<PAGE> 1
_____________________________________________
PLAN INVESTMENT FUND, INC.
ANNUAL REPORT
DECEMBER 31, 1997
ADMINISTRATOR:
__________________________
Health Plans
==========================
Capital Services Corp
225 N. Michigan Chicago, IL 60601 (312) 297-6372
<PAGE> 2
[PLAN INVESTMENT FUND, INC. LETTERHEAD]
February 10, 1998
Fellow Investors:
On behalf of the Board of Trustees, I am pleased to submit the 1997
Annual Report for Plan Investment Fund, Inc. The reduced
profitability and cash flow at many of our Blue Cross Blue Shield
customers finally caught up with the fund in 1997 as average assets
declined for the first time in four years.
At the beginning of the year, the consensus thinking was 1997 would
be a good year for the bond markets, tempered by concerns that
inflation would become a problem and the economy would begin to slow
down. However, 1997 turned out to be a very good year for the
economy as well as the markets. The accompanying reports from the
advisors provide an excellent commentary on 1997 activity.
Average asset levels of Plan Investment Fund totaled $766 million in
1997, $70 million lower than in 1996. The Government/REPO Portfolio
enjoyed a near doubling of average assets to $197 million. Its one
business day maturity policy allowed it to quickly reflect changing
interest rates. The Short-Term Portfolio's guidelines were changed
during 1997 to extend its neutral duration position to nine months
from six months. The Short-Term Portfolio should be considered for
potential additional income opportunities for your short-term
assets. As indicated in the accompanying table of comparative
returns, each of the Portfolios continued to provide competitive
returns while maintaining their high quality guidelines.
This past year was a positive one as the Plan Investment Fund
Portfolios were well managed and continued to deliver strong results
consistent with their objectives. We look forward to 1998 and the
opportunity to continue providing these high quality, low cost
investment vehicles to the members of the Blue Cross Blue Shield
system of independent Plans.
Sincerely,
Philip A. Goss
Philip A. Goss
President and Chief Executive Officer
<PAGE> 3
- --------------------------------------------------------------------------------
COMPARATIVE PERFORMANCE ANNUALIZED TOTAL RETURN
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Periods Ended Three One Five Ten From
December 31, 1997 Months Year Years Years Inception
- ----------------- ------ ---- ----- ----- ---------
<S> <C> <C> <C> <C> <C>
GOVERNMENT/REPO PORTFOLIO 5.6% 5.57% - - 5.61%
Donoghues Inst. Money Market Avg. 5.37% 5.29% - - 5.32%
Repurchase Agreements 5.65% 5.55% - - 5.59%
MONEY MARKET PORTFOLIO 5.59% 5.51% 4.82% 5.92% 5.98%
Donoghues Inst. Money Market Avg. 5.37% 5.29% 4.60% 5.71% 5.78%
Repurchase Agreements 5.65% 5.55% 4.84% 5.86% 5.90%
SHORT-TERM PORTFOLIO 5.71% 5.85% 4.68% 6.27% 6.13%
6 Month Treasury Bill 5.42% 5.44% 4.88% 5.84% 5.87%
1-3 Year Treasury Note 6.83% 6.66% 5.67% 7.30% 7.16%
</TABLE>
*Inception dates:
- -----------------
6/01/95 - Government/REPO Portfolio;3/11/87 - Money Market and Short-Term
Portfolios
- --------------------------------------------------------------------------------
PORTFOLIO CHARACTERISTICS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Closing Closing
Average Closing Average Average
Portfolio/Month Yield Price Maturity Quality
- --------------- ------- ------- -------- -------
<S> <C> <C> <C> <C>
GOVERNMENT/REPO
October 5.48% $1.00 3 Days A1+
November 5.54% $1.00 1 Day A1+
December 5.55% $1.00 2 Days A1+
MONEY MARKET
October 5.44% $1.00 48 Days A1+
November 5.46% $1.00 58 Days A1+
December 5.45% $1.00 55 Days A1+
SHORT-TERM
October 5.55% 9.97 10.4 Mos. AA+
November 5.57% 9.96 11.7 Mos. AA+
December 5.60% 9.97 11.0 Mos. AA+
</TABLE>
<PAGE> 4
- --------------------------------------------------------------------------------
REPORT FROM THE MONEY MARKET AND GOVERNMENT/REPO PORTFOLIO ADVISOR
- --------------------------------------------------------------------------------
The past year surprised many market participants as the stock market again
racked up double digit gains, the bond market saw long-term interest rates fall
to near record lows and money market fund assets grew by 20% to over $1
trillion. As the year began, these robust results were not high on everyone's
list of expectations. The nation's economy was expanding at a strong 4% pace
and higher prices for goods and services were widely anticipated. The Federal
Reserve seemed biased towards tightening monetary policy in what they implied
would be a preemptive move against future inflationary pressures. A small move
early in 1997, they argued, would prevent even higher borrowing costs down the
road. On March 25th, the Fed raised short-term rates by 25 basis points to
5.50% and with the benefit of 20/20 hindsight, their action clearly achieved
the desired results. The economy slowed slightly to a 3.1% pace in the third
quarter while inflation fell to its lowest level in a decade. Wholesale
prices, in fact, actually declined 1.2% in 1997, while consumer prices were up
approximately 1.8%. As the year came to an end, the financial crisis among the
Asian economies became a significant influence of global economic health and
the direction of interest rates. U.S. fixed income securities did well, as a
flight to quality and safety unfolded. By the first week of January 1998, the
30-year Treasury bond fell to a record low of 5.70%. Sentiment towards
monetary policy also shifted, given Mr. Greenspan's comments about deflation,
and some Fed watchers even began to talk about the possibility of an easing of
monetary policy.
The positive slope of the yield curve, particularly in the early part of the
year, biased the Money Market Portfolio towards a moderately extended average
weighted maturity in the 50-60 day range. As the curve flattened in the latter
part of the year, the Portfolio shortened its investments, while also looking
for opportunity in variable rate obligations, where reset formulas based on the
federal funds rate and LIBOR offered competitive yields. The shorter
positioning was also influenced by the decline in assets, to $414 million, at
year-end. The portfolio's total return for the year was 5.51% versus 5.29% for
the IBC Total Institutions-Only category.
The Government/REPO Portfolio adhered to its strategy of investing
substantially all of its assets in overnight investments. The Portfolio
accepted only U.S. Treasury obligations as collateral on its repurchase
agreements, and repo counterparties were scrutinized for their
creditworthiness. With the competitive rates on overnight investments for most
of 1997, the Portfolio produced a total return of 5.57%.
As we look ahead, it seems likely that the equilibrium between moderate
economic growth and low inflation will keep short-term interest rates near
their current 5.50% level well into the new year. The wild card will continue
to be Asia. If their financial problems worsen or spread, we could see lower
short-term interest rates by mid-year. On the other hand, if those economies
stabilize, our own strong economic growth could lead to a modest uptick in
rates. In either case, we think the magnitude of any change should be small.
Thomas H. Nevin, President and Chief Investment Officer
PNC Institutional Management Corporation
<PAGE> 5
- --------------------------------------------------------------------------------
REPORT FROM THE SHORT-TERM PORTFOLIO ADVISOR
- --------------------------------------------------------------------------------
Neuberger & Berman was prepared for a rewarding Fixed Income market in 1997.
However, a powerful bull market drove yields below 6% across the yield curve
which pleasantly exceeded our expectations. By the final quarter of the year,
the shape of the yield curve had changed dramatically exemplified by the
difference in yields of two versus thirty-year Treasuries. This difference
narrowed by approximately one half percent as reduced inflation fears
encouraged buying of long dated securities. During the final quarter of 1997,
the yield curve continued to flatten and actually ended with money market rates
exceeding those of five-year Treasuries.
An embarrassment of riches on the fiscal front found the Federal Government's
budget in the best shape in a generation, leading to a virtual balanced budget
as we enter 1998. This fiscal responsibility reduced borrowing by the U.S.
Treasury and resulted in higher prices for outstanding Treasury issues. Thus,
our Treasury holdings became attractive sell candidates as we aggressively took
profits and bought bank deposits, agency discount notes and corporate issues.
We increased the yield on our commercial paper purchases as year-end pressures
and the Asian crisis forced market yields higher. The widening of corporate
spreads allowed the Portfolio to pick up additional yield by increasing the
allocation in the corporate sector. Neuberger & Berman's credit research
capabilities provided added value by identifying corporate securities which
provide good returns and good quality. In a very competitive market, this
research allows the Portfolio manager to act quickly and take advantage of
opportunities.
At the close of the year, our allocation to money market securities was focused
on those maturing six months and longer, with the balance of the Portfolio
invested in two to three year issues. We ended the year with a portfolio
duration of approximately 9 months. Good sector and security decisions
combined with well-timed movements of the Portfolio's duration helped to keep
the returns of the Portfolio competitive throughout the year. Equally as
important to delivering good returns was our decision to avoid credits which
were widely perceived to be high quality but in fact were junk bonds. Our
credit staff evaluates and monitors all issues purchased, and the rating
services are then used as a reference. We are pleased to report our
conservative staff outscored the rating services in disagreements over credit
quality.
We enter 1998 with a continuing level of optimism. Inflation seems under
control, the Federal deficit continues to shrink and investors, alarmed by
developments in Asia, have a new found fondness for fixed income securities.
While it is unlikely that the powerful returns of 1997 will be repeated, we
anticipate another rewarding year.
Martin McKerrow
Co-Director, Fixed Income Group
Neuberger & Berman
[GRAPH]
<PAGE> 6
STATEMENT OF NET ASSETS
GOVERNMENT/REPO PORTFOLIO
December 31, 1997
<TABLE>
<CAPTION>
PERCENTAGE
OF PAR
NET ASSETS (000) VALUE
---------- ----- -----
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------
GOVERNMENT AGENCY OBLIGATIONS 71.2%
- ------------------------------------------------------------------------------------------------------
Federal Home Loan Bank
Discount Note
5.75% (1/02/98) $142,000 $141,977,319
(Cost $141,977,319)
- ------------------------------------------------------------------------------------------------------
REPURCHASE AGREEMENTS 29.3%
- ------------------------------------------------------------------------------------------------------
HSBC Securities, Inc.
5.50% (1/02/98)
(Collateralized by $7,372,000 U.S.
Treasury Bond, 9.25%; due 2/15/16; 10,000 10,000,000
market value $10,201,005)
Lehman Government Securities, Inc.
5.90% (1/02/98)
(Collateralized by $9,695,000 U.S.
Treasury Note, 7.125%; due 2/29/00; 10,000 10,000,000
market value $10,196,139)
Merrill Lynch, Pierce, Fenner & Smith Inc.
6.25% (1/02/98)
(Collateralized by $14,145,000 Federal
National Mortgage Association Medium Term
Notes, 5.90%-5.92%; due 10/08/02-10/08/03;
market value $10,301,507) 10,000 10,000,000
Morgan Stanley & Co., Inc.
6.70% (1/02/98)
(Collateralized by $6,742,000 U.S.
Treasury Bond, 10.375%; due 11/15/09;
market value $8,507,885) 8,300 8,300,000
</TABLE>
<PAGE> 7
STATEMENT OF NET ASSETS
GOVERNMENT/REPO PORTFOLIO
<TABLE>
<CAPTION>
PERCENTAGE
OF PAR
NET ASSETS (000) VALUE
---------- ----- -----
<S> <C> <C> <C>
Swiss Bank Corp.
4.75% (1/02/98)
(Collateralized by $17,791,000 U.S.
Treasury Bonds and Notes, 5.75%-8.75%;
due 8/15/03-11/15/08;
market value $20,406,898) $20,000 $ 20,000,000
-------------
TOTAL REPURCHASE AGREEMENTS 58,300,000
(Cost $58,300,000)
TOTAL INVESTMENTS IN SECURITIES........... 100.5% 200,277,319
(Cost $200,277,319*)
LIABILITIES IN EXCESS OF OTHER ASSETS (0.5%) (1,039,381)
------- --------------
NET ASSETS (Applicable to 199,237,938
PCs outstanding) 100.0% $ 199,237,938
====== ==============
NET ASSET VALUE, offering and
redemption price per PC
($199,237,938/199,237,938 PCs) $1.00
====
</TABLE>
* Aggregate cost for Federal tax purposes.
See accompanying notes to financial Statements.
<PAGE> 8
STATEMENT OF NET ASSETS
MONEY MARKET PORTFOLIO
December 31, 1997
<TABLE>
<CAPTION>
PERCENTAGE
OF PAR
NET ASSETS (000) VALUE
---------- ----- -----
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------
COMMERCIAL PAPER ............................................. 73.8%
- ------------------------------------------------------------------------------------------------------------------
DRUGS AND COSMETICS .......................................... 4.8%
Warner Lambert Co. ........................................
5.49% (3/17/98) ...................................... $20,000 $19,771,250
-----------
FINANCE LESSORS .............................................. 6.0%
General Electric Capital Corp. ............................
5.57% (1/20/98) ...................................... 10,000 9,970,603
IBM Credit Corp. ..........................................
5.54% (2/10/98) ...................................... 15,000 14,907,667
-----------
24,878,270
-----------
HOUSEHOLD AUDIO & VIDEO EQUIPMENT 4.8%
Panasonic Finance, Inc.
5.54% (2/05/98) ...................................... 20,000 19,892,278
-----------
LIFE INSURANCE ............................................... 4.5%
Metlife Funding, Inc. .....................................
5.63% (3/03/98) ...................................... 19,000 18,818,745
-----------
MISCELLANEOUS BUSINESS CREDIT ................................ 4.0%
National Rural Utilities Cooperative Finance Corp. ........
5.65% (3/12/98) ...................................... 16,750 16,565,983
-----------
MOTOR VEHICLES & CAR BODIES .................................. 6.4%
Daimler-Benz North America Corp. ..........................
5.50%-5.55% (2/25/98-3/26/98) ........................ 27,000 26,695,822
-----------
PERSONAL CREDIT INSTITUTIONS ................................. 4.8%
Associates Corp. of North America
5.53% (1/29/98) ...................................... 20,000 19,913,978
-----------
PIPE LINES ................................................... 5.4%
Colonial Pipeline Co. .....................................
5.55%-5.66% (4/06/98-6/04/98) ........................ 23,000 22,513,669
-----------
</TABLE>
<PAGE> 9
STATEMENT OF NET ASSETS
MONEY MARKET PORTFOLIO
<TABLE>
<CAPTION>
PERCENTAGE
OF PAR
NET ASSETS (000) VALUE
---------- ----- -----
<S> <C> <C> <C>
PRIMARY SMELTING & REFINING ............... 4.1%
RTZ America, Inc. ...................... $17,000 $16,916,587
5.52% (2/02/98) ................... -----------
SECURITY BROKERS & DEALERS ................ 4.7%
Goldman Sachs Group L.P. ...............
5.68%-5.70% (4/15/98-5/14/98) ..... 20,000 19,648,575
-----------
SERVICES - HEALTH SERVICES ................ 1.6%
Kaiser Foundation Hospitals
5.60% (6/04/98) ................... 6,500 6,344,289
-----------
SHORT-TERM BUSINESS CREDIT ................ 17.9%
Block Financial Corp. ..................
5.55% (1/15/98) ................... 20,000 19,956,833
C.I.T. Group Holdings, Inc. ............
5.58% (4/14/98) ................... 20,000 19,680,700
Caterpiller Financial Services Corp. ...
5.50% (2/04/98) ................... 10,000 9,948,056
Corporate Asset Funding, Inc. ..........
5.54% (4/09/98) ................... 15,000 14,773,783
Corporate Receivables Corp. ............
5.73% (3/24/98) ................... 10,000 9,869,482
-----------
74,228,854
SOAPS & DETERGENTS CLEANING ............... 4.8% -----------
Proctor & Gamble Co. ...................
5.55% (3/30/98) ................... 20,000 19,728,667
-----------
TOTAL COMMERCIAL PAPER ............ 305,916,967
(Cost $305,916,967) -----------
- --------------------------------------------------------------------------------------------
VARIABLE RATE OBLIGATIONS 15.2%
- --------------------------------------------------------------------------------------------
BANKS ..................................... 9.2%
Bank of America National Trust & Savings
6.10% (1/02/98) ................... 20,000 19,992,337
CoreStates Bank, N.A ...................
5.94% (1/29/98) ................... 18,000 18,000,000
----------
37,992,337
----------
</TABLE>
<PAGE> 10
STATEMENT OF NET ASSETS
MONEY MARKET PORTFOLIO
<TABLE>
<CAPTION>
PERCENTAGE
OF PAR
NET ASSETS (000) VALUE
---------- ----- -----
<S> <C> <C> <C>
SECURITY BROKERS & DEALERS.................... 6.0%
Bear Stearns Company, Inc.
5.72% (2/05/98) $25,000 $25,000,000
----------
TOTAL VARIABLE RATE OBLIGATIONS 62,992,337
(Cost $62,992,337) ----------
- ------------------------------------------------------------------------------------------------------------------------------------
REPURCHASE AGREEMENTS 11.5%
- ------------------------------------------------------------------------------------------------------------------------------------
Morgan Stanley & Co.
6.70% (1/02/98)
(Collateralized by $32,890,000 U.S.
Treasury Note, 6.00%; due 9/30/98;
market value $33,472,279) 32,800 32,800,000
Swiss Bank Corp.
4.00% (1/02/98)
(Collateralized by $13,346,000 U.S.
Treasury Bonds and Notes, 6.75%-8.75%;
due 4/30/00-11/15/08;
market value $15,308,915) 15,000 15,000,000
----------
TOTAL REPURCHASE AGREEMENTS 47,800,000
(Cost $47,800,000)
TOTAL INVESTMENTS IN SECURITIES............ 100.5% 416,709,304
(Cost $416,709,304*)
LIABILITIES IN EXCESS OF OTHER ASSETS (0.5%) ( 2,084,074)
------- ------------
NET ASSETS (Applicable to 414,625,230
PCs outstanding) 100.0% $414,625,230
====== ============
NET ASSET VALUE, offering and
redemption price per PC
($414,625,230/414,625,230 PCs) $1.00
=====
</TABLE>
* Aggregate cost for Federal tax purposes.
See accompanying notes to financial statements.
<PAGE> 11
STATEMENT OF NET ASSETS
SHORT-TERM PORTFOLIO
December 31, 1997
<TABLE>
<CAPTION>
PERCENTAGE
OF PAR
NET ASSETS (000) VALUE
---------- ----- -----
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------
U.S. TREASURY OBLIGATIONS 12.4%
- ------------------------------------------------------------------------------------------------
U.S. Treasury Notes
6.00%-6.375% (5/15/99-8/15/00) $5,700 $5,749,274
----------
(Cost $5,701,460)
- ------------------------------------------------------------------------------------------------
GOVERNMENT AGENCY OBLIGATIONS 19.5%
- ------------------------------------------------------------------------------------------------
Federal National Mortgage Association
Discount Note
5.55% (6/03/98) 1,050 1,024,909
----------
Federal Home Loan Mortgage Corp.
Collateralized Mortgage Obligations
5.95% (6/19/98) 5,500 5,505,830
Gold Balloon
6.50% (12/01/02) 2,500 2,516,400
----------
8,022,230
----------
TOTAL GOVERNMENT AGENCY OBLIGATIONS 9,047,139
(Cost $9,037,177) ----------
- ------------------------------------------------------------------------------------------------
ASSET BACKED SECURITIES 4.0%
- ------------------------------------------------------------------------------------------------
Ford Motor Credit Trust 95-A
5.90% (5/31/98) 196 196,270
Honda Auto Receivables Grantor Trust 1997-A
5.85% (11/30/98) 1,180 1,175,989
Premier Auto Trust 95-2A5
7.15% (1/15/98) 465 465,193
----------
TOTAL ASSET BACKED SECURITIES 1,837,452
(Cost $1,843,198) ----------
- ------------------------------------------------------------------------------------------------
CERTIFICATES OF DEPOSIT 5.4%
- ------------------------------------------------------------------------------------------------
Wachovia Bank N.C
6.15% (5/06/98) 2,500 2,500,300
----------
(Cost $2,499,826)
</TABLE>
<PAGE> 12
STATEMENT OF NET ASSETS
SHORT-TERM PORTFOLIO
<TABLE>
<CAPTION>
PERCENTAGE
OF PAR
NET ASSETS (000) VALUE
---------- ----- -----
<S> <C> <C> <C>
- --------------------------------------------------------------------------------------
COMMERCIAL PAPER 25.1%
- --------------------------------------------------------------------------------------
CHEMICALS 4.2%
Dupont (E.I.) DeNemours & Co.
5.48%-5.50% (3/06/98-3/26/98) 1,970 $1,947,128
----------
DRUGS AND HEALTH CARE 2.3%
Abbot Labs
5.80% (1/07/98) 1,070 1,068,966
----------
ENTERTAINMENT 3.4%
Walt Disney Company, Inc.
5.46%-5.70% (1/06/98-3/10/98) 1,590 1,584,811
----------
FINANCIAL SERVICES 8.5%
Ciesco
5.90% (1/05/98) 485 484,682
Cargill Inc.
5.47% (1/21/98) 1,000 996,812
Goldman Sachs & Co.
5.65% (5/11/98) 1,315 1,287,758
Prudential Funding Corp.
5.52% (3/23/98) 1,180 1,164,982
----------
3,934,234
TELECOMMUNICATIONS 6.7% ----------
AT&T Co.
5.46% (3/09/98) 2,000 1,979,070
Bell Atlantic Corp.
6.12% (1/05/98) 1,130 1,129,232
----------
3,108,302
----------
TOTAL COMMERCIAL PAPER 11,643,441
(Cost $11,645,692) ==========
- --------------------------------------------------------------------------------------
FIXED RATE OBLIGATIONS 33.3%
- --------------------------------------------------------------------------------------
AUTOMOBILES 2.2%
General Motors Acceptance Corp.
6.20% (12/07/98) 1,000 1,001,610
----------
BANKS 8.6%
FCC National Bank Wilmington, Delaware
6.05% (11/04/98) 2,000 2,002,340
Morgan Guaranty Trust Co.
5.93% (8/31/98) 2,000 1,999,580
----------
4,001,920
==========
</TABLE>
<PAGE> 13
STATEMENT OF NET ASSETS
SHORT-TERM PORTFOLIO
<TABLE>
<CAPTION>
PERCENTAGE
OF PAR
NET ASSETS (000) VALUE
---------- ----- -----
<S> <C> <C> <C>
FINANCIAL SERVICES 2.2%
Aristar Inc.
6.125% (12/01/00) $1,000 $ 999,000
-----------
OFFICE EQUIPMENT 3.7%
IBM Credit Corp.
5.93% (3/18/98) 1,700 1,700,204
-----------
PERSONAL CREDIT INSTITUTIONS 3.2%
Associates Corp. North America
6.375% (6/15/00) 1,500 1,507,980
-----------
SECURITY BROKERS & DEALERS 8.6%
Dean Witter Discover & Co.
6.00% (3/01/98) 2,000 2,000,760
Merrill Lynch & Co.
6.64% (4/09/99) 2,000 2,013,240
-----------
4,014,000
-----------
SERVICES-EQUIPMENT LEASING 4.8%
International Lease Finance Corp.
5.37% (2/02/98) 2,250 2,249,258
-----------
TOTAL FIXED RATE OBLIGATIONS 15,473,972
(Cost $15,460,491) ------------
TOTAL INVESTMENTS IN SECURITIES.................. 99.7% 46,251,578
(Cost $46,187,844*)
OTHER ASSETS IN EXCESS OF LIABILITIES............ 0.3% 153,347
----- -----------
NET ASSETS (Applicable to 4,655,328
PCs outstanding) 100.0% $46,404,925
===== ===========
NET ASSET VALUE, offering and redemption
price per PC ($46,404,925/4,655,328 PCs) $ 9.97
===========
</TABLE>
* Aggregate cost for Federal tax purposes.
The aggregate gross unrealized appreciation
or depreciation for all securities is as
follows: excess of value over tax cost
$78,660; excess of tax cost over value
$14,926.
See accompanying notes to financial statements.
<PAGE> 14
STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
GOVERNMENT/REPO MONEY MARKET SHORT-TERM
PORTFOLIO PORTFOLIO PORTFOLIO
----------- ----------- ----------
<S> <C> <C> <C>
INTEREST INCOME $10,933,774 $29,071,247 $3,011,975
----------- ----------- ----------
EXPENSES
Investment advisory fee 394,189 890,037 153,316
Administration fee 98,757 258,282 26,098
Custodian 29,586 53,837 9,343
Transfer agent 6,656 23,457 1,695
Legal 7,704 20,201 2,061
Audit 9,383 24,617 2,503
Trustee expenses 3,401 9,405 988
Insurance 9,934 26,005 2,645
Printing 1,787 4,611 470
Professional services 7,532 5,716 282
Service Agent 0 0 100,000
Miscellaneous 407 1,009 100
Fees waived (371,799) (13,077) (142,912)
----------- ----------- ----------
Total expenses 197,537 1,304,100 156,589
----------- ----------- ----------
NET INVESTMENT INCOME 10,736,237 27,767,147 2,855,386
NET REALIZED GAIN (LOSS) ON SECURITIES SOLD 0 2,417 ( 40,211)
UNREALIZED APPRECIATION OF SECURITIES 0 0 116,061
----------- ----------- ----------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $10,736,237 $27,769,564 $2,931,236
=========== =========== ==========
</TABLE>
See accompanying notes to financial statements.
<PAGE> 15
STATEMENTS OF CHANGES IN NET ASSETS
GOVERNMENT/REPO PORTFOLIO
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1997 DECEMBER 31, 1996
------------------ -------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income $ 10,736,237 $ 5,579,782
Net realized gain (loss) on securities sold 0 0
------------- -------------
Net increase in net assets
resulting from operations 10,736,237 5,579,782
------------- -------------
DIVIDENDS TO PARTICIPATION
CERTIFICATE HOLDERS:
From net investment income $.054
and $.053 per PC (10,736,237) (5,579,782)
------------- -------------
CAPITAL TRANSACTIONS:
Proceeds from sale of 2,398,408,529 2,398,408,529 1,417,722,752
and 1,417,722,752 PCs
Value of 2,783,503 and 1,568,583 PCs 2,783,503 1,568,583
issued in reinvestment of dividends
Cost of 2,358,336,068 and 1,381,988,959
PCs repurchased (2,358,336,068) (1,381,988,959)
-------------- --------------
Increase (decrease) in net assets derived
from capital transactions 42,855,964 37,302,376
------------- --------------
Total increase (decrease) in net assets 42,855,964 37,302,376
NET ASSETS:
Beginning of period 156,381,974 119,079,598
------------ -----------
End of period $199,237,938 $156,381,974
============ ============
</TABLE>
See accompanying notes to financial statements.
<PAGE> 16
STATEMENTS OF CHANGES IN NET ASSETS
MONEY MARKET PORTFOLIO
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1997 DECEMBER 31, 1996
------------------------ -----------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income $ 27,767,147 $ 34,545,603
Net realized gain (loss) on securities sold 2,417 (1,915)
------------- ---------------
Net increase in net assets
resulting from operations 27,769,564 34,543,688
-------------- --------------
DIVIDENDS TO PARTICIPATION
CERTIFICATE HOLDERS:
From net investment income $.054
and $.052 per PC (27,767,147) (34,545,603)
Net capital gains (502) 0
-------------- --------------
Total distributions (27,767,649) (34,545,603)
-------------- --------------
CAPITAL TRANSACTIONS:
Proceeds from sale of 4,217,170,475
and 6,250,634,449 4,217,170,475 6,250,634,449
Value of 19,203,139 and 18,322,446 PCs
issued in reinvestment of dividends 19,203,139 18,322,446
Cost of 4,346,622,164 and 6,329,059,211
PCs repurchased (4,346,622,164) (6,329,059,211)
-------------- --------------
Increase (decrease) in net assets derived
from capital transactions (110,248,550) (60,102,316)
Total increase (decrease) in net assets (110,246,635) (60,104,231)
-------------- --------------
NET ASSETS:
Beginning of period 524,871,865 584,976,096
----------- ------------
End of period $414,625,230 $524,871,865
============ ============
</TABLE>
See accompanying notes to financial statements.
<PAGE> 17
STATEMENTS OF CHANGES IN NET ASSETS
SHORT-TERM PORTFOLIO
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1997 DECEMBER 31, 1996
----------------- -----------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income $ 2,855,386 $ 3,849,874
Net realized gain (loss) on securities sold (40,211) (114,232)
Unrealized appreciation (depreciation)
of securities 116,061 (323,685)
------------ ------------
Net increase in net assets
resulting from operations 2,931,236 3,411,957
------------ ------------
DIVIDENDS TO PARTICIPATION
CERTIFICATE HOLDERS:
From net investment income $.547
and $.542 per PC (2,855,386) (3,849,874)
------------ ------------
CAPITAL TRANSACTIONS:
Proceeds from the sale of 924,097
and 3,710,897 PCs 9,215,049 37,000,000
Value of 233,412 and 259,814 PCs
issued in reinvestment of dividends 2,322,245 2,587,864
Cost of 3,533,885 and 3,330,380
PCs repurchased (35,148,367) (33,132,139)
------------ ------------
Increase (decrease) in net assets derived
from capital transactions (23,611,073) 6,455,725
------------ ------------
Total increase (decrease) in net assets (23,535,223) 6,017,808
NET ASSETS:
Beginning of period 69,940,148 63,922,340
------------ ------------
End of period $ 46,404,925 $ 69,940,148
============ ============
</TABLE>
See accompanying notes to financial statements.
<PAGE> 18
FINANCIAL HIGHLIGHTS
GOVERNMENT/REPO PORTFOLIO
For a Participation Certificate (PC) Outstanding Throughout the Period
<TABLE>
<CAPTION>
YEAR YEAR 6/1/95(1)
ENDED ENDED THROUGH
12/31/97 12/31/96 12/31/95
-------- -------- ---------
<S> <C> <C> <C>
Net Asset Value, Beginning of Period $1.00 $1.00 $1.00
----- ----- -----
Income From Investment Operations:
Net Investment Income .054 .053 .034
Net Realized Gain (Loss) on Investments 0 0 0
----- ----- -----
Total From Investment Operations .054 .053 .034
----- ----- -----
Less Distributions:
Dividends to PC holders from
Net Investment Income (.054) (.053) (.034)
Distributions to PC holders from
Net Capital Gains 0 0 0
----- ----- ------
Total Distributions (.054) (.053) (.034)
----- ----- -----
Net Asset Value, End of Period $1.00 $1.00 $1.00
===== ==== ====
Total Return 5.57% 5.42% 5.99% (3)
Ratios/Supplemental Data:
Net Assets, End of Period (000) $199,238 $156,382 $119,080
Ratio of Expenses to Average
Net Assets(2) .10% .10% .10% (3)
Ratio of Net Investment Income
to Average Net Assets 5.44% 5.29% 5.78% (3)
</TABLE>
(1) From June 1, 1995 commencement of operations
(2) Without the waiver of a portion of advisory and administration fees
(see Note C), the ratio of expenses to average daily net assets would
have been .29%, .29% and .30% for the fiscal periods ended December
31, 1997, 1996 and 1995, respectively.
(3) Annualized
See accompanying notes to financial statements.
<PAGE> 19
FINANCIAL HIGHLIGHTS
MONEY MARKET PORTFOLIO
For a Participation Certificate (PC) Outstanding Throughout the Period
<TABLE>
<CAPTION>
YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED
12/31/97 12/31/96 12/31/95 12/31/94 12/31/93
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $1.00 $1.00 $1.00 $1.00 $1.00
----- ----- ----- ----- -----
Income From Investment Operations:
Net Investment Income .054 .052 .058 .041 .030
Net Realized Gain (Loss) on Investments 0 0 0 0 0
----- ----- ----- ----- -----
Total From Investment Operations .054 .052 .058 .041 .030
----- ----- ----- ----- -----
Less Distributions:
Dividends to PC holders from
Net Investment Income (.054) (.052) (.058) (.041) (.030)
Distributions to PC holders from
Net Capital Gains 0 0 0 0 0
----- ----- ----- ----- -----
Total Distributions (.054) (.052) (.058) (.041) (.030)
----- ----- ----- ----- -----
Net Asset Value, End of Period $1.00 $1.00 $1.00 $1.00 $1.00
===== ===== ===== ====== =====
Total Return 5.51% 5.38% 5.97% 4.21% 3.07%
Ratios/Supplemental Data:
Net Assets, End of Period (000) $414,625 $524,872 $584,976 $451,367 $474,838
Ratio of Expenses to Average
Net Assets(1) .25% .23% .24% .26% .24%
Ratio of Net Investment Income
to Average Net Assets 5.38% 5.24% 5.82% 4.15% 3.02%
</TABLE>
- --------------
(1) Without the waiver of a portion of advisory and administration fees
(see Note C), the ratios of expenses to average daily net assets
would have been .24% and .25% for the fiscal periods ended December
31, 1996 and December 31, 1995, respectively.
See accompanying notes to financial statements.
<PAGE> 20
FINANCIAL HIGHLIGHTS
SHORT-TERM PORTFOLIO
For a Participation Certificate (PC) Outstanding Throughout the Period
<TABLE>
<CAPTION>
YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED
12/31/97 12/31/96 12/31/95 12/31/94 12/31/93
-------- --------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 9.95 $10.00 $ 9.93 $10.03 $10.05
------ ------- ------- ------ ------
Income From Investment Operations:
Net Investment Income .547 .542 .599 .440 .377
Net Realized and Unrealized
Gain (Loss) on Investments .020 (.050) .070 (.100) (.009)
------- ------- ------- ------ ------
Total From Investment Operations .567 .492 .669 .340 .368
------- ------- ------- ------ ------
Less Distributions:
Dividends to PC holders from
Net Investment Income (.547) (.542) (.599) (.440) (.377)
Distributions to PC holders from
Net Capital Gains 0 0 0 0 (.011)
------- ------- ------- ------ ------
Total Distributions (.547) (.542) (.599) (.440) (.388)
------- ------- ------- ------ ------
Net Asset Value, End of Period $9.97 $ 9.95 $ 10.00 $ 9.93 $10.03
======= ======= ======= ====== ======
Total Return 5.85% 5.08% 6.92% 3.46% 3.72%
Ratios/Supplemental Data:
Net Assets, End of Period (000) $46,405 $69,940 $63,922 $103,240 $186,808
Ratio of Expenses to Average
Net Assets(1) .30% .30% .30% .30% .30%
Ratio of Net Investment Income
to Average Net Assets 5.47% 5.43% 6.00% 4.29% 3.74%
Portfolio Turnover Rate(2) 79.2% 119.0% 64.8% 47.6% 34.1%
</TABLE>
(1) Without the waiver of a portion of advisory, service agent and
administration fees (see Note C), the ratios of expenses to average
daily net assets would have been .57%, .48%, .43%, .37% and .32% for
the fiscal periods ended December 31, 1997, 1996, 1995, 1994 and
1993, respectively.
(2) Excludes security purchases with a maturity of less than one year.
See accompanying notes to financial statements.
<PAGE> 21
NOTES TO FINANCIAL STATEMENTS
A. Plan Investment Fund, Inc. (the "Fund") is registered under the Investment
Company Act of 1940, as amended, as a diversified open-end regulated
investment company. The Fund consists of three separate portfolios, the
Government/REPO Portfolio, the Money Market Portfolio and the Short-Term
Portfolio (the "Portfolio(s)"). The Fund is authorized to issue five
billion Participation Certificates ("PCs"), par value $.001 per PC. The
Fund presently offers three classes of PCs as follows: the Government/REPO
Portfolio - one billion PCs authorized, the Money Market Portfolio - two
billion PCs authorized and the Short-Term Portfolio - one billion PCs
authorized.
B. Significant accounting policies relating to the Fund are as follows:
Security Valuation - Government/REPO Portfolio and Money Market Portfolio:
Securities are valued under the amortized cost method, which approximates
current market value. Under this method, securities are valued at cost when
purchased and thereafter a constant proportionate amortization of any
discount or premium is recorded until maturity or sale of the security.
Security Valuation - Short-Term Portfolio: Securities for which market
quotations are readily available (other than debt securities with remaining
maturities of 60 days or less) are valued at the most recent quoted bid
price provided by investment dealers. Debt securities with remaining
maturities of 60 days or less are valued on an amortized cost basis (unless
the Board determines that such basis does not represent fair value at that
time).
Securities Transactions and Investment Income - Securities transactions are
recorded on the trade date. Realized gains and losses on investments sold
are recorded on the identified cost basis. Interest income is recorded on
the accrual basis.
Dividends to Participation Certificate Holders - Dividends of net
investment income of the Portfolios are declared daily and paid monthly.
Dividends payable are recorded on the dividend record date. The Portfolios
intend, subject to the use of offsetting capital loss carry-forwards, to
distribute net realized short- and long-term capital gains, if any, once
each year.
Federal Income Taxes - No provision is made for federal taxes as it is each
Portfolio's intention to continue to qualify as a regulated investment
company and to make the requisite distributions to Participation
Certificate Holders which will be sufficient to relieve each Portfolio from
all, or substantially all, federal income and excise taxes. At December 31,
1997 the Short-Term Portfolio had capital loss carry-forwards amounting to
$871,994, $114,232 and $40,211 that expire in 2002, 2004 and 2005,
respectively. These loss carry-forwards are available to offset possible
future capital gains of the Short-Term Portfolio.
Repurchase Agreements - Each Portfolio may agree to purchase money market
instruments from financial institutions such as banks and broker-dealers
subject to the seller's agreement to repurchase them at an agreed upon date
and price ("repurchase agreements"). Collateral for repurchase agreements
may have longer maturities than the maximum permissible remaining maturity
of portfolio investments. The seller under a repurchase agreement is
required on a daily basis to maintain the value of the securities subject
to the agreement at not less than the repurchase price. The agreement is
conditioned upon the collateral being deposited under the Federal Reserve
book entry system or held in a separate account by the Fund's custodian or
an authorized securities depository.
Estimated Maturities - The maturity of collateralized mortgage obligations
and other asset backed securities may vary due to prepayments of principal.
The maturity dates for these securities are estimates based on historic
prepayment factors.
Variable Rate Obligations - For variable rate obligations, the
interest rate presented is as of December 31, 1997 and the maturity
shown is the date of the next interest readjustment.
<PAGE> 22
Management Estimates - The preparation of financial statements in
accordance with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts and disclosures in the financial statements. Actual results could
differ from those estimates.
C. The Fund has entered into agreements for advisory, administrative, service
agent, custodian and transfer agent services as follows:
Government/REPO Portfolio and Money Market Portfolio - PNC Institutional
Management Corporation ("PIMC"), an indirectly wholly owned subsidiary of
PNC Bank, National Association ("PNC Bank"), serves as the Portfolios'
investment advisor and service agent. As compensation for its services the
Portfolios pay PIMC a fee, computed daily and paid monthly, at the
following rate: .20% of the first $250 million, .15% of the next $250
million, .12% of the next $250 million, .10% of the next $250 million, and
.08% of amounts in excess of $1 billion.
Short-Term Portfolio - Neuberger & Berman ("N&B"), a New York limited
partnership, serves as the Portfolio's investment advisor. As compensation
for its services, the Portfolio pays N&B a fee, computed daily and paid
monthly, at the following rate: .30% of the first $50 million, .20% of the
next $50 million, .15% of the next $150 million, and .10% of amounts in
excess of $250 million.
Health Plans Capital Services Corp. ("CSC") serves as the Fund's
administrator and acts generally in a supervisory capacity with respect to
the Fund's overall operations and relations with holders of PCs. As
compensation for its services each Portfolio pays CSC a fee, computed daily
and payable monthly at an annual rate not to exceed .05% of the average
daily net assets of each of the Fund's Portfolios.
PNC Bank acts as custodian of the Fund's assets and PFPC Inc. ("PFPC"), an
affiliate of PNC Bank, acts as the Fund's transfer agent and dividend
disbursing agent. In addition, PIMC serves as the Short-Term Portfolio
service agent. PNC Bank, PIMC and PFPC receive fees from the Fund for
serving in these capacities.
PIMC and N&B have agreed contractually to reduce their advisory fees
otherwise payable to them in 1997 to the extent necessary to reduce the
ordinary operating expenses of the Portfolios individually so that they do
not exceed 0.30 of one percent (0.30%) of each Portfolio's average net
assets for the year. Under these contractual agreements, N&B waived $85,065
of such fees payable by the Short-Term Portfolio for the period ended
December 31, 1997. PIMC voluntarily waived $52,224 of service agent fees
and CSC voluntarily waived $5,623 of administrator fees payable by the
Short-Term Portfolio during this period. In addition, PIMC voluntarily
waived $9,807 and $308,175 of advisory fees and CSC voluntarily waived
$3,270 and $63,624 of administrator fees payable by the Money Market
Portfolio and Government/REPO Portfolio, respectively, during this period.
D. At December 31, 1997, net assets consisted of:
<TABLE>
<CAPTION>
Government/REPO Money Market Short-Term
Portfolio Portfolio Portfolio
------------ ------------ -----------
<S> <C> <C> <C>
Capital paid in.................... $199,237,938 $414,625,230 $47,367,628
Accumulated realized gain (loss) on
security transactions............ - - (1,026,437)
Net unrealized appreciation of
investments...................... - - 63,734
------------ ------------ -----------
$199,237,938 $414,625,230 $46,404,925
============ ============ ===========
</TABLE>
E. Short-Term Portfolio purchases and sales of investment securities, other
than short-term investments, were $32,123,939 and $21,176,425 respectively,
and purchases and sales of U.S. Government securities were $25,198,709 and
$20,801,702 respectively, for the period ended December 31, 1997.
<PAGE> 23
REPORT OF INDEPENDENT ACCOUNTANTS
To the Participation Certificate Holders and
Trustees of Plan Investment Fund, Inc.
We have audited the accompanying statements of net assets of the Government/REPO
Portfolio, Money Market Portfolio and Short-Term Portfolio of Plan Investment
Fund, Inc. (the "Fund") as of December 31, 1997 and the related statements of
operations for the year then ended, the statements of changes in net assets for
each of the two years then ended, and the financial highlights for each of the
five years or periods 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. Our procedures included physical inspection and confirmation of
investments held by the custodian and others as of December 31, 1997. 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 Plan
Investment Fund, Inc. as of December 31, 1997, the results of their operations
for the year ended, the changes in their net assets for each of the two years
then ended, and the financial highlights for each of the five years or periods
then ended, in conformity with generally accepted accounting principles.
COOPERS & LYBRAND LLP
2400 Eleven Penn Center
Philadelphia, PA
February 9, 1998
<PAGE> 24
-------------------------
PLAN INVESTMENT FUND, INC.
225 N. Michigan
Chicago, IL 60601
(312) 297-6372
TRUSTEES
--------
HOWARD F. BEACHAM III CHARLES R. LONG
Executive Vice President Senior Vice President
Blue Cross and Blue Shield Chief Financial Officer
Of Central New York, Inc. and Treasurer
Highmark, Inc.
PHILIP A. GOSS
President and DAVID M. MURDOCH
Chief Executive Officer Executive Vice President
Plan Investment Fund, Inc. Blue Cross and Blue Shield
Health Plans Capital Association
Services Corp.
M. EDWARD SELLERS
GENE HOLCOMB President and
President Chief Executive Officer
Blue Cross and Blue Shield Blue Cross and Blue Shield
of Tennessee-Memphis of South Carolina
STEVEN L. HOOKER THOMAS J. WARD
Chief Financial Officer and President and
Treasurer Chief Executive Officer
The Regence Group Blue Cross of Northeastern
Pennsylvania
RONALD F. KING
President and SHERMAN M. WOLFF
Chief Executive Officer Senior Vice President Corporate
Blue Cross and Blue Shield Resources and
of Oklahoma Chief Financial Officer
Health Care Service Corporation
INVESTMENT ADVISORS
-------------------
GOVERNMENT/REPO PORTFOLIO SHORT-TERM PORTFOLIO
AND MONEY MARKET PORTFOLIO Neuberger & Berman
PNC Institutional Management Corporation New York, New York
Wilmington, Delaware
<PAGE> 25
EDGAR Appendix
This appendix describes components of the printed version of this report that
do not translate into a format acceptable to the EDGAR system.
The cover of the printed version of this report includes a logo of the
administrator of Plan Investment Fund, Inc., Health Plans Capital Services
Corp. The logo includes the full legal name and address of the administrator
and abbreviated initials of the administrator, "CSC", enclosed in a box beneath
a line bar.
A header featuring the Plan Investment Fund, Inc. logo appears at the top of
pages 6, 8, 10, 12, 14, 16, 18 and 20. The logo includes the abbreviated
initials of Plan Investment Fund, Inc., "PIF", enclosed in a box beneath a line
bar.
A performance line chart which depicts the growth of a $10,000 investment in
the Short-Term Portfolio and the six month U.S. Treasury Bill since January 1,
1988 through December 31, 1997 appears in the lower left quarter of page 5 of
the report. The following table depicts the substance of the chart and
provides the following plots.
Growth of $10,000 Investment
Since January 1, 1998
<TABLE>
<CAPTION>
Short-Term Six Month U.S.
Portfolio Treasury Bill
---------- --------------
<S> <C> <C>
12/87 $10,000 $10,000
12/88 10,779 10,702
12/89 11,794 11,641
12/90 12,820 12,585
12/91 13,839 13,366
12/92 14,388 13,900
12/93 14,937 14,352
12/94 15,455 14,977
12/95 16,524 15,872
12/96 17,358 16,728
12/97 18,287 17,638
</TABLE>
Past Performance is Not
Predicative of Future Performance
