<PAGE> 1
PLAN INVESTMENT FUND, INC.
PROSPECTUS
April 26, 2000
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> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<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........................................... 16
Dividends and Distributions............................... 16
TAXES....................................................... 16
FINANCIAL HIGHLIGHTS........................................ 17
WHERE TO FIND MORE INFORMATION.............................. 20
</TABLE>
<PAGE> 3
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> 4
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.
4
<PAGE> 5
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 GRAPH]
<TABLE>
<S> <C>
DEPICITING ANNUALIZED RETURNS
1996 . . . . . 5.42
1997 . . . . . 5.57
1998 . . . . . 5.48
1999 . . . . . 5.05
</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 4.82% (for the quarter ended March 31,
1999).
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
(FOR THE PERIODS ENDING LIFE OF
DECEMBER 31, 1999) PAST ONE YEAR PORTFOLIO(1)
- ---------------------------- ------------- ------------
<S> <C> <C>
Government/REPO Portfolio............................. 5.05% 5.46%
</TABLE>
- -------------------------
(1) Since June 1, 1995 commencement of operations
The Government/REPO Portfolio seven day average yield as of December 31,
1999 was 4.37%. You may obtain this Portfolio's current seven day yield by
calling (800) 451-1188.
5
<PAGE> 6
MONEY MARKET PORTFOLIO
ANNUAL TOTAL RETURNS AS OF DECEMBER 31 FOR EACH YEAR
[BAR GRAPH]
<TABLE>
<S> <C>
DEPICITING ANNUALIZED RETURNS
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
1999 . . . . . 5.02
</TABLE>
During the period shown in the Bar Chart, the highest quarterly return for
the Money Market Portfolio was 8.34% (for the quarter ended June 30, 1990) 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 PAST PAST
DECEMBER 31, 1999) ONE YEAR 5 YEARS 10 YEARS
- ---------------------------- -------- ------- --------
<S> <C> <C> <C>
Money Market Portfolio............................... 5.02% 5.46% 5.27%
</TABLE>
The Money Market Portfolio seven day average yield as of December 31, 1999
was 5.09%. You may obtain this Portfolio's current seven day yield by calling
(800) 451-1188.
6
<PAGE> 7
SHORT-TERM PORTFOLIO
ANNUAL TOTAL RETURNS AS OF DECEMBER 31 FOR EACH YEAR
[BAR GRAPH]
<TABLE>
<S> <C>
DEPICITING ANNUALIZED RETURNS
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
1999 . . . . . 4.33
</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 PAST PAST
DECEMBER 31, 1999) ONE YEAR 5 YEARS 10 YEARS
- ---------------------------- -------- ------- --------
<S> <C> <C> <C>
Short-Term Portfolio................................. 4.33% 5.60% 5.60%
Salomon Six Month Treasury Bill Index................ 4.80% 5.38% 5.27%
</TABLE>
7
<PAGE> 8
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% 0.28%
Distribution (12b-1) Fees............................ None None None
Other Expenses....................................... 0.11% 0.09% 0.26%
----- ----- -----
Total Annual Portfolio Operating Expenses(1)....... 0.30% 0.27% 0.54%
===== ===== =====
</TABLE>
- -------------------------
(1) Total Annual Portfolio Operating Expenses for the year ended December 31,
1999, with fee waivers, were 0.10% of average net assets for the
Government/REPO Portfolio, 0.27% 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, 1999 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............................ $31 $ 97 $169 $385
Money Market Portfolio............................... $28 $ 87 $152 $347
Short-Term Portfolio................................. $55 $173 $304 $692
</TABLE>
8
<PAGE> 9
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.
9
<PAGE> 10
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.
10
<PAGE> 11
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.
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.
11
<PAGE> 12
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, 1999, the Government/REPO Portfolio paid fees to
BlackRock equal to 0.03% 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, 1999, the Short-Term Portfolio paid fees to Neuberger and
BlackRock, in the aggregate, equal to 0.13% of its average net assets.
12
<PAGE> 13
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 BlueCross
and BlueShield of Central New York, Inc. and Blue Cross Blue Shield of
Utica-Watertown.
Philip A. Goss is Vice President Corporate Development, Health Care Service
Corporation.
*Ronald F. King is President and Chief Executive Officer of Blue Cross and
Blue Shield of Oklahoma and subsidiaries.
James M. Mead is President and Chief Executive Officer, Capital Blue Cross.
Mark A. Orloff is Vice President and Deputy General Counsel of the Blue
Cross and Blue Shield Association.
Jed H. Pitcher is Chairman of the Board and Chief Executive Officer of
Regence BlueCross BlueShield of Utah.
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.
- -------------------------
* These Trustees of the Fund may be deemed "interested persons" as defined in
the Investment Company Act.
13
<PAGE> 14
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.
ON ANY BUSINESS DAY WHEN THE BOND MARKET ASSOCIATION("BMA") RECOMMENDS THAT
THE SECURITIES MARKETS CLOSE EARLY, THE FUND RESERVES THE RIGHT TO CLOSE AT OR
PRIOR TO THE BMA RECOMMENDED CLOSING TIME. IF THE FUND DOES SO, IT WILL CEASE
GRANTING SAME BUSINESS DAY CREDIT FOR PURCHASE AND REDEMPTION ORDERS RECEIVED
AFTER THE FUND'S CLOSING TIME AND CREDIT WILL BE GRANTED ON THE NEXT BUSINESS
DAY.
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.
14
<PAGE> 15
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 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.
15
<PAGE> 16
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 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> 17
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,
--------------------------------------------------------
1999 1998 1997 1996 1995(1)
---- ---- ---- ---- -------
<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..................... .049 .054 .054 .053 .034
Net Gains or Losses on Securities (both
realized and unrealized)................ 0 0 0 0 0
-------- -------- -------- -------- --------
Total from Investment Operations.......... .049 .054 .054 .053 .034
-------- -------- -------- -------- --------
LESS DISTRIBUTIONS:
Dividends (from net investment income).... (.049) (.054) (.054) (.053) (.034)
Distributions (from capital gains)........ 0 0 0 0 0
-------- -------- -------- -------- --------
Total Distributions....................... (.049) (.054) (.054) (.053) (.034)
-------- -------- -------- -------- --------
Net Asset Value, End of Period............ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== ========
Total Return.............................. 5.05% 5.48% 5.57% 5.42% 5.99%(2)
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (000's)......... $102,873 $124,686 $199,238 $156,382 $119,080
Ratio of Expenses to Average Net
Assets(3)............................... .10% .10% .10% .10% .10%(2)
Ratio of Net Investment Income to Average
Net Assets.............................. 4.98% 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 .30% for the year ended December
31, 1999, .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> 18
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,
--------------------------------------------------------
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
<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..................... .049 .053 .054 .052 .058
Net Gains or Losses on Securities (both
realized and unrealized)................ 0 0 0 0 0
-------- -------- -------- -------- --------
Total from Investment Operations.......... .049 .053 0.54 .052 .058
-------- -------- -------- -------- --------
LESS DISTRIBUTIONS:
Dividends (from net investment income).... (.049) (.053) (.054) (.052) (.058)
Distributions (from capital gains)........ 0 0 0 0 0
-------- -------- -------- -------- --------
Total Distributions....................... (.049) (0.53) (.054) (.052) (.058)
-------- -------- -------- -------- --------
Net Asset Value, End of Period............ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== ========
Total Return.............................. 5.02% 5.42% 5.51% 5.38% 5.97%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (000's)......... $426,020 $488,124 $414,625 $524,872 $584,976
Ratio of Expenses to Average Net
Assets(1)............................... .27% .26% .25% .23% .24%
Ratio of Net Investment Income to Average
Net Assets.............................. 4.90% 5.28% 5.38% 5.24% 5.82%
</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 .27% for the year ended December
31, 1999, .26% for the year ended December 31, 1998, .25% for the year ended
December 31, 1997, .24% for the year ended December 31, 1996 and .25% for
the year ended December 31, 1995
18
<PAGE> 19
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,
---------------------------------------------------
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period........... $ 10.00 $ 9.97 $ 9.95 $ 10.00 $ 9.93
------- ------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income.......................... .502 .540 .547 .542 .599
Net Gains or Losses on Securities (both
realized and unrealized)..................... (.080) .030 .020 (.050) 0.70
------- ------- ------- ------- -------
Total from Investment Operations............... .422 .570 .567 .492 .669
------- ------- ------- ------- -------
LESS DISTRIBUTIONS:
Dividends (from net investment income)......... (.502) (.540) (.547) (.542) (.599)
Distributions (from capital gains)............. 0 0 0 0 0
------- ------- ------- ------- -------
Total Distributions............................ (.502) (.540) (.547) (.542) (.599)
------- ------- ------- ------- -------
Net Asset Value, End of Period................. $ 9.92 $ 10.00 $ 9.97 $ 9.95 $ 10.00
======= ======= ======= ======= =======
Total Return................................... 4.33% 5.86% 5.85% 5.08% 6.92%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (000's).............. $32,941 $48,667 $46,405 $69,940 $63,922
Ratio of Expenses to Average Net Assets(1)..... .30% .30% .30% .30% .30%
Ratio of Net Investment Income to Average Net
Assets....................................... 5.01% 5.42% 5.47% 5.43% 6.00%
Portfolio Turnover Rate(2)..................... 106.6% 10.2% 79.2% 119.0% 64.8%
</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 .54% for the year ended
December 31, 1999, .59% for the year ended December 31, 1998, .57% for the
year ended December 31, 1997, .48% for the year ended December 31, 1996 and
.43% for the year ended December 31, 1995.
(2) Excludes security purchases with a maturity of less than one year.
19
<PAGE> 20
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
