.08 1995 21,494.40 17,907.17 1996 26,417.74 21,139.87 1997 35,220.11 25,859.05 1998 45,264.93 32,963.12 1999 54,777.52 45,786.00 2000 49,787.68 39,332.32 (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.) Average Annual Total Return for Bridges Investment Fund, Inc.: 1 Year - 14.09% 5 Year 17.04% 10 Year 14.68% Past Performance is not predictive of future performance. Shareholder Communication MD&A-5 January 23, 2001 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. -----END PRIVACY-ENHANCED MESSAGE-----