<PAGE> 1
As filed with the Securities and Exchange Commission on April 26, 1999
Registration No. 2-99584
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-lA
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933
POST-EFFECTIVE AMENDMENT NO. 17
and/or
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940
AMENDMENT NO. 20
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PLAN INVESTMENT FUND, INC.
(Exact Name of Registrant as Specified in Charter)
676 North St. Clair, Suite 1600
Chicago, Illinois 60611
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code (312) 951-7700
Copy to:
EDWARD J. BARAN, PRESIDENT BURTON X. ROSENBERG, ESQ.
676 North St. Clair, Suite 1600 Seyfarth, Shaw, Fairweather
Chicago, Illinois 60611 & Geraldson
(Name and Address of Agent 55 E. Monroe Street
for Service) Chicago, Illinois 60603
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)
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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.
Title of Securities Being Registered: Participation Certificates.
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<PAGE> 2
PLAN INVESTMENT FUND, INC.
PROSPECTUS
April 26, 1999
Plan Investment Fund is a mutual fund which is open only to members and
licensees of the Blue Cross and Blue Shield Association and certain related
organizations. The Fund offers participation certificates in three separate
investment portfolios:
- The Government/REPO Portfolio -- a money market fund which seeks a high
level of current income by investing in U.S. Government obligations and
repurchase agreements relating to such obligations.
- The Money Market Portfolio -- a money market fund which seeks a high
level of current income by investing in U.S. Government, bank and
commercial obligations.
- The Short-Term Portfolio -- which seeks to maximize total return
consistent with the protection of principal by investing in U.S.
Government, bank and commercial obligations. The Short-Term Portfolio is
not a money market fund.
For information or new account applications, call BCS Financial Services
Corporation (collect) at (312) 951-7700. To place purchase or redemption orders,
or to request yield information, call PFPC Inc. at (800) 821-9771.
The Securities and Exchange Commission has not approved or disapproved
these securities or passed upon the adequacy of this prospectus. Any
representation to the contrary is a criminal offense.
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
RISK/RETURN SUMMARY......................................... 3
Investment Objectives..................................... 3
Principal Investment Strategies........................... 3
Principal Risks........................................... 4
Performance Information................................... 5
Fees and Expenses......................................... 8
INVESTMENT OBJECTIVES AND STRATEGIES........................ 9
PRINCIPAL RISK FACTORS...................................... 11
MANAGEMENT OF THE FUND...................................... 12
SHAREHOLDER INFORMATION..................................... 14
Pricing of Participation Certificates..................... 14
Purchase of Participation Certificates.................... 14
Redemption of Participation Certificates.................. 15
Payment in Kind........................................... 15
Dividends and Distributions............................... 16
TAXES....................................................... 16
FINANCIAL HIGHLIGHTS........................................ 17
WHERE TO FIND MORE INFORMATION.............................. 20
</TABLE>
<PAGE> 4
RISK/RETURN SUMMARY
INVESTMENT OBJECTIVE
GOVERNMENT/REPO PORTFOLIO: This Portfolio is a money market fund which
seeks a high level of current income and stability of principal. This Portfolio
seeks an annual return at least equal to the yield on overnight repurchase
agreements collateralized by U.S. Treasury obligations.
MONEY MARKET PORTFOLIO: This Portfolio is a money market fund which seeks
a high level of current income and stability of principal. This Portfolio seeks
an annual return at least equal to the 91 day U.S. Treasury bill bond equivalent
yield.
SHORT-TERM PORTFOLIO: This Portfolio seeks to maximize total return
consistent with the protection of principal and is not a money market fund. This
Portfolio seeks an annual gross return at least equal to 105% of the blended
total return of 75% of the six-month Treasury Bill and 25% of the 1-3 year
Merrill Lynch Treasury Index.
PRINCIPAL INVESTMENT STRATEGIES
GOVERNMENT/REPO PORTFOLIO: This Portfolio invests in U.S. Government
obligations and repurchase agreements relating to such obligations which provide
for repayment within one year after purchase. The investments in the
Government/REPO Portfolio are very short-term. The average maturity of
investments in this Portfolio will not exceed seven days.
MONEY MARKET PORTFOLIO: This Portfolio invests in U.S. Government, bank
and commercial obligations and repurchase agreements relating to such
obligations which provide for repayment within one year after purchase. The
investments in the Money Market Portfolio are also very short-term, although
they may have longer maturities than investments in the Government/REPO
Portfolio. The average maturity of investments in this Portfolio will not exceed
90 days.
SHORT-TERM PORTFOLIO: This Portfolio invests in U.S. Government, bank and
commercial obligations which provide for repayment within five and a quarter
years after purchase. The investments in the Short-Term Portfolio are relatively
short-term, although they may have longer maturities than investments in the
Government/REPO Portfolio or the Money Market Portfolio. The average maturity of
investments in this Portfolio will not exceed 360 days.
3
<PAGE> 5
PRINCIPAL RISKS
GOVERNMENT/REPO AND MONEY MARKET PORTFOLIOS: Although the Government/REPO
Portfolio and the Money Market Portfolio invest in securities which their
investment adviser, BlackRock Institutional Management Corporation
("BlackRock"), believes present minimal credit risks at the time of purchase,
there is a risk that an issuer may not be able to make principal and interest
payments when due. While these Portfolios seek to maintain a constant net asset
value of $1.00 per participation certificate, they are subject to risks related
to changes in prevailing interest rates, since generally, a fixed-income
security will increase in value when interest rates fall and decrease in value
when interest rates rise. An investment in the Government/REPO Portfolio or the
Money Market Portfolio is not a deposit in a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency. Although the Government/REPO Portfolio and the Money Market Portfolio
each seek to preserve a net asset value of $1.00 per participation certificate,
it is possible to lose money by investing in these Portfolios.
SHORT-TERM PORTFOLIO: Although the Short-Term Portfolio invests in
securities which its investment adviser, Neuberger Berman, LLC ("Neuberger"),
believes are of high credit quality at the time of purchase, there is a risk
that an issuer may not be able to make interest and principal payments when due.
This Portfolio does not seek to maintain a constant net asset value per
participation certificate, and its net asset value may rise or fall. Like the
Government/REPO and Money Market Portfolios, the Short-Term Portfolio is subject
to risks related to changes in prevailing interest rates. These risks are
increased due to the maturities of the investments in the Short-Term Portfolio,
which generally are greater than the maturities of the investments in the other
Portfolios. Loss of money is a risk of investing in the Short-Term Portfolio.
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PERFORMANCE INFORMATION
The Bar Charts and Tables below show the annual return and long-term
performance of the Portfolios. The Bar Chart for each Portfolio shows how the
performance of the Portfolio has varied from year to year for the last ten
years, or the life of the Portfolio, if shorter. The Table for each Portfolio
shows that Portfolio's average annual return for one, five and ten years, or the
life of the Portfolio, if shorter, and, in the case of the Short-Term Portfolio,
compares the return to a broad-based market index. The Bar Charts and the Tables
assume reinvestment of dividends and distributions. The past performance of the
Portfolios does not necessarily indicate how they will perform in the future.
GOVERNMENT/REPO PORTFOLIO
ANNUAL TOTAL RETURNS AS OF DECEMBER 31 FOR EACH YEAR
BAR CHART
<TABLE>
<CAPTION>
GOVERNMENT/REPO PORTFOLIO
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<S> <C>
'1996' 5.42
'1997' 5.57
'1998' 5.48
</TABLE>
During the period shown in the Bar Chart, the highest quarterly return for
the Government/REPO Portfolio was 5.67% (for the quarter ended December 31,
1997) and the lowest quarterly return was 5.02% (for the quarter ended December
31, 1998).
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
(FOR THE PERIODS ENDING
DECEMBER 31, 1998) PAST ONE YEAR LIFE OF PORTFOLIO(1)
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<S> <C> <C>
Government/REPO Portfolio........................ 5.48% 5.57%
</TABLE>
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(1) Since June 1, 1995 commencement of operations
The Government/REPO Portfolio seven day average yield as of December 31,
1998 was 4.85%. You may obtain this Portfolio's current seven day yield by
calling (800) 451-1188.
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MONEY MARKET PORTFOLIO
ANNUAL TOTAL RETURNS AS OF DECEMBER 31 FOR EACH YEAR
BAR CHART
<TABLE>
<CAPTION>
MONEY MARKET PORTFOLIO
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<S> <C>
'1989' 9.39
'1990' 8.28
'1991' 6.16
'1992' 3.73
'1993' 3.07
'1994' 4.21
'1995' 5.97
'1996' 5.38
'1997' 5.51
'1998' 5.42
</TABLE>
During the period shown in the Bar Chart, the highest quarterly return for
the Money Market Portfolio was 9.66% (for the quarter ended June 30, 1989) and
the lowest quarterly return was 3.02% (for the quarter ended June 30, 1993).
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
(FOR THE PERIODS ENDING
DECEMBER 31, 1998) PAST ONE YEAR PAST 5 YEARS PAST 10 YEARS
---------------------------- ------------- ------------ -------------
<S> <C> <C> <C>
Money Market Portfolio.................... 5.42% 5.30% 5.70%
</TABLE>
The Money Market Portfolio seven day average yield as of December 31, 1998
was 4.88%. You may obtain this Portfolio's current seven day yield by calling
(800) 451-1188.
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SHORT-TERM PORTFOLIO
ANNUAL TOTAL RETURNS AS OF DECEMBER 31 FOR EACH YEAR
BAR CHART
<TABLE>
<CAPTION>
SHORT-TERM PORTFOLIO
--------------------
<S> <C>
'1989' 9.36
'1990' 8.69
'1991' 7.95
'1992' 4.05
'1993' 3.72
'1994' 3.46
'1995' 6.92
'1996' 5.08
'1997' 5.85
'1998' 5.86
</TABLE>
During the period shown in the Bar Chart, the highest quarterly return for
the Short-Term Portfolio was 10.60% (for the quarter ended December 31, 1990)
and the lowest quarterly return was 1.97% (for the quarter ended December 31,
1992).
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
(FOR THE PERIODS ENDING
DECEMBER 31, 1998) PAST ONE YEAR PAST 5 YEARS PAST 10 YEARS
---------------------------- ------------- ------------ -------------
<S> <C> <C> <C>
Short-Term Portfolio...................... 5.86% 5.42% 6.11%
Salomon Six Month Treasury Bill Index..... 5.29% 5.29% 5.67%
</TABLE>
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FEES AND EXPENSES
This table describes the fees and expenses you may pay if you invest in the
Portfolios. Plan Investment Fund (the "Fund") does not charge any form of sales
load, redemption fee or exchange fee for any of the Portfolios.
Annual Portfolio Operating Expenses (expenses that are deducted from
Portfolio assets).
<TABLE>
<CAPTION>
GOVERNMENT/REPO MONEY MARKET SHORT-TERM
PORTFOLIO PORTFOLIO PORTFOLIO
--------------- ------------ ----------
<S> <C> <C> <C>
Management Fees................................... 0.19% 0.18% 0.29%
Distribution (12b-1) Fees......................... None None None
Other Expenses.................................... 0.09% 0.08% 0.30%
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Total Annual Portfolio Operating Expenses(1).... 0.28% 0.26% 0.59%
==== ==== ====
</TABLE>
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(1) Total Annual Portfolio Operating Expenses for the year ended December 31,
1998, with fee waivers, were 0.10% of average net assets for the
Government/REPO Portfolio, 0.26% of average net assets for the Money Market
Portfolio and 0.30% of average net assets for the Short-Term Portfolio. The
fee waiver which reduced operating expenses for the Government/REPO
Portfolio for the year ended December 31, 1998 is voluntary. BlackRock
expects to continue this waiver, but can terminate it upon 90 days written
notice to the Fund.
EXAMPLES
These examples are intended to help you compare the cost of investing in
the Portfolios with the cost of other mutual fund investments.
These examples assume that you invest $10,000 in the Portfolios for the
time periods indicated and then redeem all of your investments at the end of
those periods. The examples also assume that the investments have a 5% return
each year and that the respective Portfolio's operating expenses remain the
same. Although your actual costs may be higher or lower, based on these
assumptions, your costs would be:
<TABLE>
<CAPTION>
ONE YEAR THREE YEARS FIVE YEARS TEN YEARS
-------- ----------- ---------- ---------
<S> <C> <C> <C> <C>
Government/REPO Portfolio........................ $29 $ 90 $157 $356
Money Market Portfolio........................... $27 $ 84 $146 $331
Short-Term Portfolio............................. $60 $189 $329 $738
</TABLE>
8
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INVESTMENT OBJECTIVES AND STRATEGIES
THE GOVERNMENT/REPO PORTFOLIO
The Government/REPO Portfolio is a money market fund. The investment
objective of the Government/REPO Portfolio is to maximize investment income,
with a minimum annual target return equal to the yield on overnight repurchase
agreements collateralized by U.S. Treasury obligations, while maintaining
sufficient liquidity to accommodate daily withdrawal requests on a same day
basis. The Board of Trustees may change the investment objective of the
Government/REPO Portfolio without approval of the holders of the participation
certificates.
The Government/REPO Portfolio invests in a broad range of government
obligations and repurchase agreements relating to such obligations, having
remaining maturities of one year or less, except that items of collateral
securing portfolio securities which are subject to repurchase agreements may
have maturities exceeding one year. At least 65% of the Government/REPO
Portfolio's net assets will be invested at all times in U.S. Treasury bills,
notes and other obligations issued or guaranteed by the U.S. Government or its
agencies, and repurchase agreements relating to such obligations. The
dollar-weighted average maturity of the Government/REPO Portfolio will not
exceed seven days.
The Government/REPO Portfolio will only purchase securities that present
minimal credit risks as determined by BlackRock and which either have a high
quality rating (that is, one of the two highest categories) from a nationally
recognized rating agency or, if unrated, are of comparable quality as determined
by BlackRock.
THE MONEY MARKET PORTFOLIO
The Money Market Portfolio is a money market fund. The investment objective
of the Money Market Portfolio is to maximize investment income, with a minimum
annual target return equal to the 91 day U.S. Treasury bill bond equivalent
yield, while maintaining sufficient liquidity to accommodate reasonable daily
withdrawal requests on a same day basis. The Board of Trustees may change the
investment objective of the Money Market Portfolio without approval of the
holders of the participation certificates.
The Money Market Portfolio invests in a broad range of government, bank and
commercial obligations, having remaining maturities of one year or less, except
that items of collateral securing portfolio securities which are subject to
repurchase agreements may have maturities exceeding one year. The
dollar-weighted average maturity of the Money Market Portfolio will not exceed
90 days.
The Money Market Portfolio will only purchase securities that present
minimal credit risks as determined by BlackRock and which either have a high
quality rating (that is, one of the two highest categories) from a nationally
recognized rating agency or, if unrated, are of comparable quality as determined
by BlackRock.
THE SHORT-TERM PORTFOLIO
The investment objective of the Short-Term Portfolio is to maximize total
return over time, with an annual gross target return equal to 105% of the
blended total return of 75% of the six-month Treasury Bill and 25% of the 1-3
year Merrill Lynch Treasury Index, while maintaining sufficient liquidity to
accommodate daily redemption requests on a next day basis. The Board of Trustees
may change the investment objective of the Short-Term Portfolio without approval
of the holders of the participation certificates.
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The Short-Term Portfolio invests in a broad range of government, bank and
commercial obligations, having remaining maturities of five and a quarter years
or less, except that items of collateral securing portfolio securities which are
subject to repurchase agreements may have maturities exceeding five and a
quarter years. The dollar-weighted average maturity of the Short-Term Portfolio
will not exceed 360 days. The Short-Term Portfolio may trade securities
actively, which could increase its transaction costs (thus lowering performance)
and increase taxable dividends to holders of participation certificates of this
Portfolio.
INVESTMENTS
Set forth below are the principal investments of the Portfolios, as well as
other investments which the Portfolios may make from time to time.
All three Portfolios may:
1. Purchase obligations issued by the U.S. Treasury. The Portfolios may
also purchase obligations issued or guaranteed by agencies of the U.S.
Government.
2. Enter into repurchase agreements. Under a repurchase agreement, a
Portfolio acquires an investment for a short period (usually not more than 60
days), subject to an obligation of the seller to repurchase and the Portfolio to
resell the investment at an agreed price and time, which determines the yield
during the holding period. The repurchase agreements are fully collateralized by
U.S. Government securities.
3. Enter into reverse repurchase agreements to provide liquidity to meet
redemption requests when the sale of portfolio securities is considered to be
disadvantageous. Under a reverse repurchase agreement, a Portfolio sells an
investment that it holds, subject to an obligation of the Portfolio to
repurchase the investment at an agreed price and time. Proceeds of reverse
repurchase agreements used to provide liquidity to meet redemption requests may
equal no more than five percent of the total assets of the Portfolio. The Fund
does not expect the use of reverse repurchase agreements 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, bank notes and time deposits, issued or supported by the credit of
U.S. branches of U.S. banks with assets of at least $1 billion, if such
obligations meet the Portfolio's 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 to
vary and provide for periodic adjustments in the interest rate. Although such
notes normally are considered illiquid and are not traded, the Fund may at any
time demand payment from the issuers of the VAMD Notes, in less than seven days,
of principal and accrued interest. VAMD Notes typically are not rated by credit
rating agencies.
The Portfolios do not purchase unrated instruments unless that Portfolio's
investment adviser has determined the instrument to be of comparable quality to
rated instruments which that Portfolio may buy.
10
<PAGE> 12
The Fund will:
- seek to make investments in instruments authorized by the New York State
Insurance Department provided such investments also comply with the
Fund's Investment Guidelines and the Investment Company Act.
- seek to make investments which will be permitted investments under the
requirements of other applicable state insurance laws and regulations,
although each investor should determine for itself the suitability under
state insurance laws and regulations, of investing in the Fund.
- maintain a high degree of portfolio liquidity at all times.
PRINCIPAL RISK FACTORS
The principal risks of investing in the Fund are described above in the
Risk/Return Summary. The following supplements that description.
Interest Rate Risk. Generally, a fixed-income security will increase in
value when interest rates fall and decrease in value when interest rates rise.
In the case of the Short-Term Portfolio, rising interest rates could cause the
net asset value of the participation certificates to fall. While the
Government/REPO and Money Market Portfolios attempt to maintain a stable net
asset value of $1.00 per participation certificate, if interest rates rise
rapidly, these Portfolios may not be able to prevent the net asset level from
falling below $1.00 per participation certificate.
Credit Risk. Credit risk is the risk that an issuer will be unable to make
principal and interest payments when due. U.S. Government securities are
generally considered to be the safest type of investment in terms of credit
risk, with corporate debt securities presenting somewhat higher credit risk.
Credit quality ratings published by a nationally recognized rating agency are
widely accepted measures of credit risk. The lower a security is rated by such a
rating agency, the more credit risk it is considered to represent.
Liquidity and Leverage Risks. Certain investment strategies employed by the
Portfolios may involve additional investment risk. For example, variable and
floating rate instruments may involve liquidity risk. Liquidity risk is the risk
that securities may be difficult or impossible to sell at the time and the price
that the Fund would like. Reverse repurchase agreements and when-issued or
delayed delivery transactions may involve leverage risk. Leverage risk is
associated with securities or practices that multiply small market movements
into larger changes in the value of an investment portfolio.
Year 2000. Like other mutual funds, financial and business organizations
and individuals around the world, the Fund could be adversely affected if the
computer systems used by the Investment Advisers and its other service
providers, or persons with whom they deal, do not properly process and calculate
date-related information and data from and after January 1, 2000. This
possibility is commonly known as the "Year 2000 Problem." The Fund has been
advised by the Investment Advisers, its administrator, BCS Financial Services
Corporation ("BCS"), its custodian, PFPC Trust Company, and its transfer agent,
PFPC Inc. ("PFPC"), that they are actively taking steps to address the Year 2000
Problem with respect to the computer systems that they use for the Fund and to
obtain assurances that comparable steps are being taken by the Fund's other
major service providers. While there can be no assurance that these service
providers will be Year 2000 compliant, these service providers expect that their
plans to be compliant will be achieved.
11
<PAGE> 13
MANAGEMENT OF THE FUND
INVESTMENT ADVISER -- GOVERNMENT/REPO AND MONEY MARKET PORTFOLIOS
BlackRock is the investment adviser of the Government/REPO Portfolio and
the Money Market Portfolio. (BlackRock and Neuberger sometimes are referred to
as the "Investment Advisers").
BlackRock, a majority owned indirect subsidiary of PNC Bank, was organized
in 1977 by the PNC Bank to perform advisory services for investment companies,
and has its principal offices at 400 Bellevue Parkway, Wilmington, Delaware
19809. BlackRock currently provides advisory and sub-advisory services to
investment companies having assets of approximately $50 billion. PNC Bank is a
subsidiary of PNC Bank Corp., a multi bank holding company.
As Investment Adviser, BlackRock manages, and is responsible for all
purchases and sales of securities of, the Government/REPO Portfolio and the
Money Market Portfolio. BlackRock 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 Fund. For the services provided and expenses
assumed by it with respect to the Government/REPO Portfolio, the Money Market
Portfolio and the Short-Term Portfolio, BlackRock is entitled to receive a fee,
computed daily and payable monthly, based on such Portfolio's average net
assets.
BlackRock may from time to time waive the fees otherwise payable to it, or
it may reimburse a Portfolio for its operating expenses. Any fees waived or
expenses reimbursed with respect to a particular year are not recoverable. For
the year ended December 31, 1998, the Government/REPO Portfolio paid fees to
BlackRock equal to 0.04% of its average net assets, and the Money Market
Portfolio paid fees to BlackRock equal to 0.18% of its average net assets.
INVESTMENT ADVISER -- SHORT-TERM PORTFOLIO
Neuberger is the investment adviser of the Short-Term Portfolio. Neuberger,
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 $50 billion of equity and fixed-income investments.
As Investment Adviser, Neuberger 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 responsibility
for the day-to-day management of the Short-Term Portfolio. Mr. Giuliano is a
principal at Neuberger and has been Co-Director of the Fixed Income Group at
Neuberger since 1983. Mr. Giuliano joined Neuberger in 1983. Ms. Mahaney is a
Senior Portfolio Manager and has been responsible for managing short maturity
portfolios since 1978. Ms. Mahaney joined Neuberger in 1976.
For the services provided and expenses assumed by it with respect to the
Short-Term Portfolio, Neuberger is entitled to receive a fee, computed daily and
payable monthly, based on such Portfolio's average net assets. Neuberger may
from time to time waive the fees otherwise payable to it, or it may reimburse
the Short-Term Portfolio for its operating expenses. Any fees waived or expenses
reimbursed with respect to a particular year are not recoverable. For the year
ended December 31, 1998, the Short-Term Portfolio paid fees to Neuberger and
BlackRock, in the aggregate, equal to 0.22% of its average net assets.
12
<PAGE> 14
TRUSTEES
The Trustees of the Fund are as follows:
*Edward J. Baran is President and Chief Executive Officer of the Fund and
Chairman of the Board, President and Chief Executive Officer of BCS
Financial Services Corporation and BCS Financial Corporation.
*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 Health Plans
Capital Services Corp.
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.
Mark A. Orloff is Vice President and Deputy General Counsel of the Blue
Cross and Blue Shield Association.
Joseph Reichard is Vice President, Treasury Services and Assistant
Treasurer of Highmark, Inc..
M. Edward Sellers is President and Chief Executive Officer of Blue Cross
and Blue Shield of South Carolina.
Sherman M. Wolff is Senior Vice President, Corporate Resources and Chief
Financial Officer of Blue Cross and Blue Shield of Illinois.
- -------------------------
* These Trustees of the Fund may be deemed "interested persons" as defined in
the Investment Company Act.
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SHAREHOLDER INFORMATION
PRICING OF PARTICIPATION CERTIFICATES
BlackRock determines the net asset value per participation certificate of
the Government/REPO Portfolio and the Money Market Portfolio for purposes of
pricing purchase and redemption orders as of 12 Noon (Eastern Time) and as of
4:00 P.M. (Eastern Time). This is only done on business days on which purchase
orders or redemption orders are placed for that Portfolio and there is
sufficient trading in instruments held by that Portfolio so that its net asset
value per participation certificate might be affected materially. A business day
of the Fund is any weekday other than the holidays observed by the Fund, 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
participation certificate, 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 participation certificate.
BlackRock determines the net asset value per participation certificate of
the Short-Term Portfolio for purposes of pricing purchase and redemption orders
as of 4:00 P.M. (Eastern Time). This is only done on business days on which
purchase orders or redemption orders are placed for that Portfolio and there is
sufficient trading in investments held by that Portfolio so that its net asset
value per participation certificate might be affected materially. The Short-Term
Portfolio values assets based on their market price or on their fair value as
determined by the Fund's Board of Trustees.
PURCHASE OF PARTICIPATION CERTIFICATES
The Fund, acting as its own distributor without the services of an
underwriter, sells participation certificates of each Portfolio without a sales
charge, at the net asset value per participation certificate next determined
after receipt of a purchase order by PFPC. Investors may open an account with
the Fund by completing, and submitting to BCS, an application form which may be
obtained by telephoning (collect) (312) 951-7700; the form requests information
from the investor required to enable PFPC to open an account for such investor.
After the application form has been approved by BCS and forwarded to PFPC, an
investor may place purchase orders for participation certificates on any
business day directly with PFPC, the transfer agent for the Fund. Orders may be
transmitted by telephoning (800) 821-9771 and indicating the amount and the
Portfolio of the participation certificates desired.
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, as agent for the custodian, PFPC
Trust Company, 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 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 PNC Bank receives payment by 4:00 P.M. (Eastern Time)
on the day the order is executed. Orders received at other times, and orders for
which PNC Bank has not received
14
<PAGE> 16
payment by 4:00 P.M. (Eastern Time) on the day the order is to be executed, will
not be accepted and notice will be given to the investor placing the order.
Investors must pay for participation certificates of each Portfolio 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, but the Fund may waive these minimums from time to time
in its discretion. The Money Market Portfolio and the Short-Term Portfolio do
not have minimum 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 participation certificates. Unless the purchaser
designates a specific Portfolio, all purchases automatically will be made in the
Money Market Portfolio.
REDEMPTION OF PARTICIPATION CERTIFICATES
Investors must transmit redemption orders to PFPC by telephone in the
manner described under "Purchase of Participation Certificates." The Fund will
redeem participation certificates at the net asset value per participation
certificate 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 participation certificates are determined and when dividends are
earned.
Government/REPO Portfolio and Money Market Portfolio. The Fund will pay for
redeemed participation certificates for which a redemption order is received by
PFPC on a business day before 3:00 P.M. (Eastern Time) in Federal funds wired to
the redeeming investor's account on the same business day. The Fund will pay for
other redemption orders which are received on a business day (or on a day when
PNC Bank is closed) in Federal funds wired on the next business day following
redemption that PNC Bank is open for business. An investor receives no dividend
for the day on which participation certificates 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.
The Fund will wire proceeds of such redemption on the day the redemption order
is executed. Investors receive dividends through, and including, the day before
the redemption order is executed.
The Fund may suspend the right to redemption or postpone the date of
payment upon redemption (as well as suspend or postpone the recordation of the
transfer of its participation certificates) for the periods permitted under the
Investment Company Act.
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.
If any investor ceases to be a member or licensee of the Blue Cross and
Blue Shield Association or a related organization (a "BCBS Investor"), the Fund
may redeem the participation certificates held by such investor, without the
investor's consent.
PAYMENT IN KIND
Investors may request that redemption order proceeds consist of securities
held by the Portfolio in lieu of cash. Prior to placing a payment in kind
redemption order, an investor must provide PFPC with written instructions
identifying the custodial account to receive the securities to be distributed.
The securities to be
15
<PAGE> 17
distributed shall represent a pro rata share of each security held in the
Portfolio, in accordance with Rule 17a-5 under the Investment Company Act. Under
guidelines established by the Board of Trustees, the Investment Advisers 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.
If the Board of Trustees determines that conditions exist which make
payment of redemption proceeds wholly in cash unwise or undesirable, the Fund
may make payment wholly or partly in securities or other property.
DIVIDENDS AND DISTRIBUTIONS
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 participation certificate holders of record at the close of
business on the date of declaration. The Fund pays dividends monthly. Dividends
will be reinvested in additional participation certificates 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 business days after the end of
the month (or within five business days after a redemption of all of the
investor's participation certificates). 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 participation certificates 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
As long as each Portfolio meets the requirements for being a regulated
investment company, it pays no federal income tax on the earnings it distributes
to holders of participation certificates. The Portfolios met these requirements
in the last taxable year, and intend to qualify in future years.
Dividends you receive from the Fund, whether reinvested or taken as cash,
are generally taxable. Dividends from long-term capital gains are taxable as
capital gains; dividends from other sources are generally taxable as ordinary
income. The Fund expects that substantially all of the dividends from the Fund
will be taxable as ordinary income.
PFPC, as transfer agent, will send each holder of participation
certificates or its authorized representative an annual statement designating
the amount, if any, of dividends and distributions made during each year and
their federal tax treatment.
Dividends declared in December of any year, and payable to holders of
record on a specified date in December, will be deemed for tax purposes to have
been received by the shareholders and paid by the Fund on December 31 of such
year in the event such dividends are actually paid during January of the
following year.
The foregoing discussion is only a brief summary of some of the federal tax
considerations generally affecting the Portfolios and holders of participation
certificates. No attempt is made to present a detailed explanation of the
federal, state or local income tax treatment of the Portfolios or holders of
participation certificates, and this discussion is not intended as a substitute
for careful tax planning. Investors in the Portfolios should consult their tax
advisors concerning their own tax situation.
16
<PAGE> 18
FINANCIAL HIGHLIGHTS
The financial highlights tables are intended to help you understand the
financial performance of the Portfolios, for the past 5 years, or in the case of
the Government/REPO Portfolio, for the period of its existence. Certain
information reflects financial results for a single participation certificate.
The total returns in the table represent the rate that an investor would have
earned or lost on an investment in a Portfolio (assuming reinvestment of all
dividends and distributions). This information has been audited by
PricewaterhouseCoopers LLP, whose report, along with the financial statements of
the Fund, are incorporated by reference into the Statement of Additional
Information and included in the Annual Report, each of which is available upon
request.
GOVERNMENT/REPO PORTFOLIO
The table below sets forth selected financial data for a participation
certificate outstanding throughout each period presented.
<TABLE>
<CAPTION>
PERIOD ENDED DECEMBER 31,
--------------------------------------------------
1998 1997 1996 1995(1)
---- ---- ---- -------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period.......... $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income......................... .054 .054 .053 .034
Net Gains or Losses on Securities (both
realized and unrealized).................... 0 0 0 0
-------- -------- -------- --------
Total from Investment Operations.............. .054 .054 .053 .034
-------- -------- -------- --------
LESS DISTRIBUTIONS:
Dividends (from net investment income)........ (.054) (.054) (.053) (.034)
Distributions (from capital gains)............ 0 0 0 0
-------- -------- -------- --------
Total Distributions........................... (.054) (.054) (.053) (.034)
-------- -------- -------- --------
Net Asset Value, End of Period................ $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ========
Total Return.................................. 5.48% 5.57% 5.42% 5.99%(2)
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (000's)............. $124,686 $199,238 $156,382 $119,080
Ratio of Expenses to Average Net Assets(3).... .10% .10% .10% .10%(2)
Ratio of Net Investment Income to Average Net
Assets...................................... 5.36% 5.44% 5.29% 5.78%(2)
</TABLE>
- -------------------------
(1) From June 1, 1995 commencement of operations.
(2) Annualized.
(3) Without the waiver of a portion of the advisory and administration fees, the
ratio of expenses to average daily net assets for Government/REPO Portfolio
participation certificates would have been .28% for the year ended December
31, 1998, .29% for the year ended December 31, 1997, .29% for the year ended
December 31, 1996 and .30% for the period ended December 31, 1995.
17
<PAGE> 19
MONEY MARKET PORTFOLIO
The table below sets forth selected financial data for a participation
certificate outstanding throughout each year presented.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------------
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period...... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income..................... .053 .054 .052 .058 .041
Net Gains or Losses on Securities (both
realized and unrealized)................ 0 0 0 0 0
-------- -------- -------- -------- --------
Total from Investment Operations.......... .053 0.54 .052 .058 .041
-------- -------- -------- -------- --------
LESS DISTRIBUTIONS:
Dividends (from net investment income).... (.053) (.054) (.052) (.058) (.041)
Distributions (from capital gains)........ 0 0 0 0 0
-------- -------- -------- -------- --------
Total Distributions....................... (0.53) (.054) (.052) (.058) (.041)
-------- -------- -------- -------- --------
Net Asset Value, End of Period............ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== ========
Total Return.............................. 5.42% 5.51% 5.38% 5.97% 4.21%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (000's)......... $488,124 $414,625 $524,872 $584,976 $451,367
Ratio of Expenses to Average Net
Assets(1)............................... .26% .25% .23% .24% .26%
Ratio of Net Investment Income to Average
Net Assets.............................. 5.28% 5.38% 5.24% 5.82% 4.15%
</TABLE>
- -------------------------
(1) Without the waiver of a portion of the advisory and administration fees, the
ratio of expenses to average daily net assets for Money Market Portfolio
participation certificates would have been .26% for the year ended December
31, 1998, .25% for the year ended December 31, 1997, .24% for the year ended
December 31, 1996, .25% for the year ended December 31, 1995 and .26% for
the year ended December 31, 1994.
18
<PAGE> 20
SHORT-TERM PORTFOLIO
The table below sets forth selected financial data for a participation
certificate outstanding throughout each year presented.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------------------
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period..... $ 9.97 $ 9.95 $ 10.00 $ 9.93 $ 10.03
------- ------- ------- ------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income.................... .540 .547 .542 .599 .440
Net Gains or Losses on Securities (both
realized and unrealized)............... .030 .020 (.050) 0.70 (.100)
------- ------- ------- ------- --------
Total from Investment Operations......... .570 .567 .492 .669 .340
------- ------- ------- ------- --------
LESS DISTRIBUTIONS:
Dividends (from net investment income)... (.540) (.547) (.542) (.599) (.440)
Distributions (from capital gains)....... 0 0 0 0 0
------- ------- ------- ------- --------
Total Distributions...................... (.540) (.547) (.542) (.599) (.440)
------- ------- ------- ------- --------
Net Asset Value, End of Period........... $ 10.00 $ 9.97 $ 9.95 $ 10.00 $ 9.93
======= ======= ======= ======= ========
Total Return............................. 5.86% 5.85% 5.08% 6.92% 3.46%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (000's)........ $48,667 $46,405 $69,940 $63,922 $103,240
Ratio of Expenses to Average Net
Assets(1).............................. .30% .30% .30% .30% .30%
Ratio of Net Investment Income to Average
Net Assets............................. 5.42% 5.47% 5.43% 6.00% 4.29%
Portfolio Turnover Rate(2)............... 10.2% 79.2% 119.0% 64.8% 47.6%
</TABLE>
- -------------------------
(1) Without the waiver of a portion of the advisory, administration and service
agent fees, the ratio of expenses to average daily net assets for Short-Term
Portfolio participation certificates would have been .59% for the year ended
December 31, 1998, .57% for the year ended December 31, 1997, .48% for the
year ended December 31, 1996, .43% for the year ended December 31, 1995 and
.37% for the year ended December 31, 1994.
(2) Excludes security purchases with a maturity of less than one year.
19
<PAGE> 21
WHERE TO FIND MORE INFORMATION
The Statement of Additional Information (the "SAI") includes additional
information about the Fund. The SAI is incorporated by reference into and is
legally part of this Prospectus. The Annual and Semi-Annual Reports provide
additional information about the Fund. In the Annual Report, you will find a
discussion of market conditions and investment strategies that significantly
affected the performance of the Portfolios during the last year.
Investors can get free copies of the above-named documents, and make
shareholder inquiries, by calling BCS (collect) at (312) 951-7700.
Information about the Fund (including the Fund's SAI) can be reviewed and
copied at the Securities and Exchange Commission's Public Reference Room in
Washington, D.C. Information about the operation of the Public Reference Room
may be obtained by calling the SEC at 1-800-SEC-0330. Reports and other
information about the Fund are available on the SEC's Internet site at
http://www.sec.gov. Copies of this information may be obtained, upon payment of
a duplicating fee, by writing the Public Reference Section of the SEC,
Washington, D.C. 20549-6009.
The Fund's SEC File No. is 811-04379.
20
<PAGE> 22
PLAN INVESTMENT FUND, INC.
Statement of Additional Information
April 26, 1999
TABLE OF CONTENTS
GENERAL INFORMATION..........................................................B-2
INVESTMENT STRATEGIES, RISKS AND POLICIES....................................B-2
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION...............................B-7
NET ASSET VALUE..............................................................B-8
MANAGEMENT OF THE FUND.......................................................B-9
ADDITIONAL INFORMATION CONCERNING TAXES.....................................B-17
DIVIDENDS...................................................................B-19
PERFORMANCE INFORMATION.....................................................B-19
ADDITIONAL DESCRIPTION CONCERNING
PARTICIPATION CERTIFICATES...............................................B-20
AUDITORS....................................................................B-22
COUNSEL.....................................................................B-22
MISCELLANEOUS...............................................................B-23
FINANCIAL STATEMENTS........................................................B-23
APPENDIX - DESCRIPTION OF BOND AND COMMERCIAL PAPER RATINGS.................B-24
This Statement of Additional Information is not a Prospectus and should
be read in conjunction with the current Prospectus of Plan Investment Fund, Inc.
(the "Fund"), dated April 26, 1999, as it may from time to time be supplemented
or revised. No investment in participation certificates should be made without
reading the Prospectus of the Fund. This Statement of Additional Information is
incorporated by reference in its entirety into the Prospectus. Copies of the
Prospectus and Annual Report of the Fund may be obtained, without charge, by
calling BCS Financial Services Corporation (collect) at (312) 951-7700.
<PAGE> 23
GENERAL INFORMATION
The Fund is a Maryland corporation and was incorporated on August 6,
1985. The Fund is a diversified, open-end management investment company. The
Fund consists of three portfolios: the Government/REPO Portfolio, Money Market
Portfolio and Short-Term Portfolio. Each Portfolio is represented by a class of
participation certificates separate from those of the Fund's other Portfolios.
The Government/REPO Portfolio commenced operations on June 1, 1995. The Money
Market Portfolio and the Short-Term Portfolio commenced operations on March 11,
1987.
INVESTMENT STRATEGIES, RISKS AND POLICIES
See the Prospectus for a description of the investment strategies,
risks and policies of the Fund. The following discussion supplements such
description and relates to principal investments as well as other investments
of the Fund.
B-2
<PAGE> 24
ADDITIONAL INFORMATION ON PORTFOLIO INSTRUMENTS
Examples of the types of U.S. Government obligations that the Fund may
hold 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.
With respect to the repurchase agreements ("Repurchase Agreements")
described in the Prospectus, securities subject to Repurchase Agreements will be
held by PFPC Trust Company or in the Federal Reserve/Treasury book-entry system.
Repurchase Agreements are considered to be loans under the Investment Company
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 100% of the purchase price plus accrued interest under the
Repurchase Agreements. The Fund 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 Fund 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 Fund may be delayed or limited. Each
Portfolio will enter into Repurchase Agreements only with those banks and
dealers determined by that Portfolio's Investment Adviser to meet the
Portfolio's respective quality standards as established by the Funds's Board of
Trustees. These standards require an independent review by the Portfolio's
Investment Adviser of the operating history and financial condition of the
sellers 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.
With respect to the variable amount master demand notes ("VAMD Notes")
described in the Prospectus, the Investment Advisers 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.
B-3
<PAGE> 25
The Fund may also invest in collateralized mortgage obligations
("CMOs") 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 Fund invests, the investment may be
subject to a greater or lesser risk of prepayment than other types of
mortgage-related securities. The Fund 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, such as 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 Fund invests normally
shall be deemed to be a period remaining until the date noted on the face of the
instrument as the date on which the principal amount must be paid, 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 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 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 years remaining until maturity
may be deemed to comply with the five and a quarter year maximum maturity
investment limitation.
B-4
<PAGE> 26
The portfolio turnover for the Short-Term Portfolio may be expected to
exceed 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 participation certificates 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.
The Short-Term Portfolio may purchase securities on a when-issued or
delayed-delivery basis, which means that delivery and payment will take place
after the date of the transaction. Such securities may rise and fall in value
and no interest accrues to the Short-Term Portfolio during this period. The
Portfolio will segregate an amount of cash or securities at the time of
commitment equal to or exceeding the purchase price of such securities. The
Short-Term Portfolio will not purchase securities on a when-issued or
delayed-delivery basis if, as a result, more than 15% of the total assets of the
Portfolio would be so invested.
The Appendix attached hereto contains a description of the 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
Below is a complete list of the Portfolios' investment limitations that
may not be changed without the affirmative vote of the holders of a "majority"
of the outstanding participation certificates of the respective Portfolios (as
defined herein under "Miscellaneous").
The Portfolios may not:
1. Borrow money, except from commercial banks for temporary purposes,
and then in amounts not in excess of 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 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 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 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
B-5
<PAGE> 27
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 5% of the total
assets of the respective Portfolio would be invested in such issuer; except that
up to 100% of the total assets of the Government/REPO Portfolio and up to 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 days
without regard to this 5% limitation.
4. Purchase securities, if immediately after such purchase more than
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 days and VAMD Notes with greater than seven 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 bonds and commercial paper issued by companies which invest in real
estate or interests 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 Investment Company Act.
PORTFOLIO TRANSACTIONS
Purchases and sales of securities for each Portfolio usually are
principal transactions. The Investment Advisers normally purchase securities on
behalf of the Portfolios directly from the issuer or from an underwriter or
market maker of the securities. The Portfolios usually pay no brokerage
commissions 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 Fund may not necessarily pay the lowest spread or
commission available on each transaction.
The Investment Adviser of each Portfolio determines the allocation of
transactions, including their frequency, to various dealers in its best judgment
under the general supervision of the Board of Trustees of the Fund and in a
manner deemed fair and reasonable to participation certificate holders.
The Investment Adviser of each Portfolio makes investment decisions for
such Portfolio 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 the same investment adviser advises several
investment companies, particularly when a security is suitable for the
investment objectives of more than one of such investment companies. When two or
more investment companies advised by one of the Investment Advisers 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 or the size of the security position obtainable
or sold for a Portfolio.
The Fund 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, BlackRock or
Neuberger (the Investment Advisers) or any affiliates, officers or employees of
either of them.
B-6
<PAGE> 28
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
Under the Investment Company Act, the Fund 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 participation certificate holders of the Portfolios. (The Fund may
also suspend or postpone the recording of the transfer of its participation
certificates 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 Fund
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 Fund has elected to commit itself to pay all redemption proceeds in
cash up to the lesser of $250,000 or 1% of the respective Portfolio's net asset
value for any participation certificate holder within a 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 Investment Company Act. (See
"Net Asset Value" below for an example of when such redemption or form of
payment might be appropriate.)
The Fund will not issue certificates representing participation
certificates unless requested to do so by its investors. If such certificates
have been issued representing participation certificates to be redeemed, prior
to effecting a redemption with respect to such participation certificates, 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 property authorized.
Participation certificate holders having questions regarding proper
documentation or desiring to request certificates representing participation
certificates should contact PFPC.
Transfer Payments
A BCBS Investor investing in the Government/REPO Portfolio or the Money
Market Portfolio may direct that payment upon redemption of participation
certificates in the Portfolio be used to purchase participation certificates of
the Government/REPO Portfolio or the Money Market Portfolio for another BCBS
Investor by a transfer of the redeemed participation certificates 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 its Government/REPO Portfolio or its Money Market Portfolio
account in a dollar amount greater than the dollar amount held in such
investor's account on the
B-7
<PAGE> 29
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 on the number
of transfers which a BCBS Investor can place in any one day, nor on the total
number of such transfers by all BCBS Investors per day.
NET ASSET VALUE
The Fund calculates the net asset value per participation certificate
of each Portfolio by dividing the total value of the assets belonging to each
Portfolio, less the value of any liabilities charged to that Portfolio, by the
total number of outstanding participation certificates of that Portfolio.
GOVERNMENT/REPO PORTFOLIO AND MONEY MARKET PORTFOLIO
As stated in the Fund'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 not more than seven
days for the Government/REPO Portfolio and 90 days for the Money Market
Portfolio, and do not purchase any instrument with a remaining maturity of more
than one year at the time of purchase, except that items of collateral securing
securities subject to Repurchase Agreements may bear longer maturities. The
Fund's Board of Trustees also has established procedures that are intended to
stabilize these Portfolios' net asset value per participation certificate 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 participation
certificate calculated by using available market quotations deviates from $1.00
per participation certificate. In the event such deviation exceeds 1%, 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 participation certificate may result
in material dilution or other unfair results to investors or existing
participation certificate 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
participation certificates in kind; reducing the number of the Portfolio's
outstanding participation certificates without monetary consideration; or
utilizing a net asset value per participation certificate 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 participation certificate, 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
B-8
<PAGE> 30
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 participation
certificates 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 Fund'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 Neuberger under procedures established by, and under the
supervision of, the Fund'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 360 days and does not purchase any
instrument with a remaining maturity of more than five and a quarter years, or
its duration equivalent, at the time of purchase, except that items of
collateral securing securities subject to Repurchase Agreements may bear longer
maturities.
MANAGEMENT OF THE FUND
TRUSTEES AND OFFICERS
The business and affairs of the Fund are managed under the direction of
the Board of Trustees. The Trustees and officers of the Fund, their addresses,
ages and principal occupations during the past five years are as follows:
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION(S)
NAME, ADDRESS AND AGE POSITION HELD WITH FUND DURING PAST 5 YEARS
<S> <C> <C>
Edward J. Baran* Trustee, President and Chief 1994 to Present, Chairman of
676 North St. Clair Executive Officer the Board, President and
Suite 1600 Chief Executive Officer of
Chicago, IL 60611 BCS Financial Corporation.
Age 63
</TABLE>
B-9
<PAGE> 31
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION(S)
NAME, ADDRESS AND AGE POSITION HELD WITH FUND DURING PAST 5 YEARS
<S> <C> <C>
Howard F. Beacham III* Trustee April 1998 to Present,
344 South Warren St. President and Chief
Syracuse, NY 13202 Operating Officer, Blue
Age 44 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.;
1994 to September 1996, Vice
President Finance,
Blue Cross and Blue Shield
of Central New York.
Philip A. Goss Trustee 1994 to Present, President
225 N. Michigan Ave. and Chief Executive Officer,
Chicago, IL 60601 Health Plans Capital Services
Age 40 Corp.
Steven L. Hooker Trustee April 1996 to Present, Chief
100 S.W. Market St. Financial Officer and
Portland, OR 97201 Treasurer, The Regence
Age 44 Group; April 1993 to August
1996, Senior Vice President,
Finance and Treasurer,
Blue Cross and Blue Shield of Oregon; 1994
to January 1997, President,
Oregon Pacific States
Insurance Company.
</TABLE>
B-10
<PAGE> 32
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION(S)
NAME, ADDRESS AND AGE POSITION HELD WITH FUND DURING PAST 5 YEARS
<S> <C> <C>
Ronald F. King* Executive Trustee January 1997 to Present,
1215 S. Boulder Ave. President and Chief
Tulsa, OK 74119 Executive Officer, Blue
Age 51 Cross and Blue Shield of
Oklahoma; February 1995 to
December 1996, President
and Chief Operating Officer,
Blue Cross and Blue Shield of
Oklahoma; 1994 to
January 1995, Executive
Vice President, Operations,
Blue Cross and Blue
Shield of Oklahoma.
Mark A. Orloff Trustee 1994 to Present, Vice
225 N. Michigan Avenue President and Deputy
Chicago, IL 60601 General Counsel, Blue
Age 44 Cross and Blue Shield Association
Joseph Reichard Trustee April 1998 to Present, Vice
120 Fifth Avenue President, Treasury Services
Pittsburgh, PA 15222 and Assistant Treasurer,
Age 51 Highmark, Inc.; March 1995
to March 1998, Director of
Financial Services, Blue
Cross of Western Pennsylvania;
January 1994 to February 1995,
Investment Manager, Blue
Cross of Western Pennsylvania.
M. Edward Sellers Trustee 1994 to Present, President
I-20 East at Alpine Rd. and Chief Executive Officer,
Columbia, SC 29219 Blue Cross and Blue Shield
Age 52 of South Carolina.
</TABLE>
B-11
<PAGE> 33
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION(S)
NAME, ADDRESS AND AGE POSITION HELD WITH FUND DURING PAST 5 YEARS
<S> <C> <C>
Sherman M. Wolff Trustee 1994 to Present, Senior Vice
300 East Randolph St. President, Corporate
Chicago, IL 60601 Resources and Chief
Age 58 Financial Officer, Blue Cross
and Blue Shield of Illinois.
Wendell H. Berg Secretary 1994 to Present, Senior Vice
676 North St. Clair President, General Counsel
Suite 1600 and Secretary, BCS Financial
Chicago, IL 60611 Corporation
Age 56
Dale E. Palka Assistant Secretary April 1999 to Present, Vice
676 North St. Clair President, BCS; December
Suite 1600 1996 to April 1999,
Chicago, IL 60611 Executive Director,
Age 50 Investment Programs, CSC;
1994 to December 1996,
Director of Investments, Blue
Cross and Blue Shield of
Michigan.
Phillip A. Perillo Treasurer 1994 to Present, Senior Vice
676 North St. Clair President, Chief Financial
Suite 1600 Officer and Treasurer, BCS
Chicago, IL 60611 Financial Corporation
Age 49
</TABLE>
__________________________________
* These Trustees of the Fund may be deemed "interested persons" as
defined in the Investment Company Act.
The Fund 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 Fund does not pay any compensation to its other Trustees
or to its Officers for acting in such capacities. No director, officer or
employee of BlackRock, Neuberger, PFPC Trust Company or PFPC is eligible to
serve as a Trustee or Officer of the Fund. The Trustees and Officers of the Fund
in their individual
B-12
<PAGE> 34
capacities own none, and cannot own any, of the Fund's
participation certificates. For the year ended December 31, 1998, a total of
$9,593 was paid by the Fund for Trustee meeting expenses.
PENSION OR
RETIREMENT TOTAL
BENEFITS ESTIMATED COMPENSATION
ACCRUED AS ANNUAL FROM FUND AND
NAME OF AGGREGATE PART OF FUND BENEFITS FUND COMPLEX
PERSON, COMPENSATION EXPENSES UPON PAID TO
POSITION FROM FUND RETIREMENT TRUSTEES
For the fiscal year ended December 31, 1998, the Fund 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 BlackRock and Neuberger provide as Investment Advisers are
described briefly in the Fund's Prospectus. More specifically, BlackRock and
Neuberger supervise the sales of securities, and place orders for such
transactions. As Service Agent for all three Portfolios of the Fund, BlackRock
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 Fund; prepares reports to the Board of
Trustees of the Fund; and performs related administrative services. BlackRock
agrees to abide by applicable legal requirements in providing these services.
For the services provided and expenses assumed by it with respect to
the Government/REPO Portfolio and the Money Market Portfolio, BlackRock is
entitled to receive a fee, computed daily and payable monthly, at the following
annual rates:
<TABLE>
<CAPTION>
ANNUAL FEE PORTFOLIO ANNUAL NET ASSETS
---------- ---------------------------
<S> <C> <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>
BlackRock 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 .15% of the Government/REPO
B-13
<PAGE> 35
Portfolio's average net assets for each fiscal year. BlackRock 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 .30% of the Money Market
Portfolio's average net assets for each fiscal year.
For the services provided and expenses assumed by BlackRock with
respect to its role as servicing agent for the Short-Term Portfolio, BlackRock
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
---------- ----------------------------------
<S> <C> <C>
.03% ...................... of amounts up to and including $1 billion
.02% ...................... of amounts in excess of $1 billion and up to and
including $2 billion
.01% ...................... of amounts in excess of $2 billion
</TABLE>
provided that the minimum annual fee payable shall be $100,000.
For the services provided and expenses assumed by it with respect to
the Short-Term Portfolio, Neuberger is entitled to receive a fee, computed daily
and payable monthly at the following annual rates:
<TABLE>
<CAPTION>
ANNUAL FEE PORTFOLIO ANNUAL NET ASSETS
---------- ---------------------------
<S> <C> <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>
Neuberger 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 .30%
of the Short-Term Portfolio's average net assets for each fiscal year.
BlackRock and Neuberger also 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, exceed the applicable expense limitations imposed
by the securities regulations in any state in which participation certificates
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 Fund, the expense
limitations in effect on the date of this Statement of Additional Information,
are no more restrictive than 1.5% of the respective Portfolios' average net
assets up to $30 million and 1% of their respective average annual net assets in
excess of $30 million.
B-14
<PAGE> 36
For the years ended December 31, 1996, 1997 and 1998, BlackRock was
paid $38,169, $86,014 and $114,328 respectively, net of $172,944, $308,175 and
$390,240 waived fees, as investment adviser and service agent for the
Government/REPO Portfolio. For the same periods BlackRock was paid fees of
$1,017,246, $880,230 and $790,109 respectively, net of $47,621, $9,807 and $598
waived fees, as investment adviser and service agent for the Money Market
Portfolio. For the same periods, BlackRock was paid fees of $69,444, $47,776,
and $43,919 respectively, net of $30,556, $52,224 and $56,081 waived fees, as
service agent for the Short-Term Portfolio. For the same periods, Neuberger was
paid fees of $99,207, $68,251 and $62,742 respectively, net of $92,413, $85,065
and $80,801 waived fees, as investment adviser for the Short-Term Portfolio.
CUSTODIAN AND TRANSFER AGENT
PFPC Trust Company, a wholly owned indirect subsidiary of PNC, 17th and
Chestnut Streets, Philadelphia, Pennsylvania 19103, has been retained to act as
custodian of the Portfolios' investments. As custodian, PFPC Trust Company,
among other things, collects income of and payments to the Fund; executes and
delivers proxies, consents and other authorizations for the Fund; establishes
and maintains segregated accounts in its records for and on behalf of each
Portfolio; delivers, releases and exchanges securities held for the Fund 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
participation certificates, and for the payment of interest, dividends, taxes
and management fees; and furnishes the Fund with various confirmations,
summaries and reports. PFPC Trust Company is authorized to select one or more
banks or trust companies to serve as sub-custodian on behalf of the Fund,
provided that PFPC Trust Company shall remain responsible for the performance of
its duties under the Custodian Agreement and shall hold the Fund harmless for
the acts and omissions of any bank or trust company serving as sub-custodian.
For the services provided and expenses assumed by PFPC Trust Company as
custodian, PFPC Trust Company is entitled to receive a fee, computed daily and
payable monthly, at the following annual rates:
<TABLE>
<CAPTION>
FUND'S AVERAGE
ANNUAL FEE ANNUAL GROSS ASSETS*
---------- --------------------
<S> <C> <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 Fund's net asset value on
each day in such month that such value is calculated.
B-15
<PAGE> 37
PFPC, a wholly owned indirect subsidiary of PNC, P.O. Box 8950,
Wilmington, Delaware 19899, has been retained to act as transfer agent for the
Fund. As transfer agent, PFPC, among other things, issues and redeems
participation certificates, processes dividends, prepares various communications
to participation certificate holders, answers correspondence from participation
certificate holders, keeps records of the accounts of each participation
certificate holder and prepares and submits various reports to the Fund. 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 participation certificates of a registered, open-end investment
company continuously engaged in the issuance of its participation certificates,
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. PFPC Trust
Company, BlackRock and PFPC are subject to such banking laws and regulations.
BlackRock, PFPC Trust Company and PFPC believe that they may perform
the services for the Fund contemplated by their respective agreements, the
Prospectus and this Statement of Additional Information without violation of
applicable banking laws or regulations. It should be noted, however, that future
changes in legal requirements relating to the permissible activities of banks
and their affiliates, as well as further interpretations of present
requirements, could prevent BlackRock, PFPC Trust Company and PFPC from
continuing to perform such services for the Fund. If BlackRock, PFPC Trust
Company or PFPC were prohibited from continuing to perform such services, it is
expected that the Fund's Board of Trustees would recommend that the Fund enter
into new agreements with other qualified firms. Any new advisory agreement would
be subject to participation certificate holder approval.
ADMINISTRATOR
Effective April 1, 1999, BCS, a wholly owned subsidiary of BCS
Financial Corporation, 676 North St. Clair, Suite 1600, Chicago, Illinois 60611,
was appointed as the Fund's administrator, replacing Health Plans Capital
Services Corp. ("CSC"). As the Fund's administrator, BCS acts generally in a
supervisory capacity with respect to the Fund's overall operations and
participation certificate holder relations. BCS's administrative services
include maintaining the Fund's Chicago, Illinois office; maintaining financial
and accounting records other than those maintained by the Investment Advisers or
their agents; supervising the
B-16
<PAGE> 38
performance of administrative and professional services to the Fund by others;
monitoring, and notifying the Fund of, the eligibility of the Fund'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 Fund; and accumulating information for and
coordinating (but not paying for) the preparation of reports to the Fund's
participation certificate holders and the SEC.
For its administrative services, BCS is entitled to receive a fee from
the Fund calculated daily and paid monthly at an annual rate not to exceed .05%
of the average daily net assets of the Fund's Portfolios. For the years ended
December 31, 1996, 1997 and 1998, CSC, the administrator during this period, was
paid fees of $27,853, $35,133 and $46,697 respectively, net of $24,925, $63,624
and $82,352 waived fees, as administrator for the Government/REPO Portfolio,
$313,494, $255,012 and $221,903 respectively, net of $15,874, $3,270 and $199
waived fees, as administrator for the Money Market Portfolio, and $29,762,
$20,475 and $18,823, net of $5,642, $5,623 and $5,395 waived fees, as
administrator for the Short-Term Portfolio.
EXPENSES
The Fund's ordinary operating expenses generally consist of fees for
legal, accounting and other professional services, rating agency fees, fees of
BlackRock, Neuberger, PFPC Trust Company, PFPC and BCS, costs of Federal and
state registrations and related distributions to participation certificate
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 year ended December 31, 1998,
expense ratios were .10% for the Government/REPO Portfolio, .26% for the Money
Market Portfolio and .30% for the Short-Term Portfolio. Without the waiver of a
portion of the advisory, administrator and service agent fees, the ratio of
expenses to average daily net assets would have been .28% for the
Government/REPO Portfolio and .59% for the Short-Term Portfolio for the year
ended December 31, 1998.
ADDITIONAL INFORMATION CONCERNING TAXES
The following summarizes certain additional tax considerations
generally affecting the Portfolio and holders of participation certificates that
are not described in the Fund's Prospectus. No attempt is made to present a
detailed explanation of the tax treatment of a Portfolio or holders of
participation certificates or possible legislative changes, and the discussion
here and in the Prospectus is not intended as a substitute for careful tax
planning.
As stated in the Prospectus, the Portfolios met the requirements for
being a regulated investment company under the Internal Revenue Code of 1986, as
amended (the "Code") in the last year and intend to qualify in future years. In
order to so qualify for a taxable year, a Portfolio must distribute at least 90%
of its gross income for the year, derive at least 90% of
B-17
<PAGE> 39
its gross income for the year from certain qualifying sources and comply with
certain diversification requirements. A 4% nondeductible excise tax is imposed
on regulated investment companies that fail currently to distribute an amount
equal to specified percentages of their ordinary taxable income and capital
gain net income (excess of capital gains over capital losses). Each Portfolio
intends to make sufficient distributions or deemed distributions of its
ordinary taxable income and any capital gain net income prior to the end of
each calendar year to avoid liability for this excise tax.
If for any taxable year a Portfolio does not qualify for tax treatment
as a regulated investment company, all of that Portfolio's taxable income will
be subject to tax at regular corporate rates without any deduction for
distributions to holders of participation certificates of the Portfolio. In such
event, dividend distributions to holders of participation certificates of the
Portfolio would be taxable as ordinary income to the extent of that Portfolio's
earnings and profits and would be eligible for the dividends received deduction
in the case of corporate shareholders.
Each Portfolio will be required in certain cases to withhold and remit
to the U.S. Treasury 31% of taxable dividends or 31% of gross proceeds paid to a
participation certificate holder who has failed to provide a correct tax
identification number in the manner required, is subject to withholding by the
Internal Revenue Service for failure properly to include on his return payments
of taxable interest or dividends, or has failed to certify to the Fund that he
is not subject to backup withholding when required to do so or that it is an
"exempt recipient."
Although each Portfolio expects to qualify as a regulated investment
company and to be relieved of all or substantially all federal income tax,
depending upon the extent of its activities in states and localities in which
its offices are maintained, in which its agents or independent contractors are
located or in which it is otherwise deemed to be conducting business, a
Portfolio may be subject to the tax laws of such states or localities. In
addition, in those states and localities that have income tax laws, the
treatment of the Portfolios and holders of participation certificates under such
laws may differ from the treatment under federal income tax laws. Holders of
participation certificates are advised to consult their tax advisors concerning
the application of state and local taxes.
Although each Portfolio does not expect to realize long-term capital
gains, any net realized long-term capital gains will be distributed at least
annually. A Portfolio will generally have no tax liability with respect to such
gains, and the distributions will be taxable to holders of participation
certificates of a Portfolio as long-term capital gains (20% or 28%, as
applicable), regardless of how long a holder has held a Portfolio's
participation certificates. Such distributions will be designated as a capital
gain dividend in a written notice mailed by a Portfolio to holders of its
participation certificates not later than 60 days after the close of the
Portfolio's taxable year.
B-18
<PAGE> 40
Similarly, although each Portfolio does not expect to earn any
investment company taxable income, taxable income earned by a Portfolio will be
distributed to holders of its participation certificates. In general, a
Portfolio's investment company taxable income will be its taxable income (for
example, any short-term capital gains) subject to certain adjustments and
excluding the excess of any net long-term capital gain for the taxable year over
the net short-term capital loss, if any, for such year. Each Portfolio will be
taxed on any undistributed investment company taxable income of that Portfolio.
To the extent such income is distributed by a Portfolio (whether in cash or
additional shares), it will be taxable to holders of participation certificates
of such Portfolio as ordinary income.
The foregoing discussion is based on federal tax laws and regulations
which are in effect on the date of this Statement of Additional Information.
Such laws and regulations may be changed by legislative or administrative
action.
DIVIDENDS
Net income of each Portfolio for dividend purposes will consist of (i)
interest accrued and dividends 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
(for example, legal, accounting and Trustee's fees) of, the Fund, prorated on
the basis of relative net asset value of the Fund's other Portfolios applicable
to that period.
PERFORMANCE INFORMATION
DETERMINATION OF YIELD
From time to time, the Fund may quote the Government/REPO Portfolio and
the Money Market Portfolio "yield" and "effective yield" in communications to
participation certificate 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. This means that 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, 1998 the Money Market Portfolio average
yield was 4.88% and the effective yield was 5.00%. For the same period the
Government/REPO Portfolio average yield was 4.85% and the effective yield was
4.96%.
B-19
<PAGE> 41
From time to time, the Fund may also quote the Short-Term Portfolio
"yield" in communications to participation certificate 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, 1998 the Short-Term Portfolio 30-day yield was 4.82%.
The yields of the Government/REPO Portfolio, the Money Market Portfolio
and the Short-Term Portfolio were positively affected by fee waivers. (See
"Investment Advisers and Service Agent" and "Administrator" under "Management of
the Fund".)
TOTAL RETURN
From time to time, the Fund may quote the total return of its
Short-Term Portfolio in reports and other communications to participation
certificate holders. For this purpose the total return of the Portfolio is an
average annual compound rate of return over the periods cited that an investor
would have received if the investor had invested $1,000 in participation
certificates at the beginning of the periods and had redeemed such participation
certificates 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 particular total return quotation should not
be considered as representative of the Portfolio's total return for any
specified period in the future. The annualized Short-Term Portfolio total
returns were 5.86% for the one year ended December 31, 1998, 5.18% for the five
years ended December 31, 1998 and 6.11% for the ten years ended December 31,
1998.
The total return of the Short-Term Portfolio was positively affected by
fee waivers. (See "Investment Advisers and Service Agent" and "Administrator"
under "Management of the Fund".)
ADDITIONAL DESCRIPTION CONCERNING
PARTICIPATION CERTIFICATES
The Fund's Amended and Restated Articles of Incorporation provide that
on any matter submitted to a vote of participation certificate holders, all
participation certificates, irrespective of class, shall be voted in the
aggregate and not by class except that (i) as to a matter with respect to which
a separate vote of any class is required by the Investment Company 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 a matter which does not affect the interest of a
particular class, only participation certificate holders of the affected class
shall be entitled to vote thereon.
B-20
<PAGE> 42
Rule 18f-2 under the Investment Company Act provides that any matter
required to be submitted by the provisions of such Investment Company Act or
applicable state law, or otherwise, to the holders of the outstanding voting
securities of an investment company such as the Fund shall not be deemed to have
been effectively acted upon unless approved by the holders of a "majority" of
the outstanding participation certificates (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 participation certificate holders each
of which owned of record or beneficially 5% or more of the outstanding
participation certificates of a Portfolio as of February 26, 1999.
<TABLE>
<CAPTION>
PERCENT OF PERCENT OF
PARTICIPATION PARTICIPATION PERCENT OF
CERTIFICATES CERTIFICATES PARTICIPATION
OWNED OF OWNED OF CERTIFICATES
PARTICIPATION GOVERNMENT/ MONEY OWNED OF
CERTIFICATE REPO MARKET SHORT-TERM
HOLDER PORTFOLIO PORTFOLIO PORTFOLIO
<C> <C> <C> <C>
Blue Cross and Blue Shield
Association
225 North Michigan Avenue 5.4% 21.6% 8.1%
Chicago, IL 60601
Health Care Service
Corporation
300 East Randolph Street 0.0% 10.4% 22.2%
Chicago, IL 60601
Health Plans Capital Services
Corp.
225 North Michigan Avenue 9.8% 4.3% 2.8%
Chicago, IL 60601
Horizon Blue Cross and Blue
Shield of New Jersey
3 Penn Plaza East 0.0% 15.1% 0.0%
Newark, NJ 07105
</TABLE>
B-21
<PAGE> 43
<TABLE>
<CAPTION>
PERCENT OF PERCENT OF
PARTICIPATION PARTICIPATION PERCENT OF
CERTIFICATES CERTIFICATES PARTICIPATION
OWNED OF OWNED OF CERTIFICATES
PARTICIPATION GOVERNMENT/ MONEY OWNED OF
CERTIFICATE REPO MARKET SHORT-TERM
HOLDER PORTFOLIO PORTFOLIO PORTFOLIO
<C> <C> <C> <C>
Blue Cross and Blue Shield
of Oklahoma, Inc.
1215 South Boulder Avenue 0.0% 2.2% 22.3%
Tulsa, OK 74119
Capital Blue Cross
2500 Elmerton Avenue 57.8% 0.1% 1.9%
Harrisburg, PA
Independence Blue Cross
1901 Market Street 9.5% 0.0% 0.0%
Philadelphia, PA 19103
Highmark, Inc.
120 Fifth Avenue 0.0% 8.3% 2.7%
Pittsburgh, PA 15222
Blue Cross and Blue Shield 13.8% 1.2% 34.2%
of South Carolina
I-20 East at Alpine Road
Columbia, SC 29219
</TABLE>
AUDITORS
PricewaterhouseCoopers LLP, with offices at 2400 Eleven Penn Center,
Philadelphia, Pennsylvania 19103, has been selected as the independent
accountants of the Fund for the year ended December 31, 1999.
COUNSEL
Seyfarth, Shaw, Fairweather & Geraldson, 55 East Monroe Street,
Chicago, Illinois 60603, will pass upon the legality of the participation
certificates offered hereby.
B-22
<PAGE> 44
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 participation certificate holders, means the vote of the holders of more
than 50% of the Fund's outstanding participation certificates of each class
affected by the matter with respect to which the vote is being taken.
The Fund has chosen a calendar fiscal year.
Purchase orders for participation certificates of each of the
Portfolios are accepted by the Fund's Transfer Agent which is located in
Wilmington, Delaware.
FINANCIAL STATEMENTS
The audited financial statements and notes thereto for the Fund
contained in the Fund's Annual Report dated December 31, 1998, are incorporated
by reference into this Statement of Additional Information. The financial
statements and notes thereto for the Fund contained in the Fund's Annual Report
have been audited by PricewaterhouseCoopers LLP, whose report thereon also
appears in such Annual Report and is also incorporated by reference herein. No
other parts of the Annual Report are incorporated by reference herein. Such
audited financial statements and notes thereto have been incorporated herein in
reliance on the report of PricewaterhouseCoopers LLP, independent accountants,
given on the authority of said firm as experts in auditing and accounting.
B-23
<PAGE> 45
APPENDIX
DESCRIPTION OF BOND AND COMMERCIAL PAPER RATINGS
The Fund 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. ("Moody's") possess many favorable
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
a ranking in the lower end of that
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 risk appear
somewhat larger then in the "Aaa"
securities.
</TABLE>
B-24
<PAGE> 46
<TABLE>
<CAPTION>
Type of
Security Rating Agency Rating Summary of Rating
- -------- ------------- ------ -----------------
<S> <C> <C> <C>
Bond Standard & Poor's A- An obligation rated A is somewhat
Corporation ("S & P") more susceptible to the adverse
effects of changes in circumstances and economic
conditions than obligations in higher-rated categories.
However, the obligor's capacity to meet its financial
commitment on the obligation is still strong. The "minus"
shows a relative lower standing within the major "A"
category.
Bond S & P AA An obligation rated AA differs
from the highest-rated obligations
only in small degree. The
obligor's capacity to meet its
financial commitment on the
obligation is very strong
</TABLE>
B-25
<PAGE> 47
<TABLE>
<CAPTION>
Type of
Security Rating Agency Rating Summary of Rating
- -------- ------------- ------ -----------------
<S> <C> <C> <C>
Commercial Moody's Prime-1 Issuers rated Prime-1 (or
Paper supporting institutions) have a
superior ability for repayment of senior short-term debt
obligations. Prime-1 repayment ability will often be
evidenced by many of the following characteristics:
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 A short-term obligation rated A-1
Paper is rated in the highest category by
Standard & Poor's. The obligor's capacity to meet its
financial commitment on the obligation is strong.
</TABLE>
B-26
<PAGE> 48
PART C
OTHER INFORMATION
<TABLE>
<S> <C>
Item 23. Exhibits
Exhibit No. Description of Exhibit
(a)(1) Form of Amended and Restated Articles of Incorporation of Registrant
(incorporated by reference to Exhibit 1 of Post-Effective Amendment No. 13 to
the Registrant's Registration Statement on Form N-1A No. 2-99584, as filed with
the SEC on April 19, 1996 ("PEA No. 13"))
(a)(2) Articles of Amendment to Amended and Restated Articles of Incorporation of
Registrant (incorporated by reference to Exhibit 1(a) of PEA No. 13)
(a)(3) Articles of Amendment to Amended and Restated Articles of Incorporation of
Registrant (incorporated by reference to Exhibit 1(b) of PEA No. 13)
(b) Bylaws of Registrant as Amended (incorporated by reference to Exhibit 2 of PEA
No. 13)
(c) Not applicable
(d)(1) Form of Investment Advisory and Service Agreement for the Money Market
Portfolio (incorporated by reference to Exhibit 5 of PEA No. 13)
(d)(2) Form of Investment Advisory Agreement for the Short-Term Portfolio
(incorporated by reference to Exhibit 5(a) of PEA No. 13)
(d)(3) Form of Investment Advisory Agreement for the Government/REPO Portfolio
(incorporated by reference to Exhibit 5(b) of Post-Effective Amendment No. 11 to
the Registrant's Registration Statement on Form N-1A No. 2-99584, as filed with
the SEC on March 30, 1995)
(e) Not applicable
(f) Not applicable
(g)(1) Form of Custodian Agreement (incorporated by reference to Exhibit 8 of PEA No.
13)
C-1
</TABLE>
<PAGE> 49
<TABLE>
<S> <C>
(g)(2) Form of Transfer Agency Agreement (incorporated by reference to Exhibit 8(a) of
PEA No. 13)
(h)(1) Form of Administration Agreement (incorporated by reference to Exhibit 9 of
PEA No. 13)
(h)(2) Assignment of Administration Agreement (Exhibit 9.1)
(h)(3) Form of Service Agreement for the Short-Term Portfolio (incorporated by
reference to Exhibit 9(a) of PEA No. 13)
(i) Opinion of Counsel (incorporated by reference to Exhibit 10 of PEA No. 13)
(j) Consent of PricewaterhouseCoopers LLP (Exhibit 11)
(k) Not applicable
(l) Subscription Agreement (incorporated by reference to Exhibit 13 of PEA No. 13)
(m) Not applicable
(n)(1) Financial Data Schedule for the Money Market Portfolio (Exhibit 27.1)
(n)(2) Financial Data Schedule for the Short-Term Portfolio (Exhibit 27.2)
(n)(3) Financial Data Schedule for the Government/REPO Portfolio (Exhibit 27.3)
(o) Not applicable
Item 24. Persons Controlled by or Under Common
Control with Fund
None
Item 25. Indemnification
</TABLE>
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
C-2
<PAGE> 50
authorize indemnification when it is determined that such Trustee, Officer,
employee or agent would otherwise be liable to Registrant or its participation
certificate 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 participation certificate
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 Investment Company 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 Fund, shall determine, based on a review of
readily available facts to the Fund, 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 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 26. Business and Other Connections of
Investment Advisers
BlackRock Institutional Management Corporation ("BlackRock") performs investment
advisory services for Registrant and certain other investment companies and
accounts. The information required by this Item 26 with respect to each
director, officer and partner of BlackRock is incorporated by reference to
Schedules A and D of Form ADV filed by BlackRock with the
C-3
<PAGE> 51
Securities and Exchange Commission pursuant to the Investment Advisers Act of
1940 (SEC File No. 801-13304).
Neuberger Berman, LLC ("Neuberger") performs investment advisory services for
Registrant and certain other investment companies and accounts. The information
required by this Item 26 with respect to each director, officer and partner of
Neuberger is incorporated by reference to Schedules A and D of Form ADV filed by
Neuberger with the Securities and Exchange Commission pursuant to the Investment
Advisers Act of 1940 (SEC File No. 801-3908).
Item 27. Principal Underwriters
Not applicable
Item 28. Location of Accounts and Records
<TABLE>
<CAPTION>
Location
(To the extent known) Types of Records
<S> <C>
1. BCS Financial Services Records relating to its
Corporation functions as administrator.
676 North St. Clair
Suite 1600
Chicago, IL 60611
2. Neuberger Berman, LLC Records relating to its functions
605 Third Avenue as investment adviser of the Short-
New York, NY 10158 Term Portfolio.
3. PFPC Inc. Records relating to its functions
P.O. Box 8950 as transfer agent.
Wilmington, DE 19899
4. BlackRock Institutional Records relating to its functions
Management Corp. as investment adviser of the
400 Bellevue Parkway Government/ Repo Portfolio and the
Wilmington, DE 19809 Money Market Portfolio and service
agent for each of the Portfolios.
5. PFPC Trust Company Records relating to its functions
17th and Chestnut Sts. as custodian.
Philadelphia, PA 19103
</TABLE>
C-4
<PAGE> 52
<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 29. Management Services
Not applicable
Item 30. Undertakings
The Fund 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-5
<PAGE> 53
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant, Plan Investment Fund, Inc., has
duly caused this Post-Effective Amendment No. 17 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 26th day of April, 1999.
PLAN INVESTMENT FUND, INC.
By: WENDELL H. BERG
-------------------------
Wendell H. Berg
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. 17 to the Registration Statement has been signed
below by the following persons in the capacities and on the date indicated.
Signature Title Date
--------- ----- ----
*EDWARD J. BARAN Trustee, April 26, 1999
- ----------------- President and
Edward J. Baran Chief Executive
Officer (Principal
(Executive Officer)
*HOWARD F. BEACHAM III Trustee April 26, 1999
- -----------------------
Howard F. Beacham III
PHILIP A. GOSS Trustee April 26, 1999
- ----------------------
Philip A. Goss
*STEVEN L. HOOKER Trustee April 26, 1999
- ----------------------
Steven L. Hooker
S-1
<PAGE> 54
Signature Title Date
--------- ----- ----
*RONALD F. KING Executive Trustee April 26, 1999
- -------------------------
Ronald F. King
*MARK A. ORLOFF Trustee April 26, 1999
- -------------------------
Mark A. Orloff
*JOSEPH F. REICHARD Trustee April 26, 1999
- -------------------------
Joseph F. Reichard
*PHILLIP A. PERILLO Treasurer April 26, 1999
- -------------------- (Principal Financial
Phillip A. Perillo and Accounting Officer)
*M. EDWARD SELLERS Trustee April 26, 1999
- ------------------------
M. Edward Sellers
*SHERMAN M. WOLFF Trustee April 26, 1999
- -----------------------
Sherman M. Wolff
* Executed on behalf of the indicated Officers and Trustees by
Philip A. Goss, duly appointed attorney-in-fact.
By: PHILIP A. GOSS
-------------------------------------
Philip A. Goss, Attorney-in-fact
S-2
<PAGE> 55
EXHIBITS
9.1 Assignment of Administration Agreement
11 Consent of PricewaterhouseCoopers LLP.
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.
<PAGE> 1
EXHIBIT 9.1
ASSIGNMENT
The undersigned, HEALTH PLANS CAPITAL SERVICES CORP., a Delaware
corporation (hereinafter referred to as "HEALTH PLANS"), which has its principal
place of business located at 225 North Michigan Avenue, Chicago, Illinois 60601,
for good and valuable consideration, the receipt and sufficiency of which being
hereby acknowledged, does hereby assign, transfer and set over unto BCS
FINANCIAL SERVICES CORPORATION, a Delaware corporation (hereinafter referred to
as "BCSF"), effective as of April 1, 1999, all of the right, title and interest
of HEALTH PLANS in and to that certain Administration Agreement dated the 28th
day of February, 1987, with respect to Plan Investment Fund, Inc. (hereinafter
referred to as the "PIF Administration Agreement") (a copy of said
Administration Agreement being attached hereto as Exhibit A).
BCSF acknowledges and agrees, by its acceptance and approval of this
Assignment, that BCSF will assume and perform all of the unfulfilled or
unperformed obligations of HEALTH PLANS with respect to the PIF Administration
Agreement.
This Assignment, including the Acceptance and Approval and the Consent
and Approval, may be executed in counterparts, each of which shall be deemed to
be an original but all of which shall constitute one and the same instrument.
IN WITNESS WHEREOF, HEALTH PLANS CAPITAL SERVICES CORP. has
executed this Assignment this 12th day of April, 1999.
HEALTH PLANS CAPITAL SERVICES CORP.
By: /s/ Philip A. Goss
________________________________
ACKNOWLEDGMENTS
STATE OF ILLINOIS )
:ss.
COUNTY OF COOK )
On this 12th day of April, 1999, before me, a notary public within and
for said county and state, appeared PHILIP A. GOSS, personally known to me to be
the President of HEALTH PLANS CAPITAL SERVICES CORP., the corporation described
herein, who executed the foregoing instrument, and acknowledged that he executed
the same as his free and voluntary act and deed and as the free and voluntary
act and deed of said corporation.
/s/ Marcia Jawor
_______________________________
Notary Public
10018324.1
1
<PAGE> 2
ACCEPTANCE AND APPROVAL
BCS FINANCIAL SERVICES CORPORATION does hereby accept, and approve all
aspects of, this Assignment this 12th day of April, 1999.
BCS FINANCIAL SERVICES CORPORATION
By: /s/ Edward J. Baran
________________________________
Edward J. Baran
ACKNOWLEDGMENTS
STATE OF ILLINOIS )
:ss.
COUNTY OF COOK )
On this 12th day of April, 1999, before me, a notary public within and
for said county and state, appeared Edward J. Baran personally known to me to be
the President and CEO of BCS FINANCIAL SERVICES CORPORATION, the corporation
described herein, who executed the foregoing instrument, and acknowledged that
he executed the same as his free and voluntary act and deed and as the free and
voluntary act and deed of said corporation.
/s/ Marcia Jawor
________________________________
Notary Public
10018324.1
2
<PAGE> 3
CONSENT AND APPROVAL
PLAN INVESTMENT FUND, INC. does hereby consent to, and approve all
aspects of, this Assignment this 12th day of April, 1999.
PLAN INVESTMENT FUND, INC
By: /s/ Philip A. Goss
ACKNOWLEDGMENTS
STATE OF ILLINOIS )
:ss.
COUNTY OF COOK )
On this 12th day of April, 1999, before me, a notary public within and
for said county and state, appeared Philip A. Goss personally known to me to be
the President and CEO of PLAN INVESTMENT FUND, INC., the corporation described
herein, who executed the foregoing instrument, and acknowledged that he executed
the same as his free and voluntary act and deed and as the free and voluntary
act and deed of said corporation.
/s/ Marcia Jawor
________________________________
Notary Public
10018324.1
<PAGE> 1
EXHIBIT 99.B11
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in Post-Effective Amendment
No. 17 under the Securities Act of 1933, as amended, to the Registration
Statement of the Government/REPO Portfolio, Money Market Portfolio and
Short-Term Portfolio of Plan Investment Fund, Inc. ("the Fund") on Form N-1A
(File No. 2-99584) of our report dated February 3, 1999 on our audit of the
financial statements and financial highlights of the Fund, which report is
included in the Fund's Annual Report for the year ended December 31, 1998 which
is incorporated by reference in the Post-Effective Amendment to the Registration
Statement. We also consent to the reference to our firm under the captions
"Financial Highlights" in the Prospectus and "Auditors" in the Statement of
Additional Information and to the incorporation by reference of our report in
the Statement of Additional Information.
PricewaterhouseCoopers LLP
Philadelphia, Pennsylvania
April 23, 1999
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000774412
<NAME> PLAN INVESTMENT FUND
<SERIES>
<NUMBER> 01
<NAME> PLAN INVESTMENT FUND - MONEY MARKET PORTFOLIO
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<INVESTMENTS-AT-COST> 489044980
<INVESTMENTS-AT-VALUE> 489044980
<RECEIVABLES> 1133588
<ASSETS-OTHER> 7399
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 490185967
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2061672
<TOTAL-LIABILITIES> 2061672
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 488124295
<SHARES-COMMON-STOCK> 488124295
<SHARES-COMMON-PRIOR> 409384824
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 488124295
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 24617169
<OTHER-INCOME> 0
<EXPENSES-NET> (1143643)
<NET-INVESTMENT-INCOME> 23473526
<REALIZED-GAINS-CURRENT> 77
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 23473603
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (23473526)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 3708891424
<NUMBER-OF-SHARES-REDEEMED> (3653428968)
<SHARES-REINVESTED> 18036609
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