<PAGE> 1
Registration No. 2-99584
________________________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________________________________
FORM N-lA
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933
POST-EFFECTIVE AMENDMENT NO. 15
and/or
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940
AMENDMENT NO. 18
__________________________________
P L A N I N V E S T M E N T F U N D, I N C.
(Exact Name of Registrant as Specified in Charter)
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225 North Michigan Avenue
Chicago, Illinois 60601
(Address of Principal Executive Offices) (Zip Code)
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Registrant's Telephone Number, including Area Code (312) 297-6372
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Copy to:
PHILIP A. GOSS, PRESIDENT BURTON X. ROSENBERG, ESQ.
225 North Michigan Avenue Seyfarth, Shaw, Fairweather & Geraldson
Chicago, Illinois 60601 55 E. Monroe Street
(Name and Address of Agent Chicago, Illinois 60603
for Service)
</TABLE>
It is proposed that this filing will become effective
X__ immediately upon filing pursuant to paragraph (b)
___ on (date) pursuant to paragraph (b)
___ 60 days after filing pursuant to paragraph (a)(1)
___ on (date) pursuant to paragraph (a)(1)
___ 75 days after filing pursuant to paragraph (a)(2)
on (date) pursuant to paragraph (a)(2) of Rule 485
If appropriate, check the following:
___ This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
________________________________________________________________________________
<PAGE> 2
CROSS-REFERENCE SHEET
(as required by Rule 495)
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N-1A Item No. Location
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PART A PROSPECTUS
Item 1. Cover Page Cover Page
Item 2. Synopsis Prospectus Summary and
Introduction; Portfolio
Fee Tables
Item 3. Condensed Financial Financial Highlights
Information
Item 4. General Description Cover Page; Investment
of Registrant Objectives and Policies; Description
of Participation Certificates
Item 5. Management of the Fund Management of the Investment Company
Item 5A. Management's Financial Highlights
Discussion of
Fund Performance
Item 6. Capital Stock and Dividends; Taxes;
Other Securities Management of the Investment Company;
Description of Participation
Certificates; Performance
Information; General Information
Item 7. Purchase of Securities Purchase and Redemption of
Being Offered Participation Certificates;
Management of the Investment Company;
Net Asset Value
Item 8. Redemption or Purchase and Redemption of
Repurchase Participation Certificates; Net
Asset Value
Item 9. Legal Proceedings Not Applicable
</TABLE>
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CROSS-REFERENCE SHEET (Continued)
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N-lA Item No. Location
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PART B STATEMENT OF ADDITIONAL
INFORMATION
Item 10. Cover Page Cover Page
Item 11. Table of Contents Table of Contents
Item 12. General Information See Prospectus --
and History "Description of Participation
Certificates"
Item 13. Investment Objectives Investment Objectives and
and Policies Policies
Item 14. Management of the Management of the Investment
Fund Company
Item 15. Control Persons and Additional Description
Principal Holders of Concerning Investment
Securities Company Participation Certificates
Item 16. Investment Advisory Management of the Investment
and Other Services Company; See Prospectus --
"Management of the Investment
Company"
Item 17. Broker Allocation Investment Objectives and
and Other Practices Policies
Item 18. Capital Stock and Additional Information
Other Securities Concerning Investment Company
Participation Certificates;
Miscellaneous; See Prospectus --
"Dividends", "Taxes" and "Description
of Participation Certificates"
Item 19. Purchase, Redemption Additional Purchase and
and Pricing of Redemption Information
Securities Being
Offered
Item 20. Tax Status Additional Information Concerning
Taxes; See Prospectus -- "Dividends"
and "Taxes"
Item 21. Underwriters Not Applicable
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CROSS-REFERENCE SHEET (Continued)
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N-1A Item No. Location
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Item 22. Calculation of Performance Information
Performance Data
Item 23. Report of Independent Report of Independent
Certified Public Accountants and
Accountants Financial Statements
Item 24. Financial Statements Report of Independent
Accountants and Financial Statements
PART C OTHER INFORMATION
</TABLE>
Information required to be included in Part C is set forth under the
appropriate item, so numbered in Part C of this Registration Statement
<PAGE> 5
PROSPECTUS DATED APRIL 22, 1998
PLAN INVESTMENT FUND, INC.
Plan Investment Fund, Inc. (the "Investment Company") is a diversified
open-end management investment company available for members and licensees of
the Blue Cross and Blue Shield Association, an association of independent Blue
Cross and Blue Shield Plans, and certain related organizations. The Investment
Company was organized to offer portfolios designed to provide liquidity and
professional investment management and at present offers Participation
Certificates (individually, a "PC" and, collectively, "PCs") in three (3)
separate portfolios:
The Government/REPO Portfolio seeks a high level of current income
consistent with stability of principal by investing in U.S. Treasury bills,
notes and other obligations issued or guaranteed by the U.S. Government,
its agencies or instrumentalities, and repurchase agreements relating to
such obligations, having remaining maturities of one (1) year or less. The
dollar-weighted average maturity of the Government/REPO Portfolio will not
exceed seven (7) days.
The Money Market Portfolio seeks a high level of current income
consistent with stability of principal by investing in high quality money
market instruments, including U.S. Government, bank and commercial
obligations having remaining maturities of one (1) year or less. The
dollar-weighted average maturity of the Money Market Portfolio will not
exceed ninety (90) days.
The Short-Term Portfolio also invests in high quality U.S. Government,
bank and commercial obligations, but typically with longer maturities than
the Money Market Portfolio, and seeks to maximize total return, which
includes interest income and capital gains and losses, consistent with
preservation of capital. The Short-Term Portfolio may buy instruments
having remaining maturities, or their duration equivalent, of five and a
quarter (5 1/4) years or less. The dollar-weighted maturity of the
Short-Term Portfolio will not exceed three hundred sixty (360) days.
For information on new account applications, call Health Plans Capital
Services Corp. ("CSC") at (312) 297-6372. To place purchase or redemption
orders, or to request yield information, call PFPC Inc. ("PFPC"), the Transfer
Agent for the Investment Company, at (800) 821-9771.
This Prospectus, which should be retained for future reference, sets forth
concisely the information about the Investment Company that a prospective
investor should review carefully before investing in the Investment Company.
Additional information about the Investment Company has been filed with the
Securities and Exchange Commission in a Statement of Additional Information,
dated April 22, 1998. This information is incorporated herein by reference and
is available without charge upon request from CSC, 225 North Michigan Avenue,
Chicago, Illinois 60601.
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 PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
GOVERNMENT/REPO PORTFOLIO AND MONEY MARKET PORTFOLIO PARTICIPATION CERTIFICATES
ARE NEITHER INSURED NOR GUARANTEED BY THE U.S. GOVERNMENT. THERE IS NO ASSURANCE
THAT THESE PORTFOLIOS WILL BE ABLE TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00
PER PARTICIPATION CERTIFICATE.
<PAGE> 6
PROSPECTUS SUMMARY AND INTRODUCTION
(The information below should be read in conjunction with the detailed
information appearing elsewhere in this Prospectus.)
THE PORTFOLIOS AND THE INVESTMENT COMPANY'S INVESTMENT OBJECTIVES
The Government/REPO Portfolio, the Money Market Portfolio and the
Short-Term Portfolio (individually, a "Portfolio" and, collectively, the
"Portfolios") are portfolios of Plan Investment Fund, Inc., a diversified,
open-end management investment company. Each Portfolio is represented by a class
of Participation Certificates separate from those of the Investment Company's
other Portfolios. Unless otherwise indicated, all statements made in this
Prospectus refer to all three Portfolios.
The Government/REPO Portfolio seeks a high level of current income
consistent with stability of principal by investing in U.S. Treasury bills,
notes and others obligations issued or guaranteed by the U.S. Government, its
agencies or instrumentalities and repurchase agreements relating to such
obligations. The Money Market Portfolio seeks a high level of current income
consistent with stability of principal by investing in high quality money market
instruments, including U.S. Government, bank and commercial obligations. The
Short-Term Portfolio also invests in high quality U.S. Government, bank and
commercial obligations, but typically with longer maturities, and seeks to
maximize total return, which includes interest income and capital gains and
losses, consistent with preservation of capital.
INVESTORS IN THE PORTFOLIOS
The Investment Company is designed for and permits investment exclusively
by entities within the Blue Cross and Blue Shield system of independent Plans
which include (i) Blue Cross Plans, Blue Shield Plans, and Blue Cross and Blue
Shield Plans (individually, a "Plan" and, collectively, the "Plans"), the Blue
Cross and Blue Shield Association and BCS Financial Corporation, and (ii) CSC.
Also eligible to use the Investment Company are subsidiaries and affiliates of
any of these entities. The above investors may be referred to individually as a
"BCBS Investor" and collectively as "BCBS Investors".
ADVANTAGES OF THE PORTFOLIOS
The Portfolios offer investors professionally managed, convenient, highly
liquid, diversified, high quality investment vehicles designed to ease and
assist liquidity management. Investments in PCs of the Portfolios are designed
to relieve investors of such decisions and administrative tasks involved in the
direct purchase of liquidity investments as scheduling maturities and
reinvestments, safekeeping securities, and surveying the market for the best
price at which to buy or sell. In addition, the Investment Company offers
investors seeking a liquid investment a choice between (i) PCs of the
Government/REPO Portfolio, which normally will have a constant net asset value
per PC of $1.00 and which will have a dollar-weighted average portfolio maturity
of not more than seven (7) days, (ii) PCs of the Money Market Portfolio, which
normally will have a constant net asset value per PC of $1.00 and which will
have a dollar-weighted average portfolio maturity of not more than ninety (90)
days, and (iii) PCs of the Short-Term Portfolio, which will be valued at the
market value of its investments and which will have a dollar-weighted average
portfolio maturity of not more than three hundred sixty (360) days. Securities
whose maturities are measured on an average life or duration basis are converted
to an average maturity for the purpose of calculating the Short-Term Portfolio
dollar-weighted average maturity. Investors may allocate their investments
between the Portfolios at their discretion and may change such allocations at
any time.
2
<PAGE> 7
PURCHASE AND REDEMPTION OF PCS OF THE GOVERNMENT/REPO PORTFOLIO AND THE MONEY
MARKET PORTFOLIO
Purchase orders for the Government/REPO Portfolio and the Money Market
Portfolio which are received by 12 Noon (Eastern Time) will be executed at the
net asset value determined at 12 Noon (Eastern Time) that day if PNC Bank,
National Association ("PNC Bank") receives Federal funds by 4:00 P.M. (Eastern
Time). In addition, purchase orders for the Government/REPO and the Money Market
Portfolios which are received after 12 Noon (Eastern Time) but before 3:00 P.M.
(Eastern Time) will be executed at the net asset value determined at 4:00 P.M.
(Eastern Time) that day if PNC Bank receives Federal funds by 4:00 P.M. (Eastern
Time) that day. Orders received after 3:00 P.M. (Eastern Time) and orders for
which payment has not been received by 4:00 P.M. (Eastern Time), will not be
accepted and notice thereof will be given to the investor placing the order.
Redemption requests will be executed and proceeds will be paid to redeeming PC
holders on the same day of the redemption request if the redemption request is
received before 3:00 P.M. (Eastern Time). Investors in the Government/REPO
Portfolio and the Money Market Portfolio may use purchase and redemption
procedures to effect inter-Plan transfers. (See "Purchase and Redemption of
Participation Certificates--Transfer Payments".)
PURCHASE AND REDEMPTION OF PCS OF THE SHORT-TERM PORTFOLIO
Purchase orders for the Short-Term Portfolio received before 4:00 P.M.
(Eastern Time) will be priced at the net asset value determined on that day and
will be executed as of the beginning of business on the following Business Day
if payment in Federal funds has been received by 4:00 P.M. (Eastern Time) on the
day the order is executed. Redemption orders received before 4:00 P.M. (Eastern
Time) will be priced at the net asset value determined as of 4:00 P.M. (Eastern
Time) on that day and will be executed as of the beginning of business on the
following Business Day. Proceeds will be wired on the day the redemption order
is executed.
INVESTMENT ADVISERS AND SERVICE AGENTS
BlackRock Institutional Management Corporation ("BIMC"), formerly known as
PNC Institutional Management Corporation ("PIMC"), is the investment adviser of
the Government/REPO Portfolio and the Money Market Portfolio and the service
agent of all three of the Investment Company's Portfolios. Neuberger & Berman, a
Delaware limited liability company ("N&B"), is the investment adviser of the
Short-Term Portfolio. (BIMC and N&B sometimes are referred to herein
collectively as the "Investment Advisers"; BIMC sometimes is referred to herein
as the "Service Agent".) (See "Management of the Investment Company--Investment
Advisers and Service Agent".)
CUSTODIAN, TRANSFER AGENT AND ADMINISTRATOR
PNC Bank is the Investment Company's custodian; PFPC is the Investment
Company's transfer agent; and CSC is the Investment Company's administrator.
(See "Management of the Investment Company--Custodian and Transfer Agent" and
"Management of the Investment Company--Administrator".)
PORTFOLIO FEE TABLES
PARTICIPATION CERTIFICATE HOLDER TRANSACTION EXPENSE
The Investment Company does not charge any form of sales load, redemption
fee or exchange fee.
The following tables summarize other costs and expenses that investors bear
directly or indirectly.
3
<PAGE> 8
GOVERNMENT/REPO PORTFOLIO
GOVERNMENT/REPO PORTFOLIO ANNUAL OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE
NET ASSETS)
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Management Fees (net of waivers)............................ 0.04%
12b-1 Fees.................................................. 0.00%
Other Expenses (net of waivers)............................. 0.06%
-----
Total Portfolio Operating Expenses (net of
waivers)................................... 0.10%
=====
</TABLE>
Without the waiver of advisory and administrator fees, the total operating
expense would be 0.29% based on actual costs for the period ended December 31,
1997.
GOVERNMENT/REPO PORTFOLIO EXAMPLE
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ONE THREE FIVE TEN
YEAR YEARS YEARS YEARS
---- ----- ----- -----
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Investors would pay the following expenses on a $1,000
investment, assuming (1) 5% annual return, (2)
reinvestment of dividends and (3) redemption at the end
of each time period:..................................... $1 $3 $6 $13
</TABLE>
MONEY MARKET PORTFOLIO
MONEY MARKET PORTFOLIO ANNUAL OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET
ASSETS)
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Management Fees (net of waivers)............................ 0.17%
12b-1 Fees.................................................. 0.00%
Other Expenses (net of waivers)............................. 0.08%
-----
Total Portfolio Operating Expenses (net of
waivers)................................... 0.25%
=====
</TABLE>
Without the waiver of advisory and administrator fees, the total operating
expense would be 0.25% based on actual costs for the fiscal year ended December
31, 1997.
MONEY MARKET PORTFOLIO EXAMPLE
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ONE THREE FIVE TEN
YEAR YEARS YEARS YEARS
---- ----- ----- -----
<S> <C> <C> <C> <C>
Investors would pay the following expenses on a $1,000
investment, assuming (1) 5% annual return, (2) reinvestment
of dividends and (3) redemption at the end of each time
period:..................................................... $3 $8 $14 $32
</TABLE>
SHORT-TERM PORTFOLIO
SHORT-TERM PORTFOLIO ANNUAL OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET
ASSETS)
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Management Fees (net of waivers)............................ 0.13%
12b-1 Fees.................................................. 0.00%
Other Expenses (net of waivers)............................. 0.17%
-----
Total Portfolio Operating Expenses (net of
waivers)................................... 0.30%
=====
</TABLE>
Without the waiver of advisory, administrator and service agent fees, the total
operating expense would be .57% based on actual costs for the fiscal year ended
December 31, 1997.
4
<PAGE> 9
SHORT-TERM PORTFOLIO EXAMPLE
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ONE THREE FIVE TEN
YEAR YEARS YEARS YEARS
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<S> <C> <C> <C> <C>
Investors would pay the following expenses on a $1,000
investment, assuming (1) 5% annual return, (2) reinvestment
of dividends and (3) redemption at the end of each time
period:..................................................... $3 $10 $17 $38
</TABLE>
The purpose of these fee tables is to assist the investor in understanding
the various costs and expenses that an investor in the Portfolios will bear
directly or indirectly. For more complete descriptions of the various costs and
expenses, see "Management of the Investment Company" and "Purchase and
Redemption of Participation Certificates" in this prospectus and the financial
statements and related notes contained in the Statement of Additional
Information. Coopers & Lybrand L.L.P., the Investment Company's independent
accountants, has not audited the above tables and examples.
THE FOREGOING EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES OR ANNUAL RETURN. ACTUAL EXPENSES AND ANNUAL RETURN MAY BE
GREATER OR LESSER THAN THOSE SHOWN.
5
<PAGE> 10
FINANCIAL HIGHLIGHTS
The following information regarding per participation certificate income
and principal changes has been derived from the Investment Company's financial
statements which are included in the Statement of Additional Information. The
financial data below should be read in conjunction with the financial statements
and related notes. The Investment Company's financial statements and financial
highlights have been audited by Coopers & Lybrand L.L.P., independent
accountants, whose report thereon is contained in the Statement of Additional
Information along with the financial statements. The Investment Company's annual
report contains additional performance information and will be made available
upon request without charge.
FINANCIAL HIGHLIGHTS
(FOR A PARTICIPATION CERTIFICATE OUTSTANDING THROUGHOUT THE PERIOD)
GOVERNMENT/REPO PORTFOLIO
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YEAR YEAR 06/01/95(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 and Unrealized 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%(2)
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (000)............................. $199,238 $156,382 $119,080
Ratio of Expenses to Average Net Assets(3).................. .10% .10% .10%(2)
Ratio of Net Investment Income to Average Net Assets........ 5.44% 5.29% 5.78%(2)
</TABLE>
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(1) From June 1, 1995 commencement of operations.
(2) Annualized.
(3) Without the waiver of advisory and administration fees, the ratio of
Government/REPO Portfolio 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.
- --------------------------------------------------------------------------------
The Government/REPO Portfolio seven day average current yield as of
December 31, 1997 was 5.55%.
6
<PAGE> 11
FINANCIAL HIGHLIGHTS
(FOR A PARTICIPATION CERTIFICATE OUTSTANDING THROUGHOUT THE PERIOD)
<TABLE>
<CAPTION>
MONEY MARKET PORTFOLIO
--------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------------------
1997 1996 1995 1994 1993 1992 1991
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning
of Period............... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
INCOME FROM INVESTMENT
OPERATIONS:
Net Investment Income..... .054 .052 .058 .041 .030 .037 .060
Net Realized and
Unrealized Gain (Loss)
on Investments.......... 0 0 0 0 0 0 0
-------- -------- -------- -------- -------- -------- --------
Total From Investment
Operations.............. .054 .052 .058 .041 .030 .037 .060
-------- -------- -------- -------- -------- -------- --------
LESS DISTRIBUTIONS:
Dividends to PC holders
from Net Investment
Income.................. (.054) (.052) (.058) (.041) (.030) (.037) (.060)
Distributions to PC
holders from Net Capital
Gains................... 0 0 0 0 0 0 0
-------- -------- -------- -------- -------- -------- --------
Total Distributions....... (.054) (.052) (.058) (.041) (.030) (.037) (.060)
-------- -------- -------- -------- -------- -------- --------
Net Asset Value,
End of Period........... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== ======== ======== ========
Total Return.............. 5.51% 5.38% 5.97% 4.21% 3.07% 3.73% 6.16%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period
(000)................... $414,625 $524,872 $584,976 $451,367 $474,838 $390,581 $642,583
Ratio of Expenses to
Average Net Assets(1)... .25% .23% .24% .26% .24% .23% .25%
Ratio of Net Investment
Income to Average Net
Assets.................. 5.38% 5.24% 5.82% 4.15% 3.02% 3.68% 5.97%
<CAPTION>
MONEY MARKET PORTFOLIO
-------------------------------
YEAR ENDED DECEMBER 31,
-------------------------------
1990 1989 1988
-------- -------- ---------
<S> <C> <C> <C>
Net Asset Value, Beginning
of Period............... $ 1.00 $ 1.00 $ 1.00
INCOME FROM INVESTMENT
OPERATIONS:
Net Investment Income..... .080 .090 .074
Net Realized and
Unrealized Gain (Loss)
on Investments.......... 0 0 0
-------- -------- --------
Total From Investment
Operations.............. .080 .090 .074
-------- -------- --------
LESS DISTRIBUTIONS:
Dividends to PC holders
from Net Investment
Income.................. (.080) (.090) (.074)
Distributions to PC
holders from Net Capital
Gains................... 0 0 0
-------- -------- --------
Total Distributions....... (.080) (.090) (.074)
-------- -------- --------
Net Asset Value,
End of Period........... $ 1.00 $ 1.00 $ 1.00
======== ======== ========
Total Return.............. 8.29% 9.40% 7.64%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period
(000)................... $460,402 $303,688 $127,480
Ratio of Expenses to
Average Net Assets(1)... .28% .30% .30%
Ratio of Net Investment
Income to Average Net
Assets.................. 8.02% 8.94% 7.45%
</TABLE>
- -------------------------
(1) Without the waiver of advisory, administration and service agent fees, the
ratio of Money Market Portfolio expenses to average daily net assets would
have been .25%, .24%, .25%, .26%, .24%, .24%, .25%, .28%, .32% and .37%
respectively, for the periods ended December 31, 1997, 1996, 1995, 1994,
1993, 1992, 1991, 1990, 1989 and 1988.
- --------------------------------------------------------------------------------
The Money Market Portfolio seven day average current yield as of December
31, 1997 was 5.47%
7
<PAGE> 12
FINANCIAL HIGHLIGHTS
(FOR A PARTICIPATION CERTIFICATE OUTSTANDING THROUGHOUT THE PERIOD)
<TABLE>
<CAPTION>
SHORT-TERM PORTFOLIO
-----------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------------------
1997 1996 1995 1994 1993 1992 1991
------- ------- -------- -------- -------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
Period.......................... $ 9.95 $ 10.00 $ 9.93 $ 10.03 $ 10.05 $ 10.09 $ 9.96
------- ------- -------- -------- -------- -------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income............. .547 .542 .599 .440 .377 .443 .637
Net Realized and Unrealized Gain
(Loss) on Investments........... .020 (.050) .070 (.100) (.009) (.034) .130
------- ------- -------- -------- -------- -------- -------
Total From Investment
Operations...................... .567 .492 .669 .340 .368 .409 .767
------- ------- -------- -------- -------- -------- -------
LESS DISTRIBUTIONS:
Dividends to PC holders from Net
Investment Income............... (.547) (.542) (.599) (.440) (.377) (.443) (.637)
Distributions to PC holders from
Net Capital Gains............... 0 0 0 0 (.011) (.006) 0
------- ------- -------- -------- -------- -------- -------
Total Distributions............... (.547) (.542) (.599) (.440) (.388) (.449) (.637)
------- ------- -------- -------- -------- -------- -------
Net Asset Value, End of Period.... $ 9.97 $ 9.95 $ 10.00 $ 9.93 $ 10.03 $ 10.05 $ 10.09
======= ======= ======== ======== ======== ======== =======
Total Return...................... 5.85% 5.08% 6.92% 3.46% 3.72% 4.13% 7.95%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (000)... $46,405 $69,940 $ 63,922 $103,240 $186,808 $195,579 $94,050
Ratio of Expenses to Average Net
Assets(1)....................... .30% .30% .30% .30% .30% .30% .30%
Ratio of Net Investment Income to
Average Net Assets.............. 5.47% 5.43% 6.00% 4.29% 3.74% 4.29% 6.22%
Portfolio Turnover Rate(2)........ 79.2% 119.0% 64.8% 47.6% 34.1% 37.6% 63.8%
<CAPTION>
SHORT-TERM PORTFOLIO
------------------------------
YEAR ENDED DECEMBER 31,
------------------------------
1990 1989 1988
------- ------- ----------
<S> <C> <C> <C>
Net Asset Value, Beginning of
Period.......................... $ 9.91 $ 9.85 $ 9.88
------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income............. .778 .832 .715
Net Realized and Unrealized Gain
(Loss) on Investments........... .050 .060 (.030)
------- ------- -------
Total From Investment
Operations...................... .828 .892 .685
------- ------- -------
LESS DISTRIBUTIONS:
Dividends to PC holders from Net
Investment Income............... (.778) (.832) (.715)
Distributions to PC holders from
Net Capital Gains............... 0 0 0
------- ------- -------
Total Distributions............... (.778) (.832) (.715)
------- ------- -------
Net Asset Value, End of Period.... $ 9.96 $ 9.91 $ 9.85
======= ======= =======
Total Return...................... 8.69% 9.42% 7.15%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (000)... $24,828 $15,473 $19,207
Ratio of Expenses to Average Net
Assets(1)....................... .30% .30% .30%
Ratio of Net Investment Income to
Average Net Assets.............. 7.89% 8.38% 7.22%
Portfolio Turnover Rate(2)........ 100.2% 45.4% 12.4%
</TABLE>
- ---------------
(1) Without the waiver of advisory, administration and service agent fees, the
ratio of Short-Term Portfolio expenses to average daily net assets would have
been .57%, .48%, .43%, .37%, .32%, .37%, .56%, .85%, .91%, and .99%
respectively, for the periods ended December 31, 1997, 1996, 1995, 1994, 1993,
1992, 1991, 1990, 1989 and 1988.
(2) Excludes security purchases with a maturity of less than one year.
- --------------------------------------------------------------------------------
The Short-Term Portfolio thirty day average yield as of December 31, 1997
was 5.50%. The Short-Term Portfolio annualized total return was 5.85% for the
one year period ended December 31, 1997, 4.68% for the five year period ended
December 31, 1997, and 6.27% for the ten year period ended December 31, 1997.
8
<PAGE> 13
INVESTMENT OBJECTIVES AND POLICIES
The Government/REPO Portfolio invests in liquid, high quality U.S.
Government obligations and repurchase agreements and the Money Market Portfolio
and the Short-Term Portfolio invest in diversified selections of liquid, high
quality U.S. Government, bank and commercial debt obligations, as determined by
each Portfolio's investment adviser to meet the Portfolio's respective quality
standards as established by the Investment Company's Board of Trustees. However,
as described below, the three (3) Portfolios have different investment
objectives, and investors may allocate their investments in the Investment
Company between the three (3) Portfolios as best suits their needs at any given
time. The criteria discussed below serve to explain the term "high quality" used
herein and in the Statement of Additional Information with respect to
investments of the Investment Company.
CRITERIA APPLICABLE TO THE PORTFOLIOS
All three Portfolios may:
1. Purchase obligations issued by the U.S. Treasury. The Portfolios may
also purchase obligations issued or guaranteed by agencies or instrumentalities
of the U.S. Government; some of these are backed by the full faith and credit of
the United States, such as the obligations of the Government National Mortgage
Association. Others are backed by the right of the issuer to borrow from the
U.S. Treasury, such as the obligations of the Federal National Mortgage
Association, or are backed by the credit of the agency or instrumentality
issuing the obligation, such as Federal Home Loan Mortgage Corporation Mortgage
Participation Certificates.
2. Enter into repurchase agreements ("Repurchase Agreements") pursuant to
which a Portfolio may acquire an investment for a relatively short period
(usually not more than sixty (60) days), subject to an obligation of the seller
to repurchase and the Portfolio to resell the instrument at a fixed price and
time, thereby determining the yield during the Portfolio holding period. This
results in a fixed rate of return during such period. The repurchase price
generally equals the price paid plus interest negotiated on the basis of current
short-term rates (which may be more or less than the rate on the securities
underlying the Repurchase Agreement). Securities subject to Repurchase
Agreements will be held by PNC Bank or in the Federal Reserve/Treasury
book-entry system. Repurchase Agreements are considered to be loans under the
1940 Act. The Repurchase Agreements are collateralized by U.S. Government
securities the market value of which, on a daily basis, including accrued
interest, if any, is at least equal to one hundred percent (100%) of the
purchase price plus accrued interest under the Repurchase Agreements. The
Investment Company will perfect its security interest in the collateral securing
the Repurchase Agreements in accordance with U.S. Treasury Regulations and the
applicable commercial transaction law of the state in which such collateral is
located. If the seller defaults in its obligation to repurchase the underlying
instrument, which in effect constitutes collateral for the seller's obligation,
at the price and time fixed in the Repurchase Agreement, the Investment Company
might incur a loss if the value of the collateral declines and might incur
disposition costs in connection with liquidating the collateral. In addition, if
bankruptcy proceedings are commenced with respect to the seller, realization
upon the collateral by the Investment Company may be delayed or limited. Each
Portfolio will enter into Repurchase Agreements only with those banks and
dealers determined by the Portfolio's respective investment adviser to meet the
Portfolio's respective quality standards as established by the Investment
Company's Board of Trustees. These standards require an independent review by
the
9
<PAGE> 14
Portfolio's investment adviser of the operating history and financial condition
of the seller to evaluate their creditworthiness and the risk of their becoming
involved in bankruptcy proceedings or otherwise impairing the quality of the
repurchase agreement during its contemplated term. The investment advisers will
monitor the creditworthiness of the seller during the life of a Repurchase
Agreement.
3. Enter into reverse repurchase agreements ("Reverse Repurchase
Agreements") to provide liquidity to meet redemption requests when the sale of
portfolio securities is considered to be disadvantageous. Reverse Repurchase
Agreements involve the sale of investments held by the Investment Company with
an agreement to repurchase the securities at a fixed date and price. Under the
1940 Act, Reverse Repurchase Agreements, the proceeds of which are utilized to
provide liquidity to meet redemption requests, are considered as borrowings.
Proceeds of Reverse Repurchase Agreements utilized to provide liquidity to meet
redemption requests may equal no more than five percent (5%) of the total assets
of the respective Portfolio. The use of Reverse Repurchase Agreements is not
expected to affect the net asset value of the Portfolios.
The Money Market Portfolio and the Short-Term Portfolio may:
1. Purchase bank obligations, such as certificates of deposit, bankers'
acceptances and time deposits issued or supported by the credit of the U.S.
branches of U.S. banks with assets of at least $1 billion, if such obligations
are first determined by the Portfolio's respective investment adviser to meet
the Portfolio's respective maturity limitations and quality standards for
corporate debt obligations.
2. Purchase commercial paper rated (at the time of purchase) at least "A-1"
by Standard & Poor's Corporation ("S&P") or "Prime-1" by Moody's Investors
Service, Inc. ("Moody's").
3. Purchase corporate bonds and notes. The Money Market Portfolio may
purchase corporate bonds and notes rated (at the time of purchase) at least "AA"
by S&P or at least "Aa" by Moody's. The Short-Term Portfolio may purchase
corporate bonds and notes rated (at the time of purchase) at least "A-" by S&P
or at least "A-3" by Moody's.
4. Purchase variable amount master demand notes ("VAMD Notes") issued by
corporations, which are unsecured instruments that permit the indebtedness
thereunder to vary and provide for periodic adjustments in the interest rate.
Although the notes normally are considered illiquid and are not traded, the
Investment Company may demand at any time from the issuers of the VAMD Notes
payment, in less than seven (7) days, of principal and accrued interest. VAMD
Notes typically are not rated by credit rating agencies. If an issuer of VAMD
Notes were to default on its payment obligations, the Investment Company might
be unable to dispose of the illiquid VAMD Notes and might, for this or other
reasons, suffer a loss to the extent of the default.
The Portfolios do not purchase unrated instruments unless the Portfolio's
respective investment adviser has determined the instrument to be of comparable
quality to rated instruments which the respective Portfolio may buy. The rating
symbols used by S&P and Moody's which are referred to above are described in the
Appendix to the Statement of Additional Information.
The Investment Company will (i) seek to make investments in instruments
authorized by the New York State Insurance Department to the extent such
investments also comply with the Investment Company's Investment Guidelines and
the 1940 Act; (ii) seek to make investments which will be permitted investments
10
<PAGE> 15
under the requirements of other applicable state insurance laws and regulations,
although each investor should determine for itself the suitability with respect
to such state insurance laws and regulations, of investing with the Investment
Company; and (iii) maintain a high degree of portfolio liquidity at all times.
Each investor in the Investment Company will have the right to receive
redemption proceeds from the Investment Company within one (1) Business Day of
the Investment Company's receipt of a proper redemption request order, as the
case may be. If an investor ceases to be a BCBS Investor, its PCs in the
Investment Company will be redeemed involuntarily.
THE GOVERNMENT/REPO PORTFOLIO
The Government/REPO Portfolio seeks a high level of current income
consistent with stability of principal by investing in U.S. Treasury bills,
notes and other obligations issued or guaranteed by the U.S. Government, its
agencies or instrumentalities and repurchase agreements relating to such
obligations having remaining maturities of one (1) year or less, except that
items of collateral securing Portfolio securities which are subject to
Repurchase Agreements may bear maturities exceeding one (1) year. At least
sixty-five percent (65%) of the Government/REPO Portfolio's net assets will be
invested in U.S. Treasury bills, notes and other obligations issued or
guaranteed by the U.S. Government, its agencies or instrumentalities and
repurchase agreements relating to such obligations at all times. The
dollar-weighted average portfolio maturity of the Government/REPO Portfolio will
not exceed seven (7) days. In pursuing its investment objective, the
Government/REPO Portfolio invests in a broad range of government obligations and
repurchase agreements that may be available in the money markets. In addition to
the specific quality and other investment criteria set forth above, the
Government/REPO Portfolio will purchase only those instruments judged by BIMC to
involve minimal credit risk and which either have a high quality rating from a
nationally recognized rating agency or, if unrated, to be of comparable quality
as determined by BIMC. The Government/REPO Portfolio attempts to maintain a
constant net asset value per PC of $1.00. There is no assurance, however, that
such constant net asset value will be maintained. Government/REPO Portfolio PCs
are neither insured nor guaranteed by the U.S. Government.
THE MONEY MARKET PORTFOLIO
The Money Market Portfolio seeks a high level of current income consistent
with stability of principal by investing in high quality money market
instruments having remaining maturities of one (1) year or less, except that
items of collateral securing Portfolio securities which are subject to
Repurchase Agreements may bear maturities exceeding one (1) year. The
dollar-weighted average portfolio maturity of the Money Market Portfolio will
not exceed ninety (90) days. In pursuing its investment objective, the Money
Market Portfolio invests in a broad range of government, bank and commercial
obligations that may be available in the money markets. In addition to the
specific quality and other investment criteria set forth above, the Money Market
Portfolio will purchase only those instruments judged by BIMC to involve minimal
credit risk and which either have a high quality rating from a nationally
recognized rating agency or, if unrated, to be of comparable quality as
determined by BIMC. The Money Market Portfolio attempts to maintain a constant
net asset value per PC of $1.00. There is no assurance, however, that such
constant net asset value will be maintained. Money Market Portfolio PCs are
neither insured nor guaranteed by the U.S. Government.
11
<PAGE> 16
THE SHORT-TERM PORTFOLIO
The Short-Term Portfolio seeks to maximize total return, which includes
interest income and capital gains and losses, consistent with the preservation
of capital by managing a portfolio of U.S. Government, bank and commercial
instruments having remaining maturities of five and a quarter (5 1/4) years or
less, except that items of collateral securing portfolio securities which are
subject to Repurchase Agreements may bear maturities exceeding five and a
quarter (5 1/4) years. As a matter of fundamental policy the dollar-weighted
average portfolio maturity of the Short-Term Portfolio will not exceed three
hundred sixty (360) days. The net asset value per PC in the Short-Term Portfolio
will be subject to some fluctuation. There is no assurance that the goals of the
Short-Term Portfolio will be achieved.
In the ordinary course of business, the Short-Term Portfolio may purchase
securities on a when-issued or delayed-delivery basis (i.e., delivery and
payment will take place after the date of the transaction). As such, the
securities are subject to market fluctuations and no interest accrues to the
purchaser during this period. When-issued securities are recorded as an asset
and are subject to market fluctuations. In addition, the Portfolio will
segregate an amount of cash or securities at the time of commitment equal to or
exceeding the purchase price of the securities. The Short-Term Portfolio will
not purchase securities on a when-issued or delayed-delivery basis if, as a
result, more than fifteen percent (15%) of the total assets of the Portfolio
would be so invested.
INVESTMENT AND BORROWING LIMITATIONS
The Portfolios of the Investment Company may not change the investment or
borrowing limitations summarized below without the affirmative vote of the
holders of a majority of the outstanding PCs of the respective Portfolio. (A
more detailed description of the following investment limitations, together with
other investment limitations that cannot be changed without a vote of the
holders of a majority of the outstanding PCs of the respective Portfolio, is
contained in the Statement of Additional Information under "Investment
Objectives and Policies".) The Portfolios may not:
1. Borrow money, except from commercial banks for temporary purposes, and
then in amounts not in excess of five percent (5%) of the total assets of the
respective Portfolio at the time of such borrowing; or pledge any assets except
in connection with any such borrowing and in amounts not in excess of the lesser
of the dollar amounts borrowed or five percent (5%) of the total assets of the
respective Portfolio at the time of such borrowing. This limitation applies to
proceeds of Reverse Repurchase Agreements to the extent such proceeds are
utilized to provide liquidity to meet redemption requests.
2. Purchase any securities which would cause twenty-five percent (25%) or
more of the total assets of the respective Portfolio at the time of purchase to
be invested in the securities of issuers conducting their principal business
activities in the same general industry, provided that there is no limitation
for the Portfolios with respect to investments in U.S. Government obligations or
in obligations of domestic branches of U.S. banks for the Money Market
Portfolio.
3. Purchase securities of any one (1) issuer, other than those of, or those
guaranteed by, the U.S. Government, Federal agencies and government-sponsored
corporations, if immediately after such purchase more than five percent (5%) of
the total assets of the respective Portfolio would be invested in such issuer;
except that up to one hundred percent (100%) of the total assets of the
Government/REPO Portfolio and up to twenty-five percent (25%) of the total
assets of the Money Market Portfolio and the Short-Term Portfolio
12
<PAGE> 17
may be invested in Repurchase Agreements with maturities not greater than seven
(7) days without regard to this five percent (5%) limitation.
4. Purchase securities, if immediately after such purchase more than ten
percent (10%) of the net assets of the respective Portfolio would be invested in
securities which are illiquid, including Repurchase Agreements with maturities
greater than seven (7) days and VAMD Notes with greater than seven (7) days'
notice required for sale. Restricted securities issued under Rule 144A and
commercial paper issued under Section 4(2) of the Securities Act of 1933 are not
subject to this limitation if they are determined by the Portfolio's adviser to
be liquid under guidelines established by the Board of Trustees.
5. Purchase securities issued by CSC.
PURCHASE AND REDEMPTION OF PARTICIPATION CERTIFICATES
PURCHASE PROCEDURES
PCs of each Portfolio are sold without a sales charge by the Investment
Company acting as its own distributor without the services of an underwriter at
the net asset value per PC next determined after receipt of a purchase order by
PFPC. BCBS Investors may open an account with the Investment Company by
completing, and submitting to CSC, an application form which may be obtained by
telephoning (312) 297-6372; the form requests all information from the investor
required to enable PFPC to open an account for such investor. After the
application form has been approved by CSC and forwarded to PFPC, an investor may
place purchase orders for PCs on any Business Day directly with PFPC, the
transfer agent for the Investment Company; such orders must be transmitted by
telephoning (800) 821-9771 and indicating the amount and the Portfolio of the
PCs desired. (See "Net Asset Value--Government/REPO Portfolio and Money Market
Portfolio" for the definition of "Business Day".)
Government/REPO Portfolio and Money Market Portfolio. Purchase orders for
the Government/REPO Portfolio and the Money Market Portfolio which are received
by 12 Noon (Eastern Time) will be executed at the net asset value determined at
12 Noon (Eastern Time) that day if PNC Bank receives Federal funds by 4:00 P.M.
Eastern Time. In addition, purchase orders for the Government/REPO Portfolio and
the Money Market Portfolio which are received after 12 Noon (Eastern Time) but
before 3:00 P.M. (Eastern Time) will be executed at the net asset value
determined at 4:00 P.M. (Eastern Time) that day if PNC Bank receives Federal
funds by 4:00 P.M. (Eastern Time). Orders received after 3:00 P.M. (Eastern
Time) and orders for which payment has not been received by PNC Bank by 4:00
P.M. (Eastern Time), will not be accepted and notice thereof will be given to
the investor placing the order.
Short-Term Portfolio. Purchase orders for the Short-Term Portfolio received
before 4:00 P.M. (Eastern Time) will be priced at the net asset value determined
on that day and will be executed as of the beginning of business on the
following Business Day if payment has been received by PNC Bank by 4:00 P.M.
(Eastern Time) on the day the order is executed. Orders received at other times,
and orders for which payment has not been received by PNC Bank by 4:00 P.M.
(Eastern Time) on the day the order is to be executed, will not be accepted and
notice thereof will be given to the investor placing the order.
Payment for PCs of the Portfolios may be made only in Federal funds or
other funds immediately available to PNC Bank. The Government/REPO Portfolio has
a $1 million minimum initial and subsequent investment requirement. The Money
Market Portfolio and the Short-Term Portfolio do not have minimum
13
<PAGE> 18
initial or subsequent investment requirements. Payment for orders which are not
received or accepted by PFPC will be returned after prompt inquiry to the
sending investor. Each Portfolio may in its discretion reject any orders for
purchase of PCs. Unless specifically designated as to a specific Portfolio, all
purchases automatically will be made in the Money Market Portfolio. CSC will be
responsible for the payment of any distribution expenses.
REDEMPTION PROCEDURES
Redemption orders must be transmitted to PFPC by telephone in the manner
described under "Purchase Procedures". PCs are redeemed at the net asset value
per PC next determined after receipt of the redemption order. Investors should
note the differences between the Portfolios in terms of when net asset values of
the PCs are determined and when dividends are earned.
Government/REPO Portfolio and Money Market Portfolio. Payment for redeemed
PCs for which a redemption order is received by PFPC on a Business Day before
3:00 P.M. (Eastern Time) is made in Federal funds wired to the redeeming
investor's account on the same Business Day. Payment for other redemption orders
which are received on a Business Day (or on a day when PNC Bank is closed) is
wired in Federal funds on the next Business Day following redemption that PNC
Bank is open for business. An investor receives no dividend for the day on which
PCs are redeemed; therefore, investors that do not place redemption orders by
the times indicated may wish to wait until the morning of the following Business
Day to do so.
Short-Term Portfolio. A redemption request with respect to the Short-Term
Portfolio which is received by PFPC prior to 4:00 P.M. (Eastern Time) on a
Business Day will be priced at the net asset value determined as of 4:00 P.M.
(Eastern Time) on that day and will be executed on the following Business Day.
Proceeds will be wired on the day the redemption order is executed. Investors
receive dividends through, and including, the day before the redemption order is
executed.
Further Information Regarding the Portfolios. Investors may in effect
transfer all or part of their investments from one Portfolio to another by
placing simultaneous redemption and purchase orders. These orders will be
executed in sequence in accordance with the procedures discussed above.
The Investment Company will not issue certificates representing PCs unless
requested to do so by its investors. If such certificates have been issued
representing PCs to be redeemed, prior to effecting a redemption with respect to
such PCs, PFPC must have received such certificates properly endorsed (i.e.,
duly executed with signatures guaranteed by a commercial bank, a trust company
or a member firm of a domestic securities exchange). PFPC reserves the right to
request additional documentation in order to confirm that a transaction is
properly authorized. PC holders having questions regarding proper documentation
or desiring to request certificates representing PCs should contact PFPC.
The Investment Company may suspend the right of redemption or postpone the
date of payment upon redemption (as well as suspend or postpone the recordation
of the transfer of its PCs) for such periods as are permitted under the 1940
Act. The Investment Company may also redeem PCs involuntarily under certain
special circumstances described in the Statement of Additional Information under
"Additional Purchase and Redemption Information". In addition, CSC will cause
PCs (i) owned by an investor who ceases to be a BCBS Investor or (ii) pledged as
collateral by an investor and subsequently called by a pledgee who is not a BCBS
Investor, to be redeemed involuntarily and automatically within one (1) Business
Day of the occurrence of the events set forth in (i) or (ii) immediately
preceding.
14
<PAGE> 19
TRANSFER PAYMENTS
A BCBS Investor investing in the Government/REPO Portfolio or the Money
Market Portfolio may direct that payment upon redemption of PCs in the Portfolio
be used to purchase PCs of the Government/REPO Portfolio or the Money Market
Portfolio for another BCBS Investor by a transfer (individually, a "Transfer"
and, collectively, "Transfers") of the redeemed PCs to the second BCBS Investor.
Such a Transfer is made by a redemption and simultaneous purchase in the name of
the second BCBS Investor. A BCBS Investor may not request a Transfer from his
Government/REPO Portfolio or his Money Market Portfolio account in a dollar
amount greater than the dollar amount held in such investor's account on the
Business Day prior to the date of such request. Such Transfers may be effected
at any time prior to 4:00 P.M. (Eastern Time). There is no limit to the number
of Transfers which a BCBS Investor can place in any one (1) day, nor to the
total number of such Transfers by all BCBS Investors per day.
PAYMENT IN KIND
Investors may request that redemption order proceeds be funded by
securities held by the Portfolio (a "Payment in Kind") in lieu of cash. Prior to
placing a Payment in Kind redemption order a BCBS investor must provide the
Transfer agent with written instructions identifying the custodial account to
receive the securities to be distributed. The securities to be distributed shall
represent a pro rata share of each security held in the portfolio, in accordance
with Rule 17a-5 of the Investment Company Act of 1940. Under guidelines
established by the Board of Trustees, the adviser shall have the authority to
make adjustments to the mix of securities to establish round lots that are more
easily traded; however, these adjustments may not materially change the
maturity, quality and liquidity characteristics of the remaining portfolio.
NET ASSET VALUE
GOVERNMENT/REPO PORTFOLIO AND MONEY MARKET PORTFOLIO
The net asset value per PC of the Government/REPO Portfolio and the Money
Market Portfolio for purposes of pricing purchase and redemption orders is
determined by BIMC as of 12 Noon (Eastern Time) and as of 4:00 P.M. (Eastern
Time) on any Business Day (other than a day on which there are no purchase or
redemption orders) during which there is sufficient trading in instruments held
by such Portfolio that its net asset value per PC might be affected materially.
A Business Day of the Investment Company is any weekday other than the holidays
observed by the Investment Company, which currently are: New Year's Day, Martin
Luther King's Day, President's Day, Good Friday, Memorial Day, Independence Day,
Labor Day, Columbus Day, Veterans' Day, Thanksgiving Day and Christmas Day. In
computing net asset value per PC, the Government/REPO Portfolio and the Money
Market Portfolio use the amortized cost method of valuation and normally
maintain a constant net asset value of $1.00 per PC.
SHORT-TERM PORTFOLIO
The net asset value per PC of the Short-Term Portfolio for purposes of
pricing purchase and redemption orders is determined by BIMC as of 4:00 P.M.
(Eastern Time) on any Business Day (other than a day on which there are no
purchase or redemption orders) during which there is sufficient trading in
investments held by such Portfolio that its net asset value per PC might be
affected materially. The Short-Term Portfolio values assets based on their
market price or on their fair value as determined by the Investment Company's
Board of
15
<PAGE> 20
Trustees. (See the Statement of Additional Information under "Net Asset Value"
for a more complete description with respect to all three Portfolios.)
MANAGEMENT OF THE INVESTMENT COMPANY
TRUSTEES AND OFFICERS
The Trustees, in addition to reviewing the actions of BIMC, N&B, PNC Bank,
PFPC and CSC, decide upon matters of general policy in accordance with the
General Corporation Law of the State of Maryland. Pursuant to the Investment
Company's Bylaws, the Trustees shall elect an Executive Trustee who shall
preside at all meetings of the PC holders and of the Board of Trustees. The
Investment Company's Officers conduct and supervise the daily business
operations of the Investment Company. (See the Statement of Additional
Information under "Management of the Investment Company" for a more complete
description.) The Trustees of the Investment Company are as follows:
Howard F. Beacham III is President and Chief Operating Officer of Blue
Cross and Blue Shield of Central New York, Inc.;
*Philip A. Goss is President and Chief Executive Officer of both the
Investment Company and Health Plans Capital Services Corp.;
Gene Holcomb is President of Blue Cross and Blue Shield of Tennessee;
Steven L. Hooker is Chief Financial Officer and Treasurer of The Regence
Group;
Ronald F. King is President and Chief Executive Officer of Blue Cross and
Blue Shield of Oklahoma;
*David M. Murdoch is Executive Vice President, Franchise Operations, Chief
Financial Officer and Treasurer of the Blue Cross and Blue Shield Association;
M. Edward Sellers is President and Chief Executive Officer of Blue Cross
and Blue Shield of South Carolina;
Thomas J. Ward is President and Chief Executive Officer of Blue Cross of
Northeastern Pennsylvania; and
Sherman M. Wolff is Senior Vice President, Corporate Resources and Chief
Financial Officer of Health Care Service Corporation, a Mutual Legal Reserve
Company (Blue Cross and Blue Shield of Illinois).
- ---------------
*Such Trustees of the Investment Company are also members of the Board of
Directors of CSC and thus may be deemed "interested persons" as defined in the
1940 Act.
INVESTMENT ADVISERS AND SERVICE AGENT
BIMC is the investment adviser of the Government/REPO Portfolio and the
Money Market Portfolio and the Service Agent of all three of the Investment
Company's Portfolios. N&B is the investment adviser of the Short-Term Portfolio.
(BIMC and N&B sometimes are referred to herein collectively as the "Investment
Advisers"; BIMC sometimes is referred to herein as the "Service Agent".)
16
<PAGE> 21
BIMC, an indirectly owned subsidiary of PNC Bank, was organized in 1977 by
PNC Bank to perform advisory services for investment companies, and has its
principal offices at 400 Bellevue Parkway, Wilmington, Delaware 19809. BIMC
currently renders advisory and sub-advisory services to investment companies
having assets of approximately $49 billion. PNC Bank and its predecessors have
been in the business of managing the investments of fiduciary and other accounts
in the Philadelphia area since 1847. PNC Bank is a subsidiary of PNC Bank Corp,
a multi-bank holding company ("PNC").
As Investment Adviser, BIMC manages the Government/REPO Portfolio and the
Money Market Portfolio and is responsible for all purchases and sales of these
portfolios' securities. BIMC also acts as a servicing agent, maintains the
financial accounts and records and computes the net asset value and net income
for all three Portfolios of the Investment Company. For the services provided
and expenses assumed by it with respect to the Government/REPO Portfolio and the
Money Market Portfolio, BIMC is entitled to receive a fee, computed daily and
payable monthly, at the following annual rates:
<TABLE>
<CAPTION>
ANNUAL FEE PORTFOLIO ANNUAL NET ASSETS
- ---------- ---------------------------
<C> <S> <C>
.20% ..................... of the first $250 million
.15% ..................... of the next $250 million
.12% ..................... of the next $250 million
.10% ..................... of the next $250 million
.08% ..................... of amounts in excess of $1 billion.
</TABLE>
BIMC has agreed to voluntarily reduce the fees otherwise payable to it by the
Government/REPO Portfolio to the extent necessary to reduce the ordinary
operating expenses of the Government/REPO Portfolio so that they do not exceed
0.15 of one percent (.15%) of the Government/REPO Portfolio's average net assets
for each fiscal year.
BIMC has agreed contractually to reduce the fees otherwise payable to it by the
Money Market Portfolio to the extent necessary to reduce the ordinary operating
expenses of the Money Market Portfolio so that they do not exceed 0.30 of one
percent (.30%) of the Money Market Portfolio's average net assets for each
fiscal year. (See "Management of the Investment Company--Expenses".)
For the services provided and expenses assumed by BIMC with respect to its
role as servicing agent for the Short-Term Portfolio, BIMC is entitled to
receive a fee, computed daily and payable monthly, at the following annual
rates:
<TABLE>
<CAPTION>
ANNUAL FEE PORTFOLIO AVERAGE DAILY NET ASSETS
- ---------- ----------------------------------
<C> <S> <C>
.03% ..................... of amounts up to and including $1 billion
of amounts in excess of $1 billion and up to
.02% ..................... and including $2 billion
.01% ..................... of amounts in excess of $2 billion
</TABLE>
provided that the minimum annual fee payable shall be $100,000.
N&B, a Delaware limited liability company, was founded in 1939 and its
principal investment offices are located at 605 Third Avenue, New York, New York
10158. The firm together with its affiliates and subsidiaries currently manages
approximately $54 billion of equity and fixed-income investments.
As Investment Adviser, N&B manages the Short-Term Portfolio and is
responsible for all purchases and sales of this portfolio's securities. Mr.
Theodore P. Giuliano and Ms. Josephine P. Mahaney have primary
17
<PAGE> 22
responsibility for the day-to-day management of the Short-Term Portfolio. Mr.
Giuliano is a principal at N&B and has been Co-Director of the Fixed income
Group at N&B since 1983. Mr. Giuliano joined N&B in 1983. Ms. Mahaney is a
Senior Portfolio Manager and has been responsible for managing short maturity
portfolios since 1978. Ms. Mahaney joined N&B in 1976.
For the services provided and expenses assumed by it, N&B is entitled to
receive a fee, computed daily and payable monthly at the following annual rates:
<TABLE>
<CAPTION>
ANNUAL FEE PORTFOLIO ANNUAL NET ASSETS
- ---------- ---------------------------
<C> <S> <C>
.30% ..................... of the first $50 million
.20% ..................... of the next $50 million
.15% ..................... of the next $150 million
.10% ..................... of amounts in excess of $250 million.
</TABLE>
N&B has agreed contractually to reduce the fees otherwise payable to it by the
Short-Term Portfolio to the extent necessary to reduce the ordinary operating
expenses of the Short-Term Portfolio so that they do not exceed 0.30 of one
percent (.30%) of the Short-Term Portfolio's average net assets for each fiscal
year. (See "Management of the Investment Company--Expenses".)
CUSTODIAN AND TRANSFER AGENT
PNC Bank, a subsidiary of PNC, 17th and Chestnut Streets, Philadelphia,
Pennsylvania 19103, has been retained to act as custodian of the Portfolios'
investments. As custodian, PNC Bank, among other things, collects income of and
payments to the Investment Company; executes and delivers proxies, consents and
other authorizations for the Investment Company; establishes and maintains
segregated accounts in its records for and on behalf of each Portfolio;
delivers, releases and exchanges securities held for the Investment Company when
necessary; makes payments of cash to, or for the account of, each Portfolio for
the purchase of securities for each Portfolio, for the redemption of PCs, and
for the payment of interest, dividends, taxes and management fees; and furnishes
the Investment Company with various confirmations, summaries and reports. PNC
Bank is authorized to select one or more banks or trust companies to serve as
sub-custodian on behalf of the Investment Company, provided that PNC Bank shall
remain responsible for the performance of its duties under the Custodian
Agreement and shall hold the Investment Company harmless for the acts and
omissions of any bank or trust company serving as sub-custodian. For the
services provided and expenses assumed by PNC Bank as custodian, PNC Bank is
entitled to receive a fee, computed daily and payable monthly, at the following
annual rates:
<TABLE>
<CAPTION>
INVESTMENT COMPANY'S
ANNUAL FEE AVERAGE ANNUAL GROSS ASSETS*
- ---------- ----------------------------
<C> <S> <C>
.025% ..................... of the first $5 million
.020% ..................... of the next $5 million
.015% ..................... of the next $10 million
.010% ..................... of the next $10 million
.008% ..................... of amounts in excess of $30 million
</TABLE>
plus $10 for each purchase, sale or maturity transaction with an annual minimum
of $5,000.
- ---------------
* Based on the average of the assets included in the Investment Company's net
asset value on each day in such month that such value is calculated.
18
<PAGE> 23
PFPC, an indirectly wholly owned subsidiary of PNC, P.0. Box 8950,
Wilmington, Delaware 19899, has been retained to act as transfer agent for the
Investment Company. As transfer agent, PFPC, among other things, issues and
redeems PCs, processes dividends, prepares various communications to PC holders,
answers correspondence from PC holders, keeps records of the accounts of each PC
holder and prepares and submits various reports to the Investment Company. For
the services provided and expenses assumed by PFPC as transfer agent, PFPC is
entitled to receive a fee, computed daily and payable monthly, equal to $15.00
per master account and sub-account per Portfolio per year, prorated in the case
of accounts maintained for only a portion of a full year, plus $1.00 for each
master account purchase or redemption transaction, plus $5.00 for each outgoing
wire of Federal funds, provided that the minimum annual fee payable to PFPC
shall be $5,000.
Banking laws and regulations presently prohibit a bank holding company
registered under the Federal Bank Holding Company Act of 1956 or any bank or
non-bank affiliate thereof from sponsoring, organizing, controlling, or
distributing the shares (PCs) of a registered, open-end investment company
continuously engaged in the issuance of its shares (PCs), and prohibit banks
generally from issuing, underwriting, selling or distributing securities, but
such banking laws and regulations do not prohibit such a holding company or
affiliate or bank generally from acting as investment adviser, transfer agent or
custodian to such an investment company. PNC Bank, BIMC and PFPC are subject to
such banking laws and regulations.
Ballard, Spahr, Andrews & Ingersoll, counsel to BIMC, PNC Bank and PFPC,
have advised the Investment Company, BIMC, PNC Bank and PFPC that BIMC, PNC Bank
and PFPC may perform the services for the Investment Company contemplated by
their agreements with the Investment Company, this prospectus and the Statement
of Additional Information, without violation of applicable banking laws or
regulations. Such counsel have pointed out, however, that future changes
relating to the permissible activities of banks and their affiliates, as well as
further interpretations of present requirements, could prevent BIMC, PNC Bank or
PFPC from continuing to perform such services for the Investment Company. If
BIMC, PNC Bank or PFPC were prohibited from continuing to perform such services,
it is expected that the Investment Company's Board of Trustees would recommend
that the Investment Company enter into new agreements with other qualified
firms. Any new investment advisory agreement would be subject to PC holder
approval.
ADMINISTRATOR
CSC, located at 225 North Michigan Avenue, Chicago, Illinois 60601, serves
as the Investment Company's administrator and acts generally in a supervisory
capacity with respect to the Investment Company's overall operations and PC
holder relations. CSC's administrative services include maintaining the
Investment Company's Chicago, Illinois office; maintaining financial and
accounting records other than those maintained by the Investment Advisers or
their agents; supervising the performance of administrative and professional
services to the Investment Company by others; monitoring, and notifying the
Investment Company of, the eligibility of the Investment Company's present and
prospective investors and certain requirements of various state insurance laws
and regulations; receiving and processing applications from present and
prospective investors in the Investment Company; and accumulating information
for and
19
<PAGE> 24
coordinating (but not paying for) the preparation of reports to the Investment
Company's PC holders and the SEC.
For its administrative services, CSC is entitled to receive a fee from the
Investment Company calculated daily and paid monthly at an annual rate not to
exceed one-twentieth of one percent (.05%) of the average daily net assets of
the Investment Company's Portfolios. (See the Statement of Additional
Information under "Management of the Investment Company--Administrator".)
EXPENSES
The Investment Company's ordinary operating expenses generally consist of
fees for legal, accounting and other professional services, fees of BIMC, N&B,
PNC Bank, PFPC and CSC, costs of Federal and state registrations and related
distributions to PC holders, certain insurance premiums as well as the costs
associated with maintaining corporate existence. Other costs include taxes,
brokerage fees, interest and extraordinary expenses. For the period ending
December 31, 1997, expense ratios were 0.10% for the Government/REPO Portfolio,
0.25% for the Money Market Portfolio and 0.30% for the Short-Term Portfolio.
Without the waiver of advisory, administrator and service agent fees, the ratio
of expenses to average daily net assets would have been 0.29% for the
Government/REPO Portfolio and 0.57% for the Short-Term Portfolio for the period
ending December 31, 1997.
DIVIDENDS
Investors in the Portfolios are entitled to dividends and distributions
arising only from the net income and capital gains, if any, earned on
investments held by that Portfolio. Each Portfolio declares net income daily as
a dividend to PC holders of record at the close of business on the date of
declaration. Dividends are paid monthly and will be reinvested in additional PCs
or, if the investor so elects by checking the appropriate box on the application
form, will be transmitted to such investor by wire within five (5) Business Days
after the end of the month (or within five (5) Business Days after a redemption
of all of the investor's PCs). Distributions of realized net capital gains of
the Short-Term Portfolio, if any, are declared and paid once each year and may
be reinvested in additional PCs or, at the option of the investor, paid in cash.
The Government/REPO Portfolio and the Money Market Portfolio do not expect to
realize net long-term capital gains.
TAXES
Under applicable provisions of the Internal Revenue Code (the "Code"), as
amended, each particular Portfolio established within the Investment Company is
to be treated for tax purposes as an entirely separate corporation. Therefore,
each particular Portfolio intends to elect to be taxed as a "regulated
investment company" ("RIC"), within the meaning of Subchapter M of the Code and
each particular Portfolio intends to continue to satisfy the requirements for
RIC classification for the current fiscal year and for each future fiscal year,
so long as such qualification is considered to be in the best interest of the PC
holders of that Portfolio. As a RIC, the Portfolio will not have to pay any
Federal income tax on net investment income and net capital gains distributed to
its PC holders, provided that, among other things, at least ninety percent (90%)
of its investment company taxable income earned during each fiscal year
(computed without regard to any
20
<PAGE> 25
deduction for dividends paid) is so distributed. The policy of each particular
Portfolio established within the Investment Company will be to distribute
substantially all its investment company taxable income each year.
Insofar as PC holders of any particular Portfolio may themselves be subject
to Federal income tax, dividends paid by the particular Portfolio in question
from its net investment income and distribution of net short-term capital gains
will be taxable to PC holders of the particular Portfolio in question as
ordinary income, and dividends derived from net long-term capital gains will be
taxable to PC holders of the particular Portfolio in question as long-term
capital gains, whether received in cash or reinvested in additional PCs of that
Portfolio or of PCs of any other Portfolio. PC holders of any particular
Portfolio which are exempt from taxation will treat such income similarly to
their other income items. Statements as to the tax status of dividends and
capital gain distributions made to the PC holders of each Portfolio will be
mailed annually. It is anticipated that none of the Portfolios' distributions
will be eligible for the dividends-received deduction.
Under the provisions of the Code, RICs such as each Portfolio established
within the Investment Company may be subject to a four percent (4%)
nondeductible Federal excise tax, if and to the extent that the RIC fails to
distribute to its shareholders a sufficient amount of its annual income. In
general, the required distribution amount is the sum of (i) ninety-eight percent
(98%) of the RIC's ordinary income, and (ii) ninety-eight percent (98%) of the
RIC's net capital gain income. The required distribution also includes the
cumulative amount of distribution shortfalls from the tax years during which the
four percent (4%) Federal excise tax is applicable. It is anticipated that each
Portfolio shall be operated in a manner calculated to avoid the imposition,
against the particular Portfolio in question, of this four percent (4%) Federal
excise tax.
Under the provisions of Code Section 514, a PC holder which is otherwise
exempt from Federal income tax may subject certain of its income to Federal
income tax, to the extent that the PC holder borrows funds and uses the borrowed
funds, directly or indirectly, to acquire PCs of any particular Portfolio. The
amount of income of the PC holder which would be subject to Federal income tax
would be, in general, the net income (gross income less applicable deductions)
derived by the PC holder from the investment, multiplied by a fraction, the
numerator of which is the amount borrowed, and the denominator of which is the
amount invested by the PC holder in the particular Portfolio in question.
Certain expenses of the Investment Company will be passed through to its PC
holders. Such amounts may or may not be deductible by the PC holders.
Dividends and distributions from any of the Portfolios may be subject to
additional state and local taxes and PC holders should consult their tax
advisers with respect to such matters. No attempt is made here or in the
Statement of Additional Information to present a detailed explanation of the tax
treatment of any particular Portfolio established within the Investment Company
or of its PC holders. Any discussion here or in the Statement of Additional
Information is not intended as a substitute for careful tax planning.
DESCRIPTION OF PARTICIPATION CERTIFICATES
The Investment Company was incorporated under the laws of the State of
Maryland on August 6, 1985.
The authorized capital stock of the Investment Company consists of five
billion (5,000,000,000) PCs, par value $.001 per PC. The Investment Company
presently offers investors three (3) classes of PCs as follows: (i) the
Government/REPO Portfolio--one billion (1,000,000,000) PCs, (ii) the Money
Market Portfolio--
21
<PAGE> 26
two billion (2,000,000,000) PCs and (iii) the Short-Term Portfolio--one billion
(1,000,000,000) PCs. The PCs of each class represent interests only in the
corresponding Portfolio. When issued and paid for in accordance with the terms
of the offering, each PC is fully paid and nonassessable. All PCs of the same
class have equal dividend, distribution, liquidation and voting rights and are
redeemable at net asset value at the option of the PC holder. In addition, the
PCs have no preemptive, subscription, conversion or cumulative voting rights. PC
holders are entitled to one (1) vote for each full PC held and fractional votes
for fractional PCs held.
PERFORMANCE INFORMATION
From time to time, the Investment Company may quote the yield of each of
its Portfolios in reports and other communications to PC holders. For this
purpose, the yield of the Government/REPO Portfolio and the Money Market
Portfolio is calculated by dividing the Portfolio's average daily net investment
income per PC for a specified seven (7) day period by the Portfolio's average
net asset value per PC for the same period and annualizing the result on a three
hundred sixty-five-day basis. In the case of the Short-Term Portfolio, quoted
yield is calculated by dividing the net investment income per PC during a thirty
(30) day (or one month) period by the price per PC on the last day of that
period. The result of this calculation is annualized assuming semi-annual
reinvestment of dividend income.
From time to time, the Investment Company may also quote the total return
of its Short-Term Portfolio in reports and other communications to PC holders.
For this purpose the total return of the Portfolio is an average annual compound
rate of return over the periods cited that will equate a hypothetical $1,000
investment made at the beginning of the periods to the redeemable value at the
end of the periods cited.
Each Portfolio's performance will fluctuate. All statements of yield and
total return are based on historical performance and are not intended to
indicate future performance. Portfolio performance is affected by factors that
include Portfolio quality and maturity, operating expenses, changes in interest
rates and general market conditions. (See the Statement of Additional
Information under "Performance Information" for a more complete description of
yield and total return calculations.)
GENERAL INFORMATION
The Investment Company sends to all of its PC holders of each Portfolio
quarterly reports and annual reports, including a list of investment securities
held by each Portfolio, and audited financial statements of each Portfolio.
Coopers & Lybrand L.L.P. has been selected as the Investment Company's
independent accountants.
Seyfarth, Shaw, Fairweather & Geraldson, 55 East Monroe Street, Chicago,
Illinois 60603, will pass upon the legality of the PCs offered hereby. Burton X.
Rosenberg, a Partner of Seyfarth, Shaw, Fairweather & Geraldson, acts as General
Counsel and Secretary to CSC and is also a member of its Board of Directors.
22
<PAGE> 27
======================================================
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS IN CONNECTION WITH THE OFFERING
MADE BY THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
INVESTMENT COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING BY THE
INVESTMENT COMPANY IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY NOT BE MADE
LAWFULLY.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary and Introduction.... 2
Portfolio Fee Tables................... 3
Financial Highlights................... 6
Investment Objectives and Policies..... 9
Purchase and Redemption of
Participation Certificates........... 13
Net Asset Value........................ 15
Management of the Investment Company... 16
Dividends.............................. 20
Taxes.................................. 20
Description of Participation
Certificates......................... 21
Performance Information................ 22
General Information.................... 22
</TABLE>
======================================================
======================================================
PLAN INVESTMENT FUND, INC.
PROSPECTUS
APRIL 22, 1998
======================================================
<PAGE> 28
PLAN INVESTMENT FUND, INC.
STATEMENT OF ADDITIONAL INFORMATION
April 22, 1998
Table of Contents
<TABLE>
<CAPTION>
Page
----
<S> <C>
The Investment Company ................................................ B-2
Investment Objectives and Policies .................................... B-2
Additional Purchase and Redemption Information ........................ B-6
Net Asset Value ....................................................... B-6
Management of the Investment Company .................................. B-8
Additional Information Concerning Taxes ............................... B-14
Dividends ............................................................. B-15
Performance Information ............................................... B-15
Additional Description Concerning Investment Company
Participation Certificates ......................................... B-16
Independent Accountants ............................................... B-18
Counsel .............................................................. B-19
Miscellaneous ........................................................ B-19
Appendix .............................................................. B-20
Report of Independent Accountants
and Financial Statements ........................................... B-22
</TABLE>
This Statement of Additional Information should be read in conjunction
with the Prospectus for Plan Investment Fund, Inc. dated April 22, 1998 and is
incorporated by reference in its entirety into that Prospectus. Because this
Statement of Additional Information is not itself a prospectus, no investment
in PCs of Plan Investment Fund, Inc. should be made solely upon the information
contained herein. Copies of the Prospectus for Plan Investment Fund, Inc. may
be obtained by calling Health Plans Capital Services Corp. at (312) 297-6372.
Capitalized terms used but not defined herein have the same meanings as in the
Prospectus.
<PAGE> 29
THE INVESTMENT COMPANY
The Government/REPO Portfolio, Money Market Portfolio and Short-Term
Portfolio (individually, a "Portfolio" and, collectively, the "Portfolios") are
portfolios of Plan Investment Fund, Inc. (the "Investment Company"), a
diversified, open-end management investment company. Each Portfolio is
represented by a class of PCs separate from those of the Investment Company's
other Portfolios. Unless otherwise indicated, all statements made in this
Statement of Additional Information refer to all three Portfolios.
Each of the Portfolios invests in diversified selections of liquid,
high-quality securities. However, as described in the Prospectus, the three
(3) Portfolios have different investment objectives and policies and investors
may allocate their investment in the Investment Company between the three (3)
Portfolios as best suits their needs at any given time.
INVESTMENT OBJECTIVES AND POLICIES
See the Prospectus for a description of the investment objectives and
policies of the Investment Company. The following policy discussion
supplements such description.
Portfolio Transactions
Purchases and sales of securities for each Portfolio usually are principal
transactions. Portfolio securities normally are purchased directly from the
issuer or from an underwriter or market maker of the securities. There usually
are no brokerage commissions paid by the Investment Company for such purchases.
Purchases from dealers serving as market makers may include the spread between
the bid and asked prices. While the Investment Advisers intend to seek the
best price and execution for portfolio transactions on an overall basis, the
Investment Company may not necessarily pay the lowest spread or commission
available on each transaction.
Allocation of transactions, including their frequency, to various dealers
is determined by the Investment Adviser of each Portfolio in its best judgment
under the general supervision of the Board of Trustees of the Investment
Company and in a manner deemed fair and reasonable to PC holders.
Investment decisions for each Portfolio of the Investment Company are made
independently from those for the other investment companies advised by the
Investment Adviser. It may happen, on occasion, that the same security is held
in one or more of such other investment companies. Simultaneous transactions
are likely when several investment companies are advised by the same investment
adviser, particularly when a security is suitable for the investment objectives
of more than one (1) of such investment companies. When two (2) or more
investment companies advised by the Investment Adviser are simultaneously
engaged in the purchase or sale of the same security, the transactions are
allocated to the respective investment companies, both as to amount and price,
in accordance with a method deemed equitable to each investment company. In
some cases this system may adversely affect the price paid or received by a
Portfolio of the Investment Company or the size of the
B-2
<PAGE> 30
security position obtainable or sold for such Portfolio.
The Investment Company will not execute portfolio transactions through,
acquire portfolio securities issued by, make savings deposits in, or enter into
Repurchase Agreements or Reverse Repurchase Agreements with, BIMC and N&B (the
Investment Advisers) or any affiliates, officers or employees of either of
them.
Additional Information on Portfolio Instruments
With respect to the variable amount master demand notes ("VAMD Notes")
described in the Prospectus, the Investment Advisers to the respective
Portfolios will consider the earning power, cash flows and other liquidity
ratios of the issuers of such notes and will continuously monitor their
financial status to meet payment on demand. In determining average weighted
portfolio maturity, VAMD Notes will be deemed to have a maturity equal to the
longer of the period remaining to the next interest rate adjustment or the
demand notice period.
Examples of the types of U.S. Government obligations that may be held by
the Investment Company include, in addition to U.S. Treasury bills, notes and
bonds, the obligations of Federal Home Loan Banks, Federal Farm Credit Banks,
Federal Land Banks, the Federal Housing Administration, Farmers Home
Administration, Export-Import Bank of the United States, Small Business
Administration, Government National Mortgage Association, General Services
Administration, Student Loan Marketing Association, Central Bank for
Cooperatives, Federal Home Loan Mortgage Corporation, Federal Intermediate
Credit Banks, Maritime Administration and International Bank for Reconstruction
and Development.
The Investment Company may also invest in collateralized mortgage
obligations ("CMO"s) which are obligations fully collateralized by a portfolio
of mortgages or mortgage-related securities. Payments of principal and
interest on the mortgages are passed through to the holders of the CMOs on the
same schedule as they are received, although certain classes of CMOs have
priority over others with respect to the receipt of prepayments on the
mortgages. Therefore, depending on the types of CMOs in which the Investment
Company invests, the investment may be subject to a greater or lesser risk of
prepayment than other types of mortgage-related securities. The Investment
Company may also invest in other asset-backed securities that represent a
participation in, or are secured by and payable from, a stream of payments
generated by particular assets, most often a pool or pools of similar assets
(e.g., trade receivables). The credit quality of these securities depends
primarily upon the quality of the underlying assets and the level of credit
support and/or enhancement provided. The underlying assets are subject to
prepayments which shorten the securities' weighted average life and may lower
their return. If the credit support or enhancement is exhausted, losses or
delays in payment may result if the required payments of principal and interest
are not made.
The maturity of the instruments in which the Investment Company invests
normally shall be deemed to be a period remaining until the date noted on the
face of the instrument is the date on which the principal amount must be paid,
B-3
<PAGE> 31
or in the case of an instrument called for redemption, the date on which the
redemption payment must be made. An instrument issued or guaranteed by the
U.S. Government or any agency thereof which has a variable rate of interest
readjusted no less frequently than annually may be deemed to have a maturity
equal to the period remaining until the next readjustment date. An instrument
which has a demand feature that entitles the holder to receive the principal
amount of such instrument from the issuer upon no more than seven (7) days'
notice and which has a variable rate of interest may be deemed to have a
maturity equal to the longer of the period remaining until the interest rate
will be readjusted or the period remaining until the principal amount owed can
be received through demand. An instrument which has a variable rate of
interest may be deemed to have a maturity equal to the period remaining until
the next readjustment of the interest rate. An instrument which has a demand
feature that entitles the holder to receive the principal amount of such
instrument from the issuer upon no more than seven (7) days' notice and which
has a floating rate of interest may be deemed to have a maturity equal to the
period of time remaining until the principal amount owed can be received from
the issuer through demand.
An investment owned by the Short-Term Portfolio which may have payments of
principal prior to its final maturity date may be deemed to have a maturity
equal to the average maturity of its principal balances. This average, called
an average life, may include both scheduled payments of principal and estimates
of the timing of principal payments. The Short-Term Portfolio may use an
instrument's duration, the dollar weighted present value of all future cash
flows, as a measure of final maturity. An instrument with a duration
equivalent to that of an instrument with five and a quarter (5 1/4) years
remaining until maturity may be deemed to comply with the five and a quarter (5
1/4) year maximum maturity investment limitation.
The portfolio turnover for the Short-Term Portfolio may be expected to
exceed one hundred percent (100%) per year. Because the Short-Term Portfolio
invests in securities with short maturities, there is a relatively high
portfolio turnover rate. However, the turnover rate does not have an adverse
effect upon the net yield and net asset value of the PCs of the Short-Term
Portfolio since transactions occur primarily with issuers, underwriters or
major dealers and usually do not include the expense of brokerage commissions.
Appendix A attached hereto contains a description of the relevant rating
symbols used by Standard & Poor's Corporation and Moody's Investors Service,
Inc. for bonds and commercial paper in which the Portfolios invest.
Investment and Borrowing Limitations
The Investment Company's Prospectus summarized certain of the Portfolios'
investment and borrowing limitations that may not be changed without the
affirmative vote of the holders of a "majority" of the outstanding PCs of the
respective Portfolios (as defined herein under "Miscellaneous"). Below is a
complete list of the Portfolios' investment limitations that may not be changed
without such a vote of PC holders.
The Portfolios may not:
B-4
<PAGE> 32
1. Borrow money, except from commercial banks for temporary purposes, and
then in amounts not in excess of five percent (5%) of the total assets of the
respective Portfolio at the time of such borrowing; or mortgage, pledge or
hypothecate any assets except in connection with any such borrowing and in
amounts not in excess of the lesser of the dollar amount borrowed or five
percent (5%) of the total assets of the respective Portfolio at the time of
such borrowing. This borrowing provision applies to Reverse Repurchase
Agreements whose proceeds are utilized to provide liquidity to meet redemption
requests when liquidation of portfolio securities is considered
disadvantageous. At no time shall the level of funds borrowed to meet
redemption requests exceed five percent (5%) of the total assets of the
respective Portfolio; the interest expenses associated with such credit
arrangements will be charged to the income of the respective Portfolio; and any
new cash flows must be applied to retiring such Portfolio borrowings.
2. Purchase any securities which would cause twenty-five percent (25%) or
more of the total assets of the respective Portfolio at the time of such
purchase to be invested in the securities of issuers conducting their principal
business activities in the same general industry. There is no limitation for
the Portfolios with respect to investments in U.S. Government obligations or
for the Money Market Portfolio in obligations of domestic branches of U.S.
banks.
3. Purchase securities of any issuer, other than those issued or
guaranteed by the U.S. Government, Federal agencies and government-sponsored
corporations, if immediately after such purchase more than five percent (5%) of
the total assets of the respective Portfolio would be invested in such issuer;
except that up to one hundred percent (100%) of the total assets of the
Government/REPO Portfolio and up to twenty-five percent (25%) of the total
assets of the Money Market Portfolio and the Short-Term Portfolio may be
invested in Repurchase Agreements with maturities not greater than seven (7)
days without regard to this five percent (5%) limitation.
4. Purchase securities, if immediately after such purchase more than ten
percent (10%) of the total assets of the respective Portfolio would be invested
in securities which are illiquid, including Repurchase Agreements with
maturities greater than seven (7) days and VAMD Notes with greater than seven
(7) days' notice required for sale.
5. Make loans, except that each Portfolio may purchase or hold debt
instruments, and may enter into Repurchase Agreements, in accordance with its
investment objectives and policies.
6. Purchase securities issued by CSC.
7. Purchase or sell commodities or commodity contracts, including futures
contracts, or invest in oil, gas or mineral exploration or development
programs.
8. Acquire voting securities of any issuer or acquire securities of other
investment companies.
9. Purchase or sell real estate. (However, each Portfolio may purchase
B-5
<PAGE> 33
bonds and commercial paper issued by companies which invest in real estate or
interest therein.)
10. Purchase securities on margin, make short sales of securities or
maintain a short position.
11. Act as an underwriter of securities.
12. Issue senior securities, except to the extent that certain investment
policies related to Reverse Repurchase Agreements discussed herein and in the
Prospectus may be deemed to involve the issuance of senior securities within
the meaning of the 1940 Act.
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
Under the 1940 Act, the Investment Company may suspend the right of
redemption or postpone the date of payment upon redemption (i) for any period
during which the New York Stock Exchange is closed, other than customary
weekend and holiday closings, or during which trading on said Exchange is
restricted, or (ii) for any period during which (as determined by the SEC by
rule or regulation) an emergency exists as a result of which disposal or
valuation of portfolio securities is not reasonably practical, or for such
other periods as the SEC, or any successor governmental authority, may by order
permit for the protection of PC holders of the Portfolios. (The Investment
Company may also suspend or postpone the recordation of the transfer of its PCs
upon the occurrence of any of the foregoing conditions.)
If the Board of Trustees determines that conditions exist which make
payment of redemption proceeds wholly in cash unwise or undesirable, the
Investment Company may make payment wholly or partly in securities or other
property; investors will incur expenses in disposing of redemption proceeds
which are paid in this manner. The Investment Company has elected to commit
itself to pay all redemption proceeds in cash up to the lesser of $250,000 or
one percent (1.0%) of the respective Portfolio's net asset value for any
Participation Certificate holder within a ninety (90) day period pursuant to a
notification of election filed with the SEC under, and in accordance with the
guidelines set forth in, Rule 18f-1 under the 1940 Act. (See "Net Asset Value"
below for an example of when such redemption or form of payment might be
appropriate.)
NET ASSET VALUE
The net asset value per PC of each Portfolio is calculated by dividing the
total value of the assets belonging to each Portfolio, less the value of any
liabilities charged to each Portfolio, by the total number of PCs of the
Portfolio outstanding.
Government/REPO Portfolio and Money Market Portfolio
As stated in the Investment Company's Prospectus, the Government/REPO
Portfolio and Money Market Portfolio securities are valued on the basis of
amortized cost. In connection with their use of amortized cost valuation, the
Portfolios limit the dollar-weighted average maturity of their investments to
B-6
<PAGE> 34
not more than seven (7) and ninety (90) days respectively and do not purchase
any instrument with a remaining maturity of more than one (1) year at the time
of purchase, except that items of collateral securing securities subject to
Repurchase Agreements may bear longer maturities. The Investment Company's
Board of Trustees also has established procedures that are intended to
stabilize the Portfolios' net asset value per PC for purposes of sales and
redemptions at $1.00. Such procedures include review by the Board of Trustees,
at such intervals as it deems appropriate, to determine the extent, if any, to
which the Portfolios' net asset value per PC calculated by using available
market quotations deviates from $1.00 per PC. In the event such deviation
exceeds one-half of one percent (0.5%), the Board of Trustees will promptly
consider what action, if any, should be initiated. If the Board of Trustees
believes that the amount of any deviation from a Portfolio's $1.00 amortized
cost price per PC may result in material dilution or other unfair results to
investors or existing PC holders of the respective Portfolio, it will take such
steps as it considers appropriate to eliminate or reduce to the extent
reasonably practicable any such dilution or unfair results. These steps may
include selling portfolio instruments prior to maturity; shortening the
Portfolio's average maturity; withholding or reducing dividends; redeeming PCs
in kind; reducing the number of the Portfolio's outstanding PCs without
monetary consideration; or utilizing a net asset value per PC determined by
using available market quotations.
Investors should also be aware that although procedures exist which are
intended to stabilize the net asset value of the Government/REPO Portfolio and
the Money Market Portfolio at $1.00 per PC, the value of the underlying assets
of the Portfolios will be affected by general changes in interest rates which
will result in increases or decreases in the value of the obligations held by
the Portfolios. The market value of the obligations in the Portfolios can be
expected to vary inversely to changes in prevailing interest rates. Investors
should also recognize that, in periods of declining interest rates, the
Portfolios' yields may tend to be somewhat higher than prevailing market rates,
and in periods of rising interest rates, the Portfolios' yields may tend to be
somewhat lower. Also, when interest rates are falling, the inflow of net new
money to the Portfolios from the continuous sale of its PCs will likely be
invested in portfolio instruments producing lower yields than the balance of
the Portfolios, thereby reducing the Portfolios' current yield. In periods of
rising interest rates, the opposite can be expected to occur.
Short-Term Portfolio
As stated in the Investment Company's Prospectus, the Short-Term
Portfolio's securities (i) for which market quotations are readily available,
are valued at the most recent quoted bid prices provided by investment dealers,
or (ii) for which such quotations are not readily available, are valued at
their fair value in the best judgment of N&B under procedures established by,
and under the supervision of, the Investment Company's Board of Trustees. In
connection with these methods of valuation, the Short-Term Portfolio limits the
dollar-weighted average maturity of its investments to not more than three
hundred sixty (360) days and does not purchase any instrument with a remaining
maturity of more than five and a quarter (5 1/4) years, or its duration
equivalent, at the time of purchase, except that items
B-7
<PAGE> 35
of collateral securing securities subject to Repurchase Agreements may bear
longer maturities.
MANAGEMENT OF THE INVESTMENT COMPANY
Trustees and Officers
The Investment Company's Trustees and Executive Officers, their addresses,
principal occupations during the past five (5) years and other affiliations are
as follows:
<TABLE>
<CAPTION>
Principal Occupations
Position with the During Past 5 Years
Name and Address Investment Company and Other Affiliations
---------------- ------------------ ----------------------
<S> <C> <C>
Howard F. Beacham III Trustee April 1998 to Present,
344 South Warren St. President and Chief Operating
Syracuse, NY 13202 Officer, Blue Cross and Blue Shield
of Central New York, Inc.;
September 1997 to March 1998,
Executive Vice President,
Blue Cross and Blue Shield of
Central New York, Inc.;
October 1996 to August 1997,
Senior Vice President
Finance, Blue Cross and Blue
Shield of Central New York,
Inc.; 1993 to September 1996,
Vice President Finance, Blue
Cross and Blue Shield of
Central New York; January
1996 to Present,
Secretary/Treasurer, HMO-CNY,
Inc.; 1993 to present
Secretary/Treasurer, BC&S
Associates, Inc.
Philip A. Goss* Trustee, President January 1994 to Present,
225 N. Michigan Ave. and Chief President and Chief Executive
Chicago, IL 60601 Executive Officer Officer, Health Plans Capital
Services Corp.; February 1992 to
December 1993, Vice President and
Chief Operating Officer, Health
Plans Capital Services Corp.;
Principal Occupations
Position with the During Past 5 Years
Name and Address Investment Company and Other Affiliations
- ---------------- -------------------- ----------------------
Gene Holcomb Trustee January 1996 to Present,
85 North Danny President, Blue Cross and Blue
Thomas Boulevard Shield of Tennessee; April
Memphis, TN 38103 1994 to present, President and Chief
Executive Officer, Blue Cross and
Blue Shield of
</TABLE>
B-8
<PAGE> 36
<TABLE>
<S> <C> <C>
Memphis; 1993 to April 1994,
Executive Vice President,
Administration and Chief
Financial Officer, Blue Cross
and Blue Shield of Memphis.
Steven L. Hooker Trustee April 1996 to Present, Chief
100 S.W. Market St. Financial Officer and Treasurer,
Portland, OR 97201 The Regence Group; April 1993
to August 1996, Senior Vice
President, Finance and
Treasurer, Blue Cross and Blue
Shield of Oregon; April 1993 to
January 1997, President, Oregon
Pacific States Insurance Company;
1992 to March 1993, Vice
President, Finance and Treasurer,
Blue Cross and Blue Shield of
Oregon. Mr. Hooker also serves as
a director of Regence Life and
Health(formerly known as Oregon
Pacific States Insurance Company)
and Associated Administrators,
Inc.
Ronald F. King Executive January 1997 to Present,
1215 S. Boulder Ave. Trustee President and Chief Executive
Tulsa, OK 74119 Officer, Blue Cross and Blue
Shield of Oklahoma; February
1995 to December 1996, President
and Chief Operating Officer,
Blue Cross and Blue Shield of
Oklahoma; March 1994 to January
1995, Executive Vice President,
Operations, Blue Cross and Blue
Shield of Oklahoma; September
1993 to February 1994, Senior
Vice President, Finance and
Corporate Treasurer, Blue Cross
and Blue Shield of Oklahoma;
January 1993 to September 1993
Executive Vice President and Chief
Operating officer, Member Service
Life Insurance Company
</TABLE>
B-9
<PAGE> 37
<TABLE>
<S> <C> <C>
Principal Occupations
Position with the During Past 5 Years
Name and Address Investment Company and Other Affiliations
- ---------------- ------------------ ----------------------
David M. Murdoch* Trustee and June 1995 to Present, Executive
225 N. Michigan Ave. Treasurer Vice President, Franchise
Chicago, IL 60601 Operations, Chief Financial
Officer and Treasurer, Blue Cross
and Blue Shield Association; July
1993 to June 1995, Senior Vice
President, Licensing, Finance and
Operations, Blue Cross and Blue
Shield Association; January 1993
to June 1993, Senior Vice
President, Business Support and
Strategy, Blue Cross and Blue
Shield Association; prior to
December 1993, President and Chief
Executive Officer, Health Plans
Capital Services Corp. Mr. Murdoch
also serves as a director of
Health Plans Capital Services
Corp. and Ravenswood Health Care
Medical Center.
M. Edward Sellers Trustee 1993 to Present, President and
I-20 East at Alpine Rd. and Chief Executive Officer,
Columbia, SC 29219 Blue Cross and Blue Shield of
South Carolina
Thomas J. Ward Trustee 1993 to Present, President, and
70 North Main Street Chief Executive Officer, Blue
Wilkes-Barre, PA 18711 Cross of Northeastern
Pennsylvania.
Sherman M. Wolff Trustee 1993 to Present, Senior
300 East Randolph St. Vice President, Corporate
Chicago, IL 60601 Resources and Chief Financial
Officer, Blue Cross and Blue
Shield of Illinois. Mr. Wolff
also serves on the Boards of Fort
Dearborn Life Insurance Company,
Dental Network of America, BCI
HMO, Inc., Green Spring Mental
Health Services and Third Coast
Insurance Company.
</TABLE>
B-10
<PAGE> 38
<TABLE>
<CAPTION>
Principal Occupations
Position with the During Past 5 Years
Name and Address Investment Company and Other Affiliations
- ---------------- ------------------ ----------------------
<S> <C> <C>
Dale E. Palka Assistant December 1996 to Present,
225 N. Michigan Ave. Secretary Executive Director, Investment
Chicago, IL 60601 Programs, CSC; 1993 to December
1996, Director of Investments, Blue
Cross and Blue Shield of Michigan.
Burton X. Rosenberg Secretary 1993 to Present, Partner,
55 East Monroe Street Seyfarth, Shaw, Fairweather &
Chicago, IL 60603 Geraldson.
</TABLE>
_______________________________________________________________________________
* Such Trustees of the Investment Company are also members of the Board of
Directors of CSC and thus may be deemed "interested persons" as defined in
the 1940 Act.
The Investment Company reimburses its Trustees for out-of-pocket expenses
related to attending meetings. Trustees who are not employed by Blue Cross
and/or Blue Shield Plans, or any subsidiaries or affiliates thereof, are paid
$500 for participation in each regular meeting and $150 for participation in
each telephonic meeting. The Investment Company does not pay any compensation
to its other Trustees or to its Officers for acting in such capacities.
Seyfarth, Shaw, Fairweather & Geraldson, of which Mr. Rosenberg is a partner,
receives legal fees as counsel to the Investment Company. No director, officer
or employee of BIMC, N&B, PNC Bank or PFPC is eligible to serve as a Trustee or
Officer of the Investment Company. The Trustees and Officers of the Investment
Company in their individual capacities own none, and cannot own any, of the
Investment Company's PCs. For the period ended December 31, 1997, a total of
$13,794 was paid by the Investment Company for Trustee meeting expenses.
B-11
<PAGE> 39
<TABLE>
<S> <C> <C> <C> <C>
Pension or Estimated
Capacities in Retirement Annual
Which Benefits Accrued Benefits
Name of Remuneration Aggregate During Registrant's Upon
Person Was Received Remuneration Last Fiscal Year Retirement
- ------- -------------- ---------------- ------------------- ----------
</TABLE>
For the fiscal year ended December 31, 1997 the Investment Company did not
pay any remuneration to, or accrue any retirement benefits for, any of its
Trustees or Officers.
Investment Advisers and Service Agent
The services BIMC and N&B provide as Investment Advisers, as well as the
annual fees, calculated as percentages of each Portfolio's annual net assets,
payable to them and expenses assumed by them, are described briefly in the
Investment Company's Prospectus. More specifically, BIMC and N&B supervise the
sales of securities, and place orders for such transactions. As Service Agent
for all three Portfolios of the Investment Company, BIMC maintains financial
and other books and records, including appropriate journals and ledgers;
verifies trade tickets; calculates weighted average maturity, dividends and
yields; prepares unaudited financial statements; prepares or assists in the
preparation of regulatory filings; computes net asset value and the market
value of assets of the Investment Company; prepares reports to the Board of
Trustees of the Investment Company; and performs related administrative
services. BIMC agrees to abide by applicable legal requirements in providing
these services.
In addition, BIMC and N&B have agreed that if, in any fiscal year, the
expenses borne by the Government/REPO Portfolio, the Money Market Portfolio or
the Short-Term Portfolio, respectively, exceed the applicable expense
limitations imposed by the securities regulations in any state in which PCs of
the Portfolios are registered or qualified for sale to the public, they will
reimburse the respective Portfolio for any excess to the extent required by
such regulations. Unless otherwise required by law, such reimbursement would
be accrued and paid by the Portfolios. To the knowledge of the Investment
Company, the expense limitations in effect on the date of this Statement of
Additional Information, are no more restrictive than one and one-half percent
(1.5%) of the respective Portfolios' average net assets up to $30 million and
one percent (1%) of their respective average annual net assets in excess of $30
million. For the fiscal periods ended December 31, 1995, 1996 and 1997, BIMC
was paid fees of $88,730, $69,444 and $47,776, respectively, net of $11,270,
$30,556 and $52,224 waived fees, as service agent for the Short-Term Portfolio.
For the same periods BIMC was paid fees of $968,558, $1,017,246 and $880,230
respectively, net of $31,425, $47,621 and $9,807 waived fees, as investment
advisor and service agent for the Money Market Portfolio. For the same periods
N&B was paid fees of $136,295, $99,207 and $68,251, respectively, net of
$107,922, $92,413 and $85,065 waived fees, as investment advisor for the
Short-Term Portfolio. For the June 1, inception of operations, through
December 31, 1995 period and the fiscal periods ending December 31,1996 and
1997, BIMC was paid $4,436, $38,169 and $86,014,
B-12
<PAGE> 40
respectively, net of $54,651, $172,944 and $308,175 waived fees, as investment
advisor and service agent for the Government/REPO Portfolio.
Banking laws and regulations presently prohibit a bank holding company
registered under the Federal Bank Holding Company Act of 1956 or any bank or
non-bank affiliate thereof from sponsoring, organizing, controlling, or
distributing the PCs of a registered, open-end investment company continuously
engaged in the issuance of its PCs, and prohibits banks generally from issuing,
underwriting, selling or distributing securities, but such banking laws and
regulations do not prohibit such a holding company or affiliate or banks
generally from acting as investment adviser, transfer agent or custodian to
such an investment company. PNC Bank, BIMC and PFPC are subject to such
banking laws and regulations.
Administrator
As the Investment Company's administrator, CSC administers the Investment
Company's operations, including acting as liaison with its PC holders, and has
agreed to: (i) furnish the Investment Company with adequate office facilities,
utilities, office equipment and related services; (ii) be responsible for the
financial and accounting records required to be maintained by the Investment
Company (including those being maintained by the Investment Company's custodian
and transfer agent, both of which CSC supervises) other than those being
maintained by the Investment Advisers; (iii) supervise the Investment Company's
activities with respect to accounting, clerical, bookkeeping, recordkeeping and
statistical services at such office facilities; (iv) arrange, but not pay for,
the preparation for the Investment Company and holders of its PCs of all
required tax returns and reports to the Investment Company's PCs holders and
the SEC, as necessary, and, as appropriate, the periodic updating of the
Registration Statement and Prospectus; (v) oversee the performance of
administrative and professional services to the Investment Company by others,
including the Investment Company's custodian, transfer agent and service agent;
(vi) monitor, and notify the Investment Company of, the eligibility of the
Investment Company's present and prospective investors and certain requirements
of various state insurance laws and regulations; (vii) receive and process
applications from present and prospective investors in the Investment Company;
and (viii) authorize and permit any of its directors, officers and employees
who may be elected as Trustees or Officers of the Investment Company to serve
in the capacities in which they are elected. The administrator may engage
sub-administrators or servicing agents to perform its obligations under its
agreement with the Investment Company. For the fiscal periods ended December
31, 1995, 1996 and 1997, CSC was paid fees of $291,670, $313,494 and $255,012,
respectively, net of $10,476, $15,874 and $3,270 waived fees, as administrator
for the Money Market Portfolio and $42,618, $29,762 and $20,475 net of $7,011,
$5,642 and $5,623 waived fees, as administrator for the Short-Term Portfolio.
For the June 1, inception of operations, through December 31, 1995 period and
the fiscal periods ended December 31, 1996 and 1997, CSC was paid $10,860,
$27,853 and $35,133, respectively, net of $3,912, $24,925 and $63,624 waived
fees, as administrator for the Government/REPO Portfolio.
B-13
<PAGE> 41
ADDITIONAL INFORMATION CONCERNING TAXES
The following is only a summary of certain additional tax considerations
generally affecting the Investment Company, the Portfolios established within
the Investment Company, and the PC holders of each Portfolio established within
the Investment Company which are not described in the Investment Company's
Prospectus. No attempt is made to present a detailed explanation of the tax
treatment of the Investment Company, the Portfolios established within the
Investment Company, and the discussion here and in the Investment Company's
Prospectus is not intended as a substitute for careful tax planning.
In order for any particular Portfolio established within the Investment
Company to qualify for tax treatment as a regulated investment company under
the Internal Revenue Code of 1986, as amended (the "Code"), the Portfolio in
question must derive at least ninety percent (90%) of its gross income in each
taxable year from dividends, interest, payments with respect to security loans
(as defined in Code Section 512(a)(5)), and gains from the sale or other
disposition of stock or securities, and derive less than thirty percent (30%)
of its gross income in each taxable year from the sale or other disposition of
securities held for less than three (3) months. Interest (including original
issue discount and certain accrued market discount) received by the particular
Portfolio in question at maturity or disposition of a security held for less
than three (3) months will not be treated as gross income derived from the sale
or other disposition of a security within the meaning of this requirement. In
addition, at the close of each quarter of its taxable year, at least fifty
percent (50%) of the value of the assets of the particular Portfolio in
question must consist of (1) cash and cash items, Government securities and
securities of other regulated investment companies and (2) securities of other
issuers as to which the particular Portfolio in question has not invested more
than five percent (5%) of its total assets in securities of such issuer and as
to which the particular Portfolio in question does not hold more than ten
percent (10%) of the outstanding voting securities of such issuer. The
particular Portfolio in question must not have more than twenty-five percent
(25%) of the value of its total assets invested in the securities of any one
industry (other than U.S. Government obligations or, in the case of the Money
Market Portfolio, certain bank obligations).
Dividends paid out of the interest income and the net short-term capital
gain income of any particular Portfolio are taxable to the PC holders of that
Portfolio as ordinary income, regardless of whether PC holders reinvest such
dividends in PCs of that Portfolio or any other Portfolio or are paid in cash.
Dividends designated as paid out of that particular Portfolio's net capital
gain ("Capital Gain Dividends"), i.e. the excess of net long-term capital
gains over net short-term capital losses, are taxable to PC holders of the
Portfolio as long-term capital gains. Any Capital Gain Dividends paid by the
particular Portfolio in question will be taxable to PC holders of that
Portfolio as long-term capital gains, regardless of how long PCs of that
Portfolio have been held and whether reinvested in PCs or paid in cash. Under
the provisions of the Code, starting with 1987, any long-term capital gains
will be taxed at ordinary income tax rates, but with special transitional
relief being provided, so that the maximum rate of Federal income tax imposed
upon the receipt of any such long-term capital gains will be thirty-four
percent (34%) in the case of a corporation.
B-14
<PAGE> 42
PC holders which are exempt from taxation will treat income resulting from
investments in any particular Portfolio similarly to their other dividend and
long-term capital gain income.
DIVIDENDS
Net income of each Portfolio for dividend purposes (from the time of the
immediately preceding determination thereof) will consist of (i) interest
accrued and dividend earned (including both original issue and market discount)
less amortization of any premium, (ii) plus or minus, in the case of the
Government/REPO Portfolio and the Money Market Portfolio, all realized
short-term gains and losses, if any, attributable to such Portfolio including
such Portfolio's pro rata share of the fees payable to, and the general
expenses (e.g. legal, accounting and Trustee's fees) of, the Investment Company
prorated on the basis of relative net asset value of the Investment Company's
other Portfolios applicable to that period.
PERFORMANCE INFORMATION
Determination of Yield
From time to time, the Investment Company may quote the Government/REPO
Portfolio and the Money Market Portfolio "yield" and "effective yield" in
communications to PC holders that are deemed to be advertising. Both yield
figures are based on historical earnings and are not intended to indicate
future performance. The "yield" of the Government/REPO Portfolio and the Money
Market Portfolio refers to the income generated by an investment in the
Portfolios over a seven-day period as identified in the communication. This
income is then annualized. That is, the amount of income generated by the
investment during that week is assumed to be generated each week over a 52-week
period and is shown as a percentage of the investment. The "effective yield"
is calculated similarly but, when annualized, the income earned by the
investment is assumed to be reinvested weekly. The "effective yield" will be
slightly higher than the "yield" because of the compounding effect of this
assumed reinvestment. For the seven day period ending December 31, 1997 the
Money Market Portfolio average yield was 5.47% and the effective yield was
5.62%. For the same period the Government/REPO Portfolio average yield was
5.55% and the effective yield was 5.71%.
From time to time, the Investment Company may also quote the Short-Term
Portfolio "yield" in communications to PC holders that are deemed to be
advertising. The standardized method used to calculate the Short-Term
Portfolio yield differs from the Government/REPO Portfolio and the Money Market
Portfolio yield calculations. Short-Term Portfolio yield is calculated by
dividing the net investment income per Participation Certificate during a
30-day (or one month) period by the price per Participation Certificate on the
last day of that period. The result of this calculation is then annualized
assuming semi-annual reinvestment of dividend income. For the 30 day period
ending December 31, 1997 the Short-Term Portfolio 30 day yield was 5.50%.
The yields of the Government/REPO Portfolio, the Money Market Portfolio
and the Short-Term Portfolio were positively affected by fee waivers. (See
B-15
<PAGE> 43
"Investment Advisors and Service Agent" and "Administrator" under "Management
of the Investment Company".)
Total Return
From time to time, the Investment Company may quote the total return of
its Short-Term Portfolio in reports and other communications to PC holders. For
this purpose the total return of the Portfolio is an average annual compound
rate of return over the periods cited that will equate a hypothetical $1,000
investment made at the beginning of the periods to the redeemable value at the
end of the periods cited. The Short-Term Portfolio total return fluctuates in
response to fluctuations in interest rates and the expenses of the Portfolio.
Consequently, any given total return quotation should not be considered as
representative of the Portfolio's total return in any specified period in the
future. The annualized Short-Term Portfolio total returns were 5.85% for the
one year ended December 31, 1997, 4.68% for the five years ended December 31,
1997 and 6.27% for the ten years ended December 31, 1997.
The total return of the Short-Term Portfolio was positively affected by
fee waivers. (See "Investment Advisors and Service Agent" and "Administrator"
under "Management of the Investment Company".)
ADDITIONAL DESCRIPTION CONCERNING
INVESTMENT COMPANY PARTICIPATION CERTIFICATES
The Investment Company's Amended and Restated Articles of Incorporation
provide that on any manner submitted to a vote of PC holders, all PCs,
irrespective of class, shall be voted in the aggregate and not by class except
that (i) as to the matter with respect to which a separate vote of any class is
required by the 1940 Act or the General Corporation Law of the State of
Maryland, such requirements as to a separate vote by that class shall apply in
lieu of the aggregate voting as described above, and (ii) as to the matter
which does not affect the interest of a particular class, only PC holders of
the affected class shall be entitled to vote thereon.
Rule 18f-2 under the 1940 Act provides that any matter required to be
submitted by the provisions of such 1940 Act or applicable state law, or
otherwise, to the holders of the outstanding voting securities of an investment
company such as the Investment Company shall not be deemed to have been
effectively acted upon unless approved by the holders of a "majority" of the
outstanding PCs (as defined herein under "Miscellaneous") of each class
affected by such matter. Rule 18f-2 further provides that a class shall be
deemed to be affected by a matter unless it is clear that the interests of each
class in the matter are identical or that the matter does not affect any
interest of such class. However, Rule 18f-2 exempts the selection of
independent public accountants and the election of trustees from the separate
voting requirements of Rule 18f-2.
The chart below sets forth those PC holders each of which owned of record
or beneficially five percent (5%) or more of the outstanding PCs of a Portfolio
as of February 27, 1998.
B-16
<PAGE> 44
<TABLE>
<CAPTION>
Percent of PCs Percent of PCs Percent of PCs
Owned of Owned of Owned of
Government/REPO Money Market Short-Term
PC Holder Portfolio Portfolio Portfolio
- --------- --------------- -------------- --------------
<S> <C> <C> <C>
Blue Shield of California 0.0% 7.9% 0.0%
50 Beale Street
San Francisco, CA 94105
Anthem Blue Cross and 0.0% 1.2% 8.9%
Blue Shield of Connecticut
370 Bassett Road
North Haven, CT 06473
Hawaii Medical Services 0.0% 5.5% 0.0%
Association
818 Keeaumoku Street
Honolulu, HI 96814
Blue Cross and Blue Shield 6.8% 12.9% 13.7%
Association
225 North Michigan Avenue
Chicago, IL 60601
Health Care Service Corporation, 0.0% 15.4% 32.8%
a Mutual Legal Reserve Company
300 East Randolph Street
Chicago, IL 60601
Health Plans Capital 6.7% 1.1% 4.1%
Services Corp.
225 North Michigan Avenue
Chicago, IL 60601
</TABLE>
B-17
<PAGE> 45
<TABLE>
<CAPTION>
Percent of PCs Percent of PCs Percent of PCs
Owned of Owned of Owned of
Government/REPO Money Market Short-Term
PC Holder Portfolio Portfolio Portfolio
- --------- --------------- -------------- --------------
<S> <C> <C> <C>
Blue Cross and Blue Shield 0.0% 7.3% 0.0%
of Kansas
1133 Topeka Boulevard
Topeka, KS 66629
Blue Cross and Blue Shield 32.2% 3.0% 0.0%
of Massachusetts
100 Summer Street
Boston, MA 02110
Blue Cross and Blue Shield 0.0% 5.1% 0.0%
of New Jersey
3 Penn Plaza East
Newark, NJ 07105
Finger Lakes Blue Cross 0.0% 5.3% 0.0%
and Blue Shield
150 East Main Street
Rochester, NY 14647
Blue Cross and Blue Shield 0.0% 1.6% 23.3%
of Oklahoma, Inc.
1215 South Boulder Avenue
Tulsa, OK 74119
Capital Blue Cross 25.6% 0.1% 2.8%
2500 Elmerton Avenue
Harrisburg, PA 17110
Independence Blue Cross 9.8% 0.0% 0.6%
1901 Market Street
Philadelphia, PA 19103
Highmark, Inc. 0.0% 7.5% 4.2%
120 Fifth Avenue
Pittsburgh, PA 15222
Blue Cross and Blue Shield 9.9% 0.2% 0.0%
of South Carolina
I-20 East at Alpine Road
Columbia, SC 29219
</TABLE>
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P., independent accountants, with offices at 2400
Eleven Penn Center, Philadelphia, Pennsylvania 19103, serve as independent
B-18
<PAGE> 46
accountants of the Investment Company. The financial statements dated December
31, 1997 which appear in this Statement of Additional Information and the
financial highlights which appear in the Prospectus have been audited by
Coopers & Lybrand L.L.P. whose report thereon dated February 9, 1998, appears
elsewhere herein and have been included herein and therein in reliance upon the
report of such firm of independent accountants given upon their authority as
experts in accounting and auditing.
COUNSEL
Seyfarth, Shaw, Fairweather & Geraldson, 55 East Monroe Street, Chicago,
Illinois 60603, will pass upon the legality of the PCs offered hereby. Burton
X. Rosenberg, a Partner at Seyfarth, Shaw, Fairweather & Geraldson, acts as
General Counsel and Secretary to the Investment Company and CSC and is also a
member of the CSC Board of Directors. Ballard, Spahr, Andrews & Ingersoll act
as counsel to PNC Bank, BIMC and PFPC. Levitt, Greenberg, Kaufman & Goldstein
act as counsel to N&B.
MISCELLANEOUS
As used in the Prospectus and in this Statement of Additional Information,
the term "majority," when referring to the approvals to be obtained from PC
holders, means the vote of the holders of more than fifty percent (50%) of the
Investment Company's outstanding PCs of each class affected by the matter with
respect to which the vote is being taken.
The Investment Company has chosen a calendar fiscal year.
Purchase orders for PCs of each of the Portfolios are accepted by the
Investment Company's Transfer Agent which is located in Wilmington, Delaware.
B-19
<PAGE> 47
APPENDIX
DESCRIPTION OF BOND AND COMMERCIAL PAPER RATINGS
The Investment Company may invest in securities which at time of purchase
have ratings not lower than the following:
<TABLE>
<CAPTION>
Type of
Security Rating Agency Rating Summary of Rating
- -------- ------------------- ------ -------------------------
<S> <C> <C> <C>
Bond Moody's Investors A-3 Bonds which are rated "A"
Service, Inc. possess many favorable
("Moody's") investment attributes and are to
be considered as upper medium
grade obligations. Factors giving
security to principal and interest
are considered adequate but
elements may be present which
suggest a susceptibility to
impairment sometime in the
future. The modifier "3"
indicates that the issue ranks in
the lower end of its generic
rating category.
Bond Moody's Aa Bonds which are rated "Aa" are judged
to be of high quality by all
standards. Together with the "Aaa"
group they comprise what are generally
known as high grade bonds. They are
rated lower than the best bonds
because margins of protection may not
be as large as in "Aaa" securities or
fluctuation of protective elements
may be of greater amplitude or there
may be other elements present which
make the long term risks appear
somewhat larger then in the "Aaa"
securities.
Bond Standard & Poor's A- Debt rated "A" has a strong
Corporation capacity to pay interest and
("S & P") repay principal although it is
somewhat more susceptible to the
adverse effects of changes in
circumstances and economic conditions
than debt in higher rated categories.
The "minus" shows a relative lower
standing within the major "A"
category.
</TABLE>
B-20
<PAGE> 48
<TABLE>
<S> <C> <C> <C>
Bond S & P AA Debt rated "AA" has a very strong
capacity to pay interest and repay
principal and differs from the higher
rated issues only in small degree.
</TABLE>
<TABLE>
<CAPTION>
Type of
Security Rating Agency Rating Summary of Rating
- -------- ----------------- ------ -------------------------
<S> <C> <C> <C>
Commercial Moody's Prime-1 Commercial Paper rated
Paper "Prime-1" has a superior capacity for
repayment of short-term promissory
obligations evidenced by leading
market positions in well-established
industries, high rates of return on
funds employed, conservative
capitalization structure with moderate
reliance on debt and ample asset
protection, broad margins in earnings
coverage of fixed financial charges
and high internal cash generation and
well established access to a range of
financial markets and assured sources
of alternate liquidity.
Commercial S & P A-1 This designation indicates
Paper that the degree of safety regarding
timely payment is either overwhelming
or very strong.
</TABLE>
B-21
<PAGE> 49
REPORT OF
INDEPENDENT ACCOUNTANTS AND
FINANCIAL STATEMENTS
B-22
<PAGE> 50
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements
(1) Included in Part A:
Financial Highlights
(2) Included in Part B:
Report of Independent Accountants; Statements of Net
Assets of the Government/REPO Portfolio, Money Market
Portfolio and Short-Term Portfolio as of December 31,
1997; Statements of Operations for the Government/REPO
Portfolio, Money Market Portfolio and Short-Term
Portfolio for the year ended December 31, 1997;
Statements of Changes in Net Assets for the
Government/REPO Portfolio, Money Market Portfolio and
Short-Term Portfolio for the years ended December 31,
1997 and December 31, 1996; Financial Highlights for
the Government/REPO Portfolio (for a Participation
Certificate outstanding throughout the period) for the
years ended December 31, 1997 and 1996 and the period
ended December 31, 1995 and for the Money Market
Portfolio and Short-Term Portfolio (for a Participation
Certificate outstanding throughout the period) for the
years ended December 31, 1997, December 31, 1996,
December 31, 1995, December 31, 1994 and December 31,
1993; Notes to Financial Statements
(b) Exhibits
<TABLE>
<CAPTION>
Exhibit No. Description of Exhibit
- ----------- ----------------------
<S> <C>
1 Form of Amended and Restated Articles of Incorporation of Registrant**
1 (a) Articles of Amendment to Amended and Restated Articles of
Incorporation of Registrant**
1 (b) Articles of Amendment to Amended and Restated Articles of
Incorporation of Registrant**
2 Bylaws of Registrant as Amended**
3 Not applicable
4 Specimen copy of Participation Certificate issued by Registrant**
5 Form of Investment Advisory and Service Agreement for the
</TABLE>
C-1
<PAGE> 51
<TABLE>
<S> <C>
Money Market Portfolio**
5 (a) Form of Investment Advisory Agreement for the Short-Term
Portfolio**
5 (b) Form of Investment Advisory Agreement for the Government/REPO
Portfolio *
6 Not applicable
7 Not applicable
8 Form of Custodian Agreement**
8 (a) Form of Transfer Agency Agreement**
9 Form of Administration Agreement**
9 (a) Form of Service Agreement for the Short-Term Portfolio**
10 Opinion of Counsel**
11 Consent of Coopers & Lybrand L.L.P.
12 Not applicable
13 Subscription Agreement**
14 Not applicable
15 Not applicable
16 Computation of performance quotation
27.1 Financial Data Schedule for the Money Market Portfolio
27.2 Financial Data Schedule for the Short-Term Portfolio
27.3 Financial Data Schedule for the Government/REPO Portfolio
</TABLE>
_______________________________________________________________________________
* Incorporated by reference from Registration Statement on Form N-1A No.
2-99584 as filed with the SEC by the Registrant on March 30, 1995.
** Incorporated by reference from Registration Statement on Form N-1A No.
2-99584 as filed with the SEC by the Registrant on April 19, 1996.
Item 25. Persons Controlled by or Under Common
Control with Registrant
None
Item 26. Number of Holders of Securities
As of February 27, 1998, the number of record holders of Investment
Company PCs were as follows:
C-2
<PAGE> 52
<TABLE>
<CAPTION>
Number of
Portfolio Record Holders
--------------- --------------
<S> <C>
Government/REPO 22
Money Market 100
Short-Term 22
</TABLE>
Item 27. Indemnification
Under Article IX of the Registrant's Articles of Incorporation, any
Trustee, Officer, employee or agent of the Registrant is indemnified to the
fullest extent permitted by the General Corporation Law of the State of
Maryland from and against any and all of the expenses and liabilities
reasonably incurred by him in connection with any action, suit or proceeding to
which he may be a party or otherwise involved by reason of his being or having
been a Trustee, Officer, employee or agent of the Registrant. This provision
does not authorize indemnification when it is determined that such Trustee,
Officer, employee or agent would otherwise be liable to Registrant or its PC
holders by reason of willful misfeasance, bad faith, gross negligence or
reckless disregard of his duties (collectively, "Disabling Conduct").
The Registrant shall use reasonable and fair means to determine whether
such indemnification shall be made. The determination that a person to be
indemnified is not liable to the Registrant or its PC holders by reason of
Disabling Conduct, and therefore eligible for indemnification, shall be
determined by (i) a final decision on the merits by a court or other body
before whom such proceeding is brought or (ii) after their review of the facts,
by vote of a majority of a quorum of Trustees who are neither "interested
persons" (as defined in the 1940 Act) nor parties to the proceeding (a
"Disinterested Majority")or by independent counsel in a written opinion to the
Registrant. The Registrant's indemnification policy permits the Registrant to
advance attorneys' fees or other expenses incurred by its Trustees, Officers,
employees or agents in defending such a proceeding, upon the undertaking by or
on behalf of the indemnitee to repay the advance unless it is determined
ultimately that he is entitled to indemnification. As a condition to such
advance (i) the indemnitee shall provide a security for his undertaking, (ii)
the Registrant shall be insured against losses arising by reason of any lawful
advances, or (iii) a Disinterested Majority, or an independent legal counsel in
a written opinion to the Investment Company, shall determine, based on a review
of readily available facts to the Investment Company, that there is reason to
believe that the indemnitee ultimately will be found entitled to
indemnification.
Insofar as indemnification for liability arising under the Securities Act
of 1933 (the "1933 Act") may be permitted to Trustees, Officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the SEC such
indemnification is against public policy as expressed in the 1933 Act and is,
therefore unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a Trustee, Officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
Trustee, Officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel
C-3
<PAGE> 53
the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the 1933 Act and will be governed by the
final adjudication of such issue.
Item 28. Business and Other Connections of
Investment Adviser
There is set forth below information as to any other business, profession,
vocation or employment of a substantial nature in which each director or
officer of the Registrant's Investment Advisers is, or at any time during the
past two (2) years have been, engaged for his own account or in the capacity of
director, officer, employee, partner or trustee.
PNC BANK, NATIONAL ASSOCIATION ("PNC Bank")
<TABLE>
<CAPTION>
Position Other Business Type of
with Bank Name Connections Business
- --------- ------------------ ----------------------- -------------
<S> <C> <C> <C>
Director B.R. Brown President and Chief Coal
Executive Officer
Consol, Inc.
Pittsburgh, PA
Director Constance E. Allegheny University Medical
Clayton of the Health Sciences
Philadelphia, PA
Director Eberhard Chairman and Chief Manufacturing
Faber, IV Executive Officer
E.F.L. Inc.
Bearcreek, PA
Director Dr. Stuart Heydt President and Chief Medical
Executive Officer
Geisinger Health System
Harrisburg, PA
Director Edward P. (Retired) Vice Chairman Banking
Junker, III PNC Bank, NA
Erie, PA
Director Thomas A. McConomy Chairman Manufacturing
Calgon Carbon Corp.
Swickley, PA
</TABLE>
C-4
<PAGE> 54
PNC BANK, NATIONAL ASSOCIATION ("PNC Bank")
<TABLE>
<CAPTION>
Position Other Business Type of
with Bank Name Connections Business
- --------- ------------------ ----------------------- -------------
<S> <C> <C> <C>
Director Thomas H. O'Brien Chairman and Chief Banking
Executive Officer
PNC Bank Corp.
Pittsburgh, PA
Director Rocco A. Ortenzio Chairman and Chief Medical
Executive Officer
Select Medical Corporation
Mechanicsburg, PA
Director Robert C. Robb, Jr. President Financial
Lewis, Eckert, Robb & and
Company Management
Plymouth Meeting, PA Consultants
Director James E. Rohr President and Chief Banking
Executive Officer
PNC Bank, NA
Pittsburgh, PA
Director Daniel M. Rooney President Football
Pittsburgh Steelers
Football Club of the
National Football League
Pittsburgh, PA
Director Seth E. Schofield Chairman Security
Base International Consulting
Pittsburgh, PA
</TABLE>
The information required by this Item 28 with respect to each director, officer
and partner of BIMC (formerly known as PNC Institutional Management
Corporation) is incorporated by reference to Schedules A and D of Form ADV
filed by BIMC with the Securities and Exchange Commission pursuant to the
Investment Advisors Act of 1940 (SEC File No. 801-13304).
The information required by this Item 28 with respect to each director, officer
and partner of Neuberger & Berman, LLC is incorporated by reference to
Schedules A and D of Form ADV filed by Neuberger & Berman with the Securities
and Exchange Commission pursuant to the Investment Advisors Act of 1940 (SEC
File No. 801-3908).
Item 29. Principal Underwriter
Not applicable
Item 30. Location of Account and Records
C-5
<PAGE> 55
<TABLE>
<CAPTION>
Location
---------------------------
(To the extent known) Types of Records
--------------------------- ----------------
<S> <C>
1. Health Plans Capital Copies of the Minute Book, Bylaws,
Services Corp. Amended and Restated Articles of
225 N. Michigan Ave. Corporation, annual audited financial
Chicago, IL 60601 statements, and those records maintained
by the Investment Company's Custodian and
Transfer Agent.
2. Neuberger & Berman Records of the Short-Term Portfolio's
605 Third Avenue investment activities and all periodic
New York, NY 10158 financial and statistical reports and returns
required to be filed with the SEC and other
regulatory agency, including statements,
confirmations, monthly purchase and sale
ledgers, statements of investment income,
calculations of the weighted average maturity
and the yield of the Short-Term Portfolio.
3. PFPC Inc. Returns and reports relating to the
P.O. Box 8950 Investment Company's dividends and
Wilmington, DE 19899 distributions; proxy cards for meetings of the
Investment Company's PC holders;
correspondence from PC holders, securities
brokers and others; state by state
registration reports; periodic and special
reports required or requested by state
insurance commissions and the Investment
Company; various types of statistical
information relating to the PC holder
accounts; and for each PC holder (i) his name,
address, and United States Tax Identification
or Social Security number, (ii) number of PCs
held and number of PCs for which certificates,
if any, have been issued, including
certificate numbers and denominations, (iii)
historical information regarding the account
of each PC holder, including dividends and
distributions paid and the date and price paid
for all transactions in a PC holder's
account, (iv) any stop or restraining order
placed against a PC holder's account, (v) any
correspondence relating to the current
maintenance of a PC holder's account,
information with respect to withholdings
and (vi) any information required by PFPC to
perform any calculations contemplated or
required by the 1940 Act.
</TABLE>
C-6
<PAGE> 56
<TABLE>
<CAPTION>
Location
---------------------------
(To the extent known) Types of Records
--------------------------- ----------------
<S> <C>
4. BlackRock Institutional Daily journals of the Government/REPO,
Management Corp. Money Market and Short-Term Portfolios'
400 Bellevue Parkway investments, PCs, income and expenses,
Wilmington, DE 19809 books and records relating to their
securities transactions and books of
account; the Investment Company's
semi-annual reports to the SEC
on Form N-SAR, federal, state and other
tax records, reports to PC holders and
notices to the SEC required pursuant to
Rule 24f-2 under the 1940 Act; and for
each Portfolio (i) unaudited financial
statements, including Schedules of
Investments, Statements of Assets and
Liabilities, Statements of Operations,
Statements of Changes in Net Assets, Cash
Statements and Schedules of Capital Gains
and Losses, (ii) fiscal year summaries and
(iii) quarterly broker security
transaction summaries and monthly security
transaction listings.
5. PNC Bank, National Separate custodian accounts for each
Association Portfolio; records of securities and non-
17th and Chestnut Sts. cash property of each Portfolio; daily
Philadelphia, PA 19103 confirmations and summaries of transfers
to or from the account of each Portfolio;
monthly statements of each Portfolio's
property held by PNC Bank; books and
records relating to the Investment
Company's participation in the Book-Entry
System or use of the Depository; reports on
PNC Bank's own system of internal control;
periodic and special reports as the Investment
Company requests; monthly statements
summarizing all transactions and entries for
the account of each Portfolio; monthly reports
of portfolio securities belonging to each
Portfolio; monthly reports of the cash account
of each Portfolio showing disbursements;
reports required pursuant to Rule 17f-4 under
the 1940 Act; and reports and data requested
or required by state insurance commissioners.
</TABLE>
C-7
<PAGE> 57
<TABLE>
<CAPTION>
Location
---------------------------
(To the extent known) Types of Records
--------------------------- ----------------
<S> <C>
6. Burton X. Rosenberg Minute Book, Bylaws and Amended and
Seyfarth, Shaw, Restated Articles of Incorporation.
Fairweather & Geraldson
55 East Monroe Street
Suite 4200
Chicago, Illinois 60603
</TABLE>
Item 31. Management Services
Not applicable
Item 32. Undertakings
The Investment Company undertakes to furnish each person to whom a
prospectus has been delivered with a copy of its latest annual report
to Participation Certificate holders, upon request and without charge.
C-8
<PAGE> 58
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant, Plan Investment Fund, Inc.,
certifies that it meets all of the requirements for effectiveness of this
Post-Effective Amendment No. 15 to the Registration Statement pursuant to Rule
485 (b) under the Securities Act of 1933 and has duly caused this
Post-Effective Amendment No. 15 to the Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of
Chicago, State of Illinois, on the 22nd day of April, 1998.
PLAN INVESTMENT FUND, INC.
By: BURTON X. ROSENBERG
-----------------------
Burton X. Rosenberg
Secretary
ATTEST:
DALE E. PALKA
- --------------------------
Dale E. Palka
Assistant Secretary
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment No. 14 to the Registration Statement has been signed
below by the following persons in the capacities and on the date indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
*HOWARD F. BEACHAM III Trustee April 21, 1998
- ------------------------
Howard F. Beacham III
*PHILIP A. GOSS Trustee, President and April 21, 1998
- ------------------------ Chief Executive Officer
Philip A. Goss
*GENE HOLCOMB Trustee April 21, 1998
- ------------------------
Gene Holcomb
*STEVEN L. HOOKER Trustee April 21, 1998
- ------------------------
Steven L. Hooker
*RONALD F. KING Executive Trustee April 21, 1998.
- ------------------------
Ronald F. King
*DAVID M. MURDOCH Trustee and April 21, 1998
- ------------------------ Treasurer
David M. Murdoch
*M. EDWARD SELLERS Trustee April 21, 1998
- ------------------------
M. Edward Sellers
</TABLE>
S-1
<PAGE> 59
<TABLE>
<S> <C> <C>
*THOMAS J. WARD Trustee April 21, 1998
- ------------------------
Thomas J. Ward
*SHERMAN M. WOLFF Trustee April 21, 1998
- ------------------------
Sherman M. Wolff
</TABLE>
* Executed on behalf of the indicated Officers and Trustees by
Burton X. Rosenberg, duly appointed attorney-in-fact.
By: BURTON X. ROSENBERG
------------------------------------------
Burton X. Rosenberg, Attorney-in-fact
S-2
<PAGE> 1
EXHIBIT 11
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in Post-Effective Amendment No. 15 to the
Registration Statement under the Securities Act of 1933 (File No. 2-99584) of
Plan Investment Fund, Inc., comprised of the Government/REPO Portfolio, the
Money Market Portfolio and the Short-Term Portfolio (collectively "the Fund") on
Form N-1A of our report dated February 9, 1998 on our audit of the financial
statements and financial highlights of the Fund. We also consent to the
reference to our firm under the captions "Financial Highlights" in the
Prospectus and "Independent Accountants" in the statement of Additional
Information.
Coopers & Lybrand L.L.P.
2400 Eleven Penn Center
Philadelphia, Pennsylvania
April 22, 1998
<PAGE> 1
EXHIBIT 16
COMPUTATION OF PERFORMANCE QUOTATION
Money Market Portfolio
(A) Average yield for the 7 day period ending
December 31, 1997
Daily dividend per PC (Net of
expenses)
25 0.000149304
December
26 0.000148914
27 0.000148914
28 0.000148914
29 0.000149757
30 0.000150490
31 0.000151992
-----------
Base period 0.001048285
return
Formula
Average yield = Base period returns * (365/7)
0.0010482 *
= 85 (365/7)
0.0547
=
5.47%
=
(B) Effective yield for the 7 day period ending December 31,1997
Formula
Effective yield = ((Base period return
+1) @ (365/7)) -1
(1.001048285 @
= (365/7)) -1
0.0561518
= 2
5.62%
=
<PAGE> 2
Government/REPO Portfolio
(A) Average yield for the 7 day period ending
December 31, 1997
Daily dividend per PC (Net of
expenses)
December 25 0.000151057
26 0.000150038
27 0.000150038
28 0.000150038
29 0.000152955
30 0.000154219
31 0.000156702
-----------
Base period 0.001065047
return
Formula
Average yield = Base period returns
* (365/7)
0.0010650 * (365/7)
= 47
0.0555
=
5.55%
=
(B) Effective yield for the 7 day period ending December 31,1997
Formula
Effective yield = ((Base period return +1)
(365/7)) -1
(1.001048285 @
= (365/7)) -1
0.0570743
= 5
5.71%
=
<PAGE> 3
Short-Term
Portfolio
(A) 30 day yield for period ending
December 31, 1997
A = Interest earned during the 237,544
period
B = Expenses accrued during the 12,309
period
C = Average PCs outstanding during the 4,987,987
period
D = Maximum offering price on last day 9.97
of period
Formula
30 day yield = 2 (((((A-B) / (C * d))
+ 1) @ 6) - 1)
=
2(((225,235/49,730,230)+1)@6)-
1)
= 0.05497
= 5.50%
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000774412
<NAME> PLAN INVESTMENT FUND, INC.
<SERIES>
<NUMBER> 01
<NAME> MONEY-MARKET PORTFOLIO
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 416709304
<INVESTMENTS-AT-VALUE> 416709304
<RECEIVABLES> 241814
<ASSETS-OTHER> 55763
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 417006881
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2381651
<TOTAL-LIABILITIES> 2381651
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 414625230
<SHARES-COMMON-STOCK> 414625230
<SHARES-COMMON-PRIOR> 454912527
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 414625230
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 29071247
<OTHER-INCOME> 0
<EXPENSES-NET> 1304100
<NET-INVESTMENT-INCOME> 27767147
<REALIZED-GAINS-CURRENT> 2417
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 27769564
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (27767147)
<DISTRIBUTIONS-OF-GAINS> (502)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 4217170475
<NUMBER-OF-SHARES-REDEEMED> (4346622164)
<SHARES-REINVESTED> 19203139
<NET-CHANGE-IN-ASSETS> (110248550)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 890037
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1317177
<AVERAGE-NET-ASSETS> 516568206
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> .054
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> (.054)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> .25
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000774412
<NAME> PLAN INVESTMENT FUND, INC.
<SERIES>
<NUMBER> 02
<NAME> SHORT-TERM PORTFOLIO
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 46187844
<INVESTMENTS-AT-VALUE> 46251578
<RECEIVABLES> 397002
<ASSETS-OTHER> 13904
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 46662484
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 257559
<TOTAL-LIABILITIES> 257559
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 47367628
<SHARES-COMMON-STOCK> 4655328
<SHARES-COMMON-PRIOR> 4880709
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (1026437)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 63734
<NET-ASSETS> 46404925
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 3011975
<OTHER-INCOME> 0
<EXPENSES-NET> 156589
<NET-INVESTMENT-INCOME> 2855386
<REALIZED-GAINS-CURRENT> (40211)
<APPREC-INCREASE-CURRENT> 116061
<NET-CHANGE-FROM-OPS> 2931236
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (2855386)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 9215049
<NUMBER-OF-SHARES-REDEEMED> (35148367)
<SHARES-REINVESTED> 2322245
<NET-CHANGE-IN-ASSETS> (23611073)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 153316
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 299501
<AVERAGE-NET-ASSETS> 52196313
<PER-SHARE-NAV-BEGIN> 9.95
<PER-SHARE-NII> .547
<PER-SHARE-GAIN-APPREC> .02
<PER-SHARE-DIVIDEND> (.547)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 9.97
<EXPENSE-RATIO> .30
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000774412
<NAME> PLAN INVESTMENT FUND, INC.
<SERIES>
<NUMBER> 03
<NAME> GOVERNMENT REPO PORTFOLIO
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 200277319
<INVESTMENTS-AT-VALUE> 200277319
<RECEIVABLES> 9087
<ASSETS-OTHER> 76969
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 200363375
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1125437
<TOTAL-LIABILITIES> 1125437
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 199237938
<SHARES-COMMON-STOCK> 199237938
<SHARES-COMMON-PRIOR> 128737432
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
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