N-30B-2 1 body.htm BRIDGES INVESTMENT FUND, INC

 

 

BRIDGES INVESTMENT FUND, INC.

8401 West Dodge Road
256 Durham Plaza
Omaha, Nebraska 68114
(402) 397-4700

THIRD QUARTER
SHAREHOLDER REPORT

2003

 

 

Contents of Report

Pages 1 to 3

Shareholder Letter

Exhibit 1

Portfolio Transactions from July 1, 2003, through September 30, 2003

Exhibit 2

Quarter to Quarter Changes in Financial Data

Pages F1 to F14

Unaudited Financial Statements for the Nine Months EndedSeptember 30, 2003

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.

 

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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

Randall D. Greer

Vice President

Brian M. Kirkpatrick

Vice President

Mary Ann Mason

Secretary

Kathleen J. Stranik  

Assistant Secretary

Nancy K. Dodge

Treasurer

Linda J. Morris

Assistant Treasurer

Trinh Wu

Controller


Independent Auditors

Deloitte & Touche LLP

First National Tower

1601 Dodge Street, Suite 3100

Omaha, Nebraska 68102


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

Special Counsel
 

Ballard Spahr Andrew & Ingersoll, LLP

1225 Seventeenth Street, Suite 2300

Denver, Colorado 80202

 

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October 20, 2003

Dear Shareholder:

Investment Results

Bridges Investment Fund, Inc. had a total return of 3.31% during the Third Quarter of 2003 based on a June 30, 2003, net asset value of $27.15 per share and a September 30, 2003, net asset value of $27.99 per share. On a calendar year-to-date basis for the period ending September 30, the Fund had a total return of 21.93%, and on a trailing 12-month basis for the period ending September 30, the Fund had a total return of 29.87%. By comparison, the S&P 500 had total returns of 2.65% for the Third Quarter, 14.71% for the first nine months of the calendar year, and 24.38% for the trailing 12-months' period ending September 30, 2003.

The following table summarizes the ten largest equity holdings in the Fund as of September 30, 2003:
                       
   

09/30/03

%

% of

Price

Price

EPS

EPS

    

EPS Lt

No. of

  

Market

of

Total

% Chg

% Chg

5 Yr Hist

% Chg

P/E

P/E

Future

Shares

Company

Value

Equities

Assets

QTD

12 Mos

Gr Rate

03 Vs 02

2003

2004

Gr Rate

53,500

Capital One

3,051,640

6.2%

5.5%

16.0%

63.3%

31%

19%

12.2

10.7

17%

40,000

Altria

1,752,000

3.6%

3.2%

-3.6%

12.9%

10%

1%

9.5

8.9

9%

60,000

Alcoa

1,569,600

3.2%

2.8%

2.6%

35.5%

-4%

20%

23.4

16.0

12%

32,500

Best Buy

1,544,400

3.1%

2.8%

8.2%

113.0%

24%

7%

24.9

19.7

15%

45,000

MBNA

1,026,000

2.1%

1.8%

9.4%

24.0%

22%

18%

13.2

11.8

14%

20,000

Morgan Stanley

1,009,200

2.1%

1.8%

18.0%

48.9%

-5%

18%

15.1

14.3

13%

250

First Natl. of Nebraska

981,250

2.0%

1.8%

-0.1%

35.2%

-

11%

-

-

-

15,000

Amgen

967,800

2.0%

1.7%

-2.2%

54.7%

14%

39%

33.4

27.3

21%

30,000

Home Depot

955,500

1.9%

1.7%

-3.8%

22.0%

18%

13%

18.1

16.2

13%

22,000

Harrah's Entertainment

926,420

1.9%

1.7%

4.6%

-12.7%

23%

-3%

14.5

13.8

13%
                       
   

13,783,810

28.1%

24.8%

              
                       
 

Total Equities

49,074,074

  

88.3%

              
                       
 

Total Assets

55,560,048

                  

The Third Quarter of 2003 saw a continuation of the stock price progress that was extended in the Second Quarter, albeit at a slower rate. During the Third Quarter, the S&P 500 had a total return of 2.65%; Bridges Investment Fund posted a total return of 3.31%.

The positive returns for equities in the Third Quarter were driven by generally good corporate earnings growth during the first two quarters of 2003 and an expectation that continued economic progress will unfold over the next 12 months, resulting in further improvements in corporate profitability.

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Shareholder Letter                                                    2                                         October 20, 2003

 

In the Second Quarter, we noted that the Fund's equities continued to offer good long-term capital appreciation potential in our view despite their strong recovery off the market lows reached in March. While the Fund's equities on balance performed well during the Third Quarter, we continue to believe that their current valuations should allow for good long-term investment performance over the next three-to-five years.

We continue to expect the equity market to be characterized by relatively high levels of volatility given the general level of uncertainty regarding prospects for the economy in the foreseeable future. Our approach remains committed to using periodic bouts of significant market weakness as opportunities to increase positions in companies which we believe have outstanding long-term business franchises and which sell at attractive valuation levels.

Financial Statements

The Fund's unaudited financial statements appear on pages F-1 through F-13. The Schedule of Portfolio Investments, the Statement of Assets and Liabilities, the Statement of Operations, the Statement of Changes in Net Assets, and the Notes to Financial Statements are presented as of September 30, 2003. These pages comprise our basic report to you. In addition, please refer to Exhibits 1 and 2 for information about the Fund's portfolio transactions for the Third Quarter of 2003 and for the Fund's historical information with respect to net assets, shares outstanding, net asset value per share, dividends, and capital gains distributions from 1963 through 2002. Exhibit 2 also records quarterly information for the September 30, 2003, period compared to the September 30, 2002, results.

Cash Distributions

On October 7, 2003, the Board of Directors declared a $.06 per share dividend on the shares of capital stock that were outstanding as of the close of business om October 7, 2003, the record date for this income distribution. This dividend amount will be payable on or about October 20, 2003. This dividend is composed of net investment income earned during the July-September, 2003, Quarter.

Outlook

The U.S. economy is continuing to recover from the general business slowdown of the early years in this decade. Corporate earnings have rebounded off their recession-induced low points, but, in many cases, a recovery of former peak levels has yet to be attained, particularly for those companies where capital spending drives bottom line results. Job losses to countries outside America are likely to restrain dynamic progress toward a new cyclical expansion. However, common stock investors sense profit opportunities, and there can and should be optimism that the three-year bear market that began in March, 2000, has a strong probability to have ended in the First Quarter of 2003. Confidence in the future of equity investments in American companies should be building in the months and years ahead.

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Shareholder Letter                                                    3                                      October 20, 2003

 

 

Closing Thoughts

Once again, the Board of Directors and the management of the Fund have the opportunity to thank the shareholders for their commitment to our Company. The comparative numbers in Exhibit 2, especially the current quarter of September 30, 2003, to the same period in 2002, demonstrate dramatic positive progress off the market cycle lows in 2002. We still have a long distance to travel to fully restore the former value in your shares, but these numbers tell us that this journey is well underway.

Sincerely yours,

 

Edson L. Bridges III, CFA

President

 

Edson L. Bridges II, CFA

Chairman

ELBIII:ELBII:kjs

 

 

 

 

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Exhibit 1

BRIDGES INVESTMENT FUND, INC.

PORTFOLIO TRANSACTIONS

DURING THE PERIOD FROM

JULY 1, 2003, THROUGH SEPTEMBER 30, 2003

 

 

Securities

Common Stocks Unless

 Described Otherwise

Bought or

Received

$1,000 Par

Value (M)

or Shares

Held After

Transaction

$1,000 Par

Value (M)

or Shares
     

    Apollo Group, Inc.

   3,000

  3,000

    Cardinal Health, Inc.

   4,000

  7,000

(1) Cavco Industries, Inc.

               250

    250

(2) Ebay, Inc.

             7,000

 14,000

    Electronic Data Systems Notes

     7.125% due 10/15/09

               250M

    250M

    Expeditors Int'l. Washington

            13,000

 13,000

     Kraft Foods, Inc. Notes

     6.250% due 06/01/12

               250M

    250M

     Lowes Companies

             5,000

  5,000

     Marsh & McLennan Cos.

             3,000

  8,000

(3) Medco Health Solutions, Inc.

             1,206

  1,206

    Nucor Corporation

             3,000

  8,000

    Stryker Corporation

             3,000

  3,000

    Trinity Industries, Inc.

             5,000

 20,000

    Various Issues of Commercial

     Paper Notes Purchased during

     3rd Quarter, 2003

            19,131M

  1,010M

 

 

Securities

Common Stocks Unless

 Described Otherwise

Sold or

Exchanged

$1,000 Par

Value (M)

or Shares

Held After

Transaction

$1,000 Par

Value (M)

or Shares
     

    Cintas Corp

  10,000

     --

    Egl, Inc.

  35,000

     --

    Northern Trust Co.

   5,000

     --

    Paychex, Inc.

  10,000

     --

    WorldCom, Inc. GA New

            25,000

     --

    Yum! Brands, Inc.

            15,000

     --

    Various Issues of Commercial 

      Paper Notes Maturing during

      3rd Quarter, 2003

            18,816M

     --

 

 

(1)  Received 250 shares in a spin-off of Centex Corp. on July 1, 2003.

(2)  Received 7,000 shares in a 2-for-1 stock split on August 29, 2003.

(3)  Received 1,206 shares in a spin-off of Merck on August 20, 2003.

 

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Exhibit 2

BRIDGES INVESTMENT FUND, INC.
 SELECTED HISTORICAL FINANCIAL INFORMATION

 - - - - - - - - - - - - -Year End Statistics - - - - - - - - - - - - -
 

Valuation
  Date

Net
Assets

Shares
Outstanding

Net Asset
Value/Share

Dividend/
Share

Capital
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

12-31-01

60,244,912

1,940,494

 31.05

   .26

     --

12-31-02

45,854,541

1,989,769

 23.05

   .20

     --

- - - - Current Quarter Compared to Same Quarter in Prior Year - - - -  

Valuation
  Date

Net
Assets

Shares
Outstanding

Net Asset
Value/Share

Dividend/
Share

Capital
Gains/Share
           

09-30-02

43,299,139

  1,992,957

21.73

.050

     -

09-30-03

55,560,048

1,985,237

27.99

.060

     -

 

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F 1


BRIDGES INVESTMENT FUND, INC.

SCHEDULE OF PORTFOLIO INVESTMENTS

SEPTEMBER 30, 2003

(Unaudited)


Title of Security

Number
of Shares


Cost

Fair
Value

      COMMON STOCKS   (88.3%)

      
       

Advertising   1.3%

      

  Omnicom Group, Inc.

 10,000

$   654,802

$   718,500
       

Airfreight & Logistics   0.8%

      

  Expeditors Int'l. Washington

 13,000

$   479,994

$   447,200
       

Aluminum   2.8%

      

  Alcoa, Inc.

 60,000

$ 1,701,327

$ 1,569,600
       

Asset Management   1.2%

      

  State Street

 15,000

$    62,367

$   675,000
       

Auto Parts & Equipment   0.9%

      

  Johnson Controls

  5,000

$   385,750

$   473,000
       

Banks   Diversified   1.4%

      

  Wells Fargo

 15,000

$   515,731

$   772,500
       

Banks   Regional   2.8%

      

  Fifth Third Bancorp

 10,000

$   486,522

$   555,400

  First National Bank   Nebraska

    250

    401,835

    981,250
   

$   888,357

$ 1,536,650
       

Biotechnology   1.7%

      

  Amgen, Inc.*

 15,000

$   463,500

$   967,800
       

Broadcasting & Cable   0.6%

      

  Comcast Corporation Special Class A

 12,000

$   356,075

$   355,680
       

Casinos & Gaming   1.7%

      

  Harrah's Entertainment, Inc.*

 22,000

$   729,839

$   926,420
       

Communications Equipment   2.5%

      

  Cisco Systems, Inc.*

 40,000

$   361,396

$   783,600

  Nokia ADR

 40,000

    421,175

    624,000
   

$   782,571

$ 1,407,600
       

Computer Hardware   0.2%

      

  Sun Microsystems, Inc.*

 30,000

$   595,357

$    99,300
       

Computer Storage/Peripherals   0.8%

      

  EMC Corporation/MASS*

 35,000

$  494,601

$   442,050
       

Conglomerates   Industrial   0.5%

      

  General Electric

 10,000

$   270,842

$   298,100
       

Education   Higher   0.4%

      

  Apollo Group, Inc.*

  3,000

$   193,740

$   198,090

*Nonincome producing security

 

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F 2

BRIDGES INVESTMENT FUND, INC.

SCHEDULE OF PORTFOLIO INVESTMENTS
(Continued)

SEPTEMBER 30, 2003
(Unaudited)


Title of Security

Number
of Shares


Cost

Fair
Value

       COMMON STOCKS   (Continued)        

      

Electronic Manufacturing Services   2.1%

      

  Flextronics International*

 60,000

$ 1,175,477

$   853,200

  Solectron Corporation*

 50,000

    595,457

    292,500
   

$ 1,770,934

$ 1,145,700
       

Finance   Consumer   7.3%

      

  Capital One Financial

 53,500

$ 1,935,422

$ 3,051,640

  MBNA Corporation

 45,000

    921,634

  1,026,000
   

$ 2,857,056

$ 4,077,640
       

Financial Services   Diverse   0.8%

      

  Citigroup

  9,999

$   481,932

$   455,054
       

Financing   Thrifts & Mortgage   1.4%

      

  Federal Home Loan

 15,000

$   461,417

$   785,250
       

Foods/Meats   Packaged   0.4%

      

  ConAgra Foods

 10,000

$   217,874

$   212,400
       

Health Care   Distributors   0.8%

      

   Cardinal Health

  7,000

$   430,416

$   408,730

   Medco Health Solutions, Inc.*

  1,206

     11,451

     31,272
   

$   441,867

$   440,002
       

Homebuilding   1.9%

      

  Cavco Industries, Inc. *

    250

$     3,378

$     5,358

  Centex

  5,000

    265,517

    389,400

  Horton (D.R.)

 20,000

    407,704

    654,000
   

$   676,599

$ 1,048,758
       

Hotels/Resorts/Cruise Lines   0.6%

      

  Carnival Corporation

 10,000

$   253,072

$   328,950
       

Hypermarkets & Supercenters   0.6%

      

  Costco Wholesale

 10,000

$   317,415

$   311,500
       

Insurance   Brokers   0.7%

      

  Marsh & McLennan

  8,000

$   412,655

$   380,880
       

Insurance   Multi Line   1.0%

      

  American International Group

 10,000

$   566,397

$   577,000
       

Insurance   Property/Casualty   1.6%

      

  Berkshire Hathaway Class B*

    350

$   492,609

$   873,600
       

Internet Software & Services   1.2%

      

  Retek*

 25,000

$   369,992

$   168,750

  United Online*

 15,000

    283,160

    521,850
   

$   653,152

$   690,600

*Nonincome producing security

-------------------------------------------------------------------------------------

 

F 3



BRIDGES INVESTMENT FUND, INC.

SCHEDULE OF PORTFOLIO INVESTMENTS
(Continued)

SEPTEMBER 30, 2003
(Unaudited)


Title of Security

Number
of Shares


Cost

Fair
Value

       COMMON STOCKS   (Continued)        

      
       

Investment Bank & Brokerage   3.0%

      

  Goldman Sachs Group

  8,000

$   694,445

$   671,200

  Morgan Stanley

 20,000

  1,127,600

  1,009,200
   

$ 1,822,045

$ 1,680,400
       

Machinery   Construction/Farming   0.9%

      

  Trinity Industries

 20,000

$   386,383

$   517,000
       

Medical   Products   0.4%

      

  Stryker Corporation

  3,000

$   230,903

$   225,930
       

Merchandise   General   1.4%

      

  Target Corporation

 20,000

$   316,811

$   752,600
       

Movies & Entertainment   0.7%

      

  Viacom "B"*

 10,000

$   397,500

$   384,900

Oil & Gas   Integrated   2.7%

      

  BP PLC   Sponsored ADR

 19,000

$   443,238

$   799,900

  Chevron/Texaco

 10,000

    340,535

    714,500
   

$   783,773

$ 1,514,400
       

Pharmaceuticals   4.9%

      

  Abbott Laboratories

 15,000

$   169,395

$   638,250

  Elan ADS*

 15,000

    371,827

     79,350

  Johnson & Johnson

 15,000

    338,948

    742,800

  Merck & Co., Inc.

 10,000

    197,534

    506,200

  Pfizer, Inc.

 25,000

    787,050

    759,500
   

$ 1,864,754

$ 2,726,100

Publishing   0.7%

      

  Gannett Company

  5,000

$   393,980

$   387,800
       

Restaurants   1.0%

      

  Outback Steakhouse*

 15,000

$   509,594

$   568,050
       

Retail   Apparel   1.5%

      

  Gap (The), Inc.

 50,000

$   521,360

$   856,000
       

Retail   Computers & Electronics   2.8%

      

  Best Buy*

 32,500

$   739,697

$ 1,544,400
       

Retail   Home Improvement   2.2%

      

  Home Depot

 30,000

$   672,737

$   955,500

  Lowes Companies

  5,000

    276,237

    259,500
   

$   948,974

$ 1,215,000

*Nonincome producing security

-------------------------------------------------------------------------------------

 

 

F 4


BRIDGES INVESTMENT FUND, INC.

SCHEDULE OF PORTFOLIO INVESTMENTS
(Continued)

SEPTEMBER 30, 2003
(Unaudited)


Title of Security

Number
of Shares


Cost

Fair
Value

       COMMON STOCKS (Continued)

      
       

Retail   Internet   1.4%

      

  EBAY, Inc.*

 14,000

$   453,620

$   750,960
       

Semiconductor Equipment   1.6%

      

  Applied Materials*

 50,000

$   911,013

$   906,500
       

Semiconductors   3.9%

      

  Altera*

 30,000

$   901,102

$   567,900

  Analog Devices*

 20,000

    753,090

    760,400

  Intel

 30,000

    503,898

    825,600
   

$ 2,158,090

$ 2,153,900

Services   Data Processing   5.0%

      

  Automatic Data Processing

 20,000

$   919,731

$   717,000

  Concord EFS

 40,000

    683,660

    546,800

  Electronic Data Systems

 10,000

    230,136

    202,000

  First Data

 15,000

    490,500

    599,400

  Fiserv, Inc.*

 20,000

    664,527

    725,800
   

$ 2,988,554

$ 2,791,000
       

Services   Diversified/Commercial   1.5%

      

  West Corporation*

 35,000

$   687,401

$   836,500
       

Soft Drinks   1.2%

      

  PepsiCo.

 15,000

$   192,169

$   687,450
       

Software   Application   1.3%

      

  Fair Isaac and Company, Inc.

 12,000

$   234,627

$   707,520
       

Software   Systems   1.5%

      

  Microsoft

 30,000

$   266,000

$   834,000
       

Steel   0.7%

      

  Nucor

  8,000

$   392,304

$   367,040
       

Telecommunications Services   Integrated   1.6%

      

  Level 3 Communications*

165,000

$ 1,362,169

$   894,300
       

Telecommunications Services   Wireless   1.4%

      

  Sprint PCS Group *

 30,000

$   629,783

$   171,900

  Vodafone Group ADR

 30,000

    772,993

    607,500
   

$ 1,402,776

$   779,400
       

Tobacco   3.2%

      

  Altria Group

 40,000

$ 1,621,692

$ 1,752,000

*Nonincome producing security

---------------------------------------------------------------------------------------------------------------------------------------

 

 

 

F 5


BRIDGES INVESTMENT FUND, INC.

SCHEDULE OF PORTFOLIO INVESTMENTS
(Continued)

SEPTEMBER 30, 2003
(Unaudited)


Title of Security

Shares

or

Principal
Amount


Cost

 

Fair
Value
       

Utilities   Multi   1.8%

      

  AES Corporation*

 70,000

$   844,949

$   519,400

  MDU Resources Group

 15,000

    351,556

    506,700
   

$ 1,196,505

$ 1,026,100
       

       TOTAL COMMON STOCKS

  

$40,960,526

$49,074,074
       

    PREFERRED STOCKS   (1.4%)

      
       

Banking and Finance   0.7%

      

  Harris Preferred Capital Corp.
     7.375% Series A 

 10,000

$   250,000

$   250,700

  Silicon Valley Bancshares 
     8.25% Preferred Series I

  5,000

    125,000

    125,305
   

$   375,000

$   376,005
       

Financial   Reits   0.5%

      

  Equity Office Properties Trust

    7.75% Series G Preferred

  5,000

$   134,766

$   133,500

  Public Storage

    8.00% Series R Preferred

  5,000

    133,250

    133,700
   

$   268,016

$   267,200
       

Oil Companies   Exploration and 

 Production   0.2%

 Production   0.2%

      

  Nexen, Inc. 9.275% Preferred   Series I

  5,000

$   125,000

$   127,300
       

     Total Preferred Stocks  

  

$   768,016

$   770,505
       

       Total Stocks 

  

$41,728,542

$49,844,579
       
       

      DEBT SECURITIES (9.7%)

      
       

Auto Cars/Light Trucks   0.5%

      

  General Motors Corporation 7.700% Debentures
     due April 15, 2016


$250,000


$   252,320


$   267,925
       

Electronic Components   Conductors   0.5%

      

  Applied Materials, Inc. 7.125% Senior Notes

    due October 15, 2017

$250,000

$   256,472

$   290,725
       

Energy   Alternate Sources   0.4%

      

  CalEnergy Co., Inc. 7.630% Notes
    due October 15, 2007


$200,000


$   200,000


$   228,420
       

---------------------------------------------------------------------------------------------------------------------------------------

 

F 6


BRIDGES INVESTMENT FUND, INC.

SCHEDULE OF PORTFOLIO INVESTMENTS
(Continued)

SEPTEMBER 30, 2003
(Unaudited)


Title of Security

Principal
Amount


Cost

Fair
Value
       

Finance   Services   0.5%

      

  MBNA Corporation 7.50% Senior Notes due 

    March 15, 2012

$250,000

$   268,125

$   287,900
       

Foods   Packaged   0.5%

      

  Kraft Foods, Inc. Notes 6.250%

    due 06/01/12

$250,000

$   263,873

$   274,675
       

Hotels and Motels   0.5%

      

  Marriott International 7.875% Notes Series C
    due September 15, 2009


$250,000


$   250,068


$   290,175
       

Medical   Wholesale Drug Distribution   0.5%

      

  Cardinal Health, Inc. 6.75% Notes due

    February 15, 2011

$250,000


$   260,689


$   290,350

Retail Stores   Department   0.9%

      

  Dillard Department Stores, Inc. 7.850%
    Debentures due October 1, 2012


$150,000


$   151,347


$   146,925
       

  Penney, (J.C.) Co., Inc.

    7.40% due April 1, 2037

 

$250,000

 

    263,750

 

    260,000

  

      

  Sears Roebuck & Co. 9.375% Debentures
    due November 1, 2011


$100,000


    106,399


    106,770
   

$   521,496

$   513,695
       

Services   Data Processing   0.5%

      

  Electronic Data Systems Notes 7.125%

    due 10/15/09

$250,000

$   263,750

$   263,625
       

Telecommunications   0.8%

      

  Level 3 Communications, Inc. 9.125% Senior
    Notes due May 1, 2008

$500,000

$   346,223

$   423,750
       

Tobacco   0.4%

      

  R.J. Reynolds Holding 7.250% Notes due
    June 1, 2012

$250,000

$   260,975

$   230,200
       

U.S. Government   1.9% 

      

  U.S. Treasury, 9.375% Bonds,
    due February 15, 2006


$200,000


$   256,222

 
$   236,063
       

  U.S. Treasury, 8.750% Bonds,
    due November 15, 2008


$200,000


    237,473


    201,875
       

  U.S. Treasury, 9.125% Bonds,
    due May 15, 2009


$200,000


    234,910


    210,156
       

 

----------------------------------------------------------------------------------------------------------------------------------------

 

F 7


BRIDGES INVESTMENT FUND, INC.

SCHEDULE OF PORTFOLIO INVESTMENTS
(Continued)

SEPTEMBER 30, 2003
(Unaudited)

 


Title of Security

Principal
Amount


Cost

Fair
Value
       
       

  U.S. Treasury, 7.500% Bonds,
    due November 15, 2016


$300,000


    308,539


    392,016
   

$ 1,037,144

$ 1,040,110
       
       

Commercial Paper   Short Term   1.8%

      

  American Express Credit Corporation

    Commercial Paper Note 0.770%

    due October 10, 2003

 474,929

$   474,929

$   474,929
       

  American Express Credit Corporation

    Commercial Paper Note 0.870%

    due October 17, 2003

 534,909

    534,909

    534,909
   

$ 1,009,838

$ 1,009,838
       

     TOTAL DEBT SECURITIES  

  

$ 5,190,973

$ 5,411,388
       

TOTAL INVESTMENTS IN SECURITIES   (99.4%)


   

$46,919,515

$55,255,967

CASH AND RECEIVABLES
  LESS TOTAL LIABILITIES   (0.6%)


    

  


    304,081

NET ASSETS, September 30, 2003   (100.0%)

  

  

$55,560,048
       

 

 

-----------------------------------------------------------------------------------------------------------------------------------------

F-8


BRIDGES INVESTMENT FUND, INC.

STATEMENT OF ASSETS AND LIABILITIES

SEPTEMBER 30, 2003
(Unaudited)

ASSETS

  

  Investments, at fair value 

  

    Common and preferred stocks (cost $41,728,542)

$49,844,579

    Debt securities (cost $5,190,973)

  5,411,388

        Total investments

$55,255,967
   

  Cash

     64,111

  Receivables

  

    Dividends and interest

    165,075

    Subscriptions to capital stock

    189,688
   

TOTAL ASSETS

$55,674,841
   

LIABILITIES

  

  Investment advisor, management and

  

    service fees payable

$    68,872

  Accrued operating expenses

     45,921

TOTAL LIABILITIES

$   114,793
   

NET ASSETS

  

  Capital stock, $1 par value 

  Authorized 6,000,000 shares, 1,985,237 shares
    outstanding


$ 1,985,237
   

  Paid-in surplus 

 46,667,810

        Net capital 

$48,653,047
   
   
   

  Net unrealized appreciation on investments

  8,336,451

  Accumulated undistributed net realized loss

 (1,555,292)

  Accumulated undistributed net investment income 

    125,842

TOTAL NET ASSETS

$55,560,048
 

===========
   

NET ASSET VALUE PER SHARE 

$27.99
 

======
   

OFFERING PRICE PER SHARE 

$27.99
 

======
   

REDEMPTION PRICE PER SHARE 

$27.99
 

======



The accompanying notes are an integral 
part of these financial statements.

 

--------------------------------------------------------------------------------------

F 9



BRIDGES INVESTMENT FUND, INC.

STATEMENT OF OPERATIONS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2003
(Unaudited)

INVESTMENT INCOME 

 

 

  Interest

$   229,817

 

  Dividends  (Net of foreign withholding taxes

 

 

              of $4,731)

    467,658

 

 

 

 

      Total Investment Income

 

$    697,475

 

 

 

EXPENSES

 

 

  Management fees

    190,665

 

  Custodian fees

     26,816

 

  Insurance and other administrative fees

     23,019

 

  Bookkeeping services

     16,701    

 

  Printing and supplies

     16,262

 

  Professional services

     28,448

 

  Dividend disbursing and transfer

 

 

     agent fees

     21,327

 

  Computer programming

      6,750

 

  Taxes and licenses

        799

 

  Independent directors expense and fees

     12,813   

 

   

 

 

   

 

 

       Total Expenses

 

$    343,600

          NET INVESTMENT INCOME

 

$    353,875

 

 

 

 

 

 

NET REALIZED AND UNREALIZED

 

 

   LOSS ON INVESTMENTS 

 

 

 

 

 

   Net realized loss on transactions in

 

 

       investments

$ (1,101,434) 

 

 

 

 

   Net increase in unrealized appreciation/

 

 

       (depreciation) of investments

  10,965,779

 

 

 

 

       NET REALIZED AND UNREALIZED GAIN

 

 

         ON INVESTMENTS

 

$  9,864,345

 

 

 

 

 

 

NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS

 

$ 10,218,220

 

 

=============





The accompanying notes are an integral
part of these financial statements.

 

-------------------------------------------------------------------------------------

 

F 10



BRIDGES INVESTMENT FUND, INC.


STATEMENTS OF CHANGES IN NET ASSETS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2003 AND 2002
(Unaudited)

 

  2003 

   2002 

INCREASE IN NET ASSETS

    

 Operations 

    

  Net investment income

$  353,875

  $  301,989

  Net realized loss on

    

   transactions in investments 

 (1,101,434) 

   (731,535)

  Net increase/decrease in unrealized

    

   appreciation of investments 

  10,965,779

  (17,954,547)

    Net increase/decrease in net assets

    

    resulting from operations

$ 10,218,220

 $(18,384,093)
     

 Net equalization debits/credits 

   (1,053)

      (432)

 

    

 Distributions to shareholders from 

    

  Net investment income 

  (228,173)

   (179,162)

  Net realized gain from investments

    --

    --

 Return of capital

    --

    --

 Net capital share transactions

   (283,487)

   1,617,914
     

   Total increase/decrease in net assets

$  9,705,507 

 $(16,945,773)
     
     

NET ASSETS:

    

 Beginning of year

$ 45,854,541 

 $ 60,244,912
     
     

 End of nine months

$ 55,560,048

============

 $ 43,299,139

 ============









The accompanying notes are an integral 
part of these financial statements.

--------------------------------------------------------------------------------------

 

F-11

BRIDGES INVESTMENT FUND, INC.

NOTES TO FINANCIAL STATEMENTS

SEPTEMBER 30, 2003

(Unaudited)

 


(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

       Bridges Investment Fund, Inc. (Fund) is registered under the Investment Company
    Act of 1940 as a diversified, open-end management investment company.  The primary
    investment objective of the Fund is long-term capital appreciation.  In pursuit of
    that objective, the Fund invests primarily in common stocks.  The following is a
    summary of significant accounting policies consistently followed by the Fund in
    the preparation of its financial statements.  The policies are in conformity
    with accounting principles generally accepted in the United States of America.

    A.  Investments 

              Security transactions are recorded on trade date.  Dividend income
        is recognized on the ex-divided 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 fair
        value based on quoted market prices.  Quoted market prices represent
        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 price represents the closing bid
        price.  The cost of investments reflected in the statement of assets and
        liabilities and the schedule of portfolio investments is approximately
        the same as the basis used for Federal income tax purposes.  The difference
        between cost and fair value of securities is reflected separately as
        unrealized appreciation (depreciation) as applicable.


 

    2003

    2002 

 Net Change

Net unrealized appreciation
 (depreciation):

    

    

  
       

Aggregate gross unrealized
 appreciation on securities

 $ 12,738,692

 $ 8,297,843

  
       

Aggregate gross unrealized 
 depreciation on securities

 

(4,402,241)


  (13,110,996)

  
       

             Net

  $ 8,336,451

 $ (4,813,153)

$ 13,149,604
 

============

============

=============




            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.

 

--------------------------------------------------------------------------------------

F-12




   B. Federal Income 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.

          For federal income tax purposes, the Fund has a capital loss carryover
      of $355,038 at December 31, 2002, which if not offset by subsequent capital gains
      will expire in 2009.  Also for federal income tax purposes, the Fund deferred the
      recognition of net capital losses incurred subsequent to October 31, 2002 ("Post

      October Losses") of $98,819.  These losses will be realized on January 1,

      2003.

   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 accounting
      principles generally accepted in the United States of America 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 increases and decreases in net assets from operations 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 management 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,

-----------------------------------------------------------------------------------------

 

F-13

 

    equivalent to 1/2 of 1% per annum.  Certain officers and directors of the Fund
    are also officers and directors of the Investment Adviser.  These officers do
    not receive any compensation from the Fund other than that which is received
    indirectly through the Investment Adviser.


      The contract between the Fund and the Investment Adviser provides that total
    expenses of the Fund in any year, exclusive of stamp and other taxes, but including
    fees paid to the Investment Adviser, shall not exceed, in total, a maximum of 1 and
    1/2% of the average month end net asset value of the Fund for the year.  Amounts,
    if any, expended in excess of this limitation are reimbursed by the Investment
    Adviser as specifically identified in the Investment Advisory Contract.   There
    were no amounts reimbursed during the year ended December 31, 2002.


(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 nine months ended
    September 30, was:

 

  2003

   2002
     

Other Securities

$ 8,526,556

$12,032,991
 

===========

===========



      Net proceeds from sales of long-term investments during the nine months
    ended September 30, were:

 

   2003

   2002
     

United States government obligations

$   653,485

$   500,000

Other Securities

  9,253,920

  7,606,424

               Total Net Proceeds

$ 9,907,405

$ 8,106,424
 

===========

===========
     

Total Cost Basis of Securities Sold

$11,008,854

$ 8,839,686
 

===========

===========


(5) NET ASSET VALUE

      The net asset value per share represents the effective price for all
    subscriptions and redemptions.

--------------------------------------------------------------------------------------




F-14


(6) CAPITAL STOCK

      Shares of capital stock issued and redeemed are as follows:

 

   2003

   2002
     

Shares sold

   121,156

   155,464

Shares issued to shareholders in

    

  reinvestment of net investment

    

  income and realized gain from

    

  security transactions

    11,201

     8,361
 

   132,357

   163,825

Shares redeemed

   136,889

   111,363

  Net increase/(decrease)

    (4,532)

    52,462
 

   ========

  ========



      Value of capital stock issued and redeemed is as follows:

 

   2003

    2002
     

Shares sold

$ 3,067,288

$ 4,114,701

Shares issued to shareholders in

    

  reinvestment of net investment 

    

  income and realized gain from

    

  security transactions

    278,944

    223,471
 

$ 3,346,232

$ 4,338,172
     

Shares redeemed

  3,629,719

  2,720,258

  Net increase/(decrease)

$  (283,487)

$ 1,617,914
 

============

============





(7) DISTRIBUTIONS TO SHAREHOLDERS

       On October 7, 2003, a cash distribution was declared from net investment
    income accrued through September 30, 2003.  This distribution was calculated
    as $.06 per share.  The dividend will be paid on October 20, 2003 to
    shareholders of record on October 7, 2003.