OFFERING CIRCULAR
- -----------------
Bank Investment Fund
Fund One
75 Park Plaza
Boston, Massachusetts 02116-3934
617-695-0415
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The Bank Investment Fund (the "Corporation") is an investment company
which currently invests and manages two mutual funds derived from voluntary
subscriptions made by eligible investors.
Fund One (the "Fund") is a no-load, diversified, open-end investment
fund whose objective is maximum current income consistent with liquidity
and the maintenance of a portfolio of high quality investments in short and
intermediate term marketable securities issued by the United States
Government and its agencies, repurchase agreements and certain money market
instruments. The Fund is designed solely for use by eligible investors as
an economical and convenient way to make liquid investments. Fund shares
are currently offered to the following eligible investors: Massachusetts
Co-operative Banks, Massachusetts Savings Banks, Massachusetts Trust
Companies, Federally Chartered Savings Banks and Savings and Loan
Associations with their principal place of business in Massachusetts, The
Co-operative Central Bank Reserve Fund, The Savings Bank Life Insurance
Company of Massachusetts, the National Cooperative Bank, and directly or
indirectly wholly-owned subsidiaries of such institutions (sometimes
hereinafter called "Banks").
Investors should read this Offering Circular and retain it for future
reference.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION, NOR HAS THE COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS OFFERING CIRCULAR. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
COMMISSIONER OF BANKS OF THE COMMONWEALTH OF MASSACHUSETTS (the
"Commissioner of Banks"), NOR HAS THE COMMISSIONER OF BANKS PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS OFFERING CIRCULAR. ANY REPRESENTATION TO THE
CONTRARY IS UNLAWFUL.
THE SHARES BEING OFFERED ARE NOT SAVINGS ACCOUNTS OR DEPOSITS AND ARE
NOT INSURED OR GUARANTEED. SUCH SHARES ARE BEING OFFERED PURSUANT TO AN
EXEMPTION FROM THE SECURITIES ACT OF 1933 AND APPLICABLE STATE SECURITIES
ACTS AND HAVE NOT BEEN REGISTERED OR QUALIFIED UNDER SUCH ACTS.
--------------------------------
The date of this Offering Circular is August 27, 1999
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
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<S> <C>
Risk Return Summary 1
Investment Objectives 1
Principal Investment Strategies 1
Principal Investment Risk 1
Bar Chart and Performance Table 2
Management Discussion 4
Fee Table 4
Investment Objectives and Restrictions 5
Statutory Limitation on Investments 6
Dividends 7
Net Asset Value 7
Investors' Accounts 7
Taxes 7
Auditors and Legal 8
Yield 8
How Shares of Fund are Purchased 8
How Shares of Fund are Redeemed 9
Transfer Restrictions 10
Organization 10
Description of Fund Shares 11
Supervision and Regulation 11
Investment Advisor 11
Transfer Agent 12
Operating and Distribution Expenses 12
Exchange Privilege 13
Custodian 13
Year 2000 13
Management of the Fund 14
Financial Highlights 16
Independent Auditor's Report 18
Financial Statements 19
Investments 22
Account Application Forms 34
Additional Information Back Cover
</TABLE>
BANK INVESTMENT FUND
FUND ONE
75 Park Plaza
Boston, Massachusetts 02116-3934
RISK RETURN SUMMARY
Investment Objectives
The investment objective of Fund One is to maximize current income
consistent with liquidity of assets and safety of principal.
The Fund was formed to provide participating banks with a highly
liquid, diversified, high-quality investment vehicle designed to assist
liquidity management.
Principal Investment Strategies
The Fund invests principally in short and intermediate term
marketable debt securities issued by the United States Government or by
agencies of the United States, repurchase agreements, reverse repurchase
agreements and money market instruments.
Asset investments for Fund One include principally those securities
eligible to be included in legal liquidity for Massachusetts co-operative
banks under Massachusetts General Laws, Chapter 170, Section 22.
The categories of those securities include, but may not be limited to
a) cash on hand and due from banks, b) certificates of deposit due from any
trust company, national banking association or banking company, c) bonds
and other direct obligations of the United States or such obligations as
are unconditionally guaranteed as to principal and interest by the United
States, d) federal agency obligations which have unexpired terms of five
years or less, e) repurchase agreements, and f) certain common money market
instruments of temporary duration.
The Fund may enter into reverse repurchase agreements to meet short-
term liquidity needs of the Fund. These agreements may not be in excess of
three business days.
Principal Investment Risk
The main risk factor in the Fund's performance is interest rates. The
yield and share price of the Fund change daily based on changes in interest
rates and market conditions, and in response to other economic, political
or financial events. The Fund's total return includes both income and price
gains or losses. While income is the most important component of returns
over time, the Fund's emphasis on income does not mean the Fund invests
only in the highest-yielding bonds and notes available, or that it can
avoid losses of principal. In general, bond and note prices rise when
interest rates fall and fall when interest rates rise. Longer-term bonds
and notes are usually more sensitive to interest rate changes. In other
words, the longer the maturity of a bond or note, the greater the impact a
change in interest rates is likely to have on the price.
An additional risk factor in the Fund's performance is pre-payment
risk. Many types of debt securities, including mortgage backed securities
and callable bonds and notes may be subject to a prepayment risk.
Prepayment risk occurs when the issuer of a security can prepay principal
prior to the security's maturity. Securities subject to prepayment risk
generally offer less potential for gains during a declining interest rate
environment, and similar or greater potential for loss in a rising interest
rate environment.
These risk factors may adversely effect the Fund's net asset value,
yield, total return and loss of money in an investment in the Fund may
result.
Bar Chart and Performance Table
The bar chart shows the changes of the Fund's total return
performance from year to year over a ten year period.
An investor bank may judge the Fund's portfolio performance by
comparing it to that of similar mutual funds or to market indices.
Performance may also be gauged by the total return of the portfolio over
time.
BANK INVESTMENT FUND-FUND ONE
Annual Total Return
<TABLE>
<CAPTION>
1991 1992 1993 1994 1995 1996 1997 1998
---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
12.11 6.03 6.01 -2.26 12.78 4.1 7.12 6.32
<FN>
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During the ten-year period shown in the bar chart, the highest quarterly
return was 23.4% (for the quarter ended June 30, 1989) and the lowest
quarterly return was - 5.3% (for the quarter ended March 31, 1994).
</FN>
</TABLE>
The table shows how the Fund's average annual return for one, five
and ten years for the periods ended December 31, 1998 compared to those of
the Lehman Government 1 - 3 year index. A widely recognized, unmanaged
index of fixed income securities.
<TABLE>
<CAPTION>
One Five Ten
Year Year Year
---- ---- ----
<S> <C> <C> <C>
Bank Investment Fund - Fund One 6.32% 5.50% 7.19%
Lehman Government 1 - 3 year index 6.97% 5.96% 7.35%
<FN>
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Total returns are based on past results and are not a prediction of future
performance.
</FN>
</TABLE>
BANK INVESTMENT FUND-FUND ONE
Investment Comparison
<TABLE>
<CAPTION>
1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Shearson Lehman
1-3 Yr. Treas. 10,000 11,068 12,150 13,596 14,434 15,216 15,291 16,947 17,809 18,993 20,317
Fund One 10,000 11,102 12,157 13,629 14,451 15,319 14,973 16,887 17,578 18,830 20,021
<FN>
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The line graph assumes an initial investment of $10,000, in Fund One and
the Lehman Government 1-3 year index, at the beginning of the first year.
The line graph compares this initial and subsequent account values at the
end of the most recently completed ten years.
</FN>
</TABLE>
Management Discussion
Fund One reflected a total return of 6.32% for the year ended
December 31, 1998. During the same period, the Lehman 1-3 year index, which
consists of government and agency securities of comparable maturities to
the majority of the portfolio, had a total return of 6.97%. The Fund's
portfolio performance in 1998 was slightly less favorable than the index.
This difference is attributed to both the overall net asset decrease in
1998 and the Fund's investment income stream, including reduction in
interest income from higher yielding investment securities called in 1998
and reinvested in then existing lower market rates. The Federal Reserve
Bank lowered short-term interest rates by 25 basis points on September 29,
1998, October 15, 1998, and November 17, 1998. During this period, the
Federal funds rate moved from 5.50% to 4.75%. Financial unrest in
international markets in Russia, Japan, other Pacific Rim countries and
Latin America were factors which prompted this action by the Federal
Reserve. These interest rate changes are expected to alleviate any domestic
impact to the U.S. economy from those global economic problems. The
portfolio turnover ratio was 50.00% in 1998 as compared to 25.93% in 1997.
The increased portfolio turnover is primarily attributed to the
reinvestment of maturing and called securities in light of the declining
interest rate environment in 1998. While securities were called in the
third and fourth quarters of 1997, investment securities were called
throughout 1998. In 1997, the established portfolio positions allowed
management to limit its investment activity, primarily to new share
investments and the reinvestment of maturing or called securities, in light
of the declining interest rate environment in the third and fourth quarters
of 1997.
Fee Table
This table describes the fees and expenses that you may pay if you
buy and hold shares of the Fund.
<TABLE>
<CAPTION>
Year Ended
December 31, 1998
-----------------
<S> <C> <C>
Shareholder Transaction Expenses* 0%
Annual Fund Operating Expenses
(as a percentage of average net assets)
Management Fees 0%
12b-1 Fees .08%
Other Expenses
Compensation, Payroll, Taxes, & Benefits .24%
Occupancy .04%
Remainder .12%
---
.40%
---
TOTAL FUND OPERATING EXPENSES .48%
---
<FN>
- --------------------
<F*> The Fund charges no sales load or deferred sales load on any
purchase, reinvested dividend, exchange, or redemption transactions.
</FN>
</TABLE>
Example
You would pay the following expenses on a $10,000 investment,
assuming (1) 5% annual return and (2) with or without redemption at the end
of each time period:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
December 31, 1998 $49.12 $155.01 $272.02 $621.13
</TABLE>
The purpose of the foregoing table, which is based upon the Fund's
fiscal year ended December 31, 1998, is to assist you in understanding the
various costs and expenses that an investor in the Fund will bear directly
or indirectly. The Example provided is intended to show the dollar amount
of expenses that would be incurred over the indicated periods on a
hypothetical $10,000 investment in the Fund, assuming a 5% annual return
and assuming that the Fund's expenses continue at the rates shown in the
table. However, the actual return on an investment in the Fund may be
greater or less than 5%. Furthermore, the Example should not be considered
a representation of past or future expenses; actual expenses may be greater
or less than those shown.
INVESTMENT OBJECTIVES AND RESTRICTIONS
The investment objective of the Fund is to achieve as high a level of
current income as is consistent with safety of principal.
The Fund was formed to provide participating banks with a highly
liquid, diversified, high-quality investment vehicle designed to assist
liquidity management. By pooling the money of its investors, it is able to
offer the economies of size and diversification of maturities normally
available to a large corporate and institutional investors.
Shares of the Bank Investment Fund are eligible investments to be
included in legal liquidity under Massachusetts General Laws, Chapter 170,
Section 22.
The Board of Directors of the Corporation has investment discretion
with regard to Fund One assets.
The Corporation is authorized by statute to invest its assets in a
variety of debt and equity securities. No more than 5% of the Corporation's
assets, at the time of purchase, may be invested in the securities of any
one issuer except for direct obligations of the United States or
obligations guaranteed by the United States, and other obligations issued
under certain Federal programs or by certain federal agencies or
instrumentalities.
The Fund is further restricted through the investment policy
maintained by the Corporation's Officers and Directors. The investment
policy for the Fund restricts the Corporation from a) making any investment
in equity securities for the Fund, b) making any intermediate or long-term
investment in corporate (non-governmental) debt securities for the Fund and
c) investing more than 25% of the Fund's total assets in the securities of
a particular industry other than U.S. Government or Federal agency
securities.
STATUTORY LIMITATION ON INVESTMENTS IN THE FUND
BY PARTICIPATING BANKS
Under Massachusetts General Laws, Chapter 167F, Section 3(2) as
amended, a participating or eligible savings bank or co-operative bank may
invest an amount in excess of 100% of its capital and surplus in any
distinct non-equity investment fund of the Corporation except to the extent
that the Commissioner of Banks for the Commonwealth of Massachusetts may by
regulation set limits and conditions. The participating bank will be
responsible for monitoring and compliance with this limitation.
Under Massachusetts General Laws, Acts of 1932, Chapter 45, Section
7, as amended, The Co-operative Central Bank Reserve Fund may not invest or
hold at any one time more than 20% of its assets with the Corporation.
Investments in the Fund are affected by Section 303 of the FDIC
Improvement Act of 1991 which limits investments by FDIC-insured state
banks (including Massachusetts co-operative banks, savings banks and trust
companies) in common or preferred stock or shares of mutual funds to the
extent that such investments are permissible for national banks.
Permissible national bank investments, as described in section 24(7) of the
National Bank Act and 12 C.F.R. Part 1, include mutual funds which invest
in securities and financial investments eligible for direct investment by
national banks. Because the underlying investment portfolio composition of
Fund One is comprised of U.S. Government and Federal Agency Securities,
Fund One balances may be excluded (on a pass through basis with shares of
beneficial interest) from an FDIC-insured state-chartered bank's
computation of equity securities in measuring compliance with 12 C.F.R.
Part 362 limits (usually 100% of Tier 1 capital).
Federally chartered savings banks and savings and loan associations
(with their principal place of business in Massachusetts) may invest in an
open-end mutual fund, such as Fund One, which invests in securities and
financial instruments in which such institutions may invest directly. For
purposes of determining compliance with quantitative investment limitations
under the Home Owners Loan Act ("HOLA"), an investing bank's or
association's proportionate share of a mutual fund's individual investments
will, under 12 CFR, [SECTION] 560.32, be aggregated with such investments
held directly. (The investments held by Fund One may also be held without
limitation by federally chartered savings banks and savings and loan
associations.) Apart from compliance with applicable investment
limitations, a bank or association may invest, without prior notice to the
Office of Thrift Supervision, an amount up to 15% of its total capital in
any one mutual fund, or up to 50% of total capital in all such pass-through
investment vehicles. Investments in excess of the 15% and 50% limits may
only be made when thirty days' advance notice has been provided to the
Office of Thrift Supervision.
Certain federally chartered savings banks who converted from a
Massachusetts savings bank charter may, under certain grandfather
provisions of HOLA, retain broader investment authority than that described
in the preceding paragraph. For example, section 5(i) of HOLA grandfathers
state authorized investment powers of certain Federal savings banks in
existence as of the date of enactment of Federal statutes (e.g., the
Financial Institution Reform, Recovery, and Enforcement Act of 1989) which
may have otherwise limited such investments.
DIVIDENDS
The Fund distributes all of its net income on a daily basis.
Dividends are declared on each day that the Fund is open for business.
Investors receive dividends in additional shares unless they elect to
receive cash. Payment is made in additional shares at the net asset value
on the payable date or in cash, on a monthly basis.
Investors wishing to change the method of receiving dividends must
notify the Fund in writing at least one week before payment is to be made.
Net income of the Fund consists of all interest income accrued and
earned, less estimated expenses of the Fund. Distributions of realized net
capital gains, if any, are declared and paid once each year and are
reinvested in additional shares at net asset value or, at each
shareholder's option, paid in cash.
NET ASSET VALUE
The Fund's net asset value per share is determined as of the close of
the New York Stock Exchange on days when the Custodian Bank (State Street
Bank) is open for business. The net asset value per share is determined by
adding the appraised value of all securities and all other assets,
deducting liabilities and dividing by the number of shares outstanding.
U.S. debt securities are normally valued on the basis of valuations
provided by market makers. Such prices are believed to reflect the fair
value of such securities and to take into account appropriate factors such
as institutional size trading in similar groups of securities, yield
quality, coupon rate, maturity, type of issue, and other market data.
Securities for which market quotations are not readily available will be
valued at fair value using methods determined in good faith by or at the
direction of the Board of Directors.
INVESTORS' ACCOUNTS
The Fund maintains an account for each investor in full and
fractional shares. All purchase and sale transactions are confirmed to the
investor. Statements of account showing all transactions for the month,
including dividends paid, are sent to participating banks on a monthly
basis.
TAXES
The Fund has qualified as a regulated investment company under the
Internal Revenue Code and will not be liable for federal income taxes to
the extent its earnings are distributed. Dividends derived from interest,
together with distributions of any short-term capital gains, are taxable as
ordinary income, whether or not reinvested. Dividends of the Fund do not
qualify for the dividends received exclusion for corporations.
Distributions of net long-term capital gains, if any, realized by the
Fund are made at least annually and are taxable to shareholders. In
addition, an investing Bank may realize a capital gain or loss in any year
in which it redeems shares. It should be noted that long-term capital gain
distributions and/or capital gains or losses realized from redemptions on
or after January 1, 1987 will be taxed at the same rates as ordinary income
under the provisions of the Tax Reform Act of 1986.
A statement setting forth the federal income tax status of all
distributions made during each calendar year is sent to each shareholder
promptly after the end of such year.
AUDITORS AND LEGAL
Parent, McLaughlin and Nangle, Certified Public Accountants, Inc.,
are the auditors of the Fund. The law firm of Steptoe and Johnson has
passed upon certain legal matters of the Fund in connection with the shares
offered by this offering circular.
YIELD
The yield for the 30-day periods ended December 31, 1998 and June 30,
1999 were 5.69% and 5.68%, respectively. Yield is calculated based on the
30 days ending on the date of the most recent statement of Assets and
Liabilities, (as presented elsewhere within). A standard formula as
required by the Securities and Exchange Commission is utilized for the
computation of this yield amount. Net Investment Income in the formula
differs from actual Net Investment Income as included in the Statement of
Operations (included elsewhere within). Net Investment Income as reflected
in the formula includes yield based upon market valuation of the portfolio
at the commencement of the 30 day period. This yield amount may differ from
the ratio of Net Investment Income to Average Net Assets reflected in
selected financial information (as presented elsewhere within). The Fund
yield fluctuates as a result of numerous factors. Therefore, the yield
stated here is not necessarily representative of the Fund's future yield.
The 30 day yield, for the most recent calender month end, may be obtained
by directly calling the Rate Line 617-695-0419 or by calling our main
office telephone number 617-695-0415 collect.
HOW THE SHARES OF THE FUND ARE PURCHASED-
TELEPHONE INVESTMENT PROCEDURE
Shares of the Fund are offered for sale on days on which the
custodian bank is open for business. The Fund and its custodian bank
observe the following holidays during the calendar year: New Year's Day,
Martin Luther King Day, President's Day, Memorial Day, Independence Day,
Labor Day, Columbus Day, Veteran's Day, Thanksgiving Day and Christmas Day.
There is no sales charge. The minimum initial investment is $50,000.00
(although in certain cases the Corporation may require a larger minimum
investment in accordance with requirements of applicable securities laws).
Additional investments may be made in any amount in excess of the minimum.
Bank Wire Transfers
Call your correspondent bank and speak to your account officer. Tell
him that you want to transfer funds to State Street Bank and Trust Company.
Instruct him to wire transfer the money before 12:00 noon, Eastern time,
to:
State Street Bank and Trust Company
Boston, Massachusetts
Routing number: 0110-0002-8
For account of the Bank Investment Fund, Fund One
Account number: 9006-930-3
Internal Money Transfers
If your correspondent bank account is with the State Street Bank and
Trust Company, contact your account officer and instruct him to transfer
funds from your account to the account of the Bank Investment Fund, Fund
One, Account number: 9006-930-3.
AFTER INSTRUCTING YOUR BANK TO TRANSFER FUNDS, PLEASE CALL THE FUND
AND TELL US THE AMOUNT YOU TRANSFERRED AND THE NAME OF THE BANK SENDING THE
TRANSFER. YOUR BANK MAY CHARGE A FEE FOR SUCH SERVICES. REMEMBER, IT IS
IMPORTANT TO DO THIS BEFORE 12:00 NOON.
The securities market, in which the Fund buys and sells securities,
usually requires immediate settlement in Federal funds for all security
transactions; therefore, payment for the purchase of Fund shares not
received in the form of Federal funds will be recorded as share
subscriptions, and not invested in Fund shares until such payments are
converted into Federal funds. Payments received by bank wire can be
converted immediately into Federal funds; any other form of payment will
result in a delay. Orders received prior to 12:00 noon, Eastern time, will
be invested in shares of the Fund at the next determined net asset value.
HOW SHARES OF THE FUND ARE REDEEMED-
TELEPHONE REDEMPTION PROCEDURE
An investor may withdraw all or any portion of his investment by
redeeming shares on any day that the Fund is open for business at the next
determined net asset value. The proceeds of redemptions will be wired
directly to the investor's bank account within one business day. The Fund
reserves the right to delay withdrawal requests up to 7 business days after
any investment that has been made with uncollected funds.
The right of redemption can be suspended and the payment of the
redemption proceeds deferred during any period in which a) the New York
Stock Exchange is closed or trading on such Exchange is restricted or b)
the Securities and Exchange Commission deems an emergency to exist, or
during any other period permitted by order of the Commission for the
protection of investors.
Bank Wire Transfers
Call the Fund by 12:00 noon (Call or Trade Date) to redeem shares the
following day (Settlement Date). When the amount to be redeemed is at least
$5,000.00, the Fund will automatically wire transfer the amount to your
correspondent bank account at settlement.
Internal Money Transfers
If your bank's account is with the State Street Bank and Trust
Company, contact the Fund by 12:00 noon (Call or Trade Date) for redemption
of shares the following day (Settlement Date). The Fund will transfer the
amount from its account to your account at State Street Bank and Trust
Company at settlement.
TRANSFER RESTRICTIONS
Fund shares may not be transferred by banks holding such shares to
any persons other than an eligible bank (except that the shares may be
pledged to such other persons or they may be transferred to The Co-
operative Central Bank, hereinafter the "Central Bank"). If the Fund shares
are acquired by any other persons by operation of law or by foreclosure
upon the pledge of such shares (or through transfer, in the case of the
Central Bank), the Corporation must offer to repurchase the shares from
such person at net asset value of the shares. If such offer is refused, no
dividend may be paid by the Corporation or Fund on such shares, and the
redemption price which the holder of such shares may obtain in any
subsequent repurchase of those shares by the Corporation or Fund is limited
to the net asset value of the shares on the date of the Corporation's
offer.
In the event of any transfer, it is extremely important to notify the
Corporation immediately of any purchase, sale or transfer of Fund shares
not made through the Corporation or its transfer agent. Immediate
notification should be furnished to the Corporation by telephone, with
written notification as a follow-up thereto. Prompt notification is
essential to avoid any delay in redemption offer and loss of earnings.
Please remember that a statutory restriction exists on the Corporation and
it would be unable to pay a dividend to an ineligible holder after expiry
of the 30-day repurchase period which is statutorily available following
such transfer.
ORGANIZATION
The Corporation was organized effective April 7, 1985 pursuant to a
Special Act of the Commonwealth [Acts of 1984, Chapter 482 as amended] of
Massachusetts under its chartered name "Co-operative Bank Investment Fund"
and does business under the name "Bank Investment Fund." The Special Act
indicates that the purpose of the Corporation is to hold, invest, reinvest
and manage one or more mutual investment funds, which shall include all
property of the Corporation, to be derived from voluntary subscription
thereto by the Banks.
The Corporation is an open-end diversified management investment
company authorized to invest its assets in certain real estate mortgages,
and a variety of other investments, including direct obligations of the
United States, obligations guaranteed by the United States, obligations
guaranteed by the Federal National Mortgage Association, bonds and other
evidences of indebtedness of corporations, shares of common or preferred
stock registered on a national securities exchange or for which quotations
are available through the National Quotation Bureau, Inc. or a comparable
service, or through a national securities market established in conformance
with Section 11A of the Securities Act of 1934, and other debt and equity
securities. Fund One will only invest in those securities described under
"Investment Policy" and "Investment Restrictions" elsewhere herein.
The business of the Corporation is conducted by a Board of Directors
elected by the Corporation's Incorporators and the Directors have
investment discretion relative to Corporation assets. The Incorporators of
the Corporation are the Directors of The Co-operative Central Bank, which
is the statutory reserve bank and insurer of deposits in excess of Federal
deposit insurance limitations for Massachusetts co-operative banks.
The Corporation operates pursuant to an exemption from the sections
of the Investment Company Act of 1940 which deal with (a) voting rights of
security holders and (b) the manner of sale of redeemable shares.
Only Massachusetts Co-operative Banks, Massachusetts Savings Banks,
Massachusetts Trust Companies, Federally Chartered Savings Banks and
Savings and Loan Associations with their principal place of business in
Massachusetts, The Co-operative Central Bank Reserve Fund, The Savings Bank
Life Insurance Company of Massachusetts, The National Cooperative Bank and
directly or indirectly wholly-owned subsidiaries of such institutions are
currently offered shares in the Fund. Such investors may purchase shares of
beneficial interest, which do not entitle the shareholders thereof to
voting rights of any nature, including investment policy matters.
DESCRIPTION OF FUND SHARES
The Corporation has no capital stock. Beneficial ownership in each of
the Corporation's funds is represented by shares of beneficial ownership,
as recorded in book entry form. Each share is equal in every respect to
every other share, except that if the Directors of the Corporation
establish distinct investment funds, shares will be issued in distinct
classes and each share within each class will be equal in every respect to
every other share of that class.
The shares of beneficial ownership are no par, non-voting, with a
stated value of $1,000, issued in book entry form only. Investment and
redemption of shares is effected at the net asset value as described
elsewhere herein. Shares are recorded in whole and/or fractional shares, as
applicable. Physical certificates are not issued. Monthly statements are
furnished to reflect share balance and activity.
With regard to the absence of voting rights, management believes that
eligible investors are adequately protected because of a) regulation by the
Commissioner of Banks, b) the redeemable nature of the shares, c)
representation of co-operative bank investors in the election of Directors
of the Central Bank, who as Incorporators elect the Corporation's
Directors, and d) representation of savings bank investors by an advisor at
such corporate meetings of the Incorporators.
SUPERVISION AND REGULATION
As provided by Massachusetts statute [Chapter 482, Acts of 1984 as
amended] the Corporation is subject to the supervision of the Commissioner
of Banks of the Commonwealth of Massachusetts. Periodic reporting to the
Commissioner of Banks is also required by the same statute. The Corporation
is registered as an open-end diversified management investment company
under the Investment Company Act of 1940, as amended, and is subject to
reporting requirements thereunder.
INVESTMENT ADVISOR
The Corporation presently does not employ the services of any
investment advisory or management services company. Investment decisions
for the Fund are made by authorized officers of the Corporation, subject to
approval or ratification by its Board of Directors. The Corporation
reserves the right at any time in the future to appoint an investment
advisor at any reasonable and customary fee as may be agreed when, in the
opinion of the Corporation Directors, the use of such advisory or
management services would improve Fund performance.
TRANSFER AGENT
The Corporation maintains the records for the investment, redemption,
and/or transfer of Fund shares. The Corporation reserves its right at any
time in the future to appoint a separate transfer agent at any reasonable
and customary fee as may be agreed when, in the opinion of the Corporation
Directors, the use of such transfer service is necessary. The limited
number of shareholders and nature of Fund operation does not, at this time,
justify the use of a separate agent and would only be an extra or
unnecessary expense.
OPERATING AND DISTRIBUTION EXPENSES
Normal expenses which may be borne by the Fund include, but are not
limited to: Director fees, salaries and wages, payroll taxes, employee
benefits, taxes, corporate fees, occupancy, furniture and equipment, data
processing, legal, auditing and accounting, telephone and postage,
custodial and other bank fees, preparation, printing and distribution of
reports, insurance, membership fees, organization, and other miscellaneous
expenses.
The Corporation has adopted a plan of distribution pursuant to Rule
12b-1 of the Investment Company Act of 1940 (the "Plan") providing that the
Fund will pay certain expenses incurred by the Corporation which may be
considered to be primarily intended to result in the sale of shares in the
Fund. The expenses which may be incurred pursuant to the Plan include,
without limitation, those for the preparation, printing and distribution of
written materials for other than existing investors, preparation and
distribution of advertising material and sales literature, direct payments
to sales personnel, and other similar activities. The maximum expenditures
which may be made pursuant to the Plan in any year is .12 of 1% of the
average daily net asset value of the Corporation for such year. The Board
of Directors of the Corporation has concluded that there is a reasonable
likelihood that the Plan will benefit the Fund and its shareholders.
Expenditures of $101,919 (.08% of average net assets) pursuant to the
12b-1 plan were incurred in and for the year ended December 31, 1998:
$5,200 for advertising in trade journals and similar publications; $4,919
for printing and mailing of offering circulars; $41,800 for compensation,
payroll taxes and benefits for personnel in sales and customer service;
$36,300 for sponsorship of annual subscriptions and other promotional
materials; and $13,700 for other plan expenses. Expenditures of $36,098
(.06% of average net assets-annualized) pursuant to the 12b-1 plan were
incurred in and for the six months ended June 30, 1999: $2,610 for
advertising in trade journals and similar publications; $2,598 for printing
and mailing of offering circulars; $21,765 for compensation, payroll taxes
and benefits for personnel in sales and customer service; $5,486 for
sponsorship of annual subscriptions and other promotional materials; and
$3,639 for other plan expenses.
Because more than one fund will be operated by the Corporation,
operating expenses and expenses incurred pursuant to the Plan related
directly to a single fund operation will be charged directly to that fund.
Common or indirect expenses will be allocated among funds in accordance
with the annual budget as determined by the Board of Directors of the
Corporation to be fair and equitable or on such other basis as the Board of
Directors of the Corporation may determine from time to time to be fair and
equitable.
The Corporation reimbursed the Central Bank for expenses paid on
behalf of the Corporation and for its proportionate share of expense items
used in common by both the Corporation and the Central Bank. All fees and
expenses for the Fund are estimated and accrued daily. Actual operating
expenses for the year ended December 31, 1998 and the six months ended June
30, 1999 were .48% and .51% of average net assets, respectively. Operating
expenses paid to the Central Bank for the year ended December 31, 1998 and
the six months ended June 30, 1999 were $40,800 and $20,400, respectively.
EXCHANGE PRIVILEGE
Shares of the Fund may be exchanged for shares of another fund on the
basis of the respective net asset value of the shares involved, to the
extent that additional funds are established by the Corporation.
CUSTODIAN
The Corporation is required by statute to at all times employ a
national banking association located in the Commonwealth of Massachusetts,
or a Massachusetts state-chartered bank authorized to exercise trust
powers, as the Corporation's or Fund's custodian, to hold the securities
owned by the Corporation and any monies delivered by the Corporation's or
Fund's shareholders or due to the Corporation or Fund. Purchase and sale
transactions are effected through or by the custodian bank upon the
instructions of the Corporation.
The State Street Bank and Trust Company, 225 Franklin Street, Boston,
MA 02110 serves as custodian of the Fund's cash and investments.
YEAR 2000
All software used by the Fund for general ledger, investment
securities, mutual fund operations and related purposes is provided and
maintained by Bankware, Inc. The Fund believes that all such software is
year 2000 compliant. Software review, evaluation, update, implementation
and testing validation were completed prior to December 31, 1998. We fully
expect to process participating banks' investments, redemptions and monthly
interest payments in Fund One without disruption in the year 2000. Cost
related to this year 2000 systems issue were not material. The Fund
recorded expense of $6,108 in 1998 in this regard. Little, if any, further
expense is expected.
Like other mutual funds and other financial and business
organizations around the world, the Fund could be adversely affected if the
computer systems used by its third party transaction processors, such as
custodians, banks, broker dealers or others that the Fund does business
with, do not properly process the date from and after January 1, 2000. The
Fund continues to seek assurances that comparable steps are being taken by
these third party processors. However, there can be no assurance that these
steps will be sufficient to prevent any adverse impact on the Fund.
MANAGEMENT OF THE FUND
The Incorporators of the Corporation are the Directors of The Co-
operative Central Bank which is the statutory reserve bank and insurer of
deposits in excess of Federal deposit insurance limitations for
Massachusetts co-operative banks. The Board of Directors of the Corporation
is elected by the Incorporators.
The Fund's primary investment officer is James L. Burns, Jr.,
President. He has held this position since inception of the Fund in 1985.
For more than 15 years prior to the inception of the Fund, he managed
investment portfolios for the Co-operative Central Bank and the State
Street Bank and Trust Company.
Directors and Officers of the Corporation, together with information
as to their principal business occupations during the past five years, are
shown below:
James L. Burns, Jr., President President of The Co-operative Central Bank,
and Chief Executive Officer 75 Park Plaza, Boston, MA 02116-3934
William F. Casey, Jr., Executive Vice President and Treasurer
Executive Vice President of The Co-operative Central Bank,
75 Park Plaza, Boston, MA 02116-3934
Susan L. Ellis, Vice President Vice President of The Co-operative Central
and Treasurer Bank, 75 Park Plaza, Boston, MA 02116-3934
Jeremiah J. Foley, Vice President Vice President of The Co-operative Central
and Clerk of the Corporation Bank, 75 Park Plaza, Boston, MA 02116-3934
Robert E. Haley, Vice President Vice President of Bank Investment Fund,
75 Park Plaza, Boston, MA 02116-3934
Annemarie Lee, Vice President Assistant Vice President of The
Co-operative Central Bank,
75 Park Plaza, Boston, MA 02116-3934
Claire R. Bothwell, Director Chairman of the Board of the Ware
Co-operative Bank, Main Street,
Ware, MA 01082
Alfonso DeVito, Director President of The Newton South
Co-operative Bank, 411 Watertown St.,
Newton, MA 02458-1199
Charles P. Hooker, Director Chairman of the Board of The Pittsfield
Co-operative Bank, 70 South Street,
Pittsfield, MA 01202
Ronald E. Lestan, Director President of The Walpole Co-operative Bank,
982 Main Street, Walpole, MA 02081
Edward T. Mulvey, Director President of the Pilgrim Co-operative Bank,
48 South Main St., Cohasset, MA 02025
Walter A. Murphy, Director and Chairman of the Board of the Falmouth
Chairman of the Board Co-operative Bank, P.O. Box 567,
Falmouth, MA 02541
John H. Pearson, Jr., Director President of Butler Bank-A Co-operative
and Clerk of the Board Bank, 10 George Street, Lowell, MA 01852
--------------------
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout each year)
The financial highlights table is intended to help you understand the
Fund's financial performance for the past 10 years. Certain information
reflects financial results for a single fund share. The total returns in
the table represent the rate that an investor would have earned (or lost)
on an investment in the Fund (assuming reinvestment of all dividends and
distributions).
<TABLE>
<CAPTION>
Six Months Year Ended December 31,
Ended --------------------------------------
June 30, 1999 1998 1997 1996
------------- ---- ---- ----
(unaudited) (audited)* (audited)* (audited)*
<S> <C> <C> <C> <C>
Net asset value, beginning of period $ 987.50 $ 983.75 $ 974.80 $ 996.20
-------- -------- -------- --------
Income from investment operations:
Net investment income 26.84 56.88 58.35 60.41
Net realized and unrealized gain
(loss) on investment transactions (17.92) 3.75 8.95 (21.40)
-------- -------- -------- --------
Total from investment operations 8.92 60.63 67.30 39.01
-------- -------- -------- --------
Less distributions:
Dividends from net investment income (26.84) (56.88) (58.35) (60.41)
Distributions from capital gains 0.00 0.00 0.00 0.00
-------- -------- -------- --------
Total distributions (26.84) (56.88) (58.35) (60.41)
-------- -------- -------- --------
Net asset value, end of period $ 969.58 $ 987.50 $ 983.75 $ 974.80
======== ======== ======== ========
Total return 1.82%** 6.32% 7.12% 4.10%
Ratios/Supplemental data:
Net assets, end of year (in 000's) $118,858 $128,475 $143,608 $151,591
Ratio of expenses to average
net assets 0.51% 0.48% 0.45% 0.43%
Ratio of net investment income
to average net assets 5.53% 5.74% 5.98% 6.21%
Portfolio turnover rate 27.14% 50.00% 25.93% 49.26%
</TABLE>
Portfolio turnover was computed including U.S. Governments and U.S.
Government Agency obligations with maturities in excess of one year.
See notes to financial statements.
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990 1989
-------- --------- --------- --------- --------- --------- ---------
(audited)* (audited)* (audited)* (audited)* (audited)* (audited)* (audited)*
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 944.75 $1,029.85 $1,042.13 $1,061.56 $1,028.78 $1,022.17 $1,001.04
-------- --------- --------- --------- --------- --------- ---------
Income from investment operations:
Net investment income 66.14 62.34 73.54 80.89 84.63 86.58 84.76
Net realized and unrealized gain
(loss) on investment transactions 51.45 (85.10) (12.28) (19.43) 32.78 6.61 21.13
-------- --------- --------- --------- --------- --------- ---------
Total from investment operations 117.59 (22.76) 61.26 61.46 117.41 93.19 105.89
-------- --------- --------- --------- --------- --------- ---------
Less distributions:
Dividends from net investment income (66.14) (62.34) (73.54) (80.89) (84.63) (86.58) (84.76)
Distributions from capital gains 0.00 0.00 0.00 0.00 0.00 0.00 0.00
-------- --------- --------- --------- --------- --------- ---------
Total distributions (66.14) (62.34) (73.54) (80.89) (84.63) (86.58) (84.76)
-------- --------- --------- --------- --------- --------- ---------
Net asset value, end of period $ 996.20 $ 944.75 $1,029.85 $1,042.13 $1,061.56 $1,028.78 $1,022.17
======== ========= ========= ========= ========= ========= =========
Total return 12.78% -2.26% 6.01% 6.03% 12.11% 9.59% 11.02%
Ratios/Supplemental data:
Net assets, end of year (in 000's) $146,555 $ 129,330 $ 146,767 $ 163,972 $ 196,201 $ 210,439 $ 233,920
Ratio of expenses to average
net assets 0.45% 0.50% 0.39% 0.33% 0.28% 0.37% 0.37%
Ratio of net investment income
to average net assets 6.75% 6.37% 7.01% 7.79% 8.29% 8.54% 8.36%
Portfolio turnover rate 84.45% 43.43% 30.04% 44.93% 23.24% 50.30% 110.10%
<FN>
- --------------------
<F*> Financial Statements for each of the ten years in the ten year period
ended December 31, 1998 were audited by Parent, McLaughlin & Nangle,
the Fund's independent auditors, whose report along with the Fund's
Financial Statements are included elsewhere herein.
<F**> Annualized.
</FN>
</TABLE>
See notes to financial statements.
INDEPENDENT AUDITOR'S REPORT
TO THE SHAREHOLDERS AND BOARD OF DIRECTORS
BANK INVESTMENT FUND-FUND ONE
BOSTON, MASSACHUSETTS
We have audited the accompanying statement of assets and liabilities
of Bank Investment Fund-Fund One, including the schedule of portfolio
investments, as of December 31, 1998 and the related statement of
operations for the year then ended, the statement of changes in net assets
for each of the two years in the period then ended, and the financial
highlights for each of the ten years in the period then ended. These
financial statements and financial highlights are the responsibility of the
Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements
and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements and financial highlights. Our
procedures included confirmation of securities owned as of December 31,
1998, by correspondence with the custodians and broker. An audit also
includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the financial
position of Bank Investment Fund-Fund One as of December 31, 1998, the
results of its operations for the year then ended, the changes in its net
assets for each of the two years in the period then ended, and the
financial highlights for each of the ten years in the period then ended, in
conformity with generally accepted accounting principles.
/s/ Parent, McLaughlin & Nangle
Certified Public Accountants
LOGO FOR Parent, McLaughlin & Nangle
Member of the SEC Practice Section, American Institute
of Certified Public Accountants
January 28, 1999
BANK INVESTMENT FUND-FUND ONE
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
June 30, 1999 December 31, 1998
(unaudited) (audited)
------------- -----------------
<C> <C> <C>
ASSETS:
INVESTMENTS IN SECURITIES, at value
(Identified cost $116,412,772 and
$121,737,234, respectively) $115,088,290 $122,659,962
REPURCHASE AGREEMENTS 2,240,000 6,330,000
INTEREST RECEIVABLE 1,891,044 1,971,031
CASH 40,632 50,649
------------ ------------
TOTAL ASSETS 119,259,966 131,011,642
------------ ------------
LIABILITIES:
ACCOUNTS PAYABLE-BROKER - 2,000,000
DIVIDENDS PAYABLE 317,024 410,103
ACCRUED EXPENSES 84,852 126,210
TOTAL LIABILITIES 401,876 2,536,313
------------ ------------
NET ASSETS:
(Equivalent to $969.5754 and
$987.5026 per share based on 122,587.7730
and 130,101.2565 shares of beneficial
interest outstanding) $118,858,090 $128,475,329
============ ============
REPRESENTED BY:
Paid-in Capital $137,427,618 $144,814,662
Accumulated net losses on investments (17,245,041) (17,262,056)
Unrealized appreciation (depreciation)
of investments-net (1,324,487) 922,723
------------ ------------
TOTAL NET ASSETS $118,858,090 $128,475,329
============ ============
</TABLE>
See notes to financial statements.
BANK INVESTMENT FUND-FUND ONE
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
Six Months Ended Year Ended
June 30, 1999 December 31, 1998
---------------- -----------------
(unaudited) (audited)
<S> <C> <C>
INVESTMENT INCOME:
Interest income, net of interest expense
of $0 and $11,583, respectively $ 3,766,595 $8,294,216
EXPENSES:
Compensation, payroll taxes and benefits-officers $ 119,155 $ 233,305
Compensation, payroll taxes and benefits-other 51,066 84,983
Distribution expenses 36,098 101,919
Professional fees 28,800 32,635
Occupancy 28,099 59,539
Meetings and travel 13,750 36,400
Equipment and data processing 11,500 28,600
Directors' fees 7,600 16,800
Other expenses 6,610 15,150
Postage and telephone 6,300 14,100
Shareholder reports 2,597 4,919
Other bank fees 1,900 3,300
Insurance expense 1,600 4,800
Stationary and supplies 800 7,300
---------- ----------
TOTAL EXPENSES 315,875 643,750
---------- ----------
INVESTMENT INCOME-NET 3,450,720 7,650,466
---------- ----------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS:
Net realized gain on investments 17,015 2,375
Change in net unrealized appreciation
(depreciation) on investment securities (2,247,210) 588,959
---------- ----------
Net realized and unrealized gain (loss)
on investments (2,230,195) 591,334
----------- ----------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $ 1,220,525 $8,241,800
=========== ==========
</TABLE>
See notes to financial statements.
BANK INVESTMENT FUND-FUND ONE
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Six Months Year Ended Year Ended
Ended December 31, December 31,
June 30, 1999 1998 1997
------------- ------------ ------------
(unaudited) (audited) (audited)
<S> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM
OPERATIONS:
Investment income-net $ 3,450,720 $ 7,650,466 $ 8,839,050
Net realized gain on investments 17,015 2,375 5,078
Unrealized appreciation (depreciation)-net (2,247,210) 588,959 1,330,580
------------ ------------ ------------
Net increase in net assets resulting from operations 1,220,525 8,241,800 10,174,708
DIVIDENDS TO SHAREHOLDERS FROM:
Investment income-net (3,450,720) (7,650,466) (8,839,050)
TRANSACTIONS IN SHARES OF BENEFICIAL
INTEREST-NET DECREASE (7,387,044) (15,724,503) (9,318,402)
------------ ------------ ------------
TOTAL DECREASE IN NET ASSETS (9,617,239) (15,133,169) (7,982,744)
NET ASSETS:
Beginning of year 128,475,329 143,608,498 151,591,242
------------ ------------ ------------
End of year $118,858,090 $128,475,329 $143,608,498
============ ============ ============
</TABLE>
See notes to financial statements.
BANK INVESTMENT FUND-FUND ONE
PORTFOLIO OF INVESTMENTS
June 30, 1999
(unaudited)
<TABLE>
<CAPTION>
Obligations of Federal Agencies-96.7%
Par Coupon Maturity Date Value
--- ------ ------------- -----
<S> <C> <C> <C> <C>
Federal Farm Credit Bank $ 2,500,000 6.19% 03/19/01 $ 2,517,187
2,000,000 6.20 04/09/01 2,013,750
------------ ------------
$ 4,500,000 (Cost $ 4,500,000) $ 4,530,937
------------ ------------
Federal Home Loan Bank $ 3,000,000 7.88% 02/09/00 $ 3,043,125
1,000,000 6.00 12/14/00 1,004,688
5,000,000 6.09 03/21/01 5,026,562
5,000,000 6.48 01/08/02 5,035,938
3,000,000 6.60 09/03/02 3,014,062
2,000,000 5.73 11/24/03 1,957,500
2,000,000 6.08 12/01/03 1,971,875
2,000,000 5.765 02/11/04 1,935,625
2,000,000 6.00 03/08/04 1,945,625
------------ ------------
$ 25,000,000 (Cost $25,000,000) $ 24,935,000
------------ ------------
Federal Home Loan Mortgage
Corporation $ 2,000,000 7.98% 01/19/00 $ 2,027,500
3,000,000 5.625 01/29/03 2,960,625
2,000,000 6.15 03/06/03 1,998,750
2,000,000 5.48 10/08/03 1,946,250
1,500,000 5.85 11/19/03 1,470,469
2,000,000 6.20 03/08/04 2,001,875
2,000,000 6.30 03/15/04 2,005,625
------------ ------------
$ 14,500,000 (Cost $ 14,499,221) $ 14,411,094
------------ ------------
Federal National Mortgage
Association $ 4,500,000 6.40% 05/02/01 $ 4,543,594
1,500,000 5.35 12/17/01 1,480,781
2,500,000 6.375 01/16/02 2,534,375
4,000,000 5.55 01/22/02 3,948,750
5,000,000 6.45 12/16/02 5,018,750
2,000,000 6.15 12/26/02 1,962,500
2,000,000 5.96% 02/07/03 1,965,625
2,000,000 6.08 06/23/03 1,984,375
2,000,000 6.01 08/18/03 1,980,000
4,000,000 5.91 08/25/03 3,951,250
3,000,000 6.07 09/02/03 2,956,875
2,000,000 5.75 09/23/03 1,961,250
2,000,000 5.52 10/06/03 1,946,250
2,000,000 5.27 10/14/03 1,942,500
2,000,000 5.62 10/14/03 1,950,625
2,000,000 5.80 11/17/03 1,956,250
1,500,000 5.64 11/19/03 1,463,906
2,000,000 5.66 01/05/04 1,951,875
2,000,000 5.80 01/14/04 1,936,875
2,000,000 5.80 02/09/04 1,937,500
2,000,000 5.86 02/11/04 1,938,125
2,000,000 5.90 02/17/04 1,939,375
2,000,000 5.87 02/18/04 1,938,750
2,000,000 6.00 02/19/04 1,943,125
2,000,000 6.00 03/01/04 1,945,625
------------ ------------
$ 60,000,000 (Cost $ 59,996,009) $ 59,078,906
------------ ------------
Government National Mortgage
Association $ 346,943 6.50% 11/15/07 $ 344,341
2,134,401 6.50 07/15/08 2,118,393
2,137,529 6.50 11/15/08 2,121,497
298,792 6.50 12/15/08 296,552
560,351 5.50 12/15/08 533,384
1,511,627 7.50 03/15/22 1,529,105
2,691,801 7.00 10/15/22 2,664,883
2,448,694 7.00 05/15/23 2,424,198
------------ ------------
$ 12,130,138 (Cost $ 12,317,543) $ 12,032,353
------------ ------------
NCB Savings Association $ 100,000 5.75% 01/19/00 $ 100,000
------------ ------------
(Cost $ 100,000)
(Cost $116,412,772) $115,088,290
------------
Repurchase Agreement-1.9%
$2,240,000 Repurchase Agreement dated June 30, 1999 with
PaineWebber, Inc. due July 1, 1999 with respect to
various Federal Agencies ranging from:
Par Value $1,000 - $2,070,000
Rate Range 2.00% - 9.25%
Maturity Range 08/15/04 - 03/01/26
Maturity value of $2,240,299 for an
effective yield of 4.80%.
(Cost $ 2,240,000) $ 2,240,000
------------
Total Investments-98.7% (Cost $118,652,772) $117,328,290
------------
Other assets in excess of liabilities-1.3% 1,529,800
------------
Net assets-100% $118,858,090
============
</TABLE>
See notes to financial statements.
BANK INVESTMENT FUND-FUND ONE
PORTFOLIO OF INVESTMENTS
December 31, 1998
<TABLE>
<CAPTION>
Obligations of Federal Agencies-95.4%
Par Coupon Maturity Date Value
--- ------ ------------- -----
<S> <C> <C> <C> <C>
Federal Farm Credit Bank $ 2,500,000 6.19% 03/19/01 $ 2,560,937
2,000,000 6.20 04/09/01 2,050,000
2,500,000 6.78 01/15/02 2,502,344
------------ ------------
$ 7,000,000 (Cost $ 7,000,000) $ 7,113,281
------------ ------------
Federal Home Loan Bank $ 3,000,000 7.88% 02/09/00 $ 3,093,750
1,000,000 6.00 12/14/00 1,019,375
1,985,000 5.745 01/25/01 1,982,519
2,000,000 5.735 02/13/01 1,996,250
2,000,000 6.04 02/14/01 1,998,125
5,000,000 6.09 03/21/01 5,118,750
5,000,000 6.48 01/08/02 5,045,312
3,000,000 6.60 09/03/02 3,028,125
2,000,000 6.015 02/05/03 2,000,000
2,000,000 5.73 11/24/03 1,981,875
2,000,000 6.08 12/01/03 2,004,375
------------ ------------
$ 28,985,000 (Cost $ 28,985,000) $ 29,268,456
------------ ------------
Federal Home Loan Mortgage
Corporation $ 2,000,000 7.98% 01/19/00 $ 2,061,250
4,000,000 6.125 03/03/03 4,003,750
2,000,000 6.15 03/06/03 2,016,250
2,000,000 5.48 10/08/03 1,985,625
1,500,000 5.85 11/19/03 1,487,344
------------ ------------
$ 11,500,000 (Cost $ 11,488,639) $ 11,554,219
------------ ------------
Federal National Mortgage
Association $ 2,000,000 5.91% 01/12/01 $ 1,996,250
2,000,000 5.84 01/19/01 2,000,000
2,500,000 6.37 03/22/01 2,503,906
3,000,000 6.45 04/12/01 3,007,500
4,500,000 6.40% 05/02/01 4,651,875
1,500,000 5.35 12/17/01 1,498,594
2,500,000 6.375 01/16/02 2,600,000
5,000,000 6.45 12/16/02 5,059,375
2,000,000 6.15 12/26/02 2,013,125
2,000,000 5.96 02/07/03 2,004,375
2,500,000 6.16 02/19/03 2,501,562
4,000,000 5.96 03/05/03 4,060,000
2,000,000 6.08 06/23/03 2,004,375
2,000,000 6.01 08/18/03 2,005,625
4,000,000 5.91 08/25/03 4,037,500
3,000,000 6.07 09/02/03 2,993,438
2,000,000 5.75 09/23/03 1,983,750
2,000,000 5.52 10/06/03 1,983,750
2,000,000 5.27 10/14/03 1,982,500
2,000,000 5.62 10/14/03 1,981,875
2,000,000 5.80 11/17/03 1,989,375
1,500,000 5.64 11/19/03 1,486,406
2,000,000 5.66 01/05/04 2,000,000
------------ ------------
$ 58,000,000 (Cost $ 57,994,020) $ 58,345,156
------------ ------------
Government National Mortgage
Association $ 441,999 6.50% 11/15/07 $ 450,287
2,480,040 6.50 07/15/08 2,526,540
2,405,358 6.50 11/15/08 2,450,459
358,157 6.50 12/15/08 364,873
645,027 5.50 12/15/08 637,771
1,927,868 7.50 03/15/22 1,987,511
2,893,077 7.00 10/15/22 2,961,787
2,828,690 7.00 05/15/23 2,895,872
------------ ------------
$ 13,980,216 (Cost $ 14,175,825) $ 14,275,100
------------ ------------
Student Loan Marketing
Association $ 2,000,000 7.723% 01/25/99 $ 2,003,750
------------ ------------
(Cost $ 1,993,755)
Certificates of Deposit-0.1%
NCB Savings Bank, FSB $ 100,000 5.75% 01/19/99 $ 100,000
------------ ------------
(Cost $ 100,000)
(Cost $121,737,239) $122,659,962
------------
Repurchase Agreement-4.9%
$6,330,000 Repurchase Agreement dated December 31, 1998 with
PaineWebber, Inc. due January 4, 1999 with respect to
various Federal Agencies ranging from:
Par Value $1,000-$3,100,000
Rate Range 2.00%-12.50%
Maturity Range 07/14/99-09/01/26
Maturity value of $6,333,341 for an effective yield of 4.75%.
(Cost $ 6,330,000) $ 6,330,000
------------
Total Investments-100.4% (Cost $128,067,239) $128,989,962
------------
Liabilities in excess of other assets-(0.4)% (514,633)
------------ ------------
Net assets-100% $128,475,329
============
</TABLE>
See notes to financial statements.
BANK INVESTMENT FUND-FUND ONE
NOTES TO FINANCIAL STATEMENTS
(Information for the six months ended June 30, 1999 is unaudited)
NOTE 1. Organization:
The Bank Investment Fund (the "Corporation") was organized effective
April 7, 1985 pursuant to a Special Act of the Commonwealth of
Massachusetts (Acts of 1984, Chapter 482, as amended,) under its chartered
name "Co-operative Bank Investment Fund" and does business under the name
"Bank Investment Fund." The Corporation is registered with the Securities
and Exchange Commission under the Investment Company Act of 1940, as
amended, as a diversified, open-end management investment company. The
Corporation invests and manages two mutual investment funds derived from
the voluntary subscriptions made by eligible investors.
Fund One (the "Fund") is a no-load, diversified, open-end investment
fund. Fund shares are currently offered to the following eligible
investors: Massachusetts Co-operative Banks, Massachusetts Savings Banks,
Massachusetts Trust Companies, Federally Chartered Savings Banks and
Savings and Loan Associations with their principal place of business in
Massachusetts, The Co-operative Central Bank Reserve Fund, The Savings Bank
Life Insurance Company of Massachusetts, the National Cooperative Bank, and
directly or indirectly wholly-owned subsidiaries of such institutions.
Because more than one fund will be operated by the Corporation,
operating expenses related directly to a single fund operation will be
charged directly to that fund. Common or indirect expenses will be
allocated among funds in proportion to the ratio of the net assets of each
fund to total net assets of the Corporation or on such other basis as the
Board of Directors of the Corporation may determine from time to time to be
fair and equitable.
NOTE 2. Significant Accounting Policies:
The Fund's financial statements are prepared in accordance with
generally accepted accounting principles which require the use of
management estimates. The policies described below are followed
consistently by the Fund in the preparation of its financial statements.
Investment security valuation:
U.S. debt securities are normally valued on the basis of valuations
provided by market makers. Such prices are believed to reflect the fair
value of such securities and to take into account appropriate factors such
as institutional size trading in similar groups of securities, yield
quality, coupon rate, maturity, type of issue, and other market data.
Securities for which market quotations are not readily available will be
valued at fair value using methods determined in good faith by or at the
direction of the Board of Directors.
Accounting for investments:
Security transactions are accounted for on the trade date (date the
order to buy or sell is executed). In computing net investment income prior
to January 1, 1997, the Fund did not amortize premiums or accrete discounts
on fixed income securities in the portfolio, except those original issue
discounts for which amortization is required for federal income tax
purposes. Since January 1, 1997, the Fund amortizes premiums or accretes
discounts on related fixed income securities, which change had an
immaterial effect on investment income. Premiums, if any, and discounts are
amortized or accreted on a straight line basis, which approximates the
income method. Additionally, with respect to market discount on bonds
issued after July 18, 1984, a portion of any capital gain realized upon
disposition may be recharacterized as taxable ordinary income in accordance
with the provisions of the 1984 Tax Reform Act. Realized gains and losses
on security transactions are determined on the identified cost method.
Repurchase agreements:
It is the policy of the Fund to require the custodian bank to take
possession, to have legally segregated in the Federal Reserve Book Entry
System or to have segregated within the custodian bank's vault, all
securities held as collateral in support of repurchase agreement
investments. Additionally, procedures have been established by the Fund to
monitor, on a daily basis, the market value of each repurchase agreement's
underlying investments to ensure the existence of a proper level of
collateral.
Federal income taxes:
The Corporation's policy is to comply with the requirements of the
Internal Revenue Code applicable to regulated investment companies and to
distribute substantially all of its taxable income to its shareholders.
Therefore, no federal income tax provision is required. The Fund realized a
gain of $2,375 during 1998, which was offset by the available capital loss
carryforward, resulting in a remaining capital loss carryforward of
($3,906,419) at December 31, 1998. Such capital loss carryforward will
reduce the Fund's taxable income arising from future net realized gain on
investments, if any, to the extent permitted by the Internal Revenue Code,
and thus will reduce the amount of the distributions to shareholders which
would otherwise be necessary to relieve the Fund of any liability for
federal income tax. Such capital loss carryforward will expire on December
31, 2003 ($3,906,419).
Dividends to shareholders:
The Fund distributes all of its net investment income on a daily
basis. Dividends are declared on each day that the Fund is open for
business. Investors receive dividends in additional shares unless they
elect to receive cash. Payment is made in additional shares at the net
asset value on the payable date or in cash, on a monthly basis.
Distributions of otherwise taxable realized net capital gains, if any, are
declared and paid once each year and are reinvested in additional shares at
net asset value or, at each shareholder's option, paid in cash.
Net asset value:
The net asset value per share is determined daily by adding the
appraised value of all securities and all other assets, deducting
liabilities and dividing by the number of shares outstanding.
NOTE 3. Security Transactions:
The cost of securities purchased and the proceeds from the sales of
securities, all of which were Obligations of Federal Agencies, (excluding
short-term investments) aggregated $64,588,735 and $78,099,219,
respectively for the year ended December 31, 1998. As of December 31, 1998,
unrealized appreciation of investments was $922,723; accumulated net
realized loss of investment transactions totaled ($17,262,056). The cost of
securities purchased and the proceeds from the sales of securities, all of
which were Obligations of Federal Agencies, (excluding short-term
investments) aggregated $31,000,000 and $32,585,000, respectively for the
six months ended June 30, 1999. As of June 30, 1999, unrealized
depreciation of investments was ($1,324,486); accumulated net realized loss
on investment transactions totaled ($17,245,041).
NOTE 4. Borrowed Funds:
The average balance of borrowed funds was $202,055 for the year ended
December 31, 1998. The average interest rate on these borrowings was 5.49%.
Total expense of $11,583 was netted against investment income for the year
ended December 31, 1998. There were no borrowed funds for the six months
ended June 30, 1999.
NOTE 5. Distribution Expenses:
The Fund has adopted a Plan of Distribution (the "Plan"), pursuant to
rule 12b-1 under the Investment Company Act of 1940, to use the assets of
the Fund to finance certain activities relating to the distribution of its
shares to investors. The Plan authorizes the Fund to pay for the cost of
preparing, printing, and distributing offering circulars to prospective
investors, for certain other direct or indirect marketing expenses, direct
payments to sales personnel, and for the cost of implementing and operating
the Plan. Plan expenses may not exceed an amount computed at an annual rate
of .12 of 1% of the Fund's average daily net assets. The Fund paid or
accrued $101,919 (.08% of average net assets) and $36,098 (.06% of average
net assets-annualized) pursuant to this Plan for the year ended December
31, 1998 and for the six months ended June 30, 1999, respectively.
NOTE 6. Pension Plans:
The Fund is a participating employer in the Co-operative Banks
Employees Retirement Association, and has, in effect, a Defined
Contribution Plan covering all eligible officers and employees. Under the
plan, contributions by employees are doubled by the Fund, up to a maximum
of 10% of each employee's salary. Effective January 1, 1989, the Fund also
participates in a Defined Benefit Plan, which covers all eligible
employees, and is funded currently. The Fund's contributions to these
multi-employer plans for the year ended December 31, 1998 and the six
months ended June 30, 1999 were $32,970 and $17,613, respectively.
NOTE 7. Shares of Beneficial Interest:
Chapter 482 of the Acts of 1984, as amended, of the Commonwealth of
Massachusetts permits the directors to issue an unlimited number of full
and fractional shares of beneficial interest (no par, non-voting, with a
stated value of $1,000 per share). As of December 31, 1998 and June 30,
1999 capital paid-in aggregated $144,814,662 and $137,427,617,
respectively.
Transactions in shares of beneficial interest are summarized as follows:
<TABLE>
<CAPTION>
Six Months Ended Year Ended Year Ended
June 30, 1999 December 31, 1998 December 31, 1997
---------------------------- ---------------------------- ---------------------------
(unaudited) (audited) (audited)
Shares Amount Shares Amount Shares Amount
----------- ----------- ---------- ------------ ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Sold 7,914.9087 $ 7,747,499 1,696.8609 $ 1,674,618 2,216.1487 $ 2,170,000
Issued in
reinvestment of
dividends 1,358.2991 1,329,551 2,750.3006 2,716,925 2,790.7661 2,724,117
----------- ----------- ----------- ------------ ----------- -----------
9,273.2078 9,077,050 4,447.1615 4,391,543 5,006.9148 4,894,117
Redeemed 16,786.6913 16,464,094 20,326.3359 20,116,046 14,536.5484 14,212,519
----------- ----------- ---------- ------------ ----------- -----------
Net (decrease) (7,513.4835) $(7,387,044) (15,879.1744) $(15,724,503) (9,529.6336) $(9,318,402)
=========== =========== =========== ============ =========== ===========
</TABLE>
NOTE 8. Transactions With Related Parties:
The Incorporators of the Corporation are the Directors of The Co-
operative Central Bank, which is the statutory reserve bank and insurer of
deposits in excess of Federal deposit insurance limitations for
Massachusetts co-operative banks. The Board of Directors of the Corporation
is elected by the Incorporators.
The Fund has reimbursed The Co-operative Central Bank for its
proportionate share of expense items used in common by both the Fund and
The Co-operative Central Bank. All fees and expenses for the Fund are
estimated and accrued daily. Actual operating expenses for the year ended
December 31, 1998 and the six months ended June 30, 1999 were .48% and .51%
of average net assets, respectively. Operating expenses paid to the Central
Bank for the year ended December 31, 1998 and the six months ended June 30,
1999 were $40,800 and $20,400, respectively.
The following sheets are perforated for your removal
and use in the establishment or updating of your account.
CERTIFICATE OF CORPORATE RESOLUTION
For Massachusetts Co-operative Banks, Massachusetts Savings Banks,
Massachusetts Trust Companies, Federally Chartered Savings Banks and
Savings and Loan Associations with their principal place of business in
Massachusetts, The Co-operative Central Bank Reserve Fund, The Savings Bank
Life Insurance Company of Massachusetts, the National Cooperative Bank and
directly or indirectly wholly-owned subsidiaries of such institutions only.
This form authorizes the individuals below to redeem shares by telephone or
exchange.
The undersigned is Secretary or Clerk of ________________________ and
hereby certifies that the following individuals: (name of corporation)
Name Title
---- -----
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
are duly authorized by corporate resolution or otherwise to act on behalf
of the eligible bank in connection with its ownership of shares in the Bank
Investment Fund, Fund One and in particular to give instructions for the
purchase, sale or exchange of any said shares and to execute any necessary
forms in connection therewith.
The Bank Investment Fund will consider this authorization to be in
full force and in effect until otherwise notified in writing.
IN WITNESS WHEREOF, the undersigned has executed this Certificate the
_______________ day of ___________________ 19__________.
___________________________________________________________________________
Secretary or Clerk
BANK INVESTMENT FUND
FUND ONE
ACCOUNT APPLICATION FORM
REGISTRATION. The account should be registered as follows:
DATE: ____________
NAME:
___________________________________________________________________________
POST OFFICE BOX:
___________________________________________________________________________
STREET ADDRESS:
___________________________________________________________________________
CITY/TOWN: _____________________________________ STATE: ___________________
ZIP CODE: ___________________________ TELEPHONE NUMBER: ___________________
TAX ID
NUMBER ____________________________________________________________________
INITIAL INVESTMENT: $____________________________________ (Minimum $50,000)
MONTHLY CASH DIVIDENDS
[ ] Check if dividends are to be paid monthly in cash. Otherwise
dividends will be AUTOMATICALLY REINVESTED in additional shares of
the Fund.
TELEPHONE REDEMPTION ORDERS
Redemption proceeds will be sent ONLY to the bank or trust company
listed below, for credit to the investor's account. The investor hereby
authorizes the BANK INVESTMENT FUND to honor telephone or written
instructions, without a signature guarantee, for redemption of Fund shares.
THE FUND and its Agents will not be liable for any loss, expense or cost
arising out of such transactions.
Enclose a specimen copy of your check or deposit slip (marked VOID)
for the bank account listed below. To facilitate the wiring of your
redemption proceeds the indicated bank should be a commercial bank.
Name of Bank: _____________________________________________________________
Bank Account No. __________________________________________________________
Bank Address: _____________________________________________________________
street
_______________________________________________ MA __________
city zip
Name on Account: __________________________________________________________
Bank Routing/Transit No.: _________________________________________________
AUTHORIZED PERSONS-TELEPHONE INVESTMENTS AND REDEMPTIONS
Authorized person Title Initials
----------------- ----- --------
1. ________________________________________________________________________
2. ________________________________________________________________________
3. ________________________________________________________________________
4. ________________________________________________________________________
5. ________________________________________________________________________
CORPORATE RESOLUTIONS
We have enclosed with this application form the necessary corporate
resolutions to authorize corporate officers to make wire or cash payment
transfers to the Bank Investment Fund and to purchase, sell or exchange
shares of beneficial ownership in the Bank Investment Fund, Fund One.
SIGNATURE AND CERTIFICATION
We have received and read the Offering Circular, and agree to its
terms and conditions by signing below. By the execution of this
Application, the undersigned represent and warrant that they are duly
authorized to sign this Application and to purchase or redeem shares of the
Fund on behalf of the investor.
The undersigned hereby certify under penalty of perjury that the
above Taxpayer Identification Number is correct and that the investor is
not subject to backup withholding.
We further certify and agree that the certifications, authorizations
and appointments in this document will continue until the Bank Investment
Fund receives actual written notice of any change thereof.
Signature ___________________________________ Title _______________________
Signature ___________________________________ Title _______________________
Two signatures are required, one of which should be the Secretary or Clerk
of the corporation.
SIGNATURE GUARANTEE
In order to facilitate telephone redemptions, you must have your
signature(s) on this application guaranteed by a commercial bank or stock
exchange member firm.
___________________________________________________________________________
Name of Bank or Investment Dealer
___________________________________________________________________________
By (signature of authorized person)
___________________________________________________________________________
Title (authorized person)
FINANCIAL STATEMENTS
As required by applicable statutes, semi-annual financial statements
are furnished to the shareholder, the Commissioner of Banks and the
Securities and Exchange Commission.
ADDITIONAL INFORMATION
The Bank Investment Fund (the "Corporation") has filed with the
Securities and Exchange Commission in Washington, D.C., under the chartered
name the "Co-operative Bank Investment Fund" a registration statement on
Form N-1A (together with all amendments and exhibits thereto, hereinafter
referred to as the "Registration Statement") under the Investment Company
Act of 1940. This Offering Circular does not contain all of the information
in the Registration Statement. The Registration Statement may be reviewed
and copied at the Public Reference Room of the Securities and Exchange
Commission; or:
By Phone: 1-800-Sec-0330
By mail: Public Reference Section
Securities and Exchange Commission
Washington, D.C. 20549-6009
(duplicating fee required)
On the Internet: www.sec.gov
(Investment Company Act File No. 811-4421)
The Corporation will provide, without charge to any person to whom
this Offering Circular is delivered on the written or oral request of any
such person, a copy of the Registration Statement and the additional
information contained therein and documents relating to certain exemptions
from the Investment Company Act of 1940 (see ORGANIZATION). Written
requests should be directed to the Bank Investment Fund, 75 Park Plaza,
Boston, MA 02116-3934. Telephone requests may be directed collect to 617-
695-0415.
==============================
BANK INVESTMENT FUND
FUND ONE
75 Park Plaza
Boston, MA 02116-3934
617-695-0415
==============================
OFFERING CIRCULAR
- -----------------
Bank Investment Fund
Liquidity Fund
75 Park Plaza
Boston, Massachusetts 02116-3934
617-695-0415
--------------------------------
The Bank Investment Fund (the "Corporation") is an investment company
which currently invests and manages two mutual funds derived from voluntary
subscriptions made by eligible investors.
Liquidity Fund (the "Fund") is a no-load, diversified, open-end money
market investment fund whose objective is maximum current income consistent
with liquidity and the preservation of capital. The Fund is designed solely
for use by eligible investors as an economical and convenient way to make
liquid investments. Fund shares are currently offered to the following
eligible investors: Massachusetts Co-operative Banks, Massachusetts Savings
Banks, Massachusetts Trust Companies, Federally Chartered Savings Banks and
Savings and Loan Associations with their principal place of business in
Massachusetts, The Co-operative Central Bank Reserve Fund, The Savings Bank
Life Insurance Company of Massachusetts and the National Cooperative Bank
(sometimes hereinafter called "Banks").
Investors should read this Offering Circular and retain it for future
reference.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION, NOR HAS THE COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS OFFERING CIRCULAR. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
COMMISSIONER OF BANKS OF THE COMMONWEALTH OF MASSACHUSETTS (the
"Commissioner of Banks"), NOR HAS THE COMMISSIONER OF BANKS PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS OFFERING CIRCULAR. ANY REPRESENTATION TO THE
CONTRARY IS UNLAWFUL.
THE SHARES BEING OFFERED ARE NOT SAVINGS ACCOUNTS OR DEPOSITS AND ARE
NOT INSURED BY ANY GOVERNMENT AGENCY. AN INVESTMENT IN THE FUND IS NOT
GUARANTEED OR INSURED BY THE U.S. GOVERNMENT AND THERE IS NO ASSURANCE THAT
THE FUND WILL BE ABLE TO MAINTAIN A STABLE NET ASSET VALUE. SUCH SHARES ARE
BEING OFFERED PURSUANT TO AN EXEMPTION FROM THE SECURITIES ACT OF 1933 AND
APPLICABLE STATE SECURITIES ACTS AND HAVE NOT BEEN REGISTERED OR QUALIFIED
UNDER SUCH ACTS.
--------------------------------
The date of this Offering Circular is August 27, 1999
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Risk Return Summary 1
Investment Objectives 1
Principal Investment Strategies 1
Principal Investment Risk 2
Bar Chart and 7 Day Yield 2
Fee Table 3
Investment Objectives and Restrictions 4
Statutory Limitation on Investments 5
Dividends 6
Net Asset Value 6
Investors' Accounts 6
Taxes 6
Auditors and Legal 7
Capital Gains 7
How Shares of Fund are Purchased 7
How Shares of Fund are Redeemed 8
Transfer Restrictions 8
Organization 9
Description of Fund Shares 10
Supervision and Regulation 10
Investment Advisor 10
Transfer Agent 10
Operating and Distribution Expenses 11
Exchange Privilege 11
Custodian 12
Year 2000 12
Management of the Fund 12
Financial Highlights 14
Independent Auditor's Report 16
Financial Statements 17
Investments 20
Account Application Forms 33
Additional Information Back Cover
</TABLE>
BANK INVESTMENT FUND
LIQUIDITY FUND
75 Park Plaza
Boston, Massachusetts 02116-3934
RISK RETURN SUMMARY
Investment Objectives
The investment objectives of Liquidity Fund is to maximize current
income consistent with liquidity of assets and safety of principal.
The Fund was formed to provide participating banks with a highly
liquid, diversified, high-quality investment vehicle designed to assist
liquidity management, while seeking preservation of capital.
Principal Investment Strategies
The Fund invests principally in short-term marketable debt securities
issued by the United States Government or by agencies of the United States,
bank money instruments, repurchase agreements, short-term corporate debt
instruments, commercial paper, and reverse repurchase agreements.
Asset investments for Liquidity Fund include principally those
securities eligible to be included in legal liquidity for Massachusetts co-
operative banks under Massachusetts General Laws, Chapter 170, Section 22.
The categories of those securities include, but may not be limited to
a) cash on hand and due from banks, b) certificates of deposit due from any
trust company, national banking association or banking company, or any
federally insured savings banks, co-operative bank or savings & loan
association, c) Federal funds sold, d) bonds and other direct obligations
of the United States which are unconditionally guaranteed as to principal
and interest by the United States, and issues of U.S. Government agencies
and instrumentalities, e) repurchase agreements, f) commercial paper which,
when purchased, is rated A-1 by Standard & Poor's Corporation ("Standard &
Poor's") and/or Prime-1 by Moody's Investors Service, Inc. ("Moody's") or,
if not rated, has been determined under procedures adopted and supervised
by the Fund's Board of Directors to be of comparable high quality.
Commercial paper obligations may include variable amount of master demand
notes; short-term obligations of corporations; g) Second Tier securities to
the extent permissible by Rule 2a-7 of the Investment Company Act of 1940
(see investment restrictions) including commercial paper which when
purchased is rated A-2 by Standard & Poor's or Prime-2 by Moody's or if not
rated, has been determined under procedures adopted, supervised and
approved by the Fund's Board of Directors to be of comparable quality, and
h) certain common money market instruments of temporary duration.
All the above investment must have original maturities or remaining
maturities of 397 days or less. In addition, the Fund will maintain a
dollar weighted average maturity of 90 days or less.
The Fund may invest more than 25% of its assets in the banking
industry through Certificates of Deposit and Federal Funds sold in the
ordinary course of its business.
The Fund may enter into reverse repurchase agreements to meet short-
term liquidity needs of the Fund. These agreements may not be in excess of
three business days.
Principal Investment Risk
The main risk factor in the Fund's performance is interest rates, the
fluctuation of which will cause the income of the Fund to correspondently
change. The average portfolio duration may cause a delayed effect before
the market interest rate change is fully reflected in the Fund's income
performance.
An additional risk factor in the Fund's performance, to a limited
extent, is credit risk. Credit risk is the chance that the issuer of the
security could have its credit rating downgraded or be unable to pay
interest and principal in a timely manner. While the credit quality of the
Fund's investment portfolio is extremely high based on the principal
investment strategies discussed above, the Fund is subject to some degree
of credit risk.
While the Fund seeks to maintain, it does not guaranty a stable net
asset value of $1,000 per share. In addition, the shares being offered are
not savings accounts or deposits and are not insured or guaranteed by the
Federal Deposit Insurance Corporation, U.S. Government or its agencies.
Bar Chart and 7 Day Yield
The bar chart shows the changes of the Fund's total return
performance from year to year over a ten year period ending December 31,
1998.
<TABLE>
<CAPTION>
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
9.23 8.37 6.32 4.07 3.15 3.87 5.86 5.38 5.52 5.44
<FN>
- --------------------
During the ten-year period shown in the bar chart, the highest quarterly
return was 10.1% (for the quarter ended June 30, 1989) and the lowest
quarterly return was 3.0% (for the quarter ended June 30,1993).
</FN>
</TABLE>
The table shows how the Fund's average annual return for one, five
and ten years for the period ended December 31, 1998 compared to the 3
month U.S. Treasury Bill.
<TABLE>
<CAPTION>
One Five Ten
Year Year Year
---- ---- ----
<S> <C> <C> <C>
Bank Investment Fund-Liquidity Fund 5.44% 5.21% 5.71%
U.S. Treasury Bill-3 month 5.00% 5.18% 5.46%
<FN>
- --------------------
Total returns are based on past results and are not a prediction of future
performance.
</FN>
</TABLE>
The annualized average net yield of the seven-day period ending
December 31, 1998 was 5.09%. Yield is calculated based on the last 7 days
ending on the date of the most recent statement of Assets and Liabilities,
(as presented elsewhere within). The Fund's yield fluctuates as a result of
numerous factors. Therefore, the yield stated here is not necessarily
representative of the Fund's future yield. The most recent daily yield,
together with the 7 day yield for the most recent calender month end may be
obtained by directly calling the rate line 617-695-0419 or by calling our
main office telephone number 617-695-0415 collect.
Fee Table
This table describes the fees and expenses that you may pay if you
buy and hold shares of the Fund.
<TABLE>
<CAPTION>
Year Ended
December 31, 1998
-----------------
<S> <C> <C>
Shareholder Transaction Expenses* 0%
Annual Fund Operating Expenses
(as a percentage of average net assets)
Management Fees 0%
12b-1 Fees .02%
Other Expenses
Compensation, Payroll, Taxes, & Benefits .06%
Occupancy .01%
Remainder .06%
---
.13%
---
TOTAL FUND OPERATING EXPENSES .15%
===
<FN>
- --------------------
<F*> The Fund charges no sales load or deferred sales load on any
purchase, reinvested dividend, exchange, or redemption transactions.
</FN>
</TABLE>
See notes to financial statements.
Example
You would pay the following expenses on a $10,000 investment,
assuming (1) 5% annual return and (2) with or without redemption at the end
of each time period:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
December 31, 1998 $15.35 $48.44 $85.01 $194.10
</TABLE>
The purpose of the foregoing table, which is based upon the Fund's
fiscal year ended December 31, 1998, is to assist you in understanding the
various costs and expenses that an investor in the Fund will bear directly
or indirectly. The Example provided is intended to show the dollar amount
of expenses that would be incurred over the indicated periods on a
hypothetical $10,000 investment in the Fund, assuming a 5% annual return
and assuming that the Fund's expenses continue at the rates shown in the
table. However, the actual return on an investment in the Fund may be
greater or less than 5%. Furthermore, the Example should not be considered
a representation of past or future expenses; actual expenses may be greater
or less than those shown.
INVESTMENT OBJECTIVES AND RESTRICTIONS
The investment objective of the Liquidity Fund is to maximize current
income consistent with liquidity of assets and safety of principal.
The Fund was formed to provide participating banks with a highly
liquid, diversified high-quality investment vehicle designed to assist
liquidity management while seeking preservation of capital. The Fund
pursues this objective by investing principally in short-term marketable
debt securities issued by the United States Government or by agencies of
the United States, bank money instruments, short-term corporate debt
instruments including commercial paper, repurchase agreements and reverse
repurchase agreements.
Shares of the Bank Investment Fund are eligible investments to be
included in legal liquidity under Massachusetts General Laws, Chapter 170,
Section 22.
The Board of Directors of the Corporation has investment discretion
with regard to Liquidity Fund assets.
No more than 5% of the Fund's assets at the time of purchase may be
invested in the securities of any one issuer except for direct obligations
of the United States or obligations guaranteed by the United States, and
other obligations issued under federal programs or by certain federal
agencies.
In accordance with amendments, effective June 1, 1991 to Rule 2a-7 of
the Investment Company Acts of 1940, no more than 5% of the Fund's assets,
in the aggregate, may be invested in "second tier" securities, with no more
than 1% of the Fund's assets or one million dollars, whichever is greater,
invested in the second tier securities of any one issuer.
The Fund is further restricted through the investment policy
maintained by the Corporation's Officers and Directors. The investment
policy restricts the Fund from a) purchasing any securities other than
money market and other securities described under "Investment Policy", and
b) investing more than 25% of its total assets in the securities of a
particular industry other than U.S. Government securities, Government
Agency securities or bank money instruments.
STATUTORY LIMITATION ON INVESTMENTS IN THE FUND
BY PARTICIPATING BANKS
Under Massachusetts General Laws, Chapter 167F, Section 3(2) as
amended, a participating or eligible savings bank or co-operative bank may
invest an amount in excess of 100% of its capital and surplus in any
distinct non-equity investment fund of the Corporation except to the extent
that the Commissioner of Banks for the Commonwealth of Massachusetts may by
regulation set limits and conditions. The participating bank will be
responsible for monitoring and compliance with this limitation.
Under Massachusetts General Laws, Acts of 1932, Chapter 45, Section
7, as amended, The Co-operative Central Bank Reserve Fund may not invest or
hold at any one time more than 20% of its assets with the Corporation.
Investments in the Fund are affected by Section 303 of the FDIC
Improvement Act of 1991 which limits investments by FDIC-insured state
banks (including Massachusetts co-operative banks, savings banks and trust
companies) in common or preferred stock or shares of mutual funds to the
extent that such investments are permissible for national banks.
Permissible national bank investments, as described in section 24(7) of the
National Bank Act and 12 C.F.R. Part 1, include mutual funds which invest
in securities and financial instruments eligible for direct investment by
national banks. The underlying investment portfolio composition of the
Liquidity Fund is comprised of assets (Federal agency obligations,
certificates of deposit, commercial paper, short-term corporate bonds and
notes, and Federal funds sold) that a national bank may purchase and sell
for its own account under 12 C.F.R. Part 1. An FDIC-insured state bank may
hold these investments directly or indirectly (i.e. pass-through mutual
fund investment) that are permissible for national banks without being
subject to limit restrictions for national banks. Therefore, Liquidity Fund
balances may be excluded (on a pass-through basis with shares of beneficial
interest) from an FDIC-insured state-chartered bank's (such as a
Massachusetts savings bank or co-operative bank) computation of equity
securities in measuring compliance with 12 C.F.R. 362 limits (usually 100%
of Tier 1 capital).
Federally chartered savings banks and savings and loan associations
(with their principal place of business in Massachusetts) may invest in an
open-end mutual fund, such as the Liquidity Fund, which invests in
securities and financial instruments in which such institutions may invest
directly (e.g., Federal agency obligations and high quality commercial
paper and corporate debt). For purposes of determining compliance with
quantitative investment limitations under the Home Owners Loan Act
("HOLA"), an investing bank's or association's proportionate share of a
mutual fund's individual investments will, under 12 CFR, [SECTION]560.32,
be aggregated with such investments held directly by the bank or
association. Apart from this requirement, a bank or association may invest,
without prior notice to the Office of Thrift Supervision, an amount up to
15% of its total capital in any one mutual fund or up to 50% of total
capital in all such pass-through investment vehicles. Investments in excess
of the 15% and 50% limits may only be made when thirty days' advance notice
has been provided to the Office of Thrift Supervision.
Certain federally chartered savings banks which converted from a
Massachusetts savings bank charter may, under certain grandfather
provisions of HOLA, retain broader investment authority than that described
in the preceding paragraph. For example, section 5(i) of HOLA grandfathers
state authorized investment powers of certain Federal savings banks in
existence as of the date of enactment of Federal statutes (e.g., the
Financial Institution Reform, Recovery and Enforcement Act of 1989) which
may have otherwise limited such investments.
DIVIDENDS
The Fund distributes all of its net income on a daily basis.
Dividends are declared on each day that the Fund is open for business.
Investors receive dividends in additional shares unless they elect to
receive cash. Payment is made in additional shares at the net asset value
on the payable date or in cash, on a monthly basis.
Investors wishing to change the method of receiving dividends must
notify the Fund in writing at least one week before payment is to be made.
Net income for dividend purposes consists of interest accrued and discount
earned, less amortization of any premium and accrued expenses, plus or
minus all realized short-term gains or losses, if any.
NET ASSET VALUE
The Fund's net asset value per share is determined by dividing the
value of all investment securities and all other assets, less liabilities,
by the number of shares outstanding. The Fund's investment securities are
valued based on their amortized cost, which does not take into account
unrealized appreciation or depreciation. The Corporation's Board of
Directors has established procedures reasonably designed to stabilize the
net asset value per share at $1,000.00.
INVESTORS' ACCOUNTS
The Fund maintains an account for each investor in full and
fractional shares. All purchase and sale transactions are confirmed to the
investor. Statements of account showing all transactions for the month,
including dividends paid, are sent to participating banks on a monthly
basis.
TAXES
The Fund has qualified as a regulated investment company under the
Internal Revenue Code and will not be liable for federal income taxes to
the extent its earnings are distributed. Dividends derived from interest,
together with distributions of any short-term capital gains, are taxable as
ordinary income, whether or not reinvested. Dividends of the Fund do not
qualify for the dividends received exclusion for corporations.
A statement setting forth the federal income tax status of all
distributions made during each calendar year is sent to each shareholder
promptly after the end of such year.
AUDITORS AND LEGAL
Parent, McLaughlin and Nangle, Certified Public Accountants, Inc.,
are the auditors of the Fund. The law firm of Steptoe & Johnson has passed
upon certain legal matters of the Fund in connection with the shares
offered by this offering circular.
CAPITAL GAINS
The Fund does not expect to experience long-term capital gains or
losses due to the short-term nature of the portfolio, and therefore the
Fund does not expect to pay capital gain dividends.
HOW THE SHARES OF THE FUND ARE PURCHASED-
TELEPHONE INVESTMENT PROCEDURE
Shares of the Fund are offered for sale on days on which the
custodian bank is open for business. The Fund and its custodian bank
observe the following holidays during the calendar year: New Year's Day,
Martin Luther King Day, President's Day, Memorial Day, Independence Day,
Labor Day, Columbus Day, Veteran's Day, Thanksgiving Day and Christmas Day.
There is no sales charge. The minimum initial investment is $50,000.00
(although in certain cases the Corporation may require a larger minimum
investment in accordance with requirements of applicable securities laws).
Additional investments may be made in any amount in excess of the minimum.
Bank Wire Transfers
Call your correspondent bank and speak to your account officer. Tell
him that you want to transfer funds to State Street Bank and Trust Company.
Instruct him to wire transfer the money before 12:00 noon, Eastern time,
to:
State Street Bank and Trust Company
Boston, Massachusetts
Routing number: 0110-0002-8
For account of the Bank Investment Fund, Liquidity Fund
Account number: 9006-884-2
Internal Money Transfers
If your correspondent bank account is with the State Street Bank and
Trust Company, contact your account officer and instruct him to transfer
funds from your account to the account of the Bank Investment Fund,
Liquidity Fund, Account number: 9006-884-2.
AFTER INSTRUCTING YOUR BANK TO TRANSFER FUNDS, PLEASE CALL THE FUND
AND TELL US THE AMOUNT YOU TRANSFERRED AND THE NAME OF THE BANK SENDING THE
TRANSFER. YOUR BANK MAY CHARGE A FEE FOR SUCH SERVICES. REMEMBER, IT IS
IMPORTANT TO DO THIS BEFORE 12:00 NOON.
The securities market, in which the Fund buys and sells securities,
usually requires immediate settlement in Federal funds for all security
transactions; therefore, payment for the purchase of Fund shares not
received in the form of Federal funds will be recorded as share
subscriptions, and not invested in Fund shares until such payments are
converted into Federal funds. Payments received by bank wire can be
converted immediately into Federal funds; any other form of payment will
result in a delay. Orders received prior to 12:00 noon, Eastern time, will
be invested in shares of the Fund at the next determined net asset value.
HOW SHARES OF THE FUND ARE REDEEMED-
TELEPHONE REDEMPTION PROCEDURE
An investor may withdraw all or any portion of his investment by
redeeming shares on any day that the Fund is open for business at the next
determined net asset value. The proceeds of redemptions will be wired
directly to the investor's bank account within one business day. The Fund
reserves the right to delay withdrawal requests up to 7 business days after
any investment that has been made with uncollected funds.
The right of redemption can be suspended and the payment of the
redemption proceeds deferred during any period in which a) the New York
Stock Exchange is closed or trading on such Exchange is restricted or b)
the Securities and Exchange Commission deems an emergency to exist, or
during any other period permitted by order of the Commission for the
protection of investors.
Bank Wire Transfers
Call the Fund by 12:00 noon (Call or Trade Date) to redeem shares the
following day (Settlement Date). When the amount to be redeemed is at least
$5,000.00, the Fund will automatically wire transfer the amount to your
correspondent bank account at settlement.
Internal Money Transfers
If your bank's account is with the State Street Bank and Trust
Company, contact the Fund by 12:00 noon (Call or Trade Date) for redemption
of shares the following day (Settlement Date). The Fund will transfer the
amount from its account to your account at State Street Bank and Trust
Company at settlement.
TRANSFER RESTRICTIONS
Fund shares may not be transferred by banks holding such shares to
any persons other than an eligible bank (except that the shares may be
pledged to such other persons or they may be transferred to the Central
Bank). If the Fund shares are acquired by any other persons by operation of
law or by foreclosure upon the pledge of such shares (or through transfer,
in the case of the Central Bank), the Corporation must offer to repurchase
the shares from such person at net asset value of the shares. If such offer
is refused, no dividend may be paid by the Corporation or Fund on such
shares, and the redemption price which the holder of such shares may obtain
in any subsequent repurchase of those shares by the Corporation or Fund is
limited to the net asset value of the shares on the date of the
Corporation's offer.
In the event of any transfer, it is extremely important to notify the
Corporation immediately of any purchase, sale or transfer of Fund shares
not made through the Corporation or its transfer agent. Immediate
notification should be furnished to the Corporation by telephone, with
written notification as a follow-up thereto. Prompt notification is
essential to avoid any delay in redemption offer and loss of earnings.
Please remember that a statutory restriction exists on the Corporation and
it would be unable to pay a dividend to an ineligible holder after
expiration of the 30-day repurchase period which is statutorily available
following such transfer.
ORGANIZATION
The Corporation was organized effective April 7, 1985 pursuant to a
Special Act of the Commonwealth [Acts of 1984, Chapter 482 as amended] of
Massachusetts under its chartered name "Co-operative Bank Investment Fund"
and does business under the name "Bank Investment Fund." The Special Act
indicates that the purpose of the Corporation is to hold, invest, reinvest
and manage one or more mutual investment funds, which shall include all
property of the Corporation, to be derived from voluntary subscription
thereto by the Banks.
The Liquidity Fund commenced operations on October 12, 1988.
The Corporation is an open-end diversified management investment
company authorized to invest its assets in certain real estate mortgages,
and a variety of other investments, including direct obligations of the
United States, obligations guaranteed by the United States, obligations
guaranteed by the Federal National Mortgage Association, bonds and other
evidences of indebtedness of corporations, shares of common or preferred
stock registered on a national securities exchange or for which quotations
are available through the National Quotation Bureau, Inc. or a comparable
service, or through a national securities market established in conformance
with Section 11A of the Securities Act of 1934, and other debt and equity
securities. The Liquidity Fund will only invest in those securities
described under "Investment Policy" and "Investment Restrictions" elsewhere
herein.
The business of the Corporation is conducted by a Board of Directors
elected by the Corporation's Incorporators and the Directors have
investment discretion relative to Corporation assets. The Incorporators of
the Corporation are the Directors of The Co-operative Central Bank, which
is the statutory reserve bank and insurer of deposits in excess of Federal
deposit insurance limitations for Massachusetts co-operative banks.
The Corporation operates pursuant to an exemption from the sections
of the Investment Company Act of 1940 which deal with a) voting rights of
security holders and b) the manner of sale of redeemable securities.
Only Massachusetts Co-operative Banks, Massachusetts Savings Banks,
Massachusetts Trust Companies, Federally Chartered Savings Banks and
Savings and Loan Associations with their principal place of business in
Massachusetts, The Co-operative Central Bank Reserve Fund, The Savings Bank
Life Insurance Company of Massachusetts and the National Cooperative Bank
are currently offered shares in the Fund. Such investors may purchase
shares of beneficial interest, which do not entitle the shareholders
thereof to voting rights of any nature, including investment policy
matters.
DESCRIPTION OF FUND SHARES
The Corporation has no capital stock. Beneficial ownership in each of
the Corporation's funds is represented by shares of beneficial ownership in
such fund, as recorded in book entry form. Each share of beneficial
interest in each fund is equal in every respect to every other share of
that fund. As the Directors of the Corporation establish distinct
investment funds, shares will be issued in distinct classes and each share
within each class will be equal in every respect to every other share of
that class.
The shares of beneficial ownership are no par, non-voting, with a
stated value of $1,000, issued in book entry form only. Investment and
redemption of shares is effected at the net asset value as described
elsewhere herein. Shares are recorded in whole and/or fractional shares, as
applicable. Physical certificates are not issued. Monthly statements are
furnished to reflect share balance and activity.
With regard to the absence of voting rights, management believes that
eligible investors are adequately protected because of a) regulation by the
Commissioner of Banks, b) the redeemable nature of the shares, c)
representation of co-operative bank investors in the election of Directors
of the Central Bank, who as Incorporators elect the Corporation's
Directors, and d) representation of savings bank investors by an advisor at
such corporate meetings of the Incorporators.
SUPERVISION AND REGULATION
As provided by Massachusetts statute [Chapter 482, Acts of 1984 as
amended] the Corporation is subject to the supervision of the Commissioner
of Banks of the Commonwealth of Massachusetts. Periodic reporting to the
Commissioner of Banks is also required by the same statute. The Corporation
is registered as an open-end diversified management investment company
under the Investment Company Act of 1940, as amended, and is subject to
reporting requirements thereunder.
INVESTMENT ADVISOR
The Corporation presently does not employ the services of any
investment advisory or management services company. Investment decisions
for the Fund are made by authorized officers of the Corporation, subject to
approval or ratification by its Board of Directors. The Corporation
reserves the right at any time in the future to appoint an investment
advisor at any reasonable and customary fee as may be agreed when, in the
opinion of the Corporation Directors, the use of such advisory or
management services would improve Fund performance.
TRANSFER AGENT
The Corporation maintains the records for the investment, redemption,
and/or transfer of Fund shares. The Corporation reserves its right at any
time in the future to appoint a separate transfer agent at any reasonable
and customary fee as may be agreed when, in the opinion of the Corporation
Directors, the use of such transfer service is necessary. The limited
number of shareholders and nature of Fund operation does not, at this time,
justify the use of a separate agent and would only be an extra or
unnecessary expense.
OPERATING AND DISTRIBUTION EXPENSES
Normal expenses which may be borne by the Fund include, but are not
limited to: Director fees, salaries and wages, payroll taxes, employee
benefits, taxes, corporate fees, occupancy, furniture and equipment, data
processing, legal, auditing and accounting, telephone and postage,
custodial and other bank fees, preparation, printing and distribution of
reports, insurance, membership fees, organization, and other miscellaneous
expenses.
The Corporation has adopted a plan of distribution pursuant to Rule
12b-1 of the Investment Company Act of 1940 (the "Plan") providing that the
Fund will pay certain expenses incurred by the Corporation which may be
considered to be primarily intended to result in the sale of shares in the
Fund. The expenses which may be incurred pursuant to the Plan include,
without limitation, those for the preparation, printing and distribution of
written materials for other than existing investors, preparation and
distribution of advertising material and sales literature, direct payments
to sales personnel, and other similar activities. The maximum expenditures
which may be made pursuant to the Plan in any year is .12 of 1% of the
average daily net asset value of the Corporation for such year. The Board
of Directors of the Corporation has concluded that there is a reasonable
likelihood that the Plan will benefit the Fund and its shareholders.
Expenditures of $71,549 (.02% of average net assets) pursuant to the
12b-1 plan were incurred in and for the year ended December 31, 1998:
$3,119 for advertising in trade journals and similar publications; $4,919
for printing and mailing of offering circulars; $25,700 for compensation,
payroll taxes and benefits for personnel in sales and customer service;
$22,296 for sponsorship of annual subscriptions and other promotional
materials; and $15,515 for other plan expenses. Expenditures of $26,823
(.03% of average net assets-annualized) pursuant to the 12b-1 plan were
incurred in and for the six months ended June 30, 1999; $1,890 for
advertising in trade journals and similar publications; $2,598 for printing
and mailing of offering circulars; $15,761 for compensation, payroll taxes
and benefits for personnel in sales and customer service; $3,973 for
sponsorship of annual subscriptions and other promotional materials; and
$2,601 for other plan expenses.
Because more than one fund will be operated by the Corporation,
operating expenses and expenses incurred pursuant to the Plan related
directly to a single fund operation will be charged directly to that fund.
Common or indirect expenses will be allocated among funds in accordance
with the annual budget as determined by the Board of Directors of the
Corporation to be fair and equitable or on such other basis as the Board of
Directors of the Corporation may determine from time to time to be fair and
equitable. Operating expenses paid or accrued to Bank Investment Fund-Fund
One for the year ended December 31, 1998 and the six months ended June 30,
1999 were $24,200 and $37,500, respectively.
EXCHANGE PRIVILEGE
Shares of the Fund may be exchanged for shares of another fund of the
Corporation on the basis of the respective net asset value of the shares
involved.
CUSTODIAN
The Corporation is required by statute to at all times employ a
national banking association located in the Commonwealth of Massachusetts,
or a Massachusetts state-chartered bank authorized to exercise trust
powers, as the Corporation's or Fund's custodian, to hold the securities
owned by the Corporation and any monies delivered by the Corporation's or
Fund's shareholders or due to the Corporation or Fund. Purchase and sale
transactions are effected through or by the custodian bank upon the
instructions of the Corporation.
The State Street Bank and Trust Company, 225 Franklin Street, Boston,
MA 02110, serves as custodian of the Fund's cash and investments, other
than cash and Federal funds sold. Investments held under custody include
certificates of deposit. The Fund also maintains cash and Federal fund
balances with a number of qualified national banks (located in
Massachusetts) or Massachusetts state chartered banks. The banks utilized
have been determined by the officers and directors of the Fund to have been
qualified to be custodian banks themselves. State Street Bank and Trust
Company, the Fund's custodian, and other qualified banks, as discussed
above, may be used by the Fund for the placement of short-term, usually
overnight, funds in Federal funds sold.
YEAR 2000
All software used by the Fund for general ledger, investment
securities, mutual fund operations and related purposes is provided and
maintained by Bankware, Inc. The Fund believes that all such software is
year 2000 compliant. Software review, evaluation, update, implementation
and testing validation were completed prior to December 31, 1998. We fully
expect to process participating banks' investments, redemptions and monthly
interest payments in Liquidity Fund without disruption in the year 2000.
Cost related to this year 2000 systems issue were not material. The Fund
recorded expense of $3,744 in 1998 in this regard. Little, if any, further
expense is expected.
Like other mutual funds and other financial and business
organizations around the world, the Fund could be adversely affected if the
computer systems used by its third party transaction processors, such as
custodians, banks, broker dealers or others that the Fund does business
with, do not properly process the date from and after January 1, 2000. The
Fund continues to seek assurances that comparable steps are being taken by
these third party processors. However, there can be no assurance that these
steps will be sufficient to prevent any adverse impact on the Fund.
The Fund plans to be more liquid at year end 1999 in the contingent
event that increased redemption activity is received prior to the century
date change.
MANAGEMENT OF THE FUND
The Incorporators of the Corporation are the Directors of The Co-
operative Central Bank which is the statutory reserve bank and insurer of
deposits in excess of Federal deposit insurance limitations for
Massachusetts co-operative banks. The Board of Directors of the Corporation
is elected by the Incorporators.
The Fund's primary investment officer is James L. Burns, Jr.,
President. He has held this position since inception of the Fund in 1988.
For more than 15 years prior to the inception of the Fund, he managed
investment portfolios for The Co-operative Central Bank and the State
Street Bank and Trust Company.
Directors and Officers of the Corporation, together with information
as to their principal business occupations during the past five years, are
shown below:
<TABLE>
<S> <C>
James L. Burns, Jr., President President of The Co-operative Central Bank
and Chief Executive Officer 75 Park Plaza, Boston, MA 02116-3934
William F. Casey, Jr., Executive Vice President and Treasurer of The Co-operative
Executive Vice President Central Bank, 75 Park Plaza, Boston, MA 02116-3934
Susan L. Ellis, Vice President Vice President of The Co-operative Central Bank, 75 Park Plaza,
and Treasurer Boston, MA 02116-3934
Jeremiah J. Foley, Vice President Vice President of The Co-operative Central Bank, 75 Park Plaza,
and Clerk of the Corporation Boston, MA 02116-3934
Robert E. Haley, Vice President Vice President of Bank Investment Fund, 75 Park Plaza,
Boston, MA 02116-3934
Annemarie Lee, Vice President Assistant Vice President of The Co-operative Central Bank,
75 Park Plaza, Boston, MA 02116-3934
Claire R. Bothwell, Director Chairman of the Board of the Ware Co-operative Bank,
Main Street, Ware, MA 01082
Alfonso DiVito, Director President of The Newton South Co-operative Bank,
411 Watertown St., Newton, MA 02458-1199
Charles P. Hooker, Director Chairman of the Board of The Pittsfield Co-operative Bank,
70 South St., Pittsfield, MA 01202
Ronald E. Lestan, Director President of The Walpole Co-operative Bank,
982 Main Street, Walpole, MA 02081
Edward T. Mulvey, Director President of The Pilgrim Co-operative Bank,
48 South Main St., Cohasset, MA 02025
Walter A. Murphy, Director and Chairman of the Board of the Falmouth Co-operative Bank,
Chairman of the Board P.O. Box 567, Falmouth, MA 02541
John H. Pearson, Jr., Director and President of Butler Bank-A Co-operative Bank,
Clerk of the Board 10 George Street, Lowell, MA 01852
</TABLE>
--------------------
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout each year)
The financial highlights table is intended to help you understand the
Fund's financial performance for the past 10 years. Certain information
reflects financial results for a single fund share. The total returns in
the table represent the rate that an investor would have earned (or lost)
on an investment in the Fund (assuming reinvestment of all dividends and
distributions).
<TABLE>
<CAPTION>
Six Months Year Ended December 31,
Ended --------------------------------------
June 30, 1999 1998 1997 1996
------------- ---- ---- ----
(unaudited) (audited)* (audited)* (audited)*
<S> <C> <C> <C> <C>
Net asset value, beginning of period $1,000.00 $1,000.00 $1,000.00 $1,000.00
--------- --------- --------- ---------
Income from investment operations:
Net investment income 23.26 53.07 53.83 52.53
--------- --------- --------- ---------
Total from investment operations 23.26 53.07 53.83 52.53
--------- --------- --------- ---------
Less distributions:
Dividends from net investment income (23.26) (53.07) (53.83) (52.53)
--------- --------- --------- ---------
Total distributions (23.26) (53.07) (53.83) (52.53)
--------- --------- --------- ---------
Net asset value, end of period $1,000.00 $1,000.00 $1,000.00 $1,000.00
========= ========= ========= =========
Total return 4.75%** 5.44% 5.52% 5.38%
Ratios/Supplemental data:
Net assets, end of period (in 000's) $ 208,853 $ 286,629 $ 235,204 $ 210,208
Ratio of expenses to average
net assets 0.19% 0.15% 0.16% 0.15%
Ratio of net investment income
to average net assets 4.70% 5.30% 5.22% 5.26%
<CAPTION>
Year Ended December 31,
----------------------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990 1989
--------- --------- --------- --------- --------- --------- ---------
(audited)* (audited)* (audited)* (audited)* (audited)* (audited)* (audited)*
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $1,000.00 $1,000.00 $1,000.00 $1,000.00 $1,000.00 $1,000.00 $1,000.00
--------- --------- --------- --------- --------- --------- ---------
Income from investment operations:
Net investment income 57.12 38.00 31.18 39.95 61.44 82.74 91.14
--------- --------- --------- --------- --------- --------- ---------
Total from investment operations 57.12 38.00 31.18 39.95 61.44 82.74 91.14
--------- --------- --------- --------- --------- --------- ---------
Less distributions:
Dividends from net investment income (57.12) (38.00) (31.18) (39.95) (61.44) (82.74) (91.14)
--------- --------- --------- --------- --------- --------- ---------
Total distributions (57.12) (38.00) (31.18) (39.95) (61.44) (82.74) (91.14)
--------- --------- --------- --------- --------- --------- ---------
Net asset value, end of period $1,000.00 $1,000.00 $1,000.00 $1,000.00 $1,000.00 $1,000.00 $1,000.00
========= ========= ========= ========= ========= ========= =========
Total return 5.86% 3.87% 3.15% 4.07% 6.32% 8.37% 9.23%
Ratios/Supplemental data:
Net assets, end of period (in 000's) $ 245,151 $ 91,623 $ 266,821 $ 364,171 $ 383,771 $ 64,115 $ 19,782
Ratio of expenses to average
net assets 0.13% 0.30% 0.28% 0.20% 0.19% 0.25% 0.25%
Ratio of net investment income
to average net assets 5.75% 3.63% 3.12% 3.99% 5.98% 7.99% 8.77%
<FN>
- --------------------
<F*> Financial Statements for the ten years in the ten year period ended
December 31, 1998 were audited by Parent, McLaughlin & Nangle, the
Fund's independent auditors, whose report, along with the Fund
Financial Statements are included elsewhere herein.
<F**> Annualized.
</FN>
</TABLE>
See notes to financial statements.
INDEPENDENT AUDITOR'S REPORT
TO THE SHAREHOLDERS AND BOARD OF DIRECTORS
BANK INVESTMENT FUND-LIQUIDITY FUND
BOSTON, MASSACHUSETTS
We have audited the accompanying statement of assets and liabilities
of Bank Investment Fund-Liquidity Fund, including the schedule of portfolio
investments, as of December 31, 1998, and the related statement of
operations for the year then ended, the statement of changes in net assets
for each of the two years in the period then ended, and the financial
highlights for each of the ten years in the period then ended. These
financial statements and financial highlights are the responsibility of the
Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements
and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements and financial highlights. Our
procedures included confirmation of securities owned as of December 31,
1998, by correspondence with the custodians. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the financial
position of Bank Investment Fund-Liquidity Fund as of December 31, 1998,
the results of its operations for the year then ended, the changes in its
net assets for each of the two years in the period then ended, and the
financial highlights for each of the ten years in the period then ended, in
conformity with generally accepted accounting principles.
/s/ Parent, McLaughlin & Nangle
Certified Public Accountants
LOGO FOR Parent, McLaughlin & Nangle
Member of the SEC Practice Section, American Institute
of Certified Public Accountants
January 28, 1999
BANK INVESTMENT FUND-LIQUIDITY FUND
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
June 30, 1999 December 31, 1998
------------- -----------------
(unaudited) (audited)
<S> <C> <C>
ASSETS:
INVESTMENTS, at cost which approximates value $173,631,213 $286,109,400
REPURCHASE AGREEMENTS 36,055,000 -
INTEREST RECEIVABLE 845,572 1,003,438
CASH 305,497 236,835
------------ ------------
TOTAL ASSETS 210,837,282 287,349,673
------------ ------------
LIABILITIES:
ACCOUNTS PAYABLE-DUE TO BANKS 1,500,000 -
DIVIDENDS PAYABLE 345,848 639,503
ACCRUED EXPENSES 138,336 81,536
------------ ------------
TOTAL LIABILITIES 1,984,184 721,039
------------ ------------
NET ASSETS: (Equivalent to $1,000 per share for each period
based on 208,853.0980 and 286,628.6340 shares of beneficial
interest outstanding) $208,853,098 $286,628,634
============ ============
REPRESENTED BY:
Paid-in Capital $208,853,098 $286,628,634
============ ============
</TABLE>
See notes to financial statements.
BANK INVESTMENT FUND-LIQUIDITY FUND
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
Six Months Ended Year Ended
June 30, 1999 December 31, 1998
---------------- -----------------
(unaudited) (audited)
<S> <C> <C>
INVESTMENT INCOME:
Interest income $6,901,841 $16,804,967
EXPENSES:
Compensation, payroll taxes and benefits-officers $ 86,188 $ 143,008
Compensation, payroll taxes and benefits-other 36,938 52,092
Professional fees 26,974 51,393
Distribution expenses 26,823 71,549
Other expenses 24,781 23,077
Occupancy 20,500 36,400
Custodian and other bank service fees 17,507 29,708
Meetings and travel 10,051 21,973
Equipment and data processing 8,312 17,464
Directors' fees 5,500 10,300
Printing and postage 3,653 6,622
Shareholder reports 2,597 4,919
Insurance expense 1,105 3,025
Stationary and supplies 571 4,470
---------- -----------
TOTAL EXPENSES 271,500 476,000
---------- -----------
INVESTMENT INCOME-NET 6,630,341 16,328,967
---------- -----------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS $6,630,341 $16,328,967
========== ===========
</TABLE>
See notes to financial statements.
BANK INVESTMENT FUND-LIQUIDITY FUND
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Six Months Year Ended Year Ended
Ended December 31, December 31,
June 30, 1999 1998 1997
------------- ------------ ------------
(unaudited) (audited) (audited)
<S> <C> <C> <C>
INCREASE IN NET ASSETS FROM
OPERATIONS:
Investment income-net $ 6,630,341 $ 16,328,967 $ 12,091,702
DIVIDENDS TO SHAREHOLDERS FROM:
Investment income-net (6,630,341) (16,328,967) (12,091,702)
TRANSACTIONS IN SHARES OF BENEFICIAL
INTEREST-NET INCREASE (DECREASE) (77,775,536) 51,424,170 24,996,908
------------ ------------ ------------
TOTAL INCREASE (DECREASE) IN
NET ASSETS (77,775,536) 51,424,170 24,996,908
NET ASSETS:
Beginning of year 286,628,634 235,204,464 210,207,556
------------ ------------ ------------
End of year $208,853,098 $286,628,634 $235,204,464
============ ============ ============
</TABLE>
See notes to financial statements.
BANK INVESTMENT FUND-LIQUIDITY FUND
PORTFOLIO OF INVESTMENTS
June 30, 1999
(unaudited)
<TABLE>
<CAPTION>
Obligations of Federal Agencies-23.4%
Par Coupon Maturity Date Cost
--- ------ ------------- ----
<S> <C> <C> <C> <C>
Federal Home Loan Bank $ 1,500,000 4.58%* 10/01/99 $ 1,482,252
2,000,000 5.75 12/20/99 2,008,096
3,000,000 5.01 02/03/00 3,000,000
2,000,000 5.04 03/03/00 2,000,000
2,000,000 5.05 03/03/00 2,000,000
1,000,000 5.09 03/03/00 1,000,000
----------- ------------
$11,500,000 (Value $ 11,460,003) $ 11,490,348
----------- ------------
Federal Home Loan Mortgage
Corporation $ 5,000,000 4.73%* 10/01/99 $ 4,938,904
----------- ------------
(Value $ 4,934,383)
Federal National Mortgage
Association $ 5,000,000 6.45% 07/01/99 $ 5,000,186
600,000 6.35 08/10/99 600,970
1,000,000 5.73 10/14/99 1,002,464
6,000,000 4.79* 11/05/99 5,897,813
6,000,000 4.78 11/30/99 5,998,267
----------- ------------
$18,600,000 (Value $ 18,484,689) $ 18,499,700
----------- ------------
Student Loan Marketing
Association $14,000,000 5.109%** 08/02/99 $ 14,000,000
----------- ------------
(Value $ 13,982,500)
Certificates of Deposit-3.8%
Avon Cooperative Bank $ 250,000 4.75% 11/01/99 $ 250,000
Ben Franklin Savings Bank 300,000 5.15 12/28/99 300,000
Ben Franklin Savings Bank 1,000,000 5.25% 01/28/00 1,000,000
Bank of Fall River,
a Cooperative Bank 250,000 4.85 07/21/99 250,000
Bank of Fall River,
a Cooperative Bank 250,000 5.05 01/20/00 250,000
Fidelity Cooperative Bank 500,000 5.00 07/28/99 500,000
Foxborough Savings Bank 250,000 4.90 07/15/99 250,000
Foxborough Savings Bank 200,000 4.90 09/29/99 200,000
Foxborough Savings Bank 300,000 4.80 12/01/99 300,000
Hyde Park Cooperative Bank 500,000 5.00 08/03/99 500,000
Lowell Cooperative Bank 200,000 4.90 08/05/99 200,000
Marlborough Cooperative Bank 250,000 5.65 07/01/99 250,000
Marlborough Cooperative Bank 250,000 5.60 09/30/99 250,000
Marlborough Cooperative Bank 500,000 4.95 01/27/00 500,000
Mechanics Cooperative Bank 500,000 5.15 12/28/99 500,000
Mt. Washington Cooperative
Bank 600,000 5.00 07/12/99 600,000
Mt. Washington Cooperative
Bank 450,000 5.15 01/13/00 450,000
Mt. Washington Cooperative
Bank 300,000 5.00 02/25/00 300,000
NCB Savings Bank, FSB 100,000 5.10 11/04/99 100,000
South Shore Cooperative Bank 1,000,000 5.00 02/25/00 1,000,000
First Trade Union Bank 90,000 5.50 11/10/99 90,000
----------- ------------
$ 8,040,000 (Value $ 8,040,000) $ 8,040,000
----------- ------------
Commercial Paper-38.6%
Coca Cola & Co. $ 4,000,000 4.83%* 08/16/99 $ 3,974,777
Coca Cola & Co. 3,000,000 4.83* 09/10/99 2,971,020
Duke Energy Corp. 5,000,000 4.83* 07/08/99 4,994,633
Edison Asset Securitization
LLC 5,000,000 4.84* 07/30/99 4,979,833
Ford Motor Credit Co. 5,000,000 4.93%* 08/24/99 4,962,340
General Electric Capital Corp. 5,000,000 4.90* 08/17/99 4,967,333
Gillette, Inc. 5,000,000 4.86* 08/05/99 4,975,700
Lucent Technologies Inc. 5,000,000 4.82* 08/17/99 4,967,867
Merrill Lynch & Co. Inc. 4,000,000 4.79* 07/16/99 3,991,484
Merrill Lynch & Co. Inc. 5,000,000 4.78* 07/19/99 4,987,386
MetLife Funding Inc. 5,000,000 4.86* 07/08/99 4,994,600
National Rural Utilities, Inc. 5,000,000 4.78* 07/06/99 4,996,017
Receivables Capital Corp. 6,000,000 4.81* 07/07/99 5,994,389
Receivables Capital Corp. 5,000,000 4.85* 07/14/99 4,990,569
USAA Capital Corp. 4,000,000 4.82* 07/13/99 3,993,038
Vermont American Corp. 5,000,000 4.98* 07/16/99 4,988,934
Walt Disney Co. 5,000,000 4.74* 08/02/99 4,978,275
----------- ------------
$81,000,000 (Value $ 80,695,122) $ 80,708,195
----------- ------------
Short-Term Corporate Bonds and Notes-9.9%
Associates Corp. of N.A. $ 1,000,000 6.625% 07/15/99 $ 1,000,694
Associates Corp. of N.A. 5,500,000 6.75 10/15/99 5,530,449
Associates Corp. of N.A. 1,600,000 8.25 12/01/99 1,621,626
Avco Financial Corp. 2,000,000 7.25 07/15/99 2,001,176
Beneficial Finance Corp. 1,000,000 7.18 12/20/99 1,009,912
GMAC Corp. 2,300,000 7.50 07/22/99 2,303,394
GMAC Corp. 1,000,000 6.05 10/04/99 1,002,925
GMAC Corp. 1,000,000 8.40 10/15/99 1,123,731
Household Finance Corp. 2,500,000 7.28 07/22/99 2,503,270
Household Finance Corp. 1,600,000 8.86 12/15/99 1,627,756
Pepsico 500,000 6.25 09/01/99 500,827
Wal-Mart Stores, Inc. 500,000 6.125 10/01/99 501,502
----------- ------------
$20,500,000 (Value $ 20,713,917) $ 20,727,262
----------- ------------
BankBoston $ 8,230,828 5.00% 07/01/99 $ 8,230,828
U. S. Trust Co. 6,995,976 5.063 07/01/99 6,995,976
----------- ------------
$15,226,804 (Value $ 15,226,804) $ 15,226,804
----------- ------------
(Value $173,537,418) $173,631,213
------------
Repurchase Agreement-17.3%
$36,055,000 Repurchase Agreement dated June 30, 1999 with
PaineWebber, Inc. due July 1, 1999 with respect
to various Federal Agencies ranging from:
Par Value $15,300,000-$18,125,000
Rate Range 5.29%-8.12%
Maturity Range 06/11/01-08/15/21
Maturity value of $36,059,807 for an effective
yield of 4.80%.
(Value $ 36,055,000) $ 36,055,000
------------
Total Investments-100.4% (Value $209,592,418) $209,686,213
------------
Other assets in excess of liabilities- -0.4% (833,115)
------------
Net assets-100% $208,853,098
============
</TABLE>
See notes to financial statements.
BANK INVESTMENT FUND-LIQUIDITY FUND
PORTFOLIO OF INVESTMENTS
December 31, 1998
<TABLE>
<CAPTION>
Obligations of Federal Agencies-10.1%
Par Coupon Maturity Date Cost
--- ------ ------------- ----
<S> <C> <C> <C> <C>
Federal Home Loan Mortgage
Corporation $ 5,000,000 5.04%* 01/06/99 $ 4,995,800
Federal National Mortgage
Association 5,000,000 5.06* 01/04/99 4,997,200
Federal National Mortgage
Association 5,000,000 6.45 07/01/99 5,033,794
Student Loan Marketing
Association-Floater 14,000,000 4.858** 08/02/99 14,000,000
------------ ------------
$ 29,000,000 (Value $ 29,006,944) $ 29,026,794
------------ ------------
Certificates of Deposit-3.2%
Avon Cooperative Bank $ 250,000 5.00% 05/03/99 $ 250,000
Ben Franklin Savings Bank 1,000,000 5.50 01/29/99 1,000,000
Ben Franklin Savings Bank 300,000 5.10 06/28/99 300,000
Bank of Fall River,
a Cooperative Bank 500,000 5.50 01/20/99 500,000
Fidelity Cooperative Bank 500,000 5.50 01/27/99 500,000
First Trade Union 90,000 5.50 11/10/99 90,000
Foxborough Savings Bank 250,000 5.50 01/14/99 250,000
Foxborough Savings Bank 200,000 5.25 03/31/99 200,000
Foxborough Savings Bank 300,000 5.00 06/01/99 300,000
Hyde Park Cooperative Bank 250,000 5.50 02/02/99 250,000
Lowell Cooperative Bank 200,000 5.50 02/04/99 200,000
Marlborough Cooperative Bank 500,000 5.60 01/27/99 500,000
Marlborough Cooperative Bank 250,000 5.65 07/01/99 250,000
Marlborough Cooperative Bank 250,000 5.60 09/30/99 250,000
Mechanics Cooperative Bank 500,000 5.00 06/28/99 500,000
Mt. Washington Cooperative
Bank 600,000 5.55 01/11/99 600,000
Mt. Washington Cooperative
Bank 300,000 5.55% 02/25/99 300,000
Mt. Washington Cooperative
Bank 450,000 5.00 06/17/99 450,000
NCB Savings Bank, FSB 100,000 5.00 04/05/99 100,000
South Shore Cooperative
Bank 1,000,000 5.55 02/25/99 1,000,000
South Shore Savings Bank 500,000 5.50 02/09/99 500,000
South Shore Savings Bank 1,000,000 5.50 02/24/99 1,000,000
------------ ------------
$ 9,290,000 (Value $ 9,290,000) $ 9,290,000
------------ ------------
Commercial Paper-62.0%
Anheuser Busch Corp. $ 5,000,000 5.05%* 01/07/99 $ 4,995,090
Anheuser Busch Corp. 5,000,000 5.05* 01/20/99 4,985,972
Anheuser Busch Corp. 7,000,000 5.00* 01/26/99 6,974,722
Bank One Funding Corp. 4,717,000 5.43* 01/13/99 4,707,751
Bank One Funding Corp. 7,000,000 5.45* 01/21/99 6,977,746
Carolina Power & Light Co. 5,000,000 5.15* 02/11/99 4,969,958
Carolina Power & Light Co. 5,000,000 5.10* 02/26/99 4,959,625
Coca Cola & Co. 3,000,000 5.00* 01/14/99 2,994,167
Coca Cola & Co. 5,000,000 5.09* 02/01/99 4,977,378
Coca Cola & Co. 3,000,000 5.05* 02/12/99 2,981,904
Consolidated Natural Gas Co. 5,475,000 5.05* 01/22/99 5,458,104
Consolidated Natural Gas Co. 3,000,000 5.12* 01/28/99 2,988,053
Consolidated Natural Gas Co. 3,000,000 5.05* 02/02/99 2,985,920
Duke Energy Corp. 5,000,000 5.17* 01/13/99 4,990,665
Duke Energy Corp. 5,000,000 5.15* 02/04/99 4,974,965
Duke Energy Corp. 3,000,000 5.20* 02/08/99 2,983,100
Fleet Funding Corp. 5,000,000 5.30* 01/11/99 4,991,903
Fleet Funding Corp. 5,000,000 5.45* 01/14/99 4,989,403
Ford Motor Credit Co. 4,000,000 5.02%* 01/22/99 3,987,729
General Electric Capital Corp. 5,000,000 5.01* 01/25/99 4,982,604
Gillette Inc. 5,000,000 5.12* 01/07/99 4,995,022
Gillette Inc. 5,000,000 5.12* 01/08/99 4,994,311
Gillette Inc. 7,000,000 5.12* 01/12/99 6,988,053
GTE Funding Inc. 5,000,000 5.16* 02/16/99 4,966,317
Lucent Technologies Inc. 5,000,000 5.15* 01/29/99 4,979,257
Lucent Technologies Inc. 8,000,000 5.10* 02/03/99 7,961,467
Merrill Lynch & Co. Inc. 5,000,000 5.23* 01/19/99 4,986,199
Merrill Lynch & Co. Inc. 5,000,000 5.30* 01/27/99 4,980,125
Merrill Lynch & Co. Inc. 5,000,000 5.20* 02/23/99 4,961,000
National Rural Utilities Inc. 5,000,000 5.00* 01/11/99 4,992,361
National Rural Utilities Inc. 5,000,000 5.12* 02/19/99 4,964,444
National Rural Utilities Inc. 3,000,000 5.04* 03/23/99 2,965,560
Receivables Captial Corp. 2,159,000 5.22* 01/14/99 2,154,584
USAA Capital Corp. 5,000,000 5.16* 01/12/99 4,991,400
USAA Capital Corp. 3,000,000 5.15* 01/20/99 2,991,417
USAA Capital Corp. 4,000,000 5.11* 01/28/99 3,984,102
USAA Capital Corp. 3,000,000 5.00* 03/31/99 2,962,500
Winn-Dixie, Inc. 5,000,000 5.03* 01/05/99 4,996,507
------------ ------------
$178,351,000 (Value $177,703,887) $177,671,385
------------ ------------
Short-Term Corporate Bonds and Notes-10.7%
Asssociates Corp. of N.A. $ 5,500,000 6.75% 10/15/99 $ 5,581,958
Avco Financial Corp. 2,000,000 7.25 07/15/99 2,015,366
Ford Motor Corp. 530,000 5.625 01/15/99 530,027
GMAC Corp. 5,594,000 7.75 01/15/99 5,599,099
GMAC Corp. 1,000,000 8.50 01/15/99 1,001,101
GMAC Corp. 750,000 6.04 03/19/99 751,164
GMAC Corp. 1,500,000 7.50 07/22/99 1,519,939
Household Finance Corp. 2,500,000 7.28% 07/22/99 2,530,170
Household Finance Corp. 1,600,000 8.86 12/15/99 1,657,661
IBM Corp. 1,500,000 5.40 01/27/99 1,499,969
Morgan Stanley Dean Witter
Corp. 4,000,000 6.125 01/05/99 4,000,153
Morgan Stanley Dean Witter
Corp. 1,000,000 7.44 06/08/99 1,007,182
Pepsico 500,000 6.25 09/01/99 503,204
Transamerica Financial Corp. 2,500,000 6.80 03/15/99 2,505,716
------------ ------------
$ 30,474,000 (Value $ 30,727,466) $ 30,702,709
------------ ------------
Federal Funds Sold-13.8%
BankBoston $ 13,811,096 4.875% 01/04/99 $ 13,811,096
Fleet Bank, N.A. 11,765,000 4.75 01/04/99 11,765,000
U. S. Trust Co. 13,842,416 4.938 01/04/99 13,842,416
------------ ------------
$ 39,418,512 (Value $ 39,418,512) $ 39,418,512
------------ ------------
Total Investments-99.8% (Value $286,146,809) $286,109,400
------------
Other assets in excess of liabilities-0.2% 519,234
------------
Net assets-100% $286,628,634
============
<FN>
- --------------------
<F*> Annualized yield on date of purchase.
<F**> Rate changes weekly.
</FN>
</TABLE>
See notes to financial statements.
BANK INVESTMENT FUND-LIQUIDITY FUND
NOTES TO FINANCIAL STATEMENTS
(Information for the six months ended June 30, 1999 is unaudited)
NOTE 1. Organization:
The Bank Investment Fund (the "Corporation") was organized effective
April 7, 1985 pursuant to a Special Act of the Commonwealth of
Massachusetts (Acts of 1984, Chapter 482, as amended,) under the chartered
name "Co-operative Bank Investment Fund" and does business under the name
"Bank Investment Fund." The Corporation is registered with the Securities
and Exchange Commission under the Investment Company Act of 1940, as
amended, as a diversified, open-end management investment company. The
Corporation invests and manages two mutual funds derived from the voluntary
subscriptions made by eligible banks.
Liquidity Fund (the "Fund") is a no-load, diversified, open-end money
market fund, which commenced operations on October 12, 1988. Fund shares
are currently offered to the following eligible investors: Massachusetts
Co-operative Banks, Massachusetts Savings Banks, Massachusetts Trust
Companies, Federally Chartered Savings Banks and Savings and Loan
Associations with their principal place of business in Massachusetts, The
Co-operative Central Bank Reserve Fund, The Savings Bank Life Insurance
Company of Massachusetts and the National Cooperative Bank.
Because more than one fund will be operated by the Corporation,
operating expenses related directly to a single fund operation will be
charged directly to that fund. Common or indirect expenses will be
allocated among funds in proportion to the ratio of the net assets of each
fund to total net assets of the Corporation or on such other basis as the
Board of Directors of the Corporation may determine from time to time to be
fair and equitable.
NOTE 2. Significant Accounting Policies:
The Fund's financial statements are prepared in accordance with
generally accepted accounting principles which require the use of
management estimates. The policies described below are followed
consistently by the Fund in the preparation of its financial statements.
Accounting for investments:
Security transactions are accounted for on the trade date (date the
order to buy or sell is executed). The Fund's investment securities are
carried at their amortized cost, which does not take into account
unrealized appreciation or depreciation. Interest income is accrued on all
debt securities on a daily basis and includes accretion of original issue
discount. Premiums, if any, and discounts are amortized or accreted on a
straight line basis, which approximates the income method.
Repurchase agreements:
It is the policy of the Fund to require the custodian bank to take
possession, to have legally segregated in the Federal Reserve Book Entry
System or to have segregated within the custodian bank's vault, all
securities held as collateral in support of repurchase agreement
investments. Additionally, procedures have been established by the Fund to
monitor, on a daily basis, the market value of each repurchase agreement's
underlying investments to ensure the existence of a proper level of
collateral.
Federal income taxes:
The Corporation's policy is to comply with the requirements of the
Internal Revenue Code applicable to regulated investment companies and to
distribute substantially all of its taxable income to its shareholders.
Therefore, no federal income tax provision is required.
Dividends to shareholders:
The Fund distributes all of its net investment income on a daily
basis. Dividends are declared on each day that the Fund is open for
business. Investors receive dividends in additional shares unless they
elect to receive cash. Payment is made in additional shares at the net
asset value on the payable date or in cash, on a monthly basis.
Distributions of realized net capital gains, if any, are declared and paid
once each year and are reinvested in additional shares at net asset value
or, at each shareholder's option, paid in cash.
Net asset value:
The net asset value per share is determined daily by dividing the
value of all investment securities and all other assets, less liabilities,
by the number of shares outstanding. The Fund has established procedures
reasonably designed to stabilize the net asset value per share at $1,000.
NOTE 3. Shares of Beneficial Interest:
Chapter 482 of the Acts of 1984, as amended by Chapter 244, Acts of
1986, of the Commonwealth of Massachusetts permits the directors to issue
an unlimited number of full and fractional shares of beneficial interest
(no par, non-voting, with a stated value of $1,000 per share).
Transactions in shares of beneficial interest are summarized as
follows:
<TABLE>
<CAPTION>
Six Months Ended Year Ended Year Ended
June 30, 1999 December 31, 1998 December 31, 1997
---------------------------- -------------------------------- ----------------------------
(unaudited) (audited) (audited)
Shares Amount Shares Amount Shares Amount
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Sold 573,616.4540 $573,616,454 1,468,133.7242 $1,468,133,724 763,373.3134 $763,373,313
Issued in reinvestment
of dividends 3,973.4351 3,973,435 9,254.9275 9,254,927 7,740.8565 7,740,856
------------------------------------------------------------------------------------------------
577,589.8891 577,589,889 1,477,388.6517 1,477,388,651 771,114.1699 771,114,169
Redeemed 655,365.4247 655,365,425 1,425,964.4817 1,425,964,481 746,117.2619 746,117,261
------------------------------------------------------------------------------------------------
Net increase (decrease) (77,775.5356) $(77,775,536) 51,424.1700 $ 51,424,170 24,996.9080 $ 24,996,908
================================================================================================
</TABLE>
NOTE 4. Distribution Expenses:
The Fund has adopted a Plan of Distribution (the "Plan"), pursuant to
rule 12b-1 under the Investment Company Act of 1940, to use the assets of
the Fund to finance certain activities relating to the distribution of its
shares to investors. The Plan authorizes the Fund to pay for the cost of
preparing, printing, and distributing offering circulars to prospective
investors, direct payments to sales personnel, for certain other direct or
indirect marketing expenses, and for the cost of implementing and operating
the Plan. Plan expenses may not exceed an amount computed at an annual rate
of .12 of 1% of the Fund's average daily net assets. The Fund paid or
accrued $71,549 (.02% of average net assets) and $26,823 (.03% of average
net assets-annualized) pursuant to the Plan for the year ended December 31,
1998 and for the six months ended June 30, 1999, respectively.
NOTE 5. Pension Plans:
The Fund is a participating employer in the Co-operative Banks
Employees Retirement Association, and has, in effect, a Defined
Contribution Plan covering all eligible officers and employees. Under the
Plan, contributions by employees are doubled by the Fund, up to a maximum
of 10% of each employee's salary. Effective January 1, 1989, the Fund also
participates in a Defined Benefit Plan, which covers all eligible
employees, and is funded currently. The Fund's contributions to these
multi-employer plans for the year ended December 31, 1998 and the six
months ended June 30, 1999 were $20,207 and $12,754, respectively.
NOTE 6. Transactions With Related Parties:
The Incorporators of the Corporation are the Directors of The Co-
operative Central Bank, which is the statutory reserve bank and insurer of
deposits in excess of Federal deposit insurance limitations for
Massachusetts co-operative banks. The Board of Directors of the Corporation
is elected by the Incorporators.
The Fund reimburses The Co-operative Central Bank and/or the Bank
Investment Fund-Fund One for its proportionate share of expense items used
in common. All fees and expenses for the Fund are estimated and accrued
daily. Annual operating expenses were .15% and .19% of the Fund's net
assets for the year ended December 31, 1998 and the six months ended June
30, 1999, respectively. As reimbursement of allocated expenses, the Fund
paid or accrued $24,200 and $37,500 to the Bank Investment Fund-Fund One,
for the year ended December 31, 1998 and the six months ended June 30,
1999, respectively.
The following sheets are perforated for your removal
and use in the establishment or updating of your account.
BANK INVESTMENT FUND
LIQUIDITY FUND
ACCOUNT APPLICATION FORM
REGISTRATION. The account should be registered as follows:
DATE: __________
NAME: _____________________________________________________________________
POST OFFICE BOX: __________________________________________________________
STREET ADDRESS: ___________________________________________________________
CITY/TOWN: ______________________________ STATE: __________________________
ZIP CODE: ____________________ TELEPHONE NUMBER: __________________________
TAX ID NUMBER _____________________________________________________________
INITIAL INVESTMENT: $ ___________________________________ (Minimum $50,000)
MONTHLY CASH DIVIDENDS
[ ] Check if dividends are to be paid monthly in cash. Otherwise
dividends will be AUTOMATICALLY REINVESTED in additional shares of
the Fund.
TELEPHONE REDEMPTION ORDERS
Redemption proceeds will be sent ONLY to the bank or trust company
listed below, for credit to the investor's account. The investor hereby
authorizes the BANK INVESTMENT FUND to honor telephone or written
instructions, without a signature guarantee, for redemption of Fund shares.
THE FUND and its Agents will not be liable for any loss, expense or cost
arising out of such transactions.
Enclose a specimen copy of your check or deposit slip (marked VOID)
for the bank account listed below. To facilitate the wiring of your
redemption proceeds the indicated bank should be a commercial bank.
Name of Bank: _____________________________________________________________
Bank Account No. __________________________________________________________
Bank Address: _____________________________________________________________
street
_______________________________________________ MA __________
city zip
Name on Account: __________________________________________________________
Bank Routing/Transit No.: _________________________________________________
AUTHORIZED PERSONS-TELEPHONE INVESTMENTS AND REDEMPTIONS
Authorized person Title Initials
----------------- ----- --------
1. ________________________________________________________________________
2. ________________________________________________________________________
3. ________________________________________________________________________
4. ________________________________________________________________________
5. ________________________________________________________________________
CORPORATE RESOLUTIONS
We have enclosed with this application form the necessary corporate
resolutions to authorize corporate officers to make wire or cash payment
transfers to the Bank Investment Fund and to purchase, sell or exchange
shares of beneficial ownership in the Bank Investment Fund.
SIGNATURE AND CERTIFICATION
We have received and read the Offering Circular, and agree to its
terms and conditions by signing below. By the execution of this
Application, the undersigned represent and warrant that they are duly
authorized to sign this Application and to purchase or redeem shares of the
Fund on behalf of the investor.
The undersigned hereby certify under penalty of perjury that the
above Taxpayer Identification Number is correct and that the investor is
not subject to backup withholding.
We further certify and agree that the certifications, authorizations
and appointments in this document will continue until the Bank Investment
Fund receives actual written notice of any change thereof.
Signature _____________________________ Title _____________________________
Signature _____________________________ Title _____________________________
Two signatures are required, one of which should be the Secretary or Clerk
of the corporation.
SIGNATURE GUARANTEE
In order to facilitate telephone redemptions, you must have your
signature(s) on this application guaranteed by a commercial bank or stock
exchange member firm.
___________________________________________________________________________
Name of Bank or Investment Dealer
___________________________________________________________________________
By (signature of authorized person)
___________________________________________________________________________
Title (authorized person)
CERTIFICATE OF CORPORATE RESOLUTION
For Massachusetts Co-operative Banks, Massachusetts Savings Banks,
Massachusetts Trust Companies, Federally Chartered Savings Banks and
Savings and Loan Associations with their principal place of business in
Massachusetts, The Co-operative Central Bank Reserve Fund, The Savings Bank
Life Insurance Company of Massachusetts and the National Cooperative Bank
only. This form authorizes the individuals below to redeem shares by
telephone or exchange.
The undersigned is Secretary or Clerk of ________________________ and
hereby certifies that the following individuals: (name of corporation)
Name Title
---- -----
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
are duly authorized by corporate resolution or otherwise to act on behalf
of the eligible bank in connection with its ownership of shares in the Bank
Investment Fund, Liquidity Fund and in particular to give instructions for
the purchase, sale or exchange of any said shares and to execute any
necessary forms in connection therewith.
The Bank Investment Fund will consider this authorization to be in
full force and in effect until otherwise notified in writing.
IN WITNESS WHEREOF, the undersigned has executed this Certificate the
_______________ day of ___________________ 19__________.
___________________________________________________________________________
Secretary or Clerk
NOTES
FINANCIAL STATEMENTS
As required by applicable statutes, semi-annual financial statements
are furnished to the shareholder, the Commissioner of Banks and the
Securities and Exchange Commission.
ADDITIONAL INFORMATION
The Bank Investment Fund (the "Corporation") has filed with the
Securities and Exchange Commission in Washington, D.C., under the chartered
name the "Co-operative Bank Investment Fund" a registration statement on
Form N-1A (together with all amendments and exhibits thereto, hereinafter
referred to as the "Registration Statement") under the Investment Company
Act of 1940. This Offering Circular does not contain all of the information
in the Registration Statement. The Registration Statement may be reviewed
and copied at the Public Reference Room of the Securities and Exchange
Commission; or:
By Phone: 1-800-Sec-0330
By mail: Public Reference Section
Securities and Exchange Commission
Washington, D.C. 20549-6009
(duplicating fee required)
On the Internet: www.sec.gov
(Investment Company Act File No. 811-4421)
The Corporation will provide, without charge to any person to whom
this Offering Circular is delivered on the written or oral request of any
such person, a copy of the Registration Statement and the additional
information contained therein and documents relating to certain exemptions
from the Investment Company Act of 1940 (see ORGANIZATION). Written
requests should be directed to the Bank Investment Fund, 75 Park Plaza,
Boston, MA 02116-3934. Telephone requests may be directed collect to 617-
695-0415.
==============================
BANK INVESTMENT FUND
LIQUIDITY FUND
75 Park Plaza
Boston, MA 02116-3934
617-695-0415
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